Investment and Entrepreneurship Conference, March 2015
Articles early this month on Tunisia: An Opportunity, US backs Tunisia’s efforts to improve investment appeal, and Tunisia-United States: The Declaration of Love described the Investment and Entrepreneurship Conference that took place in Gammarth on March 5. Organized by the American Chamber of Commerce (AmCham) Tunisia in collaboration with the US Department of State and the North Africa Partnership for Economic Opportunity (PNB-NAPEO) of the Aspen Institute, the conference focused on «investment trends in the region and the partnership potential for investors to grow and expand into the regional markets, leveraging technology to support regional entrepreneurs and businesses, and educational exchange.»
An impressive cast of characters animated the event, including former and current government officials, CEOs and entrepreneurs. Representing Tunisian ministries were Prime Minister Habib Essid, Minister of Finance Slim Chaker, Minister of Development, Investment and International Cooperation Yassine Brahim, Minister of Vocational Training and Employment Zied Ladhari, Minister of Communication Technologies and Digital Economy Noomane Fehri, former Minister of Finance Jaloul Ayed, former Minister of Higher Education Tawfik Jelassi, and former Minister of Infrastructure Hedi Larbi. U.S. representatives included Secretary of Commerce Penny Pritzker and former Secretary of State Madeleine Albright, while a message of support from President Barack Obama opened the conference.
[youtube https://www.youtube.com/watch?v=RbEp7q9D5Ao&w=640&h=360]
Following the conference, Albright and Pritzker co-authored a piece elaborating U.S. support and aid for Tunisia which fall within the scope of a new initiative proposed by the U.S. Department of Commerce. Through the Regional Investments to Support Entrepreneurship (RISE) initiative, «public and private sectors will work together to increase training, mentoring and access to finance for entrepreneurs…and encourage economic reforms that improve the commercial environment.» At the same time, a 37.5 million dollar “lending facility” is to be provided by the Overseas Private Investment Corporation (OPIC) for small- and medium-size companies and «will focus on the franchising sector and partner with three Tunisian banks.»
The next chapter in Tunisia’s story must advance tough economic reforms that will attract investment…It must signal that the country is open for business. To do this, its investment code must be streamlined, simplified and clarified to facilitate more private-sector growth and competition. Tunisia’s banking system is burdened by too many nonperforming loans and would benefit from comprehensive reform. It also needs a transparent, reliable and modern tax and customs structure as well as a public-private partnership law to reduce red tape for international investors and help attract private capital for needed infrastructure projects. Madeleine Albright and Penny Pritzker, This is Tunisia’s Moment
American Chamber of Commerce in Tunisia
Contrary to what one would presume from its name, the American Chamber of Commerce (AmCham) in Tunisia is a non-governmental organization largely subsidized by its members (General Electric, the US Grain Council, Attijari Bank, The Coca Cola Company, IBM, ETAP, American Express Middle East and North Africa, Top Oilfield Services, Caid Essebsi and Partners Law Firm, to name a few) and sponsors (including GAT Assurances, Boeing, Philip Morris Services, HBG Holding, CITI, Ooredoo, Microsoft, HP, BIAT, UPS), a total of some 450 individuals and corporations accumulated through the organization’s monthly membership events, door-knocking campaigns, and website. According to its 2013-2014 activity report, AmCham financial resources in 2013 were drawn from Membership (34%), Training (33%), Events (19%), Sponsorship (13%).1
With a clear emphasis on investment, the Investor and Entrepreneurship Conference has been presented through a discourse that underscores the inextricable relationship between economic and democratic progress. In an interview posted on the website, AmCham Tunisia President Amel Bouchamaoui described the context and objectives of the Conference: «We have invited them [Americans] to support the economic transition in order to allow us to complete the democratic process, since it is in creating wealth and employment that we can aspire to sustainable social peace.» According to Bouchamaoui, barely 70 out of 3,200 foreign businesses in Tunisia are American, for which, she explained, «We have put together an argument that advocates for a greater presence of American businesses in Tunisia, citing the importance of the human potential and opportunity that the country offers for foreign investors as a platform for the conquest of the African continent.»
