Tunisia's Ennahda likely to back an open economy

TUNIS Thu Oct 27, 2011 9:18am BST

TUNIS (Reuters) - Tunisian Islamists who won a historic election victory this week are expected to promote business-friendly economic policies but Europe's economic woes could favour Gulf investors in the short term, analysts say.

Ennahda has tried hard to assuage the concerns of Western powers and secular elites which have long had the upper hand in the North African country that it will not alter laws that guarantee women equal rights to men in divorce, marriage and inheritance.

But it has also been keen to argue it will not cause any ruptures in Tunisia's economic life. The two are linked since Western tourism, with its expectations of sun, sand and drinking, has been an economic driver for Tunisia.

Ennahda secretary general Hamadi Jbeli singled out on Tuesday wine and bikinis as elements in attracting tourism that the party had no intention to touch. He also said Ennahda had no plans to make changes to the banking sector, where Sharia-compliant services are so far minimal.

"We will pay close attention to what they implement but on the economic side we have no cause for concern. Our biggest concern is long delays in government formation," said one Western diplomat in Tunis.

"A lot of their backers are from the merchant class who are keen on the idea of a liberal economic policy and they don't have serious plans to change the economic policy of previous governments."

Tunisia is under pressure to reinvigorate an economy that was hailed in recent years as a "miracle" by Western governments and financial institutions for its privatisations and deregulation but which has ground to a halt since the uprising that brought down Zine al-Abidine Ben Ali in January.

Unemployment was at 14 percent before Ben Ali fell, and one third of the jobless had higher education. The figure is thought to have worsened in recent months.

The biggest problem facing the country is resource distribution. It is no accident that the revolt started in Sidi Bouzid, a depressed provincial town in the semi-arid zone of the Tunisian interior where resentment against the affluent coastal cities is strong.

"Economically, they are not radicals. Ennahda is quite conservative economically," said Jean-Baptiste Gallopin of Control Risks. "They favour free enterprise."

Ennahda leader Rachid Ghannouchi assured a delegation of bourse officials on Tuesday that he favoured more flotations on a stock market. Share prices fell in October on apparent fear of an Ennahda win, though Tunisia's Eurobonds did not react negatively to its victory.

An initial public offering in state operator Tunisie Telecom had been held up partly by the leftists who gained in influence after the revolution. Jbeli, who is tipped to be Ennahda's prime minister, met employers' federation leaders on Tuesday.

GULF INVESTMENT

About 80 percent of Tunisia's trade is with the European Union, but with Europe in a financial crisis Ennahda could draw money from the conservative Gulf Arab region.

"Qatar in particular may feel encouraged to resume exploring investment opportunities in the country as the political situation stabilises," said Dubai-based analyst Ghanem Nuseibeh, founder of Cornerstone Global Associates.

"Although it did not proactively support the Tunisian revolution like it did in Libya, many Tunisians, including Ennahda feel indebted to Qatar for the moral support it gave to their cause," he said.

Saudi Arabia is not thought to have close ties to Ennahda, but Qatar's leading Arab broadcaster Al-Jazeera has heavily promoted the group. Qatar was a major Arab backer of the NATO operation to back Libyan rebels who succeeded in ending the rule of Muammar Gaddafi.

Sama Dubai, a government-owned company in the emirate, had plans in the Ben Ali era to develop a residential and commercial district in Tunis but the future of the project is now not clear and the land sits empty.

Hardliners among Ennahda's rank-and-file could still rock the boat, despite Ghannouchi's attempts to offer reassurances on social and economic policy.

"The danger is that Ennahda members or influential independents foment fears among investors with unguarded comments that do not really reflect the party's intentions," said Crispin Hawes of the Eurasia Group.

"The net result is that we believe that investor sentiment over Tunisia will remain nervous and trending towards the negative in the aftermath of the election."

(Additional reporting by Christian Lowe and Tarek Amara; Editing by David Stamp)