TUNISIA ECONOMIC HIGHLIGHTS: Dec. 1 - Dec. 15

UNCLAS SECTION 01 OF 02 TUNIS 002950 SIPDIS SENSITIVE SIPDIS STATE FOR NEA/MAG (HARRIS) STATE PASS USTR (BELL),USPTO (ADLIN AND ADAMS),USAID (MCCLOUD) USDOC FOR ITA/MAC/ONE (NATHAN MASON),ADVOCACY CTR (JAMES),AND CLDP (TEJTEL) CASABLANCA FOR FCS (ORTIZ) LONDON AND PARIS FOR NEA WATCHER E.O. 12958: N/A TAGS: ECON ETRD EINV EPET EAIR TS SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS: Dec. 1 - Dec. 15 REF: A. TUNIS 2684 ¶B. TUNIS 629 ¶1. (U) This cable contains highlights of recent economic developments in Tunisia on the following topics: ¶A. Tunisia to Increase Transit Capacity of Algerian Gas to Italy ¶B. FDI Up Nearly Ten Percent in 2006 ¶C. Inflation Down in November -------------- Tunisia to Increase Transit Capacity of Algerian Gas to Italy -------------- ¶2. (U) On December 11, the GOT signed agreements with two Italian firms, World Energy and the Edison SpA, permitting transit of an increased volume of Algerian natural gas to Italy via Tunisia and outlining royalty payments to the GOT. The Trans-Mediterranean Pipeline (also known as the Enrico Mattei gas pipeline) is a natural gas pipeline from Algeria via Tunisia to Sicily and onward to Italy's mainland. The current capacity of pipeline is approximately 27 billion cubic meters of natural gas annually. In April, the GOT signed an agreement with Italian state-owned energy company Ente Nazionale Idrocarburi (ENI) to expand the transport capacity to Italy. By April 2008, a capacity of 3.2 billion cubic meters a year will be added; by October 2008 there will be an additional capacity of 3.3 billion cubic meters a year. There are plans to expand the total pipeline capacity to 33.5 billion cubic meters by 2012. ¶3. (U) The Tunisian section of the pipeline, which is 370 kilometers long, is owned by state-owned SOTUGAT (Societe Tunisienne du Gazoduc Trans-Tunisien). According to the 2005 Central Bank report, royalties are assessed at a rate of 5.25 to 6.75 percent of the value of transported gas, which is paid in both cash and gas. The cash value of gas royalties increased considerably in 2005, up from 158 million USD in 2004 to 261 million USD in 2005. -------------- FDI Up Nearly Ten Percent for 2006 -------------- ¶4. (U) According to the Foreign Investment Promotion Agency (FIPA), during the ten first months of 2006, foreign direct investment (FDI) increased 9.7 percent over the same period of 2005. FDI by sector for the first ten months of 2006 shows energy as the leading investment sector (320.03 million USD),followed by manufacturing (247.07 million USD) and tourism (14.25 million USD). Total FDI for this period is 683.67 million USD, excluding privatization receipts. The GOT received 2.3 billion USD from the Emirati Tecom-DIG (Dubai Investment Group) for the March 2006 partial privatization of Tunisie Telecom (Ref B),representing the largest source of foreign capital for 2006. ¶5. (U) According to FIPA, France is the top source of FDI with 87.6 million USD, followed by Italy with 40.33 million USD. The Bahamas, normally not among top investors in Tunisia, ranked third this year owing to a 31.61 million USD investment by a Bahamas-based subsidiary of American shoemaker EVOL to expand existing operations in Tunisia. Investment attributed to the United States for the first 11 months of 2006 is only 2.8 million USD. (Note: FIPA's country ranking excludes privatization, energy and portfolio investments. End Note.) -------------- Inflation Down in November -------------- ¶6. (U) According to data released by Tunisia's National Statistics Institute, year-on-year growth (November 2006/November 2005) in the national consumer price index (CPI) stood at 3.8 percent in November, down from 4.4 percent in October 2006. Inflation fell 0.2 percent in November after rising 0.3 percent in October. The monthly decrease was attributed to a 1.1 percent decline in the cost TUNIS 00002950 002 OF 002 of food, which accounts for 36.5 percent of the basket used in calculating the index. Housing and the healthcare prices remained flat between October and November, while leisure, transport and clothing prices increased. Inflation stood at 4.6 percent in the first eleven months of this year, sharply up from the 1.8 percent recorded a year earlier, owing partially to rising international oil prices (Ref A). BALLARD