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TITLE: TUNISIA ECONOMIC POLICY AND TRADE PRACTICES
DATE: FEBRUARY 1994
AUTHOR: U.S. DEPARTMENT OF STATE
Key Economic Indicators
(Millions of Dinars (TD) unless otherwise noted)
1991 1992 1993 /1
Real GDP (1990 base) 2/ 11,236 12,151 12,467
Real GDP Growth (pct.) 3.9 8.1 2.6
GDP (current prices) 2/ 12,013 13,725 14,892
Agriculture 2,016 2,133 1,964
Manufacturing Industries 1,906 2,062 2,168
Non-manufacturing Ind. 1,472 1,520 1,544
Tourism 441 600 663
Services 3,036 3,303 3,512
National Income Per Capita (TD's) 1,367 1,452 1,467
Labor Force (million) 2.44 2.50 2.56
Unemployment Rate (pct.) 15.7 16.0 16.2
Money and Prices
Money Supply 2,636 2,827 2,810
Commercial interest rates max. 14 max. 14 max. 14
Savings rate (pct.) avg. 8 avg. 8 avg. 8
Consumer Price Index 177.9 187.8 196.2
Official Exch. Rate ($ per TD) 1.10 1.20 1.02
Trade and Balance of Payments
Total Exports (FOB)/3 3,417 3,567 3,994
Exports to U.S. 25 51 50
Total Imports (CIF)/3 4,789 5,689 6,241
Imports from U.S. 154.1 282.3 350
Current Account Balance -95 50 200
Aid from U.S. (FY basis) 27.1 21.8 14.7
External Public Debt 6,400 6,850 7,505
Debt Service Payments 1,167 1,156 1,364
Gold Reserves 4.3 4.3 4.3
Foreign Exchange Reserves 637 900 800
n/a Not available.
1/ Figures for 1993 are estimates based on data available
through September, 1993.
2/ GDP at factor cost.
3/ Merchandise trade.
1. General Policy Framework
Tunisia has a mixed economy composed principally of
agriculture, tourism, manufacturing, and hydrocarbon and
phosphate mining. The largest sector is services, comprising
about 33 percent of GDP. Tourism, the single largest source of
foreign exchange, was severely affected by the Gulf War but has
recovered well since then. The manufacturing sector comprises
about 15 percent of GDP, and consists primarily of textiles and
food processing. Agriculture also comprises about 15 percent.
This sector, vulnerable to the vagaries of weather, is down
seven percent in 1993. The non-manufacturing industrial sector
accounts for 12 percent of GDP, and consists principally of
phosphate mining and hydrocarbon extraction.
For 1993, the government is predicting 2.6 percent real
growth. This is down slightly from the 2.9 percent predicted
at the start of the year, largely the result of the poorer
agricultural harvests. The favorable rainfall in the early and
mid growing season was not sustained through the end of the
season, and the results are down in comparison to the excellent
results of 1991 and 1992. Manufacturing is up 2.9 percent,
exports are up 4.5 percent, and inflation is being held to 4.5
The country is now in the seventh year of a major
structural reform program that has emphasized export-led growth
through price and import liberalization, privatization of
publicly held companies, financial sector reform, the
attraction of foreign investment, and diversification of the
The United States and Tunisia have two major bilateral
treaties affecting trade: a Double Taxation Treaty in which
each country has agreed to avoid double taxation on
corporations or individuals active in both countries; and a
Bilateral Investment Treaty dealing with the treatment of
American companies in Tunisia, expropriation, remittance of
profits, and international arbitration of disputes.
Fiscal Policy: The 1993 budget provides for 11.2 percent
increase in expenditures and 13.4 percent increase in
revenues. The deficit is financed through both international
and domestic borrowing. Government policy has called for an
expanding economy to cope with deficit problems, and the trend
in recent years is favorable: In 1991, the 486 million dinar
net deficit equaled 4.5 percent of GDP; in 1992, the figures
were 366 million dinar equal to 2.8 percent of GDP; in 1993,
357 million dinar equal to 2.4 percent; and the '94 budget
anticipates a net deficit of 320 million dinar equal to 1.9
percent of GDP.
Monetary Policy: The principal objective of the Central
Bank remains the effective control of inflation. Between 1987
and 1991 the inflation rate varied from six to eight percent.
In 1992, it was 5.5 percent. In 1993, it is 4.5 percent. This
trend is largely the result of the price and import
liberalization policies which have encouraged greater
international and domestic competition.
2. Exchange Rate Policy
President Ben Ali has declared that 1993 will be the year
the dinar is made convertible for current account purposes.