To encourage such investment, AmCham’s main strategy has been to lobby for national regulatory reforms—specifically the Investment Code and laws governing intellectual rights—as well as a bilateral trade agreement. Though Tunisia-US diplomatic relations date back to Tunisia’s independence in 1956, Tunisia is not among twenty countries with which the US has a Free Trade Agreement (Morocco is the only country on the continent with which the U.S. has such an agreement). Last March, AmCham hosted a discussion on “Trade Facilitation” in which “participants raised the issue of the urgent need of restarting the discussion of the Tunisian American agreements especially the TIFA, FTA, and MCC.”2
Tunisia-U.S. Agreements
Bilateral Investment Treaty (BIT)
“The Bilateral Investment Treaty (BIT) program, initiated in 1981, is designed to encourage and protect U.S. investment. The treaty is an integral part of U.S. efforts to encourage Tunisia and other governments to adopt macroeconomic and structural policies that will promote economic growth. It is also fully consistent with U.S. policy toward international investment. That policy holds that an open international investment system in which participants respond to market forces provides the best and most efficient mechanism to promote global economic development.”
The Bilateral Investment Treaty protocol was signed and submitted to the Senate for consideration in May 1990 by President George Bush and went into effect in February 1993. A Letter of Submittal also signed by the President explained that the US-Tunisia treaty was consistent with BIT objectives protecting foreign investors, particularly: the application of international law to govern the treatment (“‘national’ or ‘most-favored-nation’ treatment”) of foreign investors, as well as the expropriation of investments and associated payments of compensation; free transfer of funds into and out of the host country, the right of the investor to seek third-party dispute arbitration.
Trade and Investment Framework Agreement (TIFA)
In October 2002, the Trade and Investment Framework Agreement (TIFA) was signed by Robert B. Zoellick of the U.S. Trade Representative (USTR) and Mohamed Nouri Jouini, Minister of Development and International Cooperation. Articles 2 and 3 designate the establishment of a United States-Tunisia Council on Trade and Investment composed of the Tunisian Ministry of Tourism, Commerce, and Handicrafts and the U.S. Trade Representative whose primary functions are to preside over issues not covered under the BIT and generally to «identify and work towards the removal of impediments to trade and investment flows.»
“For the purpose of further developing bilateral trade and providing for a steady increase in the exchange of products and services, the Parties shall consider whether further agreements relating to trade, taxation, intellectual property, investment, vocational training, labor, and environmental issues and to any other matters agreed upon by the Parties would be desirable.” – Article 4, Agreement Between the Government of the United States of America and the Government of Tunisia Concerning the Development of Trade and Investment Relations.
Promoting a Free Trade Agreement with post-“state capture” Tunisia
There’s a lot that the US is already doing with economic and technical assistance to support the growth of the private sector in Tunisia, so an FTA would complement that because it would be mutually beneficial …This is not an FTA that is going to have a massive impact on the US economy. It will, however, have an important impact on the Tunisian side. Tamara Wittes quoted in Could the next US free trade agreement be with Tunisia?
Since the departure of Ben Ali which symbolized the end of a decades-long case of “state capture,” the push to flesh out U.S.-Tunisia trade relations has manifested in State-driven initiatives to stimulate foreign investment and in calls to adopt a Free Trade Agreement (FTA). In a 2012 “Overview of U.S. Economic Assistance to Tunisia assistance to Tunisia, «several projects under the title of “Encouraging Investment and Growth-Minded Reforms» described Congress’ authorization of a Tunisian-American Enterprise Fund to «help foster stronger investment ties between Tunisia and the United States, will leverage other investors, and will help Tunisians launch the small and medium enterprises that will be engines of long term growth.» The same year, House Committee Representative David Dreier was among a number of U.S. officials who advocated for an FTA with Tunisia.
