VZCZCXRO5729
PP RUEHTRO
DE RUEHTU #2414/01 2641042
ZNR UUUUU ZZH
P 211042Z SEP 06
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 1894
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0792
RUEHAS/AMEMBASSY ALGIERS PRIORITY 7289
RUEHLO/AMEMBASSY LONDON PRIORITY 1178
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0780
RUEHFR/AMEMBASSY PARIS PRIORITY 1631
RUEHRB/AMEMBASSY RABAT PRIORITY 8217
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0391
RUEHCL/AMCONSUL CASABLANCA PRIORITY 3991
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 002414 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/MAG (HARRIS) AND EB/CIP 
STATE PASS USTR (BELL), USPTO (ADLIN AND ADAMS), USAID 
(MCCLOUD) 
USDOC FOR ITA/MAC/ONE (ROTH), ADVOCACY CTR (JAMES), CLDP 
(TEJTEL), AND HOUSTON USEAC 
CASABLANCA FOR FCS (ORTIZ) 
LONDON AND PARIS FOR NEA WATCHER 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD BEXP LY TS
SUBJECT: ZARZIS FREE TRADE ZONE DISAPPOINTED BY LACK OF 
AMERICAN INVESTMENT 
 
REF: TUNIS 1630 
 
¶1. (SBU) Summary: Ten years after its opening, the Zarzis 
free trade zone, located in Southeastern Tunisia, has failed 
to create the foreign investment and job promotion intended, 
despite generous incentives offered by the GOT.  In a meeting 
with EconOff, newly-designated Director General for the 
Zarzis free trade zone Khaled Touibi expressed frustration 
and bewilderment at the lack of foreign, and particularly 
American, enthusiasm for investing in Zarzis, and expressed 
hope that the tide would turn due to the end of the sanctions 
against Libya.  End Summary. 
 
¶2. (U) In 1992, the Tunisian government created free trade 
zones in the Northern city of Bizerte and Southern city of 
Zarzis in order to attract foreign direct investment, create 
jobs, and increase exports.  The free trade zones also have 
the goal of aiding development of regions outside the 
capital.  The free trade zone in Zarzis, a port city on the 
Southeast coast of Tunisia, opened for activity in 1996 with 
a package of incentives for foreign investors including a 
ten-year tax holiday, full convertability of the Tunisian 
dinar, and duty free imports of necessary components and 
services. (Note: The Tunisian dinar is not fully convertible 
and Central Bank authorization is sometimes required for 
foreign exchange operations. End Note.)  In addition, exports 
to Libya are currently duty free and in 2008 Tunisian exports 
to the E.U. will gain duty free status.  Due to Zarzis' 
proximity to Libyan and Eastern Algerian oil and gas 
deposits, energy companies have been a major target for 
investment, but the zone leadership welcomes investment from 
all sectors. 
 
¶3. (SBU) Despite the favorable tax and customs concessions, 
the free trade zone has had great difficulty attracting the 
quantity and quality of foreign investment expected.  In its 
ten years of existence, the Zarzis free trade zone has only 
produced 14.1 million USD in foreign investment and created a 
paltry 200 jobs.  While the zone is home to 52 projects, most 
of these have been relatively small,  and none have involved 
American investment.  Newly-designated Director General of 
the Zarzis Park of Economic Activities Khaled Touibi 
expresses frustration at the lack of interest on the part of 
major companies and American investors.  While Touibi was 
willing to concede that Americans lacked information about 
doing business in Tunisia, he asked why U.S. companies have 
not taken advantage of the opportunities in Zarzis, or 
throughout Tunisia more generally.  When Econoff suggested 
that perhaps the prior difficulties faced by major U.S. 
companies such as McDonald's or Pizza Hut had negatively 
affected American business' perceptions of Tunisia (reftel), 
Touibi vehemently denied that there are or were ever any 
barriers for Americans to do business in Tunisia. 
 
¶4. (U) Touibi readily admitted that the free trade zone's 
performance to date has not met expectations, yet was puzzled 
as to why this was the case.  During his tenure, Touibi aims 
to to boost investment, increase working capital, and revive 
previously signed cooperation agreements, including the 
cooperation agreement signed in 2001 with the Houston Port 
Authority.  In addition, the free trade zone is currently in 
talks with Maersk to establish a regular maritime line to 
Zarzis, addressing one of the port's major shortcomings. 
Deputy Manager of Tunisia's Maersk office Lofti Mouelhi 
confirmed that Maersk is currently conducting feasibility 
studies, but noted Maersk concerns that there is not 
sufficient volume of shipments in and out of Zarzis to 
justify opening a maritime line.  The free trade zone staff 
expressed hope that the end of the sanctions against Libya 
would also increase interest in Zarzis.  However, the number 
of inquiries from foreign investors has not increased to 
date.  Though the zone's leadership was reticent to discuss 
the competition for investors with the Bizerte free trade 
zone, Bizerte commands a significant geographical advantage 
 
TUNIS 00002414  002 OF 002 
 
 
for all sectors except oil, due to its proximity to Tunis. 
 
¶5. (SBU) Comment: With recent Central Bank figures showing a 
widening trade deficit, the GOT is eager to see Zarzis become 
a major export hub and views American investment as important 
to that goal.  However, Zarzis is likely to remain the less 
successful of the two free trade zones unless and until it 
successfully targets major oil companies.  For the GOT, 
accustomed to a state-driven model of investment, the lack of 
American investment in Zarzis is indicative of American 
interest in investing in Tunisia as a whole.  Post will 
continue to look for opportunities for American business in 
Zarzis as well as possible avenues of cooperation with the 
Zarzis free trade zone, particularly as they try to revive 
and increase their cooperation with Houston.  End Comment. 
BALLARD