Draft Activity Description - Tourism Development Project in Tunisia.pdf

DRAFT ACTIVITY DESCRIPTION

Tourism Development Project1 in Tunisia

PURPOSE

USAID/Tunisia is designing a five-year, $35-38 million activity to enhance Tunisia’s tourism potential, with the goal of generating revenue and jobs, particularly for women and youth and for populations in underserved regions of the country.

BACKGROUND

Tunisia grapples with growing its economy and providing economic opportunities.

Tunisia’s foreign debt grew significantly from $19.6 billion in 2010 to $35 billion in 2019.

The country’s economic progress is undermined by a 15.3 percent unemployment rate, and differs substantially in the richer coastal and eastern regions and the poorer southern and western regions. Female participation in the labor market is 26.5 percent and youth participation is 32.3 percent. Between 2001 and 2019, the country’s gross domestic product annual growth rates averaged 3.18 percent, while inflation remained at a relatively high pace of 6.7 percent.

Tourism plays an important role in Tunisia’s economy. The tourism sector accounts for about 8 percent of the Tunisian gross domestic product and employs more than 400,000 people. It also contributes to reducing the current account deficit, improving foreign exchange reserves, and driving broad-based economic growth. According to the Tunisian Tourism and handicrafts Ministry, over 5 million tourists visited Tunisia during the first seven months of 2019, a 12.8 percent increase from the same period last year.

However, Tunisia’s tourism sector has not yet achieved its full economic potential. The 2019 World Economic Forum, Travel and Tourism Competitive Index, ranks Tunisia 85th, last in North Africa after Egypt (65th), Morocco (66th) and Jordan (84th).

According to the report, the main factors inhibiting its development are the perception of low safety and security (102nd) and the quality of human resources in the sector (101th). Tunisia’s wealth of natural and cultural resources, which range from desert to lush areas as well as millennia-old archaeological relics, are also not sufficiently valued and are ranked very low at 100th.

1 USAID refers to the activity as the “Tourism Development Project”, “Tourism Project”, or “the Project.”

Interested organizations and individuals responding to this RFI can propose a new project name following USAID guidance on project naming (ref. USAID Graphic Standards Manual 2016, https://www.usaid.gov/branding).

Recognizing the important role tourism plays in the economy, in 2017 the Tunisian Ministry of Tourism and Handicrafts held regional workshops to build a shared strategy around the following themes: (a) improved accessibility; (b) communications and promotion; (c) sustainable tourism; (d) quality of tourism products; (e) innovation and diversity of products and (f) development and qualification of tourism establishments.

However, these workshops have yet to feed into an effective plan to increase the competitiveness and profitability of Tunisia’s tourism sector. Absent from these discussions were issues related to access to finance. Banks are more cautious when it comes to lending to businesses in the tourism sector as the perceived risks are high. In the World Bank’s 2020 “Doing Business” report, Tunisia ranked 104 out of 190 on the Getting Credit indicator. It is therefore important that Tunisia builds on the stakeholder consultation to develop a strategy based on new market prospects and key policy reforms initiatives.

OBJECTIVES AND ILLUSTRATIVE RESULTS

The overall vision behind USAID’s investment in Tunisia’s tourism sector is to capitalize on the country's cultural and historical endowments to develop a diversified and high quality sector that contributes to a greater extent to broad-based economic growth in Tunisia. There are a number of objectives that need to be achieved in order to attain this vision, including:

Objective 1: Enhance Tunisia’s competitiveness as a tourism destination.

Objective 2: Increase tourism-related investments and revenue.

Objective 3: Improve the enabling environment for sustained growth in the tourism sector.

General descriptions of the development challenges for each objective and respective illustrative results are described below. The implementer should also suggest possible indicators on how to measure the success of these objectives.

Objective 1: Enhance Tunisia’s competitiveness as a tourism destination

Much of Tunisia’s tourism depends on large foreign tour operators that market Tunisia for the low-yield, all-inclusive resort market. To compete with other sun-sand-sea holiday destinations, hotels have continuously lowered prices to a point where profits and wages depreciated to a minimum. Seasonality is also a major impediment to industry growth and impacts all aspects of supply-side behavior in tourism. Each year, the tourism season starts in May, peaks in July and starts dipping in September. As a result, the sector has not been able to sustain jobs during off-peak periods, limiting its ability to attract and retain quality staff throughout the year. Existing curricula and training programs have also failed to line up skills with industry needs. From the 140 countries reviewed, the World Economic Forum index ranked wages at 130th and customer-orientation at 95th. Women participation in the sector also ranked surprisingly low, and stood at 125th. These conditions can only be sustained if Tunisia intends to continue attracting low-yield, mass-market visitors.

