3. DOING BUSINESS IN TUNISIA
3.2 E ASE OF DOING BUSINESS IN T UNISIA
The World Bank Group publishes a “Doing Business” report on an annual basis, ranking 190 economies on how favourable their environments are for conducting business in terms of regulations and their enforcement. In 2019, Tunisia went up eight spots ranking at the 80th position. However, this year the country went up two more positions coming at the 78th place in the world respectively. Wiem Zarrouk, the Minister of Development, Investment, and
International Cooperation’s advisor, has stated that in the year 2017, the Republic established a three-year program with the clear goal of breaking into the leading 50 economies globally (ExpectationState 2020). The report covers various dimensions that will be discussed further, including regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and lastly, resolving insolvency.
Firstly, Starting a Business, this index calculates the number of procedures, time, and minimum capital specifications for small and medium-size LLC’s (Limited Liability
Companies), in order to get things started and officially operate in each region. Tunisia scored the highest on this dimension in comparison to all the others, getting a 94.6 out of 100 score, and achieving the 19th rank out of 190. The process of starting a company in the Republic is fairly straightforward and can be accomplished in three steps.
1) Reservation of the company name, the entrepreneur has to go to the National Center for Company Registration and reserve the selected name, which also needs to be accessible and unique. This process usually takes up one day to complete.
2) Depositing the capital in a bank account opened in the name of the company to be
incorporated, the corporation’s funds have to be deposited in a so-called “compte bloqué”
with the sole purpose of depositing said funds, however, once the company is established the money is returned to a regular bank account. This process also takes up one day to be finalized
3) Submitting the application at the Industry Promotion Agency to get registered with the Commercial Registry, Tax Authority, Social Security, and Labor Inspectorate and obtain the official company seal. This procedure can take up to seven days for completion (The World Bank 2020).
Secondly, Dealing with Construction Permits, this dimension traces the procedures, length, and costs to construct a warehouse as well as acquiring all the essential licenses and permits, submitting the required notifications, requesting and getting all the necessary
inspections and acquiring utility connections. In total there are 14 steps to be completed, from obtaining a soil test report for technical control and obtaining a topographical study of the construction site to requesting and receiving the final inspection and approval (“permis de récolement”) from the Municipality, getting a water connection, and acquiring a sewage connection from the Office National de l’Assainissement (ONAS). The entire process of
receiving construction permits should take up to 161 days. Tunisia has been ranked 32nd among 190 countries with a score of 77.4, a much higher rating than some of its neighbouring countries (Algeria ranked 121st and Egypt ranked 74th). The World Bank Group has also stated that the
Republic of Tunisia has made it easier to do business this year by specifically merging more services into the one-stop-shop, and by decreasing fees,(The World Bank 2020).
Next, the Getting Electricity dimension, it examines the length, costs, and procedures necessary for an enterprise to procure a permanent electricity connection for newly constructed warehouses. The utility used to get electricity in Tunisia is STEG short for Societe Tunisienne de l'Electricité et du Gaz. The Republic’s process includes submitting an application to STEG and awaiting an estimate, then receiving a technical inspection also done by STEG, hiring a
registered electrical contractor along with purchasing material and installing a transformer, and lastly, getting an inspection of the installed transformer and a final connection from STEG. the entire procedure takes about 76 days. The Republic scored 82.3 out of a 100 on this criteria coming in at the 63rd rank (The World Bank 2020).
Then, Registering Property, this topic studies the steps, length and overall cost of registering property, while also examining the land administration system’s quality, that can be done by measuring the reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The five-step procedure should take up to 35 days to be finalized and involves:
1) A consultation of pending encumbrances on the property at the Regional Land Registry, stating that all parties involved must convey a search for any pending encumbrance of the property before notarizing the contract. This can be achieved by checking the data kept electronically at the property registry. The registry then issues a certificate (once requested) showing the land’s legal status to the parties included.
2) Preparation and notarization of the contract, the contract is put together by a lawyer, notary public, or local council clerk at the Conservation de la Propriété Foncière (the land registry) following a consultation with the property registry services. Said parties are then required to sign the contracts, which are then supposed to be notarized by a public notary or local council clerk.
3) Paying the transfer tax and the registration fee at the Local Tax Office
4) The buyer files for a title deed at the Land Property Administration, the Land Registry inspects the application if approved the procedure is then deposited and transcribed to the Regional Land Registry.
5) The seller must inform the Municipality of the change of ownership
Even though Tunisia scored respectively low when compared to other economies coming at the 94th rank with a score of 63.7 out of 100 on this criteria, it is still higher than the MENA regional average and still managed to increase one point from its previous 2019 report. The country has also made property registration quicker by streamlining the internal process to transfer property, enhancing the transparency of the land administration by publishing statistics tracking property transactions at the Land Registry for the previous calendar year. (The World Bank 2020).
Moreover, Getting Credit, this indicator studies how strong the credit reporting system is and the efficacy of the collateral and bankruptcy laws when facilitating lending. The Republic obtained a sum total of 50 points out of 100, along with a rank of 104 among 190 countries.
Making it the country’s second-lowest dimension and one of its weakest points that might scare potential businesses away (The World Bank 2020).
Additionally, the Protecting Minority Investors dimension examines the strength of the minority shareholders protections against abuse of corporate assets by executives for their personal gain together with shareholder rights, governance safeguards and corporate
transparency requirements that lessen the risk of mistreatment. The sub-criteria used for this index include the extent of disclosure index, the extent of director liability index, the ease of shareholder suits index, the level of conflict of interest regulation index, the level of shareholder rights index, the extent of ownership and control index, the level of corporate transparency index, the extent of shareholder governance index and lastly, the strength of minority investor protection index. The Republic of Tunisia scored 62 points out of 100, thus giving it the 61st rank respectively (The World Bank 2020).
