03 June 2008
The push to further develop Tunisia's small and medium enterprises (SMEs) has been given a welcome boost by the European Investment Bank (EIB).
The EIB announced on May 8 that it would make funds of 200m euros available to the SME sector, which has long been identified as a key driver of economic growth, and has seen strong success in attracting foreign direct investment (FDI). The loan is part of the bank's Facility for Euro-Mediterranean Investment and Partnership (FEMIP) programme to "stimulate the private sector [...] and help Tunisian companies adjust to the increased competition resulting from the liberalisation of the economy and the progressive implementation of the free trade agreement with the European Union".
Together with a 60m euro loan to the Tunisian Electricity and Gas Company (STEG) to support the development of a natural gas network, announced the same day, the new loans bring the total funds granted to Tunisia by the EIB since 1998 to 705m euros.
SME development is a priority for the Tunisian economy, both in terms of employment generation and growth. While in certain sectors a high number of small companies may indicate a lack of integration and consolidation, in high value fields such as information technology (IT), SMEs represent dynamic local growth and provide the types of specialised services that create an attractive business environment.
Compared with neighbouring Morocco, Tunisia attracts a high percentage of small foreign investments. During the period between 2003 and 2005, 84% of foreign investments in Tunisia were below 50m euros, compared to 76% in Morocco. The size of companies also tends to be smaller in Tunisia - 30% are SMEs with fewer than 500 employees, compared to only 21% in Morocco.
While at first glance bigger always seems better, Tunisia's success at attracting smaller scale investment in many ways reflects its positive business environment: sometimes countries attract only large investors because smaller ones cannot negotiate the bureaucratic hurdles to entry. In FEMIP's own words, the private sector is "the engine of sustainable growth", and SMEs are often the initiators of such growth.
FEMIP's money will be distributed through five Tunisian banks - Amen Bank, Arab Tunisian Bank, Banque de l'Habitat, Banque Internationale Arabe de Tunisie, and l'Union Bancaire pour le Commerce et l'Industrie. The funds are designed to encourage Tunisian banks to risk more of their capital on homegrown SMEs. As is seen throughout the Middle East and North Africa (MENA) region, venture capital in Tunisia is under-developed and banks are reluctant to lend to recent start-ups. Because of this, SMEs often rely on support from the government, which has stepped in with initiatives such as state-sponsored technopoles, where business incubators are offered for the most promising companies.
The technopole strategy has been of some success in recent years. El Gazala, a park established in 1999 and located on the outskirts of Tunis, has attracted a number of multinational companies, as well as offering facilities for local SMEs. Since 2002, employment in the centre has more than doubled, from 517 to 1282 in 2007.
Despite these gains, there are still challenges for SME development. For example, many small businesses tend to cluster around the Berges du Lac area of Tunis, where a number of foreign multinationals have based their offices. However, shortages of commercial space mean the majority of companies are forced to lease and convert residential property. This makes expansion difficult and has a retarding effect on employee growth.
In an effort to remedy this, the government has encouraged new thinking. One example is the NIDA Outsource Centre, in which the government has a 32% stake, a business park dedicated to offshore services located near El Gazala. In the first phase, NIDA plans to establish 2000 sq metres of office space by the end of the year on a fairly modest 3-ha site. The project hopes to break the mould of office development in Tunisia by providing large open plan office spaces that can be easily expanded, in the hope of attracting offshore FDI. If successful, the model is likely to extend to other technopoles in Tunisia.
Already known as a business-friendly destination, Tunisia attracted a record $1.6bn in FDI in 2007, up 74% on the year before. With targeted measures to boost SMEs from both the government and external sources such as the EIB, this figure looks set to steadily increase in 2008.
The push to further develop Tunisia's small and medium enterprises (SMEs) has been given a welcome boost by the European Investment Bank (EIB).
The EIB announced on May 8 that it would make funds of 200m euros available to the SME sector, which has long been identified as a key driver of economic growth, and has seen strong success in attracting foreign direct investment (FDI). The loan is part of the bank's Facility for Euro-Mediterranean Investment and Partnership (FEMIP) programme to "stimulate the private sector [...] and help Tunisian companies adjust to the increased competition resulting from the liberalisation of the economy and the progressive implementation of the free trade agreement with the European Union".
Together with a 60m euro loan to the Tunisian Electricity and Gas Company (STEG) to support the development of a natural gas network, announced the same day, the new loans bring the total funds granted to Tunisia by the EIB since 1998 to 705m euros.
SME development is a priority for the Tunisian economy, both in terms of employment generation and growth. While in certain sectors a high number of small companies may indicate a lack of integration and consolidation, in high value fields such as information technology (IT), SMEs represent dynamic local growth and provide the types of specialised services that create an attractive business environment.
Compared with neighbouring Morocco, Tunisia attracts a high percentage of small foreign investments. During the period between 2003 and 2005, 84% of foreign investments in Tunisia were below 50m euros, compared to 76% in Morocco. The size of companies also tends to be smaller in Tunisia - 30% are SMEs with fewer than 500 employees, compared to only 21% in Morocco.
While at first glance bigger always seems better, Tunisia's success at attracting smaller scale investment in many ways reflects its positive business environment: sometimes countries attract only large investors because smaller ones cannot negotiate the bureaucratic hurdles to entry. In FEMIP's own words, the private sector is "the engine of sustainable growth", and SMEs are often the initiators of such growth.
FEMIP's money will be distributed through five Tunisian banks - Amen Bank, Arab Tunisian Bank, Banque de l'Habitat, Banque Internationale Arabe de Tunisie, and l'Union Bancaire pour le Commerce et l'Industrie. The funds are designed to encourage Tunisian banks to risk more of their capital on homegrown SMEs. As is seen throughout the Middle East and North Africa (MENA) region, venture capital in Tunisia is under-developed and banks are reluctant to lend to recent start-ups. Because of this, SMEs often rely on support from the government, which has stepped in with initiatives such as state-sponsored technopoles, where business incubators are offered for the most promising companies.
The technopole strategy has been of some success in recent years. El Gazala, a park established in 1999 and located on the outskirts of Tunis, has attracted a number of multinational companies, as well as offering facilities for local SMEs. Since 2002, employment in the centre has more than doubled, from 517 to 1282 in 2007.
Despite these gains, there are still challenges for SME development. For example, many small businesses tend to cluster around the Berges du Lac area of Tunis, where a number of foreign multinationals have based their offices. However, shortages of commercial space mean the majority of companies are forced to lease and convert residential property. This makes expansion difficult and has a retarding effect on employee growth.
In an effort to remedy this, the government has encouraged new thinking. One example is the NIDA Outsource Centre, in which the government has a 32% stake, a business park dedicated to offshore services located near El Gazala. In the first phase, NIDA plans to establish 2000 sq metres of office space by the end of the year on a fairly modest 3-ha site. The project hopes to break the mould of office development in Tunisia by providing large open plan office spaces that can be easily expanded, in the hope of attracting offshore FDI. If successful, the model is likely to extend to other technopoles in Tunisia.
Already known as a business-friendly destination, Tunisia attracted a record $1.6bn in FDI in 2007, up 74% on the year before. With targeted measures to boost SMEs from both the government and external sources such as the EIB, this figure looks set to steadily increase in 2008.
© Oxford Business Group 2008