Another challenge of the tourism sector is its dependence on the economic situation in source markets. Around one third of the 8.3 million visitors in 2018 were predominantly European. France commands a tenth of arrivals, followed by Russia, Germany, England and Italy. The Tunisian government is targeting ten million tourists for 2020. However, economic downturns in Europe or any political instability in Tunisia may adversely impact expected arrivals and severely harm the tourism industry.

It is therefore important for Tunisia to look beyond traditional mass-market tourism, diversify its arrival sources and provide year-round offerings to attract arrivals and boost sector profitability. Cultural and heritage assets, for example, could provide a powerful draw for tourism. Adventure travel is also a trend that can create opportunities for new businesses to provide niche, high value experiences, especially when adventure is combined with cultural heritage experiences. Nature-based travel is also a lucrative segment. Globally, an estimated 10-12 million leisure trips have nature and wildlife as the primary motivation, a niche market predicted to grow at 8-10 percent each year.

Business events also comprise an important product segment potential for Tunisia that can bridge seasonality and generate revenue during the off season. However, Tunisia has not been able to capitalize on these markets.

The Tunisian tourism industry also depends on a reasonable level of stability and security. To succeed in diversifying its source markets and increase demand, Tunisia needs to instill confidence and interest in the international marketplace. This requires careful planning and coordination among the various industry actors to manage messaging with international media and source market partners. Particularly important is developing sophisticated communication capability by all facets of the industry. In the past, public authorities and industry players have, to a large extent, relied on foreign tour operators to promote the country’s tourism.

It is therefore critical that Tunisia adopts an integrated strategy that enhances its image as a safe destination that offers sophisticated tourism products, develops resilient sales channels and diversifies into new markets and market segments. Tunisia also needs to produce trained workers to provide quality service to tourist arrivals. The following illustrative performance results attempt to address and measure the constraints in Tunisia’s tourism industry identified under this objective:

Possible approaches: To achieve this objective, the implementer should propose approaches and activities they believe will achieve the objective such as:

▪ Comprehensive plan for Tunisia’s tourism industry developed to increase its competitiveness in the international market.

▪ Through branding and positioning campaigns, Tunisia’s image as a safe tourist destination that offers a diverse range of experiences is enhanced.

▪ Tourism products are diversified and are better able to attract more tourists and bridge seasonality.

▪ New markets are cultivated through targeted marketing campaigns, trade familiarization trips and consumer shows.

▪ Tunisia’s travel agent network is expanded and educated about the unique and diverse tourism products and services.

▪ Tourism workforce, including local guides and government workers, is developed to provide quality services, and to attract and retain quality staff.

▪ Using emerging business tools and management philosophies, hotels are better able to improve efficiency, performance and profitability.

Objective 2: Increase tourism-related investment and revenue

Due to existing demand, the bulk of development has been along the coastline, while inner Tunisia continues to struggle from insufficient visitor flows. To diversify its offerings and draw more visitors to the hinterland, Tunisia needs to develop and promote its tourism facilities in remote areas of the country. This will require developing local infrastructure, including tourist paths and signage, as well as improving visitor experience at these potential tourism sites. This will also require close collaboration with government, non-government and private sector tourism stakeholders to improve the management and promotion of these sites. Destination management organizations can play an important role in engaging tourism stakeholders in collaboration, and in promoting and attracting investment and innovation.

Business opportunities for cultural and adventure tourism in non-coastal, interior regions have not matured because Tunisian businesses and their local communities lack the experience, resources, market access, and skills to commercialize these ventures.

According to a 2017 study about destination-based tourism options in Tunisia, the growth of local businesses is sensitive to investment and professional expertise. The study also confirms that the demand will increase when local and international private firms as well as tour operators develop tailored packages with options for sophisticated tourists to experience Tunisia’s local culture and its nature.

Digital technologies and platforms have the potential to give businesses in the tourism industry direct access to a global market of travel consumers, vastly expanding their prospects. They can also provide new opportunities for women and youth rural entrepreneurs to improve their market access and financial inclusion. To fully utilize digital platforms, partnerships are key, especially ones that bring businesses to the table with governments and international organizations.

