* Three IPOs so far this year vs two in all of 2012
* Official says 15 in the pipeline
* Contrasts with moribund IPO outlook in Egypt
* Market regulation still a problem
* Outlook unclear for listings of big state firms
By Tarek Amara
TUNIS, May 8 Tunisia is struggling with rising inflation, a big external deficit and an uncertain political outlook. These obstacles did not deter local businessman Mohamed Frikha from launching an initial public offer of shares in his fledgling carrier Syphax Airlines last week.
Syphax, founded in 2011, operates three planes, competing with state-owned flag carrier Tunisair. The IPO, which will run until May 20, aims to raise 25 million dinars ($15.5 million).
Frikha said he was encouraged to list the airline on the local stock market by his success in 2011 in listing Telnet , a software and technology consulting firm.
"The Tunisian stock exchange has become a real alternative for the mobilisation of financial resources," he said, adding that Syphax's listing would help the airline buy more planes and develop routes to the United States and Asia.
Over two years after Tunisia's revolution ushered in an era of political and economic instability, the Syphax IPO points to an encouraging trend for the economy: the gradual revival of the stock market as a place for companies to raise money.
Three companies have conducted IPOs so far this year - a technology consulting firm, a cheese maker and a garment producer - compared to two in all of last year.
Mohamed Bichiou, general director of the Tunis Stock Exchange, says 15 more firms have applied to conduct IPOs, which should bring the number of listed companies up to 75 by the end of 2013.
"I am optimistic...Tunis's bourse will achieve a real take-off this year," Bichiou said in an interview at the exchange's modern new headquarters, opened last month in an upscale neighbourhood of Tunis.
If this expectation is borne out, the listings could in the long term help to boost growth of the economy. Moez Joudi, a financial analyst and economics professor in Tunis, estimates banks still provide nearly 85 percent of funding for Tunisian companies - a dependence which constrains the companies and poses risks for the banks.
In addition, a string of IPOs would send a powerful signal of returning confidence in Tunisia, by showing that businessmen were willing to entrust their firms to the stock market and investors were ready to stump up their money.
Though still in its early stages, the revival of IPOs in Tunisia contrasts with neighbouring Egypt, another economy hit by instability after a 2011 revolution. There, equity issuance has largely ground to a halt since the revolution, and some businessmen have been taking steps to delist their firms from the stock market, potentially to move their wealth abroad.
The last two years have not been kind to Tunisia's economy. The official inflation rate hit a five-year high of 6.5 percent in March, while the International Monetary Fund estimates Tunisia will post a big deficit in trade of goods and services of 7.3 percent of gross domestic product this year; it predicts GDP growth in 2013 of 4.0 percent, not enough to make much dent in poverty and unemployment.
The stock market was hit in February by the assassination of opposition politician Chokri Belaid, which ignited the worst street violence since the revolution. Elections expected towards the end of this year will involve fresh uncertainty.
The main Tunisian stock market index has reflected these reverses; it sank 7.6 percent in 2011 and a further 3.0 percent last year, and is up just 1.4 percent this year even as some other Middle Eastern markets have surged.
Foreign investment inflows totalled 394 million dinars ($244 million) in the first quarter of this year, down 10.6 percent from a year earlier and down 17.2 percent from the first quarter of 2010, before the revolution, according to the government's investment promotion agency. The vast majority of inflows in this year's first quarter were direct investment in companies; only 20 million dinars were portfolio investment in securities.
Nevertheless, there have been positive signs for the long term. Tunisia's new, democratic political system reacted with some flexibility to the February unrest, forming a new Islamist-led government that included independents. If this year's elections go smoothly, they may be seen by investors as setting the seal on the country's democratic transition.
The government has moved more actively than Egypt to introduce economic reforms such as cuts in subsidies, and last month the International Monetary Fund agreed to extend it a $1.75 billion loan, easing though not removing the pressure on Tunisia's external finances.
Joudi said a major problem still overhanging the stock market - and deterring any major influx of foreign money - was a lack of transparency. Some listed companies do not disclose their earnings regularly and regulators do not have the courage to punish offenders, he said.
Bichiou denied there was any lack of transparency, insisting that the law compelled all firms to provide quarterly results, though he acknowledged that sometimes there were delays.
Both he and Joudi agreed that to attract major foreign investment to the market, which has a capitalisation of only about $9 billion, Tunisia would need to list big state-owned companies such as steel producer Foulahdh and Tunisie Telecom.
The government has been looking at such a possibility but preparing the companies for listings could involve cutting staff, and that may be politically impossible, at least before the elections.
In February 2011, a month after the overthrow of president Zine al-Abidine Ben Ali, Tunisie Telecom said it had cancelled plans for a joint IPO on the Tunis and Paris stock exchanges after consultations with trade unions. Workers at the company had been threatening industrial action if there were job losses.