Foreign direct investment in tunisia in the context of the free trade agreement with the european union

Abstract EN

The aim of this study is to determine whether Tunisia could expect an increase in Foreign Di-ect Investment (FDI) flows in response to the establishment of a Free Trade Area with the European Union (EU).

While the necessary conditions to stimulate the flow of FDI have received considerable attention on behalf of economists in recent years, the relationship between trade policy and FDI has not been the subject of in-depth studies.

It is theoretically well established that the effect of regional integration on FDI flows is ambiguous.

The partnership agreement between Tunisia and the EU has the potential of playing a catalytic role in increasing the openness of the Tunisian economy and attracting FDI.

Empirical analysis shows that the investment potential created by the partnership agreement as well as the growth of FDI inflows to Tunisia are conditioned by the existence of important capital productivity.

Even if liberalization is extended to agricultural products and services, Tunisia couldn't expect important welfare gains if there is an absence of vital increase of capital productivity.