Tunisia Advancing Tunisia's Global Integration
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Report No. 88361-TN Report No. 88361-TN Tunisia Advancing Tunisia’s Global Integration Reforms options in the context of deeper integration with the EU (In Two Volumes) Volume I: Main Report June 25, 2014 Poverty Reduction and Economic Management Department Middle East and North Africa Region Tunisia Advancing Tunisia’s Global Integration Tunisia’s Advancing Vol. I Vol. Document of the World Bank Currency Equivalents (Exchange Rate Effective June 25, 2014) Currency Unit = Tunisian Dinar (TND) 1 TND = 0.594 USD 1 USD = 1.68 TND Fiscal Year January — December Abbreviations and Acronyms AA Association Agreement LAC Latin American Countries AfDB African Development Bank MAD Moroccan Dirham AMU Arab Maghreb Union MENA Middle East and North Africa Association of Southeast Asian Mercado Comun del Cono Sur ASEAN Nations MERCOSUR (Southern Cone Common Market) ATI Agence Tunisienne d'Internet MFN Most Favored Nation North-American Free-Trade BITs Bilateral Investment Treaties NAFTA Agreement BPO Business Process Outsourcing NTM Non-tariff measures Caribbean Group of African, Organization for Economic Co- CARIFORUM Caribbean and Pacific (ACP) States OECD operation and Development Centre for the Promotion of CEPEX Exportations ONTT Office National du Tourisme Tunisien CGE Computable General Equilibrium PAFTA Pan-Arab Free-Trade Agreement Deep and Comprehensive Free Trade DCFTA Agreement PPP Public Private Partnerships E&Y Ernst & Young PTA Preferential Trade Agreement EFTA European Free Trade Association PwC PricewaterhouseCoopers ENP European Neighborhood Policy R&D Research and Development Société Centrale pour l’Equipement du EU European Union SCET Territoire FDI Foreign Direct Investment SMEs Small and Medium Enterprises Foreign Investment Promotion FIPA Agency SOE State-Owned Enterprises FTA Foreign Trade Agreement STUDI Société Tunisienne d’Ingénierie Strengths, Weaknesses, GAFTA Greater Arab Free Trade Agreement SWOT Opportunities, and Threats General Agreement on Trade in Trade and Investment Framework GATS Services TIFA Agreements GCB General Compensation Unit TIVA Trade in Value Added GCC Gulf Cooperation Council TND Tunisian Dinar Trade Analysis and Information GDP Gross Domestic Product TRAINS System General Agreement on Government United Nations Conference on Trade GPA Procurement UNCTAD and Development IMF International Monetary Fund USD United States Dollar KPO Knowledge Process Outsourcing WBG West Bank and Gaza WTO World Trade Organization i Vice President: Inger Andersen Country Director: Simon Gray Sector Director: Bernard Funck (Acting) Sector Manager: Bernard Funck Task Team Leader: Daniela Marotta ii Table of Contents ABBREVIATIONS AND ACRONYMS................................................................................................................I EXECUTIVE SUMMARY ............................................................................................................................ VI 1. OVERVIEW ....................................................................................................................................1 1.1 Motivation ..................................................................................................................................... 1 1.2 Reforms options for deepening integration with the EU ............................................................. 3 1.3 Benchmarking Tunisia’s global integration ................................................................................... 5 1.4 Estimating the effects of deeper integration for Tunisia ............................................................ 10 2. SERVICES LIBERALIZATION AND DEEPER INTEGRATION WITH THE EU: REFORMS OPTIONS ................................. 13 2.1 Key regulatory reforms to remove barriers to trade and investment in services in Tunisia ...... 13 2.2 From Rents to Competition: Unleashing Tunisia’s Services Trade Potential in a Context of Deeper Regional Integration ................................................................................................................... 14 2.2.1 Tunisia’s structural underperformance in services trade ................................................... 16 2.2.2 The role of services and services trade in Tunisia’s overall economic performance .......... 20 2.3 The Role for Unilateral Reforms and Regional Trade Integration .............................................. 28 2.3.1 Using regional trade integration to achieve Tunisia’s services “revolution” ...................... 31 2.3.2 A focus on the negotiations with the EU: challenges and prospects .................................. 32 2.4 Reforming the Services Sector: What Has Been Done, What Remains to Be Done, and How it Should Be Done ....................................................................................................................................... 36 a. Putting in place an institutional framework for services trade promotion ................................ 37 b. Improving business environment ............................................................................................... 38 c. Increasing the benefits from the movement of services providers .............................................. 39 2.5 Conclusions ................................................................................................................................. 41 3. COMPETITION POLICY AND REFORMS OPTIONS IN THE CONTEXT OF DEEPER INTEGRATION WITH THE EU ............. 43 3.1 Background ................................................................................................................................. 45 3.2 Status of the competition in the Tunisia market: an overview .................................................. 46 3.3 The EU – Tunisia relationship on competition matters .............................................................. 52 3.4 Shortcomings of the competition policy framework: the competition law ............................... 55 3.4.1 Competition law contains broad exclusion and exceptions to its application ................... 56 3.4.2 Shortcomings of the institutional set up............................................................................. 59 3.4.3 Enforcement weaknesses ................................................................................................... 60 3.4.4 Due Process and parties’ guarantees .................................................................................. 65 iii 3.4.5 Lack of competitive neutrality between state-owned enterprises (SOEs) and private companies. .......................................................................................................................................... 68 3.4.6 Lack of State Aid framework. .............................................................................................. 69 3.5 A Roadmap for reforms options in the context of deeper integration with the EU ................... 70 4. THE LEGAL FRAMEWORK FOR OPENING TUNISIA PUBLIC PROCUREMENT TO INTERNATIONAL MARKETS IN THE CONTEXT OF REGIONAL TRADE AGREEMENTS. .............................................................................................. 73 4.1 International Framework on Access to Public Procurement ...................................................... 73 4.2 Tunisian Policy for Providing Foreign Companies Access to Tunisian Procurements ................. 76 4.3 Importance of Access to Procurement in the Agreements Signed by Tunisia ............................ 78 4.4 Procurement Provisions in the Agreements Signed by the EU ................................................... 80 4.5 Procurement Policies in the Agreements Signed by the United States ...................................... 84 4.6 The simultaneous Negotiations between the European Union and the United States May Drive the Adoption of Dissimilar Policies ......................................................................................................... 86 4.7 Conclusions ................................................................................................................................. 86 5. CONCLUSIONS .............................................................................................................................. 88 6. REFERENCES ................................................................................................................................90 List of Figures Figure 1.1A Bilateral trade costs for Tunisian products .............................................................................. 6 Figure 1.1B Bilateral trade costs for Tunisian products .............................................................................. 6 Figure 1.2 Bilateral trade costs to the world (manufactures) .................................................................. 7 Figure 1.3 Bilateral trade costs to the world (agriculture products) ........................................................ 7 Figure 2.1 A trade in services net surplus ............................................................................................... 16 Figure 2.2 Tunisia Net Trade in Commercial Services (million USD), 2004-13 ....................................... 16 Figure 2.3 Trade in Services as % of GDP, 2012 ...................................................................................... 16 Figure 2.4 A high dependency on travel and transport services ............................................................ 17 Figure 2.5 A relatively poor performance in other services ..................................................................