The private investment sector has been one of the Youssef Chahed government’s most significant wagers over the past four years. From the Tunisia 2020 international investment conference held on 30 November 2016 to Tunisia’s investment conference in June 2020, the government has harnessed its publicity capacities to promote the country as an alluring destination for local and foreign private investment. Hence, Parliament became a workshop for accumulating legislations that were drafted as the International Monetary Fund (IMF) requested and that it thought could pave the way for attracting investments. However, the hearing with the Central Bank’s governor in early February 2020 exposed the reality of private investment in Tunisia, which has witnessed negative growth rates throughout the past period. From another angle, agriculture – which has been basically absent from MPs’ thought and legislative agenda – appeared as one of the most important sectors encompassed by the negotiations between Tunisia and the European Union over the Deep and Comprehensive Free Trade Agreement (DCFTA). Chahed’s government would have rushed to sign this agreement had farmers not awakened and organized a series of protests in 2018 and 2019 against this partnership, which threatened to destroy Tunisians’ remaining capacity to produce their own food.

 

New Legislations to Encourage Investment or Obtain Loans?

Excluding the finance laws, the law on re-regulating competition and prices was the first of the important economic bills that Parliament debated. The bill replaced the 1991 law without making significant changes to its major principles. Parliament inherited this bill from the National Constituent Council, to which Ali Larayedh’s government had submitted it in summer 2013. According to the report of the committee on agriculture and commerce, which debated the bill, the reason for taking it out of the drawer and expediting its approval was not only “national necessity” but also “to comply with reforms demanded by international donors”.[1]

The bill on competition and prices was not an exception as in September 2016, Parliament approved the investment law, the bill for which was submitted by Habib Essid’s government. This law abrogated the 1993 Investment Encouragement Code (except for two articles), but it retained the same philosophy based on the state granting financial and fiscal privileges to private persons, whether Tunisian or foreign, who establish enterprises in certain sectors or regions. Its most important addition may be that it opened the door for international arbitration in disputes between foreign investors and the Tunisian state.

The law was approved in an extraordinary session because of pressure from donors: the USA had stipulated that the law be published in the official gazette by 30 September 2016 for it to guarantee the US$500 million bond that Tunisia issued in the global financial market.[2] However, publishing the applicatory orders for this law took much time. The government order that sets the list of activities subject to authorization (as an exception from the freedom of investment principle) was only issued on 11 May 2018, approximately 20 months after the law’s publication.

Similarly, Parliament approved the bill on partnership between the public and private sectors in November 2015 despite the numerous criticisms and caveats surrounding it. Opponents of the law saw the joint ventures as a danger to public funds because of the lack of transparency in these contracts’ procedures. Work on the law had begun in 2011, but the debates over it in the National Constituent Council broke down, only to be resumed later in Parliament. The law was then approved in November 2015 under pressure from international donors: the Tunisian government had committed to approving the law before the end of 2015 in order to receive the remaining installment of the loan from the IMF, which had repeated this stipulation on multiple occasions and lamented the delay of Parliament’s Finance Committee in debating it.[3]

The law on partnership between the public and private sectors was promoted as a key impetus for investment, especially in infrastructure projects. It was portrayed as a solution to which there is no alternative amid an economic situation that discourages private persons from taking the risk of establishing enterprises and the ongoing public financial crisis that had reduced the state’s public investment capacity. However, more than four years after the law’s approval, no contracts have been concluded, and most tenders published fall under the framework of concessions regulated by the 2008 law, not the public sector-private sector partnership law.[4]

In April 2016, under the framework of “improving the business climate”, Parliament approved the collective procedures law. This law replaced the law on recovering businesses experiencing economic difficulties issued in 1995, which had led to “lengthy recovery procedures and debtors delaying payment of their loans to banks and leasing companies”.[5]

