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licly held companies, financial sector reform, the attraction of foreign investment, and diversification of the economy. In 1994, Tunisia continued to liberalize its economy.
The United States and Tunisia have two major bilateral treaties affecting trade: a double taxation treaty in which each country has agreed to avoid double taxation on corporations or individuals active in both countries; and a bilateral investment treaty (BIT) dealing with the treatment of American companies in Tunisia, expropriation issues, remittance of profits and international arbitration of disputes.
Fiscal Policy: The 1994 Tunisian government budget provided for 11.4 percent increase in expenditures and 11.4 percent increase in revenues. The deficit was financed through both international and domestic borrowing. Government policy called for an expanding economy to cope with deficit problems, and the trend in recent years is favorable. In 1993, the deficit was USD 364 million, equal to 2.4 percent of GDP; in 1994, it was USD 326 million, 1.9 percent of GDP.
Monetary Policy: The principal objective of the Central Bank remains the effective control of inflation. Between 1987 and 1991 the inflation rate varied from six to eight percent. In 1993, it was 4.5 percent. In 1994, it was only slightly higher at 4.7 percent. This trend is largely the result of the price and import liberalization policies which have encouraged greater international and domestic competition. 2. Exchange Rate Policy
On March 1, Tunisia instituted a foreign currency market, making it possible for individual banks to set currency prices and trade with other banks. Although the Central Bank of Tunisia (BCT) issues a reference rate each day, the majority of Tu. nisian banks bypass the BCT, marginalizing the role of the BCT in foreign currency transactions. Earlier this year, industry sources described a smooth transition to an open currency market. The principal currencies quoted against the Tunisian dinar (TD) are the U.S. dollar, the deutsche mark, and the French franc. The rate has varied considerably over the past 13 years from a high in 1979, when the Tunisian dinar equaled USD 2.47, to a low in 1993, when it equaled USD 0.98. In 1994, the rate average was about TD 1 to USD 1.02. 3. Structural Policies
In the mid-1980s, Tunisia faced rising unemployment, stagnant economic growth, and dwindling foreign exchange reserves. The domestic economy was protected and inefficient, and the government ran unsustainable budgetary deficits. A severe balance of payments crisis in 1986 finally prompted the government to undertake structural reforms sanctioned by the International Monetary Fund (IMF) and the World Bank. To date, those reforms have enjoyed significant success, and the Tunisian government plans further reform, especially in privatizing still numerous statecontrolled enterprises.
Tax Policies: Import regulations were loosened considerably this year. Fully 90 percent of the products on the import list can now be imported freely as compared to 23 percent in 1986. Customs tariffs on imports of capital goods were cut considerably. Tunisia decreased the maximum customs tariff almost 80 percent by 1991. Total taxes on imported goods have not decreased at the same rate because a value added tax (VAT), introduced in 1988, is equally applied to imports and local products.
The only taxes significantly effecting U.S. exports to Tunisia are import tariffs. Through the structural adjustment program, Tunisia reduced the maximum basic tariff to 43 percent. However, when faced with dwindling revenues because of the adverse economic impacts of the Gulf War, the government imposed a "temporary" five percent surcharge on all merchandise imports. Although the government planned to end the surcharge December 31, 1991, it was extended through 1992. Despite repeated assurances during 1992 and 1993 that the surcharge would be terminated, it still remained in effect during 1994.
In addition, Tunisia imposed a system of custom duty increases for the period 1992 through 1994 on certain items which compete with locally produced goods. Prior to this action, the maximum basic customs duty was 43 percent. The new policy authorized an additional duty of 30 percent in 1992, reduced to 20 percent in 1993, 10 percent in 1994, and eliminated by 1995. By 1995, the average tariff rate is expected to decline to 25 percent.
Tunisia acceded to full GATT membership in 1990. All taxes now remaining on imports also apply to locally produced goods and are not considered to be tariff barriers. The only additional minor charge on imports is a very small customs user fee of USD 4.08 per declaration. However, in 1993 Tunisia revised its list of tariff concessions by modifying the tariff or provisional compensatory duty on nearly 280 items. According to the government, the action was taken to protect the competitive.
ness of certain domestic industries, and the Tunisian GATT representative expressed willingness to enter into GATT Article XXVIII and XIX negotiations as appropriate concerning these changes.
