Openness to Foreign Investment
The Tunisian Government actively encourages and places a priority on attracting foreign direct investment (FDI) in key industry sectors, such as call centers, electronics manufacturing, aerospace and aeronautics, automotive parts, and textile manufacturing. The Government encourages export-oriented FDI and screens any potential FDI to minimize the impact of the investment on domestic competitors and employment.
Foreign investment in Tunisia is regulated by Investment Code (Law 1993-120) which was last amended on January 26, 2009. It covers investment in all major sectors of economic activity except mining, energy, the financial sector and domestic trade. Government of Tunisia officials have indicated that a review of the Investment Code is slated for mid-2011, with an aim to foster job creation and developing infrastructure in the south-central regions of Tunisia. These reforms may liberalize the onshore sector and relax requirements for foreign investors wishing to serve the Tunisian market.
The Tunisian Investment Code divides potential investments into two categories:
The legislation contains two major hurdles for potential FDI:
· Foreign investors are denied national treatment in the agriculture sector. Foreign ownership of agricultural land is prohibited, although land can be secured through long-term (up to 40 years) lease. However, the Government actively promotes foreign investment in agricultural export projects.
The Investment Code is currently under reexamination by the government and the distinction between the offshore and onshore sectors may be abolished in the course of 2012.
Investment in manufacturing industries, agriculture, agribusiness, public works, and certain services requires only a simple declaration of intent to invest. Other sectors can require a series of Government of Tunisia authorizations.
The Government of Tunisia allows foreign participation in its privatization program and a significant share of Tunisia’s FDI in recent years has come from the privatization of state-owned or state-controlled enterprises. Privatization has occurred in telecommunications, banking, insurance, manufacturing, and petroleum distribution, among others.
In March 2011, the Government of Tunisia issued a decree (Law 2011-13) confiscating the assets of former President Ben Ali and his close family members. The list of assets touches upon every major economic sector. Some of Tunisia’s largest companies, such as Zitouna Bank (banking), Karthago Airlines (aviation), Carthage Cement (construction), Tunisiana (telecom), Orange Tunisie (telecom), Bricorama (home goods), Banque de Tunisie (banking), Ennakl (automotive), and Alpha Ford (automotive), were included on the list. It is unclear what percentages of shares in each company were appropriated by the state. Experts estimate that up to $2 billion worth of Ben Ali assets were leveraged by Tunisian banks.
To date, the Government of Tunisia has appointed conservators for these companies so that they can continue to operate on a day-to-day basis. According to members of the GOT Commission to Investigate Corruption and Malfeasance, a commission convened to investigate corruption claims during the Ben Ali regime, a court order will be necessary to determine how the frozen assets are handled. Some public statements have suggested shares will be sold on the stock exchange, while other conversations with GOT counterparts indicate the GOT will make case-by-case decisions on privatization of the shares. As details unfold, there may be opportunities for U.S. companies to participate in the eventual privatizations.
Significant prior privatizations include the 2006 TECOM Investments and Dubai Investment Group purchase of a 35% stake, valued at $2.25 billion, in state-owned Tunisie Telecom. In July 2008, French company Groupama won a bid to purchase 35% of the Société Tunisienne d'Assurances et de Reassurances (STAR) for 70 million Euro (around $100 million). In 2008, the French bank Caisse Générale d’Epargne purchased 60% of the Tunisian Kuwaiti Bank (BTK), valued at $249 million.
Tunisia’s investment promotion authorities established a system of regulations that received favorable feedback from established U.S. companies. Nevertheless, there are difficulties, particularly when U.S. companies attempt to launch projects in sectors that the Government of Tunisia does not actively promote. Until recently, the Government discouraged foreign investment in service sectors such as restaurants, real estate, and retail distribution. Many of these issues are expected to be addressed in the context of ongoing negotiations between Tunisia and the European Union over liberalization of the services sector under the EU/Tunisia Association Agreement.
Indeed, FDI in retail distribution is gradually expanding. French multinational retail chain Carrefour opened its first store in 2001, followed by the entry of French retail company Géant in 2005. Until then, Monoprix, a French grocery franchise, dominated the retail grocery market. Although Geant and multiple branches of Monoprix were looted and burned in January 2011, Carrefour and most branches of Monoprix remain operational.
In August 2009, the Tunisian Government adopted a new law to regulate domestic trade (Law 2009), which includes a new legislative framework for franchising. Until recently, franchise status was only granted to businesses on a case-by-case basis. A July 2010 implementation decree outlined a list of sectors in which franchises would need no prior authorization to operate in the Tunisian market. Sectors not on the list, such as food franchises, still need approval to operate. However, thanks to this new law, many franchises now have the ability to set up shop like any other business serving the Tunisian market. In general, the law is set to encourage investment, create additional jobs, and boost knowledge transfer. Many Tunisian business groups have already started looking for international franchisors and are confident the market exists for franchises to thrive.
Since 2007, there have been numerous announcements of significant Arabian Gulf company investments in the real estate sector but due to the international economic crisis, some investments have been postponed and possibly cancelled. Sama Dubai, which was set to build the Mediterranean Gate mega-construction project, halted its operations in 2009. Investment has not come to a complete standstill, however: Another such investment, the Bukhatir Group's Tunis Sports City, a sports and recreational complex, as well as Gulf Finance House's Tunis Financial Harbor, are moving forward, albeit slower than planned and with new delays associated with Tunisia’s political transformation.
