TUNISIA ECONOMIC HIGHLIGHTS: Oct. 16 - Oct. 31

UNCLAS SECTION 01 OF 02 TUNIS 002749

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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
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E.O. 12958: N/A
TAGS: ECON ETRD ELAB EFIN SENV KTEX TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS: Oct. 16 - Oct. 31

REF: A. TUNIS 2744
B.TUNIS 2684

C. TUNIS 2598


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


A. GOT to Issue a Travel Allowance Card

B. GOT Projects 5.3 percent GDP Growth for 2006

C. Central Bank Concerned About Household Debt

D. Tunisia Signs Science Cooperation Deal with China

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GOT to issue a travel allowance card by end of 2006
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2. (U) According to local press reports, the GOT plans to issue a
travel allowance card, called the "carte allocation touristique"
(CAT),by the end of 2006. The special credit card card is intended
to facilitate payment and withdrawals in foreign currency for
Tunisian residents and students while they are abroad. The card
will function much as a conventional credit card and will allow
Tunisians to make hotel reservations abroad; however, it cannot be
used for ordering goods and services on the Internet. Tunisian
credit cards are not valid for use outside of Tunisia.


3. (SBU) Comment and Background: The Tunisian dinar is not fully
convertible. Tunisians are allocated an annual per person travel
allowance of foreign currency. Currently the allowance is the
foreign currency equivalent of 2,000 dinars (roughly 1500 USD),but
President Ben Ali recently announced the allocation will be
increased to 4,000 TND (3,000 USD) (Ref A). The creation of the
travel allowance card is indicative of a gradual ease in
restrictions on foreign currency transactions. The GOT has
announced plans to make the dinar fully convertible by 2009. End
Comment and Background.

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GOT Projects 5.3 percent Growth for 2006
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3. (U) The GOT's National Institute of Statistics (INS) projects
that GDP growth will reach 5.3 percent for 2006, lower than the 5.8
percent initially forecast but still an increase over 2005 (4.2
percent). While the INS survey showed a 4.1 percent increase in
industrial production and a 5 percent increase in receipts in the
tourism sector, high inflation, now 4.7 percent (Ref B),and the
growing trade deficit (Ref C) have lowered expectations. According
to a banking sector contact, Prime Minister Ghannouchi recently
presented estimates to a gathering of bankers showing that high oil
prices have shaved one percent off of GDP growth. Foreign direct
investment also showed a modest 0.5 percent drop in the industrial
sector but a substantial 58.7 percent decrease in the services
sector.

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Central Bank Concerned About Household Debt
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4. (SBU) The Tunisian Central Bank (BCT) raised its key interest
rate from 5 to 5.25 percent, representing the first hike since 2003.
According to French daily Le Temps, in July, the BCT issued an
internal note asking banks to restrict lending to households for
consumption (Ref B). Philippe Amestoy, Director General of Union
Internationale de Banques (UIB),told EconOff that the BCT also
directed banks to reduce the term for loans reimbursement from 7 to
3 years, in an effort to discourage household debt. During the
first half of 2006, the total volume of household debt, held by the
approximately 10 million Tunisians, reached nearly 4.8 billion
dinars (roughly 3.66 billion USD) exceeding the same volume for all
of 2005, 4.5 billion dinars (approximately 3.43 billion USD). These
loans were primarily used to finance real estate (60 percent),cars
(5 percent),equipment and building materials.


TUNIS 00002749 002 OF 002



5. (SBU) Comment: Although the Central Bank has expressed concern
about the growth of household debt, the level of household debt
remains manageable and below that of most Western countries. The
higher interest rates, in combination with the reduced loan terms,
may reduce the demand for consumption loans. However, the interest
rate hike may also be motivated by a desire to curb rising
inflation, which has recently reached 4.7 percent.

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Tunisia Signs Science Cooperation Deal with China
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6. (U) On October 23, China and Tunisia signed a scientific
cooperation agreement in a bid to promote science development and
technology transfer. The agreement was announced during a meeting
in Tunis between Taieb Hadhri, the Tunisian Minister for Science and
Technology and Wu Zhongze, China's Vice-Minister for Science and
Technology. The deal paves the way for scientific cooperation
between research institutes, scientific communities and technology
organizations from each country. It will encourage the exchange of
knowledge and expertise in the areas of desertification, management
of arid lands, peaceful use of nuclear energy, sea technologies and
new technologies in the textile sector. A joint commission for
cooperation will be established to discuss and approve scientific
cooperation programs. The agreement was concluded ahead of the
summit meeting of the Forum on China-Africa Cooperation, held in
Beijing, November 3-5.


7. Comment and Background (SBU): China has recently shown an
unprecedented interest in expanding business and trade with Tunisia.
The Chinese government continues to establish goodwill for its
companies through programs of technical assistance, donations, and
other type of grants to Tunisia. Chinese companies have invested
multiple sectors, including sports and recreation, water supply and
sewage, environmental protection, energy and telecommunications.
Chinese investment in the telecom sector has particularly
aggressive, with Huawei and ZTE (Zhong Xing Telecommunications
Equipment Company Limited) receiving lucrative contracts from the
GOT for mobile phone and internet network equipment and services.
End Comment and Background.
BALLARD