The New World of Foreign Direct Investment
1 . After more than a half century of increasingly liberalized world trade, there are signs of change. Do you see world trade patterns evolving in new and different directions? What does this mean for your country and your clients?
Tunisia has been fully integrated in the trade globalization process since the 1980s and took a policy to encourage the sectors of tourism and outsourcing activities, mainly in textile and automotive.
While preserving strength within the above key sectors, Tunisia has, since 2000 been encouraging investment in the following key sectors with high growth potentials:
- Renewable energies. The green energy sector emerged in Tunisia in the 1950s through STEG’s investment in hydroelectric power. Aware of the challenge of its energy security, Tunisia has embraced a policy of gradually integrating renewable energies into the energy mix as a priority axis of development. The objective is to reach 30% of electricity production from renewable energies by 2030. The country has significant development potential, particularly in wind and solar power, and has adopted a framework law, promulgated in 2015, defining a legal base for the implementation of private renewable energy projects.
- Aerospace and aeronautic industry. The aeronautics sector has seen a significant development in Tunisia between 2000 and 2017, owing mainly to the successive set-up of foreign leaders who managed to structure the sector around six main branches covering all the value chain links. The aeronautics sector is characterized by a mature value chain on all links with high added value.
- Agro-food industry. The food-processing sector is one of the most developed sectors in Tunisia and is considered to be at the core of the Tunisian economy. The sector is structured mainly around the production of inputs for the food processing industry, upstream and downstream logistics and marketing services around 3 sectors constituting the main links of the food-processing value chain, the production of inputs, processing industry and marketing services.
- Pharmaceutics. The pharmaceutical industry value chain encompasses research & development activities, manufacturing inputs for the pharmaceutical industry and distribution channels.
- IT. With competitive salaries, an undeniable quality of human resources, a technological infrastructure meeting international standards and generally a favourable legislation through the Start-Up Act, Tunisia can be an ideal platform to access neighboring markets, such as those of Algeria or Libya, as well as other African or Middle Eastern markets.
2 . Historically, foreign direct investment was embraced by governments as a way to strengthen domestic economies. Has your country’s government adopted an aggressive posture in regulating foreign investors?
Attracting foreign direct investment (FDI) has been always a key priority for the Government of Tunisia (GoT) since the liberalization of its economy which began in the late 1980s.
From that time, Tunisia became fully integrated in the globalization of trade and developed into a major hub for outsourcing for industry, especially in textile and automotive components, and adopted a complete set of initiatives to encourage wholly exporting activities such as the promulgation of the Code of Incentives to Investments in 1993.
Facing new challenges following the financial crisis of 2008, the opening of new markets with the EU extension, the rise of the digital economy, the entry of China into the WTO and the elated increase of competition between developing countries, along with the context of the Arab Spring (which put Tunisia in face of social pressure to create jobs and economic opportunities for its young population), the country undertook an ambitious program of regulatory reforms to make the economic environment more competitive and to reinforce the attractiveness of its investment climate, including:
- adoption of a new investment law and its decrees in 2016 and 2017 respectively, enshrining key investor guarantees and removing barriers on FDI in numerous economic activities;
- adoption of a specific legal framework governing Private Public Partnerships (PPP) in 2015;
- reform of the Competition Law in 2015 with the support of EU and OECD, in order to meet international standards and best practices of competition policies;
- reform of the insolvency regulations in 2016 with an improvement of anticipated alert tools of economic difficulties;
- adoption of Startup Act in 2018; and
- adoption of Law of Improvement of the Investment Climate in 2019.
3 . Are there specific sectors of your country’s economy or industries where foreign direct investment is barred or highly regulated?
The exercise of a commercial activity in Tunisia is not permitted to foreigners according to the provisions of the Decree-law No.61-14 of August 30, 1961, relating to the conditions of exercise of certain commercial activities. Such prohibition encompasses the following activities:
- real estate agent;
- commissioner, broker and commercial agent;
- general or special agent of insurances;
- dealer, consignee, general representative, sales agent; and
- travelling salesmen;
Pursuant to the same Decree-law, any non-Tunisian person or entity who wants to perform any of the above activities must apply for a foreign trade card, with the following exemptions:
- activity of extraction of raw materials (mining, oil & gas);
- banking, exchange and stock exchange activities subject to applicable regulations; and
- trade and distribution of hydrocarbons;
Notwithstanding the above restrictions, foreign investments in industry and services are permitted, except for activities subject to authorizations and/or compliance with specifications. Tunisia decided in 2018 to adopt a policy of a negative list of activities for certain strategic sectors, such as transport, banking and finance, hospitality, hazardous industries, health, education, telecommunication, and other commercial and service activities.
