‘Investing in Tunisia, start-up democracy’ conference

Excellencies,
Distinguished Colleagues,
Ladies and Gentlemen,

I am pleased to be here in Tunisia on behalf of the United Nations system. But I am also honoured to participate in this important Conference in my capacity as the Secretary-General of the United Nations Conference on Trade and Development. Indeed, I am humbled by the role - indirect as it may be - that UNCTAD has played in your transition process. I consider it a strong endorsement of UNCTAD's capacity and expertise that at this historic moment for your country, a senior UNCTAD staff member of Tunisian nationality was requested to leave UNCTAD to become a cabinet member in your transitional government. Your Minister of Foreign of Affairs, His Excellency Mr. Mongi Hamdi, proved his value to UNCTAD in the many years he served the United Nations, and I trust that he is making a valuable contribution to your country now in this important role.

After making such an impressive political transition over the recent years, Tunisia now stands ready to reap the economic benefits. Foreign direct investment will have a key role to play in this regard. As many of you know, one of UNCTAD's main areas of expertise is advising countries on how to leverage foreign direct investment for sustainable and inclusive development.

According to UNCTAD statistics, Tunisia is the third largest holder of FDI stock in North Africa, after Egypt and Morocco. And, it is the largest holder of FDI stock in relation to the size of its economy. Tunisia's $31 billion in FDI stock is equal to 71% of the country's GDP.

However, since the financial crisis and Arab Spring, annual FDI flows have followed a downward trend, reaching $1.1 billion in 2013. European firms ? the main investors in the country -have not only been reluctant to conduct business in a changing environment, but have also had difficulties at home.

Half of FDI inflows in 2012 originated from EU countries, particularly France, Austria and Italy. . However, new investors are also emerging, such as Qatar, which became the largest investor in 2012 with $500 million in FDI to Tunisia that year.

Some changes are also appearing in sectoral trends. Historically, the agricultural sector accounted for the bulk of inward FDI flows in Tunisia. However in 2012, services - mainly telecommunications - accounted for 43% of total inflows. In contrast, the manufacturing share was only 21%.

FDI inflows to Tunisia can support growth, exports, and jobs, and contribute to regional development, as well. Foreign affiliates produce over one-third of all Tunisian exports, and they play an important role in domestic development, providing needed knowledge and technology transfer.

From the point of view of foreign investors, there are substantial reasons to invest more in Tunisia.

Tunisia offers an improving infrastructure, a well-educated workforce, proximity to Europe, tariff-free access for industrial goods to the EU through its Association Agreement and reduced customs duties for exports to the US, Canada, Switzerland and Australia. The Foreign Investment Promotion Agency offers a "one-stop shop" Agency of Industrial Promotion to investors for setting up business.

There are many potential sectors where further FDI can make an important impact on Tunisia's development process.

Tunisia's energy sector will continue to attract significant FDI as exploration for hydrocarbons is at near-record levels and the current hydrocarbon law offers generous incentives. In addition the discovery of gas shale formation might provide new opportunities for foreign investors in this sector.

There is also FDI potential in other sectors. FDI in construction, especially in infrastructure, will increase substantially as the country looks to implement large-scale infrastructure projects, especially in the south and the west of the country.

There will also be substantial inflows into manufacturing, now that Tunisia has secured "advanced partner" status with the EU, through which foreign firms can take advantage of Tunisia's still competitive wages and tariff-free access to markets in the EU.

Services, including offshore services to French-speaking countries, tourism and retailing, will also attract FDI. FDI from the privatization programme can also be expected to pick up.

In 2013, the Government of Tunisia requested UNCTAD's support to draft a new investment law. The objective of reviewing the investment regulatory framework is to create a favourable climate for both domestic and foreign investors.

UNCTAD considers that the adoption of an effective and transparent investment law enhances the capacity of a country to attract investment. And most critically, a well-conceived investment law is also a key element to ensuring that investment indeed promotes sustainable development for the benefit of all.

In this regard, I would like to congratulate the Government of Tunisia for its initiative to review the investment law and for the extensive consultations that are taking place, including with civil society as well as development partners to improve the draft and facilitate its adoption.

When it comes to promoting new democracy to investors, a number of specific issues also arise which can be addressed through research and policy action. For example, a survey of both existing investors and potential ones could help identify what hurdles investors perceive and on that the basis, policy measures can be taken to facilitate procedures and help guide investors through these hurdles.

While investors undoubtedly expressed concern at the initial destabilizing aspects of Tunisia's transition process, the benefits of democracy can be more effectively marketed and demonstrated, for instance through investor buy-in into changes in policies and procedures.

A focus on what the transition has done to further social and economic inclusion with respect to gender, youth, rural communities can also demonstrate the type of stability that attracts investment.

Ladies and Gentlemen,

I would like to reiterate UNCTAD's commitment to continue to support the Government of Tunisia in its effort to ensure that economic policy responds to the needs of the people of Tunisia, and to enable a vibrant environment for private sector development.

Thank you.