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HomeFeatured NewsTunisia: Yassine Brahim to African Manager: "IMF expressed reservations on our economy"

Tunisia: Yassine Brahim to African Manager: “IMF expressed reservations on our economy”

Yassine Brahim, Minister of Development, Investment and International Cooperation has granted an exclusive interview to African Manager where he spoke of the new investment code and the five-year plan 2016/2020.

Yassine Brahim also spoke of private investment, economic growth and the results of negotiations with the IMF, the AfDB and the World Bank.

Interview:

What about the investment code?

It must be remembered that the Tunisian government had started since 2007 a new reflection on the investment code but it was delayed following the Revolution. In 2012, a commission composed of members of the Ministry of Investment and Finance has been established in order to complete this work, while taking into account the new requirements of post-revolutionary Tunisia.

A very broad consultation took place in different parts of the country and this in coordination with the labor and employers’ organizations and the various chambers of commerce. Result: In 2013, a new investment incentives bill was prepared and submitted to the National Constituent Assembly (NCA).

The bill has sparked an outcry and a wave of criticism, demanding its withdrawal from the NCA.

And what is your contribution to the investment code?

When we arrived in this department, we focused on this goal especially as it was demanded by the IMF, which considered the bill as one of the necessary reforms to promote investment in the country.

What arethe highlights of this code?

The new investment code is based on three chapters: the first regards access to the procurement market. We have wanted, in this context, to liberate the energy sector to be more competitive and implement the necessary measures to enable farmers to benefit from funding.

The second chapter pertains to the right and obligation of the investor. In this respect, we wanted to get to the same level as several foreign countries such as Turkey or Morocco. We also wanted to enable both Tunisian and foreign investors to enjoy the same benefits, while giving foreigners the opportunity to go to international arbitration without conflict with the state.

The last chapter deals with investment incentives while focusing on the country’s priorities including regional development, employment and export.

We have also tried to make the new investment code a simple law that consists of 25 articles while incorporating the details in the application decrees with transparent governance. A national investment authority will be created for this purpose to resolve any bureaucratic problems.

In addition, there will be a Tunisian investment fund financed by the state and it will aim to encourage the private sector to invest. There will also be a higher investment council that will be responsible for determining the state’s policy in encouraging investment.

The new investment code is currently in the parliament, could you put forward a date for its approval?

It should be noted that this investment code was approved last October during a Cabinet meeting before being submitted to the Finance Committee of the HPR. Working sessions were held on this occasion with several organizations like UTICA, CONECT, UGTT, CJD, the Institute of Chartered Accountants and UTAP.

The Finance Committee will shortly begin consideration of the new code article by article and we should subsequently take part in these meetings to present the decrees. We hope the code will be validated as soon as possible, knowing that other laws are being reviewed by the HPR as the Banking Act or the one governing BCT.

What is the added value of this new investment code with respect to employment, considered a main objective of the Revolution?

What is new is regional development and support of the investor in the most difficult phases. For example, an investor who wants to create a project of 10 million dinars value in an interior development region will see the state contribute 30% to this project. If there is local integration, the investor will also receive support from the state through additional subsidies and exemption of NSSF for a period of 10 years.

How can this code solve the thorny problem of unemployment?

The new code aims to improve the framework and not to create jobs. This code includes incentives to encourage investors to go into inner regions and generate an enabling environment for investment and job creation. The code is simply an investment environment that encourages investors and this is one of the factors of investment promotion. However, we can steer this code in order to encourage investors to locate in regions.

 Some members of the Finance Committee at the HPR have decided to delay the promulgation of the Code because of the exclusion of tax measures. What do you think?

It is a point of view, knowing that we have not received a relevant official request. However, the ruling parties have supported this code by choosing to separate tax measures from financial ones. This draft was presented and a discussion took place with the incumbent government about this issue. So the decision is clear: the tax will remain as it is until the Finance Department enacts the tax code. The idea is not to see traders dispersed by several texts.

Regarding the position of some MPs, I think it is important to reintroduce the debate so as to explain the choice of the government.

Let us move to the 2016-2020 five-year plan. Where we are now?

We are well into the project. A restricted Cabinet meeting will be held on this occasion to present projects including requests put forward by regions. We will in fact enter the phase of arbitration discussions and the idea is to finish all this work before the end of the current month before submitting it to the Cabinet meeting during the first week of April next. And thereafter, this plan will be submitted to the HPR for consideration and adoption, and this before the end of the parliamentary session.

How this plan could meet the needs of inland areas?

This plan is ambitious since we have identified our problems with a growth rate considered low during the last five years especially since we did not create enough jobs in interior regions. The idea is to apply the concept of affirmative action strongly enough by connecting regions to the coast.

This plan will also focus on large projects such as the Gafsa-Tunis highway project and the Tunis-Jelma highway or the Enfidha port project. These infrastructure projects will be directed towards regions and priority will be given to industrial areas.

