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University of Pisa – Department of Economics and Management – November 2016

Master Thesis

Analysis of FDI incentives in the IT Industry:

A comparison between Tunisia and Morocco

Fulfillment of the requirements for

International Master in Business Administration Diploma

Author: Saber Ferjani

Advisor: Dr. Fabio Cassia

Address: Via Ridolfi, 10 - 56124 Pisa, Italy

Tel: (+39) 050 2216469

E-mail : [email protected]

Web site : http://mba.master.unipi.it

mailto:[email protected]

http://mba.master.unipi.it/

Master Thesis | SABER FERJANI

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Abstract

The Scope of this thesis is to assess the attractiveness of the Tunisian and the Moroccan Environment to

Foreign Direct Investment, with a particular focus on the sector of the Information Technology. We start

our analysis with a general overview of the North-African region, its history and few statistics about both

societies. In the second chapter, we go more in depth in the evaluation of the economic KPI and the global

ranking evolution, in addition to the foreign trade partners. Then we will analyze the FDI inflow and its

Impact on the economic growth. Afterwards, we will analyze the trends of the IT in the world, and the

ongoing effort in Morocco, and Tunisia. Finally, we will conclude with a general summary and future

insights based on our meeting with a Tunisian former minister.


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Acknowledgement

I am highly indebted to Mr Fabio Cassia for his guidance

and constant supervision as well as for providing

necessary information regarding the thesis.

I would like to express my gratitude towards my family and

friends for their kind support and encouragement

which helped me in completion of this thesis.

I would like to express my special gratitude and thanks to the

former minister, Mr Yassine Brahim for giving me

such attention and time.

My thanks and appreciations also go to my colleagues of the MBA

class and teachers who have willingly helped me out with

their abilities during the Master courses.


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Table of Content

Chapter 1: General Introduction about North African Region ...................................................................... 1

1. African Union ............................................................................................................................... 1

2. Arab Maghreb Union .................................................................................................................... 1

3. History of Morocco ....................................................................................................................... 2

4. History of Tunisia ......................................................................................................................... 3

5. Societies: Demography, Culture and Education ........................................................................... 4

Conclusion ............................................................................................................................................ 6

Chapter 2: Economy and Foreign Trade .................................................................................................. 7

1. Overview of the economic growth ................................................................................................ 7

2. GDP per Capita ............................................................................................................................. 8

3. Economic complexity ................................................................................................................... 9

4. Trade partners ............................................................................................................................... 9

Conclusion .......................................................................................................................................... 10

Chapter 3: Foreign Direct Investment ......................................................................................................... 11

1. FDI and Economic growth .......................................................................................................... 11

2. FDI by Sector .............................................................................................................................. 11

3. FDI in Morocco ........................................................................................................................... 12

4. FDI in Tunisia ............................................................................................................................. 13

5. Global Entrepreneurship index ................................................................................................... 17

Conclusion .......................................................................................................................................... 18


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Chapter 4: Information-Technology Industry ............................................................................................. 19

1. Impact of IT on economic growth ............................................................................................... 19

2. Impact of IT on society: The Estonian experience ...................................................................... 19

3. Digital transformation in Morocco ............................................................................................. 20

4. Digital transformation in Tunisia ................................................................................................ 21

Conclusion .......................................................................................................................................... 22

Chapter 5: Insight & Future Trends ............................................................................................................ 23

1. Biography of Mr Yassine Brahim ............................................................................................... 23

2. Discussed Topics ........................................................................................................................ 23

General Conclusion ............................................................................................................................. 25

Appendix ..................................................................................................................................................... 26

Glossary ...................................................................................................................................................... 30

References ................................................................................................................................................... 31


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Table of Figures

Figure 1: Geographic location of Maghreb Countries .................................................................................. 2

Figure 2: Timeline of Tunisian prime-ministers ........................................................................................... 4

Figure 3: Evolution of Demographic population in Tunisia and Morocco [1] ............................................. 5

Figure 4: Morocco GDP growth rate [8] ....................................................................................................... 7

Figure 5: Tunisia GDP growth rate [8] ......................................................................................................... 8

Figure 6: GDP per Capita in Thousand US$ in Tunisia & Morocco [1] ..................................................... 8

Figure 7: FDI by Sector in Tunisia and Morocco [13]................................................................................ 12

Figure 8: Noor Power Station in Ouarzazate, Morocco [15] ...................................................................... 13

Figure 9: FDI part of GDP evolution in Tunisia in TND [19] .................................................................... 14

Figure 10: TuNur project, bringing solar energy from Africa to Europe [24] ............................................ 16

Figure 11: Pillar comparison of global entrepreneurship index 2017 – Morocco [25] ............................... 17

Figure 12: Pillar comparison of global entrepreneurship index 2017 – Tunisia [25] ................................. 18

Figure 13: Morocco Global IT ranking (2015) [26].................................................................................... 21

Figure 14: Tunisia Global IT Ranking (2015) [26] ..................................................................................... 22

Figure 15: Mr Yassine Brahim in world economic forum – January 2016................................................. 23

Figure 16: What did Morocco export in 2014 [10] ..................................................................................... 26

Figure 17: What did Morocco import in 2014 [10]..................................................................................... 26

Figure 18: Where did Morocco export to in 2014 [10] ............................................................................... 27

Figure 19: Where did Morocco import from in 2014 [10] .......................................................................... 27