FDI in certain state monopoly activities (electricity, water, postal services) can be carried out following establishment of a concession agreement and with certain restrictions on trade activities. With few exceptions, domestic trading can only be carried out by a company set up under Tunisian law, in which the majority of the share capital is held by Tunisians and management is Tunisian. An additional barrier to non-EU investment results from Tunisia’s Association Agreement with the European Union. The EU is providing significant funding to Tunisia for major investment projects, but clauses in the agreement prohibit non-EU member countries from participation in many EU-funded projects.
Conversion and Transfer Policies
The Tunisian Dinar is not a fully convertible currency, and it is illegal to take dinars in or out of the country. Although it is convertible for current account transactions (i.e., most bona fide trade and investment operations), Central Bank authorization is needed for some foreign exchange operations. Prior to the 2011 revolution, the Government of Tunisia had publicly committed to full convertibility of the dinar by 2014. This timeline is now widely regarded as unrealistic given Tunisia's political transition and other, more pressing financial sector reforms.
Non-residents are exempt from most exchange regulations. Under foreign currency regulations, non-resident companies are defined as having:
Foreign investors may transfer returns on direct or portfolio investments at any time and without prior authorization. This applies to both principal and capital in the form of dividends or interest. U.S. companies have generally praised the speed of transfers from Tunisia, but lamented that long delays may occur in some operations.
There is no limit to the amount of foreign currency that visitors can bring into Tunisia and exchange for Tunisian Dinars (TND). Amounts exceeding the equivalent of 25,000 TND (approximately $17,250) must be declared at the port of entry. Non-residents must also report foreign currency imports if they wish to re-export or deposit more than 5,000 TND (roughly $3,450). Tunisian customs authorities may require production of currency exchange receipts on exit.
The Tunisian Dinar is pegged to a basket composed of currencies, using weighs that reflect the importance of these currencies in Tunisia’s external trade (including among others, the U.S. dollar, the Japanese yen and the heavily weighted euro). It is adjusted in real effective terms to the fluctuations of these currencies, taking into consideration inflation differentials. The currency is freely quoted by Tunisian banks and is published on a daily basis by the central bank. The BCT can intervene in the market to stabilize the currency. The TND follows a managed floating exchange rate regime and is officially convertible for current account transactions. In 2012 (through November), year on year, the TND depreciated 2.542% against the U.S. dollar and depreciated 1.547 % against the Euro.
Expropriation and Compensation
The Tunisian Government has the right to expropriate property by eminent domain; there is no evidence of consistent discrimination against U.S. and foreign companies or individuals. There are no outstanding expropriation cases involving U.S. interests and such cases are rare. No policy changes on expropriation are anticipated in the coming year.
There is no pattern of significant investment disputes or discrimination involving U.S. or other foreign investors. However, to avoid misunderstandings, contracts for trade and investment projects should always contain an arbitration clause detailing how eventual disputes should be handled and the applicable jurisdiction. Tunisia is a member of the International Center for the Settlement of Investment Disputes and is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Tunisia and the United States have a Bilateral Investment Treaty, which also has dispute resolution clauses.
The Tunisian legal system is based upon the French Napoleonic code. There are adequate means to enforce property and contractual rights. Although the Tunisian constitution guarantees the independence of the judiciary, the judiciary is not fully independent of the executive branch. Local legal experts assert that courts are susceptible in some measure to political pressure, although courts generally handle commercial cases objectively.
The Tunisian Code of Civil and Commercial Procedures does allow for the enforcement of foreign court decisions under certain circumstances. Commercial disputes involving U.S. firms are infrequent.
Performance Requirements and Incentives
Performance requirements are generally limited to investment in the petroleum sector or in the newer area of private sector infrastructure development. These requirements tend to be specific to the concession or operating agreement (e.g., drilling a certain number of wells or producing a certain amount of electricity). More broadly, the preferential status (offshore, free trade zone) conferred upon some investments is linked to both percentage of foreign corporate ownership and limits on production for the domestic market.
The Tunisian Investment Code and subsequent amendments provide a broad range of incentives for foreign investors, which include tax relief on reinvested revenues and profits, limitations on the value-added tax on many imported capital goods, and optional depreciation schedules for production equipment. With the expected upcoming 2011 review of the Investment Code, further incentives may be put in place to attract foreign investment to Tunisia.
In April 2011, the Tunisian Government's Foreign Investment Promotion Agency (FIPA) announced a series of new incentives to draw investment to Tunisia's interior regions. These incentives extend current advantages already available to the offshore sector, such as the 10-year tax exemption on profits for onshore investments in priority development areas. According to FIPA, companies investing in these regions will be able to import raw materials, semi-finished products, and equipment duty and tax-free or purchase those same items locally without paying the value-added tax (VAT). In addition, the Tunisian Government will provide an 8-25% investment subsidy on the total value of the investment (up to $230,000 in general, $715,000 in priority regional development areas).
For labor costs, the Tunisian Government will also assume up to 16% of social security costs for the first seven years of the investment for new college graduates employed, with an extension of up to 10 years for investments in the interior regions. FIPA also announced a $178 per month stipend provided to the company by the Tunisian Government for every college graduate hired, plus a credit for 50% of training costs, with a total $178.000 ceiling. In April 2011, the GOT announced it would hire 20,000 new public servants and would provide start-up micro-capital for projects that had a job creation component.
Large investments with high job creation potential may benefit, under certain conditions determined by the Higher Commission on Investment, from the use of state-owned land for a symbolic Tunisian dinar (less than $1). Investors who purchase companies in financial difficulty may also benefit from certain clauses of the Investment Code, such as tax breaks and social security assistance; these advantages are determined on a case-by-case basis.
Additional incentives are available to promote investment in designated regional investment zones in economically depressed areas of the country, and throughout the country in the following sectors: health, education, training, transportation, environmental protection, waste treatment, and research and development in technological fields.
