Tunisia continued to make progress on its democratic transition and successfully held its second round of parliamentary and presidential elections since the 2011 revolution in September and October 2019, which led to the formation of a new government on February 27, 2020. In 2019, Tunisia’s economy experienced a GDP growth of 1 percent. The country still faces high unemployment, high inflation, and rising levels of public debt.
In recent years, successive governments have advanced much-needed structural reforms to improve Tunisia’s business climate, including an improved bankruptcy law, an investment code and initial “negative list,” a law enabling public-private partnerships, and a supplemental law designed to improve the investment climate. The Government of Tunisia (GOT) has also encouraged entrepreneurship through the passage of the Start-Up Act. The GOT also passed the “organic budget law” to ensure greater budgetary transparency and make the public aware of government investment projects over a three-year period. These reforms will help Tunisia attract both foreign and domestic investment.
Tunisia’s strengths include its proximity to Europe, sub-Saharan Africa, and the Middle East, free-trade agreements with the EU and much of Africa, an educated workforce, and a strong interest in attracting foreign direct investment (FDI). Sectors such as agribusiness, aerospace, renewable energy, telecommunication technologies, and services are increasingly promising. The decline in the value of the dinar over recent years has strengthened investment and export activity in the electronic component manufacturing and textile sectors.
Nevertheless, substantial bureaucratic barriers to investment remain. State-owned enterprises play a large role in Tunisia’s economy, and some sectors are not open to foreign investment. The informal sector, estimated at 40 to 60 percent of the overall economy, remains problematic, as legitimate businesses are forced to compete with smuggled goods.
The United States has provided more than USD 500 million in economic growth-related assistance since 2011, in addition to loan guarantees in 2012, 2014, and 2016 that enabled the GOT to borrow nearly USD 1.5 billion at low interest.
|TI Corruption Perceptions Index||2019||74 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report||2019||78 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2019||70 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||USD 320 million||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2019||USD 3,360||http://data.worldbank.org/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The GOT is working to improve the business climate and attract FDI. The GOT prioritizes attracting and retaining investment, particularly in the underdeveloped interior regions, and reducing unemployment. More than 3,350 foreign companies currently operate in Tunisia, and the government has historically encouraged export-oriented FDI in key sectors such as call centers, electronics, aerospace and aeronautics, automotive parts, textile and apparel, leather and shoes, agro-food, and other light manufacturing. In 2019, the sectors that attracted the most FDI were energy (37 percent), services (12 percent), the electrical and electronic industry (20.6 percent), the mechanical industry (8.5 percent), and agro-food products (4 percent). Inadequate infrastructure in the interior regions results in the concentration of foreign investment in the capital city of Tunis and its suburbs (40.4 percent), the northern coastal region (20.5 percent), and the eastern coastal region (26.1 percent). Internal western and southern regions attracted only 13 percent of foreign investment despite special tax incentives for those regions.
The Tunisian Parliament passed an Investment Law (#2016-71) in September 2016 that went into effect April 1, 2017 to encourage the responsible regulation of investments. The law provided for the creation of three major institutions:
- The High Investment Council, whose mission is to implement legislative reforms set out in the investment law and decide on incentives for projects of national importance (defined as investment projects of more than 50 million dinars and 500 jobs).
- The Tunisian Investment Authority, whose mission is to manage investment projects of more than 15 million dinars and up to 50 million dinars. Investment projects of less than 15 million dinars are managed by the Foreign Investment Promotion Agency (FIPA).
- The Tunisian Investment Fund, which will fund foreign investment incentive packages.
These institutions were all launched in 2017. However, the Foreign Investment Promotion Agency (FIPA) continues to be Tunisia’s principal agency to promote foreign investment. FIPA is a one-stop shop for foreign investors. It provides information on investment opportunities, advice on the appropriate conditions for success, assistance and support during the creation and implementation of the project, and contact facilitation and advocacy with other government authorities.
Under the 2016 Investment Law (article 7), foreign investors have the same rights and obligations as Tunisian investors. Tunisia encourages dialogue with investors through FIPA offices throughout the country.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign investment is classified into two categories:
- “Offshore” investment is defined as commercial entities in which foreign capital accounts for at least 66 percent of equity, and at least 70 percent of the production is destined for the export market. However, investments in some sectors can be classified as “offshore” with lower foreign equity shares. Foreign equity in the agricultural sector, for example, cannot exceed 66 percent and foreign investors cannot directly own agricultural land, but agricultural investments can still be classified as “offshore” if they meet the export threshold.
- “Onshore” investment caps foreign equity participation at a maximum of 49 percent in most non-industrial projects. “Onshore” industrial investment may have 100 percent foreign equity, subject to government approval.
Pursuant to the 2016 Investment Law (article 4), a list of sectors outlining which investment categories are subject to government authorization (the “negative list”) was set by decree on May 11, 2018. The sectors include natural resources; construction materials; land, sea and air transport; banking, finance, and insurance; hazardous and polluting industries; health; education; and telecommunications. Per the decree, if the relevant government decision-making body does not respond to an investment request within a specified period, typically 60 days, the authorization is automatically granted to the applicant. The decree went into effect on July 1, 2018.
Other Investment Policy Reviews
In May 2019, the Tunisian Parliament adopted law 2019-47, a cross-cutting law that impacts legislation across all sectors. The law is designed to improve the country’s business climate and further improve its ranking in the World Bank’s Doing Business Report. Moreover, the law simplified the process of creating a business, permitted new methods of finance, improved regulations for corporate governance, and provided the private sector the right to operate a project under the framework of a public-private partnership (PPP).
The World Bank Doing Business 2020 report ranks Tunisia 19 in terms of ease of starting a business. In the Middle East and North Africa, Tunisia ranked second after the UAE, and first in North Africa ahead of Morocco (53), Egypt (114), Algeria (157), and Libya (186): .
