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U.S. DEPARTMENT OF STATE
TUNISIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                             TUNISIA

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                    1992    1993  1/   1994  2/

Income, Production and Employment:

Real GDP (1990 base)  3/          14,581     14,960     15,723
Real GDP Growth (pct.)               8.1        2.6        5.0
GDP (at current prices)  3/       16,470     15,190     15,965
By Sector:
  Agriculture                      2,560      2,003      1,410
  Manufacturing                    2,474      2,211      2,909
  Nonmanufacturing                 1,824      1,575      1,752
  Tourism                            720        676        887
  Services                         3,964      3,582      4,788
Real Per Capita Income             1,742      1,496      1,846
Labor Force (millions)              2.50       2.56       2.77
Unemployment Rate (pct.)            16.0       16.2       16.4

Money and Prices:

Money Supply                       3,392      2,866      3,101
Commercial Interest Rates         Max 14     Max 14     Max 14
Savings Rate (pct.)                Avg 8      Avg 8      Avg 8
Consumer Price Index               187.8      196.2      205.4
Wholesale Price Index                N/A        N/A        N/A
Official Exchange Rate (USD/TD)     1.20       1.02       1.02

Balance of Payments and Trade:

Total Exports (FOB)  4/            4,283      4,073      4,989
  Exports to U.S.                   36.7       31.0       27.2
Total Imports (CIF)  4/            6,827      6,366      6,640
  Imports from U.S.                338.8      415.2      354.0
Aid from U.S. (FY basis)            26.2       14.9        1.1
Aid from Other Countries             N/A        N/A        N/A
External Public Debt               8,220      7,655      9,009
Debt Service Payments              1,387      1,391      1,637
Gold Reserves                        5.2        4.4        4.4
Foreign Exchange Reserves          1,080        816      1,133
Balance of Payments                 60.0      102.0      204.4


N/A--Not available.

1/ Some 1993 figures are less than 1992 figures when converted
into USD values due to a devaluation of the Tunisian dinar in
1992-93.
2/ 1994 Annual figures are estimates based on data available
through June, 1994.
3/ GDP at factor cost.
4/ Merchandise trade.







1.  General Policy Framework

    Tunisia has a mixed economy composed principally of
agriculture, tourism, manufacturing, hydrocarbon extraction and
phosphate mining.  The largest sector is services, comprising
about 33 percent of GDP.  Textiles are now the largest source
of foreign exchange, earning an estimated USD 1.9 billion in
1994.  Tourism will bring another USD 887 million of foreign
exchange into Tunisia this year.  The manufacturing sector
comprises about 15 percent of GDP, and consists primarily of
textiles and food processing.  The nonmanufacturing industrial
sector accounts for 12 percent of GDP, and consists principally
of phosphate mining and hydrocarbon extraction.  Agriculture
comprises about 15 percent of GDP.  A severe drought caused
widespread crop failures in 1994.  The cereal harvest was down
60 percent from 1993.  In addition, the citrus and olive crops
were hurt by adverse weather conditions.

    In late 1994, the government predicted 5.0 percent GDP
growth for the year.  This decrease from the 6.1 percent growth
rate predicted at the start of the year is largely the result
of the poor agricultural harvests.  However, exports are up
22.5 percent, and inflation is being held to 4.7 percent.

    Tunisia completed a seven-year structural reform program in
1993 which 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 economy.  In 1994,
Tunisia continued to liberalize its economy.

    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 (BIT) dealing with the treatment of
American companies in Tunisia, expropriation issues, remittance
of profits and international arbitration of disputes.