In addition, the budget allocation as well as that for projects take into account regional development. Our goal is to ensure the development of coastal regions, but also the development of inland areas as soon as possible so as to reduce differences between them.

You said that this project requires significant funding. What are the sources of funding?

We have invested about 30 billion dinars between 2011 and 2015 and we want to go beyond 45 billion dinars over the next five years. We are able to do it by keeping some macroeconomic balances, including of course, growth. Today we see that growth is beginning to improve

We will, on the other hand, use other means such as public-private partnership. This is important given that public investment was not significant enough in recent years because several projects were delayed. We enter the new plan with 25 billion dinars of projects delayed for many reasons such as the land issue and the lack of studies…

We worked hard in 2015 on this issue and there has been improvement. The Higher Commission on Procurement has already approved several projects, equivalent to 70% of projects, thus registering an increase compared to 2014.

Our goal for the current year is to continue at the same pace for public investment to be effective. We will, in this respect, remain within an acceptable framework of debt under 60%.

More could be done if our partners like the World Bank and the African Development Bank provide us more donations. This is indeed the debate that we will begin shortly.

And to what extent can we say that this is feasible?

This is feasible especially that the world continues to support Tunisia in its transition process and its nascent democracy. This is why financial institutions have doubled or tripled donations to the Tunisian government.

Even more, this world needs Tunisia to succeed and is aware of the difficulties and risks facing Tunisia.

You are in talks with an IMF delegation but also with the AfDB and the World Bank? Where are we now?

These financial institutions have been in Tunisia since 1960 to finance not only projects, but also support the budget in case of deficit. Now we can go to the external market, but with higher interest rates. For example, a loan from the World Bank requires us to pay between 1 and 1.5% against 7% for capital markets. So it is in the interest of the country to negotiate with the WB or AfDB instead of going to the capital market.

To ensure that these institutions are confident and provide budget support, they must be sure that our accounts are sustainable. It is in this context that fits the IMF visit to Tunisia. The objective is to study the country’s finances and to issue an opinion.

But in order for these institutions to trust Tunisia again, some conditions must be met?

 Yes, indeed, this could not be done in the absence of an adequate reform program. Such is the case of the IMF, which is currently conducting an audit of the national economy. That is why we discussed with the institution a new four-year program.

We have already proposed our work schedule and our reform program, but the IMF has expressed some reservations about certain issues. They considered that the wage bill in the public service has become huge especially with the increases made in recent times and the number of civil servants. They considered as dangerous the fact of using grants and loans for the payment of salaries and not for investment.

We will have discussions in this regard to convince them that we need social peace to reform the country.

The IMF delegation will come back at the end of this month to continue negotiations and hopefully reach an agreement that will not only allow to have a credit under favorable conditions, but also to reassure the international community. Because if the IMF lends, it means that the accounts are solid and accordingly, other organizations will certainly be reassured.

And what about other donors?

Negotiations are also continuing regarding project financing. For budget support, these donors are still waiting for our discussions with the IMF.

When can we talk about the revival of private investment?

Private investment has certainly decreased to 11% of GDP against 15% in 2015, but maintained the same pace in terms of value, the equivalent of 8 billion dinars.

Certainly, private investment has declined somewhat, but it is understandable because of the instability.

And what do we really lack at this point?

What we lack today is social and security stability. Today, we need more than ever to accelerate the pace of reforms and projects for citizens to feel that the country is changing.

If this atmosphere settles with better resolution of the security issue, we will be able to go to another stage in terms of capacity for investment and job creation.

What are your estimates for growth in 2016?

During the discussions with the IMF, we have revised our growth rate to just 2%.

When can we talk of economic recovery?

If we make 2% growth during this year, it will be higher than the average over the past four years.

And what is your estimate for 2017?

We hope to achieve a growth of around 3.5% by 2017. We are already beginning to move to stages that start to revive us and the five-year average would be about 4%. If we can achieve this average in 2016-2020 while it was around 1% in 2011, we are in the economic recovery.

This five-year plan will be that of economic recovery and we hope that the next plan will be one of the acceleration.

The key factor in my opinion is stability in terms of security seeing that several sectors were hit like tourism and investment.

We have set as target for 2016 the revival of investment, especially as the flow has dropped significantly in the tourism and services sector. We will target a growth of around 7% in terms of investment.

If we make investment in 2016, the next two years will be positive. In this context, we will try to set an example by pushing the public investment. Once public investment restarts, private investment will certainly follow suit.

As a member of the Government, are you satisfied with the performance of Habib Essid’s team?

Afek Tounes is already part of the ruling coalition. Things have certainly gone well until the end of November, when the crisis erupted in the main ruling party Nidaa Tounes. Things have become more complicated and we do not understand anything. This has resulted in a disconnection between the government and the parliament.

In any case, the pace of government is not satisfactory and it is time to accelerate the program of reforms and implementation.

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