The Agency for Promotion of Industry and Innovation (APII) and the Tunisia Investment Authority (TIA) are the focal point for business registration. Online project declaration for industry or service sector projects for both domestic and foreign investment is available at: .
The new online TIA platform allows potential investors to electronically declare the creation, extension, and renewal of all types of investment projects. The platform also allows investors to incorporate new businesses, request special permits, and apply for investment and tax incentives. .
APII has attempted to simplify the business registration process by creating a one-stop shop that offers registration of legal papers with the tax office, court clerk, official Tunisian gazette, and customs. This one-stop shop also houses consultants from the Investment Promotion Agency, Ministry of Employment, National Social Security Authority (CNSS), postal service, Ministry of Interior, and the Ministry of Trade. Registration may face delays as some agencies may have longer internal processes. Prior to registration business must first initiate an online declaration of intent, to which APII provides a notification of receipt within 24 hours.
The GOT does not incentivize outward investment, and capital transfer abroad is tightly controlled by the Central Bank.
2. Bilateral Investment Agreements and Taxation Treaties
The 2002 Trade and Investment Framework Agreement (TIFA) between Tunisia and the United States remains active. A meeting of the Bilateral Trade and Investment Council in May 2019 helped promote engagement and cooperative reform efforts. A Bilateral Investment Treaty (BIT) between Tunisia and the United States entered into force in 1993, and a bilateral agreement on avoidance of double taxation has been effective since January 1990.
In December 2019, Tunisia’s Ministry of Finance issued general public note no. 27/2019 to assist foreign companies, including those from the U.S., to use bilateral taxation treaties to avoid double taxation, penalties, or extra taxes imposed on companies residing in privileged tax territories, such as the State of Delaware, for example
Tunisia and the United States signed an Intergovernmental Agreement on the Foreign Account Tax Compliance Act (FATCA), which went into force in September 2019. FATCA requires foreign financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
Tunisia has multilateral and bilateral trade agreements with approximately 127 countries, including its neighbors, Libya and Algeria. Tunisia acceded to the Common Market for Eastern and Southern Africa (COMESA) in July 2018, and is seeking membership into the Economic Community of West African States (ECOWAS), and is a signatory of the African Continental Free Trade Area (AfCFTA). In January 2008, Tunisia’s Association Agreement with the EU went into effect, eliminating tariffs on industrial goods. Tunisia and the EU are negotiating a full-fledged free-trade agreement, but it has not yet been concluded. In addition, Tunisia is a signatory to the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which offers private sector political risk insurance. Tunisia is a member of the World Trade Organization and maintains bilateral agreements with Turkey and the member states of the European Free Trade Association (EFTA), as well as a multilateral agreements with other Arab League states.
In 2013, the Tunisian Parliament adopted the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
3. Legal Regime
Transparency of the Regulatory System
As stipulated in the 2014 constitution, Tunisia has adopted a semi-parliamentary political system whereby power is shared among the Parliament, the Presidency of the Republic, and the Government, which is composed of a ministerial cabinet led by a Prime Minister (Head of Government). The Presidency and the Government fulfill executive roles. The Government creates the majority of laws and regulations; however, the Presidency of the Republic and Parliament also develop and propose laws.
The Parliament debates and votes on the adoption of legislation. Draft legislation is accessible to the public via the Parliament’s website.
Ministerial decrees and other regulations are debated at the level of the Government and adopted by a Ministerial Council headed by the Prime Minister.
After adoption, all laws, decrees, and regulations are published on the website of the Official Gazette and enforced by the Government at the national level.
The Government takes few proactive steps to raise public awareness of the public consultation period for new draft laws and decrees. Civil society, NGOs, and political parties are all pushing for increased transparency and inclusiveness in rule-making. Many draft bills, such as the budget law, were reviewed before submission for a final vote under pressure from civil society. Business associations, chambers of commerce, unions, and political parties reviewed the 2016 Investment Law prior to final adoption.
In January 2019, the Tunisian Parliament passed the Organic Budget Law, which is a foundational law defining the parameters for the government’s annual budgeting process. The law aimed to bring the budget process in line with principles expressed in the 2014 constitution by enlarging Parliament’s role in the budgetary process and strengthening the financial autonomy of the legislative and judiciary branches. The law required the government to organize its budget by policy objective, detail budget projections over a three-year timeframe, and revise its accounting system to ensure greater transparency.
Not all accounting, legal, and regulatory procedures are in line with international standards. Publicly listed companies adhere to national accounting norms.
The Parliament has oversight authority over the GOT but cannot ensure that all administrative processes are followed.
Tunisia is a member of the Open Government Partnership, a multilateral initiative that aims to secure concrete commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen governance: .
Most of Tunisia’s public finances and debt obligations are debated and voted on by the Parliament.
International Regulatory Considerations
As part of its negotiations toward a comprehensive free-trade agreement with the EU, the GOT is considering incorporating a number of EU standards in its domestic regulations.
Tunisia became a member of the WTO in 1995 and is required to notify the WTO regarding draft technical regulations on Technical Barriers to Trade (TBT). However, in October 2018 the Ministry of Commerce released a circular that temporarily restricted the import of certain goods without going through the WTO notification process, which negatively impacted some business operations without forewarning.
Tunisia has yet to ratify the WTO Trade Facilitation Agreement (TFA) that would improve processes at the port of entry. However, Tunisia submitted a “Category A” notification in September 2014 and a “Category C” notification in September 2019, which should have required the GOT to implement TFA measures by February 2017.
Legal System and Judicial Independence
The Tunisian legal system is secular and based on the French Napoleonic code and meets EU standards. While the 2014 Tunisian constitution guarantees the independence of the judiciary, constitutionally mandated reforms of courts and broader judiciary reforms are still ongoing.