Figure 20: What did Tunisia export in 2014 [10] ...................................................................................... 28

Figure 21: What did Tunisia import in 2014 [10] ...................................................................................... 28

Figure 22: Where did Tunisia export to in 2014 [10] ................................................................................ 29

Figure 23: Where did Tunisia import from in 2014 [10] ............................................................................ 29


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Table of Tables

Table 1: Population of Most important cities in Tunisia and Morocco [2] [3] [4] ....................................... 5

Table 2: Index of economic complexity (2014) [10] .................................................................................... 9

Table 3: Morocco's Trade partners (2014) [10] ............................................................................................ 9

Table 4: Tunisia's Trade partners (2014) [10] ............................................................................................... 9

Table 5: Global entrepreneurship 2017 index [25] ..................................................................................... 17

Table 6: Time spent using e-services and offline services (in minutes) [28] .............................................. 20

Chapter 1:

General Introduction about North African Region

In this chapter, we are going to present the overall context of our study, starting from The African Continent,

then focusing on North-African region. Then We will take a look on the recent history of the region, and

the different interactions that took place, which shaped societies of the two countries which we are studying:

Morocco and Tunisia.

1. African Union

The Organization of African Unity (OAU) was established in 1963 with 32 signatory governments. The

African Development Bank (AfDB) was founded in the following year to promote economic development

and social progress of African countries. Since 1982 it has allowed the entry of non-African countries.

Currently, Non-African members include countries from Asia (China, India, Saudi-Arabia and Turkey)

America (Argentina, Brazil, Canada, US) and most Western-European countries. The AfDB is

headquartered in Ivory Coast, but it was moved to Tunisia during the Ivorian conflict from 2003 to 2014.

In 2002, the South African President Thabo Mbeki, last chairperson of the OAU replaced it by the African

Union. It is a continental union consisting of 54 countries in Africa. Morocco is the only African state that

is a United Nations member, but is not a member of the African Union, it opted to leave due to the

Organization's recognition of the Sahrawi Arab Democratic Republic (Western Sahara) as a member state.

In 2016, Morocco announced its intention to rejoin the union.

2. Arab Maghreb Union

In 1988, five Maghreb states (Algeria, Libya, Mauritania, Morocco, and Tunisia) met for the first Maghreb

summit in 1988. The union aims to create an economic and future political union among the five north

African nations, but no summit has been organized since 1994 due to the tensions that have hampered

decision-making and the operation of the union.

In December 2015, the Maghrebi Bank of investment and international trade (BMICE) was established in

Tunis. It is expected to foster the harmonization of commercial exchanges between EU member states and

the entire Maghrebi area.


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Figure 1: Geographic location of Maghreb Countries

3. History of Morocco

The kingdom of Morocco was founded in 1631 by Moulay Ali Cherif, from the Alaouite Family. Unlike

Other regimes in the region, The Alaouite dynasty was distinguished in the 18th and 19th centuries for

remaining independent. Unlike other neighbor states that were under control of Turkish/Ottoman, French,

or British domination. However, the treaty of Fez signed on 1912 allowed the French to expand their

protectorate to Morocco, which was already established in Algeria and Tunisia. Thus a northern strip, with

both Atlantic and Mediterranean coasts were excluded from the French-controlled area and treated as a

Spanish protectorate. Ceuta and Melilla and tiny islets off the coast of Morocco are actually still under

control of Spain.

In late 1955, Mohammed V successfully negotiated the gradual restoration of Moroccan independence. In

1960 he reintroduced Morocco's currency: the dirham. On 1961 Hassan II became the King of Morocco,

after his father's death. On 1963 the first multi-party’s constitution of the region was adopted. Agriculture,

tourism, and phosphates mining industries played a major role in Moroccan market-based economy. Hassan

II survived two assassination attempts, in 1971, and 1972.

On 1973, the Polisario Front was constituted with an intention to end to Spanish colonization from Western

Sahara. After the withdrawal of Spain in 1975, an armed conflict erupted between the Polisario and

Morocco which lasted until a ceasefire was signed in 1991. A referendum scheduled for 1992, was intended

to offer the option between independence or integration with Morocco, but this referendum never took

place. The land borders between Morocco and Algeria have been closed since 1994 at Algeria’s initiative,


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costing the two economies billions of dollars. Furthermore, relations between the two neighboring countries

remain strained because of the Sahara issue and Algeria’s financial and military backing of the Polisario

separatists.

In 1999, Hassan II was dead naturally, and was succeeded by the current King, Mohammed VI. On July

2011, voters approved a set of political reforms, that reduced the political power of the King in favor of the

prime minister, and promoted granted more freedom for citizens.

