Cablegate: Entrepreneurship Summit: Embassy Tunis Outreach

VZCZCXYZ0007
PP RUEHWEB

DE RUEHTU #0921/01 3551522
ZNR UUUUU ZZH
P 211522Z DEC 09
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 7085
INFO RUCNMGH/MAGHREB COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC

UNCLAS TUNIS 000921

SENSITIVE
SIPDIS

DEPARTMENT FOR S/P (BEHRMAN), S/SRMC (CHANDLER), R
(NOOR-ALI)
ALSO FOR NEA/MAG AND NEA/RA
USDOC FOR CLDP (TEJTEL AND MCMANUS)
STATE PASS U.S. SMALL BUSINESS ADMINISTRATION (TANYA SMITH)
NSC STAFF FOR SENIOR DIRECTOR RAMAMURTHY

E.O. 12958: N/A
TAGS: ECON EAID PREL SOCI TS
SUBJECT: ENTREPRENEURSHIP SUMMIT: EMBASSY TUNIS OUTREACH

REF: A. TUNIS 907
B. TUNIS 880
C. TUNIS 833
D. STATE 112468
E. 2008 TUNIS 113

Sensitive but Unclassified. Please protect accordingly.

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Summary
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1. (SBU) Our engagement with public and private sector
Tunisians continues to build support for the Entrepreneurship
Summit and other Cairo speech initiatives. Tunisians are
widely supportive of the President's vision of comprehensive
engagement and partnership, and have identified the potential
for entrepreneurship, science and technology, and other key
Cairo speech themes to help solve Tunisia's most critical
challenges. With high unemployment among college graduates,
Tunisia is fertile ground for promoting entrepreneurship.
However, as we have learned from bankers, entrepreneurs, and
others, banking sector reform is needed to provide financing
to entrepreneurs, and small businesses need better coaching
and support to enable them to grow. End Summary.

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Roundtables focus on key entrepreneurship issues
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2. (SBU) In two back-to-back roundtable discussions hosted by
the Ambassador December 14 and 15, participants highlighted
key challenges and opportunities for entrepreneurship in
Tunisia. The first roundtable focused on macro-level
analysis and included bankers, business heavyweights, and
civic leaders, while the second roundtable gathered
testimonials from small- and medium-scale entrepreneurs and
microcredit non-governmental organizations (NGOs). These two
groups were highly consistent on the issues affecting
entrepreneurship in Tunisia:

- The potential for entrepreneurship to spur growth:
Tunisia's high rate of unemployment among college graduates
(22 percent, compared to an official unemployment rate of 14
percent) has fueled a "brain drain" as skilled job-seekers
flee to Europe and elsewhere. It also raises the specter of
social unrest and has thus become a national priority for the
Government of Tunisia (GOT). Roundtable participants agreed
that small business creation through entrepreneurship has the
potential to employ many of Tunisia's skilled graduates.
They also agreed, however, that this potential is weakened by
a lack of "entrepreneurial spirit" and difficulty in
obtaining financing for small businesses.

- The "entrepreneurial spirit": While some pointed to a
tradition of self-reliance in Tunisian society, all agreed
that the entrepreneurial spirit is underdeveloped in today's
Tunisia. Focusing on youth, participants complained of a
sense of entitlement, a lack of preparation, and an aversion
to risk among college-aged Tunisians. University students,
particularly in the large engineering and science programs,
are not trained in business or management. Graduates seek a
stable job in a large firm or ministry, hoping to set the
stage for home ownership, marriage, and family life. While
many focused on social and cultural biases against
entrepreneurship, one participant ventured that the GOT, by
suppressing free speech and independent thought, has failed
to create an environment in which entrepreneurship can
flourish.

- Financing for entrepreneurship: Participants were nearly
unanimous in criticizing the Tunisian banking sector for its
failure to support entrepreneurs. As we have reported in the
past, banks lack the skills and methodology to extend capital
to business projects, continuing to focus exclusively on the
credit-worthiness of the borrower (ref E). While microcredit
loans up to TD 5,000 ($3,780) are generally available through
NGOs and GOT agencies, this weakness in the banking sector
effectively puts a low ceiling on small business growth.
Entrepreneurs were also united in praising the business
coaching and training services offered by microcredit NGOs,
and on the need to extend these services to small- and
medium-sized firms.

