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Tunisia, a petrodollar haven, getting heavy Arab aid

By Michael R. MeyerSpecial to The Christian Science Monitor / February 16, 1983



Tunis

Saudi Arabia, Kuwait, and other Gulf states, concerned about the political consequences of a sharp reduction in United States and European development assistance to Tunisia, are contributing hundreds of millions of dollars annually to support the economy of this progressive, Western-oriented North African country.

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This already massive flow of aid was apparently stepped up last year despite financial pressures caused by the continuing slide in OPEC oil prices and production.

In 1981 the Gulf oil producers pumped some $500 million into Tunisia - nearly half of the $1.2 billion in foreign capital that Tunisia must attract each year to meet the goals of its ambitious social and economic plan, according to diplomats and bankers here.

Gulf aid and investment in Tunisia since 1979 is estimated at roughly $2 billion. So completely does Tunisia now depend on massive infusions of public and private capital from the Gulf that should that flow cease or be substantially curtailed, the country's economic prospects would be dashed.

The driving force behind this flow of wealth, sources here say, is security and return on investment. As one of the most stable, moderate, and forward-looking Arab countries, Tunisia over the years has become a natural ''safe haven'' for the huge petrodollar surpluses of the Gulf oil producers.

But there is also an important political dimension to the transfers.

Undercurrents of political opposition, social and economic unrest, and Islamic fundamentalism similar to those precipitating the fall of Egyptian President Anwar Sadat and the Iranian revolution are at work in Tunisia. According to diplomats and bankers here, Saudi Arabia and other moderate Arab states fear that, should Tunisia fail to meet its economic objectives and satisfy the expectations of its highly politicized young and aspiring urban class, these forces could gain momentum and threaten the country's future.

Complicating this tenuous equation between aid and political stability is the ongoing oil glut. Sources here and in Washington say that Saudi Arabia and Kuwait are willing to maintain current levels of assistance for another year, and have sufficient reserves for this. But should the glut continue beyond 1983 , aid from the Gulf will rapidly dwindle - perhaps unleashing the very forces it was meant to contain.

Precise figures are difficult to obtain, but knowledgeable financial and commercial analysts here estimate that actual disbursements by public and private Saudi investors and aid agencies since 1979 have run between $500 million and $700 million.

Some $800 million to $1 billion more is said to have come from Kuwait, with Abu Dhabi, Qatar, and the Gulf multilateral development agencies contributing between $200 million and $250 million during the period.

For all its success in attracting foreign capital and attaining a high level of economic prosperity, Tunisia is not without serious problems. The new five-year plan, spanning 1982-86, is based on projected investments of $14 billion, 40 percent of which is to be raised overseas. The government's willingness to bank so boldly on foreign capital to support its development plans reflects its view that Tunisia cannot solve its economic and social problems without massive outside help.

Unemployment and gross under-employment affect beween 25 percent and 30 percent of the adult work force. While gross national product has risen annually at 7 percent, inflation is in double figures. Given the expectations of Tunisia's young and aspiring middle class, developments that would disrupt or permanently slow Tunisia's progress toward a European standard of living could, in some cases, become the focus of widespread social unrest.

It is in this context, several foreign diplomats suggest, that Saudi Arabia and Kuwait view with special concern the sharp decline in development assistance from the West. Economic aid from the US, totaling almost $1 billion since Tunisia's independence in 1956, will amount to $5 million in 1982 - down from more than $100 million two years ago. It will cease altogether in 1983.

The French and Germans maintain small assistance programs, but the World Bank , which has traditionally provided Tunisia more than $100 million a year in aid, will reduce its contribution to $40 million in 1985.

Equally troubling is the shift in US support from economic to military aid. Between 1962 and 1979, Tunisian arms purchases and security assistance averaged less than $8 million a year - less than a fifth of the food and economic aid extended by the US.

In 1982, however, military assistance to Tunisia appears to have exceeded $ 100 million - the first installment on a new five-year $1 billion weapons modernization program negotiated by the Reagan administration and Tunisian President Habib Bourguiba.

US officials say the new level of security assistance is designed to arm Tunisia against possible future attacks from Libya. Many diplomats here are skeptical, however. The Gulf Arabs and most Tunisians consider the prime threat to Tunisia's stability to be internal unrest rather than external attack. They see such US assistance as weakening rather than strengthening Tunisia's security.

According to diplomats here and in Washington, Tunisia's aggressive and entrepreneurial prime minister, Muhammad Mzali, has put enormous pressure on the Gulf states to fill the gap.

So far his efforts appear to have paid off. Gulf aid has increased every year since 1979. A recent report by the United Nations Development Program shows that the Saudi Fund for Development, the lead Saudi aid agency, committed new loans totaling $138 million last year. Despite a steady decline in oil revenues since mid-1981, new loan commitments rose to $103 million for the first half of 1982, according to the Middle East Economic Survey.