4. History of Tunisia

The Husainid Dynasty was founded in 1705 as a vassal of the Ottoman empire, by Al-Husayn ibn Ali. His

father was a Turk and his mother was a Tunisian. Early Husaynid policy required a careful balance between

Ottoman elite and Local Tunisian landowners. In the 19th century, commerce with the Europeans increased,

with permanent residences established by many foreign merchants. In 1861, the first constitution in the

Arab world appeared in Tunisia, but a move toward a modernizing republic was slowed by the poor

economy and by political unrest. Loans made by foreigners to the government were becoming difficult to

manage. During 1830 the French army occupied neighboring Algeria. The Slave trade was abolished in

1841, slavery in 1846. During the Crimean War (1854-1856), Ahmad Bey sent 4,000 Tunisian troops against

the Russian Empire. In doing so he allied Tunisia with Turkey, France, and Britain. In 1869, an international

financial commission, with representatives from France, the United Kingdom, and Italy, took control over

the economy after Tunisia was declared bankrupt. The French army occupied Tunisia in the spring of 1881,

claiming that Tunisian troops had crossed the border to Algeria. Italy, also interested in Tunisia, protested,

but did not risk a war with France. During the second world war, Muhammad VII al Moncef become Bey

of Tunis in June 1942. Unlike previous beys, he attempted to establish an independent government without

consulting the French authorities, and claimed equal salaries between French and Tunisians. In May 1943

he was deposed and exiled to Algeria then to France where he died in September 1948. A symbolic funeral

took place in all Tunisian cities to honor Moncef Bey with many processions and deeply moved crowds. In

1956, Tunisia achieved independence from France proposed by Habib Bourguiba. He acted as De facto

ruler before proclaiming the Republic in 1957. He established a presidential system which soon turned to

be a twenty-year one-party state dominated by his party. In 1984, the rise in the price of bread due to an

IMF-imposed austerity program triggered a succession of violent riots, which led to more than 150

protesters killed. Order was not restored until Bourguiba announced that the increase in the price of bread

and flour had been cancelled.


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In 1987, The prime minister, Zine El Abidine Ben Ali staged a bloodless constitutional coup. In 1989, Ben

Ali appeared alone on the ballot in Tunisia's first presidential election since 1974. He promised a more

democratic way of ruling the country than had prevailed under Bourguiba.

On December 17th, 2010, A Tunisian street vendor set himself on fire, in response to the confiscation of

his wares and the harassment and humiliation that he said was inflicted on him by a municipal official and

her aides. This act became a catalyst for the Tunisian Revolution and the wider Arab Spring. Riots over

unemployment escalated into a widespread popular protest movement against Ben Ali's government.

Figure 2: Timeline of Tunisian prime-ministers

On 14 January 2011, thousands demonstrated in the center of Tunis, demanding Ben Ali's immediate

resignation, after which, he fled to Saudi Arabia. The former ruling party of Tunisia was dissolved, and a

Constituent Assembly was elected on October 2011. The transition ended on October 2014 by legislative

and presidential elections. Tunisia becomes a unicameral parliamentary republic.

5. Societies: Demography, Culture and Education

o Demography

One of the key factors that attract the foreign investor to Morocco is the market size. The Moroccan

population is around three times the Tunisian population. Regarding the World Bank, Morocco's population

is estimated in 2015 to be around 34'377'511, while Tunisian population is around 11'107'800.

A simple look at the evolution of Moroccan demography shows that the population has grown faster than

its Tunisian analog. The Table 1 below shows the list of the five biggest cities (per population) in Tunisia

and Morocco. Most Tunisian cities are concentrated on the coast line.


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Figure 3: Evolution of Demographic population in Tunisia and Morocco [1]

Tunisian Cities Population (2014) Moroccan Cities Population (2014)

Tunis 1,056,2471 Casablanca 3,359,8182

Sfax 330,440 Fez 1,112,072

Sousse 271,428 Tangier 947,952

Kairouan 186,653 Marrakech 928,850

Gabès 152,921 Salé 920,403

Table 1: Population of Most important cities in Tunisia and Morocco [2] [3] [4]

o Culture

In addition to the indigenous Berbers, Morocco attracted various people from different locations throughout

history: Arab from the east, African from the south, and European (Roman/Andalusian) from the North.

They all contributed to the current cultural Heritage of Morocco of Nowadays.

The culture of Tunisia is mixed due to its long established history of outside influence from people ‒ such

as Phoenicians, Romans, Vandals, Byzantines, Arabs, Turks, Italians, Spaniards, and the French ‒ who all

left their mark on the country.

o Language

Arabic is the only official language Tunisia, However, in Morocco, Berber is also considered official

language alongside with Arabic. French language is taught as an obligatory language at all schools. It is

widely used both in Tunisia and Morocco, in governmental institutions, media, mid-size and large

companies, international commerce with French-speaking countries, and often in international diplomacy.

1 3,980,500 in the metropolitan area 2 4,270,750 in the metropolitan area


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English is taught as a third language in schools, and is understood and spoken by a wide part of the Tunisian

and Moroccan population. Other Popular Languages include: Spanish, Italian and German [5] [6].

o Education

In Morocco, University of Karueein, in Fez, has been a center for Islamic studies for more than 1,000 years.

Nowadays, Education is free and compulsory through primary school. However, many children,

particularly in rural areas, still do not attend school. The country’s illiteracy rate is around 50 percent for

most of the country, but reaches as high as 90 percent among girls in rural regions [5].

Education is given a high priority in Tunisia and accounts for 6% of GDP. Since 1991, a basic education

for children between the ages of six and 16 has been compulsory. In 2008, Tunisia was ranked 17th in the

category of “quality of the higher educational system” and 21st in the category of “quality of primary

education” in The Global Competitiveness Report [6].

o Religion

The majority of Tunisia's population (~98%) and Moroccan population (~99%) are Muslims. Christian

minorities, mainly catholic, are present both in Tunisia and Morocco.

