Cablegate: Ministry of Development and International

VZCZCXYZ0000
PP RUEHWEB

DE RUEHTU #0790/01 1991520
ZNR UUUUU ZZH
P 171520Z JUL 08
FM AMEMBASSY TUNIS
TO RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 5341
INFO RUCNMGH/MAGHREB COLLECTIVE

UNCLAS TUNIS 000790

SENSITIVE
SIPDIS

NEA/MAG (STEWART), EB/CBA (WINSTEAD/GILMAN),
EB/TRA/AN(FINSTON),
STATE PASS USTR (BURKHEAD),
USDOC FOR ITA/MAC/ONE (NATE MASON), ADVOCACY CTR (REITZE),
CASABLANCA FOR (FCS ORTIZ),
LONDON AND PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: ECIN ECON ETRD KIPR TS
SUBJECT: MINISTRY OF DEVELOPMENT AND INTERNATIONAL
COOPERATION HOSTS TOWNHALL FOR US BUSINESS

-------
Summary
-------

1. (U) A July 10 meeting for US, UK, and Canadian
Ambassadors, respective Chambers of Commerce and businesses
hosted by the Ministry of Development and International
Cooperation (MDIC) allowed for a healthy exchange about the
Tunisian investment climate:

-- All three ambassadors noted that the overall investment
climate in Tunisia is positive.

-- The Ambassadors stressed the diplomatic community's lack
of easy access to GOT counterparts, requirement for reliable
internet, telephone, and power service throughout Tunisia,
expatriate employment limitations, lack of a franchise law,
high tariffs on products exported to Tunisia, and the need to
create greater transparency and a level playing field in the
tender process.

-- The Chambers of Commerce and individual companies raised
their specific issues centered on IPR protection and
bureaucratic obstacles to doing business in Tunisia.

-- Representatives from various GOT ministries provided
initial responses to particular issues.

MDIC Secretary of State Abdelhamid Triki closed the meeting
promising to look into the issues raised and expressing the
hope that they will be resolved before next year's meeting.
Triki also indicated that he can serve as the central point
of contact for any company experiencing problems with the
bureaucracy. End Summary.

---------------------
GOT Economic Overview
---------------------

2. (U) The purpose of the July 10 meeting was to exchange
information on the business climate in Tunisia (i.e., what
works and what does not work for foreign investors). Triki
chaired the meeting, which he opened with a brief overview of
Tunisia's latest economic indicators: GDP growth rate for
2007 was 6.3 percent, up from 5.5 percent for 2006; total
foreign investment was $ 8.6 billion representing 24.4
percent of GDP (a one percent increase over 2006 figures);
the private sector's share of total foreign direct investment
(FDI) in 2007 was 59.8 percent; imports and exports of goods
and services increased 22 percent over 2006 figures; 80,000
new jobs were created in 2007 and GDP per capita increased
from $ 3,581 in 2006 to $ 3806 in 2007. Tunisia's budget
deficit and its current account deficit were limited
respectively to 3 percent and 2.6 percent of GDP. Triki
ended his introduction by stating that there are currently a
combined total of 162 companies from the United States, Great
Britain, and Canada operating in Tunisia and that their total
FDI, excluding the energy sector, was around $ 521.7 million.
(Note: The majority of the FDI from our three countries is
in the energy sector - totaling around $ 1.6 billion for
2007).

---------------------------
Open the Door and Let Us In
---------------------------

3. (SBU) Ambassador Godec, along with his UK and Canadian
counterparts, stressed that one of the Embassy's primary
missions is to develop, promote, and strengthen the bilateral
economic relationship. In order to accomplish this mission,
diplomatic staff require quick and easy access to their GOT
counterparts. He added that the cumbersome and difficult
process in place today is not conducive to accomplishing this
objective. The requirement to submit a diplomatic note and
receive MFA permission for working-level meetings creates a
bottleneck and prevents the necessary government to
government interaction necessary to foster a solid
relationship. The Ambassador emphasized that Tunisia is
losing out on investment and technical assistance
opportunities because of long delays in receiving responses
to diplomatic notes.

4. (SBU) The Ambassador noted that while the investment

climate in Tunisia is generally good, opening up the market
to foreign franchises and passing legislation covering them
would offer greater investment opportunities in Tunisia. He
added that the United States is ready and willing to conclude
an Open Skies Agreement with Tunisia and would open up the
possibilities for direct air routes between our two
countries. But a lack of response from the GOT to our
queries on this issue are holding up progress in this area.
The Ambassador and his UK and Canadian counterparts
highlighted that the limitation on the number of expatriate
employees, poor telecommunications (particularly internet)
connections, high tariffs on incoming goods, the lack of
transparency in the tender process, and complex banking
regulations which serve as disincentives to investment.