Moreover, Paying Taxes, this topic documents the taxes and compulsory contributions that medium-sized companies are required to pay or withhold in a given year, along with the administrative weight of paying taxes and contributions and complying with post filing
procedures such as VAT refunds and tax audits. Tunisia gathered 69.4 points out of 100, making this index its worst-performing ranked at the 108th positions. Nonetheless, it is still an
improvement from what last year’s report recorded, as the Republic managed to move up 7.2 percentage points in just a year. This showing that the country is making visible changes to improve its rankings annually in hopes to attract more investments. The Republic has also made handling taxes simpler by implementing and executing a risk-based tax audit system (The World Bank n.d.) (The World Bank 2020).
Furthermore, Trading across Borders, this topic tracks the expenses and time associated with the logistical procedure of exporting and importing goods. The time and expenses
(excepting tariffs) of these following three sets of procedures are also being recorded including, documentary compliance, border compliance and domestic transport. Tunisia achieved 74.6 out of 100, giving it the 90th position among 190 countries. Although still above the regional average and some neighbouring countries such as Algeria and Egypt, Tunisia still hopes to further improve in the following years. A good start will be improving the Cost to import: Border compliance, Cost to export: Documentary compliance and Cost to export: Border compliance subcategories as they are currently the lowest-scoring and the reason for a relatively low overall ranking (The World Bank 2020).
Another important indicator highlighted in this report would be, Enforcing Contracts, this index measures the length and costs of settling a commercial conflict through a domestic first-instance court, the quality of judicial processes index, evaluating whether each country has adopted a series of good measures that encourage quality and efficiency in the court system. To dictate the quality and speed of a trial, the standardized conditions utilized involve, filing a claim to the Tunis First Instance Tribunal, Commercial Section for an average amounting to TND 16,305. In terms of the speed of this process, Tunisia takes up to 565 days, which is when compared to OECD high-income regions (589.6 days) and other MENA countries (622 days) still considered a good score. However, when discussing the quality of the judicial processes index, Tunisian courts obtained a rating of 6.5 points out of 18, which is way lower than OECD high-income countries (11.7 points) but corresponds with the MENA region (6.6 points). Overall Tunisia scored 58.4 out of 100 on this dimension, giving it the 88th position among 190 (The World Bank 2020).
Finally, Resolving Insolvency, this last dimension studies the time needed to recover debt, the cost required to recover debt, outcome, Recovery rate for creditors, and the strength of the insolvency framework index. The Tunisian Republic’s recovery rate (cents on the dollar) amounted to 51.3, almost double the MENA average which came at 27.3. Speed of resolving insolvencies in the country came at 1.3 years, a better result than both the MENA religion and OECD high-income countries which achieved 2.7 and 1.7 years. Costs (in percentages of the estate) in Tunisia added up to 7 percent, half as much as the MENA religion (14 percent) and again still lower than high-income OECD territories (9.3 percent). The strength of insolvency criteria, the country obtained 8.5 points out of 16, while yet again higher than other Arab countries’ average of 6.3, it still has ways to go to reach OECD developed countries’ scores of 11.9. The Republic has achieved a total score of 54.2 out of 100 on this index ranking it at the 69th position (The World Bank 2020).
Conclusion
In conclusion, this thesis was able to prove that the Tunisian market is very interesting and carries a lot of potential for any probable investor. Several aspects have presented that the Tunisian Republic is not just a competitor in its respective MENA region but also on a global level. Although Tunisia faces some complications and weaknesses among which include ever going corruption, a problem that needs to be tackled sooner than later to further improve the country’s image, and a huge unemployment difficulty.
Nonetheless, the Republic is on the rise and improving annually. For instance, Tunisia has successfully moved up to the seventy-eighth spot in the World Bank’s “Doing Business”
report for 2020. The minister of development, investment and international cooperation’s
advisor, Wiem Zarrouk, has also shared plans that aim to place Tunisia in the top 50 economies.
Moreover, the 2020-2025 program plan made by the FAO intends to further their investments into the Tunisian olive oil industry. Another sector that shows promise for investors is the aerospace sector, as its supply chain is one of the most self-sufficient and comprehensive in the world.
The aim of this thesis was to discuss the Tunisian marketplace while simultaneously highlighting its weaknesses and strengths that could be appealing for any future investors, whilst also introducing business opportunities and perspectives. Entrepreneurs contemplating entering the Tunisia Republic will have at their disposal a recent collection of data accessible, in an effort to end most business-related risks associated with investing or starting a company in a foreign country.
Furthermore, it is also of importance to consider the social realities of the region. Being a collectivist feminine society gives Tunisia another advantage and benefit, as its long-term
orientation can ensure the long-lasting cooperation of businesses and organizations, which is very instrumental in the long run and even essential to some countries of similar cultures.
To add on the country’s achievements, the Tunisian Republic has been selected to be in the top twenty countries internationally in the ease of ‘setting up a business” category. Tunisia has also been showing promising markets, as its labour force consists of highly educated yet
unemployed individuals, business owners and investors have the opportunity to employ most if not all of its workers and employees from the Tunisian population. These markets include
agriculture (currently the Republic’s largest), technological and the services sectors. Tourism has been making a comeback recently, despite Tunisia’s Arab Spring revolution that brought up political instability in 2011, and the infamous terrorist attack in Sousse the year 2015.
When investors look past the damaging media representation which solely focuses on reporting negative events, they will find that there is a wide array of investment opportunities in Tunisia, as it is equipped with promising sectors and a knowledgeable workforce.
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