Investment Policy: Tunisia's Unified Investment Code, effective since January 1, 1994, replaced five former codes. The Code is intended to simplify investment and direct it into high priority industries. The financial services, mining and energy industries are considered unique, and are covered by existing legislation.
The new code applies to both domestic and foreign investors with two exceptions. Foreign investors may only lease agricultural land and any enterprise with foreign ownership of over 50 percent must receive government approval for investment. Under the new code, potential investors do not need prior government approval. They will receive a tax exemption on 35 percent of reinvested profits and income. The customs duty on imported capital goods is reduced to 10 percent. Purchases of capital goods are exempt from the value added tax (VAT) and the consumption tax. Finally, investors may use an accelerated depreciation schedule for long-term capital.
In addition, businesses producing solely for export have special benefits. They may claim a 10 year tax exemption on 100 percent of income and profits, reduced to 50 percent of income and profits after 10 years. Exporting businesses may import all needed materials, and may sell up to 20 percent of their production on the domestic market without losing their status as an exporter. Finally, these companies may employ four foreign executives without prior government approval.
Regulatory Policies: Production standards are not a major obstacle for foreign in. vestors. The quality of goods manufactured solely for export is often superior to items produced for the local market. The Tunisian Office for Commercial Expansion (OFFITEC) carries out quality control procedures on items for export. Imported and exported food items are subject to sanitation and health controls. 4. Debt Management
In 1994, total public debt service increased by 17.7 percent. External debt service increased by 19.4 percent while service on internal public debt increased by 15.7 percent. This increase stems principally from the devaluation of the Tunisian dinar in 1993.
ximately 73 percent of the country's foreign debt is in U.S. dollars or dollar-linked currencies and the dinar fell 25 percent against the U.S. dollar between September 1992 and September 1993. The USD 1.64 billion dollar debt serv. ice payment constitutes 27 percent of the government budget. Debt service as a per. centage of exports of goods an services is approximately 21 percent.
The Central Bank closely monitors the level of external debt and tries to keep it as low as possible. One indication of Tunisia's prudent overall debt management pol. icy is that Tunisia has never rescheduled any of its debt. The deficit is financed through concessionary lines of credit from its major trading partners, and loans from official multilateral creditors such as the World Bank and the African Development Bank. The Central Bank has also moved toward more sophisticated debt portfolio management by aligning debt service payment dates with anticipated receipts from sectors characterized by seasonal variation (e.g., tourism), and by aligning debt service payments with the currencies of anticipated export receipts. 5. Significant Barriers to U.S. Exports
There are no significant barriers to U.S. exports in Tunisia and the United States enjoys a traditional bilateral trade surplus.
Historical and geographical factors have given Tunisia a special relationship with Europe. It has bilateral trade agreements with all of its major European trading partners, France, Germany and Italy being the largest. Tunisia also frequently adopts European product standards, a policy that works to the disadvantage of U.S. exporters.
The 1992 Helsinki Accord among OECD countries limited their concessional aid financing. However, France, Italy and others maintain credit facilities to promote exports of their products. In addition, EXIM Bank financing is available for government sales. Exporters to private concerns may be able to take advantage of a new Citibank credit facility.
Tunisia's leading supplier in 1993 was France (USD 1.6 billion), followed by Italy, (USD 1.15 billion), and Germany (USD 821 million). The United States was in fourth place with USD 303 million in exports. Agricultural products (much of it fic nanced by U.S. aid and export credit programs) accounted for one-third of U.S. exports to Tunisia in 1993.
There exist real possibilities for increasing the level of U.S. exports to Tunisia in areas such as environmental services, construction equipment, telecommunications, and packaging machinery and equipment.
6. Export Subsidies Policy
Tunisia has a wide range of export subsidy policies, including a special Export Promotion Fund (FOPRODEX). FOPRODEX provides preferential financing and funding to improve the productivity and competitiveness of companies producing for export. Only companies legally incorporated in Tunisia are eligible for these subsidies: these can receive transport subsidies of 50 percent for air freight and 33 per. cent for sea freight. There is also a government agency to promote exports, the Export Promotion Center (CEPEX), and a program providing long-term financing for exports of capital goods and durable consumer goods. 7. Protection of U.S. Intellectual Property
Tunisia is a member of the World Intellectual Property Organization (WIPO) and a signatory of the Universal Copyright Convention, the Paris Convention for the Protection of Industrial Property, and the Berne Convention for the Protection of Literary and Artistic Works.