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Embassy outreach continues to build support
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3. (SBU) Embassy Tunis has taken advantage of meetings and
other outreach opportunities to seek partners and gather
input on entrepreneurship and other key elements of the
President's Cairo speech. The Ambassador, who arrived in
September, has used courtesy calls to engage on these themes
with the Prime Minister, the Ministers of Agriculture,
Finance, Foreign Affairs, Public Health, Higher Education and
Scientific Research, and Development and International
Cooperation. These GOT officials have expressed strong
support for the President's Cairo agenda and have noted the
linkages between key Cairo themes (science and technology,
women's rights, entrepreneurship) and GOT policy priorities.
In a noteworthy spirit of cooperation, two of these meetings
(the Ministries of Agriculture and Higher Education) have
been followed by draft MOUs proposing enhanced U.S.-Tunisian
cooperation on Cairo-related issues.

4. (SBU) The Ambassador has also discussed President Obama's
speech with local business leaders, the Tunisian American
Chamber of Commerce, and local offices and affiliates of U.S.
companies, including Citibank, Microsoft, Pfizer, Coca-Cola,
Cisco, Hewlett-Packard. In these meetings, the Ambassador
discussed the local business climate, key investment
opportunities, and the prospects for expanding and deepening
the U.S. commercial linkages with Tunisia.

5. (SBU) The recent Tunis-Med Franchise Show (ref A) offered
an opportunity for the Ambassador and Emboffs to engage with
GOT and private sector partners on the issue of franchising.
Until recently, strict capital controls and an insufficient
legal framework have kept all but a handful of international
franchises from successfully establishing a presence in
Tunisia. A recent law promises new avenues for
entrepreneurship and investment through franchising by
facilitating registration and royalty repatriation. The
recent visit of American franchising expert Bachir Mihoubi,
whose travel was funded by the Commercial Law Development
Program (CLDP) at the Department of Commerce, included
engagement with the Ministry of Commerce, the Center for
Young Entrepreneurs, the National Chamber of Women
Entrepreneurs, and the Bank for Small and Medium-Enterprises
on this key entrepreneurship development.

6. (SBU) In other areas, the Embassy continues to engage with
stakeholders to advance entrepreneurship along with other
Cairo speech themes. The ESF-funded program on "Innovation,
Entrepreneurship, and Good Governance" (implemented by CLDP)
continues to make progress, with plans underway for a study
visit by a group from the National Agency for the Promotion
of Research and Innovation to key U.S. research and
technology sites. The Embassy has shared a draft MOU with
the Ministry of Industry for another assistance program
(implemented by the U.S. Small Business Administration) that
will promote entrepreneurship through improved GOT assistance
and financing for small and medium enterprises (SMEs).

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Comment
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7. (SBU) With its skilled labor pool, market proximity to
Europe, modern infrastructure, and large middle class,
Tunisia is fertile ground for entrepreneurship. And with 22
percent of its college graduates unemployed (compared to five
percent of the illiterate workforce), Tunisia is full of
young, educated, and motivated potential entrepreneurs.
While in some cases, risk-averse social attitudes dampen the
"spirit of entrepreneurship," for the most part the barriers
to entrepreneurship are rooted in insufficient bank loans,
inadequate business education, and weak support to SMEs. The
Tunisians put forward by the Embassy to attend the Summit on
Entrepreneurship (ref B) are uniquely positioned to tackle
these issues in both the public and private sectors; the
Embassy is supporting those efforts through technical
assistance programs (see paragraph six above) and by engaging
on franchising and U.S. investment. We will continue our
active outreach with a broad spectrum of Tunisians to help
make the Summit a success and to better address the
challenges facing entrepreneurship in Tunisia. End comment.

GRAY

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