Several years after the issuance of the investment law and the public sector-private sector partnership law, the legislature amended them via the law on improving the investment climate, known as the “Horizontal Law” because it amended no less than 16 legislations, including the Commercial Code, the Commercial Companies Codes, and the law on concessions. This law aims, in particular, to ease the administrative procedures for establishing private enterprises. However, when Parliament debated it, it stirred controversy because the government’s draft opened the door for foreigners to own agricultural lands and encouraged foreigners to invest in the private higher education sector. Consequently, the MPs on the committee removed these two articles. The choice of parliamentary committee to debate the bill also stirred controversy: Parliament’s bureau assigned it to the committee on agriculture and commerce, but the finance committee (headed by the opposition) argued that the bill falls within its competence because it amends laws that had previously passed through this committee, such as the investment law and the public sector-private sector partnership law.[6]

The same logic of encouraging investment was adopted in the law known as the “Startup Act”, which Parliament approved in April 2018. This law granted significant financial and fiscal privileges to startups and people who establish and invest in them. The “startup” label, which grants access to these privileges, is afforded by a technical committee in the ministry charged with digital economy whose members mostly come from the private sector.[7] According to the ministry’s website on this subject, 192 businesses had obtained this label by December 2019.

 

A New Investment Law with Recycled Content and Development Orientations

The new investment law and its appendices did not establish a philosophy that differs from the general approach that the government in Tunisia had adopted in this area since at least the 1990s. This approach is based primarily on increasing the state’s generosity in terms of tax privileges and exemptions for private and foreign investors and placing the tax pressure onto employees and wage workers. Similarly, the regional development policy remained coupled with superficial incentives to invest in the Tunisian interior without effective intervention from the state to improve the investment climate in those regions by improving infrastructures or developing the workforce and competencies. This approach was very evident in the Tunisia 2020 international investment conference, held on 29 and 30 November 2016, which was the culmination of the effort to approve the investment bill and an attempt to sketch the major investment projects during the following four years and send messages to international donors and foreign investors.

At that time, in the presence of 70 countries and 4,500 participants ranging from businessmen to representatives of international companies and organizations, Prime Minister Youssef Chahed[8] announced the mobilization of TND67 billion and 145 investment projects. However, these glowing numbers concealed the traditional and archaic aspect of the political and economic mentality dominating the government: the statistics accompanying the conference report[9] show that of the 145 investment projects, 75% would be directed at the country’s eastern segment, while the interior regions’ share was no more than 25%. This outcome demonstrates that the international investment conference preserved the development policy of the existing economic system and did not seek to break the economic isolation of the country’s western segment, which is in the most need of investments, to mitigate the escalating regional disparity.

Regarding education, health, water, and the environment, the interior regions with the worst development indicators gained only 0% to 20% (in the best case) of the sums allocated for investment in these sectors. As for the sectors with high return in terms of employment, such as industry and tourism, the country’s eastern segment dominated with 90% of the tourism projects and 78% of the industrial projects. Consequently, the investments in the interior regions were limited to preparation works, extending rural roads, and agricultural investments, which the state would undertake with funding from new loans.

 

The Result of the Arsenal of Investment Legislations: Back to Square One

The results of the series of new legislations and amendments encompassing several legal frameworks regulating private investments issued throughout the past five years did not live up to the government’s wager or the volume of publicity dedicated to them. Central Bank Governor Marouane El Abassi confirmed the negative outcome during the parliamentary hearing on 7 February 2020. He revealed that throughout the past period, the investment indicators have continued to deteriorate while Tunisia’s sovereign credit rating fell. In 2017, the rating fell from Ba3 to B1 with Moody’s, from BB- to B+ with Fitch, and from BB+ to BB with R&I. Fitch and R&I kept the same rating during 2018 while changing the outlook from stable to negative, while Moody’s lowered the rating again and changed the outlook from stable to negative. The report issued by the Tunisian Central Bank on the same date indicated that the percentage that investment constitutes of the GDP fell from 19.9% in 2015 to 18.5% in 2019 while the percentage that institutional savings constitutes of disposable national income receded by 1.9% during the same period, and the annual job creation rate fell by 30% over the past four years.

