Identifier
Created
Classification
Origin
06TUNIS1946
2006-08-01 15:01:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Tunis
Cable title:  

TUNISIA ECONOMIC HIGHLIGHTS

Tags:  ECON EFIN ETRD EAGR TS 
pdf how-to read a cable
VZCZCXRO7226
PP RUEHTRO
DE RUEHTU #1946/01 2131501
ZNR UUUUU ZZH
P 011501Z AUG 06
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 1432
INFO RUEHAS/AMEMBASSY ALGIERS PRIORITY 7263
RUEHFR/AMEMBASSY PARIS PRIORITY 1609
RUEHRB/AMEMBASSY RABAT PRIORITY 8193
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0368
RUEHCL/AMCONSUL CASABLANCA PRIORITY 3978
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
UNCLAS SECTION 01 OF 03 TUNIS 001946 

SIPDIS

SENSITIVE
SIPDIS

NEA/MAG FOR MAYA HARRIS, EB/CIP
STATE PASS USTR (BELL),USPTO (ADLIN),USAID (METZGER)
USDOC FOR ITA/MAC/ONE (ROTH),ADVOCACY CTR (JAMES),AND
CLDP (TEJTEL)
CASABLANCA FOR (FCS ORTIZ)
PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EAGR TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS

REF: TUNIS 1741

UNCLAS SECTION 01 OF 03 TUNIS 001946

SIPDIS

SENSITIVE
SIPDIS

NEA/MAG FOR MAYA HARRIS, EB/CIP
STATE PASS USTR (BELL),USPTO (ADLIN),USAID (METZGER)
USDOC FOR ITA/MAC/ONE (ROTH),ADVOCACY CTR (JAMES),AND
CLDP (TEJTEL)
CASABLANCA FOR (FCS ORTIZ)
PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EAGR TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS

REF: TUNIS 1741


1. (U) This cable contains highlights of recent economic
developments in Tunisia in the following areas:


A. Prime Minister Discusses Recent Economic Reforms

B. Adoption of New Economic Laws

C. National Strategy for a Digital Economy

D. Tunisia Ratifies International Sugar Agreement

E. Wheat Crop Yield Expected to Fall

F. World Bank Loans to Tunisia to Fund Education,
Irrigation Projects

G. Belgian Loan to Tunisia to Finance Taparura Project

H. European Investment Bank Loan to Tunisian NGO
Enda Inter-Arabe

-------------- --

A. PRIME MINISTER SPEAKS WITH AMBASSADOR HUDSON
ABOUT ECONOMIC REFORMS
-------------- --


2. (SBU) On July 18, Tunisian Prime Minister Ghannouchi told
Ambassador Hudson that two new economic reforms had taken
effect and that he hoped they would spur investment and
business. The first item reforms Tunisia's Customs code,
harmonizing registrations with world standards to streamline
customs procedures. The second item reduces the tax rate on
corporate profits from 35 percent to 30 percent in order to
increase investment in regional development zones. According
to the media, the tax cut renders Tunisia's rate on par with
average rates within the European Union (France 35.9%,
Germany 38.5%, Italy 37.3%).


3. (SBU) Ghannouchi also said GOT was working to make the
Tunisian dinar completely convertible. Currently, the
Tunisian dinar is a soft currency convertible only for
commercial and investment transactions. GOT has worked
since 1987 for full dinar liberalization. Comment: Full
convertibility of the dinar has been an extremely slow
process. GOT is concerned about the secondary effects of
full convertibility (capital flight, devaluation of the
dinar, inflation, loss of control, and concern that the
Tunisian economy is not strong enough to sustain full
convertibility of the dinar). GOT's total control over
fiscal measures and financial transactions has worked well so

far and has helped them maintain a relative equilibrium.
Even though full convertibility would attract more foreign
direct investment, there is still significant resistance
within the GOT to speed the process. End comment.

-------------- --------------

B. TUNISIAN CHAMBER OF DEPUTIES Ratifies ECONOMIC LAWS
-------------- --------------


4. (U) On July 18, the Chamber of Deputies Ratified the
Export Credit Guarantee Agreement between the United States
and Tunisia. The agreement is part of the U.S. Department of
Agriculture's (USDA) Commodity Credit Corporation GSM-102
program, which helps ensure that credit is available to
finance commercial exports of U.S. agricultural products to
developing countries. The agreement will help finance
Tunisian imports of U.S. agricultural products, notably
vegetable oil. At an amount of 20 million dollars (27.3
million Tunisian dinars),the credit is repayable over 3
years.


5. (U) The Chamber also ratified the International Convention
on Olive Oil and Table Olives adopted in Geneva April 29,
2005 and signed by Tunisia on November 15, 2005. Tunisia is
a member of the International Olive Oil Council of the United
Nations Conference on Trade and Development (UNCTAD).


6. (U) Tunisian Agriculture Minister Haddad specifically
noted that Tunisia's imports of vegetable oil from the U.S.
at a price below that of olive oil helps to preserve the
buying power of Tunisian consumers. He added that Tunisia's
exports of olive oil represent an important market at a value

TUNIS 00001946 002 OF 003


of 700 million dinars per year, even in an international
market where demand is declining.

