Tunisia- Digital Advance 

(MENAFN - Oxford Business Group) As a testimony to the republic's progress on developing a digital economy, Tunisia's Ministry of Communication Technologies announced last month that the country's information and communications technology (ICT) industry recorded significant expansion over the first eight months of the year.

Figures released by the ministry show that the contribution of the ITC sector to Gross Domestic Product (GDP) had reached nearly 10% by September of 2008, up from 7.8% at the start of 2007. This is in keeping with the government's policy to increase the sector's share of GDP to 13.5% by the beginning of 2012.

According to ministry statements, the growth in GDP can be attributed to both increased market demand and an improved business environment. Regulatory changes in the ICT sector have "improved the investment climate in the country and accelerated project start-ups", leading to improved competition, network roll-out and service development, the ministry said.

Tunisia was ranked 35th by the World Economic Forum in its 2008 Global Information Technology Report, which assessed its ICT readiness, accessibility and regulation. The country's ranking placed it second in the Middle East and North Africa region, after the United Arab Emirates. Although rankings such as these provide only a comparative sketch of international competitiveness, Tunisia came in well ahead of other regional players such as Jordan (47th) and Morocco (74th).

Crucially, over 90% of the Tunisian ICT sector's turnover is generated locally, which bears witness to the increasing digitalisation of the domestic market. This can be partially explained through the sizeable role the Tunisian government has taken in promoting the sector. The 11th Development Plan, for example, which was unveiled last year and laid out Tunisia's economic priorities until the end of 2011, has established a goal of $1.9bn worth of public investment into the local ICT sector.

Recent regulatory changes include law No 2007-13, which supported small and medium-sized start-ups by obliging the state to cover up to a quarter of the wages of qualified employees for a period of up to three years, and for five years following the creation of the company.

Similarly, the state's e-government initiative - which is shifting an increasing number of front-office services online, such as Customs declarations, tax payments and permit renewals - has led to a dramatic increase in government spending on both software and hardware in ministries and public-owned companies. Currently, Tunisia's government accounts for over 80% of the spending in the local market.

The ICT sector has also benefited from the success of the extensive government-sponsored upgrading programmes in the financial and industrial sectors. The programmes, which focus on improving internal governance and back-office operations, have boosted demand for new data management and modelling software.

A new regulatory and technical framework was also introduced by presidential decree last July for voice-over-internet-protocol (VoIP) services, which until recently had been banned. The new regulations have improved general accessibility to VoIP products, thereby reducing the cost of fixed-line telecommunications, as well as improving telecoms competition and encouraging infrastructure upgrades.

The VoIP framework is an important driver for Tunisia's burgeoning retail market, which has grown significantly over the past eight months. The number of regular internet users, for example, has grown by nearly 40%, or 2.31m, up from 1.66m over the same period in 2007. While the high-end of the market still remains relatively limited due to cost and accessibility issues, the number of ADSL subscribers nevertheless increased significantly, more than doubling in size by September 2008 to 166,000.

The retail customer base has expanded in recent years thanks in part to a PC loan and financing project, the "Familial PC" plan, which offers interest-free loans through the Banque Tunisienne de Solidarite. Over 22,000 PCs have been purchased through the programme, while the overall PC penetration rate has grown to more than 634,000, a threefold increase since 2007.

Employment in the sector has also been a big focus for Tunisian ICT companies. As part of the 11th Development Plan, the government aims to stimulate the creation of 10,000 new IT jobs every year - an ambitious goal, given that there are currently just over 9000 IT positions in the local market. This is in part a response to the more than 13,000 IT students graduating each year, as well as to the 42,000 students currently enrolled in the IT-related programmes. With the country's unemployment rate hovering around 14%, the urgency of these growth initiatives cannot be underestimated.