Interview Zied Lahbib « The post-Covid attractivity of the Tunisian site will be mainly supported by innovation »

Zied Lahbib, an economist specialized in FDI, is now the general promotion director of the Invest In Tunisia Agency, or « FIPA-Tunisia. » From the resilience of Tunisian companies to face the current crisis to the necessity to focus on Africa, Zied Lahbib explains Tunisia’s competitive assets and draws a painting of what will be its position in the post-Covid era.

 Interviewed by Dounia Ben Mohamed

What are FIPA’s missions and its strategy to promote the Tunisian platform? 

The FIPA is an agency that promotes Tunisia’s investment through its offices abroad, and its headquarter in Tunis. For 25 years, we aim to find new potential investors. In the beginning, our strategy was to focus on the general promotion thanks to events in Tunisia or worldwide to present the country and its assets. A way to promote Tunisia abroad. For the past five years, we focus on direct prospection. In other words, we work upstream, and we target companies to propose personalized work. We saw, after a while and an evaluation, that there were more returns on investment.

How do you adapt this strategy to the actual context of the pandemic? 

It is true, part of our job is direct prospection. Since the beginning of the lockdown and what followed, we work predominantly to ensure the successful completion of foreign investors’ activities. The idea was to secure foreign companies’ activities in Tunisia and guarantee their exports. This is one of our primary jobs in Tunisia. We set up a crisis cell, from the beginning, directly in contact with foreign companies, that received a satisfaction rate of 96%. The main issue is always foreign companies. We have 3600 of them in Tunisia, and they generate 407 000 jobs. This is really important.

Did you manage to keep their presence and activities in Tunisia and so save jobs? 

We indeed observed a decrease in the FDI volume of 26,4% against the nine first months in 2019. This number can be put into perspective since the CNUCED predicts a reduction by 40 to 50% of FDI globally.

Furthermore, we didn’t observe, for now, foreign companies closing directly because of the pandemic. This is important. Some people were laid off temporarily; it is true. There has been a substantial decrease in exports in the mechanical engineering, electrical and electronics sectors. Countrywide, we recorded a reduction of more than 15% for the nine first months, counting every company, and some of them are foreign. It has been critical for some sectors like aeronautic components that had a substantial growth thanks to Airbus’ subsidiary Stelia and its subcontractors. The aeronautic component cluster south of Tunis was developing considerably since the arrival of Stelia. It has been a real success. Mechanical engineering, electrical, and electronics sectors are the central part of our trade surplus with France, for example. During the nine first months of the year, we have a trade surplus with France of 2,56 billion dinars, 800 million euros. Those sectors perform with textile, computer services, and activities linked to innovation.

The decrease in export volume in the manufacturing industry is mainly due to the lowest demand from Europe.

The crisis revealed the resilience of the Tunisian economy with sectors like IT. Can we talk today about an economic recovery with activities that raised thanks to the crisis?

It is true. We saw it. Even if the innovation ecosystem slowly evolves, we saw our startups work abroad. The arrival of the Startup Act boosted this tech and innovation ecosystem. A crucial element of the startup Act, the law was created thanks to a partnership between public and private stakeholders. This approach could inject a new dynamic. The democratic transition is evolving in confusion, notably in some regions, but it offers a positive base. And this transition is the base of this new dynamic, and it will be the base of an inclusive and sustainable economic growth. To come back to the pandemic, indeed, we saw startup get engaged in CSR, with initiatives like the one of Enova Robotics, and other experiences like 3D design for paramedical, companies both Tunisian and foreign, and it is in accord with the spirit and tendencies that will generate this crisis at the medium and long term.

What are the most attractive sectors today? The one which could support this economic recovery? 

