Labour and Foreign Investment

Manufacturing, Labour and Foreign Investment in Tunisia

December 28, 2015

Primary Contributors: Cady Bush & Derek Hooper

Team Leader: Sabrine Elejel

Key Words: Tunisia, manufacturing, foreign investment, labour

Tunisia is home to a diverse economy, and the manufacturing sector in particular has been on the rise in recent years. Between 2000-07, manufacturing comprised 29% of the GDP, which is almost double what it was in the 1980s, where it sat at just 15%. More specifically, the production of textiles should be highlighted. Textiles (as well as leather and clothing production) are critical in Tunisia’s export industry, making up over a third of the total exports to foreign partners. Moreover, the textile industry is for job creation, and along with the agro-food and mechanical/electrical industries, comprise 83% of jobs within the private sector. Though Tunisia is not without its economic challenges, its manufacturing industry remains a bright prospect for future growth and investment.

Investment in Tunisia has been particularly problematic since the start of the Arab Spring in 2011. The way Tunisia is represented within the media makes it difficult for foreign investors to see how the benefits would outweigh the risk on investment. The Tunisian goal is to show that the country is not overrun with violence and instability, however in 2013 Foreign Direct Investment decreased by 41% regardless of these attempts. The issue remains in government intervention as potential investors are worried about the potential negative effects on their ability to invest and profit. As it stands, the government caps foreign investment and investors cannot own any land within the country making them think twice about choosing Tunisia.   

Currently, Tunisia is a member of the North Africa Partnership for Economic Opportunity made up of American and North African business leaders, entrepreneurs and civil leaders who attempt to foster job creation and investment. With the US being actively involved the agenda is moving in the direction of opening a freer market. Slowly the country is moving towards a more liberalized economy and hopes to regain investments. As it stands Tunisia is considered the 107th freest economy, the freest being where private actors control economic forces. Current investors include those geographically close in Europe, being France, Austria, Italy, Germany and the UK, in addition to Canada and Australia. In order to further drive economic growth in Tunisia, there needs to be a continued focus on further privatizing the economy in order to draw the attention of larger investors like the US which could help boost their international reputation. Overall, in order to attract investors there needs to be more transparency in government, as well as a reduction in barriers towards them.

Labour in Tunisia is struggling to support the fast-growing economy. Freedom House raised Tunisia’s freedom score from 3 to 4, and 17% of the population suffers from unemployment. Currently, strategies are being discussed to help target youth unemployment with the goal of positively impacting 100,000 people within the next five years. On a positive note, the government has established new labour organizations after the Arab Spring. These remain effective in advocating for greater labour reform, increased wages and better overall workplace conditions. As the country’s economy continues to grow, much in part due to industries like those of manufacturing and textiles, it is important that greater emphasis is placed on increasing employment to ensure that this economy can in fact be supported. Current rankings highlight the economy as modest at best, but improved foreign investment and better labour reforms could lead to serious strides forward in the future.