Gearing up to EU level
The buzz phrase in Tunisia nowadays is mise a niveau - which roughly translates as 'upgrading'. Specifically
it stands for the all-round improvements necessary if Tunisia's economic performance is to come to par with that
of Europe by 2008. In general, the term has entered the popular lexicon and stands for that great leap forward,
that burst of effort that will propel an entire nation out of one status and onto a much higher level of living.
You can feel mise a niveau in the attitude of taxi-drivers, traders, students, officials and all kinds of workers.
Tunisia's decision to deliberately raise its economic performance to the European level over a fairly short
time frame was a bold one. "In fact, Tunisia was the first non-European country to come up with the idea,"
says Abdelhamid Triki, general manager of planning forecast at the Ministry of Economic Development. "Initially
the EU did not want to talk about upgrading. Now Morocco and others want to follow our example," he adds.
What the EU realised was that the decision had been very carefully thought out, the risks assessed, contingency
provisions made and a detailed plan prepared. Tunisia was ready for the big adventure and had the will to carry
it through.
Over the next nine years, the association agreement will gradually dismantle trade barriers to the import of
EU-manufactured goods into Tunisia. Mise a niveau is the process designed to prepare Tunisian industry for the
great challenge that lies ahead. It also means gradually, but eventually completely, restructuring the Tunisian
economy so that the entire competitive sector comes into the private domain.
"We began the process in 1996," says Mohamed Ghannouchi, Minister for International Cooperation and
Foreign Investment. "There are several prongs to the programme: we have to upgrade our infrastructure, the
financial and regulatory institutions, communications and administration. Through government subsidies, we have
to push the private sector into greater efficiency, cut the costs of production, open up capital to foreign investors
and make companies more responsive to market demands. Finally, we have to inculcate a new culture of productivity
and creativity among the workforce."
The aim is to target 4,000 enterprises for upgrading during the initial five-year period, followed by a consolidation
period of another five years as tariffs come down more quickly. So far, 811 firms have applied for the upgrading
and 369 have been approved. Subsidies and other costs have amounted to $820m.
The programme is being part-financed by the EU. In addition to credits from the European Investment Bank, the
EU is providing further support under a 1996-99 financial protocol to compensate Tunisia for future losses of customs
revenues. Additional funding is coming from the World Bank, the African Development Bank, the Arab Fund for Economic
and Social Development and via bi-lateral agreements with Germany and France.
"The response to the mise a niveau programme so far has been positive. Industrialists have realised that
the only way they can expand their markets is by becoming globally competitive," says Ghannouchi. "But
the upgrading has to be continuous because European countries are constantly upgrading their products and legal
environments."
For the programme to succeed, Tunisia must increase its level of savings and investment, attract more foreign
direct investment and accelerate the privatisation programme.
"Over the span of the 9th Development Plan, (1997-2001) we expect investment to increase to 26% of GDP,"
says Ghannouchi. "The foreign investment climate in Tunisia is excellent at the moment and it can only get
better as the economy shifts up a gear."
The average foreign direct investment (FDI) inflow over the past five years has been around the $400m mark,
although in 1998 alone, $800m was invested. The bulk of this investment went into manufacturing and services with
$200m going to hydro carbons. Currently, there are 1,700 foreign companies providing 150,000 jobs. Some, like Benetton,
Siemens and Philips are household names in Europe. Other major names include British Gas, Citibank, Packard Electric
and Nabisco.
"In terms of foreign investment flows, we regard countries like Hungary, Poland, the Czech Republic and
Turkey as our direct competitors," says Ghannouchi. Tunisia, however, holds several advantages over its rivals.
The triple 'A' rating it received from Moodys and Standard and Poors was confirmed after the Asian crisis. Export
guarantee agencies in France and Britain have given Tunisia a clean bill of health. It is perfectly situated in
the Mediterranean to serve not only Europe but also the Maghreb and the Arabian peninsula. Politically it is the
most stable of it rivals. Wages and salaries, which are set collectively, are very competitive. The Tunisian dinar,
pegged to a basket of currencies, is convertible on current account and is expected to become fully convertible
over the next few years. "I think we can offer greater long-term security of investment than others can,"
says Ghannouchi.
Tunisia's economic expansion plans do not stop at Europe. "Last year we signed free-trade agreements with
Egypt and Jordan to reduce tariffs over a 10 year period," says the Investment Minister. Tunisia already has
a preferential agreement with Libya. Come 2010, Tunisia will be in a position to tap into a vibrant market with
a population of over 500m. "We are asking investors to come and take a share of this market," he says.
The pace of privatisation has been gathering momentum since last year. "We did not embark on privatisation
as a matter of ideology," says Economics Development Minister Taoufik Bacar. "What counts for us is rationalisation,
not how much we expect to earn from selling off state-owned companies. Privatisation is the first step in the modernisation
of enterprises. When we look at bids, we examine the long-term strategies of the bidders, particularly their investment
intentions."
The privatisation process has gone through three phases. Bacar explains: "From 1987 to 1994, we looked
at firms in difficulties and either sold off assets or liquidated them. This affected 48 firms, releasing TD195m;
between 1995-97 we sold shares by invitation to tender and realised TD205m; in the third phase we have been privatising
large units. In 1998 alone, we received TD460m from privatisation and by the end of 1999, we will have sold off
another 50 firms."
The biggest privatisation deals so far have involved the sale of two cement factories each producing 1m tonnes
per annum to Spanish and Portuguese investors. A further three will be sold this year. Last year the government
sold a 12% stake in the Banque du Sud and it is highly likely that other banks, such as the Tunisian/Emirates Investment
Bank and UIB will be regrouped and privatised.
Strategic utilities such as electricity, water supply, telecoms and some banks will remain in the public sector
but more private firms will be allowed to invest in infrastructure and tender for franchises in areas such as duty-free
shops. The US based Community Energy Alternatives is leading a consortium to construct a $300m electric generation
plant at Rades. A massive road construction programme, which will increase the current capacity by 700%, is likely
to see active private participation. New wastewater and desalination plants are also likely to be tendered out.
At this stage, it seems that Tunisia has left nothing to chance as the mise a niveau campaign gathers momentum.
But surely there must be some trepidation about the future? "Life is a risk," counters Ghannouchi, "but
you have nothing to fear as long as the risks have been calculated."
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