Transition with risks/New dynamic in successful transformation. In the third year after the Tunisian Revolution, economic development is still weak due to the uncertain political situation and stagnating European demand, although some progress is indeed taking place. However, the chances have improved noticeably that the important conclusion of the constitution will be made and parliamentary and presidential elections held promptly in the current year, 2013.
A cabinet reshuffle took place in March 2013 and also led to the appointment of three independent ministers. The reasons for this can be attributed to the significant drop in the popularity of the conservative Islamic majority party Ennahda, especially after the assassination of the opposition politician Chokri Belaid on 6 February, 2013. The assassination plunged the transitional government, consisting of the Ennahda party and its junior partners CPR and Ettakatol, into a serious political crisis and triggered mass protests in the country.
New investors therefore remain uncertain and are holding back. German companies that are already established in the country have an entirely different picture of the situation and invested well in 2012. But only once the political transition has been concluded successfully will the locational advantages of Tunisia come into full effect. In this context, an increase in the internal dynamic and new opportunities for the participation of German businesses is to be expected. Exploring opportunities at this early stage is certainly a sensible idea.
Since the mid-1990s, Tunisia has developed into an increasingly important location for European businesses in the region. Companies value its high level of flexibility and ability to supply. After France and Italy, Germany is one of the key investors in the manufacturing industry and Tunisia’s third largest trading partner. There is also major interest in expanding cooperation into new areas. At the end of January 2013, the German Federal Minister of Economics and Technology, Dr. Philipp Rösler, and the Minister of Economy at the Prime Minister’s Office, Ridha Saidi, launched the German-Tunisian energy partnership. The cooperation focuses, among other things, on the expansion of electricity grids, energy research and the political backing of the Desertec project.
Competitive industrial location. Comparing regional standards, Tunisia’s economic advantages encompass a high degree of industrialisation, a good level of education and high added value in the manufacturing industry. The constant devaluation of the Tunisian dinar has made no small contribution to the high productivity with low labour costs. The Tunisian currency has lost nearly 33 per cent of its value against the euro since 2002. Furthermore, another of the country’s factors for success lies in its good transport connection to the export harbours and from there on to Europe. Neither a stable power supply nor a developed IT network are self-evident in Africa.
Moreover, the extensive tax privileges for purely export-oriented companies – with or without foreign involvement – play a major role in Tunisia’s competitive edge as an industrial location: along with the exemption from import and export duties, the profits of export companies remain tax-free for a period of ten years. Future governments may possibly make changes to the investment law. However, according to observers, a fundamental change of the export rules is not to be expected. Instead, the main focus will be on intensifying investments in the neglected regions of the country.
Tunisia’s export-orientated industrialisation driven by foreign direct investments has indeed achieved remarkable success. According to a World Bank study, the exports shares to research and development have steadily increased since 1994 from 1.5 per cent per year to 6.1 per cent (2009), while the investments in the manufacturing industry have tripled between 2001 and 2009. The Tunisian investment authority FIPA (Foreign Investment Promotion Agency) reported 2,664 industrial companies with foreign shares and 275,640 employees for 2010. Even in post-revolutionary Tunisia, the manufacturing industry accounts for around 70 per cent of exports.
Target country for German investments. The German-Tunisian Chamber of Commerce and Industry has indicated that around 250 wholly German businesses or businesses with German shares are currently active in Tunisia. According to FIPA, around 51,700 staff were employed in companies with German shares in 2012. About 57 per cent worked in the manufacture of electrical and automotive components (mainly in cable production) and around 28 per cent in the textile industry. The Tunisian investment authority counts 111 German textile companies and 45 manufacturers of electrical or electronic components. The automotive suppliers Dräxelmaier and Leoni alone employ nearly 22,000 people; other cable producing companies in the country include SE Bordnetze or Kromberg & Schubert. Marquardt, the German manufacturer of switches and switching systems, also runs a manufacturing facility in Tunisia, while the Rieker Group operates a branch that manufactures shoes. Van Laak produces its top-quality shirts with highly sophisticated handicraft.
Despite the crisis: German investments are stable with potential for growth. The figures for direct foreign investments demonstrate the good conditions for competition, even for the difficult year of 2012. According to an analysis by FIPA, German industrial investments amounted to 41.8 million Tunisian dinars (around 20.8 million euros) in the year 2012. The main focus of German companies was primarily on expansion investments for the manufacture of cables and electronic components. Even during the year of revolution in 2011, the exports of the so-called mechanical and electrical industries increased by nearly 15 per cent and the clothing industry by 5.6 per cent.
The stable investments in 2012 aren’t the only thing that speaks for the sustainable commitment of German companies: the German-Tunisian Chamber of Commerce and Industry reported that none of their member companies suffered the closure of their business due to the revolution. According to a survey published by the German-Tunisian Chamber of Commerce and Industry in October 2012, 20 per cent of the participating companies rate the business development of the current year as positive. The forecast for the coming months was optimistic for 25 per cent of the companies surveyed; 35 per cent expect an unchanged economic development.
New dynamic in successful transformation. Greater constitutionality and democracy opens up more room for entrepreneurial activities. Tunisian companies in particular were the ones who suffered most as the Ben Ali clan became richer. In 2004, private sector investments accounted for only a small share of just 12.5 per cent of the gross domestic product. A number of Tunisian companies held back with their activities in fear of compulsory purchases by the government.
German companies have the chance to participate in invigorating the economy in a variety of ways. The healthcare sector also represents one of the promising industries for cooperation. Tunisia has developed into an important target country for regional health tourism. With more than around 1,800 ICT businesses and over 17,500 employees, the IT sector offers additional opportunities. Service orders of a number of multinational businesses are processed in eight centres. The ICT sector counts as a high potential business area. According to the Global Competitive Report 2011/2012, Tunisia was ranked seventh worldwide for its good availability of engineers.
Partnerships with Tunisian businesses may also help in developing the often difficult neighbouring markets in Libya and Algeria, as these mostly have a qualified group of engineers at their disposal and maintain long-term business relationships in the region. Favourable natural geographic conditions for the implementation of renewable energies and the need for consultancy services for promoting energy efficiency and a green economy present additional opportunities for cooperation. The recently-founded German-Tunisian energy partnership also plays a vital part in this context. New concepts are required for the development of the important tourism sector.
Challenges remain. Despite the high level of development by regional standards and positive GDP growth rates averaging 4.4 per cent, it has not been possible to create sufficient employment in the past decade. Along with the increase in added value, the neglected western and southern areas of the country have to be further integrated into the economic cycles. There is also a need for a stronger link between the export-oriented and domestic economies. Further efforts are particularly required in practice-oriented education and training in order to maintain and increase the international competitive edge of the Tunisian branches of industry that are exposed to wage pressure. German business will also apply its strength here through practical training programmes.
The author studied Mining Engineering at the Clausthal University of Technology. He has been the managing director of Germany Trade and Invest – Gesellschaft für Außenwirtschaft und Standortmarketing mbH since 2009. Before that, he assumed positions for the German industry in Dubai and Washington D.C. and led the “North Africa, Near and Middle East” Division of the Federal Ministry of Economics (BMWi) in Berlin.