The good news is we are in accord with the sectorial tendencies that have been the most resilient and will become strategic. For example, pharmacology, paramedical, food, IT services, environment. This crisis forces us to refocus on people, and this is the Tunisian DNA. Engineers, diploma of higher education are recognized, there are considerable investments in demanding fields training. We were ranked 8th in the Global Innovation Index in the percentage of the GNP invested in education, the first country of North Africa. We are in the top 5 concerning countries with the highest rate of engineers and scientists comparing to other graduated people. The post-Covid position of Tunisia will be mostly supported by innovation.

There is a considerable amount of sectors in which the Tunisian expertise has been revealed with the crisis. This country trains 6000 engineers per year but can’t absorb them in the labor market. Nevertheless, it is essential for Africa since there is a lack of those skills. 

We must do a benchmark. Some of our close competitors invest in Africa thanks to financial services, banks, and regular lines, and their companies operate in Africa, which is fundamental. But innovation and IT allows us to win markets without moving.

Some startups like Instadeep operate in Africa. Instadeep is a company working on AI and is among the 100 most promising companies in the sector. It is operating in Nigeria in South Africa and has this will to develop across the continent. It is also the case of OXAHOST, a startup specialized in web hosting that just opened a branch in Abidjan.

The startup Act gave more visibility to Tunisia, in French-speaking countries, and English-speaking countries. What will help now are free trade agreements. What has been done with the ECOWAS, what will happen with the COMESA will concretize projects. There is this opening we need to exploit and focus on the continent. There is sensibilization in the private sector with initiatives like the TABC that highlights Africa. But it is true; it is small step.

Another sector performing in Africa is pharmacology, especially the production of generic drugs and the Kilani group, which has a subsidiary in Cameroon Teriak. We also can talk about SAIPH, hold at 98% by an Arabic fund located in Tunisia, that opened a plant in Ivory Coast, SAIPH Ivoire… Tunisian skills are also appreciated in Africa in engineering or construction activities.

After a revolution, regional complication, a global pandemic… Tunisia still gets by, and there are more and more Tunisian success stories around the continent. What is the key to this resilience, and how do you use it to promote the made in Tunisia? 

The lockdown costs us money, mainly because of a lack of tax revenues. We experienced a decrease of 20% in tax revenues because of support to companies. That being said, it is true we do a lot of self-flagellation for ten years. Everybody lives his daily life without managing to project. We need to convince ourselves we will get results from our current reforms. Concerning resilience, we have an inflation rate that doesn’t exceed 5% on average for the past ten years, while in countries around the Mediterranean Sea, this rate is over 10! Like the weak growth rate recorded for the past ten years, other macro-economic aggregates must be put into perspective with the changes Tunisia lived during this decade.

There is a dynamic, and the private sector boosts Tunisia with foreign or Tunisian companies. The first challenge is to include every Tunisian region in this economy. Some challenges could be face thanks to our young startups performing abroad and innovations that upscale numerous jobs in the textile, mechanical engineering, electrical, and electronics sectors with R&D centers and a will to perform in niches with a high added value.

This innovation is supported by the youth and the flexibility companies showed during the crisis. The pandemic will strongly affect our way to conceive our economic development, and one of the challenges will be for some companies to manage their industrial reconversion. For example, companies working in hat design convert into mask production. Same for the medical suits, or protection element for hospitals. This agility is essential.

To conclude, the AfCFTA goes on. What opportunities for Tunisia?

The African Continental Free Trade Area that Tunisia (AfCFTA) ratified in July 2020 will ease services and good exchanges in the whole continent starting January 2021.

We can only be an export land. This is the advantage and the inconvenience of Tunisia, a small market. Companies need to target outside the borders because we can’t reach a critical size, with fewer than 12 million consumers. For companies that want to expand and perform, the reflex is to go abroad and, even if it is small step, toward Africa. The configuration of Tunisia will push this continental orientation. Even with the FIPA, we try to promote, especially since we got into the COMESA, those three-part partnerships with Europe, Africa, and Tunisia. Actions like TABC are getting stronger. There is a will of the government to support this tendency.