Tunisia along with Morocco has been said to be the Arab countries most accepting of their Jewish

populations. Djerba, a Tunisian island, is home to El Ghriba synagogue, which is one of the oldest

synagogues in the world and the oldest uninterruptedly used [7].

Conclusion

In this first chapter, we provided a brief overview of Geographical and Historical context of our study, with

some details about the actual situation of the Tunisian and Moroccan Societies. We can identify some

similarities, including language, culture and religion. However, Morocco is distinguished with its human

capital. While Tunisia has a better education system. In the next chapter, we will provide more detailed

description of the economic structure of these two countries.

Chapter 2:

Economy and Foreign Trade

In this chapter, we will analyze the economic structure of the two countries and try to identify the most

important factors that drives the growth of the economy, and also the factors that avoid it from growing

further.

1. Overview of the economic growth

GDP (Gross domestic product) measure National income / National Output and National expenditure.

GDP Growth Rate in Morocco averaged 4.36 percent from 1999 until 2015, reaching an all-time high of

9.30 percent in the second quarter of 2006 and a record low of 0.50 percent in the fourth quarter of 1999.

The Gross Domestic Product (GDP) in Morocco expanded 4.50 percent in the fourth quarter of 2015 over

the same quarter of the previous year.

Figure 4: Morocco GDP growth rate [8]

GDP Growth Rate in Tunisia averaged 2.38 percent from 2000 until 2016, reaching an all-time high of 5.90

percent in the first quarter of 2007 and a record low of -3.20 percent in the first quarter of 20113.

3 The fall of the "Ben Ali" Regime, known as "Jasmin Revolution", happened in January 14th, 2011. Which

expanded later to other countries and became widely known as the "Arab Spring"


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The Gross Domestic Product (GDP) in Tunisia expanded 1.30 percent in the third trimester of 2016 over

the same period of the previous year [9] [3].

Figure 5: Tunisia GDP growth rate [8]

2. GDP per Capita

GDP per capita is a measure of average income per person in a country, calculated by dividing the GDP by

the total population. It is often considered as an indicator of the country's standard of living. In 2015, Tunisia

was ranked 92nd, while Morocco was ranked 113th.

Figure 6: GDP per Capita in Thousand US$ in Tunisia & Morocco [1]


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3. Economic complexity

The Economic Complexity Index (ECI) explain the knowledge accumulated in a country's population and

that is expressed in the country's industrial composition. The ECI combines metrics of the diversity of

countries and the ubiquity of products to create measures of the relative complexity of a country's exports.

Country Rank ECI

Japan 1 2.209021

Italy 15 1.352926

Tunisia 47 0.1800614

South Africa 55 -0.0041597

Morocco 78 -0.5960036

Table 2: Index of economic complexity (2014) [10]

4. Trade partners

Trade and FDI inflows are well known as very important factors in the economic growth process. Trade

plays the role of upgrading skills through the importation and adoption of superior production technology

and innovation. In 2014, Moroccan exports were dominated by Spain then France, with a little difference

of only 3%. Five following trade partners have around 4% of Moroccan export.

Country Part of total Export Part of total Import

Spain 23% 22%

France 20% 14%

Germany 5% 6%

Brazil 4% 2%

Italy 4% 5%

United kingdom 4% 3%

United States 4% 6%

Table 3: Morocco's Trade partners (2014) [10]

In Tunisia, the export is highly dominated by France, Then Italy and Germany. The following countries are

getting at most 3% of the total export. This reflect a less balanced export strategy which might be highly

affected by any crisis that might happen in any one of the three biggest export partner (65% of total export).

Country Part of total Export Part of total Import

France 34% 20%

Italy 18% 20%

Germany 13% 8%

Algeria 3% 7%

Spain 3% 5%

United kingdom 3% 1%

United states 3% 4%

Table 4: Tunisia's Trade partners (2014) [10]


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Tunisia has a market-oriented and diversified economy, with important mining, agricultural, tourism, and

manufacturing sectors. Tunisia successfully focused on promoting exports, FDI, and tourism. Key exports

now include textiles and apparel, food products, petroleum products, chemicals, and phosphates, with about

80% going to the European union [6].

Conclusion

In this chapter, we compared the performance of the Tunisian and Moroccan Economies during the last few

decades. We showed that the average of GDP growth is greater than in Morocco. The Moroccan Foreign

trade is also more diversified in Morocco. However, the GDP per capita and the economic complexity are

greater in Tunisia. In the next chapter, we will describe attractiveness to the Foreign Direct Investment, and

its relationship with the economic growth.

Chapter 3:

Foreign Direct Investment

In this chapter, we are going to study the relationship between the FDI and the economic growth. We will

start with some academic analyses, then we will classify and compare the FDI by sectors. Then we will

analyses the government strategy and the incentives offered to attract foreign investors.

1. FDI and Economic growth

Foreign Direct Investment (FDI) can play an important role by increasing and augmenting the supply of

funds for domestic investment in the host country. This can be done through the production chain when

foreign investors buy locally made inputs and sell intermediate inputs to local enterprises. Furthermore,

inward FDI can increase the host country’s export capacity, causing the developing country to increase its

foreign exchange earnings. FDI can also encourage the creation of new jobs, enhance technology transfer,

and boost overall economic growth in host countries.

