OVERVIEW Thanks to the wide-ranging reforms it has undertaken, Tunisia has managed, in a relatively short period of time, to make significant gains on the political, economic and social planes. Those gains have earned it the interest and consideration of the international community which, owing to the growth levels attained by the GDP and the improved living conditions of the inhabitants in spite of the country's modest natural resources, presents the Tunisian case as a model of success for developing countries. A model based on continual search for better balance between the imperatives of sustained economic development and the demands for coherent social promotion. In accordance with this vision, Man is perceived as a full actor in the development process and the main target of all the policies and choices implemented. Indeed, thanks to the country's political stability since the Change on November 7, 1987, the climate of confidence, and the liberation of initiatives, Tunisia has been able to take confident and decisive steps towards the openness of its economy and the achievement of social welfare for its citizens. A member country of the World Trade Organization (WTO), Tunisia is also the first country on the southern coast of the Mediterranean to have concluded a partnership and cooperation agreement with the European Union, the main component of which is the establishment of a free-trade zone. In this perspective, Tunisia has initiated an important program of multisectoral reforms aimed at laying the foundations for a solid, diversified and competitive economy capable of adapting to the new international environment. These basic reforms which aim to eliminate the imbalances impeding the deregulation of initiatives, have affected in turn prices, commerce, the tax system, the investment incentive system, the banking sector, the stock market and the capital market as well as the restructuring of public enterprises and the start of a major program of privatization and administrative reform. At the same time, special attention has been paid to the promotion of human resources through reforms of the educational and vocational training systems, which is likely to fulfill all the necessary conditions for the success of the program of overall upgrading of the economy, to improve productivity and face foreign competition under the best possible conditions. Perseverance with reforms has enabled Tunisia to make significant gains on the economic as well as the social fronts. Since 1987, Tunisia has recorded an average growth rate of 5%. Furthermore, despite the intensification of the world debt problem, Tunisia has managed to reduce its total debt burden. During the last few years, Tunisia has been frequently cited by international financial institutions as a "success story" in terms of economic structural adjustment. The main Tunisian exports are crude oil, minerals, manufactured goods, and agricultural products, including its lnternationally renowned olive oil. Tourism, in its turn, generates considerable resources.Tunisia's primary trading partners are France, Italy, Germany, Belgium, Luxembourg, and the Maghreb countries. Tunisia's thriving economy croates an attractive atmosphere for investors from the European Communiry, Japan and the United States. About 2,600 foreign firms have direct investments in or joint ventures wich Tunisian companies. Many of these firms have been attracted by Tunisia's proximity and preferential trading relations wich the European Community and the Arab Maghreb Union, as well as by the Investment Code which offers foreign investors,,, considerable incentives and exemptions. The administrative formalities to obtain the necessary licenses have considerably been facilitated. Currently ranked among emerging countries, Tunisia has adopted a development model based on modernity, on women's contribution and on education as a priority sector for investment. This has made possible to develop a diversified economy where top high tech sectors like computer are among the most advanced in the African continent.  Main Economic Indicators (1987-2007) Economic Development and General Balances 1987 2007 Gross Domestic Product (MD) 7,160 44,254 Growth rate (at constant prices) -2% 4.6% Debt ratio 57.9% 46.1% Debt service 26.3% 15.4% Inflation rate 8% 3% Global investment (MD) 1,789 10,000 National Savings (MD) 1,404.8 9,118.9 Distribution of investment -         Public -         Private 52.2% 47.8% 43% 57%   Sector-based distribution of GDP -         Agriculture -         Non-manufacturing industries -         Manufacturing industries -         Services     14.9% 16.9% 18.1% 50.1%     11.4%     11% 17.5% 59.8%   Source: National Institute of Statistics  This economic performance has been accompanied by the widest possible redistribution of the fruits of growth thus highlighting the foundations of the development model advocated by Tunisia and based on the inseparability between the economic and social dimensions of development. Strengthened with these achievements, Tunisia is starting the new millennium with confidence and serenity. It intends to reinforce and deepen the reforms it has initiated in order to face the challenges of the new stage and integrate its productive system into world economy under the best possible conditions. For this reason, such subjects as the reinforcement of the competitiveness of the economy, the promotion of the private sector, the establishment of quality infrastructures and the development of human resources occupy a prominent place in Tunisia's development