OECD Competition Assessment Reviews: Tunisia 2023

1. Assessment and recommendations

Abstract

Regulations aim to pursue legitimate policy objectives, but when they are overly restrictive or onerous, a comprehensive review can help identify problematic areas and develop alternatives that achieve such objectives without harming competition. This assessment identifies distortions of competition in Tunisian legislation. It proposes 351 specific recommendations for the removal of regulatory barriers to competition in the tourism sector. The benefits of removing these barriers will lead to increased market entry and facilitate business operations, bringing about lower prices, more innovative and diverse services, greater choice for consumers, and the ability to better meet wide‑ranging demand as new, more efficient enterprises enter the market and existing firms adopt more innovative forms of production and service delivery.

1.1. Project background

The competition assessment review of laws and regulations in Tunisia’s tourism sector is part of a broader project aiming at fostering pro-competitive reforms in the country. In addition to this tourism competition assessment, the project includes a peer review of competition law and policy and a competition market study of the banking sector. The project follows an initial competition assessment conducted by the OECD in 2019 that covered two important sectors of the economy: wholesale and retail trade, and road and maritime freight transport.

The project was conducted within the framework of the European Union’s Programme d’Appui à la Gouvernance Economique, or Economic Governance Support Programme, which aims to support the Tunisian Government’s efforts to improve the national business climate and revive business investment as part of a post-COVID‑19 recovery plan. The project began in February 2021 and concluded with a formal launch of the OECD recommendations and a public report published in June 2023.

Using the methodology set out in OECD’s Competition Assessment Toolkit, the project aimed to identify unnecessary regulatory restrictions that act as barriers to competition, sustainable economic growth and innovation in Tunisia, and suggests alternative, less restrictive ways to achieve the same regulatory goals.

The OECD’s Tunisia competition assessment project identifies features of the national regulatory and policy environment that may be hindering the efficient functioning of competitive markets in the tourism sector. The project considers the likely consequences of existing regulation and proposes alternatives that may better achieve policy objectives while ensuring a competitive business climate. The project outcome, which comprises mainly recommendations for regulatory reforms, aims to support the Tunisian Government’s priorities by promoting competition, alongside increased productivity and innovation, throughout the economy.

The OECD’s competition assessment methodology is based on the assumption that there are often several ways to achieve any given public policy goal, and that some policies restrict competition more than others. Since consumers generally benefit from more, rather than less, competition, it is essential to identify which restrictions to competition are not strictly necessary for the pursuit of public goals, and to develop alternative, less restrictive policies that still achieve the desired objectives. The OECD’s Competition Assessment Toolkit provides a general methodology for these two tasks. This methodology has been used in several countries and updated based upon lessons learned and global regulatory advances.

This project was carried out against the backdrop of the COVID‑19 pandemic, which has had a profound impact on Tunisia’s economy. Putting in place a pro-competitive regulatory framework that helps businesses avoid unnecessary costs and enables flexibility will be crucial for a sustainable recovery from that crisis. More than ever, it is critical to maximise society’s well-being without unnecessary, burdensome regulatory costs to companies.

The tourism industry has played, and continues to play, a significant role in advancing Tunisia’s economic development. It has been the main source of foreign currency reserves for decades and a strong generator of additional activity in other sectors of the economy. In 2019, tourism’s contribution to gross domestic product (GDP) was about 8.1%, half of which was generated indirectly through its contribution to upstream industries. The sector is also at the core of current structural and regulatory reforms, in line with the Stratégie Nationale du Tourisme 2035, or National Tourism Strategy 2035, which is based on four main pillars: 1) competitiveness; 2) diversification; 3) investment; and 4) marketing. The activities in its scope were chosen considering the priorities of the EU’s Tounes Wijhetouna, or Tunisia – Our Destination, programme, aimed at diversifying tourism, developing crafts, and enhancing heritage in Tunisia.1

In this context, and after initial research and exchanges with stakeholders, the sectoral analysis focused on: 1) accommodation and well-being services; 2) food and beverage (F&B) service; 3) passenger transport services; 4) travel agencies and related services; 5) cultural services; and 6) sports and recreational services.

1.2. The benefits of competition

The competition assessment aims to identify regulations that may unduly restrict market forces and, in doing so, may harm the country’s growth prospects. In particular, the project identifies restrictions that:

• are unclear, meaning that they may be applied in an arbitrary fashion or lack transparency

• make it harder for new firms, including small and medium-sized enterprises, to access markets

• allow a limited number of firms to earn greater profits than they otherwise would, for reasons unrelated to their underlying productivity or product quality

• cause consumers to pay more than they otherwise would.

Each restriction is likely to have an impact well beyond individual consumers in the market segments assessed. When consumers can comparison shop for products and services, firms are compelled to compete with one another, increase innovation and be more productive (Nickell, 1996[1]; Blundell, Griffith and Reenen, 1999[2]; Aghion et al., 2004[3]). Industries in which there is greater competition experience faster productivity growth. These conclusions have been confirmed by a wide variety of empirical studies and summarised by the OECD (Forthcoming[4]). Competition stimulates productivity primarily because it provides the opportunity for more efficient firms to enter and gain market share at the expense of less efficient firms.

In addition to evidence that competition fosters productivity and economic growth, many studies have shown the positive effects of more flexible product market regulation (PMR), the area most closely relevant to this project.2 These studies analyse the impact of regulation on productivity, employment, research and development, and investment, among other variables. Differences in regulation also matter and can significantly reduce both trade and foreign direct investment (Fournier et al., 2015[5]; Fournier, 2015[6]).3 By fostering growth, more flexible PMR can increase the sustainability of public debt, which is particularly important in countries such as Tunisia (OECD, 2019[7]).

A particularly large body of evidence demonstrates the productivity gains achievable through more flexible PMR. At the company and industry level, restrictive PMR is associated with lower multifactor productivity (MFP) levels (Nicoletti and Scarpetta, 2003[8]) and (Arnold, Nicoletti and Scarpetta, 2011[9]).4 This also holds true at aggregate level (Égert, 2016[10]).5 Anti-competitive regulations have an impact on productivity that goes beyond the sector in which they are applied, although the effects are more pronounced in sectors closer to the productivity frontier (Bourlès et al., 2013[11]).6 Specifically, a large portion of their impact on productivity is felt in research and development investment (Cette, Lopez and Mairesse, 2017[12]). Lowering regulatory barriers in network industries, conversely, can have a significant impact on exports (Daude and de la Maisonneuve, 2018[13]).

