VZCZCXYZ0002
PP RUEHWEB

DE RUEHTU #1286/01 2640644
ZNR UUUUU ZZH
P 210644Z SEP 07
FM AMEMBASSY TUNIS
TO RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 3899
INFO RUCNMGH/MAGHREB COLLECTIVE PRIORITY
RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0928

UNCLAS TUNIS 001286 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB (DIBBLE), NEA/MAG (HOPKINS AND HARRIS) 
STATE PASS USTR (BURKHEAD) 
USDOC FOR (VINEYARD AND MASON), ADVOCACY CTR (JAMES), 
USDOC PASS USPTO (ADAMS, BROWN AND MARSHALL) 
CAIRO FOR FINANCIAL ATTACHE (SEVERENS) 
LONDON AND PARIS FOR NEA WATCHER 
EB/CBA (WINSTEAD), EB/TRA/AN(FINSTON), 
CASABLANCA FOR FCS (ORTIZ) 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD TS
SUBJECT: TUNISIA: US BUSINESSES BRIEF ECONOMIC DELEGATION 
ON BUSINESS CLIMATE 
 
REF: A. TUNIS 1249 
     ¶B. TUNIS 1261 
 
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Summary 
------- 
 
¶1. (SBU)  During the September 9-12 visit of an interagency 
business delegation (reftels), EEB PDAS Dibble met with 
representatives from a cross-section of US businesses 
currently operating in Tunisia to discuss the business 
climate in general and the issues that impede their 
operations.  PDAS Dibble gave an  overview of the 
delegation's meetings with the GOT and the unique nature of 
this delegation.  She indicated that the primary purpose of 
this visit was to push the GOT for improvements in the 
investment climate and to discuss the way forward in the 
US/Tunisia bilateral economic relationship.  Department of 
Commerce DAS Holly Vineyard outlined the IPR points that were 
presented to GOT representatives from all relevant ministries 
attending the delegation's meeting with the Minister of 
Development and International Cooperation.  USTR Director for 
European and Middle Eastern Trade Affairs, Paul Burkhead 
outlined the Trade Investment Framework Agreement (TIFA) and 
the USG's objective of an eventual Free Trade Agreement (FTA) 
between the United States and Tunisia.  US companies said 
that Tunisia is a central location for entering other 
markets, but bureaucracy and lack of transparency hinder 
their expansion.  End Summary. 
 
----------------------------- 
What Tunisia has Going for It 
----------------------------- 
 
¶2. (SBU)  Nearly all of the US business representatives 
agreed that Tunisia is an attractive base from which to 
target and serve the Mahgreb, European, and Sub-Saharan 
African markets.  They emphasized that the business climate 
is improving and the mobility and quality and talent of 
available human resources is above average.  Tunisian 
employees are highly educated and interested in learning new 
technologies.  The US IT firms represented opined that 
Tunisian interest in new technologies presents an opportunity 
to sell and to install the latest technologies.  Business 
representatives also said that the comparatively favorable 
cost of labor also makes Tunisia an attractive venue for 
investment. 
 
-------------------------------- 
Frustrating Impediments to Trade 
-------------------------------- 
 
¶3. (SBU)  While Tunisia has many good qualities, it is the 
domestic impediments to operating a business in Tunisia that 
have some US businesspeople thinking twice about investing in 
or expanding their investment in Tunisia.  Issues raised 
included a lack of transparency and predictability, lack of 
access to the local market, GOT procurement laws, limits on 
the number of expatriate employees permitted in country, visa 
issues, the slowness and arbitrarily high price of internet 
service, and the language barrier. 
 
------------------------------- 
Transparency and Predictability 
------------------------------- 
 
¶4. (U)  Company representatives explained that GOT 
decision-making is extremely slow and there is no central 
contact for a company to approach and receive a definitive 
answer to their particular concerns.  Information on upcoming 
projects or tenders is also difficult to obtain and major 
projects are often pre-awarded before a tender becomes 
public.  One US representative stated that the lack of 
predictability affected his ability to do long-term business 
planning/forecasting.  Participants noted that, because US 
businesses forecast based on risk, the lack of predictability 
in Tunisia makes them more reticent to invest. 
 
--------------------------------------------- ------------- 
Access to the Local Market & Government Procurement Policy 
 
 
--------------------------------------------- ------------- 
 
¶5. (U)  In general, the GOT seldom permits foreign businesses 
to compete on the local market but instead encourages FDI in 
the off-shore and manufacturing for export sectors.  US 
companies told PDAS Dibble that establishing a subsidiary 
branch in Tunisia is not cost-effective unless they are 
allowed to compete on the local market.  There are several US 
companies who have been authorized to compete on the local 
market.  They admitted that it was neither easy nor quick to 
obtain such permission, but indicated that GOT ministers are 
open to hearing about specific proposals.  Further, if a 
company can demonstrate the benefits of its 
projects/products, the relevant ministers can obtain 
authorizations to compete on the local market.  Several of 
the high tech companies said that the product registration 
and certification process is extremely long and must be 
conducted for each reseller.  In order to simplify this 
process, they would like to see a homologation law passed 
which would authorize registration and certification on a per 
product basis. 
 
