Attitude toward Foreign Direct Investment
Prime Minister Essid’s government was sworn in on February 6, 2015, following free and fair democratic elections. The current government has a five-year mandate and places a priority on reducing unemployment, attracting FDI, and girding itself against terrorist attacks by shoring up and expanding its security sector. More than 14,136 foreign companies currently operate in Tunisia (11,262 offshore and 2,875 onshore). Historically, the government has encouraged export-oriented FDI in the interior regions and in key industrial sectors, such as call centers, electronics, aerospace and aeronautics, automotive parts, and textile/apparel manufacturing. The off-shore sectors that attract the greatest FDI in 2015 are energy (51 percent), electric and electronic industries (11 percent), finance (8 percent), and ICT (5 percent). Inadequate infrastructure in the interior regions results in the concentration of most foreign investment in the coastal regions of the northeast (75 percent). Western and southern regions attracted less than 7 percent of foreign investments despite special incentives for those regions.
Foreign investment in Tunisia is regulated by the Investment Code (Law 1993-120), last amended in 2009. The current Investment Code divides potential investments into two categories:
“Offshore” investment is defined as entities in which foreign capital accounts for at least 66 percent of equity, and at least 70 percent of production is destined for the export market. Some exceptions to these percentages exist for the agricultural sector.
“Onshore” investment caps foreign equity participation at a maximum of 49 percent in most non-industrial projects. In certain cases, “onshore” industrial investment may attain 100 percent foreign equity, subject to government approval.
Some aspects of the 1993 Code lapsed in 2015. Exporting companies in operation before 2015 were grandfathered under the previous investment policy and allowed to keep their tax privileges, but new entrants are subject to a 10 percent income tax as the Government of Tunisia (GOT) gradually merges the onshore-offshore tax systems. A new draft investment code was submitted to the Parliament in October 2015 and remains under discussion.
Other Investment Policy Reviews
In March 2012, the GOT conducted an investment policy review (IPR) through the Organization for Economic Cooperation and Development (OECD) (http://www.keepeek.com/Digital-Asset-Management/oecd/finance-and-investment/oecd-investment-policy-reviews-tunisia-2012_9789264179172-en#page16.)
The WTO is scheduled to complete a Trade Policy Review for Tunisia in July 2016.
Laws/Regulations on Foreign Direct Investment
Tunisia’s multiple and overlapping customs, taxes, and financial incentive schemes are highly complex and difficult to understand for investors. In addition to offshore incentives, Tunisia provides specific incentives to promote regional development, technology, research and development (R&D), innovation, small and medium enterprises (SMEs), and investments in certain sectors (such as education, transport, health, and culture) and environmental protection. The GOT established two free-trade zones that offer benefits for foreign companies similar to those provided to offshore exporting companies. Minister of Commerce Mohsen Hassan announced in March 2016 the possibility of creating a new free trade and logistics zone in Ben Guerdan in the south.
The Parliament is expected to adopt a new investment code in 2016 that will lower restrictions and simplify procedures. In addition, the Parliament adopted a suite of economic reform laws in 2015 including a new renewable energy law, competition law, and public-private partnership law. The GOT is also undertaking extensive financial sector reform. Parliament recently adopted a new bankruptcy law and central bank statute to enshrine the independence of the Central Bank of Tunisia. Draft legislation defining the structure and regulations of the overall banking sector is currently under review by Parliament, and two large public banks were recapitalized.
For most businesses, the Agency for Promotion of Industry and Innovation (APII) is the focal point for business registration. Online registration for industry or service sector projects for both domestic and foreign investment is available at: www.tunisieindustrie.nat.tn/en/doc.asp?mcat=16&mrub=122
While the online registration process is clear and APII aims to respond within 24 hours, there are many additional steps that involve other government agencies. The APII has set up a one-stop shop which offers registration of legal papers with the tax office, tax inspection office, court clerk, official Tunisian gazette, and customs. This one-stop shop also houses representatives providing consultations from the Investment Promotion Agency (API), Ministry of Employment, National Social Security Authority (CNSS), Ministry of Interior, and the Ministry of Commerce. The World Bank’s Doing Business 2016 study reports that business registration takes an average of 11 days. A local business consulting firm estimates that this process can take up 40 days and costs $500 on average.
