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Cablegate: Ben Ali Announces New Policies to Facilitate

VZCZCXYZ0002
PP RUEHWEB

DE RUEHTU #2798/01 3280741
ZNR UUUUU ZZH
P 240741Z NOV 06
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 2252
INFO RUEHCL/AMCONSUL CASABLANCA PRIORITY 4021
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS TUNIS 002798

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/MAG - HARRIS
STATE PASS USTR - BELL, USPTO -ADLIN AND ADAMS, USAID -
MCCLOUD
USDOC FOR ITA/MAC/ONE - NATE MASON, ADVOCACY CTR - JAMES,
AND CLDP - TEJTEL
CASABLANCA FOR FCS - ORTIZ

E.O. 12958: N/A
TAGS: ECON EINV PGOV ETRD TS
SUBJECT: BEN ALI ANNOUNCES NEW POLICIES TO FACILITATE
BUSINESS

1. (SBU) SUMMARY. On November 21, President Zine El Abidine
Ben Ali spoke on the occasion of the opening of the 14th
Congress of the Tunisian Employers' Association for Industry,
Trade and Handicrafts (UTICA) and delivered a speech
announcing some new economic and commercial policies.
Designed to spur foreign investment and increase the
competitiveness of Tunisian firms, the policies seem to do
little to reduce the state's strong influence over private
business. END SUMMARY.

2. (U) BACKGROUND: The Tunisian Employers, Association for
Industry, Trade and Handicrafts (Union Tunisienne de
l,Industrie du Commerce et de l,Artisanat, UTICA) is the
sole employers, union in Tunisia and represents companies in
almost every Tunisian business sector. A traditional
counterbalance to the once powerful General Union of Tunisian
Workers (UGTT), UTICA negotiates on behalf of the private
sector in the triennial national labor negotiations, lobbies
for business and engages in trade promotion. Like many
Tunisian entities, UTICA holds a national congress once every
five years. The 14th UTICA Congress (November 21-22) will
evaluate the past five years, performance, outline the
challenges facing business and make recommendations for the
coming years, in addition to holding elections for the
Executive Bureau.

3. (U)President Ben Ali attended the opening session of 14th
UTICA Congress on November 21 and was introduced by current
UTICA Chairman Hedi Djilani, who has been head of the
organization since 1988, in addition to being a member of the
Chamber of Deputies (lower parliamentary body) and the ruling
Democratic Constitutional Rally (RCD) party Central
Committee. Djilani's introduction was predictably laudatory,
stressing that UTICA's members had responded to all of Ben
Ali's directives (more investment, more exports, etc.). The
only thing UTICA wanted in return, said Djilani, was for Ben
Ali to remain in power. Known for their generally pro-Ben
Ali stance, UTICA delegates in attendance rose on several
occasions to chant "Tunis! Ben Ali!" and "Long live Ben Ali!"
during Djilani's introduction and Ben Ali's subsequent speech.

4. (U) In his speech, Ben Ali highlighted Tunisia's economic
achievements and challenges in the five years since the last
UTICA Congress. He also announced some new policies designed
to spur business, including:

-- IPR PROTECTION: Drafting a law to improve the protection
of trademarks, empowering economic inspection agents to seize
counterfeit trademarked products, regardless of whether or
not the trademark owner has taken civil action. IMPACT: This
is a major development that will improve IPR protection for
non-resident firms that have not initiated legal action. Now
the GOT can seize counterfeit products, even if the trademark
owner is not aware of the violation. At present, trademark
owners have to initiate the complaint for the GOT to take
action.

Also, preparing a law for the protection and registration of
controlled origin appellation, and to develop a public
awareness campaign for producers, to facilitate their raw
materials supply and market their products. IMPACT: This law
appears designed to assist local producers (like of wine,
olive oil and harissa) to in establishing controlled origin
appellation for their products, particularly those intended
for export.