Tunisia has a written commercial law but does not have specialized commercial courts.
Regulations or enforcement actions can be appealed at the Court of Appeals.
Laws and Regulations on Foreign Direct Investment
The 2016 Investment Law directs tax incentives towards regional development promotion, technology and high value-added products, research and development (R&D), innovation, small and medium-sized enterprises (SMEs), and the education, transport, health, culture, and environmental protection sectors. Foreign investors can apply for government incentives online through the Tunisian Investment Authority (TIA) website: .
The primary one-stop-shop webpage for investors looking for relevant laws and regulations is hosted at the Investment and Innovation Promotion Agency website, . The 2016 Investment Law (article 15) calls for the creation of an Investor’s Unique Point of Contact within the Ministry of Development, Investment, and International Cooperation to assist new and existing investors to launch and expand their projects.
In addition, the Parliament has adopted a number of economic reforms since 2015, including laws concerning renewable energy, competition, public-private partnerships, bankruptcy, and the independence of the Central Bank of Tunisia, as well as a Start-Up Act to promote the creation of new businesses and entrepreneurship.
Competition and Anti-Trust Laws
The 2015 Competition Law established a government appointed Competition Council to reduce government intervention in the economy and promote competition based on supply and demand.
This law voided previous agreements that fixed prices, limited free competition, or restricted the entry of new companies as well as those that controlled production, distribution, investment, technical progress, or supply centers. While the law ensures free pricing of most products and services, there are a few protected items, such as bread and electricity, for which the GOT can still intervene in pricing. Moreover, in exceptional cases of large increases or collapses in prices, the Ministry of Commerce reserves the right to regulate prices for a period of up to six months. The Ministry of Commerce also reserves the right to intervene in sectors to ensure free and fair competition. However, the Competition Council can make exceptions to its anti-trust policies if it deems it necessary for overall technical or economic progress.
The Competition Council also has the power to investigate competition-inhibiting cases and make recommendations to the Ministry of Commerce upon the Ministry’s request.
Expropriation and Compensation
There are no outstanding expropriation cases involving U.S. interests. The 2016 Investment Law (article 8) stipulates that investors’ property may not be expropriated except in cases of public interest. Expropriation, if carried out, must comply with legal procedures, be executed without discrimination on the basis of nationality, and provide fair and equitable compensation.
U.S. investments in Tunisia are protected by international law as stipulated in the U.S.-Tunisia Bilateral Investment Treaty (BIT). According to Article III of the BIT, the GOT reserves the right to expropriate or nationalize investments for the public good, in a non-discriminatory manner, and upon advance compensation of the full value of the expropriated investment. The treaty grants the right to prompt review by the relevant Tunisian authorities of conformity with the principles of international law. When compensation is granted to Tunisian or foreign companies whose investments suffer losses owing to events such as war, armed conflict, revolution, state of national emergency, civil disturbance, etc., U.S. companies are accorded “the most favorable treatment in regards to any measures adopted in relation to such losses.”
ICSID Convention and New York Convention
Tunisia is a member of the International Center for the Settlement of Investment Disputes (ICSID) and is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Investor-State Dispute Settlement
U.S. investments in Tunisia are protected by international law as stipulated in the U.S.-Tunisia Bilateral Investment Treaty (BIT). The BIT stipulates that procedures shall allow an investor to take a dispute with a party directly to binding third-party arbitration.
Disputes involving U.S. persons are relatively rare. Over the past 10 years, there were three dispute cases involving U.S. investors; two were settled and one is still ongoing. U.S. firms have generally been successful in seeking redress through the Tunisian judicial system.
The Tunisian Code of Civil and Commercial Procedures allows for the enforcement of foreign court decisions under certain circumstances, such as arbitration.
There is no pattern of significant investment disputes or discrimination involving U.S. or other foreign investors.
International Commercial Arbitration and Foreign Courts
The Tunisian Arbitration Code brought into effect by Law 93-42 of April 26, 1993, governs arbitration in Tunisia. Certain provisions within the code are based on the United Nations Commission on International Trade Law (UNCITRAL) model law. Tunisia has several domestic dispute resolution venues. The best known is the Tunis Center for Conciliation and Arbitration. When an arbitral tribunal does not adhere to the rules governing the process, either party can apply to the national courts for relief. Unless the parties have agreed otherwise, an arbitral tribunal may, on the request of one of the parties, order any interim measure that it deems appropriate.
Parliament adopted in April 2016 a new bankruptcy law that replaced Chapter IV of the Commerce Law and the Recovery of Companies in Economic Difficulties Law. These two laws had duplicative and cumbersome processes for business rescue and exit and gave creditors a marginal role. The new law increases incentives for failed companies to undergo liquidation by limiting state collection privileges. The improved bankruptcy procedures are intended to decrease the number of non-performing loans and facilitate access of new firms to bank lending.
According to the World Bank Doing Business 2020 report, Tunisia’s recovery rate (how much creditors recover from an insolvent firm at the end of insolvency proceedings) is about 51.3 cents on the dollar, compared to 27.3 cents for MENA and 70.2 cents for OECD high-income countries.
4. Industrial Policies
Preferential status is usually linked to the percentage of foreign corporate ownership, percentage of production for the export market, and investment location. The 2016 Investment Law provides investors with a broad range of incentives linked to increased added value, performance and competitiveness, use of new technologies, regional development, environmental protection, and high employability.
To incentivize the employment of new university graduates, the GOT assumes the employer’s portion of social security costs (16 percent of salary) for the first seven years of the investment, with an extension of up to 10 years in the interior regions. Investments with high job-creation potential may benefit from the purchase of state-owned land at the price of one Tunisian dinar per square meter. Investors who purchase companies in financial distress may also benefit from tax breaks and social security assistance. These advantages are determined on a case-by-case basis.