4 . The global supply chain has been collapsing worldwide since 2020. How has this impacted businesses in your country and what steps has your country’s government taken to respond?
With the acceleration of price increases, the consequences of the post-COVID-19 crisis and the war in Ukraine, repeated interruptions of supply chains have disrupted not only worldwide companies and industry tycoons but also small and medium companies around the world.
The automotive industry is an example of such phenomenon. The disturbance of the production of semiconductors in Taiwan in 2021 strongly impacted the automotive market. More recently, German automotive manufacturers saw their situation worsened with the stopping of work on their cabling plants located in Ukraine further to the outbreak of the Russian-Ukrainian war. Contrary to their German competitors, French automotive manufacturers were less affected by such crisis since they are used to locating their contractors in North Africa.
All the above crises constitute a challenge for globalization under its current form and force the restructuring of global supply chains into a new configuration based on relocation in nearby countries, which experts of OECD, IMF and US Treasury call “friend-shoring”.
According to OECD officials, Tunisia has many key assets ready to take advantage of such reshaping of global supply chains. The Tunisian Minister of Industry, Energy and Mines, Mrs. Neila Nouira El Gongi, recently declared that the Russian-Ukrainian crisis, despite its impact on the national budget, may offer great potential for growing the industrial sector. A task force works in close collaboration with Tunisian Ministry of Economy, Tunisian Investment Agency (TIA) and Foreign Investment Promotion Agency (FIPA) to identify opportunities resulting from this new configuration of global supply chains. In the same way, Mrs. Gongi announced that discussions are ongoing with foreign investors about advanced projects of relocation in the sectors of electronics, automotive industries as well as new projects related to mobility – “We are actually repositioning our country on the international chessboard of investment with a special focus on Africa” she declared in the same context.
5 . In M&A transactions as well as joint ventures in your country, what are the most critical issues foreign investors must evaluate prior to contemplating a transaction?
Before considering an M&A or joint venture transaction, a foreign investor will need to be in compliance with the provisions of the following regulations:
- Law No. 2016-71 of September 30, 2016 on the Investment Law;
- Law No. 2015-36 of September 15, 2015 relating to the reorganization of competition and prices;
- the Decree-Law No. 61-14 of August 30, 1961 relating to the conditions of exercise of certain commercial activities; and
- the foreign exchange regulations.
The main concerns for a foreign investor regarding Law No.2016-71 will be in respect of the conditions of eligibility to the premiums and incentives granted to the foreign investors (e.g. allowance of increase of added value and competitiveness, allowance of regional development, allowance of development of the capacity of employability, allowance of sustainable development etc.). To do this, they will have to make effective their investment project and to comply with regulations relating to the right of work, transparency, health, social security, environmental protection, protection of natural resources, taxation, territorial planning and urbanism.
Regarding the law on competition and prices, a foreign investor, for an M&A transaction, will have to obtain the approval of the minister in charge of trade, provided that some thresholds are met (market share of 30% and/or global turnover of TND 100 million). This agreement is necessary for any economic concentration project. It is understood that an economic concentration is any act involving the transfer of ownership or use of all or part of the assets, rights or obligations of an enterprise, the effect of which is to enable an enterprise or a group of enterprises to exercise, directly or indirectly, a decisive influence over one or more other enterprises.
Decree-Law No. 61-14 requires foreign investors to obtain a trade card from the Ministry of Trade in order to engage in certain commercial activities (examples include, but are not limited to, commercial agents, brokers and dealers).
Foreign exchange regulations provide for freedom of transfers related to “current operations”, i.e. without prior authorization of the Central bank of Tunisia (CBT), as well as for net real proceeds and value added from sale or liquidation of capital invested previously through foreign currency import, while other operations, such as clearing debts with foreign countries, are subject to prior CBT authorization.
6 . What is the best strategy for acquiring interests in real estate or other tangible property in your country? Is this more difficult for foreign investors?
Tunisian law imposes some restrictions regarding the ownership of real estate by foreign citizens, which can be summarized as follows:
- Foreign ownership of agricultural land is forbidden (Law No.69-56 of 22 September 1969 related to reform of agricultural structures, as amended by Law No.97-33 of 26 May 1997). The ownership of agricultural land is permitted for Tunisian persons, cooperatives, public entities, civil and limited liability companies fully owned by Tunisians and public limited companies dedicated to agricultural activities and created in compliance with Law No.89-43 of 8 March 1989. Companies whose capital is owned totally or partially by foreigners can operate agricultural activities through lease of land only and the land cannot constitute a contribution in kind to such companies.
