1. Openness To, and Restrictions Upon, Foreign Investment
The GOT has made efforts to improve the business climate and attract FDI. The GOT prioritizes attracting and retaining investment, particularly in the underdeveloped interior regions, and reducing unemployment by providing tax breaks, subsidizing social security fee contributions for new hires, and offering investment bonuses. However, government policies have not always yielded the anticipated flow of foreign investment in the country, and political developments have had a mitigating effect. More than 3,700 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. Through the first half of 2021, the sectors that attracted the most FDI were electrical and electronic (31.3 percent), energy (29 percent), services (10 percent), mechanical (8.2 percent), and agro-food (7.4 percent). Inadequate infrastructure in the interior regions results in the concentration of foreign investment in the capital city of Tunis and its suburbs (54.7 percent), the northern coastal region (20 percent), the eastern coastal region (18.8 percent), and the northwest region (5.7 percent). Internal western and southern regions attracted only 0.8 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 ($17.9 million) and 500 jobs).
- The Tunisian Investment Authority, whose mission is to manage investment projects of more than 15 million dinars ($5.4 million) and up to 50 million dinars ($17.9 million). Investment projects of less than 15 million dinars ($5.4 million) are managed by the Agency for Promotion of Industry and Innovation (APII).
- The Tunisian Investment Fund, which funds 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.
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 no. 417 of 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. The decree specified the deadline to respond to authorization requests for most government agencies and fixed a deadline of 60 days for all other government decision-making bodies not specifically mentioned in the decree. The decree went into effect on July 1, 2018.
In June 2021, the government announced the elimination of government authorization requirements for 27 business activities in various sectors, about 10 percent of the total authorization categories. The change allows foreign and local investors to open businesses under conditions detailed in books of specifications without waiting for a government license. The action is meant to revive an economy heavily impacted by the COVID-19 pandemic and boost investment in sectors such as tourism, transportation, finance, and renewable energy.
For example, government authorizations are no longer required for business ventures such as the opening of shopping malls and supermarkets, operation of certain aircraft for tourism and leisure activities, management of financial portfolios by non-resident companies, organization of sporting events, cement manufacturing, self-production of electricity from renewable energies under 1 megawatt, import and marketing of films, sale and distribution of tobacco and alcohol, and import of used clothes. While the government decree has yet to be published, the elimination of authorization categories will likely improve Tunisia’s investment climate.
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. 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 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 2019 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 and Export Development. Registration may face delays as some agencies may have longer internal processes. Prior to registration, a business must first initiate an online declaration of intent, to which APII provides a notification of receipt within 24 hours.
For agriculture and fisheries, business registration information can be found on the Agricultural Investment Promotion Agency’s (APIA) website: . In February 2022, APIA announced the establishment of a 100% online investment declaration service for Tunisian and foreign investors in agricultural projects. The online service provides investors with an electronic investment declaration certificate (in PDF format) authenticated by a QR code. The service is accessible through “Espace Promoteur”
The GOT does not incentivize outward investment, and capital transfer abroad is tightly controlled by the Central Bank.
6. Financial Sector
Tunisia’s financial system is dominated by its banking sector, with banks accounting for roughly 85 percent of financing in Tunisia. The GOT’s overreliance on bank financing impedes economic growth and stronger job creation. Equity capitalization is relatively small; Tunisia’s stock market provided 9.1 percent of corporate financing in 2019 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 85 companies as of December 2021. Market capitalization increased by 0.74 percent to $8.3 billion (19 percent of GDP), versus $7.9 billion in 2020 (19.7 percent of GDP). Financial institutions still dominate market capitalization with a share of 42.3 percent. Foreign transactions generated a net outflow of $99.2 million in 2021, and their share of market capitalization declined to 23.1 percent in 2021 versus 25.3 percent in 2020; only a small share of foreign capitalization is floating. 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. Listing on the stock exchange helps ensure transparent financial statements, whereby the public sharing of certified financial statements has generally discouraged the introduction of more companies on the stock exchange.
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.