Further benefits are available for investments of a specific nature. For example, companies producing at least 70% for the export market receive tax exemptions on profits and reinvested revenues, duty-free import of capital goods with no local equivalents, and full tax and duty exemption on raw materials and semi-finished goods and services necessary for the business.
Foreign companies resident in Tunisia face a number of restrictions related to the employment and compensation of expatriate employees. Tunisian law limits the number of expatriate employees allowed per company to four. There are lengthy renewal procedures for annual work and residence permits. Although rarely enforced, legislation limits expatriate work permit validity to a total of two years. Central Bank regulations impose administrative burdens on companies seeking to pay for temporary expatriate technical assistance from local revenue. For example, a foreign resident company that has brought in an accountant would have to document that the service was necessary, fairly valued, and unavailable in Tunisia before it could receive authorization to transfer payment from its operations in Tunisia. This regulation prevents a foreign resident company from paying for services performed abroad.
For U.S. passport holders, a visa is not necessary for stays of up to four months; however, a residence permit is required for longer stays.
Right to Private Ownership and Establishment
Tunisian Government actions clearly demonstrate a strong preference for offshore, export-oriented FDI. Investors in that category are generally free to establish and own business enterprises and engage in most forms of remunerative activity. Investment which competes with Tunisian firms or on the Tunisian market or which is seen as leading to a net outflow of foreign exchange may be discouraged or blocked.
Acquisition and disposal of business enterprises can be complicated under Tunisian law and depend on the nature of the contract specific to the proposed transaction.
Disposal of a business investment leading to reductions in the labor force may be challenged or subjected to substantial employee compensation requirements. Acquisition of an onshore company may require special authority from the Government if it is an industry subject to limits on foreign equity shareholding (such as in the services sector).
Protection of Property Rights
Secured interests in property are both recognized and enforced in Tunisia. Mortgages and liens are in common use. Tunisia is a member of the World Intellectual Property Organization (WIPO) and has signed the United Nations (UNCTAD) Agreement on the Protection of Patents and Trademarks. The agency responsible for patents and trademarks is the National Institute for Standardization and Industrial Property (INNORPI - Institut National de la Normalisation et de la Propriété Industrielle). Foreign patents and trademarks should be registered with INNORPI.
Tunisia's patent and trademark laws are designed to protect only owners duly registered in Tunisia. In the area of patents, U.S. businesses are guaranteed treatment equal to that afforded to Tunisian nationals. Tunisia updated its legislation to meet the requirements of the WTO agreement on Trade-Related aspects of Intellectual Property (TRIPS). Copyright protection is the responsibility of the Tunisian Copyright Protection Organization (OTPDA - Organisme Tunisien de Protection des Droits d'Auteur), which also represents foreign copyright organizations. New legislation now permits customs officials to inspect and seize goods if copyright violation is suspected.
The new Customs Code, which went into effect on January 2009, allows customs agents to seize suspect goods in the entire country for products under foreign trademarks registered at INNORPI. Tunisian Copyright Law (Law 1994-36) has been amended by Law 2009-33, and includes literary works, art, scientific works, new technologies, and digital works. However, its application and enforcement have not always been consistent with foreign commercial expectations. Print audio and video media are considered particularly susceptible to copyright infringement, and there is evidence of significant retail sale of illegal products in these media. Illegal copying of software and entertainment CDs/DVDs is widespread.
Although the concept and application of intellectual property protection is still in the early stages, the Government is making an effort to build awareness and has increased its enforcement efforts in this area. These efforts have led a major supermarket chain to halt the sale of pirated audio and video goods. A U.S. Government-backed initiative, managed by the Department of Commerce in conjunction with United States Patent and Trademark Office (USPTO), provides training for Tunisian officials in the field of IPR regulation enforcement. The Government of Tunisia has announced that new IPR legislation is being drafted which will improve enforcement capabilities and strengthen punishment for offenders.
Transparency of Regulatory System
While the Tunisian Government has adopted policies designed to promote foreign investment, it continues to enact legislation and implement protectionist measures to safeguard domestic industry. Some amendments to the Investment Code have substantially improved, standardized, and codified incentives for foreign investors. However, some aspects of existing tax and labor laws remain impediments to efficient business operations.
The 2012 World Bank “Doing Business,” report published in October 2011, ranked Tunisia 46 - down six places compared to the previous year, in view of the ongoing political transition. Despite the down ranking, Tunisia remained the highest-rank country in North Africa.
Some bureaucratic procedures, while slowly improving in some areas, remain cumbersome and time-consuming. Foreign employee work permits, commercial operating license renewals, infrastructure-related services, and customs clearance for imported goods are usually cited as the lengthiest and most opaque procedures in the local business environment. Investors have commented on inconsistencies in the application of regulations. These cumbersome procedures are not limited to foreign investment and also affect the domestic business sector.
Efficient Capital Markets and Portfolio Investment
The mobilization and allocation of investment capital are still hampered by the underdeveloped nature of the local financial system. Tunisia’s stock market “Bourse de Tunis” is under the control of the state-run Financial Market Council and lists 57 companies. The Government offers substantial tax incentives to encourage companies to join the exchange, and expansion is occurring. On December 13, 2011 the stock market capitalization of listed companies in Tunisia was valued at $9.751 billion, approximately 21.25% of 2011 GDP, down 8.24 percent from $10.627 billion in 2010. On December 13, 2011, the Tunindex, the stock market’s benchmark index, fell (in USD) by 10.28% compared to the same period in 2010. Capital controls are still in place. Foreign investors are permitted to purchase shares in resident firms (through authorized brokers) or to purchase indirect investments through established mutual funds.