- Foreign investors benefit from a freedom to acquire lands and buildings located in industrial and tourist zones for the purpose of their economic project.
- For lands and buildings which are not located within industrial or tourist zones, their acquisition by foreign investors is subject to the prior authorization of the Governor, in accordance with the provisions of the Decree of 4 June 1957 related to real estate transactions. Such authorization is mandatory, failing which the sale contract is void. In practice, the acquisition will follow the following process, regardless of the quality of the foreign applicant (private or investor):
- Signature of a promise of sale, on which performance will be conditioned by the obtaining of the Governor authorization. Parties can agree upon an advance payment (generally between 10% and 20% of the sale price).
- Obtaining of the Governor authorization (applicable to foreigners either for the sale and the purchase of a real estate). If refused, the promise of sale is terminated and the advance payment is reimbursed to the purchaser (parties can agree on a non-reimbursable portion of the advance as indemnity for the seller).
- Signature of the sale contract (which shall make reference to the Governor authorization) / registration at the tax office / registration at the Land Registry.
- Obtaining authorization of the Central Bank of Tunisia when the purchase is made by any foreigner who is not resident in Tunisia, in accordance with the provisions of article 20 of the Decree No.77-608 of 27 July 1977 related to exchange control regulations.
7 . What laws or regulations exist in your country to protect data exchange and privacy, and is the protection of intellectual property challenging for foreign investors?
Article 30 of the new Tunisian Constitution of 25 July 2022 provides that “The State protects privacy, inviolability of the home and the secrecy of correspondences, communications and personal data (…)”, while article 29 provides that the protection of intellectual property is guaranteed.
Protection of personal data
Based on such principle, the protection of personal data is governed by the provisions of Organic Law No. 2004-63 of 27 July 2004 on the protection of personal data, which has been adopted further to the adhesion of Tunisia to the Convention No.108 of the European Council.
The collection (automated or manual) of personal data is subject to prior declaration to the Tunisian authority of protection of personal data (INPDP). The legal representative of the legal entity wishing to collect personal data must be of Tunisian nationality, be resident in Tunisia and have no criminal record. The data concerned by the collection are those of natural persons present (resident or not) in Tunisia.
The transfer of personal data abroad, is subject to the prior authorization of the INPDP.
Criminal sanctions include:
- in case of non-compliance with the obligation of prior declaration and obtaining authorization for the transfer abroad: one year imprisonment and a fine of TND 5000;
- in case of not obtaining the consent of the person concerned by the collection of his personal data: one year of imprisonment and a fine of TND 5000;
- in case of collection of personal data that are subject to a ban on collection: two years imprisonment and a fine of TND 10,000.
Civil sanctions must be evaluated from the point of view of compensating for the damage suffered by the person concerned by the collection of their personal data.
Protection of intellectual property
Tunisia is a member of the World Intellectual Property Organization (WIPO), and adheres to most related international treaties and conventions. The National Institute for Standardization and Industrial Property (INNORPI) (see https://www.innorpi.tn/) is the agency responsible for patents and trademarks; the Tunisian Copyright Protection Organization (OTDAV) is the agency responsible for copyrights; and the Tunisian Internet Authority (ATI) is the agency responsible for administering the .TN country domain name.
Tunisia intellectual property laws enshrine the equal treatment of foreign registrants and Tunisian nationals. Registration and maintenance requirements for Tunisian patents, trademarks, and copyrights are straightforward and relatively inexpensive. The creation of a specialized intellectual property court in 2014 employing judges and court clerks with specific training and expertise in handling intellectual property cases has also significantly increased the speed and quality of legal enforcement decisions clients, with numerous advantages for companies claiming trademark infringement in connection with counterfeit goods.
In 2016, Tunisia signed an agreement with the EU that allowed automatic patent protection in Tunisia for European patent applications through the European Patent Organization. The agreement went into effect in December 2017.
8 . Describe the most common legal structures used by foreign investors when doing business in your country.
Tunisian legal framework distinguishes between:
|Individual companies and|
|Limited Liability company||Joint stock companies|
In Tunisia, the most widespread and frequent forms of companies are the limited liability company (SARL) and the public limited company (SA). Each legal form (SARL or SA) has its own particularities.