Appropriate legislation was introduced in April, and some but
not all of the detailed Central Bank circulars have been
promulgated. Under the plan, (a) foreign exchange will be more
readily available for business trips, tourism, study abroad and
health related travel; (b) exporters will be permitted to
retain a higher percentage of the foreign exchange they
generate; (c) businesses and banks will be able to borrow
abroad directly instead of through the Central Bank; and, (d)
businesses and banks will be able to channel payments to
foreigners through a commercial bank instead of the Central
Bank for those services arising from normal business activities.
The principal currencies quoted against the Tunisian Dinar
(TD) are the U.S. dollar, the Deutschemark, and the French
franc. The rate has varied considerably over the past 13 years
from a high in 1979, when the Tunisian dinar equaled $2.47, to
a low in 1993, when it equaled $0.98. For 1993, the rate is
projected to average about one Tunisian dinar equals $1.02.
The exchange rate is set daily by the Central Bank via a
controlled floating system based on the currencies of Tunisia's
major trading partners. However, the pending convertibility
plan proposes to change this to a more flexible and market
oriented method. The most likely scenario is one in which
representatives of the largest banks meet each day and, through
market type interplay and auctioning, allocate the foreign
exchange among themselves in accordance with their needs and
those of their clients.
3. Structural Policies
In the mid-1980s, Tunisia was faced with rising
unemployment, stagnant economic growth, and dwindling foreign
exchange reserves. The domestic economy was protected and
inefficient, and the government was running unsustainable
budgetary deficits. A severe balance of payments crisis in
1986 finally prompted the government to undertake IMF and World
Bank sanctioned structural reforms. To date, those reforms
have enjoyed remarkable success.
Over the past four years the economy has grown at an
average annual rate of 5.6 percent, and inflation has been held
to an average of 6.2 percent per year. In 1992, the government
embarked upon its eighth five-year economic plan emphasizing
private investment and domestic consumption as well as
continued export growth.
Tax Policies: Under the structural adjustment program,
import regulations have been relaxed to stimulate economic
expansion through export of manufactured goods. The import of
raw materials and semifinished goods has also been
liberalized. Fully 85 percent of the products on the import
list can now be imported freely as compared to 23 percent in
1986. Customs tariffs on imports of capital goods have been
cut considerably. By 1991, the maximum customs tariff had been
decreased by nearly 80 percent. Total taxes on imported goods
have not, however, been cut by such levels as a value added tax
(VAT) introduced in 1988 is payable on imported items at rates
identical to those on locally produced goods.
The only taxes having significant effect on U.S. exports to
Tunisia are import tariffs. By 1991, the Structural Adjustment
Program had reduced the maximum basic tariff to 43 percent.
However, when faced with dwindling revenues because of the
adverse economic impacts of the Gulf War the government imposed
a "temporary" five percent surcharge on all merchandise
imports. Originally scheduled to end on December 31, 1991, the
surcharge was later extended through 1992, and, despite
repeated assurances during 1992 that it would be terminated as
scheduled, it remains in effect in 1993.
In addition, Tunisia imposed a system of custom duty
increases for the period 1992 through 1994 on certain items
which compete with locally produced goods. Prior to this
action the maximum basic customs duty was 43 percent. The new
policy authorized an additional duty of 30 percent in 1992,
reduced to 20 percent in 1993, ten percent in 1994, and
eliminated by 1995. By 1995, the average tariff rate should be
down to 25 percent.
Tunisia acceded to full GATT membership in 1990. All taxes
now remaining on imports also apply to locally produced goods
and are not therefore considered to be tariff barriers. The
only additional minor charge on imports is a very small customs
user fee of two TD per declaration. However, in 1993 Tunisia
revised its list of tariff concessions by modifying the tariff
or provisional compensatory duty on nearly 280 items.
According to the government, the action was taken to protect
the competitiveness of certain domestic industries, and the
Tunisian GATT representative expressed willingness to enter
into GATT Article XXVIII and XIX negotiations as appropriate
concerning these changes.
Investment policy: Existing Tunisian legislation on
investment applies equally to domestic and foreign investors
and attractive tax breaks are among the investment incentives
geared to encouraging exports of manufactured goods. In
addition to generous fiscal and customs advantages, the law
provides nonresidents with a transfer guarantee for capital
invested through the import of foreign convertible currency and
the income earned from that capital. Companies are considered
nonresident when at least 66 percent of their capital is held
by Tunisian or foreign nonresidents. Similar legislation
exists for investment in the agricultural sector, although
Tunisian law still prohibits ownership of land by
non-Tunisians. A special 40-year land lease system permits
agricultural development by foreign companies.
