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UNCLAS TUNIS 002321 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
NEA/MAG 
 
E.O. 12958:    NA 
TAGS: SOCI PREL PGOV PHUM PINR PTER ASEC ECON TS
SUBJECT: SCENESETTER FOR VISIT OF BUSINESS EXECUTIVES FOR 
NATIONAL SECURITY TO TUNISIA 
 
 
¶1.  (SBU) Embassy Tunis warmly welcomes the Business 
Executives for National Security (BENS) delegation's 
September 13-14 2006 visit to Tunisia.  This cable provides 
a brief overview of the political situation in Tunisia, as 
well as a summary of the business climate. 
 
-------------------------- 
The Bilateral Relationship 
-------------------------- 
 
¶2. (SBU) Your visit takes place in the context of a long- 
standing and positive bilateral relationship; the U.S. was 
the first western power to recognize an independent Tunisia 
in 1956.  Recent high-level visits include a February, 2006 
visit by Secretary of Defense Rumsfeld, a May, 2006 visit by 
then-Deputy Secretary of State Robert Zoellick and a March, 
2006 visit by Assistant Secretary of State for Near Eastern 
Affairs David Welch. 
 
¶3. (SBU) The Tunisian government considers external security 
as one of its top concerns which highlights the value it 
places on its historic and robust military-military 
relationship with the United States.  Unfortunately, and 
against the backdrop of a very limited national budget, new 
equipment is needed to match an evolving and common threat- 
international terrorism. At present, Tunisia receives 
approximately 8-10 million USD in Foreign Military Financing 
and nearly all of that money is used for the partial 
maintenance of its aging fleets of U.S.-origin equipment. 
This makes any significant recapitalization of the Tunisian 
Armed Forces at least problematic for the near future unless 
additional third country financing is secured. That said, 
Tunisia has been and remains an active participant in United 
Nations Peacekeeping Missions.  The GOT is supportive of 
several military issues of mutual interest, takes part in 
NATO Seminars and activities, and is extremely appreciative 
of US assistance (which includes IMET, USEUCOM Humanitarian 
Assistance, Counterterrorism related seminars, and other 
activities.) In fact, the GOT reciprocated the USG's past 
generosity with a symbolic gesture of two C-130 loads of 
humanitarian assistance in the wake of Hurricane Katrina. 
You may wish to thank them for this effort and the Tunisian 
Red Crescent's gifts included blankets, tents, diapers, 
detergent, blankets, and water. In total, it represented 
some 20 tons of supplies. 
 
¶4. (SBU) The visit also comes at a time when the USG is 
working to advance a number of issues in Tunisia, including 
the promotion of greater democratic and political freedoms 
and economic reforms. 
 
------------------ 
Political Overview 
------------------ 
 
¶5.  (SBU) Tunisia is a constitutional republic with a 
population of approximately 10 million, dominated by a 
single political party, the Democratic Constitutional Rally 
(RCD). Zine el-Abidine Ben Ali has been the president since 
¶1987. Although three opposition parties contested the 
October 2004 presidential election, official results 
indicated that President Ben Ali won approximately 94 
percent of the registered popular vote.  The official 
turnout was reportedly higher than 90 percent of registered 
voters, although there were indications that voter turnout 
figures were artificially inflated.  Tunisia has a bicameral 
legislature.  In addition to the Chamber of Deputies, a 
second legislative body, the Chamber of Advisors, was 
created in a 2002 referendum amending the Constitution.  The 
legislature plays a limited role as an arena for debate on 
national policy but never originates legislation and 
virtually always passes bills presented by the Executive 
with only minor changes. 
 
¶6.  (SBU) Tunisia proudly -- and justifiably -- calls itself 
a "country that works."  Despite Tunisia's relatively small 
economy and lack of natural resources, the Tunisian 
government has proven itself capable of providing basic 
education, health care, housing and a workable 
infrastructure to its population.  Tunisian woman enjoy more 
rights and opportunities than in any other Muslim country. 
As a result of these policies, the majority of Tunisians are 
generally moderate and desire a government intent on 
modernizing the country and integrating it fully into the 
world economy. 
 
¶7.  (SBU) Despite these positive parameters, political 
liberties remain tightly controlled and civil society 
development is stifled.  Tunisia's sluggishness on political 
 
reform has been a point of contention in the U.S. - Tunisian 
relationship in recent years.  Although President Ben Ali 
has introduced some positive political reform steps in the 
past year (pardoning some political prisoners, lifting a 
form of censorship for print media, registering a new 
political party), civil society and human rights groups 
remain deeply cynical and continue to report many instances 
of government harassment, intimidation, and limits on their 
activities.  Journalists reject the suggestion that press 
censorship has ended and local media usually lacks any 
meaningful coverage of domestic political issues. According 
to the 2005 Reporters Without Borders list of Worldwide 
Press Freedom Index rankings, Tunisia was 147 out of 167. 
National elections - both presidential and legislative - 
will be next held in 2009. 
 