The table below details the different aspects related to SARL and SA, including those related to
incorporation, management, rights and obligations of shareholders, and transfers of securities:
|Limited liability company (SARL)||Public limited company (SA)|
|Number of shareholders||1 (Single-owned limited liability company) up to 50.||7 to unlimited.|
|Shareholders||Persons (adults, and minors through their legal administrator) and/or entities.||Persons (adults, and minors through their legal administrator) and/or entities.|
|Responsibility||Limited to capital contributions.||Limited to capital contributions.|
|Share Capital||Undefined (in practice no less than TND 1,000).||At least TND 5000 and TND 50,000 in case of a publicly-traded SA.|
|Composition of the share capital||Contributions in cash and/or in kind.||Contributions in cash and/or in kind.|
|Release of cash contributions|
In full at incorporation.
|The company is only incorporated after the subscription of the entire share capital. Each shareholder must release at least a sum corresponding to the quarter of its subscribed shares. The full payment of the cash shares must take place within a maximum period of 5 years from the day of the incorporation.|
Contributions in industry
|Possible, but does not integrate the company capital.||Impossible.|
|Decision-making||Powers divided between the manager and the shareholders' assembly.||Powers divided between the management and control bodies (board of directors and CEO, or supervisory board and management board) and the shareholders' assembly.|
|Accounting obligations||Keeping of regular accounts, mandatory accounting books and preparation of annual accounts.||Keeping of regular accounts, mandatory accounting books and preparation of annual accounts.|
|Deposit and publication of the accounts at the National Register of Companies||Mandatory.||Mandatory.|
Mandatory as of the second fiscal year and only if the company meets two of the above thresholds:
9 . What are the most attractive opportunities for foreign investors in your country at this time?
Excellent opportunities exist for potential investors, especially in sectors of high-added value technology, such as hydrocarbons, power generation, renewable energy (including green hydrogen), aeronautics, transportation, healthcare, safety and security, and IT. Other opportunities may be identified in more labor-intensive, offshore manufacturing industries such as textiles, agribusiness, aerospace, and mechanical and electrical equipment. In recent years, multinational companies have established call-centers primarily for European markets.
Tourism has always constituted a key economic advantage for Tunisia. The crisis in the 10 last years (Revolution of 2011, terrorist attacks, pandemic) deeply impacted local operators who were oriented on the business model of popular mass tourism. The sector is trying to take a second wind and new opportunities are emerging for some businesses such as guesthouse hospitality, cultural and historical tours, golf packages, desert excursions, and medical tourism.
10 . Do specific laws or mechanisms exist in your country to protect foreign direct investors?
Tunisia has bilateral investment treaties in force with Argentina, Austria, Belgium-Luxembourg Economic Union, Bulgaria, Burkina Faso, China, Czech Republic, Denmark, Egypt, Ethiopia, Finland, France, Germany, Greece, Indonesia, Iran, Italy, Jordan, Republic of Korea, Kuwait, Lebanon, Libya, Malta, Morocco, the Netherlands, Oman, Poland, Portugal, Romania, Senegal, Spain, Sweden, Switzerland, Syria, Togo, Turkey, the United Arab Emirates, the United Kingdom and the United States.
Tunisia is also member of the WTO as well as the regional trade organizations AfCFTA, COMESA, ECOWAS and Arab Maghreb Union, and was the first country of the south Mediterranean coast to have entered into association agreement with the EU in 1995.
In addition to its above international commitments, soon after its adhesion to WTO, Tunisia adopted a specific legal framework dedicated to attracting foreign investment through the Code of Incentives of Investments in 1993, granting specific advantages to wholly-exporting companies. The investment legal framework has been reshaped with the Law of Investment of 17 September 2016 which reaffirms certain benefits granted to foreign investors:
- The investor is free to own, rent and exploit non-agriculture properties for the purpose of achieving direct investment operations or their extension.
- A foreign investor must not be treated less favorably than a Tunisian investor in like circumstances with regard to his rights and obligations.
- An investor’s funds, possessions and intellectual rights are guaranteed in conformity with the legislation in force.
- Investors’ properties shall not be expropriated, except for public interest without any discrimination regarding nationality and upon fair and equitable compensation in accordance with due process of Law.
- Foreign investors can freely transfer abroad funds in foreign currency in accordance with applicable exchange regulations.
- Where a dispute arises between the Tunisian State and the investor, parties are freely allowed to agree on the mediation’s procedures and rules, Otherwise, Conciliation Rules of the United Nations Commission on International Trade Law shall apply. If a dispute between the Tunisian State and a foreign investor is not settled through conciliation, it may be submitted to arbitration under an agreement between the parties. In such case, the arbitration procedures are subject to the Arbitration Code provisions. Otherwise, the Tunisian courts are exclusively entitled to examine the dispute.