Country drops three places in investor-protection rankings

Tunisian Constituent Assembly Economic magazine Doing Business’ 2013 ranking of countries in terms of investors’ protection put Tunisia three places below its 2012 position, moving it from 46th to 49th. The report came out as former finance minister Hussein al-Dimassy warned against the collapse of the Tunisian dinar which he said may happen due to the forecast severe budget deficit caused by extreme salary hikes in the public sector.
Former President of Tunisian Financial Market Council Farid al-Qibbi blamed the ranking failure on the long absence of any real and effective reforms aimed at advancing and developing the Tunisian finance market.
The Doing Business ranking is made using several criteria pertinent to the organisation of local project. Among these criteria is the measure of a country’s ability to complete projects. Tunisia came 66th in this ranking, losing 10 places. The country also slipped five places in the ranking of state copyright policies, coming in at 70.
Hussein al-Dimassy predicted huge deficit in the 2013 budget due to the rise in public-service salaries, which he said would further complicate Tunisia’s economic and financial situation. He also warned of the possibility of the collapse of the Tunisian dina. Al-Dimassy expressed concern that the current social climate in his country “could only lead to a disordered economy.” Also referring to the “serious economic crisis” that many countries face now, he said Tunisia will not be an exception.
In other news, the Tunisian Central Bank has decided to maintain the interest rate, leaving it at 3.75 per cent. The bank board described this decision as “difficult,” and justified it as a response to the continued pressure on the country’s budget. These pressures, according to the bank board, are caused by the continued increase of deficit of current payments coupled with the decrease of hard-currency assets. This in addition to the worsening inflation which rose from 5.6 per cent in August to 5.7 per cent in September.
The Central Bank had raised the interest rate by 25 basis points to 3.75 per cent on August 25. The Governor of the Central Bank had also promised last month to raise the interest rate by 25–50 bp to combat inflation.
These fears come at a time when the government is preparing next year’s highly controversial budget, which raises the tax ceiling. Import duties on cars are expected to rise by as much as 25 per cent while travel exit tax is expected to go from 60 dinars to 100, the equivalent of around 65 per cent.
The finance law for 2013 is almost set to impose registration duties on contracts and agreements while removing stamp duties. The law will also create a subsidy tax to be levied on income-tax payers at a percentage of 1–3 per cent. A new tax of one dollar per night will also be imposed on guests staying at Tunisian hotels.
The 2012 finance law had also created new taxes that included on sports betting and mobile phone top-up cards with the aim of increasing the state’s income from tax.
The state budget for 2013 is expected to be around 26.342 billion dinars, in comparison with this year’s 25.401 billion, with an increase of 3.1 per cent.
Deputy Finance Minister Selim Bisbas had announced the government’s intention to achieve a 4.5 per cent growth rate in 2013 in comparison with the 3.5 per cent rate sought this year. He also said that the government intends to reduce deficit from 6.6 per cent in 2012 to 5.9 per cent in 2013.
The provisional government has also proposed a rise of alcohol duties in the 2013 finance law bill, with the Prime Minister saying that this hike will put $100 million dollars in the government’s coffers. The bill also proposes a 1 per cent sales tax increase for nightclubs, cafés, restaurants and refreshments shops.
A Finance Ministry official has revealed that the new bill begins subsidy reform in Tunisia through setting new procedures and provisions for those with higher incomes who take advantage of state subsidies alongside the poor and needy. These measures, he says, aim at better subsidy control and ensuring that it benefits those who need it.
The text of the bill shows that state revenues from new taxes will come up to 315 million dinars split into 125 million set to be dedicated to providing additional resources to cover the deficit for the benefit of the General Compensation Fund. The financial reflection of the tax provisions, however, will be around 191 million dinars, the equivalent of $120 million.
Among the measures proposed in next year’s bill, is alteration to the rent tax system, as well as hikes in child support duties, real estate sales tax, company registration tax among others.
For his part, Prime Minister Hamadi Jebali promised to intensify efforts to support public debt funding through conforming to international standards while also reviving the secondary money market for treasury bonds. These measures, he said, should activate effective mechanisms for assessing portfolios in line with market prices. A great deal of effort is being expended in the area, he said, as a number of institutions try to fulfill their financial needs, particularly in the competitive sectors.
The Prime Minister, speaking at the inauguration of the first stock exchange and financial services show INVESTIA 2012, stressed the importance of creating a suitable climate for investment given the economic and social transformations that Tunisian institutions are undergoing. Only through these measures, he said, is it possible to create wealth and absorb unemployment. “It is on the basis of these assumptions that we will intensify efforts to improve the climate for business.” He called on financial market professionals to exert more effort in spreading awareness of the Tunisian market, advising institutions and use their innovation and creativity to help Tunisia develop its activities.
The Tunisian Constituent Assembly (parliament) is expected to discuss the budget at the beginning of December.