Even though the positive effect of FDI on economic growth is theoretically and empirically proven in many

developed and developing countries, many academic researches on the relationship between FDI and

economic growth in the case of Morocco and Tunisia are deceptive. Most of these analyses [11] [12] says

that economic growth is mainly determined by exports, domestic investments, and to a lesser extent human

capital. However, the impact of FDI on economic growth in the MENA countries, remain significantly

negative. This is due to the weak performances in attracting FDI by a too limited international and regional

integration in this zone and by the slowness and ineffectiveness of structural reforms.

2. FDI by Sector

FDI inflows were significant but mainly focused in the energy sector; however, investments in

manufacturing remained mainly in low value added and assembly activities. FDI inflows to Tunisia reached

3.7 percent of GDP on average between 2000 and 2010 compared to 3.1 percent average for MICs.

In reality, the success of Tunisia in attracting FDI hides a paradox. Although Tunisia is well endowed in

skilled human resources and has well positioned location, 60 percent on average of attracted FDI between

2006 and 2012 is targeting natural resources. In fact, FDI in manufacturing stabilized around 26 percent of

FDI in the same period, after dropping by half between 2000 and 2006 and.


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Figure 7: FDI by Sector in Tunisia and Morocco [13]

Further, FDI in industrial sectors has remained focused on low value added industries, notably electric

cabling, construction materials, and textiles. In addition, unlike the recent trends in Morocco, FDI in the

services sector continues to remain below 10 percent, even though these sectors are critical to improving

employment of university graduates.

3. FDI in Morocco

Many International firms (PSA, Stelia, Total, Renault, Holcim, STMicroelectronics, Sanofi-Aventis,

Nestlé…) have moved part of their operations to Morocco. The government was successful in attracting a

relatively consistent flow of FDI, by relying mainly on the conversion of foreign debt into investments, the

national privatization program, and the operations of public services concessions. The FDI policy is

targeting mainly the countries of sub-Saharan Africa. Other sectors have been dominated by foreign capital,

including energy, tourism, industry and banking. However, the level of FDI remains modest and could

make a stronger contribution to promote the country's economy [14].

In 2014 FDI flows into Morocco increased, after a decline in economic performance during to the global

recession. In 2015, Morocco attracted EUR 3.6 billion in FDI, mostly in the industrial sphere. The

investment was directed particularly towards the car and aircraft industry. This represents a significant

annual increase and the amount of investment have reached their highest levels in ten years.


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Noor Solar Power Station

Figure 8: Noor Power Station in Ouarzazate, Morocco [15]

In 2015, the country opened the Noor solar power plant. Once completed, Noor will cost 2.2 billion euros

($2.45 billion) and generate 580 MW, enough power for a city of almost 2 million people. The European

Union has funded about 60% of this project. Morocco aims to expand at other desert regions to 2 gigawatts

of solar capacity by 2020 at a cost of $9 billion [16].

Morocco ranks 75th out of 189 countries in the 2016 Doing Business report issued by the World Bank.

Traditionally, France, Saudi Arabia and Spain have been the three main investors. FDI is mainly

concentrated in the real estate sector, followed by industry and tourism. The country's stability should attract

more investors. In addition, a vast project of economic modernization has been launched to boost FDI.

Casablanca in particular aims to become an international financial center [1] [17].

4. FDI in Tunisia

FDI currently represents 1/10 of productive investments, and generates 1/3 of exports and around 1/6 of the

total number of jobs. After a short decline after the 2011’s revolution and the crisis in the Eurozone, FDI

showed a clear signs of recovery. However, it declined again in 2013 and in 2014, due to the deterioration

in the country's security situation and the lack of medium and long term economic visibility. According to

Tunisian FIPA, FDI flows rose by 20.7% in 2015 compared to 2014. This FDI was mostly concentrated in


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the industry sector, while it declined in the service sector. In 2016 Tunisia gained one place in the Doing

Business report of the World Bank (ranking 74th out of 189 countries). The main investment sectors are

energy, computer science, corporate services, textile and tourism. The sectoral distribution today shows a

definite orientation towards industrialization [18].

The following Figure shows the evolution of FDI part of GDP. We can see that the FDI inflow didn’t follow

the same increase rate of the GDP since the 2011’s revolution. As a reference, the FDI part of GDP in

Morocco in 2014 was around 30%, while in Tunisia it’s only 19,2%.

Figure 9: FDI part of GDP evolution in Tunisia in TND [19]

Aware of the need to boost the economy and promote investment, the authorities have opened a vast

legislative project to facilitate and simplify investment in Tunisia. The will of the legislators who drew up

the new investment code is clearly to simplify the legal framework for investment in Tunisia, especially the

foreign investment framework. This commitment is reflected both in the new code’s form and context.

Thus, from a formal point of view the new code is very short, barely 25 articles spanning five to six pages.

In contrast, the previous code included 67 complex articles and several dozen pages. From a core point of

view, the legal framework introduced by the draft of the new code are many and important [20]:

Freedom of Investment: This freedom is a significant evolution given the rules that were previously

in force. However, the new principle of freedom is not intended to override legislation specific to

certain sectors. In some cases, for example, investments in the banking or insurance sectors are

subject to formal approval. It should also be noted that the lack of a reply from the administration

within the deadline, which will be set by decree, will be considered tacit authorization.

Access to Home Ownership: The acquisition by a foreigner of property is subject today, in most

cases, to the authorization of the governor of the region where the property is located.


