TUNISIA ECONOMIC HIGHLIGHTS

UNCLAS SECTION 01 OF 02 TUNIS 000896

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 AND MCMANUS)
CASABLANCA FOR FCS (ORTIZ)
LONDON AND PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: ECON ETRD EINV EFIN ECPS ENRG EPET TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS

REF: 06 TUNIS 2950


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


A. Creation of a New Agency for E-Commerce

B. British Gas to Invest US $1.3 billion in Tunisia

C. Central Bank June Report

D. Italy and Tunisia Agree to Connect Electrical Grids

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Creation of a New Agency for E-Commerce
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2. (U) The Ministry of Commerce and Handicrafts plans to create the
Technical Agency for the Development of E-Commerce (AGTDCE).
Although widely reported in local press, a Ministry of Commerce
contact indicated that the agency is still in the initial planning
stages. The AGTDCE will act as a one-stop shop where companies can
receive assistance in launching websites, marketing goods and
providing online services. Observers note that online commercial
transactions in Tunisia have strongly increased from 7,658 in 2005
to 63,000 transactions in 2006, an increase of 800 percent.
However, e-commerce remains relatively limited with only 250
Tunisian websites out of 4,566 offering the possibility of online
payment.


3. (SBU) COMMENT AND BACKGROUND: Despite GOT interest in e-commerce,
the potential remains limited due to low Internet use. Most reports
place Internet use at around 10 percent of the population. In
addition, due to the non-convertibility of the dinar, Tunisians are
not able to make international purchases online. The Tunisian Post
has developed a credit card called "e-dinar" with which users can
make online payments for some government services. The GOT is
trying to promote such online services by pushing institutions as
universities, public utilities and state-owned companies, such as
national airline Tunisair, to accept payment via e-dinar. END
COMMENT AND BACKGROUND.

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British Gas to Invest US $1.3 billion in Tunisia
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4. (U) On June 20, Robert Wilson, Chairman of British Gas (BG)
Group, the largest foreign investor in Tunisia, announced that BG
would invest US $1.3 billion to boost its natural gas production in
Tunisia. The first project, an investment of US$ 500 million, will
raise output at the Miskar field near the southern town of Gabes. BG
has already invested US $1 billion in Miskar. In addition to the
Miskar project, BG will invest US $800 billion along with
state-owned Tunisian Company for Petroleum Activities (ETAP) to
finance the development of new gas field in Hasdrubal. ETAP will
contribute US $400 million to the Hasdrubal project.


5. (U) BACKGROUND: Tunisia imports most of its refined oil product
needs due to declining output from its aging fields over the past
decade. BG Tunisia is the leading company on the Tunisian gas
market, supplying more than 50 percent of domestic demand.
Production comes from the Miskar offshore fields in the Gulf of
Gabes. Natural gas is piped to the coast south of Sfax where it is
processed at the Hannibal plant and sold to the state-owned Tunisian
Electricity and Gas Company (STEG). END BACKGROUND.

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Central Bank June Report
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6. (U) According to the Central Bank's June report, the inflation
rate was 2.3 percent for the first five months of 2007, down from
4.6 percent in the same period of 2006. The current account
deficit was 1.4 percent of GDP over the first five months of 2007,
down slightly from 1.6 percent over the same period of last year.
The improvement in the current account deficit is the result of a

TUNIS 00000896 002 OF 002


lower trade deficit (NFI). Hard currency reserves topped 8.675
billion dinars (US $6.5 billion),up 67 percent due to a 9.4 percent
rise in tourist receipts and a 5.8 percent rise in expatriate
remittances.

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Privatization of Magasin General Retail Chain
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7. (U) On June 26, Tunisian consortium GIAN-Poulina won the tender
to purchase a majority share in state-owned retail grocery chain
Magasin General. The consortium has offered 70 million dinar (about
US $55 million) for the purchase of a 76.31 percent stake in Magasin
General. The remaining shares are privately held. Created in the
1920s, Magasin General has a network of 45 stores throughout
Tunisia. According to Tunisian financial online magazine Tustex,
annual turnover is approximately 100 million dinars (about US $78
million). GIAN belongs to the Bayahi family group, which owns
business in the aluminum industry, agribusiness, textile, retail
sector and finance. The Bayahis' partner, Poulina, is one of the
largest Tunisian groups with 40 subsidiaries in both industrial and
service sectors, including agribusiness, computer science, tourism,
ceramics and others.


7. (SBU) COMMENT: Retail distribution has expanded rapidly with the
success of French retail chains Carrefour and Geant. According to
Tustex, total annual turnover for the four main retail chains
operating in Tunisia (Carrefour, Geant, Monoprix and Magasin
General) is roughly US $606 million, or nearly 2 percent of GDP.
Tustex estimates that the Tunisian retail sector is growing by 15
percent annually. While the French retail chains have successfully
expanded their operations, Magasin General has had difficulty
competing with the wider selection and better advertising of the
international chains. As with many state-owned enterprises, Magasin
General is also believed to be overstaffed. In recent weeks, the
local press has reported strikes by Magasin General employees, who
fear the privatization will bring job cuts. END COMMENT.

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Italy and Tunisia Agree to Connect Electrical Grids
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9. (U) On June 29, state-owned Tunisian Electricity and Gas Company
(STEG) signed a memorandum of understanding with Italian Terna Spa
to build a submarine cable connecting the two countries' electrical
grids and to launch a tender to build and manage a new electrical
plant in El Haouaria. The El Haouaria plant, scheduled to be
operational in 2011, will produce 1200 megawatts: 800 megawatts for
the Italian market and 400 megawatts for Tunisia. The total project
is estimated to cost between 2 and 2.5 billion dinars (roughly US
$1.55 to 1.93 billion). The project falls under the framework of an
agreement signed in July 2003 between Tunisia and Italy to promote
energy cooperation. In 2006, the GOT signed several agreements with
Italian energy firms to expand the transit capacity of Algerian gas
to Italy (Reftel).
GODEC