Tunisia hosts 29 banks, of which 18 are universal banks (that are both commercial and investment banks), eight are offshore, two are business banks, and one is an Islamic bank. Although some bank branches were damaged during civil unrest in December 2010 and January 2011, the impact of this damage on the banking sector was minimal. After the fall of the Ben Ali government, companies, banks, and real estate that belonged to the ousted President Ben Ali’s family were brought under GOT receivership. Since January 21, 2010, the Zitouna bank, formerly owned by the former president's son-in-law Sakher El-Materi, is currently operating under the supervision of the Tunisian Central Bank. The final disposition of the assets of the former president and his family will be decided by Tunisian courts. In addition to the traditional banking system, the GOT started developing microfinance. As a matter of facts, on November 5, 2011, the GOT issued a decree law No. 117 that aims at upgrading microfinance activity in Tunisia through the setting of microfinance institutions that comply with international standards. The mentioned law targets primarily regional development by providing lower income populations with easy access to financial services.
The banking system is considered generally sound and is improving, as the Central Bank has begun to enforce adherence to international norms for reserves and debt. Due to its relative insulation from international markets, the banking sector actually weathered the international economic crisis and resisted serious adverse effects visible in other countries. Reform is underway, however. Other recent measures include actions to strengthen the reliability of financial statements, enhance bank credit risk management, and improve creditors’ rights. Revisions to banking laws tightened the rules on investments and bank licensing, and increased the minimum capital requirement. The required minimum risk-weighted capital/asset ratio has been raised to 8%, consistent with the Basel Committee capital adequacy recommendations.
Despite the strict new requirements, many banks still have substantial amounts of non-performing or delinquent debt in their portfolios. The Government has established debt recovery entities (sociétés de recouvrement de créances) to buy the non-performing loans (NPLs) of commercial banks. According to official figures, the sharp increase in nonperforming loans (NPLs) in 2010, along with the events that took place in Tunisia in 2011 after closing the financial year, were reflected in the quality of banks’ portfolio. In effect, the outstanding balance of NPLs went up in 2010 by 17.2 percent or TND 927 million (approximately $647 million), 49 percent of which was attributable to classification of businesses tied to the former regime. Nonetheless, because of the sharp increase in loans, NPL’s ratio fell to 13 percentage. In 2011, the Central Bank decreased three times banks’ reserve requirement ratio ( from 12.5% down to 2.5%) in order to provide enough financing to the economy and prevent liquidity squeeze at banks. Although in recent years the Government has undertaken a number of banking privatizations and consolidations, the Government is the controlling shareholder in 10 of the 20 major banks. On June 2011, the estimated total assets of the country's five largest banks were 28.650 billion TND (roughly $19.77 billion). Foreign participation in their capital has risen significantly and is now well over 20%.
In the last five years regulatory and accounting systems have been brought more in line with required international standards. Most of the major global accounting firms are represented in Tunisia. Tunisian firms listed on the stock exchange are required to publish semiannual corporate reports audited by a certified public accountant.
On June 12, 2009 the GOT passed legislation addressing access to financial services for non-residents (Law 2009-64). Financial authorities aimed essentially to address regulatory gaps in the existing system by giving an appropriate framework for financial transactions between non-residents, introducing new financial tools attractive to foreign investors, defining new rules for monitoring and supporting the creation of the Tunis Financial Harbor project (a $3 billion Bahraini project inaugurated on June 12, 2009 and envisioned to include banks, real estate firms, investment companies, commercial centers, housing units and tourism areas). The code allows non-resident individuals or companies to use financial products and services as well as perform other relevant financial operations. Non-resident financial service providers may, in some cases and under certain conditions, provide services to residents. Regarding financial products, the code distinguishes between two types: securities and financial contracts. Both must be issued in Tunisia or negotiated on a foreign-regulated market member of the International Securities Commissions Organization.
Concerning financial service providers, the code established two categories regarding of activities: banking (deposits, loans, payments and exchange operations, acquisition of capital in operating companies or companies in current creation) and investment services (reception, transmission, order execution; and portfolio management). Non-resident financial entities, namely lending institutions authorized to act as banks, investment companies and portfolio management companies, are considered by the code non-resident investment service providers.
Among the conditions required, non-resident financial service providers must present initial minimum capital (fully paid up at subscription) of 25 million TND ($17.25 million) for a bank, 10 million TND ($6.9 million) for a financial institution, 7.5 million TND ($5.175 million) for an investment company, and 250,000 TND ($172,500) for a portfolio management company.
Competition From State Owned Enterprises
Since the implementation of the IMF Adjustment Program at the end of 1986, Tunisia has undertaken many reforms aimed at limiting the State's intervention in economic activities in the domestic market. These reforms have centered on:
SOEs are active in many sectors and compete alongside private enterprises (such as the telecom and insurance sectors). However, SOEs retain monopoly control in other sectors considered sensitive by the government, such as railroad transportation, water and electricity distribution, postal services, and port logistics. In these companies, senior management is appointed by the GOT and reports to the respective minister. The board of directors is mainly formed by representatives from other ministries and public shareholders. Like private companies, SOEs are required by law to publish independently-audited annual reports whether their capital is publicly traded on the stock market or not.
Tunisia does not have a Sovereign Wealth Fund (SWF).
Corporate Social Responsibility
The concept of corporate social responsibility is developing progressively through governmental campaigns but has not yet taken firm hold in Tunisia. The most successful campaigns to date have focused on preserving the environment, energy conservation, and combating counterfeiting.
To date, most corporate social responsibility initiatives come from foreign multinationals that incorporate Tunisia into worldwide campaigns. Examples include supporting an educational program related to children's nutrition, supporting a clean water initiative, and creation of a program aimed at discouraging emigration of skilled workers from Tunisia. Such programs are viewed favorably by the GOT.