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Unique Interlocutor: the new code provides for the creation of a new institution known as the

“investor’s sole interlocutor”, which will be responsible for:

o Providing any necessary information to investors

o Filling any paperwork needed to obtain the required permission on behalf of the investor.

o Fielding requests from investors and supporting their economic development

Employing Foreign Managers: The new investment code provides that any company can recruit up

to 10 foreign executives. Beyond this limit an authorization is required.

Exchange Control: A foreigner who invests in Tunisia can freely export dividends, shares or

company stock sale proceeds and any liquidation surplus. The most positive changes to this under

the new code are:

o The response time from the Central Bank of Tunisia will be limited by decree

o The new code also requires that any refusal should be explained in writing.

Grants & Benefits: These subsidies are granted for investments in priority areas, which are

determined by the relevant authorities. Grants for the purpose of regional development may be

awarded for certain industrial activities and services, which will be specified by decree, and in

accordance with the proposed location for production.

In order to promote the new legal investment framework, an international conference ‘Tunisia2020’ is

planned in November 29th and 30th 2016. 140 projects will be presented including 64 public projects, 33

Public-Private Partnership projects and 43 private ones in infrastructure, energy, desalination of water,

agriculture, tourism, IT, health and high-technology industries sectors. High-ranking foreign political

figures including Emirs, Heads of State and Prime Ministers, Ministers, Secretary of States and senior

officials of international institutions (International Monetary Fund, World Bank, European Union…) will

take part in this event [21].

In June 2016 within a press release, Mr Yassine Brahim, Minister of Development, Investment and

International Cooperation at the time, said:

“Our country has made great strides in its political transition. Now, the great challenge is on an economic

and social level. Tunisia must affirm its choice to be a market economy country, open to globalization and

setting all regions and social strata on the road to modernization. A strategic vision and a plan combining

fundamental reforms and investment projects are the result of over a year’s collaborative work with all

regions of the country. ‘Tunisia 2020’ is the international conference during which we will present the

progress made in reforms and all project opportunities for the years to come,” [22]


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TuNur Solar Power Station

In 2011, Tunisia started an ambitious project called TuNur: A €10bn joint venture between British solar

developer Nur Energie and a group of Tunisian, Maltese and British investors including London-based

‘Low Carbon’, working to develop the first solar export project from Africa to Europe [23].

The TuNur Project encompasses three schemes in one:

2,250MW concentrated solar power (CSP) plant in the Tunisian desert

A HVDC (High-Voltage Direct Current) submarine cable to transport power from Tunisia to Italy.

Sale and distribution of electricity to the EU energy market.

The project is scalable and will allow Europe to replace fossil fuels and nuclear power with environmentally

friendly solar energy from a region with loads of available land where solar power production is cheaper

than anywhere in Europe. The construction is scheduled for 2016, the commercial operation by 2018, and

delivering power to the UK by late 2020.

Figure 10: TuNur project, bringing solar energy from Africa to Europe [24]


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5. Global Entrepreneurship index

The global entrepreneurship and development institute (GEDI) report released in the global

entrepreneurship index 2017, to provide insights for entrepreneurs willing to assess the situation in a

particular country. The following table provide some data relative to Tunisia and Morocco and few other

countries as a reference.

Country Rank Human capital Technology absorption Startup skills Process innovation

US 1 1 0.812 1 0.932

Germany 13 0.452 0.789 0.569 0.841

France 14 0.549 0.941 0.451 0.891

Turkey 37 0.386 0.623 0.645 0.383

Tunisia 43 0.622 0.687 0.316 0.590

Italy 47 0.199 0.406 0.333 0.675

Jordan 57 0.339 0.077 0.578 0.312

Morocco 71 0.128 0.230 0.137 0.648

Table 5: Global entrepreneurship 2017 index [25]

In case of Morocco, the process innovation was identified as the main strength. Product innovation and Risk

acceptance are comparable to regional and global averages. Surprisingly, Morocco underperform in Human

capital, which is usually considered as one of the key the main strengths of MENA countries.

Figure 11: Pillar comparison of global entrepreneurship index 2017 – Morocco [25]


18

We can easily identify that Tunisia outperform in technology absorption. Other significant strengths include

process innovation, human capital and risk capital. However, Tunisia underperform in Internationalization,

competition and risk acceptance.

Figure 12: Pillar comparison of global entrepreneurship index 2017 – Tunisia [25]

Conclusion

In this chapter, we studied the economy of Tunisia and Morocco, and analyzed the FDI and their Impact on

the economic growth. We showed that the Moroccan FDI are more service-oriented, while in Tunisia, FDI

are still relying on energy and mining, which is not sustainable for job creation. We also showed that both

countries are ambitious towards renewable energy. Finally, we showed that Tunisia has a better ranking in

global entrepreneurship index. In the next chapter, we will focus on a specific part of the service sector:

The Information-Technology Industry, and its Impact on the economy and the whole society.

Chapter 4:

Information-Technology Industry

In this chapter, we will focus on the Information Technology Industry. We will start with the story of the

most innovative technology cluster in the world. Then we will move to the Estonian experience in the

modernization of the public administration. Then we will move to discuss the global index of readiness of

to adopt the benefit of IT. Finally, we will enumerate some successful IT-related projects done in Morocco

and Tunisia.

