Cablegate: Tunisia: Us Businesses Brief Economic Delegation

VZCZCXYZ0002
PP RUEHWEB

DE RUEHTU #1286/01 2640644
ZNR UUUUU ZZH
P 210644Z SEP 07
FM AMEMBASSY TUNIS
TO RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 3899
INFO RUCNMGH/MAGHREB COLLECTIVE PRIORITY
RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0928

UNCLAS TUNIS 001286

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EEB (DIBBLE), NEA/MAG (HOPKINS AND HARRIS)
STATE PASS USTR (BURKHEAD)
USDOC FOR (VINEYARD AND MASON), ADVOCACY CTR (JAMES),
USDOC PASS USPTO (ADAMS, BROWN AND MARSHALL)
CAIRO FOR FINANCIAL ATTACHE (SEVERENS)
LONDON AND PARIS FOR NEA WATCHER
EB/CBA (WINSTEAD), EB/TRA/AN(FINSTON),
CASABLANCA FOR FCS (ORTIZ)

E.O. 12958: N/A
TAGS: ECON EFIN ETRD TS
SUBJECT: TUNISIA: US BUSINESSES BRIEF ECONOMIC DELEGATION
ON BUSINESS CLIMATE

REF: A. TUNIS 1249
B. TUNIS 1261

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Summary
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1. (SBU) During the September 9-12 visit of an interagency
business delegation (reftels), EEB PDAS Dibble met with
representatives from a cross-section of US businesses
currently operating in Tunisia to discuss the business
climate in general and the issues that impede their
operations. PDAS Dibble gave an overview of the
delegation's meetings with the GOT and the unique nature of
this delegation. She indicated that the primary purpose of
this visit was to push the GOT for improvements in the
investment climate and to discuss the way forward in the
US/Tunisia bilateral economic relationship. Department of
Commerce DAS Holly Vineyard outlined the IPR points that were
presented to GOT representatives from all relevant ministries
attending the delegation's meeting with the Minister of
Development and International Cooperation. USTR Director for
European and Middle Eastern Trade Affairs, Paul Burkhead
outlined the Trade Investment Framework Agreement (TIFA) and
the USG's objective of an eventual Free Trade Agreement (FTA)
between the United States and Tunisia. US companies said
that Tunisia is a central location for entering other
markets, but bureaucracy and lack of transparency hinder
their expansion. End Summary.

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What Tunisia has Going for It
-----------------------------

2. (SBU) Nearly all of the US business representatives
agreed that Tunisia is an attractive base from which to
target and serve the Mahgreb, European, and Sub-Saharan
African markets. They emphasized that the business climate
is improving and the mobility and quality and talent of
available human resources is above average. Tunisian
employees are highly educated and interested in learning new
technologies. The US IT firms represented opined that
Tunisian interest in new technologies presents an opportunity
to sell and to install the latest technologies. Business
representatives also said that the comparatively favorable
cost of labor also makes Tunisia an attractive venue for
investment.

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Frustrating Impediments to Trade
--------------------------------

3. (SBU) While Tunisia has many good qualities, it is the
domestic impediments to operating a business in Tunisia that
have some US businesspeople thinking twice about investing in
or expanding their investment in Tunisia. Issues raised
included a lack of transparency and predictability, lack of
access to the local market, GOT procurement laws, limits on
the number of expatriate employees permitted in country, visa
issues, the slowness and arbitrarily high price of internet
service, and the language barrier.

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Transparency and Predictability
-------------------------------

4. (U) Company representatives explained that GOT
decision-making is extremely slow and there is no central
contact for a company to approach and receive a definitive
answer to their particular concerns. Information on upcoming
projects or tenders is also difficult to obtain and major
projects are often pre-awarded before a tender becomes
public. One US representative stated that the lack of
predictability affected his ability to do long-term business
planning/forecasting. Participants noted that, because US
businesses forecast based on risk, the lack of predictability
in Tunisia makes them more reticent to invest.