Tunisia also needs to encourage tourists to venture out of resorts by providing them with options to spend more on travel-related services and buy more local products.

Currently, tourist yields are well below potential and relatively lower than of those in competitor destinations. The World Tourism Organization reports that average per capita spending for tourists in Tunisia stands at $385, which is markedly less when compared to Egypt ($890), Turkey ($770), or Morocco ($725). The report also found that Europeans stay much longer and spend more than their Maghrebi counterparts.

Increasing direct visitor spending of tourists arriving to Tunisia requires: (a) developing and promoting cultural and adventure products and experiences that are reachable through day trips from resorts such as city or culinary tours, craft, ancient and museum routes, and adventure and wellness experiences; (b) increasing purchases of local products such as traditional handcrafts; and (c) increasing expenditure on culinary experiences and festivals, and site-related cultural activities. Operators will also have to realize the needs and desires of more sophisticated tourists when creating and promoting such products and packages.

Possible approaches: To achieve this objective, the implementer should propose approaches and activities they believe will achieve the objective such as:

▪ Improved tourist sites and facilities for enhanced visitor experience and increased visitor arrivals to the hinterland.

▪ Local businesses and tour operators are better able to build itineraries, price and promote tourism products that target foreign tourists interested in cultural or adventure tourism in Tunisia.

▪ International access to local tourist service providers and hotels increased.

▪ Cultural and adventure products and experiences such as city or culinary tours;

craft, ancient and museum routes; and adventure and wellness experiences are developed and promoted internationally and locally, and are reachable from resorts through day trips and night tours.

▪ Innovations in tourism is supported and promoted through digital platforms, particularly for women and youth and for people in underserved regions of the country.

▪ Tourism receipts increased by 15 percent.

▪ Access to finance for business and entrepreneurs that help improve and diversify tourism products increased.

Objective 3: Improve the enabling environment for sustained growth in the tourism sector.

The state directly controls important supporting industries such as the cultural sector.

The Tunisian government owns, manages and promotes museums and key historical sites, and organizes and finances major festivals. The Ministry of Tourism and Handicrafts implements the government's policy in the tourism sector. Tourism policy has largely focused on promoting coastal regions at the expense of the interior and border regions, with the bulk of infrastructure investment targeted these regions.The National Tourism Office (Office National du Tourisme Tunisien) is responsible for designing and implementing media campaigns for the tourist sector, and its regional offices monitor the quality of tourist infrastructure as well as organize events and festivals. Other public institutions include the newly created workforce development authority (Agence De Formation Dans Les Métiers Du Tourisme) which prepares students for the professions of cooks, confectioners, waiters, receptionists, cleaning agents or tourist guides, and the Agency for Heritage Development and Cultural Promotion (L’Agence de Mise en Valeur du Patrimoine et de Promotion Culturelle) established to manage and promote archeological and historical heritage sites.

Industry associations are weak and have failed to define effective channels of communication and advocacy with the government. Traditionally, the private sector, through industry associations and syndicates, have not played an important role in identifying and advocating for a more enabling policy and regulatory environment for competitiveness and growth in the tourism sector. The Tunisian Federation of Hotels (Fédération Tunisienne De L’Hotellerie) promotes the sector, represents and defends its members in its relations with the government, and provides recommendations for tourism development. Supported by annual fees from private companies, the Federation Tunisienne Des Agences de Voyages et de Tourisme comprises tour operators and travel agencies as well as tourism transport. Established in 2014 to represent the economic interests of its members, the Tunisian Federation of Tourist Restaurants aims to improve the regulatory environment for hotels, improve the quality of workforce in the restaurant sector, and develop and promote Tunisia’s culinary heritage. To achieve a sustainable, diversified and profitable tourism sector, it is important that Tunisia strengthens the capacity of tourism business associations, and facilitate transparent dialog to allow private sector associations to advocate for better business practices and legislation affecting the industry.

Possible approaches: To achieve this objective, the implementer should propose approaches and activities they believe will achieve the objective such as:

▪ Strategies, policies, reforms and industry standards adopted to advance tourism in Tunisia.

▪ Business associations in the tourism sector strengthened to identify and advocate for a more enabling policy and regulatory environment for competitiveness and growth in the tourism sector.

▪ Dialogue between the public and private sectors stakeholders in the tourism sector is encouraged and facilitated.