    Fiscal Policy:  The 1994 Tunisian government budget
provided for 11.4 percent increase in expenditures and 11.4
percent increase in revenues.  The deficit was financed through
both international and domestic borrowing.  Government policy
called for an expanding economy to cope with deficit problems,
and the trend in recent years is favorable.  In 1993, the
deficit was USD 364 million, equal to 2.4 percent of GDP; in
1994, it was USD 326 million, 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 1993, it was 4.5 percent.  In 1994, it was only slightly
higher at 4.7 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

    On March 1, Tunisia instituted a foreign currency market,
making it possible for individual banks to set currency prices
and trade with other banks.  Although the Central Bank of
Tunisia (BCT) issues a reference rate each day, the majority of
Tunisian banks bypass the BCT, marginalizing the role of the
BCT in foreign currency transactions.  Earlier this year,
industry sources described a smooth transition to an open
currency market.  The principal currencies quoted against the
Tunisian dinar (TD) are the U.S. dollar, the deutsche mark, and
the French franc.  The rate has varied considerably over the
past 13 years from a high in 1979, when the Tunisian dinar
equaled USD 2.47, to a low in 1993, when it equaled USD 0.98. 
In 1994, the rate average was about TD 1 to USD 1.02.


3.  Structural Policies

    In the mid-1980s, Tunisia faced rising unemployment,
stagnant economic growth, and dwindling foreign exchange
reserves.  The domestic economy was protected and inefficient,
and the government ran unsustainable budgetary deficits.  A
severe balance of payments crisis in 1986 finally prompted the
government to undertake structural reforms sanctioned by the
International Monetary Fund (IMF) and the World Bank.  To date,
those reforms have enjoyed significant success, and the
Tunisian government plans further reform, especially in
privatizing still numerous state-controlled enterprises.

    Tax Policies:  Import regulations were loosened
considerably this year.  Fully 90 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
were cut considerably.  Tunisia decreased the maximum customs
tariff almost 80 percent by 1991.  Total taxes on imported
goods have not decreased at the same rate because a value added
tax (VAT), introduced in 1988, is equally applied to imports
and local products.

    The only taxes significantly effecting U.S. exports to
Tunisia are import tariffs.  Through the structural adjustment
program, Tunisia 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.  Although the government planned to end the surcharge
December 31, 1991, it was extended through 1992.  Despite
repeated assurances during 1992 and 1993 that the surcharge
would be terminated, it still remained in effect during 1994.

    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, 10 percent in 1994, and
eliminated by 1995.  By 1995, the average tariff rate is
expected to decline 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 considered to be tariff barriers.  The only
additional minor charge on imports is a very small customs user
fee of USD 4.08 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:  Tunisia's Unified Investment Code,
effective since January 1, 1994, replaced five former codes. 
The Code is intended to simplify investment and direct it into
high priority industries.  The financial services, mining and
energy industries are considered unique, and are covered by
existing legislation.

    The new code applies to both domestic and foreign investors
with two exceptions.  Foreign investors may only lease
agricultural land and any enterprise with foreign ownership of
over 50 percent must receive government approval for
investment.  Under the new code, potential investors do not
need prior government approval.  They will receive a tax
exemption on 35 percent of reinvested profits and income.  The
customs duty on imported capital goods is reduced to 10
percent.  Purchases of capital goods are exempt from the value
added tax (VAT) and the consumption tax.  Finally, investors
may use an accelerated depreciation schedule for long-term
capital.

    In addition, businesses producing solely for export have
special benefits.  They may claim a 10 year tax exemption on
100 percent of income and profits, reduced to 50 percent of
income and profits after 10 years.  Exporting businesses may
import all needed materials, and may sell up to 20 percent of
their production on the domestic market without losing their
status as an exporter.  Finally, these companies may employ
four foreign executives without prior government approval.

    Regulatory Policies:  Production standards are not a major
obstacle for foreign investors.  The quality of goods
manufactured solely for export is often superior to items
produced for the local market.  The Tunisian Office for
Commercial Expansion (OFFITEC) carries out quality control
procedures on items for export.  Imported and exported food
items are subject to sanitation and health controls.


4.  Debt Management

    In 1994, total public debt service increased by 17.7
percent.  External debt service increased by 19.4 percent while
service on internal public debt increased by 15.7 percent. 
This increase stems principally from the devaluation of the
Tunisian dinar in 1993.  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
USD 1.64 billion dollar debt service payment constitutes
27 percent of the government budget.  Debt service as a
percentage of exports of goods an 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 Tunisia's prudent overall debt management policy is that
Tunisia has never rescheduled any of its debt.  The deficit is
financed through concessionary 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.

