TUNIS — TO the east, in Libya, people and markets are gradually feeling the pinch of the international air embargo launched in response to Libya's alleged connection to terrorist airline bombings.
To the west, in Algeria, access to quality foreign goods is drying up as the government launches a "war economy" forbidding many imports in response to the country's debt crisis and moribund industry.
But in Tunisia, a country smaller and poorer than its two neighbors, markets are full, per capita income is rising, and job growth is keeping unemployment steady.
One might assume that such contrasts would be a plus for Tunisia, but instead they pose a problem for a country that stakes much of its future growth on its ability to attract foreign investors.
"We have seen growth in foreign investment but not as much as we might have expected," Minister of Economic Planning and Regional Development Mustapha Nabli says. "The main reason is the perception people have of political and economic instability," he says. "Investors confuse Tunisia and its region."
The level of foreign investments falls well behind other Mediterranean countries like Morocco or Turkey. And all of these countries are being hurt by Europe's slowdown and a focus on Eastern Europe. Still, foreign investments this year are expected to jump by 50 percent over last year - admittedly a bad year because of the Gulf war.
Not surprisingly, Mr. Nabli says Tunisia's stability, geography, work force, and investment incentives give it "one of the most favorable investment climates in the world."
But he earns some more objective support from the International Monetary Fund, which recently praised Tunisia's economic performance. "The Tunisian experience shows that the serious application of structural and stabilization reforms can ... stimulate economic growth," the IMF said.
Tunisian economist Mohsen Toumi also praises his country's "ability to adapt" in a regional atmosphere he finds "hardly conducive to business." But despite the impressive 6.5 percent average annual growth rate officials predict for the next five years, Mr. Toumi says a small country like Tunisia will only make real economic progress if it develops a long-term economic vision that includes a "niche" for setting it apart in an increasingly competitive world.