The Tunisian National Institute of Standardization and Industry (INNORPI) proc. esses and grants patents, trademarks and registration of designs. It also regulates standardization, product quality, weights and measures and the protection of industrial property. Foreign patents and trademarks
are registered with INNORPI. There are no active cases of intellectual property rights disputes with Tunisia. However, the unauthorized use of foreign trademarks, especially in cheap copies of clothing and sporting goods, continues to be a problem as does the unauthorized du. plication of music and video cassettes. 8. Worker Rights
a. Right of Association.—The Tunisian constitution and the labor code stipulate the right of workers to form unions. The Central Labor Federation, the Tunisian General Federation of Labor (UGTT), claims about 15 percent of the work force as members, including civil servants and employees of state-owned enterprises. The UGTT and its member unions are legally independent of the government, the ruling party and other political forces but operate under government regulations which have to some extent restricted their freedom of action. The UGTT's membership includes persons associated with all political tendencies, though a campaign against Islamists was effective in removing Fundamentalist holding union offices. The current leadership follows a policy of cooperation with the government and its structural adjustment program. There are credible reports that the UGTT receives substantial subsidies from the government to supplement the modest officially-mandated monthly contributions from UGTT members and funding from the national social security account.
Dissolution of a union requires action by the courts. There is no requirement for a single trade union structure; the fact that Tunisia has a single labor organization (the UGTT) is a result of historical circumstances, not government action. However, establishment of a rival labor union would require government authorization. The government has decreed that UGTT member federations are the labor negotiators for collective bargaining agreements that cover 80 percent of the private sector work force, whether unionized or not.
Unions, including those of civil servants, have the right to strike, provided 10 days' advance notice is given and the UGTT approves. However, these restrictions on strikes are rarely observed in practice. In recent years, the majority of strikes were illegal because they were not approved in advance. In 1993, there were 68 legal strikes and 445 illegal strikes. The government did not prosecute workers involved in illegal strike activity. Tunisian law prohibits retribution against strikers, but some employers punish strikers who are then forced to pursue costly and timeconsuming legal remedies to protect their rights. Labor disputes are settled through conciliation panels on which labor and management are equally represented. The 1994 labor code reform set up tripartite regional arbitration commissions, which settle industrial disputes when conciliation fails, to replace the former single arbiter system.
The 1994 report of the International Labor Organization's (ILO) Committee of Experts (COE) mentioned possible government violations of ILO Convention 29 on forced labor, but noted the stated intention of the President to abolish the penalty of “rehabilitation through work” on state work sites.
Unions in Tunisia are free to join federations and international bodies. The UGTT is a member of the International Confederation of Free Trade Unions (ICFTU) and various regional groupings.
b. The Right to Organize and Bargain Collectively. The right to organize and bargain collectively is protected by law and practiced throughout the country. Wages and working conditions in Tunisia are set through negotiation by the UGTT member federations and employer representatives of approximately 47 collective bargaining agreements which set standards applicable to entire industries in the private sector. The UGTT is by law the labor negotiator for these agreements, which cover 80 percent of the private sector work force, whether unionized or not. The government's role in concluding these agreements is minimal, consisting mainly of lending, its good offices if talks appear to be stalled. The government must approve the collective bargaining agreements (although it cannot modify them) and publish them in the official journal before these agreements acquire legal validity, No agreement between a union and an individual firm may be concluded unless there already exists an agreement applicable to that firm's economic sector.
The UGTT also negotiates with various ministeries and 208 state-run enterprises on behalf of public sector employees. By 1994, the UGTT had concluded three-year public and private sector collective bargaining agreements calling for an average 5 percent annual wage increase.
Anti-union discrimination by employers against union members and organizers is prohibited by law, and there are mechanisms for resolving such disputes. However, the UGTT has complained about what it claims are increasingly vigorous anti-union activities by private sector employers, particularly the firing of union activists and, as a pretext to avoid unionization, employers' use of temporary workers, which in certain factories, especially in the textile sector, account for up to 80 percent of the work force. The labor code extends the same worker rights protection to temporary workers as to permanent workers, but its enforcement in the case of the temporary workers is much more difficult. A 1994 labor code revision called for the creation of a tribunal to hear cases involving alleged unjustified firing of workers. Compensa. tion floor and ceiling levels were set.
