Tunisian Hoteliers Concerned Over Government-Backed ‘Vulture Fund’

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By Dorra Megdiche via Al Monitor

The hotel sector in Tunisia, more so than other economic sectors, was severely affected during the revolution and the transitional period that followed it. Tourism took an even greater hit, since for businessmen, owners, managers, administrators and workers the survival of their establishments and the durability of the entire sector is at stake. Thousands of jobs and many more families that need to be fed have been affected.

Representing 7% of GDP in 2010, insuring 46% of cash revenue and contributing at a rate of 62% of coverage for the running deficit, tourism cannot be considered secondary to the national economy. Quite the contrary, in a country such as Tunisia with few natural resources, tourism is a vital economic pillar. Our beautiful sunshine, mild climate, beaches and desert all represent our “natural resource capital.” However, this area of economic growth remains one of the most tenuous, since — aside from the problems and imperfections directly related to businessmen, hoteliers and others with interrelated activities — tourism is directly subject to the external effects connected to the precarious socio-political situation of the transitional phase.

Professionals from the Tunisian Hotel Federation (FTH) organized a lunch-discussion on March 15 to which journalists were invited. The purpose of the meeting was to discuss the current situation of the sector, especially the financial difficulties faced by hotel investors.

Ridha Taktak, a hotelier and member of the FTH, led the discussion, beginning by giving an overview of the sector’s evolution. It was stressed that interest in the sector and its expansion reached 815 hotel units in 2010, of which more than 300 had been established since 1990. Taktak elaborated that today, close to 200 hotels have been shut and many others face impending difficulties. According to Taktak, some big investors are not faced by these difficulties, however, the majority of the sector’s investors are going through an acute crisis. Taieb Zahar, another hotelier in attendance, asserted, “These are grave times about which we can no longer remain silent. The difficulties are enormous and the authorities have turned a deaf ear to us!”

So, why then does the economic crisis affect the hotel sector so drastically? Professionals from the sector explained that the difficulties are on the one hand due to external factors related to political events, the global economic crisis and even natural disasters, and on the other hand due to political and financial decisions dating back several years. These problems, which already existed before the revolution, have clearly been exacerbated since.

Tourism is an incredibly vulnerable sector that quickly falls victim to any security problems. The revolution, the attack on the US embassy and the assassination of Chokri Belaid are just a few of the many examples where each time tourism has taken a hit with an exorbitant number of potential tourists canceling their reservations.

Otherwise, as a totally privatized sector, decisions concerning the hotel sector have always been made by a third party with the appearance of the government. These decisions are thus not always adequate or they do not take into consideration the interests of hoteliers. Members of the FTH — determined not to remain passive, fight to revive the sector and save their institutions — wrote several messages to the minister of tourism proposing solutions to the debt crisis, such as rescheduling principle credit and interest, as well as revising the lowered applied interest rates.

Nejiba Chouk, an accounting expert who has written several studies on the sector, was also in attendance at the discussion and pointed her finger at the political choices and strategies, which show preference to banks to the detriment of tourism. “The former regime preferred to hold off on any just decisions that would nourish the financial sector,” she noted. Current politics have followed the same path. Hotels are effectively overburdened with 7% direct national debt and 19% indirect debt.

Chouk also condemned the use of illegal interest rates practiced by banks for credit granted to tourist investors. Additionally, bank establishments detect conventional interest in advance, illegally overbilling in an amount equal to 12% more than the initial interest. These types of overcharges have not yet gotten any sort of reaction or solid decision from the government.

In the opinion of our accounting expert, the solution to this problem should take into consideration financial and judicial breaches of the law committed by the banks. According to her, urgent action must be taken by giving hoteliers a tax cut on the total outstanding debt today.

The authorities’ response shows a real discrepancy, since the government — based on the proposition of a financial expert at the World Bank — is about to create a “vulture fund” to resolve the debts and hotel debt insolvency problems. Yet, by definition, the “vulture fund” is an “investment fund” that re-buys business debt or signs on to increases in capital to take control, taking advantage of the titles’ extremely low prices. The vulture funds are, in this sense, specialized investment funds, which re-buy the debt of businesses in trouble in order to take control of them and restructure them.

In simpler terms, it is a matter of selling off hotels facing difficult circumstances for the benefit of third parties. Rumors suggest that investors from the Gulf are behind the fund and have already begun to market it behind closed doors. The draft decree, placed for the moment before the minister, will shortly be put up for the approval of the Constituent Assembly (ANC).

Hoteliers seek to sound the alarm about the risks and dangers of such a fund, and are intent on taking a series of measures to bring some sense to the public. They plan to hold discussions and coordinate with the authorities and file complaints with the administrative tribunal.

Photo: Harry and Rowena Photos