Cablegate: Tunisia Economic Highlights: Dec. 1 - Dec. 15

VZCZCXRO0804
PP RUEHTRO
DE RUEHTU #2950/01 3550731
ZNR UUUUU ZZH
P 210731Z DEC 06
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 2377
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0826
RUEHAS/AMEMBASSY ALGIERS PRIORITY 7373
RUEHLO/AMEMBASSY LONDON PRIORITY 1222
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0813
RUEHFR/AMEMBASSY PARIS PRIORITY 1677
RUEHRB/AMEMBASSY RABAT PRIORITY 8284
RUEHRO/AMEMBASSY ROME PRIORITY 0728
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0018
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4031
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 002950

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/MAG (HARRIS)
STATE PASS USTR (BELL), USPTO (ADLIN AND ADAMS), USAID (MCCLOUD)
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR (JAMES), AND CLDP
(TEJTEL)
CASABLANCA FOR FCS (ORTIZ)
LONDON AND PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: ECON ETRD EINV EPET EAIR TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS: Dec. 1 - Dec. 15

REF: A. TUNIS 2684

B. TUNIS 629

1. (U) This cable contains highlights of recent economic
developments in Tunisia on the following topics:

A. Tunisia to Increase Transit Capacity of Algerian Gas to Italy
B. FDI Up Nearly Ten Percent in 2006
C. Inflation Down in November

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Tunisia to Increase Transit Capacity
of Algerian Gas to Italy
------------------------------------

2. (U) On December 11, the GOT signed agreements with two Italian
firms, World Energy and the Edison SpA, permitting transit of an
increased volume of Algerian natural gas to Italy via Tunisia and
outlining royalty payments to the GOT. The Trans-Mediterranean
Pipeline (also known as the Enrico Mattei gas pipeline) is a natural
gas pipeline from Algeria via Tunisia to Sicily and onward to
Italy's mainland. The current capacity of pipeline is approximately
27 billion cubic meters of natural gas annually. In April, the GOT
signed an agreement with Italian state-owned energy company Ente
Nazionale Idrocarburi (ENI) to expand the transport capacity to
Italy. By April 2008, a capacity of 3.2 billion cubic meters a year
will be added; by October 2008 there will be an additional capacity
of 3.3 billion cubic meters a year. There are plans to expand the
total pipeline capacity to 33.5 billion cubic meters by 2012.

3. (U) The Tunisian section of the pipeline, which is 370 kilometers
long, is owned by state-owned SOTUGAT (Societe Tunisienne du Gazoduc
Trans-Tunisien). According to the 2005 Central Bank report,
royalties are assessed at a rate of 5.25 to 6.75 percent of the
value of transported gas, which is paid in both cash and gas. The
cash value of gas royalties increased considerably in 2005, up from
158 million USD in 2004 to 261 million USD in 2005.

----------------------------------
FDI Up Nearly Ten Percent for 2006
----------------------------------

4. (U) According to the Foreign Investment Promotion Agency (FIPA),
during the ten first months of 2006, foreign direct investment (FDI)
increased 9.7 percent over the same period of 2005. FDI by sector
for the first ten months of 2006 shows energy as the leading
investment sector (320.03 million USD), followed by manufacturing
(247.07 million USD) and tourism (14.25 million USD). Total FDI for
this period is 683.67 million USD, excluding privatization receipts.
The GOT received 2.3 billion USD from the Emirati Tecom-DIG (Dubai
Investment Group) for the March 2006 partial privatization of
Tunisie Telecom (Ref B), representing the largest source of foreign
capital for 2006.

5. (U) According to FIPA, France is the top source of FDI with 87.6
million USD, followed by Italy with 40.33 million USD. The Bahamas,
normally not among top investors in Tunisia, ranked third this year
owing to a 31.61 million USD investment by a Bahamas-based
subsidiary of American shoemaker EVOL to expand existing operations
in Tunisia. Investment attributed to the United States for the
first 11 months of 2006 is only 2.8 million USD. (Note: FIPA's
country ranking excludes privatization, energy and portfolio
investments. End Note.)

--------------------------
Inflation Down in November
---------------------------

6. (U) According to data released by Tunisia's National Statistics
Institute, year-on-year growth (November 2006/November 2005) in the
national consumer price index (CPI) stood at 3.8 percent in
November, down from 4.4 percent in October 2006. Inflation fell 0.2
percent in November after rising 0.3 percent in October. The
monthly decrease was attributed to a 1.1 percent decline in the cost

TUNIS 00002950 002 OF 002

of food, which accounts for 36.5 percent of the basket used in
calculating the index. Housing and the healthcare prices remained
flat between October and November, while leisure, transport and
clothing prices increased. Inflation stood at 4.6 percent in the
first eleven months of this year, sharply up from the 1.8 percent
recorded a year earlier, owing partially to rising international oil
prices (Ref A).
BALLARD

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