-- CUSTOMS: Establishing a "master plan" for customs
clearances, which will aim to shorten clearance periods to
less than 24 hours from the submission of required documents
and increase electronic processing of customs declarations
from 40 percent to 80 percent by 2007. Ben Ali also called
on involved parties to do their part to improve the quality
and speed of freight, handling, transport and inspection
operations and reduce the amount of time goods remain in
port. IMPACT: Customs clearances are notoriously
time-consuming and some report bribery is widespread. It is
not clear if this "master plan" will have any impact on the
realities of this business issue.

-- PRODUCTS: Launching a pilot program for the establishment
of logistical centers across Tunisia for collection,
distribution, packaging, canning and quality control

facilities, as well as lower the cost and facilitate the
marketing of high-value export products. IMPACT: This
program appears to be directly associated with a recent
tender for the establishment of a port logistical center in
Tunis and may also assist agricultural producers in exporting
a branded retail product as opposed to bulk exports.

-- PROFITS: Developing a program to liberate profit margins
in goods and services where there is sufficient competition.
IMPACT: In some industries, there is a limit on the profit
margin for products, therefore the program would increase the
profitability of related firms.

-- EXCHANGE CONTROLS: Eliminating foreign exchange
authorizations for advance payments for the import of
production-related goods and services, transport and
communication expenses; IMPACT: In the past, Tunisia firms
had to present customs documentation to prove the imports had
arrived before they would be able to obtain hard currency to
pay for the goods. This decision may be a response to IMF
calls for increased liberalization, as it allows importing
firms to obtain hard currency without authorization to make
advance payments for imports.

-- Extending the payment facilities offered by Tunisian firms
from six months to one year. IMPACT: Perhaps designed to
assist the banking sector in reducing the number of
non-performing loans, this will allow Tunisian wholesalers to
extend repayment periods for smaller firms. While a benefit
for the end-user, this will place an increased burden on
wholesalers, whose payments may not be received for an entire
year.

-- FOREIGN DIRECT INVESTMENT: Canceling exchange
authorization for subscription to the increase of the capital
of Tunisian companies beyond the preferential rights of
subscription in sectors covered by the Investment Code.

-- Allowing non-residents who invest more than 50 percent of
the total capital of a Tunisian company the right to manage
the firms accounts, and increasing short-term dinar or
foreign currency borrowing limits for these individuals, in
order to finance local product purchases. IMPACT: Both of
these initiatives will make it easier for foreign investors
to control their hard currency and their broader investments,
whose control of which has limited investment in the past.
Previously, foreign firms had limits on the amount of foreign
capital that could be added to an existing investment, and
additional rights were limited to those who controlled more
than 66 percent of the total capital.

-- Encouraging new investors to re-open closed exporting
companies through the elimination of outstanding customs fees
on these facilities. IMPACT: Some smaller exporting firms,
such as textile companies, have closed due to lack of
competitiveness and left fees for customs-related services
unpaid. This policy will remove the burden on the new
investor to pay these overdue fees.

-- TUNISIAN INVESTMENT: Increasing the export profit accounts
rate from 10 percent to 15 percent (2007) to 20 percent
(2009); IMPACT: This grants exporters greater control over
their convertible accounts, which are historically limited.

Increasing the annual ceiling for external Tunisian
investment from 300,000 TD (approx. USD 227,000) to 1,000,000
TD (approx. USD 758,000) and to 3,000,000 TD (approx. USD
2,272,000) for exporters that finance their investments
through export revenues, and increasing the annual ceilings
for non-exporting enterprises from 100,000 TD (approx. USD
75,800) to 500,000 TD (approx. USD 379,000), with the aim of
eventually eliminating these ceilings on a case-by-case
basis. IMPACT: This change appears to be reflective of the
recent depreciation of the dinar against the Euro, which has
reduced the hard currency value of Tunisian investments.

5. (SBU) COMMENT. While the speech contained a number of new
initiatives, none of them significantly decrease the state's
role in the economy. However, the speech did give Ben Ali
and opportunity to engage a key audience on one of his major
administration initiatives, economic growth. As he makes few
public appearances or speeches, this event indicates the

importance of economic development to Ben Ali's regime
strength. END COMMENT.
GODEC

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