TUNISIA ECONOMIC HIGHLIGHTS

C O N F I D E N T I A L TUNIS 000012 SIPDIS SIPDIS STATE FOR EB AND NEA/MAG STATE PASS USTR (BELL),USPTO (ADLIN),USAID (METZGER) USDOC FOR ITA/MAC/ONE (ROTH),ADVOCACY CTR (JAMES),AND CLDP (TEJTEL) CASABLANCA FOR FCS (ORTIZ) E.O. 12958: DECL: 01/04/2016 TAGS: ECON EINV EPET EINT ELAB TS SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS REF: A. 05 TUNIS 2234 ¶B. 05 TUNIS 2433 Classified By: Ambassador William J. Hudson; Reasons 1.4 (b),(d) -- Coming Privatization of Tunisia's Internet Agency -- Labor Concern over Tunisie Telecom's Partial-Privatization -- Launch of Internet Services via Mobile Phones Postponed -- Prequalification Begins for Tunisia's Second Petroleum Refinery -- Strengthening Customs Operations Against Counterfeit Goods Coming Privatization of Tunisia's Internet Agency -------------- -------------- ¶1. (SBU) Following criticism of Tunisia's freedom of information and internet access during its November 2005 hosting of the World Summit on the Information Society, the Chamber of Deputies is debating plans to privatize Tunisia's master internet service provider (ISP) and sole international internet gateway, the Agence Tunisienne d'Internet (ATI). ATI leases internet access to 12 ISPs in Tunisia (five of which are privately-owned),which in turn offer retail access for customers. ATI also controls Tunisia's country code Top-Level Domain (ccTLD),i.e., maintenance of internet addresses bearing a ".tn" designation. The sell-off of the GOT's stake in ATI would likely go to firms such as Tunisie Telecom (the national fixed-line monopoly),which is also currently undergoing partial-privatization of its ownership. (Comment: No information regarding the GOT's future regulatory oversight of ATI is yet available, but post expects such ownership modifications to be mainly cosmetic changes, with the GOT retaining full capability to control access to the internet in Tunisia. End comment.) Labor Concern over Tunisie Telecom's Partial-Privatization -------------- -------------- ¶2. (C) The bid deadline for Tunisia Telecom's (TT) partial-privatization (35 percent of its ownership and Tunisia's largest privatization ever) is January 31. The privatization is causing some murmurings at TT by employees fearful of potential job cuts. (Note: Ref A reported on a former-TT Board of Director member's view that as many as 1,000 of TT's 8,000 employees may be redundant. End note.) In an effort to head off these labor concerns, TT CEO Ahmed Mahjoub has attempted to reassure employees that the state will continue to play a significant role in the stewardship of the company, following privatization. Media reported Mahjoub as explaining that TT's privatization will be contingent upon locating a "strategic partner," presumably one appreciative of Tunisia's history of socialist-inspired macroeconomic control and heightened labor protections. European interests, including France Telecom, are important front-runners in this regard, though Gulf firms, such as Etilisat and Saudi Telecom, are also keenly active in expressing interest to partner with TT. Launch of Internet Services via Mobile Phones Postponed -------------- -------------- ¶3. (C) Tunisiana -- Tunisia's sole private-sector mobile phone rival to state-owned Tunisie Telecom (TT) -- has postponed the launch of internet services over mobile phones until later in 2006. The launch of mobile phone internet access had been anticipated mid-December 2005, but has been deferred due to purported concerns over transmission quality. (Comment: State-owned TT typically price-undercuts Tunisiana's services shortly after Tunisiana releases new offerings, according to Tunisiana officials, which could be a reason for deferring the launch of internet access to allow better release of new services. There is also the possibility that the GOT is not yet fully ready to loosen its control on the internet or figured how to staff its control centers to handle the increased access to the internet via mobile phones. End Comment.) Prequalification Begins for Tunisia's Second Petroleum Refinery -------------- -------------- ¶4. (SBU) The GOT is seeking to prequalify bidders for the construction of a second petroleum refinery in La Skhira, next to the country's petroleum terminal by March 31, 2006. (Detailed information in English about this international tender can be found at: www.raffinerie.nat.tn/www/en/cahier/asp.) The La Skhira refinery will be Tunisia's second refinery with an expected capacity of 120,000 barrels per day. The GOT will award rights to build, own, and operate the refinery for a 30-year period, and will offer financial incentives to the awardee. Tunisia consumed an average of 79,000 barrels of petroleum per day in 2004, of which an average 61,000 barrels per day were imported. Tunisia's sole existing refinery in Bizerte refines approximately 30,000 barrels per day. (For additional background on Tunisia's oil/energy developments, see Reftel B.) Strengthening Customs Operations Against Counterfeit Goods -------------- -------------- ¶5. (SBU) Following the successful prosecution against nine small-scale sellers of counterfeit Louis Vuitton products in Tunisia in December, the GOT has signed a cooperation agreement between its Customs Department and its French counterpart (to be financed under a 20 million Euro EU assistance program). Separately, Tunisia's Ministry of Commerce and Customs are also ramping up efforts to tackle illegal imports with upgraded electronic scanning equipment and increased human resources. A Customs official reported that Customs is now recruiting an additional 200 officers and will open a new school for customs administration in 2006. Comment -------------- ¶6. (SBU) Tunisia's privatization efforts continue at a positive pace, albeit reflecting the GOT's chronic desire to retain ultimate control over strategic industries, including banking and telecoms, and to moderate social impacts on the government's chief economic preoccupation: unemployment. Given the GOT's strategic focus on employment issues, recent assurances by Tunisie Telecom's CEO are probably much more than empty promises -- at least for the near term. Nonetheless, globalization and market forces (which Tunisia has only gradually adapted to) will continue to impose pressures to liberalize its economy, to increase access to information via the internet, and to streamline bureaucracies such as Customs, which have long been the bane of foreign investors here. HUDSON