VZCZCXRO9780
PP RUEHTRO
DE RUEHTU #0120/01 0261451
ZNR UUUUU ZZH
P 261451Z JAN 07
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 2567
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0837
RUEHAS/AMEMBASSY ALGIERS PRIORITY 7393
RUEHLO/AMEMBASSY LONDON PRIORITY 1243
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0837
RUEHFR/AMEMBASSY PARIS PRIORITY 1702
RUEHRB/AMEMBASSY RABAT PRIORITY 8298
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0029
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4043
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 TUNIS 000120 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/MAG (HARRIS AND HOPKINS) AND EB/CIP 
STATE PASS USTR (BELL), USPTO (ADLIN AND ADAMS), USAID 
(MCCLOUD) 
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR (JAMES), 
AND CLDP (TEJTEL) 
CASABLANCA FOR FCS (ORTIZ) 
LONDON AND PARIS FOR NEA WATCHER 
 
E.O. 12958: N/A 
TAGS: BEXP ETRD EINV ECPS EINT KIPR TS
SUBJECT: US COMPANIES BEMOAN COMPLEX REGULATIONS, BUT ARE 
STILL HAPPY IN TUNISIA 
 
REF: A. TUNIS 119 
     ¶B. TUNIS 105 
     ¶C. TUNIS 67 AND PREVIOUS NOTAL 
     ¶D. 06 TUNIS 629 
     ¶E. 06 TUNIS 429 
 
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Summary 
------- 
 
¶1. (U) During a January roundtable hosted by Ambassador, 
representatives of US companies in Tunisia highlighted a wide 
range of issues related to doing business in Tunisia. Common 
complaints included Tunisia's complex regulatory environment, 
excessive restrictions on importation, and poor 
telecommunications infrastructure.  Despite the myriad 
challenges facing US companies, most representatives 
emphasized that their businesses were healthy and that they 
were satisfied that they invested in Tunisia.  Ambassador 
stressed USG support for American  business in Tunisia and 
has subsequently raised US company concerns with several GOT 
ministers.  End Summary. 
 
-------- 
Red Tape 
-------- 
 
¶2. (SBU) The most common, and passionate, complaint voiced by 
US companies was the complexity of Tunisian regulations 
governing trade and commerce and the slow pace of the GOT 
bureaucracy.  ExxonMobil Tunisia Director General Arnaud 
Blouin noted that he had been trying to get permission from 
the GOT to sell a property for over three years, despite the 
fact he had already negotiated the terms of the sale with the 
buyer.  Blouin stated that examples such as this make it 
difficult to justify acquisitions of new property and 
investments as there is no guarantee the asset could be 
divested in a timely manner.  Central Bank control over 
exchange operations, customs delays, and Ministry of Finance 
regulations also slow international commerce.  Crown Maghreb 
Director General Aidan Sanderson noted that the Ministry of 
Finance had yet to refund the (recoverable) 18 percent 
value-added tax (VAT) the company paid for imported 
equipment.  Crown submitted its refund request in May 2006 
and has only recovered 3.1 million Tunisian dinars (2.4 
million USD) of the total 9 million dinars (6.9 million USD) 
claimed.  The onerous recovery procedures and long wait-times 
hinder the efficient flow of capital, preventing resources 
from being allocated to further investment. 
 
------------------ 
Telecommunications 
------------------ 
 
¶3.  (SBU) While all participants acknowledged the excellence 
of Tunisian electric and water utilities, Tunisie Telecom 
services were widely panned for the time required to 
establish a connection and the quality of the connection 
itself.  Although there are multiple Internet service 
providers, Tunisie Telecom maintains a monopoly on fixed line 
services.  Prior to establishing a high-speed Internet 
connection, Tunisie Telecom must install a high bandwith 
line.  Anecdotal reports from Tunisians and EmbOffs show 
waits of several months to receive the necessary Tunisie 
Telecom line; the US company representatives present 
complained that they are subject to similar wait times. 
Moreover, Internet connection speed and quality were critized 
as subpar.  For multinational companies high-speed 
telecommunications are critical, and those present expressed 
their frustration that Tunisia's telecom infrastructure 
remains inadequate compared to its otherwise excellent 
utility and transportation infrastructure.  A British Gas 
representative recently told EconOff that his company had 
 
TUNIS 00000120  002 OF 003 
 
 
taken matters into its own hands by laying telecommunications 
cables to ensure high-speed connectivity. 
 
