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OCCASION This publication has been made available to the public on the occasion of the 50th anniversary of the United Nations Industrial Development Organisation. DISCLAIMER This document has been produced without formal United Nations editing. The designations employed and the presentation of the material in this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. Designations such as “developed”, “industrialized” and “developing” are intended for statistical convenience and do not necessarily express a judgment about the stage reached by a particular country or area in the development process. Mention of firm names or commercial products does not constitute an endorsement by UNIDO. FAIR USE POLICY Any part of this publication may be quoted and referenced for educational and research purposes without additional permission from UNIDO. However, those who make use of quoting and referencing this publication are requested to follow the Fair Use Policy of giving due credit to UNIDO. CONTACT Please contact [email protected] for further information concerning UNIDO publications. For more information about UNIDO, please visit us at www.unido.org UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Vienna International Centre, P.O. Box 300, 1400 Vienna, Austria Tel: (+43-1) 26026-0 · www.unido.org · [email protected] U 11= 11.8 1.25 V- I-'1 Original Version written in German 11052. Industrial Redeployment from Developed to Developing countries. A Case Study on the Experiences of Tunisia in International Subcontracting. by Institute of Development Research and Development Policy Ruhr-University Bcchum Author: Faouzi A3ED Bochum, January 1981 Federal Republic of Germany Study prepared on the behalf of the United Nations Industrial Development Organization. Vienna/Austria. Project No. UF'/GLO/78/220 I CONTENTS Chapter Page Introducery Remarks 1 A. International Subcontracting as a Form of Industrial Redeployment 5 1. Concepts and Definitions 5 2. Types of International Subcontracting 8 3. International Subcontracting: Motivations and Objectives of Developing Countries 10 B. Basic Information on Tunisia 14 1. A Brief Survey of the General Situation of the Country 1 4 2. Tunisia's Various Phases of Development since its Independence 1 5 3. Population 15 4. Production 19 5. Transport System 20 6. Labour Market 21 7. National Income 22 8. Investments 23 9. Foreign Trade 24 10. Balance Of Payments 25 11 • Debt Servicing 25 II Chapter Page C. The Pre-Requisites for International Sub contracting in Tunisia 27 1. Legal Background 27 2. Other Factors and Incentives 33 D. Forms of International Subcontracting in Tunisia E. Quantitative and Qualitative Effects of International Subcontracting in Tunisia 46 1. Quantitative Effects 46 1.1. Investments and the Number of Firms Established 46 1.2. Employment 52 1.3. Effects on the Balance of Payments 55 2. Qualitative Effects 59 2.1. Technical Aspects 59 2.2. Interaction between Principal and Subcon tractor 67 2.3. Industrial Diversification 70 2.4. Regional Diversification 71 2.5. Linkage Effects 7 3 2.6. Transfer of Technology 7 5 F. Conclusion 81 Brief Summery of the Results of the Questionnaire 85 Appendix I - Statistics Appendix II - Questionnaire Appendix III - Laws No. 72.38 and 74.74 Bibliography 12 2 Ill Abbreviations Afl Agence foncière Industrielle API Agence de Promotion des Investissements 3. • S • O • and so on app. appendix approx. approximately BfA Bundesstelle für Außenhandelsinformation BCT Banque Centrale de Tunisie CEPIA Centre Français de Promotion Industrielle en Afrique c f . compare DEG Deutsche Entwicklung für wirtschaftliche Zusammenarbeit (Entwicklungsgesellschaft) DM Deutsche Mark e. g. for example etc. et cetera Foprodi Fond de Promotion e.t de la Decentralisa tion Industrielle GDF Gross Domestic Product GNP Gross National Product i.e. that means IS International Subcontracting TD Tunisian Dinar Parity 1 Tunisian Dinar = 1 000 Miliimes 1976 1977 1978 1 Tunisian Dinar = 2.36 0 2.33 $ 2.44 ^ 1 Tunisian Dinar = 5.69 DM 5.26EM 4.54 CM IV List of Tables (Joint to the Text) Page Table 1 : Industrial Zones 38 Table 2: List of Tunisian Enterprises partly engaged in International Subcontract ing 44 Table 3 : Classification of Export Enterprises according to Nationality 45 Table 4: The Distribution of Approved and Realized Investments within the Frame work of Law 72.38 by Industrial Sec tors in 1973-75 (in TD) and 1976 (in Million TD) 48 Table 5 : Approved and Realized Investments and Projects in 1977 by Sectors in TD 49 Table 6: German Investments in Tunisia (per the end of 1977) in Million DM 50 Table 7 : Total Investments and Foreign Con tribution within the Framework of In ternational Subcontracting in Tunisia between 1973 and 1977 in Million DM 51 Table 8 : Distribution of Export-oriented Enter prises according to Sectors and Em ployment 54 Table 9: Distribution of Projects by Sectors 64 Table 10: Distribution of Projects of the Tex tile- and Clothing Industry according to the Forms of International Sub contracting 65 Table 11 : International Subcontracting xn Tu nisia. Main Type of Production 66 Table 12: Regional Distribution of Industrial Projects 72 V * List of Tables (Joint in the Appendix) Table 1 : Index of Industrial Production Table 2: Production Index: Manufacturing Industry Table 3: Production of the Mining Industry Tabl ; 4: Production of the Chemical Industry Table. 