 
---------------- 
Business Climate 
---------------- 
 
¶8. (U) Tunisia has the most diversified economy in the 
region.  It has one of the highest standards of living on 
the entire continent.  The country does not have vast 
reserves of hydrocarbons like its neighbors Algeria and 
Libya but has prospered under long-standing government 
policies to develop manufacturing industries for export and 
to promote tourism.  At the same time, social programs limit 
population growth, provide a high standard of education, and 
ensure a relatively decent standard of living for all. The 
average annual income is approximately 3000 USD. 
 
¶9. (U) The Tunisian economy is maintaining average annual 
growth of almost 4.5 percent. Inflation is running at about 
2 percent annually and hard currency reserves of 
approximately 4.25 billion USD at the end of 2005 are equal 
to 121 days of imports.  Manufacturing industries, producing 
largely for export, are the motor of Tunisia's economic 
growth and a major source of foreign currency revenue, 
accounting for nearly 90 percent of exports.  Labor- 
intensive plants, historically producing textiles, and more 
recently, those producing automobile components, create much- 
needed jobs.  Textiles have long been the primary source of 
foreign currency revenue, with more than 90 percent of 
production being exported, but foreign orders have slowed in 
the face of increased global competition.  A government 
export promotion center (Centre de Promotion des 
Exportations - CEPEX) is responsible for identifying new 
export markets.  Tourism and mechanical and electrical 
equipment sales are the second largest source of foreign 
currency revenue.  About 6.4 million tourists visited 
Tunisia in 2005, compared to 6 million in 2004, bringing in 
nearly 2 billion USD in convertible currency.  Agriculture 
plays a major role in Tunisia, and engages approximately one- 
fifth of the population.  In 2005, Tunisia exported nearly 
940 million USD of agricultural products, mainly olive oil, 
seafood, dates and citrus.  The government still retains 
control over certain strategic sectors of the economy 
(finance, hydrocarbons, the national airline, electricity 
and gas distribution, land-based telecommunications, and 
water resources), but the role of the private sector is 
increasingly important.  The Government of Tunisia is now 
studying the economic impact of a proposed liberalization of 
petroleum product price controls, especially since energy 
imports accounted for 34 percent of all imports through June 
2006, and petroleum products are subsidized. 
 
¶10. (U) Accessing the Tunisian market can be a challenge for 
U.S. companies.  Geographically part of Africa but 
culturally more Middle Eastern or Mediterranean, this former 
French protectorate has extremely close ties to Europe. 
These have been reinforced by Tunisia's Association 
Agreement with the European Union (EU) which will create a 
free trade zone by 2008.  Over 70 percent of Tunisia's 
foreign trade is with Europe.  Tunisia's other major trading 
partner is Libya.  In 2005, total Tunisian imports were 
12.86 billion USD and exports totaled 10.2 billion USD. 
 
¶11. (U) Foreign Direct Investment (FDI) in Tunisia was 
estimated at around fifteen billion dollars and has been 
growing steadily, thanks mainly to Spanish companies and 
British Gas.  A large part of FDI has also come from the 
GOT's efforts at privatization, which have led to the sale 
of many state-run enterprises and assets.  FDI usually falls 
into either the food products, automotive or 
telecommunications and electronics sectors of the economy, 
but retail distribution is growing as well.  While the GOT 
has made movement toward liberalization of the marketplace, 
it still directs FDI toward offshore manufacturing 
 
industries that are primarily export-oriented: The GOT is 
not yet fully comfortable with investment that flows toward 
foreign firms that compete with local ones, or that mean 
foreign exchange leaving the country.  The U.S. has been 
working towards a Free Trade Agreement with the GOT since 
2003, but even the preliminary Trade and Investment 
Framework Agreement (TIFA) is still in its working stages. 
There are concerns regarding the GOT's failure to relinquish 
its control over major sectors of the economy, including its 
position as the controlling shareholder of nine major 
Tunisian banks.  This control has been named by some as the 
reason there is little interest in stocks and bonds, leaving 
the stock market without strong capital investment. 
 
