United Arab Emirates Investments Target Tunisia

UNCLAS SECTION 01 OF 03 TUNIS 002753 SIPDIS SENSITIVE SIPDIS STATE FOR NEA/MAG (HARRIS) AND EB/CBA USDOC FOR ITA/MAC/ONE (ROTH),AND CLDP (TEJTEL) CASABLANCA FOR FCS (ORTIZ) LONDON AND PARIS FOR NEA WATCHER E.O. 12958: N/A TAGS: EINV ECON ETRD TS SUBJECT: United Arab Emirates Investments Target Tunisia REF: (a) TUNIS 2488; (b) TUNIS 0629; (c) TUNIS 2598; ¶1. SUMMARY: In a period of less than 12 months, the United Arab Emirates (UAE) has become the biggest single foreign investor in Tunisia, surpassing France, which, excluding energy, has been the largest investor in Tunisia over the last five years. Comment: While UAE investors have been active in Tunisia for a number of years, the oil boom has meant that they have billions to spend -- and they have decided to spend a good deal of it in Tunisia. End comment. The recent sale of 35 percent of Tunisie Telecom, Tunisia's national telecommunications agency, to a Dubai Holding consortium for USD 2.25 billion, set off a frenzy of planned investment amounting to over USD 20 billion. The bulk of the investment targets prime real estate in the city of Tunis and its immediate suburbs. Sale of this state-owned property was not opened to public tender and a U.S. company has claimed it was barred from making an offer for one of the development sites, ultimately sold to a Dubai Holding company for a reported USD 15 billion. END SUMMARY. ¶2. BACKGROUND: Dubai Holding is controlled by Sheikh Mohammed Bin Rashid Al Maktoum, the current vice president of the UAE and Prime Minister and ruler of Dubai. In May 2006 his wife, Princess Haya Bint Al Hussein, paid a visit to Tunisia and was widely covered in the media in the company of President Ben Ali's wife. The CEO of Dubai Holding, Mr. Mohammed Al Gergawi, also visited Tunisia earlier this year and announced that a fund of USD 300 million would be available for investment in the share capital of Tunisian companies or on the Tunisian Stock Exchange. Gergawi is also chairman of another member of the group, Dubai International Capital. Several other Emirati groups have also launched projects in Tunisia. Meanwhile, Emirates Airlines has just started a five times weekly service between Dubai and Tunis (Ref A). END BACKGROUND. ¶3. Known and planned investments in Tunisia by various Emirati groups include: -- TUNISIE TELECOM A consortium of TECOM Investments and Dubai Investment Group (TECOM-DIG) won the contract for the sale of 35 percent of the capital of Tunisie Telecom (Ref B). �0A;TECOM Investments is a subsidiary of Dubai Holding. Dubai Investment Group (DIG - formerly called The Investment Office - is the global financial investor of Dubai Holding. DIG is also sometimes referred to as the Dubai Investors Group. --DEVELOPMENT OF THE SOUTHERN PART OF THE LAKE OF TUNIS (KNOWN AS THE LAC SUD PROJECT) Dubai Holding's newly formed Sama Dubai has launched the USD15 billion Lac Sud project which will cover 683 hectares and contain commercial and residential centers housing up to 120,000 inhabitants. Plans include a 105-storey tower, three-level overpasses, a football stadium, and the renovation of the old port of Tunis into a marina. The local headquarters of Dubai Holding has been built adjacent to the old port and was expected to be inaugurated on November 7, not coincidentally the anniversary of President Ben Ali's accession to power (in 1987). Construction of the building took only 52 days. There had been US interest in the Lac Sud project but a US company was not allowed to present its offer since the project was not opened up to tender. --DEVELOPMENT OF THE SPORTS CITY ON THE NORTHERN PART OF THE LAKE OF TUNIS (KNOWN AS LAC NORD SPORTS CITY) The USD 5 billion Sports City will be built on the Lac Nord by the Emirati Al Bukhatir group (Ref C). The group is one of the major investors in Dubai Sports City which is being developed by Dubai Holding. It will cover 250 hectares on the north of the lake. Work is due to start in 2007 and is expected to take five/six years. The project will include nine sports academies covering 36.5 hectares, golf courses and a 125 hectare residential zone. Maghreb Confidential has also reported that "Dubai Holding Co., whose SIPDIS Tunisian partner is the Trabelsi group, is in advanced talks to TUNIS 00002753 002 OF 003 acquire a huge building plot on the banks of the Lake North in Tunis." The Trabelsi group is headed by Belhassen Trabelsi, brother