Innovation and investment in knowledge‑based capital, such as computerised information and intellectual property rights, are also negatively affected by stricter PMR (Andrews and Criscuolo, 2013[14]; Andrews and Westmore, 2014[15]). Nicoletti et al. (2020[16]) show that competitive pressure, as measured by lower regulatory barriers (for example, lower barriers to market entry), encourages firms to adopt digital technologies such as cloud computing. Pro-competitive reforms to PMR are associated with an increase in the number of patents (Westmore, 2013[17]). More stringent PMR is shown to be associated with less investment and an amplification of the negative effects of restrictive labour market regulation (Égert, 2018[18]). 7

Greater flexibility can also lead to higher employment. Cahuc and Kramarz (2004[19]) found that after France’s road transport industry was deregulated, employment levels in the sector increased at a faster rate.8 A 10‑year, 18‑country OECD study (Criscuolo, Gal and Menon, 2014[20]) concluded that small firms operating for five or fewer years on average contribute about 42% of job creation.9 As the OECD (2015[21]) notes, “such a disproportionately large role by young firms in job creation suggests that reducing barriers to entrepreneurship can contribute significantly to income equality via employment effects”.

Evidence also exists indicating that lifting anti-competitive regulations helps to reduce income inequality. Causa et al. (2015[22]), for instance, found that less restrictive PMR improved household incomes and reduced income disparity.10 Evidence further suggests that barriers to competition can contribute to the accumulation of resources by the wealthiest segments of society at the expense of others. Ennis et al. (2019[23]), for example, assessed the redistributive effects of market power in eight countries.11 They found that market power benefits the wealthiest households by providing them with rents and that the share of wealth of the most affluent 10% of households derived from market power is between 12% and 21%.

Finally, Eklund and Lappi (2018[24]) studied the impact of PMR on the persistence of profits in the long term. Regulations that raise barriers to entry can protect incumbents’ above‑average profits. The authors found that more stringent product market regulation, as measured by the OECD’s PMR indicator, was associated with persistent profits.

The results described above hold true in a variety of settings, although the specific estimates may differ by country. For instance, Égert (2017[25]) quantified the impact of structural reforms and found that “stringent product market regulations will have a three‑times larger negative impact on MFP in countries with per capita income lower than USD 8 000 (in purchasing power parity terms)”.

In summary, anti-competitive regulations that hinder entry into and expansion within markets may be particularly damaging for a country’s economy because they reduce productivity growth, limit investment and innovation, harm employment creation, and may favour a certain group of firms over other firms and consumers, with consequences for income inequality. This is particularly true for tourism, which is also susceptible to external events. Changes in business cycles, for example, can have an outsized effect on tourism activity (Wong, 1997[26]; Guizzardi and Mazzocchi, 2010[27]). It is therefore crucial that the sector be flexible to changes in conditions. An absence of significant entry and exit barriers in the regulatory framework for tourism, as this report advocates, contributes to that flexibility.

1.3. Main findings and recommendations

OECD competition assessment projects evaluate market regulations to identify regulatory barriers to competition. These include regulations that restrict market entry, constrain enterprises’ ability to compete (for example, by regulating prices), treat competitors differently (for instance, by favouring incumbents), facilitate co‑ordination among competitors, or restrict consumers’ ability to change suppliers. The methodology followed in this systematic exercise is summarised in Annex A, which also describes the stages of the project and provides full references to the OECD competition assessment methodology.

This section provides a summary of the main regulatory and administrative issues in Tunisia’s tourism sector, and recommendations for addressing them. More details can be found in the report’s subsequent chapters, and a complete list of all the barriers to competition identified and the OECD’s recommendations is contained in a spreadsheet published as a standalone document on the dedicated webpage, https://oe.cd/ca-tunisia.

1.3.1. Sector overview

The sectors covered by this review are essential for the tourism industry in Tunisia which represented about 4.5% of GDP and 4.4% of formal salaried employment in 2019. Given this proportion and the importance of the industry for the performance of many other sectors of the economy, lifting barriers to competition in these sectors could have a powerful economic effect. The activities in scope constitute the main components of the Tourism Satellite Account (TSA), the official and internationally recognised conceptual framework for a comprehensive reconciliation of tourism data related to supply and demand (OECD et al., 2017[28]). In close co‑operation with the Institut National des Statistiques (INS), or National Institute of Statistics, the project has contributed to the creation of the TSA for the first time in Tunisia.

Overall, the OECD has identified 447 potential regulatory barriers in 163 legal texts, including laws, decrees, ordinances, regulations and concession contracts reviewed for the purpose of this assessment (see Table 1.1). This report makes 351 specific recommendations to make regulation more pro-competitive. The assessment does not cover the resources available to authorities and does not evaluate whether these are sufficient to support the performance of their tasks.

Table 1.1. Summary of the legal provisions analysed

	Accommodation & well-being	F&B service	Passenger transport	Travel agencies	Cultural services	Recreational services	Total
Potential restriction identified	159	59	41	51	58	79	447
Recommendations made	115	54	38	48	34	62	351

Using the methodology described in the OECD Competition Assessment Toolkit and data from the TSA, the report provides estimates of the impact that the implementation of its recommendations would have. It finds that the implementation of its key recommendations would lead to benefits worth around TND 1.4 billion, 1.2% of Tunisia’s 2018 GDP.

1.3.2. Common issues identified across sectors

The assessment revealed a number of similar restrictions across different sets of regulations. These can be grouped into three main categories:

• complex, burdensome licensing procedures

• onerous, overly detailed operational requirements

• the influence of incumbents in decision-making bodies.

Complex licensing procedures stifle competition. Competition is affected by how easily firms can enter and exit markets, and by the extent of licence requirements for starting or expanding a business. Many of the activities within the scope of the assessment are subject to elaborate licensing procedures, discussed in more detail in Chapter 9. It is important for Tunisian authorities to take stock of the burdens that even well-intentioned regulations and codes can impose on private activity.

Overly detailed operational requirements were identified in several parts of the tourism sector. These include minimum share capital requirements (for example, for travel agencies and specific cultural establishments), professional and academic requirements (such as those applied to accommodation and particular transport services), staff and equipment requirements (for instance, in the well-being, restaurant and transport segments) and size, layout and functional requirements (in such segments as accommodation, well-being and some recreational services). These detailed and sometimes duplicative requirements deter market entry, create an uneven playing field, and fuel informality. The OECD recommends that Tunisian authorities revise these requirements to make them less burdensome and reconsider the level of detail necessary, ensuring that requirements are reduced to the strict minimum necessary to achieve their respective public policy objectives. Most of these details could be transferred into investor guides, if the purpose is to help investors comply with standards.

The participation of incumbent industry participants in public authorities’ decision-making processes (such as those of the classification and reclassification commissions for accommodation establishments and restaurants) might lead to potential foreclosures of competition and the promotion of professional associations’ interests, especially against those of newcomers. Another negative consequence could be the introduction of unnecessary administrative barriers due to a tendency to standardise interests and actions in cases where the members of private associations may influence the attitudes of public authorities and legislation in their favour. The OECD recommends revising the membership of these commissions, or at least establishing a complete, clear and accessible set of conflict rules to be adopted by professional associations involved in such decisions.