¶6. (SBU)  Companies also complained that the GOT government 
procurement law and policy, which is based on lowest price 
rather than best quality, excludes them from competing in the 
marketplace.  A Prime Ministry commission controls 
procurement and, instead of requiring that a product meet 
certain specifications or technical standards, its requests 
for proposals (RFPs) always go for the lowest priced product. 
 US companies selling quality products cannot compete on a 
price basis.  Microsoft gave the example of PC procurement, 
in which the GOT procurement commission does not specify an 
operating system in their RFPs.  This results in the PCs 
being shipped with the Linux,s open source operating system, 
which does not support Microsoft software.  The Microsoft 
representative argued that this has encouraged piracy and 
resulted in GOT PCs using pirated Microsoft software.  She 
continued that the fact that the EU Commission and the 
African Development Bank accept these GOT procurement laws 
only encourages the GOT to maintain government procurement on 
a lowest cost basis. 
 
----------------------- 
Authorized Expatriates 
----------------------- 
 
¶7. (SBU)  Tunisian law currently allows foreign companies to 
obtain visas for only four expatriate employees at any given 
time, but companies report that this number can be increased 
on a case-by-case basis.  (Note:  GOT officials had indicated 
to EmbOffs last year that the law was going to be updated to 
allow 10 expatriates per company, but this has not yet been 
implemented.  End Note.)  This limitation on expatriates is a 
problem for US companies particularly when they are initially 
starting up their operations in Tunisia.  For example, 
Parsons Corporation, a major US engineering firm currently 
considering investing in Tunisia, said that this restriction 
would present a problem.  The Parsons representative argued 
that his company has a quality product to deliver and an 
excellent reputation to maintain.  Thus, if it were to invest 
in Tunisia, Parsons would need to bring in a minimum of 12 
expatriate Parsons engineers per project.  The GOT has told 
Parsons that the number of expatriates allowed is negotiable, 
but the company would prefer that the law be repealed, so 
that there would be not uncertainty.  Most US companies 
present concurred.  Similarly, US companies mentioned that 
their ability to provide quality services to their clients 
was impeded by the difficulty some of their expatriate staff 
face in obtaining visas to enter Tunisia on a temporary basis 
in order to train Tunisian employees or to provide expertise 
on a particular project. 
 
--------------- 
Internet Access 
--------------- 
 
¶8. (U)  US companies said that 95 percent of business today 
is conducted over the Internet.  Thus, reliable and 
cost-effective Internet access was paramount to their 
success.  Most of the companies present at the roundtable 
 
complained about the slow speed of Internet connections in 
Tunisia and the high cost of dedicated leased lines between 
two points.  Another issue related to Internet access was 
GOT's encryption requirement that all encryption keys must be 
provided to the National Digital Encryption Agency (ANCE). 
Providing such information was described as a nonstarter by 
US companies providing services where protection of fiscal or 
personal data was critical.  While most companies indicated 
that they could find ways around this requirement, they 
nonetheless argued that the encryption key requirement should 
be abolished. 
 
-------- 
Language 
-------- 
 
¶9. (U)  Several participants raised English language 
capabilities of the Tunisian work force as an important 
factor when considering whether to set up business operations 
in Tunisia.  Acknowledging that most US company executives 
are not multi-lingual and conduct business in English, all 
companies said that English language capability was a 
necessary element to allow the Tunisian subsidiary management 
to effectively communicate with its employees and with its US 
headquarters.  Several Tunisian nationals representing US 
companies noted, however, that the GOT recognizes the 
importance of English and has made efforts to address this 
issue.  They pointed out that Tunisian schools now encourage 
English language study from the primary to the university 
level. 
 
------- 
Comment 
------- 
 
¶10. (SBU)  Although the business roundtable was a late 
addition to the economic delegation,s program, it proved to 
be an excellent opportunity for all.  Members of the 
delegation were able to learn first-hand about the benefits 
achieved and drawbacks faced by US businesses in Tunisia.  At 
the same time, US businesses were able to learn about USG 
advocacy for an improved business climate in Tunisia.  The 
general consensus drawn from this discussion seems to be that 
despite the shortcomings, US companies investing in Tunisia 
have made the right decision.  End Comment. 
 
¶11. (SBU) This cable has been cleared by EEB/PDAS Dibble. 
GODEC