of Leila Ben Ali, wife of President Ben Ali. -- EL QUOSSOUR (LES PALAIS) TOURISM PROJECT This USD 1.88 billion project is being developed by Dubai-based real estate group EMAAR. It will cover 442 hectares and includes 4,000 luxury residences, six hotels, a yacht club, a marina, and a golf course. The capital of the group is divided equally between the Emirate of Dubai, private investors, and stock exchange investors. Borj El Arab was developed by this company. -- MEDIALEADER A company known as Medialeader, based in Paris and Dubai, plans to start an economics magazine "Saneou al Hadath" (Event Maker) in Tunisia. It will be edited in Dubai, with contributions from correspondents in Tunisia and 60 percent local Tunisian content. Medialeader also produces another magazine entitled "Arabies Trends". The local partner is BienVu, an advertising company that is part of a group belonging to Mrs. Ben Ali's niece, Lilia Nacef. Medialeader has said it has plans "to increase its association with other parts of the media." -- AL THANI GROUP Mr. Abdulla Saeed Al Thani, head of the Al Thani Group, recently visited Tunisia and said the group intends to reinforce existing cooperation, which already includes the choice of Tunisia as the African regional centre for the Al Thani Petroleum group (operational since the beginning of 2005). The group also wants to invest in tourism, agriculture, and maritime transport services. -- KARTHAGO AIRLINES Dubai Investment Group (DIG) has recently increased to 20 percent its share in Karthago Airlines, the airline owned by Belhassen Trabelsi, brother-in-law of President Ben Ali(Ref C). -- SOMOCER This Tunisian company manufacturers ceramic tiles and bathroom fittings and has had severe financial difficulties in recent years. Dubai Investment Group (DIG) has purchased a 12 percent share in the company, which belongs to the Abdennadher family. Fethi Abdennadher, formerly a "Counselor" at the Palace and now President of the Constitutional Council (Conseil Constitutionnel) is a member of this family. -- SOTRAPIL A majority GOT-owned company that installs and operates hydrocarbon transport pipelines. Emirates International Investment Company owns more than a 5 percent share of this company. --ELECTROSTAR LG Electrostar LG is a Tunisian company that assembles and distributes LG Products. Emirates International Investment Company owns about a 7 percent share in Electrostar LG. -- SIAME Dubai Investment Group (DIG) owns approximately 5 percent of the capital of SIAME, which manufactures components for low-tension power networks. -- BANQUE DE TUNISIE ET DES EMIRATS (BTE) Established in 1982 as an investment bank, the BTE became a commercial bank when new Tunisian legislation amended the statutes of financial institutions in 2001. BTE can now offer the whole range of financial services. The capital is approximately USD 70 million. The chairman of the bank is an Emirati and the CEO is TUNIS 00002753 003 OF 003 Tunisian. Each country has six board members. --DAMAC HOLDING On November 3 the Tunisian press reported a meeting between President Ben Ali and the CEO of Dubai's DAMAC Holding group, stating that "certain projects that the group proposes to carry out were presented during the meeting." No other details were given. ¶4. (SBU) COMMENT: Most press commentaries on the upsurge in Emirati investments are keen to point out that at last Tunisia is being recognized as a favorable site for Arab investment. There has been no public negative comment on the implications of this influx, but privately citizens are saying Tunisia is being been sold to the Emirates. The October 19 edition of the weekly magazine Realites published a large dossier presenting the Emirati projects and questioned "Why, after having almost ignored Tunisia for the past twenty to thirty years, and despite the existence of the Tuniso-Emirate bank since the 1980s, are private Emirati investors now in such a rush to invest in our country?" Realites concluded that this is because, "They have been assured by the Tunisian authorities they will have all the necessary facilities to carry out their projects under the best conditions, and in all transparency." However, the way state-owned land is being distributed, and to whom, suggests that the buyers will be offered all the necessary assistance. As for transparency, well, it seems to be close to irrelevant when talking about Emirati investments in Tunisia. END COMMENT.