A new Unified Investment Code that will consolidate many of
the existing separate codes is in the final stages of national
debate. Under the proposed legislation all types of investment
will have up to 35 percent of their reinvested revenues and
profits exempt from taxation and will pay only ten percent
customs duty on imported capital goods. For those companies
producing exclusively for export, 100 percent of the revenues
and profits stemming from exports are exempt from taxation for
a period of ten years (reduced to 50 percent after ten years).
Companies producing "exclusively for export" will have the
right to sell up to 20 percent of their output on the local
market. Additional special incentives are proposed for those
investments that benefit underdeveloped areas, the environment,
agriculture and fishing, entrepreneurs and small businesses.
Regulatory Policies: Production standards are not a major
obstacle for foreign investors. The quality of goods
manufactured solely for export, usually by foreign operated
companies, is clearly superior to items produced for the local
market. The Tunisian Office for Commercial Expansion (OFFITEC)
carries out quality control procedures on items for export.
Sanitary and health controls are carried out on both exported
and imported food items.
4. Debt Management
Total external debt will reach 7,505 TD in 1993. Debt
service payments rose 18 percent in 1993 to 1,364 million
dinar, and are expected to rise another 17 percent in 1994.
This increase stems principally from dinar devaluation over the
past year. Approximately 73 percent of the country's foreign
debt is in U.S. dollars or dollar-linked currencies and the
dinar fell 25 percent against the U.S. dollar between
September, 1992 and September, 1993. The 1,364 million dinar
debt service payment constitutes 27 percent of the government
budget. Debt service as a percentage of exports of goods and
services is approximately 21 percent.
The Central Bank closely monitors the level of external
debt and tries to keep it as low as possible. One indication
of the overall prudent debt management policy of the government
is the fact that Tunisia has never rescheduled any of its
debt. The deficit is financed through concessional lines of
credit from its major trading partners, and loans from official
multilateral creditors such as the World Bank and the African
Development Bank. The Central Bank has also moved toward more
sophisticated debt portfolio management by aligning debt
service payment dates with anticipated receipts from sectors
characterized by seasonal variation (e.g., tourism), and by
aligning debt service payments with the currencies of
anticipated export receipts.
5. Significant Barriers to U.S. Exports
There are no significant barriers to U.S. exports in
Tunisia and the United States enjoys a traditional bilateral
trade surplus. However, the level of sales of American
products in Tunisia remains low.
Historical and geographical factors have given Tunisia a
special relationship with Europe. It has bilateral trade
agreements with all of its major trading partners there, and
most of them link supplier credits to generous aid programs.
Without similar facilities backing U.S. exports, it is
difficult for U.S. firms to make real inroads into the Tunisian
market. Tunisia also frequently adopts European product
standards for itself, a policy that works to the disadvantage
of U.S. exporters.
Tunisia's leading supplier in 1992 was France ($1,447
million), followed by Italy, ($1,030 million), and Germany
($793 million). The United States was in fourth place with
$282 million of exports. Agricultural products (much of it
financed by U.S. aid and export credit programs) accounted for
one-third of U.S. exports to Tunisia in 1992.
There exists real possibilities for increasing the level of
U.S. exports to Tunisia in areas such as consumer goods,
environmental services, construction equipment,
telecommunications, and packaging machinery and equipment.
However, Tunisian businessmen frequently report that American
products are highly competitive at the prices at which they are
offered in the United States, but not competitive when they
must be purchased through a high-priced European intermediary.
6. Export Subsidies Policy
Tunisia has a wide range of export subsidy policies,
including a special Export Promotion Fund (FOPRODEX). FOPRODEX
provides preferential financing and funding in order to improve
the productivity and competitiveness of companies producing for
export. Only companies legally incorporated in Tunisia are
eligible for these subsidies, but those who are can receive
transport subsidies of 50 percent for air freight and 33
percent for sea freight. There is also a government agency to
promote exports, the Export Promotion Center (CEPEX), and a
program providing long term financing for exports of capital
goods and durable consumer goods.
7. Protection of U.S. Intellectual Property
Tunisia is a member of the World Intellectual Property
Organization (WIPO) and a signatory of the Universal Copyright
Convention, the Paris Convention for the Protection of
Industrial Property, the Madrid Agreement on deceptive
indications of source, and the Bern Convention for the
Protection of Literary and Artistic Works.