project for the years to come. More Economic and Social Indicators on Tunisia (in PDF format) The Banking Sector Since 1987, the banking sector has undergone major reforms aimed at consolidating its financial foundations, restructuring the sector, improving its intervention and adapting it to transformations and developments on a worldwide scale. The sector has gone through three essential stages: Adjustment of the banks' financial situation . Modernization and restructuring of the banking sector. Improvement of bank services and reinforcement of the rules of governance. Adjustment of the banks' financial position - Adoption of prudential management applicable on the international scale: solvability ratio, liquidity ratio, assessment, and claim classification norms and provisions constitution. - Suppression of credit coaching policy and replacing it with a monitoring system to make banks responsible in terms of credit granting. - Establishment of a short-term capital market for banks and companies through the use of the instruments of the monetary market and the establishment of new financial products such as deposit certificates issued by the banks and treasury bonds to finance companies. - State support in financing according to market conditions through treasury bills. - Suppression of preferential interest rates and total release of banking conditions: interest rate and commission. Modernization and restructuring of the banking sector The modernization program of the banking sector (1997) is based on three axes: - Modernization of bank services by implementing an electronic compensation system and the development of electronic banking system, - Promulgation in 2001 of the law relative to credit institutions for the establishment of an all-purpose bank concept and the establishment of a legal framework relative to debt recovery companies. - Restructuring the sector through the merging of two development banks (BDET and BNDT) with a public commercial bank (STB), privatization of 3 banks (UIB, Banque du Sud now Ettijari Bank and BTKD) and the transformation of all development banks into all-purpose banks. Results of the reforms Diversity of sources of financing - 20 all-purpose banks - 10 leasing companies - 2 business banks - 2 factoring companies - 8 offshore banks - 11 foreign bank representation offices (only 6 in 1986) Solidity index These reforms also resulted in improving the financial basis of the banks through: - An increase in the banks' equity capital from 420 MD in 1986 to 3,410 MD at the end of 2007. - An increase in the reserves that amounted to 3,096 MD at the end of 2007. - A rate of risk coverage of 11.3% at the end of 2007 (as against an international standard of 8%) - A rate of listed debts of 17.6% at the end of 2007. - A rate of listed debts cover of 53.2% at the end of 2007. Financing of the economy The various reforms allowed banks to continue their efforts in financing the economy as current loans increased from 4,176 MD in 1986 to 27,100 MD at the end of 2007. These credits benefited all sectors of the economy including agriculture (8.8%), industry (29.7%) and service 61.5% (of which tourism with 10.8%). Bringing services closer to customers In order to meet the expectations of customers, the number of branches has been increased and rose to 1060 in 2007, which means one branch for every 9,600 inhabitants. Development of the electronic banking system Within the framework of the development of the electronic banking system development, the majority of banks' branch offices have been equipped with teller machines thus increasing their number to 1,100 in 2007. The number of banking cards rose to 1.3 million cards, i.e. one card per 7 inhabitants. The number of electronic payment terminals TPE reached 8,577 during the same period. Mobilization of savings Banks' efforts have intensified for the mobilization and diversification of saving products. As a result, customers' deposits increased from 2,762 MD at the end of 1986 to approx. 25,270 MD at the end of 2007. The capital market In market economies, the capital market constitutes an essential source for financing the needs of economic agents. For this reason, the government's efforts have focused, since 1987, on working out the necessary framework to make this market one of the financing supports of the economy. In this respect, several reforms were undertaken. They mainly consist in the organization of the issue of bond loans, and creation of a legal framework for investment companies, organization of the modes of equity participation and transfer to traders to run the trading room at the stock exchange. Adoption of international standard restructuring with the establishment of three independent structures having clear and complementary functions (the capital market authority, the Tunis Stock market authority, the Tunis Stock Exchange and the deposit, clearance and settlement society). Along with the reduction, from 35 to 20% of the corporate tax for companies that open 30% more of their capital. Furthermore, reforms allowed the organization of the activity of unit trusts (investment companies, open-end investment companies, collective investment funds or mutual debt funds), including a new set of measures taken to implement the presidential program "For Tomorrow's Tunisia " which set the ambitious target of doubling the contribution of the capital market to the financing of private investment to reach the rate of 20% by the year 2009. Results of the reforms - Increase of up to 7.5% in 2007, in the capital market contribution