Tunisia’s minister of tourism does not have an easy job. Present at November’s World Travel Market in London, minister Salma Elloumi Rekik had to work beneath the shadow of the terrorist attack in Tunisia’s resort city of Sousse in June 2015, which took the lives of 38 people.

Tourism, which directly accounts for 7% of Tunisia’s GDP and employs nearly 500,000 people, was already dealt a blow after an attack at the country’s famous Bardo museum in March 2015. Now, following the UK government’s decision to suspend all flights to the country, Tunisia predicts it has lost upwards of 1 million visitors.


Political rollercoaster

A small country of roughly 11 million, Tunisia has for decades been a well-loved vacation spot for tourists. In 2012, it attracted 6 million visitors, half of whom were from Europe. The Mediterranean beach hub is also the birthplace of the Arab Spring, which sent the country’s economy reeling after the ousting of long-time dictator Zine el Abidine Ben Ali in 2011. FDI fell by nearly 30%, and tourism by 50%.

In the face of monumental challenges, and in stark contrast to neighbouring Arab countries mired in post-revolution violence, Tunisia has been lauded internationally as a democratic model for the Middle East and north Africa (MENA) region, successfully holding peaceful elections and adopting a new constitution in 2014. In October of 2015, Tunisia’s National Dialogue Quartet  – the group of organisations central to attempts to build democracy in the country – was awarded the Nobel Peace Prize.

Despite marked political progress, however, the country's economy continues to struggle. A legacy of red tape and corruption remains, and unemployment sits at 15.3%. Tourism figures have not recovered to pre-revolution levels and are likely to remain low given recent events. In response, Tunisia’s leadership is doubling its efforts to diversify its economy and attract foreign investment. This is not only crucial for Tunisia’s revenue and trade; it is essential to maintaining national stability.

In November, a Tunisian delegation led by the country’s minister of development, investment and international co-operation, Yassine Brahim, met with international investors at a UK-Tunisia investment forum in London hosted by Developing Market Associates. Companies presented plans for ambitious projects covering sectors ranging from energy to ICT to manufacturing. Mr Brahim introduced Tunisia’s new investment code, set to come into effect in early 2016, which aims to open up a previously complex business environment. 

A difficult legacy

Tunisia’s pre-revolution model failed to generate inclusive growth. Mr Ben Ali’s government had a stranglehold on the economy, and the World Bank reports that by the time the dictator was deposed, firms connected to his family collected 21% of private sector profits, while producing only 3.2% of output and employing just 0.8% of the workforce.

At the UK-Tunisia forum, Mr Brahim outlined the country's new economic framework for the coming five years. Critical structural reforms will focus on creating a stable banking system, an improved business climate, strengthened tax policies and the provision of a safety net for the country’s most vulnerable citizens. The new Tunisian Investment Code will offer investors incentives such as VAT exemption on many imported capital goods, multi-year tax relief on reinvested revenues and profits, investment subsidies, and cheap labour and training.

Tunisia has one of the most highly qualified workforces in the MENA region, a well-developed education system, and its geographic location makes it a hub for expansion into Africa, Europe and the Middle East. It has some of the most developed infrastructure and transport routes in north Africa, with 100 industrial zones and nine international airports providing more than 2000 flights to Europe every week. 

The country has ambitious growth targets, projecting 5% economic growth from 2016 to 2020, compared with the 1.5% achieved in the previous four years. “We are confident because FDI increased 40% in the first eight months of 2015, with a 15% increase in local investment,” says Mr Brahim.  Gradual European growth and low oil prices have helped in this regard. “Even with the security challenges, FDI is going up this year in Tunisia and it could – if we succeed in stabilising the security issue – continue to go up next year,” he adds.

Promising industries

British Gas is Tunisia’s largest single foreign investor, with $4bn invested to date, and accounts for more than 60% of the country’s gas production. Contracts with Shell, Enquest and Nur Energy are also in the pipeline. Pivotal to increased energy investment is infrastructure development, which will be aided by new public-private partnership laws in national infrastructure currently under discussion. The government is also devising continued privatisations for telecommunications, insurance, power generation and manufacturing.

FDI, infrastructure upgrades and financial reforms are crucial to bridging Tunisia’s technological gap and developing its long-neglected southern and interior regions. “The five-year plan will focus on logistical infrastructure to connect these regions to the coast and the ports. There are numerous financial incentives encouraging companies to invest there,” says Mr Ibrahim. “Customs and taxes are simplified, and incentives are clarified for those investing, particularly in youth employment and in the regions facing disparities.”

As for tourism, Mr Ibrahim is aware of the realities. “We are quite conscious that the hit to tourism will last at least a year and a half,” he acknowledges. “The idea now is to diversify the product.” Tourism minister Salma Rekik told journalists that “the ministry’s priority is to introduce reforms and diversify tourism beyond beach venues, as well as change Tunisia’s image abroad without losing sight of the importance of good governance”.

Real talk

At the UK-Tunisia investment forum, Mr Brahim spoke candidly about the difficulties his country faces. “The revolution happened because of social and economic problems, and we haven’t been able to offer the people anything because of the instability of the past four years. In the streets you hear people saying that the days of Ben Ali were better,” he said. “This is why we are very committed to accelerating – because we have no choice. We have the skills, we have the potential – but we cannot do it alone.”

Half of Tunisians are under the age of 30, and the current youth unemployment rate sits at 30%. Many of the unemployed are degree holders who speak several languages. The government’s pursuit of FDI is therefore pivotal in creating more jobs and opportunities for its youth, who many believe are otherwise at risk of falling prey to extremism.

With militant Islamist activity across the insecure Libyan border to the east, Tunisia is in a precarious position. And, as the closest north African country to Europe, its stability is not just important to its own citizens, but to Europe as well. 

The UK won more than $60m-worth of projects in Tunisia during the first eight months of 2015 in fields including healthcare, education and IT. “It’s not just about security, but about building sustainable prosperity,” says Tobias Ellwood, UK minister for the MENA region. “These investments aren’t just projects and pound signs, but people and potential. And these reforms have the potential to transform Tunisia economically as it has been transformed politically.”

A stable and democratic Tunisia reinforced by a healthy economy is in the interest of the entire international community. Tunisia has done much of the work already; it now needs the world’s support.