As much of the world celebrated Christmas at the end of December, a Saudi delegation flew to Tunisia bearing gifts. Specifically, they bore $1bn in investment.
When Saudi Minister of Industry and Mineral Resources Bandar Ibrahim Alkhorayef announced the sum, it sounded more like a gift to a struggling country.
In fact, the talks were serious, and the ideas real. Proposals were concrete, and the synergies were evident. Far from being a $1bn gift, these two countries drew up grand joint plans.
This was on display by the Saudi delegation, which included over 100 businessmen and investors accompanying the Saudi minister. That is a large contingent. And these were the decision-makers, too, not their underlings.
Saad Alkhalb, chief executive of the Saudi EXIM Bank; Hassan Al-Huwaizi, chairman of the Federation of Saudi Chambers of Commerce and Industry; and Omar Al-Ajaji, chairman of the Saudi-Tunisian Business Council, were among the high-profile businessmen.
The Saudi government's $1bn investment was aimed at encouraging and enhancing private investment in Tunisia. It was welcomed with great fanfare.
The Saudi government's $1bn investment was aimed at encouraging and enhancing private investment in Tunisia. It was welcomed with great fanfare.
Much needed boost
The North African country has seen a significant decline in internal and external investment indicators. It has been gradually losing its shine as an attractive destination for foreign money while also facing difficulties in financing its imports.
The Saudis and their Tunisian hosts took part in a meeting of the Saudi-Tunisian Joint Committee (its first meeting in four years) and the Saudi-Tunisian Business Council.
Several ideas of interest emerged.
Tunisia needed the boost. Problems at home, not least political, have sapped its outward-facing energy. For investors, that is not an attractive quality.
Foreign direct investment recently hit 1.5% of GDP, its lowest level in five decades. Ten years ago, it was twice that level, having been on an upward trend since 1992. The year 2006 saw a historic 9.4% of GDP invested, a record.
Times have changed. For the 2024 budget, Tunisian authorities allocated $1.7bn (TND 5.2bn) for public investment. This is 6.8% of the government's expenditure.
A Tunisian bank manager displays newly circulated Tunisian banknotes.
Tunisian leaders, who inherited a thicket of legislation that has put investors off, now look forward to a review of laws. A bonfire may entice them back.
Successive political shocks have risked Tunisia becoming a land of wasted opportunity. A report by the World Bank Group titled The Unfinished Revolution referred to the country as the 'Mediterranean Tiger'. Many feel it should be roaring.
As it is, it defaults to international suppliers, and the downgrading by rating agencies Moody's and Fitch of Tunisia (to CCC- with negative prospects) has led to a lack of confidence. Imports now need to be paid for in advance.
In step with Saudi Arabia
All is not lost. Saudi Arabia's investment focuses on five sectors in Tunisia: automotive, renewable energy, pharmaceuticals, healthcare, and food security.
Saudi money will be used to finance imports, particularly Saudi commodities and goods. It will also fire the starting gun on further investments, which Al-Ajaji said would be "in the billions". The lion's share will be in the tourism sector.
According to Minister Alkhorayef, these five sectors offer "great complementarity between the two countries", making it a win-win.
Tunisia has defaulted to international suppliers and been downgraded by ratings agencies, resulting in investors losing confidence.
He also said that the Saudis were looking for investment opportunities in Tunisia, especially as the country is rich in essential minerals such as iron, copper, and lead, not to mention its large phosphate reserves.
Analysts now ask whether the Kingdom may be interested in Tunisian state-owned companies such as the Compagnie des Phosphates de Gafsa, a phosphate miner, or the Société Tunisienne de Sidérurgie Elfouladh, which manufactures steel.
Tunisian authorities say they have no intention of privatising state-owned companies, but, given the situation, observers wonder whether this vow is viable. Debt is estimated at $9.2bn (TND 28.2bn), including $500mn owed to Riyadh.
In terms of renewable energy, the plan is to produce green hydrogen. Tunisia aspires to become a leading player, as does Egypt, its North African neighbour.
Tunisia wants to be the first supplier of green hydrogen to Europe. If it can keep production costs down, it has a wealth of renewable resources (including solar and wind) from which to draw. Being physically close to Europe could also help.
Tunisian planners have even mapped an export route to take the hydrogen from Gabes and Tataouine in the south to its ports in the north.
All very well and good, say the markets, but investing in the development of this technology is not cheap. It requires significant funding, as Egypt is currently finding.
Belhassen Chiboub, director general of electricity and energy transition at the Ministry of Industry, says a million tons of green hydrogen requires $25bn of investment, adding that Tunisia cannot bear these costs alone.
Water and power
In December, a participant in the Tunis meetings told Al Majalla that ENOWA, which supplies water and power to the Saudi city of Neom, was discussed in terms of a partnership proposal.
A design for the 500-metre parallel structures, known collectively as The Line, in the heart of the megacity of NEOM on the Red Sea.
Neom, a city of the future near the Red Sea in Saudi Arabia's coastal northwest, plans to establish a leading system for sustainable water and energy, so the potential synergies seem evident.
According to one delegate, who requested anonymity, the Saudis want to work with the Tunisians in the field of desalination and water treatment.
Collaboration in these areas could help meet an urgent priority in Tunisia, which declared a water emergency last year due to climate change.
The African Development Bank Group estimated in May 2023 that Tunisia needs $24.4bn in financing to respond adequately to climate change.
It is not alone.
Water scarcity is a problem for 90% of the population in the Arab world, according to a report by the United Nations Economic and Social Commission for Western Asia (ESCWA).