    Historical and geographical factors have given Tunisia a
special relationship with Europe.  It has bilateral trade
agreements with all of its major European trading partners,
France, Germany and Italy being the largest.  Tunisia also
frequently adopts European product standards, a policy that
works to the disadvantage of U.S. exporters.

    The 1992 Helsinki Accord among OECD countries limited their
concessional aid financing.  However, France, Italy and others
maintain credit facilities to promote exports of their
products.  In addition, EXIM Bank financing is available for
government sales.  Exporters to private concerns may be able to
take advantage of a new Citibank credit facility.

    Tunisia's leading supplier in 1993 was France (USD 1.6
billion), followed by Italy, (USD 1.15 billion), and Germany
(USD 821 million).  The United States was in fourth place with
USD 303 million in 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 1993.

    There exist real possibilities for increasing the level of
U.S. exports to Tunisia in areas such as environmental
services, construction equipment, telecommunications, and
packaging machinery and equipment.


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 to improve the
productivity and competitiveness of companies producing for
export.  Only companies legally incorporated in Tunisia are
eligible for these subsidies:  these 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, and the Berne Convention for the
Protection of Literary and Artistic Works.

    The Tunisian National Institute of Standardization and
Industry (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 INNORPI.

    There are no active cases of intellectual property rights
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 stipulate 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 regulations which have to some extent
restricted their freedom of action.  The UGTT's membership
includes persons associated with all political tendencies,
though a campaign against Islamists was effective in removing
Fundamentalist holding union offices.  The current leadership
follows a policy of cooperation with the government and its
structural adjustment program.  There are credible reports that
the UGTT receives substantial subsidies from the government to
supplement the modest officially-mandated monthly contributions
from UGTT members and funding from the national social security
account.

    Dissolution of a union requires action by the courts. 
There is no requirement for a single trade union structure; the
fact that Tunisia has a single labor organization (the UGTT) is
a result of historical circumstances, not government action. 
However, establishment of a rival labor union would require
government authorization.  The government has decreed that UGTT
member federations are the labor negotiators for collective
bargaining agreements that cover 80 percent of the private
sector work force, whether unionized or not.

    Unions, including those of civil servants, have the right
to strike, provided 10 days' advance notice is given and the
UGTT approves.  However, these restrictions on strikes are
rarely observed in practice.  In recent years, the majority of
strikes were illegal because they were not approved in 

advance.  In 1993, there were 68 legal strikes and 445 illegal
strikes.  The government did not prosecute workers involved in
illegal strike activity.  Tunisian law prohibits retribution
against strikers, but some employers punish strikers who are
then forced to pursue costly and time-consuming legal remedies
to protect their rights.  Labor disputes are settled through
conciliation panels on which labor and management are equally
represented.  The 1994 labor code reform set up tripartite
regional arbitration commissions, which settle industrial
disputes when conciliation fails, to replace the former single
arbiter system.

    The 1994 report of the International Labor Organization's
(ILO) Committee of Experts (COE) mentioned possible government
violations of ILO Convention 29 on forced labor, but noted the
stated intention of the President to abolish the penalty of
"rehabilitation through work" on state work sites.

    Unions in Tunisia are free to join federations and
international bodies.  The UGTT is a member of the
International Confederation of Free Trade Unions (ICFTU) and
various regional groupings.

    b.  The 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 in Tunisia are set through negotiation by the UGTT
member federations and employer representatives of
approximately 47 collective bargaining agreements which set
standards applicable to entire industries in the private
sector.  The UGTT is by law the labor negotiator for these
agreements, which cover 80 percent of the private sector work
force, whether unionized or not.  The government's role in
concluding these agreements is minimal, consisting mainly of
lending its good offices if talks appear to be stalled.  The
government must approve the collective bargaining agreements
(although it cannot modify them) and publish them in the
official journal before these agreements acquire legal
validity.  No agreement between a union and an individual firm
may be concluded unless there already exists an agreement
applicable to that firm's economic sector.

    The UGTT also negotiates with various ministeries and 208
state-run enterprises on behalf of public sector employees.  By
1994, the UGTT had concluded three-year public and private
sector collective bargaining agreements calling for an average
5 percent annual wage increase.