The Tunisian National Institute of Standardization and
Industrial Property (INNORPI) processes and grants patents,
trademarks, and registration of designs. It also regulates
standardization, product quality, weights and measures, and the
protection of industrial property. Foreign patents and
trademarks are registered with this organization.
There are no active cases of intellectual property right
disputes with Tunisia. However, the unauthorized use of
foreign trademarks, especially in cheap copies of clothing and
sporting goods, continues to be a problem as does the
unauthorized duplication of music and video cassettes.
8. Worker Rights
a. Right of Association
The Tunisian constitution and the labor code establish the
right of workers to form unions. The central labor federation,
the Tunisian General Federation of Labor (UGTT), claims about
15 percent of the work force as members, including civil
servants and employees of state owned enterprises. The UGTT
and its member unions are legally independent of the
government, the ruling party, and other political forces but
operate under government regulation. While there is no legal
requirement for a single trade union structure, the UGTT has
developed into the country's sole labor organization by
historical circumstance. The government has decreed that the
UGTT member federations are the negotiators for collective
bargaining agreements that cover 80 percent of the private
sector work force, whether unionized or not.
Union federations, including those of civil servants, have
the right to strike provided ten days advance notice is given
and the UGTT approves. The International Labor Organization's
Committee of Experts cited the required UGTT approval as being
inconsistent with ILO Convention 87 on freedom of association.
However, the strike restrictions are rarely enforced. In the
past few years the vast majority of strikes, both private and
public, failed to provide the required notice and thus were
technically illegal. In the first half of 1993 there were 23
legal strikes and 245 illegal ones, but the government did not
prosecute workers in any of the illegal cases.
b. Right to Organize and Bargain Collectively
The right to organize and bargain collectively is protected
by law and practiced throughout the country. Wages and working
conditions are established by negotiation between the UGTT
member federations and the employer representatives of
approximately 47 collective bargaining agreements which set
standards applicable to entire industries in the private
sector. It also negotiates with the various ministries and 208
state-run enterprises in the public sector. In 1993, the UGTT
negotiated triennial public and private collective bargaining
agreements calling for an average five percent annual wage
Anti-union discrimination by employers against union
members and organizers is prohibited by law and there exist
mechanisms for resolving such complaints. However, the UGTT
has complained of increasing anti-union activities by private
sector employers. The central labor organization has
characterized the propensity of certain industries to hire
temporary employees as "anti-union activity" because
enforcement of worker rights for temporary workers is more
difficult than for permanent ones, and the hiring of workers on
a nonpermanent contract basis exempts the employer from paying
certain benefits otherwise required. This problem is most
acute in the textile sector where such labor accounts for as
much as 80 percent of the work force.
c Prohibition of Forced or Compulsory Labor.
Compulsory labor is not specifically prohibited by local
law, but there have been no reports of its practice in recent
d. Minimum Age of Employment of Children
The minimum age for employment in the manufacturing sector
is 15 years, and in the agricultural sector 13 years.
Inspectors from the Social Affairs Ministry check the records
of employees to verify that employers comply with the minimum
age law. Nevertheless, underage children often perform
agricultural work in rural areas and sell food and other items
in urban areas. Small enterprises in the informal sector
allegedly violate the minimum age law frequently. The UGTT
alleges that certain apprenticeship programs are, in fact, a
form of child labor.
e. Acceptable Conditions of Work
Tunisia has a labor code dating from independence in 1956
that sets standards, including a maximum 48 hour work week and
a range of administratively determined minimum wages. The
Social Affairs Ministry has an office responsible for improving
health and safety standards in the work place. Regional labor
inspectors are responsible for enforcing these standards but
most firms are inspected only about once every two years. The
regulations tend to be interpreted more strictly in the Tunis
area than in the rural areas, and working conditions and
standards tend to be better in export-oriented industries than
in those producing for the domestic market.
f. Rights in Sectors with U.S. Investment
U.S. investment in Tunisia is not significant. It exists
primarily in the petroleum industry where both union and
nonunion firms operate.
Extent of U.S. Investment in Selected Industries
U.S. Direct Investment Position Abroad
on an Historical Cost Basis - 1992
(millions of U.S. dollars)
Total Manufacturing D
Food & Kindred Products 0
Chemicals and Allied Products 0
Metals, Primary & Fabricated 0
Machinery, except Electrical D
Electric & Electronic Equipment 0
Transportation Equipment 0
Other Manufacturing 0
Wholesale Trade 0
Finance and Insurance 0
Other Industries 0
TOTAL ALL INDUSTRIES 33
(D)-Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
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