Tunisia is in the process of building up its innovation capabilities. Strong investment in universities and the creation of technology parks specialized in different fields are some examples of these efforts. However, the country's innovation capabilities still remain very underdeveloped, in particularly when they are compared with those of developed countries.

One measure of the country's innovation level is the number of patents. Local enterprises account for a small portion of the total number of patents registered in Tunisia . Between 1984 and 1994, from a total of 1720 patents, only 285 patents (16.6%) were deposited by local companies, the rest has foreign origen. The small size of local firms and the government's protectionism role on the internal market are two of the main reasons for the low level of inventiveness of domestic firms. In terms of funding, the target of the government in 2004 for investment in R&D was very low, less than 1% of GDP . In comparison, for example, UK total budget for 2004-2005 is £3.901 billions, around 2% of GDP and expected to growth to 2.5% over this decade , Finland invest 3.5 % of GDP and South Africa 0.7%. The average expenditure in the OECD countries is 2.15%. Australia has committed $5.3 billions over the next 5 years ($8.3 billions from 2001 to 2011) to be spent in science and innovation.

1- The importance of knowledge flow

For Tunisia, however, investment is not the critical issue. The local capability to develop innovative products is the final stage of a process which aims, above all, the creation of national-scale learning capabilities. Knowledge is in constant evolution, being create and transferred at global scale. For a developing country such as Tunisia, the process of catching up technologically depends on the extent to which the country is able to position itself to best take advantage of knowledge flows originating at international level.

Liberalisation plays a key role in reducing the cost and speeding up the process of acquiring, learning and implementing the technologies and associated practices of already developed countries. Tunisia's innovation will not be possible without wide access to international markets; access to international markets will not be possible without the removal of the trade barriers.

2- The role of Liberalisation on innovation development

For Tunisia, the liberalisation of services opens the door to technology and knowledge inflow otherwise impossible to obtain (unless it were developed again from scratch). In particular, the possibility to have temporary foreign professionals in Tunisia is critical because of the tacit character of much of the knowledge, embodied in human minds and difficult to transfer without moving people across national territory.

In order to understand the impact of liberalisation of services on Tunisia's innovation capabilities, it is necessary to analyse the link between the different modes of supply of services and the stages of innovation development.

In this article, the process of innovation development is described through the following three-level framework:

• the acquisition of foreign technology,
• the internal use and diffusion of technology and
• the improvement and development technology.

3- Acquiring Foreign Technology

Technology can be acquired in two ways : foreign direct investment; and foreign licensing. Foreign direct investment (FDI) involves the establishment of singly or jointly owned local companies. The moving of foreign personnel to work in the setting up and in the operation of new companies is important as foreign firms need to bring their key experts to provide assistance to local partners on the implementation of new technologies. The possibility to acquire services abroad could also be important in those situations where local owners must stay abroad to take specific training in order to be able to later operate the firm in the country. Both supply modes present an important source of theoretical and practical knowledge.

Tunisia government can influence these avenues of knowledge acquisition in different ways. By relaxing domestic foreign investment policy, foreign licensing regulations and providing incentives on selected programs, Tunisia government can improve the level of knowledge acquisition on those service sectors critical to the overall innovation capability, such as Information Technology and Healthcare.