Ghazi Meziou, Associate Lawyer, Meziou Knani & Khlif: Viewpoint

Viewpoint: Ghazi Meziou

Adopted by Parliament in April 2019, Law No. 47 of 2019, also known as the Transversal Law, aims to improve the business environment in Tunisia. This law is seen as part of a wider comprehensive investment framework reform that started in 2016 with the promulgation of the New Investment Law. The Transversal Law includes a set of modifications to several laws currently in force. Its primary objective, as described in the law’s first article, is to promote investment and improve the business climate in Tunisia by simplifying the procedures for setting up businesses, facilitating access to finance, improving corporate governance and boosting transparency.

While the effort is commendable, the results thus far have been debatable. The Transversal Law brings undeniable improvements to certain aspects of the current business environment, such as the prohibition of administrations to request documents already made available or issued by a Tunisian administration; the obligation for transparent, simplified and swift administrative action; the possibility for a company to be the sole shareholder of a one-person limited liability company (which formerly was only open to natural persons); strengthened minority shareholder rights; simplified and accelerated procedures for the status change of agricultural lands in the case of a direct investment; eased public-private partnerships regulations; and simplified self-generation conditions.

Unfortunately, most of these improvements are either anecdotal or sectoral. As a result, it is unlikely that the Transversal Law will effectively promote international nor domestic investment in Tunisia. In fact, there remains fundamental and broader actions to pursue. For instance, agricultural land and foreign exchange regulations are in urgent need of a revision. In the case of foreign exchange, several successive reforms were passed, some of which gave concrete results. However, the numerous constraints related to foreign exchange legislation and the often obscure or interpretable wording of various governing texts have given rise to a climate of insecurity, which is a major deterrence for some investors.

In addition, despite the recently observed tendency of the Central Bank of Tunisia (Banque Centrale de Tunisie, BCT) to respond more positively and more frequently to authorisation requests, obtaining approval from the BCT remains a lengthy process. Moreover, the foreign exchange regulations restrict the ability of Tunisian companies to take advantage of international digital payment solutions. This hinders the country’s economic integration into the global system. The same restrictions affect a company’s ability to internationalise and invest abroad. Lastly, the foreign exchange regulations are an obstacle to the establishment of financial instruments that allow investors to hedge themselves against currency risks.

Moreover, the majority of Tunisian land has been classified as agricultural, which cannot be owned by foreigners. Repealing the land ownership ban on agricultural fields for foreigners or allowing foreigners to claim a minority share in companies holding farmland may have been more effective in attracting investors than establishing a faster way to convert land deemed as agricultural into non-agricultural land under the Transversal Law. This is an important issue considering that a significant portion of Tunisia’s industries is operating on farmland. As a result of these ownership restrictions, the level of foreign investment in Tunisia is modest. Indeed, in the case of a greenfield or brownfield investment, foreign investors have to deal with cumbersome legal arrangements, which can be discouraging and lead them to direct their assets elsewhere.

Lastly, the Transversal Law has not completed the liberalisation of foreign direct investment, particularly in the distribution and retail sector, which would benefit the economy as a whole. These developments are not only desirable but inevitable in the medium term.