Investment Climate

Openness to Foreign Investment

The Tunisian government actively encourages selected Foreign Direct Investment, particularly for export- oriented industry. The Tunisian government does screen potential foreign investment to minimize the impact of the investment on domestic competitors and employment, and to minimize foreign currency outflows. Tunisian government officials have identified restaurants, real estate, retail distribution, and other service industries as among the areas in which foreign investment is discouraged. For onshore companies outside of the tourism sector, government authorization is required if the foreign capital share exceeds 49 percent. Foreign investors are denied national treatment in the agriculture sector. Foreign ownership of agricultural land is prohibited, although land can be secured through long-term (up to 40 years) lease. However, the government actively promotes foreign investment in agricultural export projects.

The privatization program had consisted largely of the sale of the smallest and least viable public sector enterprises until 1998 when two large cement factories were privatized through sale to foreign investors. In tandem with privatizations pitched primarily to foreign investors, the government continues to privatize smaller assets through sales to pre-selected Tunisian buyers with strict terms of sale. Public offerings of shares of large state industries (e.g., airline, beverage) have been stalled, partly by the underdevelopment of the secondary market. However, the government has loosened restrictions on direct foreign participation in the trading; now allowing up to 49 percent of the shares of a publicly traded company to be foreign held. In cooperation with the World Bank, the government has reaffirmed its commitment to privatize larger assets, which began in the construction materials industry. Three additional cement factories are expected to be offered for sale in 1999.

The most significant step in the privatization program was the government's 1996 launch of an international tender for Tunisia's first private utility, an independent power producer.

Conversion and Transfer Policies

The Tunisian Dinar is now convertible for current account transactions. Full convertibility is not expected in the medium term. The Dinar is still subject to certain restrictions. It is illegal to take Tunisian bank notes and coins in or out of the country. Central bank authorization is still needed for some foreign exchange operations, including resident foreign company payment from local revenue for foreign-origin goods or services. There is no limit to the amount of foreign currency that visitors can bring into Tunisia and exchange for Tunisian Dinars. The unused balance of such foreign currency may be taken out of the country. Amounts exceeding the equivalent of TD 1,000 must be declared at the port of entry.

Nonresidents are exempt from most exchange regulations. Foreign investors may transfer returns on direct or portfolio investments at any time and without prior authorization. This applies to both principal and capital in the form of dividends or interest. Under foreign currency regulations, nonresident companies are defined as having:

Nonresident individuals who own at least 66 percent of the capital; and,

-capital financed through imported foreign currency.  The Dinar is traded on an intra-bank market, established in 1994. Trading operates around a "fix" established by the central bank (based upon a "basket" of the euro plus five currencies: German Marks, French Francs, U.S. Dollars, Japanese Yen, and Italian Lira). The dollar/ Dinar value fluctuates on a daily basis, but is roughly equivalent to one to one. Tunisia has permitted restricted spot market trading of foreign currency since 1995.

Right to Private Ownership and Establishment

Tunisian government actions clearly demonstrate a strong preference for offshore, export-oriented Foreign Direct Investment. Investors in that category are generally free to establish and own business enterprises and engage in most forms of remunerative activity.

Protection of Property Rights

Secured interests in property are both recognized and enforced in Tunisia. Mortgages and liens are in common use. Tunisia is a member of the World Intellectual Property Organization (WIPO), and has signed the UNCTAD agreement on the protection of patents and trademarks. The agency responsible for patents and trademarks is the National Institute for Standardization and Industrial Property (INNORPI). Foreign patents and trademarks should be registered with INNORPI. Tunisia's patent and trademark laws are designed to protect only owners duly registered in Tunisia. Revised legislation on industrial ownership in Tunisia is still pending, but is expected before the WTO agreement on Trade-Related Aspects of Intellectual Property (TRIPS) comes into force in 2000.

Copyright protection is the responsibility of the Organisme Tunisien de Protection des Droits d'Auteur (OTPDA), which also represents foreign copyright organizations. Tunisian copyright law has been updated to cover modern techniques, but its application and enforcement have not been consistent with foreign commercial expectations. Print, audio, and video media are considered particularly susceptible to copyright infringement.

Foreign Trade Zones/ Free Ports

Tunisia has two free trade zones, one in the north at Bizerte and the other in the south at Zarzis. The land is state owned but managed by a private company. Companies setting up operation in the free trade zones are exempt from most taxes and customs duties except those relating to land transport and contributions to the social security system. Companies in the free trade zones are exempted from profits tax for the first 10 years of export operation.

Foreign Direct Investment Statistics

Tunisia attracted TD 682 million of total foreign investment in 1998, up from td 380 million in 1997. As much as 75 percent of Foreign Direct Investment (FDI) in Tunisia in recent years has been in the energy sector --principally in the areas of petroleum exploration and development, although the percentage of manufacturing investment is increasing. The privatization of two cement plants in 1998 is responsible for one half of the increase in fdi. Continued privatization is expected to sustain the upward trend in foreign direct investment. The rades ii independent power project, valued at $300 million, will significantly increase FDI in 1999.

Government figures indicate over 1600 companies established as a result of foreign direct investment. The government counts over 1000 manufacturing companies with foreign or mixed capital, 875 of which produce entirely for the export market. The vast majority of these companies are in the textile industry, with mechanical and electrical industries a distant second. Foreign investment in agriculture is valued at $140 million, spread over 78 joint ventures ranging from aquaculture to flower production.