Last March, sixty-five «qualified experts, researchers, academics, and analysts» called for an initiative to adopt an FTA with Tunisia in an open letter to Secretary of State John Kerry. In anticipation of the first session of the Tunisia-U.S. Strategic Dialogue with Prime Minister Mehdi Jomaa and President Barack Obama, the Project on Middle East Democracy (POMED) issued a letter urging the US to “deepen” its commitments to, “bolster support” for, and act with “determination and urgency” on behalf of Tunisia’s democratic transition. Among seven recommendations concerning US security restrictions in Tunisia, economic aid, assistance programs, academic and professional exchanges, two encouraged the invigoration of trade policies and the adoption of regulatory reforms to incentivize private investment:
Publicly express intent to pursue a Free Trade Agreement with Tunisia, while revitalizing the Trade and Investment Framework Agreement process. Declaring a long-term aspiration to sign a Free Trade Agreement (FTA) with Tunisia, the Arab world’s most diversified and best performing non-oil economy prior to the revolution, can help spur additional economic reform, encourage a more business-friendly regulatory environment, and galvanize regional and European allies to deepen their own trade and investment relationships with Tunisia. Revitalized Trade and Investment Framework Agreement (TIFA) processes should be used immediately to lay the foundations for a future FTA.
Support Tunisian priorities for financial and regulatory reform and offer technical assistance to encourage private sector investment. …Offering technical assistance and mentorship for existing initiatives, like the Tunisian-American Enterprise Fund, can help improve the entrepreneurship ecosystem. Open Letter to Secretary of State John Kerry, published by POMED (March 24, 2014).
‘Administrative Facilitation’ of the Foreign Franchise
With the volume and range of foreign investors and business operations that AmCham’s rigorous campaigning aims to draw to the country, certainly the quality of employment opportunities and associated working conditions will be accordingly variable. Asked how or to what extent potential investors—for whom AmCham serves as a go-to for networking, communication, and navigating bureaucracy in Tunisia—are screened or regulated in terms of their projected engagement of Tunisia’s “human potential,” AmCham indicated that Tunisia is presently not in the position to be highly selective, that the necessary first step is to increase foreign investment which represents the job opportunities and foreign currency that Tunisia is so desperately lacking.3
The franchise is a foreign investment model of growing visibility in Tunisia. AmCham has discussed «the importance of providing some administrative facilitation to attract international franchises to the Tunisian market.»4 In Foreign Franchises: A Boon or Menance for the Tunisian Economy? Nawaat Contributor Yassine Bellamine describes Law 2006-69 of 12 August 2009 concerning distributive commerce which defines, establishes the conditions for, and states the rights and responsibilities of the franchiser and franchisee in Tunisia. “Too general,” the law was followed by Decree 2010-1501 of 21 June 2010 and the Minister of Commerce and Crafts Decision of 28 July 2010 to specify the conditions and obligations commanded by a franchise contract. Noting the absence of statistics or studies gauging the impact of foreign franchises in the Tunisian economy, Bellamine concludes that it is impossible to discern the extent to which this model of foreign investment will have a bearing on economic and social outcomes in the long-term. “Nonetheless,” Bellamine writes, «it is undeniable that the security offered by franchise contracts is a solution for economic development.» Given the economic weight of the franchiser and the support provided for its operations abroad, the foreign franchise represents a force of continuity and sustainability both for the franchiser and the host economy.
The Foreign Franchise: Effects Upon Franchiser and Franchisee
Potential Advantages:
● Legal independence, ownership status of the franchiser
● A well-known brand with an established clientele incurs profits more quickly than does a new brand
● Services offered by the franchiser represent technical and psychological support for the franchisee
● Training provided by the franchiser facilitates the transfer of know-how and saves the franchisee on the costs of securing outside training
● Reduced risk for bankruptcy (80% of small businesses versus 10% of franchises go bankrupt during the first two years of operation according to Tunisie Franchise)
Potential Disadvantages
● «…the presence of the franchise business model in Tunisia poses no threat to Tunisian businesses», according to Tunisie Franchise
● Initial investment costs associated with opening a franchise business may be greater than those associated with starting a new business
● Constraints imposed by the franchiser on the product or services and/or franchise contract specifications may diminish the autonomy of the franchisee.