The combination of these issues, together with several shortcomings in the quality of Tunisia’s regulations that are analysed in more detail in Chapter 9 appear to be an important driver of informality in most of the segments reviewed. Where high informality and weak competition coincide, the consequences for both growth and equity can be particularly severe. To foster formal job creation, all parts of a country’s regulatory framework should be simple and clear, promote competition, and facilitate both market entry and exit by firms (Loayza, Oviedo and Serven, 2005[29]).

1.3.3. Accommodation and well-being services

Accommodation services

Tunisian regulation classifies tourist businesses providing accommodation according to their characteristics, the quality of their services and the facilities they offer. Tunisian authorities have employed a zoning policy since the 1970s to attract and encourage investment in the sector. Tourist investments made in tourist areas identified by decree benefit from a number of advantages and a fast-track approval procedure. Outside these areas, administrative procedures for obtain classifications and licences are lengthy and burdensome. A number of minimum size, layout and functional characteristics to meet classification standards are provided for in regulation, in relation to both hotel-type accommodation and alternative accommodation. For the latter, classification requirements are very detailed, burdensome, and not necessarily linked to any specific policy objectives. Appointments of managers of tourist businesses providing accommodation, including alternative types of accommodation, are subject to several qualification requirements. These explain in part the informality that characterises a large portion of Tunisia’s supply of alternative accommodation.

Against this backdrop, the OECD makes several recommendations. The following are those considered most important to foster competition in the accommodation sector:

• Revise the zoning policy and redefine tourist areas in different categories benefiting from different regimes with, for example, peak, medium and lower levels of fiscal and administrative advantages, and covering all areas of tourist potential.

• Streamline the licensing process for accommodation projects outside of tourist areas according to the best international practices for permitting and licensing.

• Revise requirements on classification, and on size, layout and functional thresholds for hotels and alternative accommodation, reducing the level of detail of minimum requirements to the strict minimum necessary for the fulfilment of public policy objectives.

• Eliminate qualification requirements for managers of small, alternative accommodation facilities such as bed and breakfasts, guesthouses and gîtes rural, or rural lodges.

Well-being services

Tunisia’s well-being and hydrotherapy (also called three‑waters treatments, using sea, fresh and hot water) sector includes thermal cures, thalassotherapy and freshwater (spa) treatments. All three activities became subject to an authorisation process overseen by the Office National du Thermalisme et de l’Hydrothérapie, or National Office of Thermalism and Hydrotherapy, in 2011. Although the process is relatively clear for thermal and thalassotherapy centres, no official application text exists for spa centres. The authorisation process and conditions for operating thalassotherapy and thermal centres impose multiple permitting and licensing steps involving several government agencies. These well-being activities are also subject to several operational conditions, such as minimum size, layout and equipment requirements, and minimum staffing levels.

The OECD recommends that authorities consider simplifying and harmonising the regulatory framework for hydrotherapy and remove contradictory legal provisions. The OECD also recommends streamlining the licensing process for establishing and operating hydrotherapy centres according to the best international practices for permitting and licensing, and simplifying technical requirements by removing detailed provisions to refer only to International Organization for Standardization benchmarks. Specific size and layout details, and suggested staff numbers, might be included an investor guide if the purpose is to help investors comply with standards.

1.3.4. Food and beverage service

Tourist restaurants

Tourist restaurants are regulated by the Office National Du Tourisme Tunisien (ONTT), or Tunisian National Tourism Office, through an authorisation and classification process based on their physical characteristics, facilities and the quality of services. There are four classification categories ranging from one‑fourchette, or fork, to three‑fourchette luxury. The classification process imposes a wide range of minimum size, layout, functional and management standards. It is overseen by a commission that includes incumbent enterprises among its members. Tourist restaurants must obtain a specific licence if they intend to serve alcohol. Legislation provides that this licence is issued by the Ministry of Interior, following the opinion of the municipal authority and the territorially competent governor. The licensing process is lengthy, cumbersome, and its outcome is particularly uncertain.

The OECD recommends removing the mandatory fourchette classification system and requirements that fall outside the scope of hygiene, safety and consumer protection concerns, and considering the inclusion of specific size, layout and equipment details in an investor guide. The process for applying for alcohol licences should be streamlined as part of the investment procedure for restaurants and other F&B service establishments. Alternatively, authorities should set out clear rules for obtaining licences and digitalise procedures so that applicants are not required to apply for them at local police stations.

Other food service operators

Traditional restaurants, traditional fast-food restaurants and street food are regulated at the municipal level. All food service providers must obtain sanitary approval from the municipality in which they wish to operate and comply with general sanitary regulations. The regulations set out very strict, specific requirements that are difficult to fulfil and are not necessarily clearly related to policy objectives. Street food markets do not exist in Tunisia. Vendors are required to obtain the same site authorisations required for newspaper kiosks and flower sellers’ shops. The absence of an appropriate framework is the reason for the disproportionately informal character of street food in Tunisia.

The OECD recommends removing requirements beyond those addressing hygiene, safety and consumer protection issues from the sanitary regulations and considering other regulatory options for street food hawkers and vendors that wish to operate such non-fixed facilities as food trucks. Adapting specific areas or streets in cities and granting temporary occupation authorisations for public areas are two possible alternatives.

1.3.5. Selected passenger transport services

Tourist transport

Although legislation stipulates that tourist transport is regulated by the Ministry of Transport through a particular cahier des charges, or set of specifications, this has not been drafted, and the activity remains reserved exclusively for Category-A travel agencies. Tourist transport vehicles can be driven only by a person holding a professional licence. The licence is granted by the territorially competent governor, based on several conditions, including relevant experience, specific training and a work contract. Licences have an exclusivity provision that disallows drivers providing one type of transport service from providing another. Each type of transport requires a professional licence, and drivers may hold only one.

The OECD recommends withdrawing the exclusivity granted to travel agencies to offer tourist transport and adopting a separate framework, as provided for in the legislation. Authorities should also consider abolishing the work contract requirement and the exclusivity clause associated with professional licences to allow individuals to engage in different types of tourist transport provision if they satisfy relevant requirements.

Vehicle hire

Car rental services are regulated by a cahier des charges setting out minimum entry and operating standards. Market entry requirements include a minimum fleet size of 20 vehicles. Vehicles are also subject to strict minimum and maximum age requirements, according to their type. Following a recent regulatory change, services are now provided exclusively by companies, with sole proprietorships no longer permitted to operate.

The OECD recommends abolishing or reducing the minimum fleet size for vehicle rental companies, and abolishing or significantly increasing maximum vehicle age requirements while applying other measures to ensure roadworthiness. Such measures could include establishing a uniformly applied maximum number of years that vehicles can be in service and a requirement that vehicles pass more frequent technical inspections. The OECD also recommends removing professional experience requirements for vehicle hire management and allowing sole proprietorships once again to provide car rental services.

