Tunisian Priorities. American Investments.
On November 15, 2011, OPIC President and CEO Elizabeth Littlefield delivered the keynote address at the Tunisia Partnerships Forum at the U.S. Department of State. “Tunisia is one of the oldest friends and allies of the United States and a model for the region,” she said, also noting that Tunisia today “is ripe with opportunity for investors.” The full test of her speech, Tunisian Priorities, American Investments, is attached below.
Tunisia has inspired a deep admiration from all corners of the world for sparking the Arab Spring and for how it has smoothly managed the transition that has followed. And although this is the lens through which many Americans and American businesses see Tunisia, the U.S. and Tunisia have a long and rich history of partnership and mutual support dating back over two-hundred years. Tunisia was among the first to recognize the Independence of the United States, and the U.S. and Tunisia concluded one of our very first trade agreements ever in 1799.
As we all know, two weeks ago, on Oct. 23, Tunisia successfully and peacefully concluded its first democratic elections in more than 50 years. In their protests and their elections, Tunisians have set an example for the rest of the Arab Spring countries. I believe that Tunisia can also set the economic example for the region, and OPIC is ready and eager to support this.
OPIC: Who We Are and What We Do
Many of you are familiar with the Overseas Private Investment Corporation, or OPIC. We are the U.S. Government’s Development Finance Institution. We help U.S. businesses gain footholds in emerging markets by providing the financing and risk mitigating tools they need to remove the barriers to investing. With current finance and insurance exposure of about $15 billion, we are diversified in some 100 countries. And we achieve our mission on a self-sustaining basis, earning income for the U.S. government every year.
At OPIC, we offer loans, guarantees, and insurance to big companies, small businesses, NGOs, individuals, diaspora entrepreneurs, and foundations investing in emerging markets. To give you some concrete examples, on the small end we provided over $3.5 million in loans and insurance for a U.S. small business run by a Turkish-American family to convert an historic building into a small hotel in Turkey. At the larger end, OPIC provided a $200 million loan guaranty to Hamma Water Desalination, sponsored by GE Ionics Incorporated, for a reverse osmosis seawater desalination facility that will provide potable water to 25 percent of the residents of Algiers through a joint venture with the state-owned Algerian Energy Company. And just last week, I approved a loan guaranty of some $50 million to a Tunisian-based private equity firm that will invest in SMEs in the Maghreb region, if approved by our Board. These are just a few examples but they illustrate the range and diversity of OPIC clients.
Immediately after the revolution in Tunisia, I travelled with Secretary Clinton to Tunisia and Egypt where we met with the interim governments, revolutionary leaders, civil society, and most memorably, the young people. Recognizing an urgent need for private capital to fuel economic growth and job creation, the Secretary announced that OPIC would commit $2 billion to support private sector investment in the Middle East and North Africa, including in Tunisia.
This financing is available to U.S. and Tunisian-American businesses and entrepreneurs who are seeking to invest in Tunisia and the broader region, especially in key sectors like the three we are highlighting today. In fact, we have already committed about $700 million.
Private businesses are of course what will drive the sustainable, broad-based economic growth and job creation that Tunisia needs most today. So let’s turn to the opportunities in Tunisia.
Opportunities in Tunisia
Tunisia is ripe with opportunities for investors. There are three reasons for this: Economic prospects, location, and a talented, business-friendly workforce. Last month, Bloomberg reported that Tunisia looks set to stage a faster recovery than the other Arab Spring countries.
IMF data have Tunisia growing by four percent in 2012, and more than five percent in 2013 – more than any other Arab country that experienced uprisings, including Egypt, Syria and Bahrain. So, economic prospects are strong.
Second, Tunisia is strategically located to serve as a regional hub and a platform for commercial engagement in Libya. It has demonstrated its commitment to its neighbors by opening its doors to fleeing Libyans during these difficult times. Moreover, Tunisia’s proximity to Europe has caught the eye of many investors in export-focused sectors, even energy exports. Third, Tunisia is a business-friendly country endowed with a talented, highly educated workforce. In a 2009 survey, 80 percent of respondents in Tunisia felt that their city or local area was a good place to start a new business (of course, it’s hard to imagine why anyone would say their city wasn’t).
Despite these opportunities, Tunisia is not on the radar screen or white boards of very many U.S. investors. At last count, Tunisia had an impressive 1,300 foreign investors, but only a mere 75 were U.S. companies. That means that only six percent of foreign investors in Tunisia are American.
Four Key Sectors
Today we are focused on four key sectors which have been defined as priorities by the Tunisian Government and private sector; Tourism, Franchising, Information Communications Technology (ICT) and Renewable Energy. These sectors are Tunisian Priorities that are ready for American Investments. I will touch briefly on each sector.
Tourism is the primary source of income in Tunisia: Anyone who has ever been there will quickly understand why. One out of every five Tunisians works directly or indirectly for the tourism sector. But, the number of tourists coming to Tunisia decreased by half after the revolution, and revenues are expected to decrease further this year by some 50 percent, meaning that many hard-working Tunisians have lost their livelihoods. But, given my own familiarity with Tunisia’s unique charms and location, I am confident that will turn around. Tunisia’s tourism sector powered economic growth and investment prior to the revolution, and there is even more potential for growth today, especially in the U.S. and other relatively new markets. Also, early fears that a victorious Ennahda Movement would impose restrictions on how foreign tourists dress on beaches or on their alcohol consumption have been rejected by the moderate Islamist party who also declared their support for business-friendly policies.