Further benefits are available for offshore investments, such as 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, semi-finished goods, and services necessary for operation.
On March 9, 2017, the GOT adopted decree no. 2017-389 on financial incentives to investment in priority sectors, economic performance areas, and regional development. Investors have to declare their projects through the regional FIPA and APII offices to receive incentives. Investors can also request incentives online through the Tunisian Investment Authority (TIA) website: .
According to the World Bank’s Doing Business 2020 report, Tunisia’s overall ranking improved to 78 out of 190 countries, from 80 the previous year.
Foreign Trade Zones/Free Ports/Trade Facilitation
Tunisia has free-trade zones, officially known as “Parcs d’Activités Economiques,” in Bizerte and Zarzis. While the land is state-owned, a private company manages the free-trade zones. They enjoy adequate public utilities and fiber-optic connectivity. Companies established in the free-trade zones are exempt from taxes and customs duties and benefit from unrestricted foreign exchange transactions, as well as limited duty-free entry into Tunisia of inputs for transformation and re-export. Factories operate as bonded warehouses and have their own assigned customs personnel.
For example, companies in Bizerte’s free-trade zone may rent space for three Euros per square meter annually – a level unchanged since 1996 – plus a low service fee. Long-term renewable leases, up to 25 years, are subject to a negotiable 3 percent escalation clause. Expatriate personnel are allowed duty-free entry of personal vehicles. During the first year of operations, companies within the zone must export 100 percent of their production. Each following year, the company may sell domestically up to 30 percent of the previous year’s total volume of production, subject to local customs duties and taxes. Lease termination has not been a problem, and all companies that desired to depart the zone reportedly did so successfully.
Performance and Data Localization Requirements
Foreign resident companies face restrictions related to the employment and compensation of expatriate employees. The 2016 Investment Law limits the percentage of expatriate employees per company to 30 percent of the total work force (excluding oil and gas companies) for the first three years and to 10 percent starting in the fourth year. There are somewhat lengthy renewal procedures for annual work and residence permits, and the GOT has announced its intention to ease them in the future. Although rarely enforced, legislation limits the validity of expatriate work permits to two years.
Central Bank regulations impose administrative burdens on companies seeking to pay for temporary expatriate technical assistance from local revenue. For example, before it receives authorization to transfer payment from its operations in Tunisia, a foreign resident company that utilizes a foreign accountant must document that the service is necessary, fairly valued, and unavailable in Tunisia. This regulation hinders a foreign resident company’s ability to pay for services performed abroad.
The host government does not follow “forced localization,” but encourages the use of domestic content.
There are no requirements for foreign information technology (IT) providers to turn over source code that is protected by the intellectual property law; however, they are required to inform the Ministry of Communication Technologies and Digital Economy about encrypted equipment.
Public companies and institutions are prohibited by the Ministry of Communication Technologies and Digital Economy from freely transmitting and storing personal data outside of the country.
Private and public institutions must comply with the recommendations of the National Authority for Personal Data Protection (INPDP) when handling personal data, even if it is business-related. The National Institute of Office Automation and Micro-computing (INBMI) enforces the rules on local data storage.
Until recently, performance requirements were generally limited to investment in the petroleum sector. Now, such requirements are in force in sectors such as telecommunications and for private sector infrastructure projects on a case-by-case basis. 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).
5. Protection of Property Rights
Secured interests in property are enforced in Tunisia. Mortgages and liens are in common use, and the recording system is reliable.
Foreign and/or non-resident investors are allowed to lease any type of land, but can only acquire non-agricultural land.
A large portion of privately held land, especially agriculture land, has no clear title, and the government is investing a great deal of effort to encourage people to clear and register their properties. For the past ten years, it has been estimated that privately held land accounts for approximately 45 percent.
Properties legally purchased must be duly registered to ensure they remain the property of their actual owners, even if they have been unoccupied for a long time.
According to the World Bank’s Doing Business 2020 report, registering a property in Tunisia is done in five steps, takes 35 days, and costs around 6.1 percent of the total property cost. In North Africa, Tunisia ranks second after Morocco but is ahead of Egypt, Algeria, and Libya.
Intellectual Property Rights
Tunisia is a member of the World Intellectual Property Organization (WIPO) and signatory to the United Nations 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). Tunisia also is party to the Madrid Protocol for the International Registration of Marks. Foreign patents and trademarks should be registered with INNORPI.
Tunisia’s patent and trademark laws are designed to protect owners duly registered in Tunisia. In the area of patents, foreign 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 (OTDAV — Office Tunisien des Droits d´Auteurs et des Droits Voisins), which also represents foreign copyright organizations.
The 2009 Intellectual Property law greatly expanded the current scope of protections. The minimum fine for counterfeiting is 10,000 Tunisian dinars (approximately USD 3,800), and copyright protection is valid for the holder’s lifetime. Customs agents have the authority to seize suspected counterfeit goods immediately. Tunisia’s 2014 constitution enshrined intellectual property protection in article 41.
If customs officials suspect a copyright violation, they are permitted to inspect and seize suspected goods. For products utilizing foreign trademarks registered at INNORPI, the Customs Code empowers customs agents to enforce intellectual property rights (IPR) throughout the country. Tunisian copyright law applies to literary works, art, scientific works, new technologies, and digital works. Its application and enforcement, however, have not always been consistent with foreign commercial expectations. Print, audio, and video media are particularly susceptible to copyright infringement in Tunisia. Smuggling of illegal items takes place through Tunisia’s porous borders.
In 2015, the GOT issued a decree defining registration and arbitration procedures for trade and service marks, and establishing a national trademark registry. The new decree contained provisions governing the registration of trademarks under the Madrid Protocol and included improvements such as the extension of the deadline for opposition to the registration of trademarks, as well as the electronic filing of applications for trademarks registration.