5: Production of the Mechanical and the Electrical Industry Table 6: Ship-Movements in All Five Tunisian Ports Table 7: Growth of Employment Table 8: Development of the Minimal Wages since January 1974 Table 9 Development of the GDP by Sectors Table 10 GDP, GNP and Personal Per Capita Income Table 11 Decomposition of Total Investments by Sectors Table 12 Terms of Trade Table 13 Import by Groups of Products Table 14 Export by Groups of Products Table 15 Ealance of Payments, 1977 and 1978 - Comparative Survey Table 16 Statistics of Internal Monetary Policy Table 17 Import and Export of Textiles Table 18 Balance of Payments 1 I. Introductary Remarks 1. Objectives of the study For the past few years, the uncertainty surrounding the development strategies to be adopted by developing coun tries has increased rather than decreased. On the one hand, it is suggested that developing countries should adopt a strategy of far reaching disintegration from the world economy wh?.:eby a domestic market oriented development strategy on the basis of self-sufficiency through domestic production plays a crucial role. The advocats of this idea warn of the danger of an ex ternal tr?de orientation which leads - among other things - to alienation and foreign dependence of the local economy. On the other hand, Third World countries are advised to pursue a strategy of further integration into the world economy in order to abolish certain specific factors, hindering the development, and others forcing underde velopment. In that connection, foreign enterprises as conveyors of technology and owners of capital are of de cisive importance. Through this strategy, relatively high rates of growth and industrialization have been achieved in countries like South Korea, Taiwan, Hong Kong, Singa pore, Brazil, Mexico and others. Attention is drawn to these countries in order to demonstrate the obvious 2 efficiency of the suggested development strategy, at least in the economic sector. Since the beginning of the seventies, Tunisia has follow ed an outward looking development strategy, characte rized by export-orientation within the framework of an in ternational redeployment and esp. of international sub contracting. By passing the Laws No. 72.38 and 74.74, which offer them special privileges , foreign private investments are officially encouraged. These foreign en terprises appear within the framework of international sub contracting either as producers (subsidiaries) or simply as contractors for the production of particular products. The objective of this study is to survey the qualitative and quantitative effects and the development contribution of international subcontracting in Tunisia since inter national subcontracting is one of the country's instru ments of development. In this sense, it is not the objec tive of the present study to propose an alternative de velopment model for Tunisia. 2. Organisation and Methodology of the Study With regard to the ambiguity of the concept of interna tional subcontracting , which is being employed increas 3 ingly in recent scientific literature, it seems necessary to obtain a survey of the definitions of international subcontracting (IS) as well as its forms and development (Chapter A). Chapter B deals with general economic information on Tuni sia and with the development phases passed through by the country since independence.- Chapter C serves to portray the legal framework of IS and the objectives envisaged by its encouragement in Tunisia. In addition, the existing forms of IS in the country will be listed and systematically presented (Chapter D). Chapter E in which the quantitative and qualitative effects of IS will be analysed with emphasis being lai/* upon the economic effects, is with no doubt the most important chapter of the study. For the purposes of the study, the material was compiled from four sources: - the collection of theoretical information and empirical data relating to international redeployment and inter national subcontracting; - the collection of general informations on Tunisia; - the analysis of results of studies having dealt with Tunisia and other developing countries within the frame work of IS. Verification of empirical results as far as Tunisia is concerned; - a field survey, consisting of interviews with 30 inter national -subcontracting enterprises as well as discussions 4 with representatives or employees of local institutions and ministries. (A sar.ple of the questionaire is ad^ed in the appendix.