▪ Dialogue between ministries and local communities encouraged to advance tourism.

RELATIONSHIP TO AGENCY AND MISSION STRATEGY

This activity aligns with USAID Tunisia’s Country Development Cooperation Strategy (CDCS), Development Objective (DO) 1: “Inclusive Private Sector Employment Increased”, Intermediate Result (IR) 1.1: “Private Sector Demand for Skilled labor Increased,” IR 1.2 workforce skills better matched to market needs, and Sub-IR 1.1.2:

“Business Enabling Environment Improved.” DO 1 is driven by the need to promote inclusive, private sector-led growth that will reduce unemployment and contribute to Tunisia’s long-term socio-economic transformation. By supporting an enabling environment in the tourism sector, this activity also contributes to IR 2.1: “Accountable Governance Strengthened.”

This activity also supports USAID’s Journey to Self-Reliance (J2SR) Country Road Map (CRP) for Tunisia, which highlights the need to improve economic inclusion of the different segments of society. It also supports USAID’s 2019 Private Sector Engagement (PSE) Policy assigns a leading role to the private sector as a critical pathway to self-reliance. Specifically, the PSE policy signals an intentional shift to pursue market-based approaches and private sector investment and expertise as a means to accelerate Tunisia’s progress on the J2SR. The 2019 Women’s Entrepreneurship and Economic Empowerment Act led by USAID also expands USAID’s authorities to finance micro, small and medium enterprises owned, managed and controlled by women in support of the Economic Gender Gap metric of the CRM for Tunisia. The Act recognizes that women’s entrepreneurship and economic empowerment is critical to achieving inclusive economic growth, and requires USAID missions to prioritize firm- and policy-level assistance to increase economic opportunity, employment and income for women.

GRANTS PROGRAM

Small grants may be used to support tourism development under this activity. No grants will be issued to government entities of Tunisia or other countries. The Grants Program will be no more than $10,000,000 in total over the life of the activity and may be used to support the following:

1) Consistent with USAID’s Private Sector Engagement policy, and to accelerate Tunisia’s progress on its journey to self-reliance, support private sector activities and innovations that could achieve sustainable impact at scale;

2) Reduce risks to the start-up or expansion of local businesses, training business owners, or other initiatives to stimulate economic growth in the tourism sector.

With predefined criteria, grants can be used as seed capital for business ventures in partnership with the private sector. Some cost-sharing could actualize business opportunities with international companies or investors;

3) Support tourism workforce development activities to enhance skills and increase employment;

4) Support international sales-oriented plans for tour operators and/or hoteliers that can cost share from cooperating Tunisian partners or foreign tour operators partners to ensure advertising leads to booking; provide credible marketing and sales opportunities; and targets new niches, not resort mass tourism; and

5) Support local community organizations, NGOs and entrepreneurs that can present credible proposals to create new tourism experiences that fit the culture, adventure and wellness markets to achieve diversification and increased expenditure, and reach under-served areas and communities. Support may include the design, promotion and operation of themed itineraries, walking tours, and adventure experiences.

IMPLEMENTATION CONSIDERATIONS

Implementing partners must consider the following:

a. Private sector engagement

USAID’s Private Sector Engagement policy assigns a leading role to the private sector as a critical pathway to self-reliance. Focused on more sustainable and enterprise-driven outcomes in planning, programming and implementation, the policy calls for USAID and partners to engage the private sector early and often; incentivize their participation; expand the use of USAID approaches to unlock private sector potential;

and build and act on the evidence of what does and does not work in engaging the private sector. Implementing partners must focus on prioritizing private sector investment to catalyze new tourism products, with the public sector creating the necessary conditions for supporting and facilitating private sector-led investments. The implementing partner must demonstrate the inclusion of the private sector in a leading role, with continual feedback mechanisms to ensure maximum impact. This will include cooperation and consultation with the relevant industry, business, and civil society associations.

b. Technology and Innovation

The activity will utilize IT-based solutions and applications to make data collection and analysis, monitoring and evaluation, service delivery and oversight more effective and efficient. Moreover, implementing partners must consider how existing and emerging technologies and related applications can be used by beneficiaries to achieve sustainable outcomes.