---- 
IPR 
---- 
 
¶4. (SBU) Although noting continuing concerns with 
intellectual property rights (IPR), particularly in the 
pharmaceutical industry, Pfizer representative Amelle Gaddes 
expressed relief over the recent decision by the GOT to end 
its practice of "correlation."  Prior to December 31, 2006, 
the GOT prohibited the importation of foreign pharmaceutical 
equivalents if the drug was produced locally, preventing 
brand names such as Pfizer from importing certain 
pharmaceutical products (ref D).  While pleased that 
"correlation" has come to an end, Gaddes noted that the 
decision was not retroactive and that drugs placed on the 
banned list prior to decision will continue to be blocked 
from importation.  Gaddes informed Econ/CommercialOff that in 
the days prior to the decision 150 new pharmaceutical 
products, including four Pfizer products, were quickly added 
to the list of correlated products that could not be 
imported.  (Note: Ambassador subsequently raised this issue 
with the Minister of Health (septel).  End Note.) 
 
------------------ 
Export Orientation 
------------------ 
 
¶5. (SBU) Several of the representatives lamented the GOT 
focus on exports and noted that, from an economic policy 
perspective, the emphasis is excessive and counterproductive. 
 In order to encourage exports, companies that export over 70 
percent benefit from a wide range of tax and financial 
incentives, including exemption from certain import duties. 
Crown's Sanderson, exasperated, commented that the focus on 
exports and incentives provided to exporting companies 
adversely affects Tunisian commerce.  From an entrepreneurial 
standpoint, an export-oriented business is the most difficult 
to launch; Tunisian businesses would be more successful if 
they started to produce for the domestic market before trying 
to export.  Sanderson complained of the 43 percent duty he 
had to pay on imported spare parts.  As his EU competitors 
only pay a 7.5 percent duty for the same parts, it is 
difficult for Crown to remain competitive.  Following the 
full implementation of the EU Association Agreement, set for 
2008, EU companies will pay zero duty, creating an even 
larger gap between US and EU companies.  In a telling, but 
frustrating, example of the effect of the excessive stress on 
exportation, Sanderson noted that his company was forced to 
import the safety boots for his factory's employees even as 
EVOL's Managing Director Daniele Fogagnolo revealed that EVOL 
is producing the very same boots for export right in Tunisia. 
 
 
---------------------- 
Still Happy in Tunisia 
---------------------- 
 
¶6. (U) Despite the regulatory headaches, most representatives 
indicated that their businesses were doing well and that they 
were satisfied to have chosen to do business in Tunisia. 
Even after the recent security-related incidents on December 
23 and January 3 (ref C), all of the representatives 
expressed that they continue to feel safe in Tunisia. 
Although the companies complained about the slow pace of GOT 
economic reforms, those present believed that the climate for 
business in Tunisia was generally improving.  They expressed 
the belief that the higher levels of the GOT, and Minister 
for Development and International Cooperation (MDIC) Jouini 
in particular, understand what reforms need to take place; it 
is the lower level bureaucrats that fail to see the bigger 
 
TUNIS 00000120  003 OF 003 
 
 
picture. 
 
------- 
Comment 
------- 
 
¶7. (SBU) The opinions expressed by the US company 
representatives echo complaints made by other foreign 
companies and even by Tunisian business people.  Excessive, 
and sometimes confusing, GOT commercial regulations hamper 
not only American investment, but Tunisian entrepreneurship 
as well.  Similarly, poor telecommunications infrastructure 
serves as a drag on the Tunisian economy as a whole, which is 
surprising given the strong emphasis on ICT sector 
development by the GOT.  Although the entry of a second 
mobile operator and the partial privatization of Tunisie 
Telecom (ref E) have had a moderately positive impact on 
Tunisie Telecom operations, the plans to privatize the 
remaining 65 percent stake of Tunisie Telecom and license a 
second fixed line carrier (ref A) would be welcome steps to 
spur upgrades to Tunisia's telecom infrastructure.  Yet, as 
the representatives noted, the problem is not that the GOT 
does not understand what reforms are necessary, but that the 
GOT appears to be in no rush to implement them.  Ambassador 
has raised US firms' concerns with the Minister for 
Development and International Cooperation Jouini (ref B) and 
Minister for Communications Technology Ouaili (ref A) and 
will continue to raise these issues with GOT officials as 
appropriate.  End Comment. 
GODEC