to the financing of private investment. It is expected that it will reach 10% in 2008. - Since 1999, 14 companies have opened their capital to a proportion of 30% at least, which increased to 50 the number of companies listed on the stock exchange. - Increase in the number of stock market investment savings accounts from 621 in 2000 to 5,072 in July 2008. Amounts also increased during the same period from 1.9MD to 61.4MD. - Increase in the number of stock market investment savings establishments to 67 in July 2008 as compared to only one establishment in 1991; the funds managed increased from 6 MD in 1992 to 3,605 MD at the end of July 2008. In light of the recent financial and economic world crisis, the President of the Republic has named a follow up committee to monitor the eventual consequences of the crisis and make recommendations. This high level committee is chaired by the Prime Minister and includes the Governor of the Tunisian Central Bank, and senior economic figures. Insurance: The insurance sector has benefited since the Change of reforms that encompassed major economic and social sectors of the country. The most important achievements are: - Modernization of the legal framework; - Preserving global balances of insurance companies; - Development of some insurance branches. One of the achievements on the legal level was the promulgation on March 9, 1992 of the Insurance Code and the publication of implementation texts. Reforms introduced by the new Insurance Code are to guarantee a better protection of the insurance policy holders through a legal organisation of the insurance policy and the implementation of rules reorganizing the insurance market and fixing work conditions (insurance companies, intermediates, experts and damage commissioners). These reforms had a positive impact on the sector's activities in terms of restructuring the insurance market as well as global indexes. The market has been considerably reinforced and there are 18 resident insurance companies of which 13 are non-specialized, 2 are specialized in life-insurance, 1 specialized in export insurance, 1 specialized in domestic loan insurance and 1 specialized in reinsurance. The market also comprises four non-resident companies specialized in insurance of non-resident natural persons and working under the framework of the law dated December 6, 1985, relative to encouraging financial and banking institutions, as well as articles 67 and 68 of the Insurance Code. The network of the insurance intermediaries including 712 insurance agents and brokers has been reinforced and offer services close to customers all over the country. The sector relies on 888 experts and damage commissioners of all specialities to assess any damage. As a result, the undertaken reforms increased noticeably the turnover of insurance sector from 801.6 MD in 2006 to 876.3 MD in 2007, i.e. an increase of 9.3%. The evolution of the turnover came along with an increase in the amount of indemnities to victims reaching 463.9 MD in 2007 against 461.3 MD in 2006, i.e. an increase of 0.6%. The insurance sector has made an active contribution to the national economy thanks to the wise use of obligatory reserves devoted to covering commitments towards insurance policy holders, but also used for the financing investments. The total amount of these funds reached approximately 1,685 MD in 2007 against 1,424.4 MD in 2006, i.e. an increase of 18.3%. Customs Administration Being considered as a window of international trade and a compulsory passage for goods or exports, customs services work hard to adapt to the changing environment and to assimilate the mutations taking place on the national and international economic scene. Customs administration have witnessed as from independence several structural reforms in order to improve its output and meet the requested efficiency in performing its mission in respect of national legislation , as well as bilateral and multilateral agreements. They were set in place by the end of 1980s along with the policies brought about by the era of the Change. The fundamental economic changes that the world is facing nowadays and the rejection of the economic interventionist policy based on the protection of national goods from all economic spaces had a major effect on all sectors and all levels, including on the scale of activity of the customs administration. Furthermore, the latter underwent major developments at the level of its tasks, as well as its management methods in order to meet the needs of partners on the qualitative and quantitative levels. This change was achieved in the context of the new economic stakes such as the impulsion of interior and exterior investments, as well as the need to meet all conditions to ensure the country's viable development. Deep structural reforms have been introduced into the sector of commerce, with a view to enhancing its role in promoting the national economy, offering larger prospects for enterprises and productive sectors, achieving balance between supply and demand, and adapting the Tunisian economy to the requirements of integration within the world economy. Foreign trade The period 1987 - 1994 With the launching of a reform program, the integration of the Tunisian economy within the world economy, and the adoption of export as an essential foundation of development within the objectives of development plans, commercial exchanges knew a significant increase amounting nearly to 24% annually, within a national situation marked by successive years of drought, and an international situation