Taxis and other for-hire vehicles

Taxis and other for-hire vehicles are subject to the issuance of an operating licence by the territorially competent governor. The number of licences granted is set for each governorate by the Ministry of Transport. Companies have been excluded from providing non-regular public road transport following a recent regulatory change. Applicants are required to satisfy several conditions, including the possession of a specific driving licence (Category D or G), a minimum level of experience, and specific first-aid training. Applicants should also have a professional licence and a professional aptitude certificate, both issued by the governor. Tariffs for non-regular public transport are regulated by the Ministry of Transport. However, the legislation doesn’t include any details relating to the frequency or to the parameters of tariff revision.

The OECD recommends revising and publishing criteria defining taxi quotas and the conditions for the issuance of operating licences, and streamlining procedures for obtaining licences, ensuring the transparency of selection criteria. Authorities should reconsider the exclusion of companies from the market. The professional licence requirement should also be reconsidered, as operators must already hold a specific driving licence for the relevant transport category and are required to hold an operating licence. In terms of tariff regulation, authorities should adopt a more flexible, predictable tariff framework for non-regular public transport that takes into account conditions for its sustainability and which promotes fair competition with providers of “disruptive” new transport services.

Ride‑ hailing services

Ride‑ hailing platforms are not regulated in Tunisia as disruptive innovations and new business models do not fit into the traditional regulatory framework of regulated tourist or public transport. These services are offered mainly by taxis through several apps. The current supply of road transport vehicles has remained unchanged by the introduction of ride‑ hailing platforms, as regulated taxis are their main users, thanks to the fact that they offer a way for drivers to avoid compliance with regulated tariffs. The use of the apps is associated with an increase in fares and limited service availability for consumers.

The OECD recommends ensuring that anti-competitive distortions and safety concerns arising from the informal practices of ride‑hailing service providers are limited as much as possible to enable them to achieve compliance, increase the size of the market, and improve the quality of services provided to consumers.

1.3.6. Travel agencies and other reservation services

Travel agencies

Travel agencies in Tunisia are designated Category-A or Category-B. An agency’s category determines the activities it may provide. Both categories are subject to a notification process through a cahier de charge that includes a number of requirements, including minimum capital levels for each category, staff qualifications and other operating standards. Informality is widespread among travel agencies, with many companies providing activities intended to be reserved exclusively for travel agencies without meeting the category requirements, notably sociétés de service, or service companies, which are regulated by the Ministry of Industry and SMEs. Category-B travel agencies tend also to provide services restricted by legislation to Category-A agencies. Current regulations grant travel agencies monopolies to provide certain services such as tourist transport and prevent foreign travel agencies from operating directly in Tunisia. Foreign agencies may operate only indirectly through partnerships with local Tunisian travel agencies.

The OECD recommends, among other things, ensuring that the services reserved exclusively for travel agencies are limited to core services. It also recommends revising the cahiers des charges for travel agencies so that authorisation requirements are proportional. This means removing the distinction between the two categories of travel agencies and subjecting all agencies to the same requirements, removing minimum capital requirements and complying with the general provisions of commercial law, abolishing professional requirements that do not necessarily provide any guarantee of quality, and considering allowing foreign travel agencies to enter the Tunisian market.

Tourist guides

The regulatory framework for tourist guide services dates back to the early 1970s and differentiates between two categories: professional guides and auxiliary guides. Both categories require a professional licence to operate in the market. Applicants must be graduates of one of Tunisia’s public tourist training centres or have successfully passed the tourist guide recruitment exam organised by the ONTT. The professional licence must be renewed annually. If it is not renewed within two years of its expiry, the guide’s cardholder status lapses.

The OECD’s main recommendations to deal with the harm to competition arising from these arrangements include revising the education requirements for the professional licence and revising the card application and renewal procedures, and the rules determining its validity. Applicants should be able to renew their cards online, and auxiliary guides should be allowed to re‑enter the market, from which they were de facto excluded after the terrorist attacks of 2015, when renewals of their professional licences were disallowed.

1.3.7. Cultural services

Heritage concessions

Heritage concessions are regulated by general concessions rules. A 2019 amendment to these rules allowed the Agence de Mise en Valeur du Patrimoine et de Promotion Culturelle (AMVPPC), or Agency for Heritage Development and Cultural Promotion, to grant concessions for cultural and archaeological sites. However, the agency is reluctant to make use of its mandate, despite the growing interest among private investors, hinting at a potential conflict of interest. The agency has the monopoly on managing monuments, archaeological sites and museums, and is in part funded by their entrance fees. Yet stakeholders have told the OECD that the agency lacks the human and financial resources to ensure proper management of the nation’s 4 000‑plus historical and archaeological sites.

The OECD recommends regulatory changes in order to minimise any conflict of interest, including a revision of the AMVPPC’s business model and a clarification of its role in the allocation of heritage concessions. The OECD also recommends consolidating the current framework for heritage concessions and ensuring that it is more open to private initiative, more flexible, and more conducive to competition by adopting guidelines that allow grantors, including local authorities, to properly manage concession procedures and design offers that consider the specificities of the sites to be granted.

Specific types of cultural tourism

Private galleries, private museums and arts and crafts workshops are regulated by specific cahiers des charges. Despite the adoption of an ex-post notification procedure for operating these facilities, regulations still include several barriers to entry, such as specific equipment requirements, professional qualification standards and minimum capital thresholds. The regulations also include some onerous operating requirements, such as mandatory one‑year advance notice for programmes and some grandfather clauses providing exemptions for incumbents from certain requirements, such as those involving capital levels and professional standards.

The OECD’s main recommendations are that minimum capital requirements be lifted, that operators be required to comply only with horizontal requirements provided for by commercial law, and that the requirement for announcements of gallery or workshop programmes one year in advance be replaced by more flexible alternatives such as monthly or quarterly online notifications. Authorities should also ensure competitive neutrality between incumbent enterprises and new entrants by subjecting both to the same requirements.

1.3.8. Sport and recreational services

Golf courses

Unlike most sporting and adventure activities, which are regulated at the municipal level, golf is regulated at the national level. Legislation subjects golf courses to several technical criteria related to land use and other operational limitations on real estate and accommodation services. These restrictions have constrained the emergence of integrated golf courses and reduced the attractiveness of Tunisia as a golf destination in a very competitive regional context. In addition, the state’s presence in the operation of golf courses raises concerns over competitive neutrality.

The OECD recommends revising all restrictions on land use and transferring specific size and layout details into an investor guide if the purpose of the regulations is to help investors comply with standards. The OECD also recommends reconsidering the state’s presence in the sector, streamlining land reclassification procedures and ensuring that urban development plans are updated to further promote the sector.

Marinas

The regulatory framework for marinas is lacking most implementing texts. An official list of marinas has not been published as stipulated by the 2009 Code des Ports Maritimes, or Maritime Ports Code. The institutional framework remains undefined, which means no overall authority is in charge of the sector and there is no clarity on the respective responsibilities of various actors, namely the Ministry of Tourism and Handicrafts, concession holders, customs, the Garde Nationale Maritime, or National Maritime Guard, and the border police. This has given rise to conflicts of competence among these actors. It has also affected the transparency and effectiveness of procedures to award, renew and monitor concessions, which has led to problems with the management and maintenance of several marinas. Moreover, the management of some marinas by state‑owned enterprises raises concerns over competitive neutrality.

