Background

Thanks to an increase in investments and several years of sectorial reforms, Tunisia has relatively good infrastructure and transport services, among the best in the region. But in order to spur economic growth and meet international standards, the transport system still needs to be upgraded.

Transport chains underlying internal and external trade display additional costs attributable to lack of competition and delays. Currently, there is an extensive 20,000 km paved roads network and 360 km of freeways, 2167 Km of railways, seven commercial ports (in Tunis) with a capacity of 7600 ships/year (30 million tons of merchandise) and 9 international airports.

Policy Framework

Tunisia's Economic and Social Development Strategy (2012-2016) places great emphasis on infrastructure investment in the hinterland. The strategy calls for integrated development programmes for 100 priority délégations at the regional level and 100 urban zones and a multiyear investment programme to speed infrastructure development in these regions. It will focus on developing networks, in particular a motorways network, a high-speed telecommunications network and a network of gas pipelines linking all interior regions to the rest of the country.

Air freight and passenger transport services have been open to private initiative since 1996, but foreign investment in the sector is still limited to 49% of capital. Under the 2008 law on concessions, regulating private sector participation in public infrastructure and equipment projects, the legitimate rights of the concessionaire are guaranteed, including the right to deduct the value of buildings constructed before they revert to the public agencies and the right to claim damages for unjustified cancellation of the contract or failure to observe the required legal procedures and time limits. This regime also recognises the right of the concessionaire to exert ongoing supervision over operation of the public service, to be involved in setting prices to the consumer, and to review the contract clauses whenever the economic situation so demands.

Institutional and regulatory reforms are underway to establish a solid and sustainable framework for PPPs. Thus, the General Directorate of PPPs was created in October 2011 as part of the re-organisation of the Ministry of Finance. This new structure is tasked with:

• (i) modernising and adapting national regulations and supervising reforms in this area, planning for long-term needs and developing PPP models, particularly with international co-operation; and

• (ii) organising relations between operators and local governments on the basis of clear and strict rules, while seeing that competition requirements are respected.

On 23 May 2011, the transition government revised the legal framework for public procurement and issued a new decree to promote equal opportunities and access to public procurement to all businesses and increase the transparency of the system.

Transport infrastructure is regulated by a number of laws:

• Road infrastructure is regulated by the Decrees 87-654 and 87-655 and 17-720 for the construction of highways, the Decree 99-2318 regulates railways and the construction and operation of airports is regulated by the Civil Aeronautic Code enacted by law 2004-54 and 2005-84.

• Decree 2008-2965 of 8 September 2008 established a specialized institution serving as the Central PPP Unit, the Concession Follow-up Unit.

Challenges

The process of planning and evaluating investment projects in Tunisia is well-coordinated, but accelerating infrastructure development through private investment requires institutional changes and targeted capacity building in the public sector.

The responsibilities of key players in the PPP and concession landscape will need to be clarified once the draft PPP regime is enacted, and a "pipeline" of potential PPP projects (which is better integrated in national plans and budget programmes) will need to be elaborated. In addition the government will need to clearly communicate the expected private sector role in infrastructure, perhaps through a PPP Policy, so as to increase investor confidence and raise awareness of existing investment opportunities.

On the legal front, the legislative framework for private participation in infrastructure remains rather, but there is strong potential for greater clarity and for better guarding against the risks presented by concessions and PPPs. Indeed, following multiple revisions between 2002 and 2012 (at the risk of somewhat blurring the legal landscape for investors), the legal regime for concessions has been significantly clarified and condensed within the Decree n° 2013-4631 of 18 November 2013. This decree makes significant progress in many areas, including upstream project preparation and risk evaluation. The draft PPP law of 2013 and its two accompanying decrees are moreover very consistent with the provisions of Decree n° 2013-4631, which sets the basis for a smooth transition once the PPP law has been enacted.

Nevertheless possible areas for improvement include: better integrating the principle of Value-for-Money within the legal framework for PPPs and concessions; clarifying the distinction (if one must be made) between PPPs and concessions, as well as versus public procurement more broadly; developing standard guidelines and implementation manuals for use by contracting authorities; and greater emphasis on participation of SMEs in infrastructure project bids (whether by PPP, concession, or other forms of public procurement).

Other pending issues include:

• Macroeconomic challenges, including high deficit levels and unemployment rates

• Insufficient institutional capacity

• Regional disparities in infrastructure development

• Access to finance (relatively inefficient financial system)

• Monopoly in maritime passenger lines

• Overlapping of regulatory and operational functions of "L'Office de la Marine Marchande et des Ports" in maritime transportation and "L'Office des Aeroports et de L'Aviation Civile" in air transportation

• Decline in national savings and downgrade of sovereign debt rating

• Governance and corruption issues

• Requirement for foreign investors to obtain prior authorization if their equity holding would exceed 50% of the capital of companies in a relatively high number of sectors (land, air, maritime and pipeline transport are among the sectors subject to approval by the investment commission when foreign participation exceeds 50%)

• High levels of deficit

Project Pipeline

• Enfidha-Monastir Airport1

• Enfidha Deep Water Port

• Greater Tunis Ring Road

• Radès Logistics Zone