Two export processing zones, authorized by a 1992 law, have not yet begun oper. ations. Workers in other export firms have the same right to organize, bargain col. lectively, and strike as those in non-export firms. The unionization rate is about the same. The state pays the employer contribution to the social security system if the firm produces primarily for export.
c. Prohibition of Forced or Compulsory Labor.-Compulsory labor is not specifically prohibited by local law, but there have been no reports of its practice in recent years.
Minimum Age of Employment of Children.-For manufacturing, the minimum agę for employment is 15 years; in agriculture it is 13. Tunisian children are required to attend school until age 16. Over 2.1 million children enrolled in Tunisian schools in fall 1994. Inspectors from the Social Affairs Ministry check the records of employees to verify that the employer complies with the minimum age law. De. spite this law, young children often perform agricultural work in rural areas and sell food and other items in urban areas. UGIT officials report that small enterprises in the informal sector (street vendors, day laborers, etc.) violate the concern that child labor-frequently disguised as apprenticeship-still exists, principally in the traditional craft sectors such as ceramics and stone carving. Young girls from rural areas are sometimes placed as domestics in urban homes by their fathers, with the fathers collecting their children's wages. Workers between the ages of 14 and 18 are prohibited from working from 10 p.m. to 6 a.m. Children over 14 may work a maximum of 4.5 hours a day. The combination of school and work may not exceed 7 hours.
e. Acceptable Conditions of Work.—The labor code provides for a range of administratively determined minimum wages. An agricultural and industrial minimum wage increase in August kept pace with the rise in the cost of living. When supple. mented by transportation and family allowances, the minimum wage covers essential costs for a worker and his family. Effective August, 1994, the minimum monthly industrial wage is roughly USD 130 (129 TD) for a 40-hour work week and USD 147 for a 48-hour week. The minimum agricultural wage was set at nearly USD 4.50 per day.
Tunisia's labor code sets a standard 48-hour workweek for most sectors and requires one 24-hour rest period. The workweek is 40 hours for those employed in the energy, transportation, petrochemical and metallurgy sectors.
Regional labor inspectors are responsible for enforcing standards. Most firms are inspected about once every two years. However, the government often encounters difficulty in enforcing the minimum wage law, particularly in non-unionized sectors of the economy. Moreover, according to a 1992 UGTT study, there are approximately 240,000 workers employed in the informal sector, which falls outside the purview of labor legislation.
The Social Affairs Ministry has an office with responsibility for improving health and safety standards in the work place. There are special government regulations covering many hazardous jobs-e.g. mining, petroleum engineering, and construction. Although the ministry maintains offices throughout the country, these regulations are enforced more strictly in Tunis than in other regions, where much work, especially in construction, is performed in the informal sector. Working conditions and standards tend to be better in firms that are export-oriented than in those producing for the domestic market. Occupational safety improved considerably in 1993. Reported work place accidents declined 17 percent to 30,645, perhaps due to an intensive public awareness campaign in the media. Workers are free to remove themselves from dangerous situations without jeopardizing their employment, and then may take legal action against employers who retaliate for exercising their right. 9. Extent of U.S. Investment in Goods Producing Sectors
U.S. investment in Tunisia is growing, but an accurate sectoral breakdown is unavailable. Currently, total U.S. investment in Tunisia is an estimated USD 50 million. The majority is invested in the petroleum sector, but U.S. corporations are increasing investment in other areas including telecommunications and pharmaceuticals.
UNITED ARAB EMIRATES
Key Economic Indicators
Income, Production and Employment:
Real GDP (1985 prices)
Retail Trade Restaurants/Hotels
Household Domestic Services
Exchange Rate (USD/dirham)
Exports to U.S. Total Imports
Imports from U.S.
782 3,029 3,547 1,953 1,752 2,228
798 - 730 3,917
163 3,043 17.63 769.30
806 3,154 3,645 2,013 1,814 2,310
847 -781 4,053
183 17.22 794.40
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