Tunisia has a history of stability, and incidents involving politically-motivated damage to economic projects or infrastructure were extremely rare. In December 2010 and January 2011, however, civil unrest erupted in the underserved interior regions of Sidi Bouzid, Kasserine, and Le Kef; in other interior towns in the country, as well as in Tunis. These protests, fueled by economic grievances and public resentment of corruption and lack of political freedom, spread and eventually forced former President Ben Ali and some members of his family to flee Tunisia on January 14.
Immediately after his departure, there was looting and damage to holdings of the Ben Ali extended family network, including grocery chains, individual residences, and other symbols of the Ben Ali clan. There were also reported cases of looting and property damage to companies unaffiliated to the former ruling family, although American companies were not specifically targeted. There were also clashes between former Ben Ali loyalists and military forces in major urban areas of Tunisia, although these lasted only a few days and occurred immediately after the former president's departure.
Within one week of Ben Ali’s departure, the military and police had quelled the violence and looting had stopped in Tunis. As of December 2011, the general security situation in Tunis and most areas of the country remains relatively calm and business is back to normal. One government official noted up to 10-20% of businesses had been directly or indirectly impacted due to disruptions in port operations, customs, and transportation networks since the revolution. The government has enacted a series of assistance measures designed to compensate companies who have suffered losses due to the civil unrest. Most American companies operating in Tunisia reported some disruption to their operations but returned to prior levels of activity within one week.
The security situation remains calm in southern and central areas of Tunisia, although demonstrations and other incidents generally related to domestic political concerns can occur. Travelers are urged to visit www.travel.state.gov for the latest travel warnings and alerts regarding Tunisia.
Until the December 2010-January 2011 period, there were only a handful of incidents of politically-motivated violence. In April 2002, al-Qaida took responsibility for an attack at a synagogue on the island of Djerba that claimed 20 victims, 14 of them German tourists. This resulted in a significant reduction in the number of European visitors in the immediate aftermath of the attack, but the sector recovered. In December 2006 and January 2007, Tunisian security forces disrupted a terrorist group, killing or capturing many individuals who reportedly planned to carry out acts of violence in Tunisia. The U.S. Embassy in Tunis was reportedly among the group’s intended targets. In February 2008, al-Qaida in the Islamic Maghreb claimed responsibility for kidnapping two Austrian tourists along Tunisia’s southern border with Algeria. They were released in Mali in September of that year, reportedly after payment of a ransom.
Corruption, including bribery, raises the costs and risks of doing business. Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.
It is important for U.S. companies, regardless of their size, to assess the business climate in the relevant market in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in foreign markets should take the time to become familiar with the relevant anticorruption laws of both the foreign country and the United States in order to properly comply with them, and where appropriate, they should seek the advice of legal counsel.
The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, by requiring them to uphold their obligations under relevant international conventions. A U. S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract should bring this to the attention of appropriate U.S. agencies, as noted below.
U.S. Foreign Corrupt Practices Act: In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to foreign public officials for the purpose of obtaining or retaining business for or with, or directing business to, any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. For more detailed information on the FCPA, see the FCPA Lay-Person’s Guide at http://www.justice.gov/criminal/fraud/docs/dojdocb.html.
Other Instruments: It is U.S. Government policy to promote good governance, including host country implementation and enforcement of anti-corruption laws and policies pursuant to their obligations under international agreements. Since enactment of the FCPA, the United States has been instrumental to the expansion of the international framework to fight corruption. Several significant components of this framework are the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Antibribery Convention), the United Nations Convention against Corruption (UN Convention), the Inter-American Convention against Corruption (OAS Convention), the Council of Europe Criminal and Civil Law Conventions, and a growing list of U.S. free trade agreements. Tunisia is a party to the United Nations Convention against Corruption.
OECD Antibribery Convention: The OECD Antibribery Convention entered into force in February 1999. As of December 2009, there are 38 parties to the Convention including the United States (see http://www.oecd.org/dataoecd/59/13/40272933.pdf). Major exporters China, India, and Russia are not parties, although the U.S. Government strongly endorses their eventual accession to the Convention. The Convention obligates the parties to criminalize bribery of foreign public officials in the conduct of international business. The United States meets its international obligations under the OECD Antibribery Convention through the U.S. FCPA. Tunisia is a not a party to the OECD Convention.
UN Convention: The UN Anticorruption Convention entered into force on December 14, 2005, and there are 143 parties to it as of December 2009 (see http://www.unodc.org/unodc/en/treaties/CAC/signatories.html). The UN Convention is the first global comprehensive international anticorruption agreement. The UN Convention requires countries to establish criminal and other offences to cover a wide range of acts of corruption. The UN Convention goes beyond previous anticorruption instruments, covering a broad range of issues ranging from basic forms of corruption such as bribery and solicitation, embezzlement, trading in influence to the concealment and laundering of the proceeds of corruption. The Convention contains transnational business bribery provisions that are functionally similar to those in the OECD Antibribery Convention and contains provisions on private sector auditing and books and records requirements. Other provisions address matters such as prevention, international cooperation, and asset recovery. Tunisia is a party to the UN Convention, signing it in March 2004; it came into force in September 2008.
OAS Convention: In 1996, the Member States of the Organization of American States (OAS) adopted the first international anticorruption legal instrument, the Inter-American Convention against Corruption (OAS Convention), which entered into force in March 1997. The OAS Convention, among other things, establishes a set of preventive measures against corruption and provides for the criminalization of certain acts of corruption, including transnational bribery and illicit enrichment, and contains a series of provisions to strengthen the cooperation between its States Parties in areas such as mutual legal assistance and technical cooperation. As of December 2009, the OAS Convention has 33 parties (see http://www.oas.org/juridico/english/Sigs/b-58.html). Tunisia is not a party to the OAS Convention.