The negative indicators for the growth of investments encompassed most sectors during the past years. Hence, in 2019 the decline for the manufacturing industries reached 16.9%,[10] particularly in the realm of food industries, which declined 32% in relation to 2018. Moreover, foreign investments in the industrial sector declined by 25.1% in 2019 in relation to the previous year. The crisis extended to the regions encompassed by the positive discrimination principle, where industrial investments declined by 10% over the past years. As for investments in the services sector, their total value fell from TND1.379 billion in 2018 to TND869 million in 2019, a decline of more than 32%.

The shrinkage of investments in the various sectors during the last five years was reflected in the industrial production indicator, which declined by 3.5% between 2018 and 2019 at a faster rate than the fall recorded between 2016 and 2017 (approximately 0.5%), in addition to the decline in the rate of growth of the services sector from 4.5% in 2016 to 2.2% in 2019. The accumulation of these negative indicators was automatically reflected in the growth rate, which declined from 2.4% in 2014 to 1.3% in 2019.

 

Agriculture: Legislative Interventions with Limited Scope … Except for the Law That Farmers Revolted Against

Regarding agriculture, the sector did not seem to be among Parliament’s priorities or part of the government’s reform schemes. Parliament approved a limited number of legislative initiatives presented at times by the government and at other times by MPs. Although these legislations addressed specific problems, they did not bear a comprehensive vision or strategy for advancing the sector. In 2016, Parliament approved the law on rescheduling the debts of tenants of state agricultural lands and a law supplementing Law no. 87 of 1983 on Protecting Agricultural Lands to allow rural lodges and tourist spaces “related to agricultural activity” on those lands. The same year, Parliament also approved an amendment to the basic regulation for common lands to resolve the issues that still obstructed the liquidation of those that remained and thereby introduce them into economic circulation. In 2017, Parliament approved the amendment of Law no. 21 of 1995 on State Agricultural Properties, which was initiated by cooperative farmers from the Meknassy District in Sidi Bouzid Governorate and adopted by a group of MPs, in order to settle the property status of the lands of cooperatives that were dissolved before the 1995 law’s issuance.

In 2018, facing farmers’ complaints about the increasing theft of their machinery, livestock, and crops, Parliament approved the law on increasing farmers’ protection from theft, which added an article to the Penal Code singling out this type of crime with a punishment of up to ten years imprisonment. Similarly, the traffic accident commonly known as the “Cebalet accident”, which killed 12 people, most of them female farmers being transported to their worksite on a truck, prompted Parliament to approve an amendment to the law regulating land transport to include the category of “transporting agricultural workers”.

However, the most important law pertaining to the agricultural sector issued during the past five years is Law no. 25 of 2019 (dated 26 February 2019) on Health Safety of Foodstuffs and Animal Foods. Presented by the Ministry of Health, this law met opposition from the Ministry of Agriculture and from the farmers’ union, which argued that it could cause “the people of the sector to refrain from agricultural production activities” and thereby constituted “a threat to food security”. According to the agriculture committee’s report, this law aims to “adapt national legislation to practices on the international level, especially in Europe given the volume of commercial trade with the European partner”.[11] This legislative text was proposed while Tunisian-European negotiations were continuing over the DCFTA’s draft, before their suspension in summer 2019.

 

Amidst Government Neglect, Food Poverty Becomes a Reality

Despite the dozens of agricultural sector crises during the past five years, the interruption in the supply of a significant number of foodstuffs (such as potato, sugar, and, most recently, milk) to the local market, and the statistical indicators that have been portending for decades that Tunisia could reach a serious food deficit, the problems of the agricultural sector have not been part of the government reform plans.

Over half a century, agriculture’s share of the GDP has shrunk from 24.6% in 1968 to 8.8% in 2018.[12] This process was linked to an official policy based on systematically marginalizing the agricultural sector, excepting it from training programs, and providing scarce support, as well as the inflation of production costs, which peaked during the last five years.