c. Gender Considerations

Women account for less than one-third of Tunisia’s workforce; social and cultural norms still restrict women’s access to economic opportunity. Nonetheless, women can be found in all areas of trade and commerce and they represent an important, under-utilized segment of the working age population. The implementing partner must systematically consider gender aspects and implications of specific interventions, including opportunities to reduce gender-related biases or risks embedded in tourism development. Furthermore, the implementing partner must integrate gender considerations into all planned deliverables. The implementing partner will also seek opportunities to promote the equitable professional development of women in targeted interventions. To that end, all data collected for monitoring and evaluation purposes must be sex-disaggregated and surveys and other monitoring and evaluation tools must include questions to elicit information enabling differentiation of impact based on gender.

d. Youth Considerations

In recent years, Tunisia’s population growth rate has slowed to around one percent per year. While the youth bulge of the 1990s has tapered off and many young Tunisians are now entering their prime working years, there are approximately 2.5 million youth (about 23 percent of the total population) aged 10-24. The youth bulge transition presents Tunisia with the opportunity to capitalize on a potential demographic dividend. In recent years the country has garnered impressive social and political achievements. While addressing the legitimate aspirations of Tunisian youth is critical for Tunisia to sustain its positive momentum, young Tunisians have not been adequately included in the process. The official unemployment rate for youth (15-24) is 38 percent. In reality, of the two million youth that comprise one-fifth of Tunisia’s population, only 22 percent are actually employed, while most are not active in the labor force. Youth economic exclusion is a critical barrier to advancing prosperity and security in Tunisia. According to a World Bank study, a large portion of the youth population in Tunisia are “Not in Education, Employment, or Training” and job seekers spend an average of more than three years looking for a job before finding employment. To cope with unemployment, many young Tunisians migrate to peri-urban areas in greater Tunis, seeking livelihoods and jobs, leading to social marginalization and exclusion. Youth unemployment is an important issue throughout the MENA region, particularly in Tunisia. Coupled with the fragile nature of Tunisian peace, which is closely linked with economic stability and inclusion, the high rate of youth unemployment exacerbates challenges to a sustainable democratic transition.

e. Geographic Considerations

USAID has long recognized the critical role of development in addressing social and economic disparities. In the case of Tunisia, a substantial development gap remains between the coast and the periphery. In the wake of Tunisia’s revolution, the government embarked on a series of efforts to increase social inclusion and reduce regional disparities. However, as of today, the regional socio-economic imbalances remain. To address this challenge, Tunisia needs to increase investment and economic opportunities in these regions. Tourism opportunities exist along Tunisia’s borders with Algeria and Libya, ranging from desert voyages to cultural sites. Consistent with the objectives and performance results included above, Implementing partners will be required to develop and promote tourism products in these locations.

f. Sustainability Considerations

USAID defines sustainability as “the capacity of a host country entity to achieve long-term success and stability and to serve its clients and consumers without interruption and without reducing the quality of services after external assistance ends.” For all private sector-led interventions, sustainability is defined as the achieved outcomes and results that continue, and are scaled and replicated, in the absence of USG government assistance. Sustainability, as defined, is critical to the design of this activity. The partner’s approach to implementation must be flexible in order to adapt to changes in priorities or leadership within key institutions. This activity must also emphasize building sustainable local capacity in support of activity objectives. At all times, the partner must exercise flexibility, embrace facilitation, foster accountability, and cultivate capacity and demand for monitoring and evaluation as a tool for enhancing performance, monitoring progress and ensuring sustainability. Learning from the lessons of global tourism activities, the partner must ensure systematic and sustained engagement of all stakeholders spanning the public sector, private sector, and civil society to ensure sustainability of the assistance provided.

g. Environmental Considerations

Compliance with USAID Environmental Procedures (22 CFR 216), including appropriate environmental mitigation and monitoring measures will be considered an integral part of all activity implementation. An Initial Environmental Examination (ME-19-51) for this activity was approved on July 30, 2019 as part of the six-year, private sector employment project aimed at contributing to broader and more inclusive private sector employment in Tunisia, and to help Tunisians alleviate systemic constraints to private sector job creation. The Initial Environmental Examination included a Negative Determination with Conditions (NDC) for small scale construction activities, and a Categorical Exclusion for studies, projects or programs intended to develop the capability of recipient countries to engage in development planning, except to the extent designed to result in activities directly affecting the environment. Activities determined to fall under NDC require that an environmental mitigation and monitoring plan be prepared and submitted to USAID for approval prior to the implementation of such activities.

[End of the Draft Activity Description]