1. Impact of IT on economic growth

Open Access to Internet has created new opportunities for entrepreneurs globally. The amount of connected

users from all over the world is continuously increasing. Not only can these new users consume what is

already online, but they can also start their own online business, and target a global market of nearly 3

billion Internet users while incurring low distribution costs. The largest of these startups, including Google

and Facebook, are now taking their place among the most valuable companies in the world. These

companies all benefited from the same conditions that led to the development of Silicon Valley as the largest

and best-known cluster for high-tech startups, including access to Stanford University, to venture capital,

and to a large pool of skilled employees. Not everyone is able to benefit from access to a cluster, but

everyone can benefit from the new opportunities now available, as many of the important inputs for startups

are migrating online [26].

2. Impact of IT on society: The Estonian experience

The Internet has also generated societal change by connecting individuals and communities, providing

access to information and services, and promoting transparency. In February 2015, the republic of Estonia,

was nominated “the most advanced digital society in the world” by Wired Magazine [27]. In fact, since

2000, Estonia launched the e-tax board. Two years later, free public Wi-Fi was provided in most populated

areas, and electronic ID were introduced. In 2007, 94% of tax returns were being filed electronically. The

e-police system was launched in the same year, and e-health was launched one year later. In 2014, the e-

residency was introduced, offering to every world citizen a government-issued digital identity and the

opportunity to run a trusted company online, allowing its holder to create and run an online location

independent business within one day.


20

Service e-service offline service Time saved

Establishing a company

30 510 480 (94%)

Vat declaration 7 68 61 (89%)

Social tax declaration 10 78 68 (87%)

Voting 6 44 38 (86%)

Parliamentary legislation system

7 26 19 (73%)

Unemployment fund self-service

13 37 24 (64%)

Table 6: Time spent using e-services and offline services (in minutes) [28]

Because the Estonian tax office automatically fills in much of the form, the average return takes five minutes

to fill out. Everything from prescriptions to court papers to the minutes of Estonia’s Cabinet has been made

paperless.

3. Digital transformation in Morocco

In 2008, the Kingdom of Morocco started issuing contactless biometric identification smart cards.

Moroccan citizens over 18 years old are required to carry the new ID, but on the upside; the card

conveniently supplants birth certificates, certificate of residence, certificate of life, and certificate of

nationality in "all procedures for which these documents must be provided."

In the same year, the government launched an ambitious project in order to issue the first biometric e-

Passport in Africa. An issuance pilot program started in December 2009 was expanded to 83 prefectures

and provinces and 125 embassies and consulates in April 2010 [29]. Moroccan citizens can now apply for

a biometric e-Passport anytime, anywhere, and trace the various stages of processing using a dedicated

web-portal: www.passeport.ma

In November 2016, The Digital Transformation Forum was organized in Rabat, by the International

Telecommunication Union and Intel Corporation. The event focused on successful digital transformation

programs in different regions and countries (including broadband, smart learning, digital economy, funding

mechanisms and e-government) and key factors for the planning, deployment, and success of digital

transformation programs in Arab States [30].

The Global IT report issued by the World Economic Forum ranked Morocco 78th in 2015, which is a strong

improvement compared to the previous year (ranked 99th in 2014). The sub-index ranking is detailed in the

following graph (fig. 13) [26].

http://www.passeport.ma/


21

Figure 13: Morocco Global IT ranking (2015) [26]

4. Digital transformation in Tunisia

In 2005, The second phase of the World Summit on the Information Society (WSIS) took place in Tunis.

More than 19,000 participants from 174 countries attended the Summit and related events. The Summit

represents a unique opportunity to raise awareness of the benefits that Information and Communication

Technologies (ICTs) can bring to humanity and the manner in which they can transform people’s activities,

interaction and lives, and thus increase confidence in the future [31].

In December 2014, Tunisian authorities announced that the implementation of electronic identity card and

biometric passport has already begun. In April 2016, the government announced that issuing the electronic

ID and biometric passport will be introduced gradually and soon [32] [33].

In June 2014, The ministry of higher education and scientific research released the strategic national plan

‘Digital Tunisia 2018’ which is expected to promote the IT sector in Tunisia by supporting innovative

startups and attract foreign investors in order to create more jobs. The renovation of public administrations

and pushing toward a digital society [34].


22

‘Smart Tunisia’ One of the most Important pillar of ‘Digital Tunisia 2018’ strategic plan. It was launched

in November 2015, and is expected to create 50,000 jobs over the five following years, in the areas of

Offshoring, Nearshoring and Colocation.

The Global IT report ranked Tunisia 81st in 2015, which is a little improvement compared to the previous

year (ranked 87th in 2014). The sub-index ranking is detailed in the following graph (fig. 14) [26].

Figure 14: Tunisia Global IT Ranking (2015) [26]

Conclusion

In this chapter, we highlighted the impact of IT sector on the economy and the society, and we enumerated

the previous and ongoing projects in Morocco and Tunisia. The global IT report ranks Morocco in a greater

position. However, the Tunisian government is trying to promote this sector in the near future. The next

chapter will be dedicated to the meeting we had with a Tunisian former minster.

Chapter 5:

Insight & Future Trends

In this final chapter, we are going to report our discussion with a Tunisian ex-minister about the current and

future situation in Tunisia and in Maghreb and Mediterranean region. Then we will conclude our thesis with

a general conclusion.