Council of Europe Criminal Law and Civil Law Conventions: Many European countries are parties to either the Council of Europe (CoE) Criminal Law Convention on Corruption, the Civil Law Convention, or both. The Criminal Law Convention requires criminalization of a wide range of national and transnational conduct, including bribery, money-laundering, and account offenses. It also incorporates provisions on liability of legal persons and witness protection. The Civil Law Convention includes provisions on compensation for damage relating to corrupt acts, whistleblower protection, and validity of contracts, inter alia. The Group of States against Corruption (GRECO) was established in 1999 by the CoE to monitor compliance with these and related anti-corruption standards. Currently, GRECO comprises 46 member States (45 European countries and the United States). As of December 2009, the Criminal Law Convention has 42 parties and the Civil Law Convention has 34 (see www.coe.int/greco.) Tunisia is not a party to the Council of Europe Conventions.
Free Trade Agreements: While it is U.S. Government policy to include anticorruption provisions in free trade agreements (FTAs) that it negotiates with its trading partners, the anticorruption provisions have evolved over time. The most recent FTAs negotiated now require trading partners to criminalize “active bribery” of public officials (offering bribes to any public official must be made a criminal offense, both domestically and trans-nationally) as well as domestic “passive bribery” (solicitation of a bribe by a domestic official). All U.S. FTAs may be found at the U.S. Trade Representative Website: http://www.ustr.gov/trade-agreements/free-trade-agreements. Tunisia does not have a FTA with the U.S.
Local Laws: U.S. firms should familiarize themselves with local anticorruption laws, and, where appropriate, seek legal counsel. While the U.S. Department of Commerce cannot provide legal advice on local laws, the Department’s U.S. and Foreign Embassy can provide assistance with navigating the host country’s legal system and obtaining a list of local legal counsel.
Assistance for U.S. Businesses: The U.S. Department of Commerce offers several services to aid U.S. businesses seeking to address business-related corruption issues. For example, the U.S. Embassy can provide services that may assist U.S. companies in conducting their due diligence as part of the company’s overarching compliance program when choosing business partners or agents overseas. The U.S. Foreign and Commercial Service can be reached directly through its offices in every major U.S. and foreign city, or through its Website at www.trade.gov/cs.
The Departments of Commerce and State provide worldwide support for qualified U.S. companies bidding on foreign government contracts through the Commerce Department’s Advocacy Center and State’s Office of Commercial and Business Affairs. Problems, including alleged corruption by foreign governments or competitors, encountered by U.S. companies in seeking such foreign business opportunities can be brought to the attention of appropriate U.S. government officials, including local embassy personnel and through the Department of Commerce Trade Compliance Center “Report A Trade Barrier” Website at tcc.export.gov/Report_a_Barrier/index.asp.
Guidance on the U.S. FCPA: The Department of Justice’s (DOJ) FCPA Opinion Procedure enables U.S. firms and individuals to request a statement of the Justice Department’s present enforcement intentions under the antibribery provisions of the FCPA regarding any proposed business conduct. The details of the opinion procedure are available on DOJ’s Fraud Section Website at www.justice.gov/criminal/fraud/fcpa. Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA. For further information, see the Office of the Chief Counsel for International Counsel, U.S. Department of Commerce website, at http://www.ogc.doc.gov/trans_anti_bribery.html. More general information on the FCPA is available at the Websites listed below.
Exporters and investors should be aware that generally all countries prohibit the bribery of their public officials, and prohibit their officials from soliciting bribes under domestic laws. Most countries are required to criminalize such bribery and other acts of corruption by virtue of being parties to various international conventions discussed above.
Tunisia Corruption Climate
Most U.S. firms involved in the Tunisian market (generally in the offshore sector) have not identified corruption as a primary obstacle to foreign direct investment. Some potential investors asserted that under the former Ben Ali regime, unfair practices and corruption among prospective local partners had delayed or blocked specific investment proposals, and that cronyism or influence peddling had affected some investment decisions. The presence of former President Ben Ali's family members in key sectors of the economy, including banking, car imports, agriculture, food distribution, and media, was widely regarded as having come about solely due to nepotism and abuse of power. The perception that any successful business venture could be encroached upon by members of the ruling family apparently affected domestic investment rates during the Ben Ali era.
Anecdotal reports from the Tunisian business community and U.S. businesses with regional experience suggest that corruption exists, but is not as pervasive as that found in neighboring countries. Most U.S. investors report that corruption involving routine procedures for doing business (customs, transportation, and some routine bureaucratic practices) may exist but does not pose a significant barrier to doing business in Tunisia. After several years of steady improvement, Tunisia’s ranking on Transparency International’s (TI) Corruption Index dropped from 43 in 2005 with a CPI score of 4.9, to 65 in 2009 with a score of 4.2, but improved to 59 in 2010 with a score of 4.2. At the regional level, Tunisia is ranked 8th among MENA countries, before its direct competitor, Morocco (9), and its neighbors Algeria (11) and Libya (13). According to the TI Corruption Index scale, a score of ten indicates extremely little corruption and a score of zero means very serious corruption.
