MINISTRY OF DEVELOPMENT AND INTERNATIONAL

UNCLAS TUNIS 000790 SENSITIVE SIPDIS NEA/MAG (STEWART),EB/CBA (WINSTEAD/GILMAN), EB/TRA/AN(FINSTON), STATE PASS USTR (BURKHEAD), USDOC FOR ITA/MAC/ONE (NATE MASON),ADVOCACY CTR (REITZE), CASABLANCA FOR (FCS ORTIZ), LONDON AND PARIS FOR NEA WATCHER E.O. 12958: N/A TAGS: ECIN ECON ETRD KIPR TS SUBJECT: MINISTRY OF DEVELOPMENT AND INTERNATIONAL COOPERATION HOSTS TOWNHALL FOR US BUSINESS -------------- Summary -------------- ¶1. (U) A July 10 meeting for US, UK, and Canadian Ambassadors, respective Chambers of Commerce and businesses hosted by the Ministry of Development and International Cooperation (MDIC) allowed for a healthy exchange about the Tunisian investment climate: -- All three ambassadors noted that the overall investment climate in Tunisia is positive. -- The Ambassadors stressed the diplomatic community's lack of easy access to GOT counterparts, requirement for reliable internet, telephone, and power service throughout Tunisia, expatriate employment limitations, lack of a franchise law, high tariffs on products exported to Tunisia, and the need to create greater transparency and a level playing field in the tender process. -- The Chambers of Commerce and individual companies raised their specific issues centered on IPR protection and bureaucratic obstacles to doing business in Tunisia. -- Representatives from various GOT ministries provided initial responses to particular issues. MDIC Secretary of State Abdelhamid Triki closed the meeting promising to look into the issues raised and expressing the hope that they will be resolved before next year's meeting. Triki also indicated that he can serve as the central point of contact for any company experiencing problems with the bureaucracy. End Summary. -------------- GOT Economic Overview -------------- ¶2. (U) The purpose of the July 10 meeting was to exchange information on the business climate in Tunisia (i.e., what works and what does not work for foreign investors). Triki chaired the meeting, which he opened with a brief overview of Tunisia's latest economic indicators: GDP growth rate for 2007 was 6.3 percent, up from 5.5 percent for 2006; total foreign investment was $ 8.6 billion representing 24.4 percent of GDP (a one percent increase over 2006 figures); the private sector's share of total foreign direct investment (FDI) in 2007 was 59.8 percent; imports and exports of goods and services increased 22 percent over 2006 figures; 80,000 new jobs were created in 2007 and GDP per capita increased from $ 3,581 in 2006 to $ 3806 in 2007. Tunisia's budget deficit and its current account deficit were limited respectively to 3 percent and 2.6 percent of GDP. Triki ended his introduction by stating that there are currently a combined total of 162 companies from the United States, Great Britain, and Canada operating in Tunisia and that their total FDI, excluding the energy sector, was around $ 521.7 million. (Note: The majority of the FDI from our three countries is in the energy sector - totaling around $ 1.6 billion for 2007). -------------- Open the Door and Let Us In -------------- ¶3. (SBU) Ambassador Godec, along with his UK and Canadian counterparts, stressed that one of the Embassy's primary missions is to develop, promote, and strengthen the bilateral economic relationship. In order to accomplish this mission, diplomatic staff require quick and easy access to their GOT counterparts. He added that the cumbersome and difficult process in place today is not conducive to accomplishing this objective. The requirement to submit a diplomatic note and receive MFA permission for working-level meetings creates a bottleneck and prevents the necessary government to government interaction necessary to foster a solid relationship. The Ambassador emphasized that Tunisia is losing out on investment and technical assistance opportunities because of long delays in receiving responses to diplomatic notes. ¶4. (SBU) The Ambassador noted that while the investment climate in Tunisia is generally good, opening up the market to foreign franchises and passing legislation covering them would offer greater investment opportunities in Tunisia. He added that the United States is ready and willing to conclude an Open Skies Agreement with Tunisia and would open up the possibilities for direct air routes between our two countries. But a lack of response from the GOT to our queries on this issue are holding up progress in this area. The Ambassador and his UK and Canadian counterparts highlighted that the limitation on the number of expatriate employees, poor telecommunications (particularly internet) connections, high tariffs on incoming goods, the lack of transparency in the tender process, and complex banking regulations which serve as disincentives to investment. -------------- Infrastructure and Capacity Requirements -------------- ¶5. (SBU) The overall capacity and poor quality of internet, electricity, and telephone services were the main infrastructure concerns voiced by the companies represented at the meeting. Several companies complained of weekly cut-offs of electrical power and the non-responsiveness of the state-owned utility, Societe Tunisienne de l'Electricite et du Gaz (STEG). Current Internet services is also unreliable with frequent interruptions and inadequate bandwidth to support the demands of private enterprises. The chief complaint regarding telephone service was the lack of coverage in Tunisia's southern regions. The Ambassador offered that more competition (i.e., more private telephone and internet service providers) in