----------------------------------------
Infrastructure and Capacity Requirements
----------------------------------------

5. (SBU) The overall capacity and poor quality of internet,
electricity, and telephone services were the main
infrastructure concerns voiced by the companies represented
at the meeting. Several companies complained of weekly
cut-offs of electrical power and the non-responsiveness of
the state-owned utility, Societe Tunisienne de l'Electricite
et du Gaz (STEG). Current Internet services is also
unreliable with frequent interruptions and inadequate
bandwidth to support the demands of private enterprises. The
chief complaint regarding telephone service was the lack of
coverage in Tunisia's southern regions. The Ambassador
offered that more competition (i.e., more private telephone
and internet service providers) in this sector could resolve
many of these issues.

-----------------------
Company-Specific Issues
-----------------------

6. (SBU) Several US companies took advantage of the meeting
to continue pressing for progress on issues they (and we)
have previously raised with the GOT including:

-- Coca-Cola pushed for reduction of the high tax on
carbonated beverages; eliciting a lukewarm response from GOT
officials. Coca-Cola mentioned that their Tunisian bottled
products exported tax-free to Libya are now illegally brought
back into Tunisia and sold at lower prices. Coca-Cola called
for Customs to enforce better border control between Libya
and Tunisia to help alleviate the huge problem this was
creating for its local bottler.

-- Crown Can raised the customs-related problems they have
been experiencing when attempting to re-export the aluminum
waste so that it can be recycled. Customs has been blocking
the re-export of this material.

-- Pfizer argued for converting the current administrative
decree on data exclusivity into a law to better protect
pharmaceutical products. The company also called for better
enforcement against counterfeit products.

-- Columbus Industries called on the MDIC to intervene on its
behalf to expedite the administrative procedure to authorize
the company expansion on its property. Columbus Industries
was in the midst of expanding its manufacturing facilities in
Sidi Bou Ali (in the Sousse area) when GOT authorities issued
a decree freezing all sales and development on land located
between the new Endifha Airport project and the Kantoui port
in Sousse. Columbus Industries' expansion and installation
of new lines to meet client orders has been frozen due to
this decree. Post has engaged in advocacy to help Columbus
Industries resolve this matter. (Note: At the conclusion of
the meeting, Columbus Industries informed EconOff that
shortly after Embassy representatives' visit to his factory,
the Sousse Governor called and gave his approval for the
factory expansion but that it still needs to be cleared by
the governmental agency in charge of the management of public
lands, Agence Fonciere de l'Habitat in both the Sousse and
the Tunis offices. Columbus Industries also mentioned that
STEG installed a new transformer to resolve its frequent
power outage problems within one day of the Embassy
Representatives' visit. End Note.)

------------------
Promises, Promises
------------------

7. (SBU) Triki thanked everyone for coming. He said that he
fully understood that the diplomatic community needs easy
access to their GOT counterparts and undertook to relay the
ambassadors' concerns to the Ministry of Foreign Affairs. He
also offered to be the central point of contact for any
company experiencing administrative problems. Triki
concluded the townhall by giving the floor to relevant
working-level representatives from the specialized GOT
agencies. These officials gave brief responses to the issues
raised:

-- The Ministry of Commerce representative said that the GOT
is doing its best to enforce intellectual property rights and
to eliminate counterfeit products from the market. He opined
that it is becoming extremely hard to distinguish the
counterfeit product from the authentic product.

-- Regarding franchises the Commerce official said that the
draft law on franchising (copy of which Post sent to
Department of Commerce) is still being studied within the
ministry and has not yet been transmitted to Parliament for
final approval.

-- The representative from Tunisie Telecom said that current
plans call for fiber optic cables for Internet service to be
installed in the five major governorates (Tunis, Ben Arous,
Ariana, Sousse, and Sfax) by the end of 2008 and the same
coverage is scheduled for other governorates for 2009. He
said this will significantly improve Internet coverage and
service in Tunisia.

-- The representative from the Agence Tunisienne d'Internet
(ATI) peaked the interest of the audience by announcing that
ATI has created a "One Stop Shop" to receive all complaints
about Internet connections and service. He provided the
contact information for this "One Stop Shop".

-- The representative from the Ministry of Social Affairs
said that any company having expatriate employment
requirements should bring their request directly his ministry
and once they prove that the requested qualifications do not
exist on the local market, any appropriate request for
expatriates can be quickly approved.

-- The Customs representatives said that a new customs code
to be implemented in January 2009 will authorize customs
officials to immediately stop the import of counterfeit
products as soon as they are brought to their attention.

-- The Tunisair representative said that the airline is
currently in discussions with Air Canada and American
Airlines about instituting direct air travel between Tunisia
and their respective countries. He also pointed out that the
main problem is that Tunisair does not currently have the
long distance aircraft to handle such direct flights.

-------
Comment
-------

8. (SBU) This town hall-style meeting was much longer and
more animated than in previous years. Private companies from
all three countries were much more vocal and open about
issues and problems they encounter while doing business in
Tunisia. The forum allowed each ambassador the opportunity
to forcefully lodge a unified complaint about the GOT's
reticence to allowing GOT representatives to meet freely and
regularly with their respective counterparts within the
diplomatic community. Whether matters will change remains to
be seen. End Comment.
GODEC

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