Reporting on Tunisia’s industrial prospects, Oxford Business Group said that, at a time when European companies are looking to reduce expenses, they are increasingly relying on North African countries such as Tunisia – with large, educated workforces and cheaper operating costs – to supply technical expertise at a lower price.
For some major European firms, such as European Aeronautic Defence and Space Company (EADS), the parent company of Airbus, 2009 marks the first time production has been expanded outside of the eurozone. As part of a restructuring plan seeking to save €1bn by 2012, Airbus announced in September it would build a components factory in Tunisia. “We are planning to produce basic parts in Tunisia, while research and production of more sophisticated parts and composites will be in Europe,” EADS spokeswoman Gaelle Pellerin was reported as saying. Work slated to be done in the TD165m ($138.6m) factory includes sheet metal and surface processing for the assembly of fuselage components manufactured in France.
The Airbus plant is just one part of Tunisia’s strategy to become a regional industrial centre. Since 2007 the Ministry of Industry, Energy and Small-and Medium-Sized Enterprises has been working to implement a programme to double exports between 2007 and 2016, from TD15bn ($12.6bn) to TD30bn ($25.2bn). Mechanical, electric and electrical industries are expected to capture a major share of this upward trend, as their share of industrial exports is set to increase from 25% to 46% between 2006 and 2012, making them the pillars of the country’s manufacturing industry.
The ministry’s programme was launched only recently but auto parts manufacturers and cable manufactures have already inked multiple agreements that will bring foreign direct investment and jobs to Tunisia. In 2008 new projects helped turn cable manufacturing into a an attractive niche, including a TD70m ($58.8m investment from German group Draexlmaier to build a plant in Siliana, a TD35m ($29.4m) commitment from Kromberg & Schubert to set up a company in Beja, South Korean firm Sewon’s TD15m ($12.6m) factory in Kairouan and Sumito Electric Bordi Jetz’s operations in the Kef industrial zone, which will cost TD5m ($4.2m).
Besides aeronautic and automotive components, the government’s growth programme calls for expansion in four other high-value sectors: textiles, footwear and leather, food processing and biotechnology.
These segments are proving popular areas of investment for European firms. Benetton, the Italian group, has been manufacturing textiles in the Tunisia to export since 1995, but is now working to expand its presence.
In 2008 alone the company has made over €20m in industrial investments, specifically aimed at building a new plant to produce cotton knits. Commenting on the group’s decision, Alessandro Benetton, Executive Deputy Chairman of Benetton Group, told OBG, “We think the success factors of Tunisia can be summarized in three words: stability, proximity and quality.”
Free trade agreements (FTAs) within the region and with the EU offer vast potential. The Agadir Agreement, a FTA between Jordan, Morocco, Tunisia and Egypt, is designed to help countries meet the EU rules of origin more easily, with Agadir seen as a first step towards a broader Euro-Mediterranean free trade zone. While the trade and business links between the four Arab countries are not the strongest, the partnership is still in its early stages and the agreement offers great potential by increasing access to EU and US markets for the member states. Tunisia has also expanded its trade network through a number of other bilateral agreements, including FTAs with Libya, Turkey and the European Free Trade Association.
All of these factors should help Tunisia’s industrial sector weather the global financial storm. By offering a low-cost, high-quality alternative to European production the country can maintain and even expand production and employment over the coming years.