1. Biography of Mr Yassine Brahim

Mr Yassine Brahim is a Tunisian engineer, manager and politician. He

was appointed Minister of Transport and Equipment in January 2011.

He resigned in June of the same year and founded a secular liberal party:

Afek Tounes. In February 2015, he was appointed Minister of

Development, Investment and International Cooperation, and stayed

until the August 2016.

2. Discussed Topics

Overview

Our meeting took place September 19th, 2016 in the main office of Afek Tounes.

Mr Yassine Brahim underlined the assets of Tunisia, including the well-educated human capital and the

geostrategic position (in the route of international trade). The government succeeded to attract lot of BPO

(Business Process Outsourcing), Call-centers, companies in the telecom, healthcare and tourism services,

and also companies in the textile and automotive industries. However, the protectionist and conservative

economic approach, in addition to the bureaucracy are preventing an efficient economic growth. The

instable situation in Libya has also a direct impact on Tunisian economy.

Maghreb Union

Despite the inauguration of (BMICE) Bank which is expected to promote the trade within the Maghreb

union, the political conflict between Algeria and Morocco, in addition to the situation in Libya also, are

considered as major challenges in front of a well-integrated Maghreb Union.

Figure 15: Mr Yassine Brahim in world

economic forum – January 2016


24

Digital innovation

In regards to digital innovation, Mr Yassine highlighted the effort done by the Mr Noomen Fehri in the

project ‘Smart Tunisia’ which promoted the Tunisian eco-system of the IT sector in the global market.

Moreover, The Tunisian Government started doing more effort to promote the e-commerce, through an

agreement with PayPal, and also to replace the national digital currency e-dinar With Blockchain-Driven

Monetas Currency [35].

Privatization of Public companies

In regards to the privatization of public companies, the Model of telecom sector showed that the entrance

of new competitors pushed the public company – Tunisie Telecom – toward better governance and made it

more competitive. This was only achieved after the sale of 35% share to private entity. This was beneficial

also to the customers, who saw the improvement of the service. This applies also to all other public

companies that are currently under-performing, like Tunisair, and SNCFT (the public railway company).

In regards to Open-sky agreement, which is expected to allow low cost airlines to offer tickets to/from

Tunisia, Mr Yassine Brahim affirmed that low cost airlines will be allowed to operate through Tunisian

airports starting from the summer of 2017. The only exception is the main airport of Tunis-Carthage which

will be postponed to summer 2018, in order to help the state owned airline, Tunisair, to compete with the

new entrants. This agreement is expected to promote tourism, increase the foreign currency inflow, and

attract more FDI. We remind that the open-sky agreement between Morocco and Europe was signed since

2006 [36].

Language barrier

In regards to the English language, Mr Yassine totally agree that the use of English language should be

improved in Tunisian administrations and in the cyberspace, in order to attract more foreign investors.

Comparison with Morocco

In regards to the recent success of Morocco in attracting more FDI, Mr yassine consider that this is the

result of appointing the ‘right people in the right position’ during the last 10 years. The political stability

and the size of Moroccan market is also among important factors that helped in attracting more FDI.


25

General Conclusion

The scope of this document was to compare and analyze the attractiveness of Moroccan and Tunisian

ecosystems for foreign investment, in particular in the IT sector. We started with a general overview, then

we went more in depth in the KPI of the two economies. Then we compared the FDI evolution, and

enumerated two main projects, both in the energy sector. In the fourth chapter, we focused on IT sector,

and described the effort done by the government to promote this sector. Finally, we summarized our

discussion with Mr Yassine Brahim about the current challenges and barriers to promote FDI attraction.

In overall, we consider that both Morocco and Tunisia have their competitive advantages, and also

weaknesses. We showed that foreign trade is more diversified in Morocco, However, the economic

complexity is higher in Tunisia, which is expected to have a positive impact on future GDP growth.

In the same time, we also showed that FDI in Morocco is more service-oriented, while in Tunisia, it is more

focused on Energy and Mining activities, which have a limited impact on economic growth and job creation.

Morocco did also an impressive improvement in global IT ranking, while Tunisia still has a better ranking

in Global Entrepreneurship index.

In our opinion, the stability in Morocco plays an important factor in creating a sustainable growth, while

the frequent government substitution in Tunisia might explain the limited FDI inflow in the recent years.


26

Appendix

Figure 16: What did Morocco export in 2014 [10]

Figure 17: What did Morocco import in 2014 [10]


27

Figure 18: Where did Morocco export to in 2014 [10]

Figure 19: Where did Morocco import from in 2014 [10]


28

Figure 20: What did Tunisia export in 2014 [10]

Figure 21: What did Tunisia import in 2014 [10]


29

Figure 22: Where did Tunisia export to in 2014 [10]

Figure 23: Where did Tunisia import from in 2014 [10]


30

Glossary

BPO: Business Process outsourcing

BMICE: Maghrebi Bank of investment and international trade

CSP: Concentrated Solar Power

FDI: Foreign Direct Investment

FIPA: Agency for the Promotion of Foreign Investment

GDP: Gross Domestic Product

HVDC: High-Voltage, Direct Current

KPI: Key Performance Indicators

MAD: Moroccan Dirham

MENA: Middle-East & North Africa

MIC: Middle Income Countries

OAU: Organization of African Unity

TND: Tunisian Dinar


31

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