The deepening crisis manifested itself in particular in the statistics published by both the Ministry of Agriculture and the National Institute of Statistics, which reveal that agricultural sector growth has shrunk by 3% during the past four years and investment declarations in the sector have declined by 23.85%. This deterioration was directly reflected in the state balance sheets via the rise of the financial deficit in the food trade balance from TND522.3 million in 2015 to TND1.114 billion in 2019. This was a natural consequence of the increasing prices of basic foodstuff imports such as grain, potato, and sugar, whose values rose by 26.3%, 53.7%, and 14.2%, respectively. As for animal resources, Tunisia’s lost more than 20,000 dairy and beef cattle over the last three years[13] because of smuggling and farmers’ abandonment of their livestock due to the deterioration of their economic conditions, the high cost of feed, and the rising production cost. Consequently, dairy product production had declined nationwide by 15% in 2018 in relation to 2014, and meat production fell by more than 4,000 tons each year between 2014 and 2019.

Facing this catastrophic outcome and statistics[14] warning that the number of Tunisians suffering from undernutrition rose from 500,000 to 600,000 (i.e. 4.9% of the total population) between 2010 and 2017, the Tunisian government, headed by Youssef Chahed, tried to pass the DCFTA with the European Union, which was expanded to encompass the agricultural sector. Farmers understood the disastrous repercussion of this course for the remaining constituents of agricultural production in the country. Hence, the people of the sector began a series of protests. These culminated on 10 April 2019 in a national action in which hundreds of farmers assembled before Parliament and demanded an immediate stop to the negotiations over the agreement, which would put the distressed Tunisian agricultural sector in an unbalanced confrontation with the European giant, whose agriculture had enjoyed approximately ED€362.8 billion of governmental support during the 2014-2020 period. The farmers’ movements and civil society pressure forced the government to suspend the negotiations for the time being and keep the situation as -is: perishing agriculture, land lying fallow, and hunger looming on the horizon.

 

This article is an edited translation from Arabic.

 

Keywords: Tunisia, Agriculture, European Union, DCFTA, Investment Law

 

[1] Parliament, report by the Committee on Agriculture, Food Safety, Commerce, and Related Services on Bill no. 48 of 2013 on Amending and Supplementing Law no. 64 of 1991 (dated 29 July 1991) on Competition and Prices, p. 4.

[2] Yassine Nabli, “Dawra Barlamaniyya Istithna'iyya: Taswiq li-Hukumat al-Shahid wa-Irda' li-l-Muqridin”, Nawaat, 31 August 2016.

[3] Observatoire tunisien de l’économie, “Des projets qui ne décollent pas, Défis à relever et leçons à tirer des partenariats public-privé en Tunisie”, p. 14

[4] Ibid., p. 12 and 20.

[5] Parliament, report by the General Legislation Committee on Bill no. 57 of 2013 on Collective Procedures, April 2016.

[6] Al Bawsala, “al-Taqrir al-Sanawiyy li-Ashghal Majlis Nuwwab al-Sha'b, al-Dawra al-Barlamaniyya al-Khamisa”, p. 14.

[7] According to Governmental Order no. 840 of 2018 (dated 11 October 2018) on Setting the Conditions, Procedures, and Timeframes for Affording and Withdrawing the Startup Label and Benefiting from the Encouragements and Privileges with the Startup Title and Setting the Organization, Powers, and Workflow of the Committee Affording the Startup Label.

[8] Prime Minister Youssef Chahed’s press conference at the conclusion of the Tunisia 2020 cConference for Supporting Investment and the Economy.

[9] Report issued by the Ministry of Development, Investment, and International Cooperation on the official plan of the Tunisia 2020 Cconference for Supporting Investment and the Economy.

[10] Ministry of Industry and Small and Medium Enterprises, Bawwabat al-Sina'a al-Tunisiyya.

[11] Parliament, report by the Committee on Agriculture, Food Safety, Commerce, and Related Services on the bill on health safety of foodstuffs and animal foods, 24 January 2019.

[12] UN Food and Agriculture Organization.

[13] Tunisian Agriculture and Fishing Union (Union tunisienne de l'agriculture et de la pêche).

[14] UN Food and Agriculture Organization.