The OECD recommends accelerating the publication of the implementing regulations for the Maritime Ports Code that relate to marinas to clarify institutional arrangements and resolve the issues involving the roles and powers of the various authorities. The OECD also recommends rethinking the role of the state in the sector and revising the concession framework, including by defining the conditions and criteria for the approval or rejection of extension requests, and aligning the duration of extensions with the Maritime Ports Code.

Yachting and recreational vessels

Recreational vessel traffic is an important determinant of demand for marinas. The use of such vessels is subject to authorisation by the Commission Centrale de Sécurité Maritime, or Central Maritime Safety Commission. The conditions for the approval or rejection of authorisation requests are not clarified in legislation. The use of foreign-flagged boats is subject to specific customs regulations, and they can be used only privately under a temporary import regime for a maximum period of 24 months. Customs rules are ambiguous when it comes to entitled users of recreational vessels and the types of uses to which such vessels may be put, conferring considerable discretionary power on regional customs offices.

Paid maritime transport between ports and coastal sites is subject to authorisation by the Office de la Marine Marchande et des Ports (OMMP), or the Office of the Merchant Marine and Ports. Transport permits are valid for one year and are renewable. No official guidelines or criteria underpin decisions to grant permits. Operators of all recreational vessels are required to file sailing notices with port authorities to enter or exit marinas. These declarations are completed on paper and must be submitted in person.

The OECD recommends setting clear conditions for authorisations to use recreational vessels, establishing a transparent evaluation grid for authorisation requests, and revising customs rules and procedures relating to the use of yachts under the temporary import regime to avoid ambiguity and limit the discretionary power of authorities. Authorities should consider clearly defining the conditions and criteria for granting maritime transport permits and make them publicly available. They should also ensure that sailing notice procedures are simplified and digitalised to cut the costs involved in terms of waiting times and the administrative burden.

Dive centres

Dive centres are subject to authorisation by the territorially competent governor following the opinion of the Commission Nationale de Plongée, or National Diving Commission. The commission is chaired by the Ministry of National Defence and rules on several other matters, including authorisations to operate diving activity, qualification requirements, and the recognition of foreign diplomas. Only training and tourism centres are approved and regulated by the law, but sports associations, regulated by the Ministry of Youth and Sports, account for a significant portion of dive industry activity in Tunisia. Diving certifications are issued following the Confédération Mondiale des Activités Subaquatiques (CMAS), or World Confederation of Underwater Activities, system and there is no official equivalence framework for other certifications.

The OECD’s main recommendations are to streamline the authorisation and licensing process for dive clubs, revise the sector’s institutional arrangements, clarify the status of diving associations as industry participants, publish a clear and transparent grid for evaluating applications, and adopt an appropriate regulatory inspection and enforcement framework.

Water sports centres

Water sports centres are subject to authorisations by the territorially competent governor following the opinion of the commission régionale des activités touristiques et de loisir, or regional committee of leisure tourism activities. The steps involved in obtaining a licence are rather complicated and lack transparency. Applicants must file a request that includes nine documents and go through several administrative processes that differ from one governorate to the other. Licences are granted for a renewable one‑year period following the favourable opinion of the regional committee. Eligibility criteria for the allocation of permits are vague. Although legislation does not state clearly whether authorisation to establish and operate water sports centres is limited to individuals and not company entities, the OECD has learned that this is the case in practice.

The OECD recommends streamlining the authorisation and licensing process, developing a clear, transparent and publicly available evaluation grid, making the technical opinions of the regional committees of leisure tourism activities accessible to candidates, and ensuring that rejection decisions are justified and subject to an appeal process. Authorities should also revise the one‑year duration of permits or streamline the renewal process by further shortening deadlines and limiting interventions by the regional committees to matters in which risk levels as well as the risk drivers mandate such interventions.

1.3.9. Horizontal findings

Regulatory quality

The regulations reviewed in this project are often dispersed across many different pieces of legislation. Modifications to core legislation result in further fragmentation and, on many occasions, a lack of clear rules, and new legislation does not always explicitly repeal previous provisions. In the course of its assessment, the OECD found conflicting provisions and legislation that is vague and inconsistently implemented. A number of activities are missing application texts, despite legal frameworks having been enacted, and other activities lack adequate frameworks.

The OECD recommends undertaking a comprehensive legislative review to ensure that: 1) superseded legislation is explicitly abolished; 2) all adopted legal texts, including circulars, are published, and when possible, legally consolidated; and 3) authorities’ websites provide updated lists of applicable legislation, when they do not do so already, to improve transparency and help new market entrants. The OECD also recommends adopting a regulatory impact assessment framework to inform policy makers’ decisions on the effectiveness and efficiency of this legislative review and of forthcoming policies.

Investment licensing

The activities upon which this report focuses are for the most part subject to complex, cumbersome licensing procedures. In the course of its assessment, the OECD identified 26 ex-ante authorisations and eight administrative operating requirements embedded in some cahiers des charges, such as the cahiers des charges for travel agencies. The assessment also revealed anomalies involving regulatory inspections and enforcement practices. As is the case with all ex-ante barriers, licensing and permitting can cause serious economic harm, strongly curtailing competition, imposing substantial administrative and financial burdens on regulated entities, raising actual and perceived barriers to new start-ups, and hindering innovation and investment.

The OECD recommends that Tunisian authorities consider streamlining their licensing procedures according to international best practices. Regulatory systems and instruments need to be risk-based, risk-proportional and risk-focused. The OECD also recommends that reform should involve not only ex-ante and start-up matters, but improvements to ex-post regulatory inspections and enforcement. A risk-targeted, risk-proportional approach will ensure that official efforts target businesses and activities presenting the highest combined level of likelihood and potential magnitude of harm. Such an approach will also achieve results while limiting costs and optimising resource efficiency in both the private and the public sectors.

Restrictions on foreign investment

The participation of foreign companies in several activities related to tourism in Tunisia is subject to restrictions and screening procedures. Some activities are reserved strictly for Tunisian nationals and others are subject to pre‑approvals if foreign participation exceeds 50% of capital. Restrictions apply also to the recruitment of foreign managers. The implications of service restrictions typically go beyond sector borders, limiting potential economy-wide productivity gains.

The OECD recommends that Tunisian authorities consider lifting or reducing nationality requirements and the associated restrictions imposed on foreign investors in the tourism industry in line with Law No. 2016‑71 on investment, establishing the principle of freedom of investment and participation by non-Tunisian citizens in Tunisian companies alongside the national treatment instrument of the OECD’s Declaration on International Investment and Multinational Enterprises.