    Anti-union discrimination by employers against union
members and organizers is prohibited by law, and there are
mechanisms for resolving such disputes.  However, the UGTT has
complained about what it claims are increasingly vigorous
anti-union activities by private sector employers, particularly
the firing of union activists and, as a pretext to avoid
unionization, employers' use of temporary workers, which in
certain factories, especially in the textile sector, account
for up to 80 percent of the work force.  The labor code extends
the same worker rights protection to temporary workers as to
permanent workers, but its enforcement in the case of the
temporary workers is much more difficult.  A 1994 labor code 
revision called for the creation of a tribunal to hear cases
involving alleged unjustified firing of workers.  Compensation
floor and ceiling levels were set.

    Two export processing zones, authorized by a 1992 law, have
not yet begun operations.  Workers in other export firms have
the same right to organize, bargain collectively, and strike as
those in non-export firms.  The unionization rate is about the
same.  The state pays the employer contribution to the social
security system if the firm produces primarily for export.

    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 years.

    d.  Minimum Age of Employment of Children

    For manufacturing, the minimum age for employment is 15
years; in agriculture it is 13.  Tunisian children are required
to attend school until age 16.  Over 2.1 million children
enrolled in Tunisian schools in fall 1994.  Inspectors from the
Social Affairs Ministry check the records of employees to
verify that the employer complies with the minimum age law. 
Despite this law, young children often perform agricultural
work in rural areas and sell food and other items in urban
areas.  UGTT officials report that small enterprises in the
informal sector (street vendors, day laborers, etc.) violate
the concern that child labor - frequently disguised as
apprenticeship - still exists, principally in the traditional
craft sectors such as ceramics and stone carving.  Young girls
from rural areas are sometimes placed as domestics in urban
homes by their fathers, with the fathers collecting their
children's wages.  Workers between the ages of 14 and 18 are
prohibited from working from 10 p.m. to 6 a.m.  Children over
14 may work a maximum of 4.5 hours a day.  The combination of
school and work may not exceed 7 hours.

    e.  Acceptable Conditions of Work

    The labor code provides for a range of administratively
determined minimum wages.  An agricultural and industrial
minimum wage increase in August kept pace with the rise in the
cost of living.  When supplemented by transportation and family
allowances, the minimum wage covers essential costs for a
worker and his family.  Effective August, 1994, the minimum
monthly industrial wage is roughly USD 130 (129 TD) for a
40-hour work week and USD 147 for a 48-hour week.  The minimum
agricultural wage was set at nearly USD 4.50 per day.

    Tunisia's labor code sets a standard 48-hour workweek for
most sectors and requires one 24-hour rest period.  The
workweek is 40 hours for those employed in the energy,
transportation, petrochemical and metallurgy sectors.

    Regional labor inspectors are responsible for enforcing
standards.  Most firms are inspected about once every two
years.  However, the government often encounters difficulty in
enforcing the minimum wage law, particularly in non-unionized
sectors of the economy.  Moreover, according to a 1992 UGTT 
study, there are approximately 240,000 workers employed in the
informal sector, which falls outside the purview of labor
legislation.

    The Social Affairs Ministry has an office with
responsibility for improving health and safety standards in the
work place.  There are special government regulations covering
many hazardous jobs - e.g. mining, petroleum engineering, and
construction.  Although the ministry maintains offices
throughout the country, these regulations are enforced more
strictly in Tunis than in other regions, where much work,
especially in construction, is performed in the informal
sector.  Working conditions and standards tend to be better in
firms that are export-oriented than in those producing for the
domestic market.  Occupational safety improved considerably in
1993.  Reported work place accidents declined 17 percent to
30,645, perhaps due to an intensive public awareness campaign
in the media.  Workers are free to remove themselves from
dangerous situations without jeopardizing their employment, and
then may take legal action against employers who retaliate for
exercising their right.


9.  Extent of U.S. Investment in Goods Producing Sectors

    U.S. investment in Tunisia is growing, but an accurate
sectoral breakdown is unavailable.  Currently, total U.S.
investment in Tunisia is an estimated USD 50 million.  The
majority is invested in the petroleum sector, but U.S.
corporations are increasing investment in other areas including
telecommunications and pharmaceuticals.

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