Tunisia's penal code devotes 11 articles to defining and classifying corruption and to assigning corresponding penalties (including fines and imprisonment). Several other legal texts also address broader concepts of corruption including violations of the commercial or labor codes, which range from speculative financial practices to giving or accepting bribes. Detailed information on the application of these laws or their effectiveness in combating corruption is not publicly available. There are no statistics specific to corruption. After the departure of former President Ben Ali, the interim government created the Independent Commission to Investigate Corruption focused on abuses of power during the Ben Ali era. Before January 2011, the Tunisian Ministry of Commerce published information on cases involving the infringement of the commercial code, but these incidents generally covered relatively low level abuses such as non-conforming labeling procedures, as well as price/supply speculation.
The Government's recent efforts to combat corruption have concentrated on the seizure of assets belonging to former President Ben Ali's family members, ensuring that price controls are respected, enhancing commercial competition in the domestic market and harmonizing Tunisian laws with those of the European Union. The transition government has also created a commission to investigate corruption, which is working in tandem with the court system to bring to light corruption incidents during the Ben Ali era.
Since 1989, the public sector has been governed by a comprehensive law designed to regulate each phase of public procurement. The GOT had also established the Higher Market Commission (CSM - Commission Supérieure des Marchés) to supervise the tender and award of major Government contracts, though this commission was disbanded in January 2011. The Government publicly supports a policy of transparency and has called for it in the conduct of privatization operations. Public tenders require bidders to provide a sworn statement that they have not and will not, either themselves or through a third party, make any promises or give gifts with a view to influencing the outcome of the tender and realization of the project. Pursuant to the FCPA, the U.S. Government requires that American companies requesting U.S. Government advocacy support with foreign states certify not to participate in corrupt practices.
Some useful resources for individuals and companies regarding combating corruption in global markets include the following:
· Information about the FCPA, including a “Lay-Person’s Guide to the FCPA” is available at the U.S. Department of Justice’s Website at: http://www.justice.gov/criminal/fraud/fcpa.
· Information about the OECD Antibribery Convention including links to national implementing legislation and country monitoring reports is available at: http://www.oecd.org/department/0,3355,en_2649_34859_1_1_1_1_1,00.html.
See also new Antibribery Recommendation and Good Practice Guidance Annex for companies: http://www.oecd.org/dataoecd/11/40/44176910.pdf.
· General information about anticorruption initiatives, such as the OECD Convention and the FCPA, including translations of the statute into several languages, is available at the Department of Commerce Office of the Chief Counsel for International Commerce Website: http://www.ogc.doc.gov/trans_anti_bribery.html.
· Transparency International (TI) publishes an annual Corruption Perceptions Index (CPI). The CPI measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is available at: http://www.transparency.org/policy_research/surveys_indices/cpi/2009. TI also publishes an annual Global Corruption Report which provides a systematic evaluation of the state of corruption around the world. It includes an in-depth analysis of a focal theme, a series of country reports that document major corruption related events and developments from all continents and an overview of the latest research findings on anti-corruption diagnostics and tools.
· The World Bank Institute publishes Worldwide Governance Indicators (WGI). These indicators assess six dimensions of governance in 212 countries, including Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption. See http://info.worldbank.org/governance/wgi/sc_country.asp. The World Bank Business Environment and Enterprise Performance Surveys may also be of interest and are available at http://beeps.prognoz.com/beeps/Home.ashx .
· The World Economic Forum publishes the Global Enabling Trade Report, which presents the rankings of the Enabling Trade Index, and includes an assessment of the transparency of border administration (focused on bribe payments and corruption) and a separate segment on corruption and the regulatory environment. See http://www.weforum.org/en/initiatives/gcp/GlobalEnablingTradeReport/index.htm.
· Additional country information related to corruption can be found in the U.S. State Department’s annual Human Rights Report available at http://www.state.gov/g/drl/rls/hrrpt/.
· Global Integrity, a nonprofit organization, publishes its annual Global Integrity Report, which provides indicators for 92 countries with respect to governance and anti-corruption. The report highlights the strengths and weaknesses of national level anti-corruption systems. The report is available at http://report.globalintegrity.org/.
Bilateral Investment Agreements
A Trade and Investment Framework Agreement (TIFA) between Tunisia and the United States was signed in 2002 and three TIFA Council meetings have taken place, most recently in March 2008. A Bilateral Investment Treaty between Tunisia and the United States took effect in 1991. A 1985 treaty (and 1989 protocol) guarantees U.S. firms freedom from double taxation.
Tunisia has concluded bilateral trade agreements with approximately 81 countries, including its neighbors Libya and Algeria. In January 2008, Tunisia’s Association Agreement with the EU went into effect, eliminating tariffs on industrial goods with the eventual goal of creating a free trade zone between Tunisia and the EU member states. Tunisia is currently negotiating services and agriculture provisions with the EU. In addition, Tunisia is a signatory of the multilateral agreements with the Multilateral Investment Guarantee Agency (MIGA). Tunisia has signed the WTO Agreement, bilateral agreements with the Member States of the European Free Trade Association (EFTA), bilateral and multilateral agreements with Arab League members, and a bilateral agreement with Turkey.
OPIC and Other Investment Insurance Programs
OPIC is active in the Tunisian market and provides political risk insurance and other services to a variety of U.S. companies. OPIC has also designed a number of investment funds that include Tunisia. These funds, among other sectors, cover renewable energy and small and medium enterprise development. OPIC supports private U.S. investment in Tunisia and has sponsored several reciprocal investment missions. The 1963 OPIC agreement with Tunisia was revised and signed in February 2004.
Tunisian labor is readily available. Tunisia has a labor force of approximately 3.5 million and a national literacy rate of about 75%. Around 90% of the work force under 35 is literate. The 2011 official unemployment rate is 19%. This figure reaches 25% to 35% among university graduates, although some experts believe it is as high as 40%. The official employment rate does not count underemployment and does not disaggregate geographically, which would show a distortion favoring the coastal tourist regions over central and southern Tunisia. Unemployment is Tunisia's most pressing economic issue.