1.4. Benefits of lifting barriers

This competition assessment project focuses on legislation, not enforcement. However, changes in regulation can have an impact only if that regulation is enforced. This is not always the case in Tunisia (OECD, 2019[7]), which limits the potential benefits of lifting regulatory restrictions.12 Moreover, the broader business environment is also important and contributes to the economic benefits of reform.

The OECD’s recommendations address specific restrictions in legislation. The impact of the recommendations is directly linked to lifting those restrictions and the consequent positive effect on competition in the tourism sector. It has not been possible to quantify the effects of all the individual restrictions identified, due either to a lack of data or the nature of the recommended regulatory change.

Throughout this quantification exercise, the focus is on the activity level, or GDP at constant price. The focus on GDP, rather than consumer surplus, reflects the belief that GDP can provide a better measurement of welfare. By adopting the recommendations in this report, inefficiently high prices would fall and tourism activity would increase. This would add to the consumer surplus, mostly for foreign tourists, since foreign visitors account for 83.7% of Tunisian tourism (INS, 2022[30]). At the same time, the adoption of the recommendations would increase GDP, and thus income, while diversifying the tourism market, and the gains would be shared more widely among Tunisian people. Finally, the adoption of the recommendations would lay the groundwork for increased investment, productivity and output in the long run, as shown above.

This assessment draws on a standard analytical framework that has been used in previous OECD competition assessment reports. The framework is built on the classical diagram used to investigate consumer surplus (OECD (2017[31]); see Box A.A.2). This means that the GDP impact derived from this framework is partial (looking at only one product) and static (with no consideration of changes in productivity or income). However, the framework allows for taking account of consumer demand specific to tourism in Tunisia and the effects of price changes specifically expected following the implementation of recommendations and resulting from changing market structures.

In this assessment, tourism GDP at the sector level is taken into account (Table 1.2). Tourism direct GDP is defined as tourism-specific, value‑added, meaning goods and services specifically produced for tourism and consumed by tourists, adjusted for tax and subsidies, according to the TSA (OECD et al., 2017[28]). Tourism direct GDP at the sector level is used to gauge the initial level of sector revenue in the classical diagram to investigate consumer surplus (see Box A.A.2). It is assumed that tourism sector revenue is approximated by tourism direct GDP at the sector level (direct effects) and that GDP in other sectors (value‑added, adjusted for tax and subsidies) are intermediate inputs for tourism (indirect effects). It is also assumed that tourism sector revenue and tourism GDP are proportional and that they change proportionally for any given price change. Intermediate inputs are considered costs of production for tourism enterprises and are used proportionally to the level of tourism activity, in line with the TSA methodology. The price effects of reducing restrictions on sector revenue, and thus tourism GDP at the sector level, are specified in detail below. Once the total change in tourism GDP is identified, the associated change in GDP in other sectors required as intermediate inputs will be separately identified.

1.4.1. Initial level of economic activity

This report benefits from the latest estimates of tourism activity made by the INS. As mentioned earlier, these estimates were made based on the methodology defined by the TSA, so only goods and services directly consumed by tourists are considered tourism value added (OECD et al., 2017[28]). According to the estimates, tourism gross domestic product (GDP) amounted to TND 4.8 billion in 2018, representing 4.3% of national GDP (the OECD average is 4.4%). The OECD, in co‑operation with the INS, estimated tourism activity at a granular level (see Table 1.2). These estimates form the basis for the estimation of the GDP impact arising from adopting the OECD’s recommendations in each market segment.

Table 1.2. Tourism GDP by sector

Sector	Sub-sector	NAT Industrial code	Tourism GDP, TND million
Accommodation		55	1 080.3
Food & beverage service		56	1 399
Land transport, etc.	Other land transport (i.e. excluding railways)	493	548.5
Water transport	Sea and coastal water transport	501	68.1
Rental and leasing activities	Renting and leasing of motor vehicles	7711	127
	Renting and leasing of recreational and sports goods	7721	⋍0
Travel agencies, tour operators, etc.		79	326.0
Libraries, museums, etc.	Museum activities	9102	3.2
	Operation of historical sites	9103
Sports activities, amusement and recreation activities	Other sports activities	9319
	Other amusement and recreation activities	932	351.2

Note: In some cases it was possible to estimate the figures only at a higher level of aggregation including all the sub-sectors (e.g. accommodation and food & beverage service), while in other cases it was possible to estimate the figures at a detailed level more specifically related to tourism (e.g. renting and leasing of motor vehicles and renting and leasing of recreational and sports goods). In each case, the figures for tourism GDP should in principle reflect tourism activity as defined by the TSA (OECD et al., 2017[28]), i.e. only goods and services directly consumed by tourists are considered tourism value added.

Source: TSA, (INS, 2022[30]), Compte Satellite du Tourisme: Principaux résultats 2018‑21.

1.4.2. Price elasticity of demand

The price elasticity of demand is assumed to be ‑2 in the baseline scenario, in accordance with previous OECD competition assessment reports. This assumption is subject to uncertainty. Since 83.7% of Tunisia’s tourism consumption is attributed to foreign visitors, the demand for international tourism (non-Tunisians) is considered. The price elasticity of demand for international tourism has often been found to be lower than ‑2, according to a relatively large body of literature. For instance, Crouch (1994[32]) shows that, on the basis of the results from around 80 studies, the price elasticity of demand for international tourism ranges between ‑0.6 and ‑0.8 after adjusting for differences in the selection of variables, sample and methodology.

Nonetheless, the price elasticity of demand for Tunisian tourism may differ from what is generally observable in international tourism. For example, Ouerfelli (2008[33]), focusing specifically on demand for tourism in Tunisia, found stronger price elasticities of demand. According to Ouerfelli (2008[33]), the price elasticity of demand differs across countries of origin: ‑8.34 for the United Kingdom; ‑5.17 for Germany; between ‑4.89 and ‑2.51 for France; and ‑1.51 for Italy. Tourists from these countries account for the vast majority of Tunisia’s foreign visitors, and these estimates were obtained controlling for other factors that can affect tourism demand, such as supply factors (e.g. accommodation capacity), income and exchange rates. The findings support the use of a price elasticity of ‑2, although this is much higher than typical international levels.

Over the years, estimates of the price elasticity of demand for international tourism have been investigated in detail, including specifications of relevant prices. It is difficult to identify a representative price index for tourism, since tourism consumption consists of products across many sectors (see Chapter 2). At the same time, it is practically impossible to include all related prices in estimates of tourism demand (Crouch, 1994[32]). In practice, general price levels have been used in the literature. When considering international tourism, the difference in general price levels denominated in different currencies needs to be taken into account. This has been achieved by adjusting general price levels normalised by exchange rates (e.g. (Dogru, Sirakaya-Turk and Crouch, 2017[34]). The baseline scenario in this report, according to which the price elasticity of demand is ‑2, is built on this methodology, drawing on Ouerfelli (2008[33]).