In March 2020, the Tunisian Parliament approved the government’s request for Tunisia to host the headquarters of the Pan-African Intellectual Property Body (PAIPO). Tunisia is waiting for at least 14 African countries to ratify the formation of PAIPO in order for it to enter into force.
The registration of pharmaceutical drugs in Tunisia requires that the product is both registered and marketed in the country of origin. In 2005, Tunisia removed its restriction on pharmaceutical imports where there are similar generic products manufactured locally.
Resources for Rights Holders
Intellectual Property Attaché for the Middle East and North Africa
U.S. Embassy Kuwait City, Kuwait
U.S. Department of Commerce Global Markets
U.S. Patent and Trademark Office
Tel: +965 2259 1455
6. Financial Sector
Capital Markets and Portfolio Investment
Tunisia’s financial system is dominated by its banking sector, with banks accounting for roughly 85 percent of financing in Tunisia. Overreliance on bank financing impedes economic growth and stronger job creation. Equity capitalization is relatively small; Tunisia’s stock market provided 13.2 percent of corporate financing in 2017 according to the Financial Market Council annual report. Other mechanisms, such as bonds and microfinance, contribute marginally to the overall economy.
Created in 1969, the Bourse de Tunis (Tunis stock exchange) listed 82 companies as of December 2019. The total market capitalization of these companies was USD 8.41 billion, equivalent to 23.1% of the GDP. During the last five years, the exchange’s regulatory and accounting systems have been brought more in line with international standards, including compliance and investor protections. The exchange is supervised and regulated by the state-run Capital Market Board. Most major global accounting firms are represented in Tunisia. Firms listed on the stock exchange must publish semiannual corporate reports audited by a certified public accountant. Accompanying accounting requirements exceed what many Tunisian firms can, or are willing to, undertake. GOT tax incentives attempt to encourage companies to list on the stock exchange. Newly listed companies that offer a 30 percent capital share to the public receive a five-year tax reduction on profits. In addition, individual investors receive tax deductions for equity investment in the market. Capital gains are tax-free when held by the investor for two years.
Foreign investors are permitted to purchase shares in resident (onshore) firms only through authorized Tunisian brokers or through established mutual funds. To trade, non-resident (offshore) brokers require a Tunisian intermediary and may only service non-Tunisian customers. Tunisian brokerage firms may have foreign participation, as long as that participation is less than 50 percent. Foreign investment of up to 50 percent of a listed firm’s capital does not require authorization.
Money and Banking System
According to the Central Bank of Tunisia (CBT) annual report on banking supervision published in January 2020, Tunisia hosts 30 banks, of which 23 are onshore and seven are offshore. Onshore banks include three Islamic banks, two microcredit and SME financing banks, and 18 commercial universal banks.
Domestic credit to the private sector provided by banks stood at 68 percent of GDP in 2018. According to the World Bank, this level is higher than the MENA region average of 56.7 percent. In the World Bank’s Doing Business 2020 survey, Tunisia’s ranking in terms of ease of access to credit went down from 99 in 2019 to 104 in 2020. Tunisia’s banking system penetration has grown by four percent annually for the past five years. 87 percent of banks are located in the coastal regions, with about 41 percent in the greater Tunis area alone. Tunisia’s banking system activity is mainly within the 23 onshore banks, which accounted for 92 percent of assets, 93 percent of loans, and 97 percent of deposits in 2018. They offer identical services targeting Tunisia’s larger corporations. Meanwhile, SMEs and individuals often have difficulty accessing bank capital due to high collateral requirements.
Foreign banks are permitted to open branches and establish operations in Tunisia under the offshore regime and are subject to the supervision of the Central Bank.
Government regulations control lending rates. This prevents banks from pricing their loan portfolios appropriately and incentivizes bankers to restrict the provision of credit. Competition among Tunisia’s many banks has the effect of lowering observed interest rates; however, banks often place conditions on loans that impose far higher costs on borrowers than interest rates alone. These non-interest costs may include collateral requirements that come in the form of liens on real estate. Often, collateral must equal or exceed the value of the loan principal. Collateral requirements are high because banks face regulatory difficulties in collecting collateral, thereby adding to costs. According to the CBT banking supervision report, nonperforming loans (NPLs) were at 13.4 percent of all bank loans in 2018, mostly in the agriculture (27.1 percent) and tourism (46 percent) sectors.
Beyond the banks and stock exchange, few effective financing mechanisms are available in the Tunisian economy. A true bond market does not exist, and government debt sold to financial institutions is not re-traded on a formal, transparent secondary market. Private equity remains a niche element in the Tunisian financial system. Firms experience difficulty raising sufficient capital, sourcing their transactions, and selling their stakes in successful investments once they mature. The microfinance market remains underexploited, with non-governmental organization Enda Inter-Arabe the dominant lender in the field.
The GOT recognizes two categories of financial service activity: banking (e.g., deposits, loans, payments and exchange operations, and acquisition of operating capital) and investment services (reception, transmission, order execution, and portfolio management). Non-resident financial service providers must present initial minimum capital (fully paid up at subscription) of 25 million Tunisian dinars (USD 8.5 million) for a bank, 10 million dinars (USD 3.4 million) for a non-bank financial institution, 7.5 million dinars (USD 2.6 million) for an investment company, and 250,000 dinars (USD 85,200) for a portfolio management company.
Foreign Exchange and Remittances
The Tunisian Dinar can only be traded within Tunisia, and it is illegal to move dinars out of the country. The dinar is convertible for current account transactions (export-import operations, remittances of investment capital, earnings, loan or lease payments, royalties, etc.). Central Bank authorization is required for some foreign exchange operations. For imports, Tunisian law prohibits the release of hard currency from Tunisia as payment prior to the presentation of documents establishing that the merchandise has been shipped to Tunisia.
