Tunisian PM on Gulf tour to attract investment

Article Summary
Tunisian Prime Minister Mehdi Jomaa has visited a number of Gulf countries in an attempt to encourage investment, as the country’s economy continues to falter in the wake of the Arab Spring.

Several countries have rushed to show their support to Tunisia following the revolution, with the exception of Arab countries. They were rather distant, probably fearing the spread of the Tunisian phenomenon. The successive heads of governments and some political leaders in the country have tried to strengthen cooperation and encourage these countries to invest in Tunisia. Prime Minister Mehdi Jomaa embarked on a tour of these countries in the hope of convincing them to extend a hand to Tunisia, while the political consensus currently prevails. Below is a closer look at the Gulf-Tunisia relations.

On Saturday, March 15, 2014, Jomaa embarked on an official visit to several Gulf countries, namely the United Arab Emirates (March 15-16), the Kingdom of Saudi Arabia (March 16-17), Qatar (March 17-18), Kuwait (March 18) and Bahrain (March 19). The objective was to persuade these countries to invest in Tunisia and boost trade at this delicate moment.

Tunisia relies on the assistance of several partners, particularly that of the Gulf countries. It aspires to further promote its cooperation with them. While several countries have expressed their support of Tunisia through donations, soft loans and investment projects, Gulf-Tunisia relations were rather “formal” and, even worse, some Arab projects have been aborted or even suspended.

For instance, in March 2011, Algeria provided Tunisia with $100 million in aid (a donation of $10 million, a $40 million loan at 1% interest paid over 15 years with a five-year grace period and another interest-free $50 million loan). France and Germany have turned half of the debt Tunisia owes them into investment projects, and China has donated at least 45 million dinars [$28.5 million]. In December 2012, the European Union provided a grant of 107 million euros [$148 million] to balance public accounts. The World Bank and the African Development Bank have paid $500 million each under the recovery support program. Switzerland has pledged to grant Tunisia a 13 million dinar [$8.2 million] donation per year until 2016. In mid-February, the European Parliament provided Tunisia with a 300 million euro [$414 million] loan, while the United States and Japan have agreed to be the AAA-rated guarantors of Tunisia’s sovereign debt in the international financial market. A few days ago, Japan also decided to grant Tunisia two loans worth nearly 800 million dinars [$507 million] at a 0.6 % interest rate with a 10-year grace period.

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Gulf countries have not been stingy with Tunisia. Large projects, such as the Med Gate Real Estate Project (Sama Dubai, UAE), Tunis Sports City (Bukhatir, UAE), Tunisbay Financial Harbor project (Gulf Finance House, Bahrain) have been halted. Only Qatar, which is a close friend of Ennahda leaders, has deployed some efforts, including offering a $500 million loan at 3% interest rate in early 2012, a 31 million-dinar donation for the revolution’s martyrs and injured fund, a $79 million donation to finance development projects and a $500 million deposit in the Central Bank of Tunisia. The deposit, to be paid back over five years, is aimed at bolstering foreign exchange reserves in the country.

In return, Qatar has announced plans in the coming days to free up $500 million from the $1.25 billion worth of donations that it has pledged to give to Morocco.

This proves that Qatar could have done more for Tunisia, but didn’t. The same applies to other Gulf countries. For example, Saudi Arabia, the UAE and Kuwait announced in July 2013 their intention to offer $12 billion worth of financial aid to get Egypt out of its state of near-collapse and support the transition phase. This proves that there is no political will to help Tunisia.

Our imports have soared since 2010, while our exports have decreased or slightly increased, which has considerably worsened our trade deficit with these countries. The trade deficit with these five Gulf countries has almost doubled in four years, increasing from 297.5 million dinars [$188 million] in 2010 to 513 million dinars [$324.8 million] in 2013.

Imports from the UAE increased from 138.4 million dinars [$87.7 million] in 2010 to 194.1 million dinars [$123 million] in 2013. Exports increased from 127.4 million dinars [$80.7 million] in 2010 to 110 million dinars [$70 million] in 2013, with the deficit going from 11.049 million dinars [$7 million] to 83.811 million dinars [$53 million] — a 7.5-fold increase.

Imports from Saudi Arabia have almost doubled. They moved up from 256.1 million dinars [$162 million] in 2010 to 426.8 million dinars [$270 million] in 2013. As for the exports, they have also doubled, but are still below Tunisian expectations in terms of economic exchange (from 28.1 million dinars [$17.8 million] in 2010 to 61.9 million dinars [$39.2 million] 2013). Trade deficit went from 227.9 million [$144 milion] dinars in 2010 to 364.9 million dinars [$231 million] in 2013 (an increase of 1.6 times).

Imports from Qatar increased from 20.8 million dinars [$13.2 million] in 2010 to 31.4 million dinars [$19.9 million] in 2013, while exports increased from 4.5 million dinars [$2.8 million] in 2010 to 7.6 million dinars [$4.8 million] in 2013. The trade balance deficit went up from 16.3 million dinars [$10.3 million] in 2010 to 23.7 million dinars [$15 million] in 2013 (an increase of 1.5 times).

With Bahrain, the deficit went up from 14.2 million dinars [$9 million] in 2010 to 15.3 million dinars [$9.7 million] in 2013.

Imports from Kuwait increased from 32.9 million dinars [$20.9 million] in 2010 to 51 million dinars [$32.3 million] in 2012 and 36.6 million dinars [$23.2 million] in 2013. Exports also increased from 5.4 million dinars [$3.4 million] in 2010 to 9.3 million dinars [$5.9 million] in 2012 and 11.3 million dinars [$7.2 million] in 2013. The trade deficit went from 27.6 million dinars [$17.5 million] in 2010 to 41.7 million dinars [$26.4 million] in 2012 and 25.2 million dinars [$16 million] in 2013.

As far as investments are concerned, Tunisia received, up until Dec. 15, 2013, 5.99 billion dinars [$3.8 billion] worth of foreign direct investments (FDI) from Gulf countries, with 79 companies and 22,948 jobs created (the latter figure is questionable as we count up all of the jobs created in joint projects).

The most important projects are Tunisie Telecom with an investment of 3.768 billion dinars [$2.39 billion] (8,000 jobs) and Tunisiana with 1.41 billion dinars [$887 million] (850 jobs). On the other hand, the Tunisbay Financial Harbor project, promoted by Bahrain’s Gulf Finance House (GFH) Islamic investment bank, in the northern suburbs near Raoued, and pending since the revolution, has only just begun (a project involving an investment budget of about $3 billion that is supposed to create 16,000 jobs).

Through his tour in the Gulf countries, Jomaa hopes to multiply such projects in Tunisia to achieve added value, bring about growth and create job opportunities, especially for university graduates. These investments can be very profitable, as the country enjoys a strategic location and a skilled workforce, which enables it to become a hub linking the European countries with the Maghreb countries and the countries of the sub-Saharan Africa, thus offering a win-win partnership.

Tunisia is not asking for charity, but it is hoping to get a little help to successfully overcome this important but critical stage in its history for a better future.

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Found in: tunisian politics, tunisian development, gulf states, foreign investments, foreign aid, economy, business
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