Different estimates have been calculated using metrics other than exchange rates. Seetaram, Forsyth and Dwyer (2016[35]) argue that the use of real exchange rates is relevant to measure changes in the relative price but not the level of the relative price (as real exchange rates are typically normalised to the value of the base year, which is common across countries, as though countries had the same price levels in the base year). They instead use purchasing power parity between countries as the measure of the relative price and find that the price elasticity of demand for international tourism is ‑1.07. According to their notes on empirical results, income is another major determinant of tourism demand, and real exchange rates are closely associated with it, which can distort the estimated effects of real exchange rates on tourism demand. The abovementioned findings by Ouerfelli (2008[33]) may also suffer from this problem. Based on these findings, this report also uses an alternative scenario in which the price elasticity of demand is ‑1.

1.4.3. Estimates of price changes

Transport: Rental cars

Tourism GDP generated by the vehicle hire sector was TND 127 million in 2018 (see Table 1.2). The OECD’s recommendations for this sector are related to administrative requirements, which are similar to those required for licences and qualifications. This report takes into account comprehensive studies looking at the price effects of occupational licensing by Kleiner (2000[36]) and Kleiner and Vorotnikov (2017[37]). The impact of licensing-related practices on prices ranges between 5% and 33%, depending on the type of occupational practice and location. According to Kleiner (2000[36]) the estimates are larger for licensed occupations that require more education and training, such as lawyers. Since there are no relevant results looking specifically at those requirements in the rental car sector, the OECD makes a conservative assumption of a price decline of 5%. This will result in additional economic activity worth TND 12.7 million (i.e. 1 270 000 x (‑0.05) x ‑2) in the baseline scenario, in which the price elasticity of demand is ‑2. In the alternative scenario, in which the price elasticity of demand is ‑1, additional economic activity is estimated to be worth TND 6.4 million (i.e. 1 270 000 x (‑0.05) x ‑1).

Transport: Tourist transport

Tourism GDP attributable to this sector is reported as “other land transport”, worth TND 548.5 million in 2018, in Table 1.2, which is combined with non-regular public road transport (see below). Tourism GDP generated by the tourist transport sector is estimated to be TND 109.7 million, with an assumption that this sector accounts for one‑fifth of “other land transport” in Table 1.2. This report takes into account the results in Barrett (2005[38]), showing that costs in regulated coach services markets are higher than in deregulated ones by 52%, as well as those in Darbéra (2004[39]), providing evidence that deregulation of coach services would reduce costs by 46%. Then, the OECD estimates the price change to be ‑50% following the adoption of recommendations related to this sector, with additional economic activity worth TND 109.7 million in the baseline scenario and TND 54.9 million in the alternative scenario.

Transport: Non-regular public road transport

Tourism GDP generated by this sector, essentially taxis, is assumed to be TND 438.8 million, with an assumption that the sector accounts for four‑fifths of “other land transport” in Table 1.2. Most of the OECD’s recommendations relate to reducing requirements to operate taxis, which would result in an increased taxi supply. In Tunisia’s formal taxi sector, fares are regulated, so no price effects are assumed and volume effects are directly estimated in this quantification exercise. This report takes into account the results in Bentivogli (2009[40]), who studies the case of Italy, where a similar reform was adopted at the national level in the 2000s. That reform resulted in a supply increase ranging from 6.4% to 30%, depending on the municipality, as municipalities have authorisation competency. Drawing on this study, a 25% increase in the supply of taxis is assumed. A further assumption is that the increased supply is fully met by unsatisfied demand. Such a reform is therefore assumed to result in a 25% increase in economic activity in the sector worth TND 109.7 million. Since no price effects are assumed, the baseline and alternative scenarios do not differ.

Travel agencies

Tourism GDP arising from the travel agency sector is TND 326 million (see Table 1.2). The OECD’s recommendations for this sector concern requirements related to qualifications. The estimate of prices takes into account the results in Kleiner and Park (2014[41]), who investigated certain occupational licences with a strong focus on such requirements as age, education and examinations, according to which costs in related sectors are higher by 6%‑8%. This also aligns with findings on licensing-related practices by Kleiner (2000[36]) and Kleiner and Vorotnikov (2017[37]), according to which the impact on prices ranges between 5% and 33%, with weaker effects for those sectors requiring low educational attainment and training. The OECD estimates the price impact due to the adoption of its recommendations would be a 7.5% decline, with additional economic activity worth TND 48.9 million in the baseline scenario and TND 24.5 million in the alternative scenario.

Tourist restaurants

Tourism GDP attributable to the tourist restaurant sector is TND 1.4 billion (see Table 1.2). Most of the OECD’s recommendations concern requirements related to the restaurant classification system, which are similar to those for administrative licences and qualifications. This estimation draws on the findings on licensing-related practices by Kleiner (2000[36]) and Kleiner and Vorotnikov (2017[37]), according to which the price effect ranges between 5% and 33%, with weaker effects for those sectors requiring low educational attainment and training. Since no relevant studies exist looking specifically at tourist restaurants, the OECD makes a conservative assumption of a price decline of 5% following the adoption of its recommendations for the sector, resulting in additional economic activity worth TND 139.9 million in the baseline scenario and TND 70 million in the alternative scenario.

Water transport

Tourism GDP generated by this sector and its subsectors is TND 68.1 million (see Table 1.2). Thus, tourism value added accounts for a significant share of the total value added in the overall sea transportation sector, which amounts to TND 200.2 million (0.2% of total value added in Tunisia in 2019, compared with 2.9% in Greece and 0.2% in Italy). The OECD’s recommendations related to this sector are similar to those in a past study on tourism in Greece (OECD, 2014[42]). The OECD follows the assumption made in the Greek study of a 5% increase in sales. This assumption would translate into additional economic activity worth TND 3.4 million. This estimate implicitly assumes a price decline of 2.5%. Therefore, in the alternative scenario, in which the price elasticity of demand is halved, additional economic activity is estimated to be TND 1.7 million.

Accommodation

Tourism GDP accounted for by the accommodation sector is TND 1.08 billion (see Table 1.2). The nature of the OECD’s recommendations for this sector varies. One strand of recommendations relates to requirements involving qualifications. The estimate of prices takes into account the results in Kleiner and Park (2014[41]), who investigated certain occupational licences with a strong focus on such requirements as age, education and examinations, according to which costs in related sectors are higher by 6%‑8%. This also aligns with findings on licensing-related practices by Kleiner (2000[36]) and Kleiner and Vorotnikov (2017[37]), according to which the impact on prices ranges between 5% and 33%, with weaker effects for those sectors requiring low educational attainment and training. The OECD estimates that the price decline arising from the adoption of its recommendations would be 7.5%, with additional economic activity of TND 162 million in the baseline scenario and TND 81 million in the alternative scenario.

For the accommodation sector, this report includes another strand of recommendations relating to space requirements for hotel classification. The OECD takes account of the results in Suzuki (2013[43]) on the restrictiveness of land use, based on a restrictiveness indicator formulated by Gyourko et al. (2008[44]). An illustrative policy impact is directly taken into account, according to which prices are 4% higher if the land use restrictiveness indicator is higher by one standard deviation. A decline in prices of 4% would result in additional economic activity worth TND 86.4 million in the baseline scenario and TND 43.2 million in the alternative scenario.

