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 Algeria: Country presentation

Algeria currently has a very favourable macro-economic situation. The good performance of crude oil prices and the efficacious management of the external debt has helped to fill the State’s coffers. However, the purchasing power of the inhabitants remains relatively limited. In this context, the government is making an effort to give a boost to activity, to diversify and liberalise the economy and call upon private investment.

The weight of the State is starting to diminish. A number of sectors have been privatised during the past two years. Among them, telecommunications, maritime and air transport, tourism and mining. The last stronghold would seem to be the energy sector. During the years to come, economic progress will depend on an improvement in the social and political climate and the capacity of the authorities to reassure investors and develop an entrepreneurial class, especially in the SME domain.
The reforms follow each other relentlessly in an attempt to help the country to revive its growth, and society and businesses win their gamble on the global market. The objective: attract investors from outside the energy sector and escape from the dependence on oil. The reform of the banking system and the restructuring of the industrial domain are some of the priorities set by the authorities. These areas are badly in need of modernisation.

Imports remain at a high level in the consumer durable domain. Furthermore, the country is the leading African importer of agro-food products. Despite incontestable assets, Algeria, compared with the other Mediterranean countries, has hardly developed its tourist activities, especially the coastal area (1,200 kilometres of shoreline). The domains of transport and catering are also under-exploited.

Challenge
The level of unemployment is high: it is estimated at 25%. Unemployment affects essentially the young. The economy is not sufficiently diversified and the country is still too dependent on the price of crude oil. Agriculture has suffered from a period of post-colonial nationalisation and still remains too dependent upon the random effects of the climate. In 1992, the interruption of the electoral process was to signal the start of fundamentalist violence and the rise in Islamic terrorism which is at the origin of the death of more than 100,000 people in ten years and the disappearance of thousands of others. This crisis, today largely overcome, has created serious disturbances in the economy for more than a decade.

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Strong points

The wealth of hydrocarbons means that this sector really is the heavyweight industry of the economy. In fact, it provides 25 % of the GDP. The country is in fifth place in the world for its reserves of natural gas and in 14th place for oil. Europe’s needs in oil and natural gas are an immense advantage for Algeria. In fact, 95% of Algeria’s exports are destined for these countries. Partnerships with foreign companies have enabled oil reserves at 1970 levels to be identified. There are a number of projects underway for a total value of 20 billion dollars, including the construction of two new gas pipelines towards Spain and Italy. Other non-negligible mineral resources remain under-exploited especially phosphates.

The large numbers of universities, grandes écoles and professional training centres, which supply a reservoir of qualified staff, enable companies to recruit quality personnel.

The country’s remarkable sites, its position close to the European market (Algiers is one hour from Marseille by plane), the wealth of the Algerian culture, and the traditions of hospitality make the great hopes for the tourist industry perfectly legitimate.

An investment promotion agency, the ANDI, saw the light of day in 2001, a sign of the determination of the government to open up to outside investment. Customs duties have dropped dramatically. Generally, foreigners benefit from exactly the same customs and fiscal advantages as the nationals and have the possibility to repatriate the capital invested.

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:::: Country Opportunities

          How invest in Algeria?

The opening up of the Algerian economy has made rapid progress over the past few years thus enabling its entry into the market economy. The legislation and regulations provide measures to encourage and facilitate the efforts of all investors, without distinction between domestic or foreign capital. In this context, Algeria has provided itself with an investment code modified by the ruling No. 01-03 of 20th August 2001 concerning the development of investments. This ruling offers a series of advantages to investors and has introduced the instruments necessary for a policy of investment promotion such as the National Investment Council chaired by the Head of the Government, the National Investment Development Agency (ANDI), with its central structures and its one-stop units which bring together all the administrative sectors concerned by investment action. The Agency also manages the Investment Support Fund.

As for facilities, they include a fiscal and a parafiscal part granting large reductions even exonerations, depending on the regime chosen, of certain company charges (application of the reduced rate of customs duty for equipment imported in the framework of the investment to be made, exoneration of tax on annual profits, tax on overall income, and VAT on goods and services…). Algerian legislation provides for different levels of preferential treatment. The general regime grants standardised advantages that are essentially linked to the setting up of the project, and special regimes intend to favour certain investments depending on their nature, interest or location. The different facilities may be spread over three years in the context of the general regime and over a maximum of ten years for special regimes.

Algeria news

The law also grants guarantees essential to investors. The investment guarantee which concerns non-discrimination and the identical treatment of all non-resident physical and legal entities (national or foreign) and between those and the Algerian physical and legal entities. Also guaranteed is the transfer of capital invested and the associated income (if the latter has been made thanks to foreign currency equity), the inviolability of the law, the settlement of disputes between the State and the investor as well as the guarantee allowing recourse to international arbitration.

Any investor, whether a physical person or a legal entity, national or foreign, interested in the Algerian market, has several possibilities for becoming involved on Algerian territory: he can set up under his own name, by creating a legal entity under common Algerian law (Algerian commercial law) 100% constituted of non-resident capital, he can associate himself with one or several residents (physical persons or legal entities) to create a Mixed Enterprise (S.E.M.), take one or several stakes in the capital of an already existing company, underwrite a management contract. According to the provisions of the Commerce Code, the law guarantees investors the choice of legal form of the company to be created such as a stock company (SPA), a limited liability company (SARL), a single person company with limited liability (EURL), a general partnership (SNC), limited partnerships, joint stock companies, or joint venture companies. A new version of the Commerce Code is to be drawn up in the not too distant future to satisfy the conditions of Algeria’s international commitments, especially those with the European Union and its membership of the WTO.

Since 1st January 2002, a new customs tariff has been in force. It has been drawn up according to an eight figure structure and comprises four customs rates : 0, 5, 15 and 30%, depending on the degree to which the imported products have been transformed. The rate of 5% is applicable for raw materials and generally for capital equipment, the average rate (15%) for semi-finished and intermediate products, the highest rate (30%) for final end-user consumer goods. These rate levels, to which should be applied any duty exoneration for certain sectors as well as capital concerning the new investors, means that Algeria is the most open country in the Mediterranean basin even before the phasing out of tariffs planned by the free trade area comes into force. However, an additional temporary duty (DAP) is applied to certain goods so as to protect locally produced products. From 60% at the start (2001), it is a degressive duty (12% /annum) in time, until it disappears completely in 2006. 

Source: Animaweb.org