During the 18th century and the beginning of economic liberalism, free-trade zones (FTZs) were first set up in Western countries and their former colonies to boost wider economies. Their forms have evolved since that time. The definition, guidelines and standards for FTZs are contained in the Revised Kyoto Convention of the World Customs Organization.
By providing premises, facilities and infrastructure, as well as a beneficial tax regime in a geographically defined area, states expect to attract foreign investments, increase exports and create jobs opportunities. Hong Kong and Gibraltar are two of the most well-known examples, but it is estimated that around 4 000 free-trade zones exist worldwide.
Tunisia has two FTZs, which were both established in 1993 in an effort to open up the domestic economy. The Bizerte Free Zone in the north is located at the crossroads of major Mediterranean shipping routes and is less than eight hours by sea from Europe. Zarzis Park in the south benefits from its proximity to the Libyan market. Libya is Tunisia’s second most important trade and economic partner after the European Union, and one of the three countries with which Tunisia has a trade surplus – the others being Morocco and France.
Located less than 45 km from Zarzis Park is Ben Guerdane, a site chosen for a new Tunisian FTZ project, inaugurated on 6 March 2019. So why would Tunisia decided to set up a second FTZ in the same region?
Ben Guerdane is known as a hotspot for illicit trade in Tunisia. In 2014, a World Bank report estimated the overall revenue of the illicit trade of licit goods at Ras Jedir, the closest border crossing with Libya, at TND420 million (US$140 million).
This points to an informal agreement that used to exist between the central government and local communities, whereby the authorities turned a blind eye to the illicit trade of licit goods such as tobacco, fuel, fruits and vegetables, electronics and fertilisers. In exchange, local communities helped to contain the flows of illicit items such as arms and drugs – as well as incursions by terrorist groups.
In March 2015, when fighters from the Islamic State in Libya took control of the city, it showed that this informal agreement was not enough. Investigations conducted by the authorities showed their attack was marked by troubling linkages with organised criminal networks – and particularly smuggling cartels.
In response, the Tunisian government decided to implement the FTZ project to ‘celebrate the victory of the population of Ben Guerdane against terrorism’, according to Minister of Trade Omar El Behi. This political announcement hides the reality of the need to integrate Ben Guerdane’s informal economy into organised trade.
In 2018, the Global Illicit Trade Environment Index ranked Tunisia 53rd out of 84 countries (the first country being the least exposed). Stefano Betti, Deputy Director of the Transnational Alliance to Combat Illicit Trade, told ENACT that the creation of an FTZ ‘might help [to] reduce the size of an informal economy that is widely dependant on cross-border smuggling.’ Betti added, however, that ‘at the same time, the very establishment of an FTZ may itself be a source of illicit trade when activities taking place therein are not subject to proper oversight and customs regulation’.
FTZs play a key role in the global economy, as they attract foreign investment and encourage economic growth. But if simplified customs procedures mean less bureaucracy, they also mean fewer controls and checks. In this way, an FTZ may therefore constitute ‘a perfect place to manufacture and transport illicit goods’ – according to a 2018 Phillip Morris International report on the role of FTZs in aggravating the illicit manufacture and trade in counterfeit cigarettes.
In 2018, the Organisation for Economic Cooperation and Development (OECD) also provided evidence that the existence and the size of FTZs directly correlate with the levels of counterfeiting activities and piracy in a country. The challenge for authorities is to find the right balance between stimulating trade and growth while limiting transnational illicit flows.
This not only affects Tunisia. The OECD Task Force on Combating Illicit Trade is currently developing a toolkit for OECD member and partner states, including Tunisia, on how FTZs could be made into ‘clean zones’ that are free from illicit activity. OECD Policy Analyst Michael Moritz told ENACT that this will also allow for FTZs to be categorised, differentiating so-called ‘clean’ FTZs from those that present more challenges.
Tunisia has made significant improvements in its regulatory customs capacities. Its adhesion to the Global Container Control Programme (run by the United Nations Office on Drugs and Crimes and the World Customs Organization) in 2016 has made it possible to start aligning local capacities with international standards for risk analysis, and to profile high-risk containers used in the cross-border movement of illicit goods. But the establishment of an FTZ in Ben Guerdane will not automatically eliminate illicit trade in the region. For that to happen, a political process should be conducted at all levels (local, regional and national) through dialogue and consultations with local communities as well as the private sector. In this way, a national strategy can be developed to not only ‘combat illicit trade’ but also address the far larger issue of integrating it into the formal economy.
Jihane Ben Yahia, ENACT Regional organised crime observatory coordinator – North Africa, ISS