1.4.4. Summary

In total, the GDP impact of adopting the recommendations in this report is estimated to be worth TND 672.8 million, which is equivalent to 0.6% of Tunisia’s 2018 GDP in the baseline scenario, in which the price elasticity of demand for tourism is ‑2. The GDP impact is measured at base year 2018 prices, as it would appear in the national accounts if all other factors are held constant. In the alternative scenario, in which the price elasticity of demand for tourism is ‑1, the total benefits would be worth TND 391.3 million, or 0.3% of 2018 GDP. The price elasticity of demand is twice as strong in the baseline scenario as in the alternative scenario, but the estimated figure is not simply doubled because in some cases volume effects are estimated directly.

The total GDP impact should also take into account the associated increase in intermediate inputs (indirect effects). Tourism is typically a downstream industry, requiring intermediate inputs from many other industries. Based on this understanding, the TSA provides a means of calculating the size of such indirect effects, assuming a constant relationship between tourism production and the consumption of intermediate inputs from other industries based on input-output tables showing flows of final and intermediate goods and services. According to an estimate by the INS, a unit increase in tourism activity is associated with a rise in activity in all other industries by 0.98. This is called the multiplier of tourism activity to derive indirect effects.

Table 1.3. Estimated impact on tourism GDP (TND million)

	|ϵ| = 2	|ϵ| = 1
Transport: Vehicle hire	12.7	6.4
Transport: Tourist transport	109.7	54.9
Transport: Taxis, etc.	109.7	109.7
Travel agency	48.9	24.5
Tourist restaurant	139.9	70.0
Maritime, water activities	3.4	1.7
Accommodation (qualifications)	162.0	81.0
Accommodation (classification)	86.4	43.2
Total impact	672.8	391.3
Tunisian GDP in 2018	11 2679.2	11 2679.2
Total impact as a percentage of GDP	0.6%	0.3%

The rise in economic activity including these indirect effects would be equivalent to the rise in total tourism revenue. Drawing on an estimate made by the INS and using the multiplier of tourism activity, the benefits of reform in the baseline scenario (additional activity worth TND 672.8 million) would necessitate more intermediate inputs, raising the level of economic activity in Tunisia by a further TND 659.3 million (indirect effects). Thus, the total effects (direct effects plus indirect effects), on approximate tourism revenue would be worth TND 1.3 billion, or 1.2% of Tunisia’s 2018 GDP. In the alternative scenario, the total effects would be worth TND 774.7 million, or 0.7% of 2018 GDP.

The expected benefits are likely to spill over to the broader economy, notably in additional spending on goods that tourists purchase. These goods are not counted as tourism value added, according to the TSA, because they are not produced specifically for tourism. They are, however, recorded as tourism consumption, which is part of the TSA that identifies products effectively purchased by tourists. According to INS estimates, tourism consumption amounted to around TND 10 billion in 2018, compared with tourism GDP of TND 4.8 billion. Assuming that the consumption of goods not accounted for in the TSA as value‑added is proportional to tourism GDP as defined by the TSA, additional consumption of TND 59.9 million (0.1% of Tunisian GDP in 2018) would be expected following the rise in tourism activity estimated in the baseline scenario (in this case, the total benefits would add up to TND 1.4 billion, or 1.2% of Tunisia’s 2018 GDP).

Importantly, the total benefits would be even larger, in particular in the longer run, if dynamic aspects are considered. Such dynamic aspects reflect, among other things, intra-company productivity growth and reallocations of resources that raise productivity and income in the aggregate (see OECD (Forthcoming[4]) forthcoming). These are facilitated by encouraging market entry, as new firms tend to be more innovative than incumbents, and facilitate the expansion of productive enterprises through competitive pressures, in line with the recommendations of this report. Although such positive effects can be sizable, it is practically impossible to identify every single transmission mechanism in a model in order to quantify these precisely [and such effects tend to be evaluated globally, linking productivity and policy, see OECD (Forthcoming[4])].

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Notes

← 1.  See https://ue-tunisie.org/projet-192-13-300_appui-au-programme-tounes-wijhetouna-programme-d-appui-a-la-.html

← 2.  The methodology followed in this project is consistent with PMR developed by the OECD. See OECD (2014[46]), Box 2.1, p.67. To measure a country’s regulatory stance and track the progress of reforms over time, the OECD in 1998 developed an economy-wide indicator set of PMR (Nicoletti, Scarpetta and Boylaud, 2000[45]). The indicator was updated in 2003, 2008 and 2013.

← 3.  Fournier et al. (2015[5]) find that national regulations, as measured by the economy-wide PMR index, have a negative impact on exports and reduce trade intensity (defined as trade divided by GDP). Differences in regulations between countries also reduce trade intensity. For example, convergence of PMR among EU member states would increase trade intensity within the European Union by more than 10%. Fournier (2015[6]) studied the impact of heterogeneous PMR in OECD countries and concluded that lowering regulatory divergence by 20% would increase foreign direct investment by about 15% on average across OECD countries. He investigated specific components of the PMR index and found that command-and-control regulations and measures protecting incumbents (such as antitrust exemptions and entry barriers for networks and services) are especially harmful in terms of reducing cross-border investment.

← 4.  Arnold et al. (2011[9]) analysed firm-level data from 10 countries from 1998 to 2004 using the OECD’s PMR index at industry level and found that more stringent PMR reduces firms’ MFP.

← 5.  Égert (2016[10]) investigated the drivers of aggregate MFP in a sample of 30 OECD countries over a 30‑year period.

← 6.  The study of 15 countries and 20 sectors from 1985 to 2007 estimated the effect of regulation of upstream service sectors on downstream productivity growth.

← 7.  Égert investigated the link between product and labour market regulations with investment (capital stock) using a panel of 32 OECD countries from 1985 to 2013 (Bourlès et al., 2013[11]).

← 8.  Employment growth in France increased from 1.2% a year between 1981 and 1985 to 5.2% a year between 1986 and 1990. Between 1976 and 2001, total employment in the road transport sector doubled from 170 000 to 340 000.

← 9.  The sample includes 18 countries over a 10‑year period.

← 10.  Using the OECD’s summary index of PMR in seven non-manufacturing industries in the energy, telecoms and transport sectors, Causa et al. (2015[22]) found stringent PMR had a negative impact on household disposable income. This result held both on average and across the income distribution, and led to greater inequality. The authors noted that lower regulatory barriers to competition would “tend to boost household incomes and reduce income inequality, pointing to potential policy synergies between efficiency and equity objectives”.

← 11.  These were Australia, Canada, France, Germany, Japan, South Korea, the United Kingdom and the United States.

← 12.  The lack of enforcement calls for regulatory compliance cost analysis, since several regulations are outdated and simply not enforceable.