Libya, Tunisia test new ties
Tunisia and Libya plan to strengthen their trade relationship over the next few years as Libya gradually opens its domestic market to international economic forces. With the surge in demand for goods and services in Libya, (one of the offshoots of economic growth), Tunisia, a former partner, has placed the development of exports among its top national priorities and is expected to play a key role.
The latest official figures published by Tunisia’s CEPEX (Centre de Promotion des Exportations) show a significant increase in the value of bilateral trade, which reached TD1.07 billion ($808.77 million) in the first seven months of 2006, whereas trade value for the entire previous year was equivalent to TD1.27 billion ($959.94 million), up from TD960 million ($725.62 million) in 2004. The increase in bilateral trade value can be credited to several factors, including the rise in oil prices but also the surge in demand for agro-industrial products in a country which imports nearly 70% of its food.
At present, regional trade within the Maghreb region does not exceed 3% of the annual total. Tunisia’s main trading partners, like those of Morocco and Algeria, are European countries such as France, Spain or Italy. These markets account for between 50% and 60% of total trade. Many observers are optimistic about the new opportunities presented by renewed partnerships between the Libyan and Tunisian business communities.
Tunisia mainly imports hydrocarbons (a gas pipeline between Libya and Tunisia is set to be completed by 2007), steel products, and some agricultural products. The country exports textiles, agro-industrial products (such as olive oil and dairy products), some plastics and small domestic appliances.
Free Trade Zone established
In a recent interview with international press, Saadi Gadhafi, the son of Libyan leader Mouammar Gadafi, announced the establishment of a new free trade zone (FTZ), a 60-by-30 km strip of land near the coastal town of Zuwarah, west of the capital Tripoli and located some 30km east of the Tunisian border. The Libyan cabinet also said in a statement that “the zone aims at creating real estate development, tourist, manufacturing, trade and various other investment projects.”
Already, a number of Tunisian small and medium-sized enterprises have established themselves in Libya along family or cultural lines. Joint ventures are also on the rise with the recent proposed partnership a Tunisian firm, the Société des Grandes Carrières of Bizerte and a Libyan company, the Enterprise of Quarries of the city of Tripoli.
Saïd Ben Khelifa of North Africa International Bank, said that the FTZ would provide Tunisian firms with a great opportunity to invest and export goods and services. The FTZ will indeed offer several advantages to Tunisian companies. Projects in the FTZ will first of all enjoy tax and customs exemptions. The Tunisian hotel industry might also consider building resorts, as its firms can provide Libya with renowned expertise. But geographical advantages must also be taken into account. First, it will give access to the important harbor of Zuwarah. Second, it is located on the route to Dubai, a major investor in North Africa. Third, it is geographically close to Italy, a major trade partner.
The FTZ, one the first of its kind in Libya, will be a real test. If successful, more zones could be established, thus offering more opportunities for Tunisian entrepreneurs. The south Tunisian FTZ of Zarzis, which operates to a large extent for the Libyan market, is expected to face fierce competition with the opening of the Libyan FTZ.
The number of Libyan tourists in Tunisia is also on the rise: some 1.4 million Libyan tourists entered the country in 2005.
Hurdles remain
Despite these bright prospects on the whole, several hurdles remain. Observers warn that the Libyan bureaucracy can slow trade flows. Also, Libyans appear to be more eager to deal with American firms than Tunisian ones. Another deterring measure was recently implemented by Libya. Tunisians are now required to bring TD500 ($378) whenever they enter Libya (although this new measure is rarely enforced).
Nonetheless, a Libyo-Tunisian superior committee co-chaired by the prime ministers of both countries has been set up to meet every two months to gauge the advancement of trade relations.
Some observers ultimately feel that Tunisia has not completely seized the business opportunity offered by the opening of the huge and virgin Libyan market. A recent visit by the Tunisian minister for trade in Libya should help boost bilateral trade further.
