Can Tunisia’s investment conference deliver?
This week, Tunisia will hold its long-awaited Tunisia 2020 investment conference, which aims to build support for the country’s economic, social and sustainable development. The conference’s main event will be the government’s presentation of its 2016-2020 development plan. Tunisia 2020 aims to persuade investors that the country is stable, open for business and can offer competitive investment opportunities.
In order to generate financing for its five-year plan, the government intends to mobilise $60 billion in investments over the next five years and create 400,000 jobs. It will have to restore investor confidence in Tunisia’s economic stability and security. This will be no easy task.
This is not the first time Tunisia has sought to bring in significant investment in such a way. In September 2014, the interim government of prime minister Mehdi Jomaa held an investment conference jointly organised with the French government entitled Invest in Tunisia: Startup Democracy. The rhetoric surrounding Tunisia 2020 echoes that of the 2014 conference, which presented the country as embarking on a path to economic recovery through a new vision. Indeed, the five-year plan that will be announced at Tunisia 2020 is presented as “a true social initiative” that “defines a new vision of social and economic development”.
Tunisia 2020 is markedly more ambitious than the 2014 conference. It will present 140 public, private and joint public-private projects to investors in 20 different sectors and will bring together participants from 70 countries. The 2014 conference presented 22 projects to investors and international stakeholders from more than 30 countries. The conference will be an important test of the new government of Prime Minister Youssef Chahed’s ability to bring much-needed foreign investment into the country.
To be sure, Tunisia has made important progress on the economic reform front in the past year, which may lend some confidence to international investors. In September, the parliament approved a long-delayed investment law. Earlier this year, Tunisia moved to adopt sweeping banking reforms and passed legislation protecting the Central Bank from political interference. Tunisia also reached a four-year, $2.9 billion loan agreement with the International Monetary Fund. Earlier this month, the IMF praised the government’s progress in adopting critical economic reforms. The European Commission recently proposed doubling the European Union’s annual aid to Tunisia.
However, the country faces significant economic and social challenges that have the potential to spoil the inflow of foreign investment that is expected from Tunisia 2020. The tourism industry was hit hard by two major terrorist attacks in 2015 and is still far from recovery. Spillover from growing instability in neighbouring Libya remains a serious concern for Tunisia’s security. And while Germany, France and Spain have lifted travel restrictions to Tunisia, the United Kingdom has yet to lift its travel ban. Tourism income fell 8% in the first nine months of this year compared to a year earlier.
The precipitous decline in tourism figures has contributed to the country’s stagnant growth. The growth rate in 2015 was just 0.8% and this year’s growth rate is projected at 1.8%. Tunisia’s five-year development plan aims to achieve an annual growth rate of 4% by 2020; however it is unclear whether the country will be able to meet this goal.
Social unrest threatens to derail the Chahed government’s planned reforms aimed at cutting spending, spurring growth and creating jobs. His cabinet, which assumed authority in August, was presented as fresh-faced and inclusive and capable of pushing through tough economic reforms. However, the government’s austerity measures have come up against opposition from powerful interests. Thousands of lawyers went on strike twice this month to protest new taxes that are included in the 2017 budget, and the powerful General Tunisian Labour Union has threatened to strike over the government’s plans to freeze public wage increases. Another powerful lobby, the Union of Industry, Trade and Handicrafts, has rejected a proposed exceptional tax contribution on businesses that the government plans to use to generate funds. Tunisia’s teachers’ union is also reportedly planning a major protest over the austerity measures.
International investors will not be blind to the economic, security and social challenges that Tunisia faces. Should the government succeed in bringing in much-needed investment, it will have to prove it can deliver on major planned infrastructure projects, particularly those in the country’s long-marginalised interior regions. Neither Tunisia 2020 nor the five-year development plan will act as a magic bullet that will pull the country out of the current difficult situation.
While the government should aim to take advantage of the conference to jump-start increased investment in the country, the real challenge will be keeping to the promises that will be made in the five-year economic development plan. Only time will tell whether the plan will deliver and put the country on a sustainable path towards economic recovery.