According to the Central Bank of Tunisia (CBT) annual report on banking supervision published in January 2022, 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 64 percent of GDP in 2019. According to the World Bank, this level is higher than the MENA region average of 56.7 percent. Eighty-seven percent of banks are located in the coastal regions, with about 41 percent in the greater Tunis area alone. The number of bank accounts has increased by 5 percent over the last five years to reach 10.3 million accounts at the end of 2020, of which 6 million are savings accounts.
Tunisia’s banking system activity is mainly within the 23 onshore banks, which accounted for 92 percent of total assets, 94 percent of loans, and 96 percent of deposits in 2020. The onshore banks offer identical services targeting Tunisia’s larger corporations. Meanwhile, SMEs and individuals often have difficulty accessing bank capital due to high collateral requirements.
The CBT report noted that in 2020, overall lending totaled $32.8 billion, an increase of 5 percent compared to a 3.1 percent increase in 2019. Loans to professionals were driven mainly by the increase in commitments of public enterprises, which rose by $586 million in 2020 (26.8 percent increase). Loans to the private sector increased by only 2.4 percent in 2020, the same rate as the previous year. These credits benefited mostly industry, trade, real estate development and tourism sectors. Tourism — alone made up nearly 80 percent of the lending.
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 15.6 percent of all bank loans in 2020, mostly in the agriculture (28.4 percent) and tourism (41.3 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 challenges raising sufficient capital, sourcing their transactions, and selling their stakes in successful investments once they mature. The microfinance market remains underexploited, but profitable for microfinance institutions 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 ($8.9 million) for a bank, 10 million dinars ($3.5 million) for a non-bank financial institution, 7.5 million dinars ($2.6 million) for an investment company, and 250,000 dinars ($89,400) for a portfolio management company.
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 des 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 to serve the public interest. More information is available about the CDC at . As of June 2021, CDC had 9.7 billion dinars ($3.5 billion) in assets and 466 million dinars ($167 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.
10. Political and Security Environment
President Kais Saied was elected in the aftermath of presidential and parliamentary elections held in September and October 2019, the country’s first elections 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.
In the 10 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.
On July 25, citing widespread protests and political paralysis, President Saied took “exceptional measures” under Article 80 of the constitution to dismiss Prime Minister Hichem Mechichi, freeze parliament’s activities for 30 days, and lift the immunity of members of parliament. On August 23, Saied announced an indefinite extension of the “exceptional measures” period and on September 22, he issued a decree granting the president certain executive, legislative, and judiciary powers and authority to rule by decree, but allowed continued implementation of the preamble and chapters one and two, which guarantee rights and freedoms. Civil society organizations and multiple political parties raised concern that through these decrees President Saied granted himself unprecedented decision-making powers, without checks and balances and for an unlimited period. On September 29, Saied named Najla Bouden Romdhane as prime minister, and on October 11, she formed a government. On December 13, Saied announced a timeline for constitutional reforms including public consultations and the establishment of a committee to revise the constitution and electoral laws, leading to a national referendum in July 2022. Parliamentary elections would follow in December 2022. On March 30, President Saied issued a decree formally dissolving Parliament.
Terrorist groups continue to operate in the mountains of Western Tunisia and developments in Libya continue to affect the security situation along the Tunisian-Libyan border. Extremist groups, including ISIS affiliates, operate and recruit in the country’s interior, particularly in disadvantaged regions. Tunisia has been under a State of Emergency since November 24, 2015, following two major terrorist attacks that targeted tourism destinations. Under the state of emergency, security forces have more authority to maintain civil order, enabling the government to focus on combating terrorism. Despite COVID-19 and economic challenges that affect national resources, Tunisia continues to demonstrate consistent security force readiness to combat security threats. There have been no terrorist attacks targeting tourists or other western interests since June 2015. Extremist elements continue to target police and military forces in suspected “lone wolf” attacks, including in front of the U.S. Embassy on March 6, 2020, and more recently in November 2021 at the Ministry of Interior in downtown Tunis. Travelers are urged to visit for the latest travel alerts and warnings regarding Tunisia.