In agriculture and fisheries, business registration can be found at: www.apia.com.tn.
In tourism, companies must register with the National Office for Tourism at: http://www.tourisme.gov.tn/pour-investir/prestations-administratives.html
The Foreign Investment Promotion Agency (FIPA) is the central point of contact for foreign investors. Its website is: www.investintunisia.com.tn.
Small and Medium Enterprises (SMEs)
While the GOT has no official definition of SMEs, commonly used thresholds include between 10 - 100 employees and less than $1.5 million in investment. Companies with fewer than 10 employees are typically considered micro-enterprises. The Tunisian Solidarity Bank (SOE) provides up to $2,500 in refinancing credits for micro-enterprises. The Bank for SME Financing (BFPME) offers financing in the range of $50,000 to $5 million. These institutions do not offer services for foreign investors.
Each ministry establishes a list of opportunities relevant to its sector and communicates that list to three government promotion agencies: the APII, the Agriculture Investment Promotion Agency (APIA) and FIPA.
Limits on Foreign Control and Right to Private Ownership and Establishment
Some strategic sectors like national defense are not open to foreign investment. Due to labor restrictions, foreign firms tend to be confined to making offshore investments in the energy sector or in low value-added industries.
Market access regulations remain tight in multiple sectors, with 15 sectors and 20 activities for which investment is subject to authorization. These include tourism, transport (road, air, and sea), handicrafts, telecommunications, education and vocational training, health, advertising, and agricultural extension services. An additional 49 sectors require pre-authorization on a per case basis by the Commission Supérieure d’Investissement if a foreign investor intends to hold more than 49 percent ownership.
The GOT allows foreign participation in its privatization program. 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 many sectors, such as telecommunications, banking, insurance, manufacturing, and fuel distribution, among others.
In 2011, the GOT confiscated the assets of the former regime. The asset list touched upon every major economic sector. According to the GOT Commission to Investigate Corruption and Malfeasance, a court order is required to determine the ultimate handling of frozen assets. Since court actions frequently take years – and with the government facing immediate budgetary needs – the GOT allowed privatization bids for shares in Tunisiana, Ennakl, Carthage Cement, City Cars, and Banque de Tunisie. The GOT does not exclude the possibility of selling shares in these companies on the “Bourse de Tunis,” Tunisia’s stock exchange. So far, the privatization process has led to the sale of the GOT’s 60 percent stake in Ennakl to Tunisian consortium Poulina-Parenin, its 13 percent stake in Banque de Tunisie to French group Crédit Industriel et Commercial (CIC), and its 7 percent stake in City Cars to Tunisian consortium Bouchammaoui-Chabchoub. In its efforts to upgrade the banking sector and increase foreign reserves, the GOT is expected to privatize a 15 percent stake in state-owned banks, but information about related tenders is not yet available.
Screening of FDI
The GOT screens FDI that targets the domestic market to minimize the possible negative impact on domestic competitors and employment. If a foreign investor seeks to hold more than 49 percent ownership of a domestic company (onshore), a pre-authorization from the High Committee on Investment (Commission Supérieure d'Investissement) is required. Authorization of these projects is on a per case basis, depending on sectors and activities. The majority of U.S. businesses in Tunisia choose to operate under the offshore regime to avoid the foreign capital limitation.
The GOT adopted a new competition law in 2015 that empowered a Competition Council to reduce government intervention in the economy and promote competition based on supply and demand.
The law ensures free pricing of most products and services, with the exception of a list (determined by decree) of basic products and services such as bread or electricity. In exceptional cases of large increases or collapse in prices, the Ministry of Commerce reserves the right to regulate prices for a period of up to six months. The new competition law also voids previous agreements that fix prices, limit free competition or the entry of other companies, and limit or control production, distribution, investment, technical progress, or supply centers. The Ministry of Trade reserves the right to uphold these competition-inhibiting agreements if parties can convince the Competition Council that these practices are necessary for overall technical or economic progress, and that benefits are fairly distributed.