Romano Prodi’s visit with President Zine el Abidine Ben Ali in Tunis on October, 30, 2006 – one of the stops on his 20-day visit to North Africa and the Middle East – highlighted Italy’s growing interest in Tunisia as an investment destination.
Italy is the second largest source of foreign investment in the country, with almost 650 firms and an estimated $758 million of Foreign Direct Investment (FDI) so far, a figure that does not include the investment in the energy sector. It is estimated that more than 47,000 jobs have been created through Italian funds.
Just over half (56%) of all Italian investment in the country is accounted for by textile-related industries. There are roughly 320 Italian companies involved in textile, leather and shoe manufacturing, with a cumulated investment of roughly $204.6 million. Despite the end of the Multi-Fibre Agreement, Tunisia continues to attract Italian brands looking for high-quality production and finishing and quick restocking capabilities. Most recently, clothing giant Benetton announced plans for a new, 14,000m2 finishing plant, worth approximately $27.3 million. Benetton produces 21 million pieces per year in Tunisia, and its activity alone represents no less than 7,000 jobs.
Prominent presence
Mechanical and electrical manufacturing, particularly automotive components, is another important activity. There are 90 Italian companies active in this sector, and their cumulated investment is in excess of $166.7 million. Fiat, Piaggio, Iveco, among others, have production plants in the country.
The Italian involvement in banking is more of a mixed bag. In August 2005, Italian bank Monte dei Paschi di Siena pulled out of Tunisia by selling the 17% stake it had acquired in the recently-privatized Banque du Sud. SIMEST, however, has recently acquired shares of Banque Internationale Arabe de Tunisie (2%), in which Gruppo San Paolo IMI also has a 5.61% stake. Banca del Popolo is the latest of the Italian banks that have opened representative offices in Tunisia.
Meanwhile, Italy’s presence in service industries is limited. Only $1.13 million has been invested in the sector so far, and only a handful of companies operate in the country – mainly consultancies. Nevertheless, Tunisia has the potential to woo Italian service companies contemplating outsourcing. There is already one Italian call centre operator in the country, and observers anticipate more activity in this segment. Teleperformance, the biggest call-centre operator in the country, is currently recruiting Italian-speaking employees.
But the most ambitious project to date is an energy deal. The Tunisian government is pushing hard for a mega-project estimated to cost more than $1,28 billion that would interconnect both countries through an underwater electrical cable.
The Tunisian side would like to see the project begin as early as 2007. This would entail installing a gas-powered electrical plant in El Haouaria, on the northern tip of Cap Bon (which is just 87 miles away from Sicily). As a joint venture, it would produce 1,200 MW of electricity, of which 800 would be exported to Italy, and 400 sold locally. The cable, with a capacity of 1,000MW, would provide some room for growth in exports to the Italy.
The project would allow Italy to secure alternative energy supplies – the 2005 “gas war” between Russia and Ukraine, and recent power cuts have shed light on Europe’s energy vulnerability. For Tunisia, it would provide significant cash inflows and would allow it to even the trade balance with Italy.
However, despite the political enthusiasm surrounding the project, it might take some time to effectively kick-start. The Italian side is still conducting technical and financial feasibility studies, according to some observers. The cable’s cost, that by some estimates could cost up to $350 million, is a major hurdle that will have to be lifted.
