US embassy cable - 05TUNIS1484

UNCLAS SECTION 01 OF 02 TUNIS 001484 
 
SIPDIS 
 
STATE FOR EB, NEA/PI (FRANCESKI), AND NEA/MAG (LAWRENCE) 
COMMERCE FOR CLDP (MARC TEJTEL), ITA/MAC/ONE (DAVID ROTH), 
AND ADVOCACY CENTER (CHRIS JAMES) 
CASABLANCA FOR FCS (GAIL DEL ROSAL) 
STATE PLEASE PASS USTR (DOUG BELL) 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EFIN, EAGR, TS, ENIV 
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS: JULY 7, 2005 
 
REF: 04 TUNIS 2422 
 
Minister of Commerce at MEPI Small Grant Conference on Free 
Trade with U.S. 
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1. (U) During the Tunisian American Chamber of Commerce's 
(TACC) recent conference on Free Trade, June 29-30, Tunisian 
Minister of Commerce Mondher Zenaidi, said that the GOT will 
continue integration with the world economy to support 
Tunisia's socio-economic development.  Zenaidi noted that an 
FTA with the U.S. would serve national objectives by 
supporting growth, increasing investment as a percentage of 
GDP, and helping create a targeted 80,000 new jobs annually 
(with 50 percent for university graduates) and 70,000 
companies over the next five years.  Zenaidi cautioned, 
however, that agriculture and some service sectors are 
particularly "sensitive" and are not immediately ready for 
liberalization.  Zenaidi also suggested that an FTA with the 
U.S. should be accompanied by financial assistance and that 
further steps would require further analysis through impact 
studies and dialogue with the private sector and civil 
society. 
 
2. (U) Post Comment: Although an U.S. FTA may be some years 
away for Tunisia, we view the increased dialogue as 
productive for raising awareness of the benefits of greater 
economic/commercial engagement and for helping better 
understand where Tunisian sensitivities lie.  The conference 
brought a number of excellent Arab-country stakeholders 
together, notably Jordanian and Moroccan representative, who 
could speak frankly about the FTA experience.  The USG's 
Middle East Partnership Initiative (MEPI) sponsored TACC's 
conference through its Embassy Small Grants Program with 
funding of USD 25,000.  We offer this Small Grant as a useful 
model for other posts in the region pursuing a similar 
agenda.  End comment. 
 
World Bank Approves Additional Economic Competitiveness Loan 
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3. (U) The World Bank (WB) has recently approved USD 150 
Million loan for Tunisia under its Economic Competitiveness 
Adjustment Program.  This latest financing, called ECAL IV, 
is intended a) to promote fiscal consolidation and strengthen 
the medium term fiscal framework; b) to improve Tunisia's 
private investment climate; and c) to reinforce the financial 
sector's capacity to finance growth by supporting the 
reduction of non-performing loans, strengthening the 
regulatory framework for bank intermediation, and fostering 
contractual savings, especially in the insurance sector.  The 
ECAL IV loan will be apportioned as follows:  20 percent for 
law and justice and public administration (Central government 
administration); 55 percent for the finance sector;  25 
percent for industrial and trade sectors. 
 
4.  (U) ECAL IV follows three similar, prior WB loans.  The 
WB approved ECAL I (USD 75 Million) in 1996 and ECAL II (USD 
159 Million) in 1999. The WB approved ECAL III (USD 283 
Million) in 2001, but did not disburse USD 45 Million of that 
loan associated with the government's issuance of a second 
Global System for Mobile Communications (GSM wireless 
telecommunications) license because the WB did not receive 
documentation "to demonstrate that the GSM license was issued 
according to a competitive and transparent process." 
 
Privatization Update 
-------------------- 
5. (U) Tunisia has privatized 193 companies since 1987, 
netting approximately USD 1.9 billion for government coffers. 
 An estimated 74 percent of this amount constitutes foreign 
direct investment (FDI), most notably in tourism and 
commerce.  In 2005, the GOT is selling off a 35 percent stake 
in the National Oil Distribution Company (SNDP), which ranks 
sixth nationwide in terms of turnover (USD 450 Million in 
2003; net profit of USD 6.5 Million).  A consortium managed 
by Spain's Santander Services and the Banque d'Affaires de 
Tunisie has been selected as an advisor to GOT on this 
transaction. 
 
6.  (U) Going forward, the IMF, for one, has requested 
Tunisia to accelerate its privatization efforts, especially 
in "strategic sectors" like telecoms, finance, and 
transportation.  Tunisie Telecom, the state 
telecommunications monopoly for all except mobile operations, 
is expected to place 35 percent of its equity up for public 
offering in 2005, with Banque de Affaires de Tunisie acting 
as advisor to the GOT on the sale.  Estimates valute the 35 
percent share of Tunisie Telecom in the neighborhood of USD 
1.6 Billion, which would nearly equal all combined 
privatizations in Tunisia since 1987.  Last year's attempted 
financial sector privatization of Banque de Sud, however, did 
not succeed due to a lack of sufficient bidders (reftel). 
Recent reports, however, indicate that the Banque de Sud's 
privatization will be reattempted in 2005 or 2006 as its data 
room has been reopened for review and the GOT has 
specifically requested the Banque Internationale Arabe de 
Tunisie to actively consider a submission. 
HUDSON