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Tunisia – Enhancing private investment to improve employment

Friday, 20 November 2009 14:46

The international community has lauded Tunisia's resilience and ability to preserve economic growth during times of global economic uncertainty. But in order to better distribute the benefits of a stable growth pattern, the country will have to enhance private sector investment to improve job creation.

The country's financial sector was not exposed to the worst of the global crisis due to its relatively simple product offerings and limited linkages with international markets. Some protection has also been provided by the non-convertibility of the Tunisian dinar. Growth has remained stable, with government estimates pointing to a 3%-3.5% increase in GDP in 2009, local press reported.

Similarly, the strength of local demand and large middle-class spending helped maintain a balanced economy whilst consumer activity in other countries plummeted. "Domestic demand remains strong in Tunisia, so internal expenditure remained at a steady pace and that helped us," Mohamed-Hechmi Djilani, the president and director-general of Hannibal Lease, told OBG

Nevertheless, there are some risks, primarily related to the country's reliance on European markets, which have been affected by the crisis. A recent report by Standard & Poor's expects potential slowdown in export-oriented sectors, such as the mechanic and electronic industry and the tourism sector, both big earners for Tunisia.

"The companies that were most affected in terms of industry were the small subcontractors that received support orders from bigger players," Djilani told OBG. "Since the bigger companies can now serve their orders because of slower demand from Europe, they have less excess orders to pass on to smaller companies." Industrial exports bring a large amount of revenue into the economy, accounting for €4bn in 2008.

Afif Chelbi, the minister for industry, energy and small and medium-sized enterprises, has stated that the level of Tunisian industrial exports fell 18% in the first half of 2009, but has returned to normal levels during the summer. The government wants industrial exports to bring €20bn into the country's economy by 2016, and is betting on attracting expecting to attract investment that in previous years has been directed towards Eastern Europe.

Yet, there are clear signs that the worst has already passed for Tunisia. Bukhatir group, a UAE-based real estate developer, has recently confirmed that Sports City, its huge €3.3bn project in Tunis, is going ahead after doubts had been cast on the feasibility of the project amid an international credit squeeze.

The government's infrastructure development goals will also help strengthen Tunisian production. Modern motorways, an expansion of the railway network, two 400-MW power stations, a new oil refinery in the south of the country and a deep-water seaport are all in the pipeline for the coming years, local media reported.

The government has set aside around €2.3bn for several development projects in 2010, with this economic stimulus expected create at least 16.000 new government jobs.

There are also further plans to boost the institutional environment, with the government recently announcing an increase in funding for incubator and start-up projects, as well as the establishment of a more favorable legal framework. The encouragement of start-up businesses is seen as way of lowering unemployment, which is currently at 14%, according to official figures.

Having avoided the worst consequences of the international economic slowdown, Tunisia is now set to reap some of the benefits. As the downturn is leading to cost-cutting measures in European markets, Eurozone producers are turning their attention to the stable performance and educated workforce of Tunisia

Global Arab Network

This article is published in partnership with Oxford Business Group

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Last Updated on Friday, 20 November 2009 15:29

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