-------------- --------------

C. COUNCIL OF MINISTERS EXAMINES NATIONAL STRATEGY FOR
DIGITAL ECONOMY
-------------- --------------


7. (U) Tunisian President Ben Ali presided over a special
Ministerial Council on July 19 to discuss Tunisia's national
strategy to promote a digital economy. The Council first
reviewed its achievements in improving its digital economy:
information technology networks, human resource development,
and ways to improve the competitiveness of employees in these
fields. The Council also reviewed future tools and
objectives needed to modernize Tunisia's workplace, export
potential, and investment climate. The Council mentioned
several ways to achieve its objectives, particularly through:
1) integrating the public and private sectors in activities
related to the digital economy; 2) increasing the work force
of small and medium-sized enterprises (SMEs),with the
government paying 25% of the salaries earned by newly-hired
workers with graduate degrees for three years; 3) supporting
businesses working in the digital economy in international
quality systems; and 4) creating a High Commission on the
Digital Economy. President Ben Ali asked the Council of
Ministers to prepare a bill finalizing this strategy.

-------------- --------------

D. TUNISIA REVIEWS INTERNATIONAL SUGAR AGREEMENT
-------------- --------------


8. (U) On July 12, the Council of Ministers reviewed a bill
which, if approved, would bring Tunisia into compliance with
the 1992 International Sugar Agreement. According to the
local press, compliance with the agreement would allow
Tunisia to have a say in the policies of the UN's
International Sugar Council, in which each member has one
vote, and would reportedly create regional opportunities to
promote and improve Tunisia's sugar industry.

-------------- --------------

E. TUNISIA'S WHEAT CROP YIELD EXPECTED TO FALL IN 2006
-------------- --------------


9. (U) Media reports indicate that Tunisia's 2006 overall
wheat crop is likely to reach only 1.1 million metric tons.
This is 32% lower than the 2005 overall wheat crop of 1.6
million metric tons. The lower yield is reportedly due to
drought during the March and April growing period.

-------------- --

F. WORLD BANK LOANS TO TUNISIA FOR IRRIGATION,
EDUCATION PROJECTS
-------------- --


10. (U) The World Bank and Tunisia signed an agreement on
July 20 in which the World Bank granted two loans to Tunisia
in the amount of 142.8 million dollars. The first loan will
finance a project to support the quality of higher learning
and will support the GOT's own project to improve economic
competitiveness in a knowledge-based society. The second
loan will finance a project in western Tunisia to improve the
quality of water used in irrigation over a sustainable period
of time.

--------------

G. BELGIAN LOAN TO TUNISIA TO CO-FINANCE
TAPARURA PROJECT
--------------


11. (U) On June 25, Tunisian Minister of Development and
International Cooperation Jouini and Belgian Minister of
Finance Didier-Raynders signed an accord during the two-day
Facility for Euro-Mediterranean Investment and Partnership
(FEMIP) conference in which Belgium agreed to provide Tunisia
with a 15.05 million euro loan. Repayable over 20 years with

TUNIS 00001946 003 OF 003


a 2% interest rate and a 10-year grace period, the loan is to
co-finance an environmental project called 'Taparura' near
Sfax. The 'Taparura' project includes anti-pollution efforts
along the north coast of Sfax, rehabilitation of Sfax
beaches, and terraforming new land along the sea to extend
the city's oceanfront. With a total cost of 98 million
dinars, the 'Taparura' project will be co-financed at a price
equal to 52 million Tunisian dinars by a prior loan given by
FEMIP on July 28, 2004.


12. (U) The project plans to reclaim 400 hectares of land and
to excavate phosphogypsum, a pollutant that covers an 80
hectare area. Sand with a volume of 6.9 million squared
meters will be put down to cover the area and to stabilize
the coastline. Other parts of the project include
constructing a 3.3 km canal to drain rainwater and protecting
the site against waves and erosion. Some 260 hectares of the
land will also be set aside to create parks, housing,
offices, and tourist and recreation sites.

-------------- --------------

H. LONG-TERM LOAN TO ENDA INTER-ARABE FOR MICROFINANCE
PROJECTS IN TUNISIA
-------------- --------------


13. (U) On June 25, the European Investment Bank (EIB),
through the Facility for Euro-Mediterranean Investment and
Partnership (FEMIP),signed with Enda Inter-arabe a loan in
the amount of 1.25 million Tunisian dinars, repayable over
eight years at a rate of 2.5% during the two-day FEMIP
Conference. This loan will allow Enda Inter-arabe to extend
its micro-credit operations in the economically-depressed
areas of Tunisia.


14. (U) The financial agreement, the first in Tunisia between
the EIB and a non-governmental organization (NGO),was signed
by M. Philippe de Fontaine Vive, the EIB,s head of FEMIP,
and Essma Ben Hamida, co-director of Enda Inter-arabe. The
loan will allow co-financing of microenterprises in an effort
to reduce poverty through private initiatives in Tunisia.
The EIB loan follows a loan of 2 million Tunisian dinars
given by Oikocredit, the world's largest private microcredit
investment company, signed at the beginning of June 2006.
BALLARD