characterized by economic recession and fluctuations. These results made it possible to improve the cover rate at the end of the period, and to limit the deficit of the commercial balance within a reasonable rate of the GDP. The period 1994 - 2002 This period was marked by numerous international developments, including the dismantling of multi-fiber agreements, China's joining the World Trade Organization, the enlargement of the European Union, and the rise of world prices of raw materials, including oil. These developments created challenges that affected, in particular, textile exports. At the national level, structural reforms in the field of foreign trade made possible the continuous achievement of positive results. As regards the sector-based performance of exports, Tunisia managed to achieve a sustained growth in the exports related to mechanical and electric industries. It also preserved the share of EU countries in textile exports, within an increasing Chinese competition on the European market. Concerning imports, the share of raw materials and energies increased, as a result of the rise of world prices and the increase of national needs, whereas the share of other groups was stabilized, except for equipment materials whose share decreased by 6 points. o The 10th Development Plan period 2002 - 2006 During the 11th Plan, exports of goods and services increased by 10%, an achievement to which all exporting sectors contributed. During the same period, imports of goods and services rose by 7.5% at constant prices. o The 11th Development Plan period 2007 - 2011 In the first year of the 11th Plan, positive results were achieved as regards foreign trade exchanges. Exports of goods increased by 24%, a rate exceeding that of the rise of imports. This has improved, by 1.6 points, the rate of the covering of imports by exports, to reach 79.4%. At the sector-based level, exports increased in all sectors, particularly mechanical and electric industries (30.9%), energy and hydrocarbons (55.5%), textile and clothing (16.4%), phosphates and derivatives (30.5%) and leather and shoes (20.8%). In 2007, Tunisian exports were re-structured. The sector of mechanical and electric industries ranked first with a share of 27.1%, compared to 25.9% in 2006, while the share of textile and clothing decreased from 28.7% to 26.7%, and that of agriculture and food industries from 12.1% to 9.7%. Support structures Export Promotion Center (CEPEX) Since its creation, CEPEX has endeavored to diversify its actions in order to keep up with national and international developments. It has, in fact, managed to be in tune with the various stages and different plans that have characterized the economic policy of Tunisia. During the New Era, CEPEX has been given a fresh impetus, materialized through the improvement of its means of action and the increase of its budget. This has enabled it to clearly identify demand on foreign markets, to guarantee the continuity of export, and to facilitate the continuous presence of Tunisian products on foreign markets. This action has allowed to diversify the commercial partners of Tunisia, through reinforcing bilateral and multilateral cooperation, developing an active partnership with foreign countries, and expanding this partnership so that it encompasses various sectors of activity. The establishment of the Higher Council for Export and Investment gave a fresh impetus to CEPEX action. This Council offers an adequate framework to provide all conditions of success for the export activity. Export Promotion Fund (FOPRODEX) This Fund is one of the major mechanisms of support for exports. It has largely contributed to conquering new foreign markets and maintaining the positions of Tunisian products on these markets. Fund for Access to Export Markets (FAMEX) This Fund was created as part of the program for the development of exports, established by the Ministry of Commerce and Handicrafts, in cooperation with the World Bank. Its actions are targeted essentially at small and medium-sized enterprises. It provides technical and financial support to new exporters, to exporters looking for new markets, and to exporters exporting new products. Domestic trade, quality and consumer protection Since the Change, Tunisia has opted for a sound policy that reconciles between the economic and social dimensions of development. The policy of liberalization of all the components of the economy (investment, financial and tax system, foreign and domestic trade) has consolidated Tunisia's position and the invulnerability of its economy in the face of the rapid changes and fluctuations taking place on the international scene. This policy has yielded very positive results. The number of traders has considerably gone up from 49,420 in 1987 to 285,721 in 2005. The same holds true for hypermarkets whose number has significantly increased, and which now cover all regions of the country. Considerable results have also been achieved in terms of supply, thanks to the joined efforts of all the concerned parties, including administrative and professional structures, and the sound organization and regular follow-up of the situation of the market. This has made it possible to ensure a regular supply of goods and to maintain prices in a way that protects the interests of producers and consumers. Upgrading the commercial sector The sector of commerce is of crucial importance, in that it creates wealth, valorizes the national product, and promotes employment and export. It contributes by 10% to the GDP and provides no less than 