TUNISIA ECONOMIC HIGHLIGHTS: SEPT. 16 - OCT. 15

UNCLAS SECTION 01 OF 03 TUNIS 002598

SIPDIS

SENSITIVE
SIPDIS

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

E.O. 12958: N/A
TAGS: ECON ETRD ELAB EAGR EFIN EINV EAIR KPRV TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS: SEPT. 16 - OCT. 15

REF: A. TUNIS 2465


B. TUNIS 2173

C. TUNIS 1741

D. TUNIS 1672


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


A. Trade Balance Continues to Deteriorate

B. Emirates Bukhatir to Build 5 Billion USD "Sports City"

C. Emirati DIG Increases Stake in Karthago Airlines

D. Legal Retirement Age to Be Raised

E. Tunisair to Invest in Mauritanie Airways

F. Attijariwafa Bank to Buy Banque Senegalo-Tunisienne

G. GOT and Kuwait to Sell BTKD Bank Shares

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Trade Balance Continues to Deteriorate
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2. (U) According to September's Central Bank report, over the August
1 - September 20 period, the trade deficit reached 689 million
dinars (roughly 524 million USD) against 357 million dinars (272
million USD) during the same period of 2005. Imports of goods and
services grew 13.9 percent, outpacing a 10.9 percent rise in
exports. Energy imports represent 46 percent of the trade deficit
during this period (ref C).

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Emirates Bukhatir to Build 5 Billion USD "Sports City"
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3. (U) According to local press reports, in 2007, the Emirates
Bukhatir Group will invest 5 billion USD to design and build the
Tunis Sports City project, part of a GOT initiative to develop
recently reclaimed lake property. The 250-hectare project's main
objective is to train young people in different sports disciplines,
but also to provide residential, leisure and commercial services.
The complex will comprise nine sports training centers, three golf
courses, tennis courts, outdoor and indoor Olympic-sized swimming
pools, a multi-event stadium for 5,000 spectators, a football
stadium with a 20,000-person capacity, and five five-star hotels.
The project is expected to create around 40,000 new jobs in the
Tunisian economy. (Note: The GOT did not announce a tender for this
project. End Note)

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Emirati DIG Increases Stake in Karthago Airlines
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4. (U) The Dubai Investment Group (DIG),a subsidiary of Dubai
Holdings, has increased its shares in Tunisian private carrier
Karthago Airlines to 20 percent. The Emirati company already has
investments in partially state-owned Tunisie Telecom and
privately-owned La Societe Industrielle d'Appareillage et de
Materiels Electriques (SIAME),a company specializing in electric
components (ref C). Karthago Airlines is owned by Belhassen
Trabelsi, brother-in-law of President Ben Ali (ref D). Karthago
Airlines also recently announced plans to merge with another private
Tunisian carrier, Nouvelair, by 2007.


5. (SBU) Comment: Both the Sports City and Karthago Airlines
investments represent the growing number of Emirati investments in
Tunisia. Dubai Holdings' recent launch of a new publicity campaign
in Tunis is further evidence of the company's mounting interest in
Tunisia. Yet, the Sports City investment is also indicative of the
way business is done in Tunisia. The Sports City project follows
the creation of a Culture City in Tunis and another large
development project in the South Lake area, both sizeable GOT
projects for which there was no public tender. The lack of
transparency surrounding how these projects were awarded is,
unfortunately, according to business contacts, all too common. End

TUNIS 00002598 002 OF 003


Comment.

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Legal Retirement Age to Be Raised
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6. (U) According to the Arabic Tunisian daily Ash- Shourouq, the GOT
plans to raise the mandatory legal retirement age to 63 years from
the current age of 60. The law will allow workers to delay their
retirement up until the age of 65.


7. (SBU) Comment: The decision to raise the retirement age
highlights the burden on social security funds caused by Tunisia's
growing retirement-age population, a problem compounded by a birth
rate below replacement, and may also reflect the strain created by
the use of retirement funds for workers laid off after the age of 50
(ref A). While relieving the pressure on the retirement fund may be
necessary, the decision is not without drawbacks for the GOT.
Although unemployment is an issue at the top of the GOT agenda, the
extension of the legal retirement age will affect the absorption of
unemployed workers in the economy. End Comment.

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Tunisair to Invest in Mauritanie Airways
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8. (U) Tunisian state-owned carrier, Tunisair, has announced it will
participate in a joint-venture with the Mauritanian government to
create a new airline, to be named Mauritanie Airways. In recent
years, Tunisair has launched a series of flights toward new
destinations in Africa, such as Dakar, Bamako and Abidjan. The 2003
temporary, but indefinite, relocation of the African Development
Bank from Abidjan to Tunis is likely the driving force behind the
increased flight connections to African destinations. The Tunisair
investment in Mauritanie Airways also follows state-owned Tunisie
Telecom's investment in state-owned Mauritanian telecom operator
MATTEL (ref B).

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Attijariwafa Bank to Buy Banque Senegalo-Tunisienne
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9. (U) Attijariwafa Bank, the Moroccan bank that purchased Tunisian
Banque du Sud, has concluded an agreement to purchase a 66.67
percent stake in Banque Senegalo-Tunisienne (BST) from a number of
private shareholders. BST was incorporated in Senegal in 1986
between the Tunisian and the Senegalese governments. In 1999,
Senegalese private investors bought 92.6 percent of BST shares,
leaving 7.32 percent to Tunisian state-owned Socit Tunisienne de
Banques (STB). In 2005, total BST assets amounted to 167.2 million
euros (roughly 209 million USD). The bank's market share is 7
percent and it is ranked 5th, in Senegal. It owns a total of 12
branches, all in Senegal. Attijariwafa Bank already has a
subsidiary with four branches in Dakar.

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GOT and Kuwait to Sell BTKD Bank Shares
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10. (U) According to wire reports, the GOT and state-run Kuwait
Investment Authority (KIA) announced plans to sell 30 percent each
of their equal ownership of the Banque Tuniso-Koweitienne de
Developpement (BTKD). According to a Fitch Ratings report issued in
July, BTKD's asset quality is poor and its performance ratios
deteriorated last year, partly reflecting declining lending
activity. Established in 1981, Tunis-based BTKD has a
capitalization of 100 million Tunisian dinars (74.74 million USD)
with about two thirds of BTKD activities related to the tourism
sector.


11. (SBU) Comment and Background: Given the poor performance of BTKD
and low growth in the tourism sector, the partial privatization is

TUNIS 00002598 003 OF 003


not surprising. According to an Embassy banking contact, most of
Tunisia's non-performing loans are related to investments in the
tourism sector. The partial privatization of BTKD also highlights
recent restructuring and reform in the Tunisian banking sector. In
2000, the GOT merged three state-owned banks, Societe Tunisienne de
Banques, Banque Nationale de Developpement Touristique and Banque de
Developpement Economique de Tunisie. In addition, several
state-owned banks have been fully privatized. In 2002, French
Societe Generale purchased state-owned Union Internationale de
Banques (UIB) and in 2005, the Spanish-Moroccan consortium
Santander-Attijariwafa purchased state-owned Banque du Sud. End
Comment and Background.
BALLARD