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Amidst Political Paralysis, Opportunities Emerge in Tunisia

As the two month-mark since Tunisia’s political standoff approaches, global retailers and brands are keeping a careful eye on the climate in the north African nation.

On July 25, President Kais Saied declared emergency measures, fired the prime minister and dissolved parliament promising a new prime minister within 30 days. This deadline passed with no action, even as many global leaders insisted on a quick return to democracy. U.S. deputy national security adviser Jonathan Finer traveled to Tunisia in August, reaffirming personal support from President Joe Biden, but “urging a swift return to the path of Tunisia’s parliamentary democracy.”

Meanwhile, President Saied has resisted outside interference, and maintains that he’s attempting to rescue the nation from a social and economic crisis exacerbated by Covid and maintained by years of corruption. He claims he’s acting within the constitutional framework. With the appointment of a prime minister still pending, the political situation remains tenuously unpredictable.

Covid had already dinged Tunisia’s apparel and textile industry before the political climate exploded.

As of August, Tunisia had the third-largest number of Covid cases in Africa, at 610,660, after South Africa and Morocco.

In Tunisia the number of cases has continued to climb, surpassing 750,000 confirmed cases by this week.

Yet, despite its troubles, Tunisia continues to be among the top 10 exporters of apparel and textiles to the European Union, even as global business reassess the risks of both Covid and the political theater that is still playing out.

‘In the past decade, characterized by mass expansion in textile and garment sourcing from Asia, Tunisia filled the gap, and became known for small orders production called by some the ‘workshop of Europe,’” said Terezia Hasselhoff, country manager for Tunisia at Fair Wear Foundation. “The majority of the textile and garment factories in Tunisia are co-owned by foreign investors, mostly European. It’s probably thanks to these foreign relations, that the closures of the garment factories during the Covid-19 crisis remained relatively low at around 4 percent so far.”

Global organizations have been monitoring, and helping out as well.

“In February 2021, apparel exports for Tunisia were at 2.1 billion in 2020, a drop of 16.3 percent over the previous year. In this time, employment dropped by about 4,500 to about 157,000, according to a COVID-19 impact study of the textile and clothing sector in Tunisia,” said Matthias Knappe, program manager for Geneva-based International Trade Centre (ITC). The International Trade Centre is a joint agency of the United Nations and the World Trade Organization, whose mandate is to foster inclusive and sustainable economic growth through trade and international business development.

The industry continues to be an important source for labor, with the share of employees in the clothing sector at 30.47 percent of all manufacturing industry workers slightly dippling over the last year, according to the ITC. An estimated 157,742 labor are employed in this sector.

According to the COVID-19 Impact Study on the Tunisian Textile and Clothing Sector, approximately 60 companies have shut down over the last year, with 1,530 companies that have more than 10 employees, and a loss of jobs for roughly 4,500 workers.

The learning curve has been steep over this year, in Tunisia as well as all in other countries in which the ITC works, Knappe said. “First of all, there was no physical meeting possible, so everything had to turn to virtual and that was a learning experience for companies, buyers and trade fair organizers. Everybody had to learn how to organize these from scratch. It was a learning exercise for all. During this time, it was not about finding new clients, but trying to hold on to the existing clients and try to see how you can best serve them,” Knappe said.

 “There has been a lot of adaptation and progress,” he said, with some companies switching their production, as well as a certain amount of help for smaller outfits. “Some of the larger companies took care of some of the smaller ones to ensure that employment remained, with production for medical needs including masks and personal protective equipment PPE—not for export, but for the local market. By doing so, 3,000 to 4,000 jobs were maintained in the targeted regions.”

 Mehdi Chaker, trade promotion adviser at ITC, said that overall, business continued to function in the country despite the Covid-19 situation.

“Tunisia did not impose lockdowns and everything has stayed open. The only restriction was travel between cities and almost all sectors remained open. Some sectors like tourism were affected, but factories and companies did not close, including the training centers of the companies,” he said.

Despite the manifold change, global manufacturers functioning within Tunisia have been holding their own.

Daniele Lovato, general manager for Elleti Group, is still upbeat. The Italian company has approximately 50 percent of its production in Tunisia, making roughly 5 million pieces a year for brands including Replay, Diesel, Armani, Calvin Klein, Tommy Hilfiger.

This year marks their 25th anniversary in Tunisia, he said, though “there has been little time for celebration this year…We will save the big party for 30 years.”

“I won’t break my head thinking about the politics, because we have seen it happen for 10 years and it never really was the worst thing that happened to business,” Lovato said.

Lovato pointed out that the manufacturing sector in Tunisia is made up of a lot of small companies, with limited assets to create investments, “ so it is really easy to have huge damage to the little but fundamental players in the industry.”

“That is why we built up a policy of building up a net of suppliers and partners from the beginning, towards which we can funnel our own resources to create a stable supply chain that is able to withstand crisis situations,” he continued. “Of course, it is not a 100 percent safe net, but it has paid off in the last two years because we selected and found our suppliers, and almost all of them did not have to close or reduce the personnel in this period.”

Like some other manufacturers, Lovato observed that the challenges are not dissimilar to how companies operate in some parts of Europe. “I would say the challenges of doing business in Tunisia are really quite similar to doing business in Italy,” he said.  “There is a bureaucracy which is quite byzantine, because it is the French model of bureaucracy which has not really been simplified, so that takes a lot of administrative people to follow up…and it is a limitation for growth because many smaller players do not have the resources to have a team that only follows ever-changing documentation and paperwork.”

Denise Salustri, secretary general, Tunisian Italian Chamber of Commerce and Industry, reiterated his point. “The problems are much more for smaller companies which don’t have the buffer,” she said. “The strong companies don’t look to the political situation but rather the economic advantage of investing in Tunisia.”

In a general way, Tunisia remains one of the most competitive countries in the region,” she added.

Paola Sandini, vice treasurer, Tunisian Italian Chamber of Commerce and Industry, added that the effect of the political and economic situation is impossible to ignore, with investments tumbling 7 to 8 percent over the last year. While global companies are being cautions, “if the investor comes to Tunisia and they want to do serious work, they are still able to find the right social environment,” she said.

Other issues are affecting sourcing, too.

“Let’s say we have two main concerns,” Lovato said. “The uncertainty of what will happen with the third or fourth covid wave and the increase in cost of raw materials worldwide. More than other factors what has been critical have been cotton prices, and increases in transport costs. Neither brands nor customers are willing to absorb these costs, so it is us in the supply chain who have to absorb them. It is hard to say how the pricing of raw materials will move in the next few months—so we have to prepare for the worst, and hope for the best.”