Prospects of Tunisia in Attracting Foreign Direct Investments (FDI) in the Light of Changing International Business Landscapes

By

CHAPTER 1: INTRODUCTION1

1.1 Background1

1.2 Problem Statement2

1.3 Research Objectives2

1.4 Research Question3

1.5 Ethical Considerations3

CHAPTER 2: LITERATURE REVIEW4

2.1 Defining Foreign Direct Investment4

2.2 Motivation and Determinants of FDI5

2.2.1 Market Size and Growth Prospects5

2.2.2 Availability Of Infrastructure5

2.2.3 Levels of Taxation6

2.2.4 Stable Political Environment6

2.2.5 Governance Concerns6

2.2.6 Legal Framework.7

2.3 Impact of Foreign Direct Investment7

2.3.1 Advantages of Foreign Direct Investment7

2.3.2 Disadvantages of Foreign Direct Investment8

2.4 Increased Foreign Direct Investment in Emerging Economies- Lessons for Tunisia9

2.5 Attracting Foreign Direct Investment in Tunisia10

2.6 Factors Preventing Foreign Direct Investment in Tunisia11

CHAPTER 3: RESEARCH METHODOLOGY13

3.1 Research Philosophy13

3.2 Research Methods14

3.2.1 Secondary Research14

3.2.2 Primary Research14

3.3 Validity and Reliability15

3.4 Research Limitations16

3.5 Gantt Chart17

References18

CHAPTER 1: INTRODUCTION

1.1 Background

Tunisia is considered to be one of the most diversified economies in the Sub-Saharan Africa and has one of the highest living standards in the continent. With its past policies the country has been successful in having a skilled and low-cost workforce. Furthermore, the economy has a national literacy rate of 77.1% which is highest in the North Africa and the Middle East (Stiglitz, 2000). The annual growth rate of the economy has been maintained at an average of 4.5% from 2004 to 2009, which increased by 3.7% in 2010 (Stiglitz, 2000). The economy is likely to experience further growth with an average rate of 6.1% in the future years (Stiglitz, 2000). However, it experienced a decline in its revenue from tourism and also a fall in its foreign direct investment by 26% (Stiglitz, 2000).

Despite of this decline in the foreign direct investment, Tunisia has been able to attract $750 million in Foreign Direct Investment as it is an emerging economy with a rapidly growing tourism and manufacturing industries (Soto, 2000). A major proportion of these investments come from Europe, which accounts for an approximate two-thirds of the investments. In the year 2006, the FDI of Tunisia increased to $3.522 billion, of which 68% was contributed by UAE (Soto, 2000). However, by the end of the year 2011 the FDI of Tunisia decreased to $1.142 billion, which is a decline of 26% as compared to 2010 (Soto, 2000). Thus, the purpose of this research is to examine the prospects in Tunisia for attracting foreign investments and the ways in which the economy can overcome the challenges it faces to attract investment from international markets.

1.2 Problem Statement

Countries can invest in two regimes in Tunisia that include offshore and onshore investments. In order to invest in offshore, countries can invest in goods and services that are for export. On the contrary onshore investments are for the Tunisian market and also for onshore investments it is essential for the firms to partner with the local firms (Rapoza, 2013). Foreign countries may find it challenging to invest in the Tunisian market due to its bureaucracy as slow and cumbersome. Moreover, the government of Tunisia has been devoting substantial efforts to attract foreign direct investment in its key ...