Tunisia outlook positive, notwithstanding US government indifference

By bne IntelliNews June 16, 2014

TUNIS/WASHINGTON (CI MENA) -- Tunisia’s status as a gateway to Africa offers opportunities for companies from around the world, but American businesses risk missing out to competition from China, Germany and Italy, Tunisian government and business executives told Capitol Intelligence/Intellinews.

The Tunisian government welcomes investors from the United States, Minister Development and International Cooperation, Noureddin Zekri, told Capitol Intelligence/Intellinews on the sidelines of the Tunisian Investment Forum held in Tunis on June 12, 2014

The country’s strengths include automotive and agricultural industries, but in particular service industries, such as tourism and ICT. In the latter areas, the United States boasts many world-beating companies, whose know-how could hugely benefit the Tunisian economy, he said.

Tunisia suffers in the eyes of American investors due to the continued instability in Libya, a Tunisian financier said.

“We are very affected by what happens in Libya, positively or negatively,” he said. “And the situation there is very bad right now, the Americans know they have made huge mistakes and are staying away. I think they hope that, if they don’t look at the problems, they won’t be there to see.”

In fact, the US Oversea Private Investment Corporation (OPIC), which also funds the Tunisinvest private equity fund, had been scheduled to be a keynote speaker at the TIF but than cancelled its participation without stating a reason.

Italy, thanks to its proximity to Tunisia, and Germany, with its seemingly unstoppable export machine expanding all over the emerging world, are the main investors in Tunisia, said Muhammed BouAoune, the chief executive of consultancy Vertical & Horizontal Partnership.

France also remains a significant player, due to economic and cultural links going back to the colonial era. French businesses have, however, earned themselves a reputation as tough to do business with, a financier said in comments echoed by two other Tunisian businessmen.

Chinese companies are also among the most active players in Tunisia, especially in infrastructure sectors, such as construction or telecommunications, several local businesspeople said. Huawei is now the dominant player in the telecoms equipment and network markets, rising to a position of strength from almost nothing five years ago.

Chinese companies are also now entering the services markets, where Tunisia’s greatest strengths lie, according to a local banker and to an owner of a technology/IC advisory firm.

“The proximity of non-transparent, difficult markets like Libya and Algeria is our curse, but also our greatest strength,” the advisor said. “We are going to develop in a finance route, not a production route. Tunisia has financial services, banks, an economic ecosystem that is lacking in Libya and in most African countries. And we have cultural understanding and existing links with African countries that have young populations and growth prospects lacking in Europe. So if you are an Italian company looking for growth, you want to be in Tunisia and expand from here to the rest of Africa. Italians and Germans understand it. Unfortunately, there is no understanding at all from the Americans.”

Notwithstanding the lack of a US government agency such as OPIC, Tunisia is already a financial success story as seen by the recent Tunis Stock Exchange listing of automotive parts supplier One-Tech and the USD 1.1bn automotive parts multinational Coficab owned by Hichem Elloumi.

In a previous interview with this news service during Tunisian Prime Minister Mehdi Jomaa’s meeting with President Obama in April, One-Tech owner and general manager Hedi Sellami said the group with annual turnover of USD 350mn is experiencing double-digit sales and profit growth.

One-Tech had initially sought out a US private equity investor to join the International Finance Corporation as a company shareholder, but is now talking instead to European investment banks for a dual listing on a major European market such as London, Paris, Milan and even Warsaw.

Tunisia’s high-level support in the US, including from President Obama, Secretary of State John Kerry, House Foreign Affairs Chairman Ed Royce (R-CA) and business leaders such as Honeywell CEO Dave Cote has failed to translate into transformational investment.

Some even see certain actions by the US government as counterproductive. The non-profit investment bank, Middle East Investment Initiative (MEII) led by former Secretary of State Madeleine Albright, has been criticised as more of an obstacle than conduit to fresh investment. MEII leadership includes the international law firm of DLA Piper led co-chaired by former Senate Majority Leader and Northern Ireland and Middle East peace envoy George Mitchell.

“MEII is closely connected to people and firms connected with the old Ben Ali elites such as Swicorp,” a foreign investment banker said.  “People are surprised that MEII which is directly connected to the State Department has such dealings.”

 DPA Piper’s Mitchell and DLA Piper co-chairman Lee Miller declined to comment when contacted by Capitol Intelligence.

However, Mitchell noted at DLA Piper had won major legal mandates for unfreezing Libyan assets and DLA’s Piper Miller said the law firm works very closely with Clinton Global Initiative founded by former US President Bill Clinton and husband of former Secretary of State Hillary Clinton.

By Aleksander Nowacki in Tunis and PK Semler in Washington, DC.  For more information please call +1-202-549-3399 or email pks@capitolintelgroup.com


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