TUNISIA OUTRANKS U.S. IN COMPETITIVENESS, SAYS

C O N F I D E N T I A L SECTION 01 OF 02 TUNIS 002538

SIPDIS

SIPDIS

NEA/MAG FOR MAYA HARRIS, EB/CIP
USDOC FOR ITA/MAC/ONE (ROTH)
CASABLANCA FOR (FCS ORTIZ)
LONDON, PARIS FOR NEA WATCHER

E.O. 12958: DECL: 10/10/2016
TAGS: ECON EFIN ELAB ETRD TC UK MO TS
SUBJECT: TUNISIA OUTRANKS U.S. IN COMPETITIVENESS, SAYS
DAVOS REPORT

Classified By: CDA David Ballard for reasons 1.4 (b) and (d)


1. (SBU) The Government of Tunisia is gloating over its
ranking in the 2006 Global Competitiveness Report released by
the World Economic Forum (WEF) on September 26th. Classified
as the 30th most competitive country in the world and first
among African and Middle East countries, Tunisia advanced
seven ranks above last year's rating. All major Tunisian
newspapers have been touting this achievement, as well as the
fact that Tunisia scored higher than the U.S. in the areas of
institutions, macroeconomy, and health and primary education.
These results are reportedly due to the WEF move this year
to a more comprehensive index (Global Competitiveness Index).



2. (U) The new methodology considers a number of factors
which were not accounted for in previous versions of this
annual report. Different weights are given to each factor
based on the stage of economic development of each country.
The stage of economic development was based on GDP per
capita. Tunisia falls into the factor-driven stage, which
places more weight on areas such as institutions,
macroeconomy, and primary education (50 percent) than does
the innovation-driven stage (30 percent) where the U.S. is
placed.

--------------
Government Reaction
--------------


3. (SBU) An official at the Ministry of Development and
International Cooperation told EconOff that the report is
positive and speaks well for Tunisia. He characterized the
report as objective and credible, due to the fact that the
source is well-known and respected. The official added that
the World Bank has also recently issued a positive report on
the Tunisian economy and that both reports support the
premise that investors can rely on good public governance
from the GOT. From the GOT's perspective Tunisia's positive
ranking is another argument to promote Tunisia as an
attractive destination for investors.

--------------
Local Tunisian Reaction
--------------


4. (C) Among the reactions of several Tunisian and expat
businessmen with whom the EconOff spoke about the report
were, "It is too positive," and "I'm not feeling it." They
criticized the report as being subjective and oriented toward
foreign businessmen. They wondered how China, France, the
U.S. or other more developed countries could be ranked below
Tunisia. While many felt that perhaps the report could be
used as a vehicle to attract investment, several Tunisian
businessmen stated that, "Tunisian people all know what's
going on and where we really are. Tunisia has lots of
problems and for the people who live here, the report adds
nothing to their purchasing power. So if we are doing so
well, why is this not reflected in our standard of living?"
Among the problems to be solved, several interlocutors
complained about the GOT's reluctance and slowness in making
the necessary reforms to improve the business climate in
Tunisia. A number of the interlocutors stated that the
Institut Arabe Des Chefs d'Entreprises (IACE) conducted the
survey of Tunisian business executives that was used as a
basis for this WEF report. This organization is said to be
linked with the extended family of President Ben Ali and
thus, in the average Tunisian business leader's mind, the
results are suspect.


5. (C) Comment: We were surprised that Tunisia fared as well
as it did in the WEF's rankings. Since the entity that
conducted the survey locally is linked with the President's
family, this could explain the high marks Tunisia received,
especially in areas known to be problematic, such as
"favoritism in the decisions of the governmental civil
servants." The WEF report is unique in that the methodology
used, combines publicly available data with survey data that
captures the perceptions and observations of business leaders

TUNIS 00002538 002 OF 002


in a given country. It could very well be that the critics
are right and that IACE only surveyed and provided input
from business leaders who would provide politically-correct,
positive impressions. End Comment.
BALLARD