OPIC has established considerable expertise and a successful track record in the tourism sector. We have financed or insured the construction and operation of hotels and resorts from Afghanistan to Anguilla, from the green zone in Iraq to the banks of the Nile in Egypt. In fact, OPIC’s very first project in Tunisia, in 1974, was with the ITT Hotel Corporation of Tunisia for a Sheraton Hotel.
OPIC’s financial products are well-suited to this sector. Our long-term, patient financing and our ability to finance large amounts of $250 m or more are well suited for large projects like the construction of a hotel. We have also developed products like long-term subordinated debt to support investments in energy efficiency, which can have a huge effect on a hotel’s bottom line.
As I have discussed with the Tunisian Minister of Finance Jalloul Ayed, new international standard hotels could increase both business and tourism in Tunisia, supporting thousands of local jobs. Furthermore, an internationally-recognized American brand like Hilton or Marriot is invaluable to setting the stage for business travelers and tourists. The sector can also benefit from U.S. experience in developing business plans that maximize tourism dollars.
Second, there is high-demand for new American franchises in Tunisia. Recent changes to the franchising legislation have opened up a new market to foreign investors and now, franchise models are growing slowly but surely in Tunisia.
But, the purchase of a franchise requires significant upfront capital. Because many small, local entrepreneurs can’t access the credit they need to make this type of investment, franchises are out of their reach. To address this, OPIC is collaborating with the State Department to pursue the establishment of a franchisee lending program. This debt facility could provide working capital to Tunisian franchisees interested in working with American, European and Tunisian franchisors. We are currently seeking partners for this facility and attempting to secure the grant assistance that would be necessary to cover its operating costs.
Information Communications Technology (ICT)
Third, there is significant potential in Tunisia in Information Communications Technology. Tunisia already has one of the most developed telecom infrastructures in North Africa. There is a 3G mobile network that covers some 95 percent of the population. A Nationwide nationwide fibre optic backbone, coupled with some of the lowest broadband prices in Africa, has supported rapid development of the Internet sector. Tunisia also boasts higher-than-average rates of internet usage and more than double the world average of Facebook users. These statistics are fitting of a country that taught the world about the power of the internet and social media in fueling revolutions.
OPIC can support investments in ICT in Tunisia not only through traditional financing and insurance, but through support for private equity investment funds. In 2009, President Obama announced in Cairo that the U.S. would launch an investment fund to support technological development in Muslim-majority countries. So we issued a call for proposals and less than a year later, the OPIC Board approved $305 million for four investment funds specifically targeting the growth of technology in MENA.
However, the events of the Arab Spring have made it increasingly difficult for these funds to raise the private capital required before they can start lending and before OPIC can disburse. To address this, OPIC is developing an insurance product that can mitigate the risks U.S. investors face in OPIC-supported investment funds. OPIC is also taking the message of the importance of investing in MENA on the road. For example, this week in Silicon Valley OPIC is hosting a forum for investors on the many attractive investment opportunities in the MENA region.
Lastly, renewable resources is another sector in Tunisia that looks promising for investors. Currently, Tunisia generates less than one percent of its electricity through wind and solar – but the Tunisian Government knows this has to change. They recently proposed the $2.6 billion “Tunisian Solar Plan,” a public-private partnership with the goal of substantially enhancing the renewable energy sector by 2016. Notably, this plan calls on private investors to increase Tunisia’s overall installed renewable capacity through large-scale wind and solar projects. Estimates suggest that renewable capacity will increase from its current level of below 200 megawatts to 1100 megawatts by 2020.
This won’t be easy, but this is a promising initiative by the Tunisian government and a great opportunity for investors.
Working with OPIC
So now, having touched on the key sectors, let me tell you how you can partner with OPIC. We work primarily with U.S. businesses. These often aren’t the Fortune 100 companies because these large corporations are able to finance their investments off their own balance sheet.
Instead, we work mainly with small and medium sized businesses. This past year, nearly 90 percent of our committed projects (by number) involved small and medium sized businesses. We also increasingly partner with NGO’s, diaspora entrepreneurs, and foundations. Here are four things we look for in a project:
1. Significant U.S. involvement
2. Private capital
3. A financially sound business plan
4. A project aimed at sustainable development
In closing, Tunisia is one of the oldest friends and allies of the United States and a model for the region. It is home to a wealth of investment opportunities in tourism, franchising, ICT, renewable energy and other sectors, but U.S. investors are seriously underrepresented.
Whether you are a large company or a Tunisian-American entrepreneur, as long as you have a viable project, OPIC can offer the tools and financial products that make investments feasible and attractive.
As President Obama said about the MENA region before the Arab Spring, “many young people have a solid education, but closed economies [have left] them unable to find a job. Entrepreneurs are brimming with ideas,” but have nowhere to take them. Tunisia is forging its path to a future where this description no longer applies. And we are ready to help investors seize this opportunity.