Nearly 80,000 new jobs must be created each year to keep unemployment at current levels. Sustained annual GDP growth of about 8-9% would be required in order to make significant inroads into chronic unemployment. The structure of the workforce has remained stable over the past 20 years (19% agriculture, 32% industry, and 49% commerce and services). Tunisia has been successful in developing the industrial sector and creating employment for low-skilled jobs, but has not been able to keep up with new educated entrants into the job market.
The right to form a labor union is protected by law. Currently, there are three national labor confederations, the oldest and largest is the General Union of Tunisian Workers (UGTT - Union Generale des Travailleurs Tunisiens) and the two new ones are the General Confederation of Tunisian Workers (CGTT – Confederation Generale des Travailleurs Tunisiens) and the Tunisian Labor Union (UTT – Union Tunisienne du Travail), created in May 2011. The UGTT claims about one third of the labor force as members, although more are covered by UGTT-negotiated contracts. Wages and working conditions are established through triennial collective bargaining agreements between the UGTT, the national employers’ association (UTICA - Union Tunisienne de l’Industrie, du Commerce et de l'Artisanat), and the Government of Tunisia. These agreements set industry standards and generally apply to about 80% of the private sector labor force, whether or not individual companies are unionized.
Since the January 2011 change in government, labor groups have called for reform in labor law and have increased demands on employers. The latest wage increase agreement was signed in July 2011. In the meantime, an emboldened labor movement increased its demands for private sector reforms. The private sector saw a proliferation of wildcat strikes in the first half 2011, but the labor movement’s approval of the government formed by then-Prime Minister Caïd Essebsi in March 2011 appeared to reduce the momentum of such actions. However, as recently as December 2011, labor unrest was still in issue for state-owned companies in Gafsa and Gabes.
The official minimum monthly wage in the industrial sector is 246.3 TND (about $178.5) for a 40 hour week and 286 TND (about $207.25) for a 48 hour week.
Foreign Trade Zones/Free Trade Zones
Tunisia has two free trade zones, one in the north at Bizerte, and the other in the south at Zarzis. The land is state-owned, but the respective zones are managed by a private company. Companies established in the free trade zones, officially known as “Parcs d’Activités Economiques,” are exempt from most taxes and customs duties and benefit from special tax rates. Goods are allowed limited duty-free entry into Tunisia for transformation and re-export. Factories are considered bonded warehouses and have their own assigned customs personnel.
However, companies do not necessarily have to be located in one of the two designated free trade zones to operate with this type of business structure. In fact, the majority of offshore enterprises are situated in various parts of the country. Regulations are strict, and operators must comply with the Investment Code.
Foreign Direct Investment Statistics
Foreign direct investment inflows for the first eleven months of 2011 declined by 31.7 percent compared to the same period in 2010 due to the political transition and Tunisia's downwardly revised credit ratings by major agencies due to the civil unrest in January 2011.
Total foreign investment during the first eleven months of 2011 was TND 1.436 billion ($990.84 million), which represents a 35.5 percent decrease compared to the same period last year. This decrease in foreign investment is the result of a 31.7 percent decrease in foreign direct investment, TND 1.36 billion [$938 million] in 2011 down from TND 1.992 billion [$1.39 billion] in 2010, and a 67.6 percent decrease, in portfolio investment, TND 76.1 million [$52.5 million] in 2011 down from 235.1 million TND [$164.1 million] in 2010. This sharp downward trend in FDI is attributable to a drop in investment flows for the sectors of tourism and real estate (-87.5%), industry (-43.8%), energy (-28%) and agriculture (-11.5%).
According to the GOT statistics, in 2010, 3,135 foreign or joint capital companies are operational in Tunisia and employ 324,821 people. Foreign investments generate about one-third of exports and one-fifth of total employment. In recent years, however, FDI in real estate, infrastructure, and the energy sector has been a significant source of growth.
Tunisia’s largest single foreign investor is British Gas, which has developed the Miskar offshore gas field ($650 million) and is investing a further $500 million for new development. The largest single foreign investment was Turkish company TAV's 550 million euro ($792 million) construction of the Enfidha International Airport, which is operating on a 40-year concession. Major foreign presence in other key sectors includes telecommunications and electronics (Lucent, Lacroix Electronique, Sagem, Alcatel, Stream, Siemens, Philips, Thomson), the automotive industry (Lear Corporation, Draxlmaier, Valeo, Toyota Tsusho, Pirelli), food products (3 Suisses, Danone) and aeronautics (Zodiac Aerospace, Eurocast, SEA Latelec).
Major U.S. company presence in Tunisia includes: Citibank, Cisco, Coca-Cola, Crown Maghreb Can, Eurocast (a joint venture with Palmer), Hewlett-Packard, Johnson Controls, Lear Corporation, Microsoft, Pfizer, Sara Lee (represented in Tunisia under the name of Essel Tunisie / DBA), and Stream. JAL Group, originally part of an Italian-owned group producing safety footwear for the export market, was recently purchased by U.S. investors and, with a staff of over 4,600, is now the largest U.S. employer in Tunisia.
Foreign Investment Promotion Agency (FIPA) www.investintunisia.tn
Central Bank of Tunisia www.bct.gov.tn
General Information about Tunisia www.tunisie.com
Tunisian Industrial Promotion Agency www.tunisieindustrie.nat.tn
Bizerte Free Zone www.bizertaeconomicpark.com.tn
Zarzis Free Zone www.zfzarzis.com.tn
Stock Exchange www.bvmt.com.tn
National Statistic Institute (INS) www.ins.nat.tn