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Cablegate: Tunisia Economic Highlights

VZCZCXRO5791
PP RUEHTRO
DE RUEHTU #1073/01 2211141
ZNR UUUUU ZZH
P 091141Z AUG 07
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 3645
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0910
RUEHAS/AMEMBASSY ALGIERS PRIORITY 7509
RUEHDO/AMEMBASSY DOHA PRIORITY 0421
RUEHLO/AMEMBASSY LONDON PRIORITY 1337
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0898
RUEHFR/AMEMBASSY PARIS PRIORITY 1810
RUEHRB/AMEMBASSY RABAT PRIORITY 8419
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0124
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4122
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 001073

SIPDIS

SENSITIVE
SIPDIS

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

E.O. 12958: N/A
TAGS: ECON ETRD EINV EFIN KTEX TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS

REFS: 06 TUNIS 2573

06 TUNIS 2465
06 TUNIS 2464

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

A. Trade Gap Narrows
B. President Signs US $14 Billion Emirati Project Bill
C. GOT Offers Tax Amnesty for Capital Repatriation

-----------------
Trade Gap Narrows
-----------------

2. (U) According to recently published Tunisian National Institute
of Statistics (INS) data, the trade deficit for the first half of
2007 declined 7.4 percent over the same period of 2006. Exports,
which account for 45 percent of GDP, rose 29.8 percent to 9.818
billion TND (US $7.432 billion), with imports only up 21.9 percent
to 11.695 billion TND (US $8.853 billion). Agricultural exports,
mainly olive oil and dates, registered a 28.9 percent increase with
1.073 billion TND (US $812.261 million). Textile and apparel
exports, a key foreign currency earner, rose 22.5 percent to 3.227
billion TND (US $2.44 billion). Notably, the value of petroleum
product imports fell by 17.8 percent to 1.175 billion TND (US
$889.475 million).

3. (SBU) Comment: The rise in textile exports is welcome development
for the GOT after relatively weak performance in 2005 and 2006 (Refs
B and C). The improvement indicates that the GOT's strategy to
improve productivity and encourage value-added production is finally
yielding results. The fall in petroleum imports is notable, but
there is no further information regarding whether the decline is a
result of falling demand (due to higher oil prices) or increased
domestic supply. While there have been significant discoveries and
increases in production over the past year, downstream processing
has been minimal, forcing Tunisia to import most of its refined
petroleum products. End Comment.

--------------------------------------------- ------
President Signs US $14 Billion Emirati Project Bill
--------------------------------------------- ------

4. (U) On July 17 President Ben Ali signed into law legislation
paving the way for the largest internal investment project in the
country's history. The US $14 billion real-estate project between
GOT and Sama Dubai, the property unit of state-owned Dubai Holding,
will create luxury apartments, offices, trade centers and hotels on
an 837 hectare property north of the capital. According to local
news reports, the deal came under scrutiny in Parliament due to
concerns that the project might stimulate further concessions of
Tunisian lands to foreigners. Several articles of the original
agreement were reportedly amended to stress the sovereignty of
Tunisian law and to allow the GOT to oppose certain provisions and
precludes foreign appropriation. The GOT estimates that the
investment will boost the GDP growth rate to 6.3 percent by
stimulating business activities in all sectors, especially building
materials. The GOT projects that the investment will create 15,000
new positions for skilled workers, with the total number of jobs
estimated at nearly 130,000 including unskilled work. There is
widespread speculation that Sama Dubai has received authorization to
bring in a large number of unskilled foreign workers to complete the
project.

5. (SBU) Comment: The Sama Dubai investment is one of many large
Emirati investments currently on the horizon (Ref A). The GOT has
been eager to attract foreign direct investment in order to boost
GDP growth and tackle the country's very high unemployment rate
(officially 13.9 percent). The recent visit of a high-level UAE
delegation, led by Vice President and Prime Minister Shaikh Mohammad
Bin Rashid Al-Maktoum, highlights the ongoing interest of both
countries in joint investment projects. Although FDI from the Gulf

TUNIS 00001073 002 OF 002


is growing in Tunisia, much of the investment is targeted towards
large real estate projects or privatizations. While investments
such as the Sama Dubai project or Tunisie Telecom privatization will
raise Tunisia's FDI figures, these types of investment may not lead
to the type of job creation necessary to significantly reduce
unemployment. End Comment.

--------------------------------------------- --
GOT Offers Tax Amnesty for Capital Repatriation
--------------------------------------------- --

6. (U) According to the recently published official gazette, on June
25, 2007, President Ben Ali signed Law No. 2007-41, a tax amnesty to
encourage Tunisians to repatriate currency possessed illegally. The
amnesty will apply to individuals and companies who have (1) failed
to repatriate their unsanctioned income and assets held abroad, (2)
failed to declare personal holdings of foreign currency, or (3)
exceeded the amount of undeclared dinars that one can take outside
of the country. Tunisians repatriating their capital will be able
to keep their funds in foreign currency.

7. (SBU) Comment and Background: Although the Central Bank has eased
restrictions on foreign currency transactions in recent years, the
dinar is not yet fully convertible. In order to transfer money
abroad or hold a specified amount of hard currency Tunisian
companies and residents must apply for authorization from the
Central Bank. Strict annual limitations on foreign currency for
residents and the often onerous Central Bank authorizations have
driven many Tunisians to keep their money abroad illegally. While
the full amount of capital held abroad is unknown, one Embassy
contact referenced a World Bank study that estimated that the amount
of capital held abroad might equal the level of external debt. With
Tunisia's external debt at roughly 20.2 billion dinars (US $15.8
billion), or 46 percent of GDP, the GOT is eager to capture even a
fraction of this capital and reincorporate it into the Tunisian
economy. End Comment and Background.
GODEC

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