…Tunisia’s democratic progress and Tunisia’s economic progress go hand in hand. President Barack Obama, Message of Support for Tunisia
Questions concerning the implications and long-term impact of foreign investment models such as franchising are at the center of broader debates animated by contrasting economic visions: to what extent must Tunisia embrace the principles and practices of a free-market economy? In this arena, discourse that underlines the interrelatedness of economic and democratic progress is characteristic of a growth-based, free-market interpretation of “economic freedom.” While there is no question that any semblance of democracy requires the harmonization of economic, social, and political rights and realities, history and human nature show that power and political forces pushing for economic growth are not necessarily and not often the ones pushing for equity or equilibrium.
Notes
1 Information regarding AmCham in Tunisia members, sponsors, and financial resources are from the Activity Report and Membership Directory 2013-2014 which was distributed to Conference participants.
2 Activity Report, pp. 61-62
3 AmCham Tunisia. Personal Interview. 10 March 2015.
4 Activity Report, pp.62
Thank you. Very interesting piece… want to study it a bit before commenting, but frankly, given what we already know, no particular surprises here.
I hoped to see a more critical piece. I hope there will be considerable resistance towards a possible FTA with the US. While it might seem tempting as a means to kickstart the economy it is a poisonous fruit that should be avoided at all costs.
A FTA will be the initial step in letting US based global corporations get an unhealthy influence in Tunisian politics and can have potential devastating effects on both the environment and Tunisia’s ability to self-govern.
@Hakim
What other options have this Government got left, in order to reduce unemployment on a large scale, and to get the Economy up and running ? No other adequate options are at hand . Everyone agreed that Foreign Investment, should be the most suitable alternative, available at this point in time . Yet, you have to keep in mind that Foreign investment, never comes for free . That’s given fact . Investers invest to make profit, no matter where they come from .
In contast, if you’re counting on investers from the Gulf States, on such a magnitude, you & I may wait till hell freezes over . The choice is yours .
@Kerim
Of course there are alternatives. If the government does not believe so then they have no business governing. I’m not opposed to foreign investments but it need to be on terms that benefit Tunisia, not just here and now but in the long run. How is being slaves to IMF, the world bank and huge multinationals any different than being ruled by the French?
But since were talking about the USA and were talking about mass unemployment and poverty – why are we not talking about a New Deal for Tunisia? If we can take anything positive from America it should be inspiration from how they saved their own economy. Besides there are many more problems than unemployment especially when it comes to the environment. But perhaps there is a solution that can tackle both at the same time. If there is it has to do with restorative farming practices and ecology. There could be many many jobs in that, plus we could be battling issues of desertification and poor water quality at the same time, while giving people a means to make a living. The exact opposite will happen with the American corporations: once they are in the door they will strong arm their GMO crops and most likely make a dire situation catastrophic. This is not wild speculation, it is recent history in many places in the world. But if you rather have Nestlé and Monsanto calling the shots you make me want to cry.
Tunisia is not in a position to dictate its will upon Multinational Corporations .
It’s a “Take-it or Leave-it” deal . These guys have the know how & the cash . That’s what it’s all about in modern Economy . If you depend on them, and you allow them to come and boost your Economy, you’ll have to go along with the facts, because there’s no turning back .
This country lacks that kind of cash -loads of it- to solve all the problems you’ve mentioned above . There are simply no reserves in the Treasury to undertake large projects . There is just enough to pay the salaries of some 4million civil Servants, including security forces, teachers, medics & paramedics . On some sectors, payment delays happen every now and then, all due to lack of reserves, as we said . Ask the best financial expert, he will tell you : Tunisia has got one single problem…it has not enough money to cover all necessities which all need to be addressed at once. So, the solution is obviously to make a priority list, and to start from there . The sooner the better .