Econostrum | Economic News in the Mediterranean



Tunisia welcomes FDI with open arms

Energy, textiles, clothing, cement works. Foreign businesses from all these sectors have increased their investment in Tunisia over the last few years thanks to political stability and a more open economic and financial stance in the country. In a study for Femise, economist Sonia Seghir looks at what lies behind this success.

Low cost of labour is key to FDI. (Photo N.B.C)
Low cost of labour is key to FDI. (Photo N.B.C)
Now an open market, Tunisia saw foreign direct investment (FDI) increase from TND 402.9m in 1997 to TND 1,015.7m in 2005.

Low cost of labour is key to FDI, but it is losing its importance because the technological revolution is gradually taking hold in traditional business sectors. In addition, the Tunisian economy faces stiff competition in terms of labour cost from Morocco, Egypt, Turkey and Portugal,” explains Samia Seghir in a Femise report entitled “Les boucles d’investissement intérieur – Investissement étranger et la croissance des pays Méditerranéens” [“The links between domestic and foreign investment and the growth of Mediterranean countries”]. In the report, Ms Seghir looks closely at changes in the textiles and clothing sectors.



Both tourists and the major multinational companies are attracted by social and political stability as well as by a business environment that has been enhanced by various reforms, including privatisation.

The state’s withdrawal from industrial and major infrastructure sectors opened the way for foreign investment in cement works, electricity production, water desalination plant construction, motorways, banks, solid and liquid waste treatment, telecoms, etc.
As well as fairly simple centralised administrative procedures, foreign investment is encouraged by tax breaks. And then there is the qualified workforce, access to the Euro-Mediterranean market and credit lines from the European Investment Bank.

With so much going for it, Tunisia is attracting the French, Italians, Germans, British, Spanish and Americans, and, increasingly, new nationalities as well.

At the end of 2005, there was foreign investment in 2,703 companies in Tunisia, representing 259,842 jobs.

FDI in Tunisia accounts for 10% of the country’s production investment and generates a third of exports and one sixth of jobs. Ms Seghir, however, issues a note of caution: “Relying on privatisation to stimulate foreign investment could be a limited strategy.” The economist continues: “Companies put forward for privatisation are unlikely to bring in vast sums of money because they are fairly small and there aren’t many of them.”

The FEM21-20  report is available on the FEMISE website. 

Also read : Domestic investment must be the driving belt of FDI
                   : Liberalisation of services in Poland and Turkey: Discrimination

Nathalie Bureau du Colombier

Monday, October 15th 2012

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