Tunisia: Looking for FDI | Global finance magazine

Tunisia offers opportunities for foreign direct investors, but it may be better to wait.


Location: North Africa

Neighbors: Liberia, Algeria

Capital city: Tunisia

People (2022): 12,021,590

Official language: Arab

GDP per capita (2020): $3,521.60

GDP growth (2020): -9.2%

Inflation (2020): 2.4%


Strong interest in attracting FDI

Trade agreements with the EU and much of Africa

Good infrastructure, including ports and airports


Major bureaucratic barriers to investment

Several sectors closed to foreign investment or subject to limits

The informal sector represents between 40% and 60% of the economy, which means higher costs and lower revenues for legal businesses

Sources: Africa Manager, Al Arabiya News, Al Jazeera, France24, Government of Canada Travel Advisory, International Monetary Fund, Middle East Eye, Middle East Monitor, Middle East Online, Reuters, Transparency International, US Department of State, World Bank, World Population Review

For more information see Global financeTunisia Economic Report data page.

Even before Covid, indecisive policymaking and protectionism were draining Tunisia’s economy, according to the World Bank. The pandemic, combined with social, political and labor upheavals, has dampened foreign direct investment (FDI) inflows. As a result, FDI fell by 23% to $652 million in 2020 from $845 million in 2019, as recorded by the United Nations Conference on Trade and Development.

In addition to other problems, the closure of Parliament in July 2021 had other consequences. Fitch Ratings lowered the country’s long-term currency rating from B- to CCC, citing liquidity risks and delays in reaching a loan agreement with the International Monetary Fund (IMF). Tunisia has been excluded from international capital markets since 2019.

Today, FDI has become even more critical, according to Keren Uziyel, analyst and country risk manager for the Middle East and North Africa at the Economist Intelligence Unit. “FDI would certainly help external finance and the private sector,” she says.

Rich in skills and resources

Tunisia is rich in natural resources and has a skilled workforce, according to Kaouther Bouzamitta, director of common law studies and legal monitoring at the Central Bank of Tunisia. It also highlights Tunisia’s proximity to the European market and the country’s association agreement with the EU.

Ironically, the pandemic could lead to an increase in FDI from neighboring countries. “The disruption caused by the pandemic has influenced the decisions of multinationals to reorganize the geographical and sectoral distribution of their production activities, generating new opportunities for Tunisia,” explains Bouzamitta.

Also, the restructuring of investment regulations in 2017 encouraged investment, says Sarra Ben Khelil, Tunisia researcher at the University of Ottawa. Tunisia’s new legal framework for investments has reduced taxes and eased hiring restrictions for new businesses. If a foreign company invests in Tunisia, it can employ 30% of its foreign workforce during the first three years. “But then that number drops to 10% after three years,” she says.

The benefits have attracted a wide range of foreign companies. Among them: consulting firms KPMG and Deloitte, hoteliers like Four Seasons and Movenpick, banks like Citi and BNP Paribas and fast food chains McDonald’s and KFC.

The benefits have also led to a sea change in retail. “Until five years ago, we didn’t have the concept of a shopping center,” recalls Ben Khelil. “Now new malls are opening regularly.”

The upsides notwithstanding, the Tunisian economy presents an equally long list of risks. Social unrest looks set to continue due to rising costs; the general dissatisfaction is attributable to the discrepancy between the promises of the Arab spring of 2011 and the current reality. In addition, the high unemployment rate has led to a brain drain of highly qualified professionals.

Taken together, these factors produce a mixed and cautious outlook for investors. Tourism projects could be suspended for the time being. “With the tough economic situation and potential social unrest around the need for fiscal tightening to get IMF support, I think you’ll see a resurgence in industrial action,” said EIU’s Uziyel. However, energy and hydrocarbon projects would be more feasible.

Last column

This story represents the latest frontier market report from our longtime columnist Al Emid, who died in Toronto at the end of April after a short hospital stay. A seasoned business and finance writer with a solid understanding of financial markets, Al also offered a nuanced and knowledgeable perspective on the Middle East in addition to developing countries. Fearless and energetic, he has published several books and has worked on radio and podcasts as well as in print media. Her creative and versatile mind was always juggling several projects. Al had, as he liked to say, “done the trick”. He had contacts all over the world and often recommended other writers, many of whom remain trusted regular contributors.

We will all miss him for his insightful reporting and commentary.