Work continues. By the end of this year, three seawater desalination plants in Gabes, Sfax, and Sousse should be operational.
Last year, the government announced tenders for four other plants in Tozeur, Kebili, Sidi Bouzid, and Ben Guerdane.
Saudi Arabia wants to work with Tunisia in the field of desalination and water treatment for the city of Neom.
Driving and drugs
Beyond energy, Saudi investors are eying up Tunisia's automotive sector.
It is Africa's third largest exporter of automotive parts, around $2.7bn annually, and has 280 companies operating in this field, within which there is a lot of expertise.
With Saudi Arabia's plans for Tunisia's automotive industry, the country aspires to become a hub for manufacturing electric cars in the Middle East by 2030.
As for its pharmaceutical sector, projects were presented at the Saudi-Tunisian Business Council. This sector is one of the most promising, having grown by 45% in just over six years. More than a third of all clinical trials in Africa are conducted in Tunisia.
One of the participants told Al Majalla that the Tunisians suggested that Lifera, a leading Saudi pharmaceutical company, invest in the Tunisian market through stakes in, or partnerships with, Tunisian manufacturers.
The company makes things like insulin, vaccines, plasma-derived drugs, antibodies, cellular and genetic therapies, and innovative small molecules. It was established through the Saudi Public Investment Fund in 2023.
Saudi firms and money are already here. According to Tunisian Finance Minister Siham Nemsiyeh, her country already hosts 50 Saudi firms employing 7,500 people, while the Saudi Development Fund has provided 30 development loans for projects.
This is in addition to several big Saudi grants made in the fields of education, water and sanitation, transport and communications, healthcare, energy, infrastructure, and rural development sectors in Tunisia.
Saudi investment focuses on five sectors in Tunisia: automotive, renewable energy, pharmaceuticals, healthcare, and food security.
Together into 2030
Before they left, the Saudi minister and delegates signed seven Memorandums of Understanding covering tourism, environment, agricultural research, meteorology, climate, water, and labour.
The overall pattern is one of closeness. Given that the Kingdom has big plans for the future, they could still become closer.
During the discussions, Saudi officials outlined the Saudi investment opportunities available to Tunisia regarding the Kingdom's Vision 2030.
This would involve increasing the percentage of bilateral trade between the pair and promoting investment projects to help Tunisia become an active partner in accordance with Riyadh's 'integration strategy'.
This is where the Kingdom forges regional and international alliances as part of its plans to diversify its economy and strengthen its relations based on common interests.
Bilateral trade could certainly increase.
At a lowly $310mn per year, Tunisia ranks an unsubstantial 15th among the Kingdom's trading partners in the Arab region. Senior officials from both states acknowledge that it could be a lot more.
Location, location, location
At the Saudi-Tunisian Investment and Partnership Forum, Alkhorayef spoke of the "great opportunities" available to the two countries, specifically mentioning Tunisia's favourable geographical location.
Maps show that he is right. Tunisia is a strategic trade outlet, connecting the north and the south of the Mediterranean, as well as connecting the Maghreb with the Levant. Finally, it is the gateway to sub-Saharan Africa.
Tunisia is a strategic trade outlet, connecting the north and the south of the Mediterranean, as well as connecting the Maghreb with the Levant.
This places Tunisia on the doorstep of markets comprising 1.4 billion consumers while letting it benefit from trade partnership agreements with several blocs.
These include the Association Agreement with the European Union, the Agadir Multilateral Free Trade Agreement, the Greater Arab Free Trade Area, the Common Market for Eastern and Southern Africa (COMESA), and the African Continental Free Trade Area (AfCFTA).
It also includes bilateral agreements to establish a free trade area with Libya, Egypt, Morocco, Jordan, and Iraq and an agreement to establish a free trade area with Turkey.
More to follow
The newly established Saudi EXIM Bank, created in February 2020, will drive the desired increase in bilateral trade and open access to new markets. As such, EXIM Bank is tasked with a vital role.
It exists to "promote the development and diversification of Saudi exports, increase their competitiveness, secure export credit with competitive advantages to enhance confidence in Saudi exports, enter new markets, and reduce the risks of non-payment". It also provides credit facilities for imports.
At the end of 2022, the Saudi EXIM Bank had allocated $200mn to finance Tunisia's imports of Saudi oil derivatives. There is more available if needed.
The newly established Saudi EXIM Bank, created in February 2020, will drive the desired increase in bilateral trade and open access to new markets.
The Saudi delegation left having given the strong impression that "the ball is in Tunisia's court", say sources.
The Kingdom has grand plans and wants Tunisia to be a part of them, yet if the partnership is to work, the Tunisians will need to do a lot better.
In 2017, a financing agreement was signed with the Saudis to build the new King Salman Ibn Abdelaziz Teaching Hospital in the Kairouan governorate in central Tunisia. It was to have 500 beds and specialist services in various areas.
The money came from the Saudi Development Fund, which forwarded an initial $85mn. Almost seven years later, and four years after a plaque was unveiled during King Salman's visit, only the gates have been built.
In August, the Tunisian president finally lost patience and fired his Kairouan governor, whose "feasibility studies" costing millions had seemed to know no end.
Yet the hospital is no outlier. In fact, a government committee has had to be formed just to follow up on stalled projects whose total value now exceeds $5.5bn (TND 17bn).
The Kingdom's representatives came bearing gifts and offered to bear more. But they have a lot to do and a challenging timeline in which to do it.
Infinite money, yes. Infinite patience, no.
The ball, as the Saudis suggested, is in the Tunisian court. Let's see what shot they play.
