THE DEPUTY SECRETARY'S MAY 18 MEETING WITH

C O N F I D E N T I A L TUNIS 001252 SIPDIS SIPDIS STATE FOR NEA/MAG (WLAWRENCE),D (JOST),DRL, NEA/PI STATE PLEASE PASS USTR (DBELL) E.O. 12958: DECL: 05/21/2016 TAGS: PREL ECON KDEM TS SUBJECT: THE DEPUTY SECRETARY'S MAY 18 MEETING WITH TUNISIAN MINISTER OF DEVELOPMENT MOHAMED NOURI JOUINI Classified By: AMBASSADOR WILLIAM HUDSON FOR REASONS 1.4 (b) AND (d) ¶1. (U) May 18, 2006; 6:00 P.M.; TUNIS, TUNISIA ¶2. (U) Participants: U.S. -------------- The Deputy Secretary Ambassador William Hudson Christine Davies, D Special Assistant Kelly Dillon, D Personal Assistant Aaron Jost, D Special Assistant Michael Matera, D Executive Assistant Richard Mills, D Senior Advisor Anna Wagner, D Staff Assistant Embassy Pol/Econ Deputy Susannah Cooper (notetaker) TUNISIA Minister of Development and International Cooperation (MDIC) Mohamed Nouri Jouini Khelil Lajimi, MDIC Secretary of State Amor Jilani, MDIC Director of Bilateral Cooperation Mohammed Fadhel Hassayoun, MDIC ¶3. (C) SUMMARY. During his May 18-19 visit to Tunisia, Deputy Secretary Zoellick met on May 18 with Tunisian Minister of Development and International Cooperation Mohamed Nouri Jouini to discuss economic development in Tunisia and the status of TIFA-related bilateral trade talks. Jouini presented an overview of economic development in Tunisia, noting the challenges Tunisia faces in providing employment for increasing numbers of university graduates. He then offered insight into Tunisia's relations with international financial institutions, noting the importance of providing assistance appropriate to a country's development level. The Deputy Secretary highlighted the natural relationship between increased education and demands for political participation. The Deputy Secretary and Jouini also discussed the need for increased regional integration and how U.S. might support this objective. END SUMMARY. DOMESTIC ISSUES -------------- ¶4. (C) Jouini began by noting that Tunisia's economy currently faces two major challenges: rising oil prices and increasing international competition. While domestic energy price increases have covered thirty percent of the worldwide increase, the GOT is still subsidizing energy prices in order to protect the purchasing power, particularly of lower income and lower middle-income families, and to support the competitiveness of Tunisian enterprises. Despite rising energy prices, Jouini said that Tunisia has kept its budget deficit to three percent of GDP in 2006. ¶5. (C) Turning to unemployment, Jouini said that the GOT has been addressing the unemployment problem for years, however the structure of the employment market is changing as the number of university graduates increase, and the number of workers with basic education and the population in general decreases. Employment among university graduates, said Jouini, is less than the national level of fourteen percent, however, it is rising. Meanwhile, unemployment of primary school graduates is only seven percent and continues to decline. As graduates enter the job market, Jouini said the quality of work becomes equally important to the quantity of jobs available. The GOT is thus focusing on high knowledge content positions, particularly in services such as tourism, health, consulting and financial services. ¶6. (C) Jouini then offered some insight into Tunisia's relations with international financial institutions (IFIs) like the World Bank and the African Development Bank. Jouini said that Tunisia is pushing these institutions to support the needs of middle-income countries. Jouini stressed the importance of these institutions acting as a real partner in studies, so that countries like Tunisia can continue to improve local skills. IFIs can also join with the private sector to help reduce risk and attract private investors to developing countries, suggested Jouini. BILATERAL POLITICAL AND ECONOMIC ISSUES -------------- ¶7. (C) The Deputy Secretary then turned the discussion to bilateral trade relations, noting that USTR would like to see more progressive responses on TIFA-related issues from the GOT. Jouini said he hoped to hear more about USTR's position and that a yearly TIFA Council meeting was a minimum in order to continue related discussions. The Deputy Secretary said that he would follow up with USTR, noting the value of sessions that included private business. ¶8. (C) The Deputy Secretary reiterated, as discussed with Foreign Minister Abdallah (septel),that university graduates will increasingly want a say in the political dialogue. He said that he hoped Tunisia will not be content with giving citizens a narrow scope of life. Jouini agreed, noting that political parties, civil society, trade unions and employers associations had participated in recent meetings on economic development. "We have to improve everything - we know," said Jouini, adding that more dialogue was needed on economic and business matters. REGIONAL INTEGRATION -------------- ¶9. (C) In closing, Jouini said that Tunisia seeks to overcome political difficulties that limit regional integration. He highlighted the success of Gulf Cooperation Council countries in advancing economic issues despite political disagreements. Jouini estimated that lack of Maghreb integration costs Tunisia one percentage point of growth annually. The difference between Tunisia's average 5.5 percent growth and the 6.5 percent that is possible through increased regional integration would be enough to create the necessary job growth for university graduates, said Jouini. The Deputy Secretary added that the U.S. would be willing, if it would SIPDIS be helpful, to encourage regional integration and that we could explore opportunities to bring Morocco, Algeria and Tunisia together with the U.S. to discuss trade issues. ¶10. (U) The Deputy Secretary's party has cleared this cable. HUDSON