In 2019, the dinar depreciated 10 percent against the dollar and 5 percent against the Euro.
Non-residents are exempt from most exchange regulations. Under foreign currency regulations, non-resident companies are defined as having:
- Non-resident individuals who own at least 66 percent of the company’s capital, and
- Capital fully financed by imported foreign currency.
Foreign investors may transfer funds at any time and without prior authorization. This applies to principal as well as dividends or interest capital. The procedures for repatriation are complex, however, and within the discretion of the Central Bank. The difficulty in the repatriation of capital and dividends is one of the most frequent complaints of foreign investors in Tunisia.
There are no limits to the amount of foreign currency that visitors can bring to Tunisia to exchange into local currency. However, amounts exceeding the equivalent of 25,000 dinars (USD 8,500) must be declared to customs 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 dinars (USD 1,700). Tunisian customs authorities may require currency exchange receipts on exit from the country.
Tunisia’s 2016 Investment Law enshrines the right of foreign investors to transfer abroad funds in foreign currency with minimal interference from the Central Bank. Ministerial decree no. 417 of May 2018 stipulates that the Central Bank of Tunisia must decide on foreign currency remittance requests within 90 days. In case of no response, the investor may contact the Higher Investment Authority, which will give final approval within 30 days.
Sovereign Wealth Funds
By decree no.85-2011, the GOT established a sovereign wealth fund, “Caisse des Depots et des Consignations” (CDC), to boost private sector investment and promote small and medium enterprise (SME) development. It is a state-owned investment entity responsible for independently managing a portion of the state’s financial assets. The CDC was set up with support from the French CDC and the Moroccan CDG (Caisse de Depots et de Gestion) and became operational in early 2012. The original impetus for the creation of the CDC was to manage assets confiscated from the former ruling family as independently as possible in order to serve the public interest. More information is available about the CDC at . As of June 2019, CDC had 7.7 billion dinars (USD 2.6 billion) in assets and 317 million dinars (USD 110 million) in capital.
All CDC investments are made locally, with the objective of boosting investments in the interior regions and promoting SME development.
The CDC is governed by a supervisory committee composed of representatives from different ministries and chaired by the Minister of Finance.
7. State-Owned Enterprises
State-owned enterprises (SOEs) are still prominent throughout the economy. Many compete with the private sector, in industries such as telecommunications, banking, and insurance, while others hold monopolies in sectors considered sensitive by the government, such as railroad transportation, water and electricity distribution, and port logistics. Importation of basic food staples and strategic items such as cereals, rice, sugar, and edible oil also remains under SOE control.
The GOT appoints senior management officials to SOEs, who report directly to the ministries responsible for the companies’ sector of operation. SOE boards of directors include representatives from various ministries and personnel from the company itself. Similar to private companies, the law requires SOEs to publish independently audited annual reports, regardless of whether corporate capital is publicly traded on the stock market.
The GOT encourages SOEs to adhere to OECD Guidelines on Corporate Governance, but adherence is not enforced. Investment banks and credit agencies tend to associate SOEs with the government and consider them as having the same risk profile for lending purposes.
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 list of assets involved every major economic sector. According to the Commission to Investigate Corruption and Malfeasance, a court order is required to determine the ultimate handling of frozen assets.
Because court actions frequently take years –and with the government facing immediate budgetary needs – the GOT allowed privatization bids for shares in Ooredoo (a foreign telecommunications company of which 30 percent of shares were confiscated from the previous regime), Ennakl (car distribution), Carthage Cement (cement), City Cars (car distribution), and Banque de Tunisie and Zitouna Bank (banking). The government is expected to sell some of its stakes in state-owned banks; however, no clear plan has been adopted or communicated so far due to fierce opposition by labor unions.
8. Responsible Business Conduct
Tunisia adopted law no. 35 in June 2018 to encourage Corporate Social Responsibility (CSR). The law requires companies to allocate a portion of their budgets to finance CSR projects such as those in sustainable development, green economy, and youth employment. According to the law, an organization in charge of monitoring CSR projects will be created to ensure that the projects comply with the principles of good governance and sustainable development. Tunisia is an adherent to the OECD Guidelines for Multinational Enterprises.
Since 1989, the public sector has been subject to a government procurement law that requires labor, environmental, and other impact studies for large procurement projects. All public institutions are subject to audits by the Court of Auditors (Cour des Comptes).
The Tunisian Central Bank issued a circular in 2011 setting guidelines for sound and prudent business management and guaranteeing and safeguarding the interests of shareholders, creditors, depositors and staff. The circular also established policies on recruitment, appointment, and remuneration, as well as dissemination of information to shareholders, depositors, market counterparts, regulators, and the general public.
In May 2019, the Parliament adopted law no. 2019-47, which introduced in Chapter 5 a set of articles designed to improve corporate governance and increase transparency. For example, the new legislation required that all companies listed on Tunisia’s stock exchange have on their board of directors at least two independent members, and separate individuals serving as the chairman of the board and the chief executive officer.
The national point of contact for OECD for Multinational Enterprises guidelines is:
Ministry of Development, Investment, and International Cooperation
Avenue Mohamed V
Tel: +216 7184 9596
Fax: +216 7179 9069
Tunisia has not yet joined the Extractive Industries Transparency Initiative (EITI). However, Tunisia participated in the eighth world conference of the EITI in Paris, France, in 2019.
Per Tunisia’s 2014 constitution, projects related to commercial development of oil, natural gas, or minerals are subject to Parliamentary approval.