¶12. (U) The International Monetary Fund has lauded Tunisia's 
performance in the agricultural sector in recent years, but 
has suggested that the country is in need of a policy which 
would bring down public sector debt.  The convertibility of 
the Tunisian dinar is another issue which is repeatedly 
addressed in economic circles, but the government still does 
not allow physical importation or exportation of the 
currency.  These laws remain based on the Foreign Trade and 
Foreign Exchange Code of 1976, which the government has said 
it is reviewing.  The dinar is convertible for most bona- 
fide investment and trade operations.  However, the 
inability of the average Tunisian citizen to possess an 
international credit card, and the strict restrictions on 
the amount of currency allowed out of the country, have led 
many to question the true gains made in this arena.  The 
dinar is traded in an intra-bank market. Trading is based on 
a fixed basket of currencies (the Euro, the U.S. dollar and 
the Japanese yen) established by the Central Bank.  The 
dollar/dinar value fluctuates on a daily basis, with the 
dollar trading most recently at approximately TD 1.30. 
Since the beginning of 2005 the dinar has depreciated more 
than 12 percent against the U.S. dollar but has gained 1 
percent against the Euro.  The GOT has hinted that the dinar 
will not be fully convertible before 2009. 
 
¶13. (U) The Tunisian American Chamber of Commerce (TACC) is 
a nonprofit trade association developed to facilitate trade 
between the US and Tunisia.  Since Tunisia hopes to set 
itself up as a tourist destination and a palatable 
investment option for Americans, TACC helps support U.S. 
companies investing in Tunisia.  The organization has pushed 
for a free trade agreement between the two countries, and is 
a strong advocate for liberalizing the Tunisian market 
system.  TACC also focuses on bolstering regional trade 
relations in the Maghreb.  TACC hosts a variety of 
conferences and seminars on the bilateral economic 
relationship between Tunisia and the US, and organizes trade 
missions at exhibitions and trade fairs in both countries. 
TACC offers English language training courses, as well as 
courses for business executives, and it also sends a group 
of Tunisian business leaders to Washington annually to meet 
with US government representatives and fellow nonprofits. 
One of TACC's greatest strengths may be that it frankly and 
openly addresses troubling issues affecting many world 
economies, from the problems arising from "brain drain," to 
whether or not the local currency should become convertible. 
TACC holds and publishes debates on a variety of trade and 
industry issues; a vital part of any economy. 
 
-------- 
Security 
-------- 
 
¶14. (U) The crime rate in Tunisia remains fairly low, but 
has been on the rise in the past few years.  Violent crime 
is still a relatively rare occurrence, especially in the 
wealthier areas where tourists and expatriates tend to 
congregate, but theft and pick-pocketing of foreigners has 
become more commonplace.  Females walking alone are common 
targets.  Burglaries of private residences have also seen an 
upward trend. 
 
¶15. (U) While American citizens or interests have not been 
the target of any terrorist attacks in Tunisia, the threat 
of terrorism is not absent from the country.  In 2002 a 
faction of al Qaeda bombed a famous synagogue on the island 
of Djerba; the first al Qaeda-related terrorist incident 
after 9/11.  The GOT remains concerned about signs of 
increasing Islamic extremism. 
 
¶16. (U) The Tunisian press is routinely critical of U.S. 
foreign policy, reflecting widespread cynicism about U.S. 
policy in the region.  These sentiments have not led to any 
violent anti-American demonstrations or activities, however. 
On July 24, civil society and trade union activists 
 
organized a rally in downtown Tunis to express solidarity 
with the Lebanese people.  While some demonstrators carried 
anti-U.S. banners and chanted anti-U.S. slogans, the event 
remained peaceful. 
 
---------------- 
Public Diplomacy 
---------------- 
 
¶17. (U) Your visit represents an important opportunity to 
engage Tunisian audiences and to listen to local 
perspectives.  Especially since the recent events in 
Lebanon, Tunisian public opinion and the press has been more 
critical of US policy.  Tunisians do not agree, in general, 
with the position of the USG regarding the Lebanese and the 
Palestinian-Israeli conflicts.  This has colored their 
perceptions of Americans in general.  When Secretary 
Rumsfeld and then-Deputy Secretary of State Zoellick visited 
this spring, they were articulate interlocutors and their 
visits resulted in positive press coverage of US policy. 
 
¶18. (U) The Public Affairs Office at the Embassy has a very 
active exchange program with many Tunisian and American 
students and faculty participating.  It recruits for over 
twenty-five different exchange programs, including Fulbright 
scholarships for those seeking advanced degrees, and 
programs for high school students. The Public Affairs Office 
also arranges for speakers, cultural performances and 
workshops on a variety of topics. Despite criticism of 
American policies, most Tunisians are eager to continue the 
longstanding friendship between our two countries.   We 
trust your visit will reinforce this relative advantage. 
 
BALLARD