Tunisia-EU-DCFTA - FTDES Urges Increasing Micro-Enterprises' Resilience to European Competition

Tunis/Tunisia — The Tunisian Forum for Economic and Social Rights (FTDES) has called in a new study to increase the resilience of national microenterprises and the entrepreneurial fabric that it describes as "fragile" against European competition under the "Deep and Comprehensive Free Trade Agreement (DCFTA).

In this study entitled "Study of the expected impact of the DCFTA on microenterprises in trade and services sectors in Tunisia", FTDES recommends directing development programmes and budgetary support to the extension of water, gas and telecommunications networks (telephone and Internet) and facilitate the connection of ME (medium-sized enterprises) to these basic services.

According to an INS survey (2016), MEs employ about 718,250 people and generate a value added (VA) of 9,486.6 million dinars, or nearly 9% of GDP.

The Forum suggests creating clusters or industrial zones hosting MEs belonging to complementary business fields in order to create positive externalities, productive synergies and cost savings related to the extension of basic infrastructure networks.

With regard to finance, the FTDES proposes the development of an associative and cooperative network specific to micro-entrepreneurs and raising their awareness about the benefits of networking and membership in professional associations (better knowledge of the market, financial and social support, training and skills improvement, etc.).

It advocates for the emergence and development of credit cooperatives and mutual insurance companies for the various activities of MEs, setting up financial support initiatives in rural areas and inland regions, in collaboration with the BTS and a network of microfinance institutions (microcredit, microinsurance and micro-savings) by launching credit lines and interest rate subsidy programmes.

The development of venture capital financing programmes exclusively dedicated to MEs in collaboration with public and private financial institutions and the launch of awareness campaigns and training programmes aimed at spreading a certain financial culture among micro-entrepreneurs are also among the FTDES recommendations.

In terms of competitive policy and public support, the authors of the study stress the importance of establishing a legislative framework and a public policy exclusively dedicated to preserving and strengthening the competitiveness of the ME sector of trade and services.

They also call for the heterogeneity of the ME sector to be taken into account and for the allocation of subsidies and public aid to be better targeted.

The allocation of subsidies, grants and all forms of financial support should give priority to innovative micro-entrepreneurs.

The study also recommends putting in place a system of protection for MEs based on the provisions of the General Agreement on Trade in Services and in harmony with the provisions of the DCFTA, in order to reduce the negative impact of the opening of the European market, as well as a legislative framework to protect MEs operating in wholesale trade and especially retail trade from competition from large and medium-sized European enterprises after the signing of the DCFTA.

It suggests adopting concrete measures to reduce the vulnerability of MEs operating in services to European competition.

Regarding the business climate, the FTDES considers it important to increase transparency, reduce administrative and bureaucratic complications related to the registration and issuance of business permits for micro-entrepreneurs and simplify the legislative framework, labour regulations and the tax system specific to MEs.

Tunisia and the EU are negotiating, since 2016, a "Deep and Comprehensive and Free Trade Agreement" (DCFTA) which is based on the Association Agreement (AA) signed in 1995 and entered into force in 1998 between Tunisia and the EU. It aims to increase the scope and depth of the association agreement through the liberalisation of the agricultural and services sectors.

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