Most U.S. firms involved in the Tunisian market do not identify corruption as a primary obstacle to foreign direct investment. However, some have reported that routine procedures for doing business (customs, transportation, and some bureaucratic paperwork) are sometimes tainted by corrupt practices. Transparency International’s Corruption Perceptions Index 2019 gave Tunisia a score of 43 out of 100 and a rank of 74 among 180 countries which was the same as in 2018. Regionally, Tunisia is ranked 7 for transparency among MENA countries and first in North Africa, ahead of Morocco, Algeria, Egypt, and Libya. Transparency International expressed concern that Tunisia’s score has not improved in recent years despite advances in anti-corruption legislation, including laws to protect whistleblowers, improve access to information, and encourage asset declarations by public officials or individuals with public trust roles.
Recent government efforts to combat corruption include: the seizure and privatization of assets belonging to Ben Ali’s family members; assurances that price controls on food products, and gasoline are respected; enhancement of commercial competition in the domestic market; establishment of a Minister in Charge of Public Service, Good Governance, Anti-corruption; arrests of corrupt businessmen and officials; and harmonization of Tunisian corruption laws with those of the European Union.
The constitution requires those holding high government offices to declare assets “as provided by law.” In 2018 parliament adopted the Assets Declaration Law, identifying 35 categories of public officials required to declare their assets upon being elected or appointed and upon leaving office. By law the National Authority for the Combat Against Corruption (INLUCC) is then responsible for publishing the lists of assets of these individuals on its website. In addition the law requires other individuals in specified professions that have a public role to declare their assets to INLUCC, although this information would not be made public. This provision applies to journalists, media figures, civil society leaders, political party leaders, and union officials. The law also enumerates a “gift” policy, defines measures to avoid conflicts of interest, and stipulates the sanctions that apply in cases of illicit enrichment. In 2019, Tunisia’s newly elected government officials declared their assets, including the 217 Members of Parliament.
In February 2017, Parliament passed law no. 2017-10 on corruption reporting and whistleblower protection. The legislation was a significant step in the fight against corruption, as it establishes the mechanisms, conditions, and procedures for denouncing corruption. Article 17 of the law provides protection for whistleblowers, and any act of reprisal against them is considered a punishable crime. For public servants, the law also guarantees the protection of whistleblowers against possible retaliation from their superiors. In September 2017, the GOT established the Independent Access to Information Commission. This authority was prescribed in the 2016 Access to Information Law to proactively encourage government agencies to comply with the new law and to adjudicate complaints against the government for failing to comply with the law. Following the passage of the access to information and whistleblower protection laws, the government initiated an anti-corruption campaign led by then prime minister Youssef Chahed. A series of arrests and investigations targeted well-known businesspersons, politicians, journalists, police officers, and customs officials. Preliminary charges included embezzlement, fraud, and taking bribes.
Tunisia’s penal code devotes 11 articles to defining and classifying corruption and assigns corresponding penalties (including fines and imprisonment). Several other regulations also address broader concepts of corruption. Detailed information on the application of these laws and their effectiveness in combating corruption is not publicly available, and there are no GOT statistics specific to corruption. The Independent Commission to Investigate Corruption, created in 2011, handled corruption complaints from 1987 to 2011. The commission referred 5 percent of cases to the Ministry of Justice. In 2012, the commission was replaced by the National Authority to Combat Corruption (INLUCC), which has the authority to forward corruption cases to the Ministry of Justice, give opinions on legislative and regulatory anti-corruption efforts, propose policies and collect data on corruption, and facilitate contact between anti-corruption efforts in the government and civil society.
During a March 16, 2019 press conference, INLUCC president Chawki Tabib said that it takes seven to 10 years on average for corruption cases to be processed in the judicial system. In 2018 the Tunisian Financial Analysis Committee, which operates under the auspices of the Central Bank as a financial intelligence unit, announced that it froze approximately 200 million dinars ($70 million) linked to suspected money-laundering transactions. The committee received approximately 600 reports of suspicious transactions related to corruption and illicit financial flows during the year.
Since 1989, a comprehensive law designed to regulate each phase of public procurement has governed the public sector. The GOT also established the Higher Commission on Public Procurement (HAICOP) to supervise the tender and award process for major government contracts. The government publicly supports a policy of transparency. Public tenders require bidders to provide a sworn statement that they have not and will not, either by 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. Starting September 2018, the government imposed by decree that all public procurement operations be conducted electronically via a bidding platform called Tunisia Online E-Procurement System (TUNEPS). Despite the law, competition on government tenders appears susceptible to corrupt behavior. Pursuant to the Foreign Corrupt Practices Act (FCPA), the U.S. Government requires that American companies requesting U.S. Government advocacy certify that they do not participate in corrupt practices.
Resources to Report Corruption
Contacts at agencies responsible for combating corruption:
The National Anti-Corruption Authority (Instance Nationale de Lutte Contre la Corruption – INLUCC)
71 Avenue Taieb Mhiri, 1002 Tunis Belvédère – Tunisia
+216 71 840 401 / Toll Free: 80 10 22 22
I WATCH Tunisia
14 Rue d’Irak 1002 Lafayette, Tunisia
+ 216 71 844 226
10. Political and Security Environment
In September and October 2019, Tunisia held presidential and parliamentary elections, the country’s first since its post-revolution constitution was ratified in 2014, which were widely regarded as well-executed and credible. The transition of power was smooth and without incident, following a clear procedure outlined by the 2014 constitution. Newly elected President Kais Saied designated former Minister of Finance Elyes Fakhfakh to form a new coalition government, which he did on February 27. In the nine years since the revolution, Tunisia has made significant progress in the areas of civil society and rights-based reforms, but economic indicators continue to lag and have been a major driver of frequent protests. Public opinion polls indicated that corruption, poor economic conditions, and persistently high unemployment fuel public discontent with the political class. While ideological differences with respect to religion dominate much of the political discord, differing economic ideologies – whether Tunisia will follow a statist economic model or a liberal one – have more tangible effects on policy. The country’s first municipal elections, held in May 2018, were a critical first step in the decentralization process, which should help alleviate some of the economic disparity between the relatively wealthy coastal areas and the relatively poor interior of the country.