this sector could resolve many of these issues. -------------- Company-Specific Issues -------------- ¶6. (SBU) Several US companies took advantage of the meeting to continue pressing for progress on issues they (and we) have previously raised with the GOT including: -- Coca-Cola pushed for reduction of the high tax on carbonated beverages; eliciting a lukewarm response from GOT officials. Coca-Cola mentioned that their Tunisian bottled products exported tax-free to Libya are now illegally brought back into Tunisia and sold at lower prices. Coca-Cola called for Customs to enforce better border control between Libya and Tunisia to help alleviate the huge problem this was creating for its local bottler. -- Crown Can raised the customs-related problems they have been experiencing when attempting to re-export the aluminum waste so that it can be recycled. Customs has been blocking the re-export of this material. -- Pfizer argued for converting the current administrative decree on data exclusivity into a law to better protect pharmaceutical products. The company also called for better enforcement against counterfeit products. -- Columbus Industries called on the MDIC to intervene on its behalf to expedite the administrative procedure to authorize the company expansion on its property. Columbus Industries was in the midst of expanding its manufacturing facilities in Sidi Bou Ali (in the Sousse area) when GOT authorities issued a decree freezing all sales and development on land located between the new Endifha Airport project and the Kantoui port in Sousse. Columbus Industries' expansion and installation of new lines to meet client orders has been frozen due to this decree. Post has engaged in advocacy to help Columbus Industries resolve this matter. (Note: At the conclusion of the meeting, Columbus Industries informed EconOff that shortly after Embassy representatives' visit to his factory, the Sousse Governor called and gave his approval for the factory expansion but that it still needs to be cleared by the governmental agency in charge of the management of public lands, Agence Fonciere de l'Habitat in both the Sousse and the Tunis offices. Columbus Industries also mentioned that STEG installed a new transformer to resolve its frequent power outage problems within one day of the Embassy Representatives' visit. End Note.) -------------- Promises, Promises -------------- ¶7. (SBU) Triki thanked everyone for coming. He said that he fully understood that the diplomatic community needs easy access to their GOT counterparts and undertook to relay the ambassadors' concerns to the Ministry of Foreign Affairs. He also offered to be the central point of contact for any company experiencing administrative problems. Triki concluded the townhall by giving the floor to relevant working-level representatives from the specialized GOT agencies. These officials gave brief responses to the issues raised: -- The Ministry of Commerce representative said that the GOT is doing its best to enforce intellectual property rights and to eliminate counterfeit products from the market. He opined that it is becoming extremely hard to distinguish the counterfeit product from the authentic product. -- Regarding franchises the Commerce official said that the draft law on franchising (copy of which Post sent to Department of Commerce) is still being studied within the ministry and has not yet been transmitted to Parliament for final approval. -- The representative from Tunisie Telecom said that current plans call for fiber optic cables for Internet service to be installed in the five major governorates (Tunis, Ben Arous, Ariana, Sousse, and Sfax) by the end of 2008 and the same coverage is scheduled for other governorates for 2009. He said this will significantly improve Internet coverage and service in Tunisia. -- The representative from the Agence Tunisienne d'Internet (ATI) peaked the interest of the audience by announcing that ATI has created a "One Stop Shop" to receive all complaints about Internet connections and service. He provided the contact information for this "One Stop Shop". -- The representative from the Ministry of Social Affairs said that any company having expatriate employment requirements should bring their request directly his ministry and once they prove that the requested qualifications do not exist on the local market, any appropriate request for expatriates can be quickly approved. -- The Customs representatives said that a new customs code to be implemented in January 2009 will authorize customs officials to immediately stop the import of counterfeit products as soon as they are brought to their attention. -- The Tunisair representative said that the airline is currently in discussions with Air Canada and American Airlines about instituting direct air travel between Tunisia and their respective countries. He also pointed out that the main problem is that Tunisair does not currently have the long distance aircraft to handle such direct flights. -------------- Comment -------------- ¶8. (SBU) This town hall-style meeting was much longer and more animated than in previous years. Private companies from all three countries were much more vocal and open about issues and problems they encounter while doing business in Tunisia. The forum allowed each ambassador the opportunity to forcefully lodge a unified complaint about the GOT's reticence to allowing GOT representatives to meet freely and regularly with their respective counterparts within the diplomatic community. Whether matters will change remains to be seen. End Comment. GODEC