--------------------------------------------- -------------
Access to the Local Market & Government Procurement Policy

--------------------------------------------- -------------

5. (U) In general, the GOT seldom permits foreign businesses
to compete on the local market but instead encourages FDI in
the off-shore and manufacturing for export sectors. US
companies told PDAS Dibble that establishing a subsidiary
branch in Tunisia is not cost-effective unless they are
allowed to compete on the local market. There are several US
companies who have been authorized to compete on the local
market. They admitted that it was neither easy nor quick to
obtain such permission, but indicated that GOT ministers are
open to hearing about specific proposals. Further, if a
company can demonstrate the benefits of its
projects/products, the relevant ministers can obtain
authorizations to compete on the local market. Several of
the high tech companies said that the product registration
and certification process is extremely long and must be
conducted for each reseller. In order to simplify this
process, they would like to see a homologation law passed
which would authorize registration and certification on a per
product basis.

6. (SBU) Companies also complained that the GOT government
procurement law and policy, which is based on lowest price
rather than best quality, excludes them from competing in the
marketplace. A Prime Ministry commission controls
procurement and, instead of requiring that a product meet
certain specifications or technical standards, its requests
for proposals (RFPs) always go for the lowest priced product.
US companies selling quality products cannot compete on a
price basis. Microsoft gave the example of PC procurement,
in which the GOT procurement commission does not specify an
operating system in their RFPs. This results in the PCs
being shipped with the Linux,s open source operating system,
which does not support Microsoft software. The Microsoft
representative argued that this has encouraged piracy and
resulted in GOT PCs using pirated Microsoft software. She
continued that the fact that the EU Commission and the
African Development Bank accept these GOT procurement laws
only encourages the GOT to maintain government procurement on
a lowest cost basis.

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Authorized Expatriates
-----------------------

7. (SBU) Tunisian law currently allows foreign companies to
obtain visas for only four expatriate employees at any given
time, but companies report that this number can be increased
on a case-by-case basis. (Note: GOT officials had indicated
to EmbOffs last year that the law was going to be updated to
allow 10 expatriates per company, but this has not yet been
implemented. End Note.) This limitation on expatriates is a
problem for US companies particularly when they are initially
starting up their operations in Tunisia. For example,
Parsons Corporation, a major US engineering firm currently
considering investing in Tunisia, said that this restriction
would present a problem. The Parsons representative argued
that his company has a quality product to deliver and an
excellent reputation to maintain. Thus, if it were to invest
in Tunisia, Parsons would need to bring in a minimum of 12
expatriate Parsons engineers per project. The GOT has told
Parsons that the number of expatriates allowed is negotiable,
but the company would prefer that the law be repealed, so
that there would be not uncertainty. Most US companies
present concurred. Similarly, US companies mentioned that
their ability to provide quality services to their clients
was impeded by the difficulty some of their expatriate staff
face in obtaining visas to enter Tunisia on a temporary basis
in order to train Tunisian employees or to provide expertise
on a particular project.

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Internet Access
---------------

8. (U) US companies said that 95 percent of business today
is conducted over the Internet. Thus, reliable and
cost-effective Internet access was paramount to their
success. Most of the companies present at the roundtable

complained about the slow speed of Internet connections in
Tunisia and the high cost of dedicated leased lines between
two points. Another issue related to Internet access was
GOT's encryption requirement that all encryption keys must be
provided to the National Digital Encryption Agency (ANCE).
Providing such information was described as a nonstarter by
US companies providing services where protection of fiscal or
personal data was critical. While most companies indicated
that they could find ways around this requirement, they
nonetheless argued that the encryption key requirement should
be abolished.

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Language
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9. (U) Several participants raised English language
capabilities of the Tunisian work force as an important
factor when considering whether to set up business operations
in Tunisia. Acknowledging that most US company executives
are not multi-lingual and conduct business in English, all
companies said that English language capability was a
necessary element to allow the Tunisian subsidiary management
to effectively communicate with its employees and with its US
headquarters. Several Tunisian nationals representing US
companies noted, however, that the GOT recognizes the
importance of English and has made efforts to address this
issue. They pointed out that Tunisian schools now encourage
English language study from the primary to the university
level.

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Comment
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10. (SBU) Although the business roundtable was a late
addition to the economic delegation,s program, it proved to
be an excellent opportunity for all. Members of the
delegation were able to learn first-hand about the benefits
achieved and drawbacks faced by US businesses in Tunisia. At
the same time, US businesses were able to learn about USG
advocacy for an improved business climate in Tunisia. The
general consensus drawn from this discussion seems to be that
despite the shortcomings, US companies investing in Tunisia
have made the right decision. End Comment.

11. (SBU) This cable has been cleared by EEB/PDAS Dibble.
GODEC

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