10% of jobs. This sector is also the driving engine of the other production sectors in general. In line with the objectives included the Presidential Program for Tomorrow's Tunisia, and pursuant to the presidential decisions announced in November 2006, the Ministry of Commerce and Handicrafts established a coherent program for the upgrading of the trade sector. This program revolves around three axes : - Upgrading local commerce - Upgrading the channels of distribution of agricultural and fishing products - Promoting electronic commerce Promoting the legislative and structural framework of competition since 1987 Since the Change of 1987, action has been focused on introducing reforms aimed activating the market mechanisms and limiting the state's intervention in economic activities. These reforms involve in particular : - Re-structuring the national economy as part of the program for the comprehensive upgrading of economic enterprises; - Liberalizing foreign trade by establishing the principle of the free flow of goods, abolishing import and export licenses, dismantling customs duties on imported goods in line with the State's international commitments, especially with the World Trade Organization and the European Union, and establishing free-trade zones with a number of sisterly Arab countries like Morocco, Egypt, Jordan and Libya. - Stimulating free initiative in the economic sector, by issuing a unified investment code, reforming the financial and tax system, privatizing a number of sectors, and adopting the principle of free trade. This process of reform was crowned with the establishment of a coherent legal framework adapted to the current national and international requirements, and aimed at enhancing the economy, bringing under control the inflation rate, promoting the performance of enterprises, and improving the quality of products. Public Subsidization Fund The policy of subsidization has always constituted one of the most important mechanisms that contribute to protecting the national economy against world economic fluctuations, and preserving the purchasing power of low-income citizens. Though this policy has undergone several reforms, it has nevertheless remained the basic foundation for the path that seeks to reconcile between the requirements of economic efficiency and the preservation of the social dimension of the Tunisian development policy. At the beginning of the 11th Development Plan period, the prices of most basic products significantly increased, which had a direct impact on the global subsidization costs which exceeded 1% of the GDP in 2007, and are expected to exceed 2% in 2008. To bring under control subsidization expenses, and, at the same time, protect the citizens' purchasing power, a number of measures were taken, covering the various components of the subsidization system. These measures were aimed, in particular, at : - Rationalizing the use of subsidized basic products, and orienting them exclusively toward consumption; - Encouraging agricultural producers to enlarge cultivated lands and cover the largest part of the national consumption by local production; - Promoting the supply of alternative products in the domestic market, in order to alleviate pressure on subsidized products. Action will be pursued, during the coming period, to further rationalize subsidization expenses, while preserving the role of the public subsidization fund as one of the mechanisms of social policy. Handicrafts Handicrafts have now become an important sector of the national economy, given its permanent vitality and capacity to adapt to the requirements of progress at the local and international levels, thanks to the know-how, experience and creativity of craftsmen. The strategic study on handicraft promotion by the year 2016, in light of which the President of the Republic gave instructions to organize a national consultation in this field, has confirmed the economic, social and cultural dimensions of the handicrafts sector. This sector, in fact, provides jobs for 300,000 craftsmen, that is 11% of the workforce. It contributes by 3.8% to the GDP and by 2.2% to the global volume of exports. It creates nearly 7,000 additional jobs every year. These results are the fruit of the constant support provided to the sector, materialized through successive presidential measures benefiting craftsmen and covering all their fields of activity. These measures are aimed at upgrading human resources, anchoring the culture of handicrafts in young generations, developing the legal frameworks regulating the sector, particularly as regards social security protection, promoting the quality, marketing and export of handicrafts products, and encouraging participation in relevant national and international events. To promote the handicrafts sector and increase exports, a number of craftsmen and handicrafts institutions are annually involved in regional, national and international events, which offer opportunities to further make known the specificities of Tunisian products and to highlight handicrafts innovations. Thanks to the constant attention and support granted to this sector, the volume of investments in the field of handicrafts, during the 10th development Plan period, reached 37.2 million dinars. The private sector's contribution to this effort amounts to 86%. As regards job reaction, the handicrafts sector has provided 35,000 new jobs, which reflects the important role of this sector in materializing the priority objectives set for the national economy, in the forefront of which is, promoting employment.