Two major terrorist attacks targeting the tourism sector occurred in 2015, killing dozens of foreign tourists at the Bardo National Museum in Tunis and a beach hotel in Sousse. Security conditions have markedly improved since then. Travelers are urged to visit www.travel.state.gov for the latest travel alerts and warnings regarding Tunisia.
11. Labor Policies and Practices
Tunisia has a labor force of approximately 5.4 million. The official 2019 unemployment rate was 15.5 percent. However, the registered unemployment for the fourth quarter of 2019 was 14.9 percent. Approximately 28.2 percent of the unemployed are university graduates, of which three quarters are women. Official statistics do not count underemployment or provide disaggregated data by geography. As Tunisia works on creating a sustainable economy for its new democracy, professionals, such as IT engineers, doctors, and professors, continue to seek employment abroad. Tunisian interlocuters maintain that around 70 percent of Tunisian young professionals seek employment in other countries after graduation. Additionally, a World Bank study estimated that 41.5 percent of the Tunisian workforce is employed in the parallel economy. Official statistics do not count underemployment.
Over the past two decades, the structure of the workforce remained relatively stable, and as of the last quarter of 2019, it stood at 13.8 percent in agriculture and fishing, 33.9 percent in industry, and 51.8 percent in commerce and services. Tunisia has developed its industrial sector and created low-skilled employment, although several manufacturers struggle to find qualified technical workers. Tunisian law provides workers with the right to organize, form and join unions, and bargain collectively. The law prohibits anti-union discrimination by employers and retribution against strikers. The government generally enforces applicable laws. Currently, four national labor confederations operate in Tunisia. The oldest and largest is the General Union of Tunisian Workers (UGTT — Union Générale des Travailleurs Tunisiens). The others are the General Confederation of Tunisian Workers (CGTT — Confederation Générale des Travailleurs Tunisiens), the Tunisian Labor Union (UTT — Union Tunisienne du Travail), created in May 2011, and the Tunisian Labor Organization (OTT — Organisation Tunisienne du Travail), created in August 2013. UGTT claims about one third of the salaried labor force as members, although more are covered under 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 GOT. These tripartite agreements set industry standards and generally apply to about 80 percent of the private sector labor force, regardless of whether individual companies are unionized. The regional tripartite commissions also arbitrate labor disputes.
Public Wage Increase: On February 7, 2019, the GOT and UGTT reached an agreement to increase salaries for civil servants commensurate with the October 20, 2018 increase for SOE employees. Depending on grades and positions, increases ranged from 66 to 90 dinars per month, retroactively covering calendar years 2017 and 2018. In July and August 2019, the GOT and UGTT negotiated a general pay increase for civil servants, to include a special increase for skilled professionals, covering the 2019 calendar year. Negotiated increases ranged from 70 to 90 dinars a month depending on the grade and position.
Minimum Wage Increase: On July 14, 2018, former Prime Minister Youssef Chahed decided to raise the minimum wage (SMIG) by 6 percent retroactively, starting from May 2018, for the 48- and 40-hour work week regimes. For the 48-hour regime, the minimum wage is 378.56 dinars per month. For the 40-hour regime, it is 323.43 dinars per month. In May 2019, Chahed approved an increase in the monthly minimum wage for industrial and agricultural workers to 403 dinars. The minimum wage exceeds the poverty income level of 180 dinars per month.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
The Development Finance Corporation (DFC), a new U.S. government agency, provides financing for private development projects. Created by the Better Utilization of Investments Leading to Development (BUILD) Act of 2018, the DFC consolidated and modernized the former Overseas Private Investment Corporation (OPIC) and Development Credit Authority (DCA) of the United States Agency for International Development (USAID). In addition to the existing capabilities of OPIC and DCA, the DFC has an investment cap of USD 60 billion, more than double that of OPIC, and new financial tools. These tools include equity financing; technical assistance; feasibility studies; the ability to use local currency loans and first-loss guarantees to reduce risks; a “preference” for U.S. investors, rather than a requirement, thereby expanding partnership opportunities with foreign investors; and, a prioritization of low- and lower-middle income countries.
Outside of energy infrastructure projects in Europe and Eurasia, high income countries (as defined by the World Bank) generally do not qualify for DFC support. OPIC was active in Tunisia since 1963 and executed a number of investments and debt transactions. From the prior OPIC portfolio in Tunisia, the DFC currently has an active $50-million credit-guarantee facility with local banks to increase access to finance for small and medium-sized enterprises.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2018 published in June 2019.
FIPA, which is the host country statistical source for FDI stock, does not track the stock of foreign investment in energy and uses statistics that are constant 2010.
|Foreign Direct Investment Flows (excluding energy) in Tunisia in 2019|
|From Top Five Sources (US Dollars, Millions)|
|Inward Foreign Direct Investment||Outward Foreign Direct Investment|
|Total Inward||535.17||100%||Total Outward||47.18||100%|
|“0” reflects amounts rounded to +/- USD 500,000.|
*Sources: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2019 published in February 2020. Central Bank of Tunisia (CBT) yearend December 2019 published in February 2020.
|Portfolio Investment Assets in Tunisia in 2019|
|(Millions, current US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||57.65||100%||All Countries||N/A||All Countries||N/A|
*Source: Tunisia’s Foreign Investment Promotion Agency (FIPA) yearend December 2019 published in February 2020.
Central Bank of Tunisia
*Tunisia was not covered by the IMF’s Coordinated Portfolio Investment Survey (CPIS).
14. Contact for More Information
Embassy Tunis Commercial Section
U.S. Embassy Tunis, Les Berges du Lac, 1053, Tunisia
+216 71 107 000