Investment Climate in Algeria

Economy

Algeria is a low-to-middle-income country with huge reserves of natural gas and other hydrocarbons. Hydrocarbons have long been the backbone of the economy, accounting for roughly 60% of budget revenues, 30% of GDP, and over 95% of export earnings. Algeria has the 10th-largest reserves of natural gas in the world and is the sixth-largest gas exporter. It ranks 16th in oil reserves. Hydrocarbon exports have enabled Algeria to maintain macroeconomic stability and amass large foreign currency reserves and a large budget stabilization fund available for tapping. In 2015, Algeria’s growth rate was 3%, a decline compared to 4% in 2014. Algeria has been strongly affected by the falling oil prices, which constitute 98% of its export revenues and account for 60% of its budget. The economy will remain dependent on energy production and oil prices; it will grow by an average of just 2.1% a year in 2017-21.

Why invest in Algeria?

  • Privileged geographic zones that allow investors to take part in regional industrial development;
  • The country offers good investment incentives;
  • Algeria has signed bilateral investment conventions with more than thirty countries aimed at protection of foreign investors
  • The low cost of energy constituents (gas, fuel and electricity): industrial gas is 22 times cheaper than the European average, electricity is six times cheaper
  • The workforce is skilled and inexpensive
  • Recent laws to encourage foreign investments and various incentives for foreign investors
  • Algeria’s proximity to Europe

Political

Algeria achieved political independence in 1962 after more than a century of colonial rule by France. Over the past 25 years, Algerians lived through 10 traumatic years of insurgency and counterinsurgency, sometimes called the Dark Decade that shook the country to its foundations from 1991-2002, followed by a decade and a half of peace under Bouteflika. Bouteflika, along with his predecessor Liamine Zeroual, negotiated the laying down of arms and reconciliation—albeit an imperfect one—among armed groups that brought the bloody conflict to a close, thereby restoring the centrality of the state and the apparent necessity of the status quo. To be sure, much of the state’s post-conflict political capital has been embodied in Bouteflika himself; he is widely credited with delivering Algeria to its prized normalcy and has maintained the presidency since 1999.

However, since the mid-2000s, this political capital has dwindled due to spreading perceptions of mismanaging the economy. Bouteflika’s won his fourth term in April 2014, despite his advanced age and visibly weakened physical state. Algeria is emerging as an indispensable broker of stability in North Africa and the Sahel. Where insecurity, foreign meddling and polarisation are on the rise across the region, it has at key moments promoted dialogue and state-building as the best means for lifting neighbours out of crisis, thus safeguarding its own long-term security.

Population

Algeria has a total estimated population of about 40.3 million   people in July 2016   with an estimated population growth rate of around 1.77%. By the year 2020 it is estimated that the population will be 43.8 million.

Urbanisation

About 70.7% of the population live in areas with urbanization rate of about 2.77% based on the period from 2010 to 2015. In 2017 it is projected that 73.5 % of the population Algeria live is in urban areas.

Doing business in Algeria

The highlights of World Bank score of doing business in Algeria is summarised as follows;

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Topics

World Bank 2017 Rank World Bank 2016 Rank Change in Rank
Overall 156 163  

7

Starting a Business 142 145  

3

Dealing with Construction Permits 77 119  

42

Getting Electricity 118 130  

12

Registering Property 162 161  

1

Getting Credit 175 174  

1

Protecting Minority Investors 173 174  

1

Paying Taxes 155 170  

15

Trading across Borders 178 178
Enforcing Contracts 102 100  

2

Resolving Insolvency 74 71  

3

http://www.doingbusiness.org/data/exploreeconomies/algeria

The country made some improvements in a number of areas.

Credit Rating

Algeria is not rated for credit rating under Moody’s credit rating or Fitch’s credit rating

Remittances

There have been no recent changes to remittance policies. Monies cannot be expatriated to pay royalties or to pay for services provided by resident foreign companies. There is no legal parallel market by which investors can remit; however, there is a substantial black market currency exchange system in Algeria.

Arbitration

The Algerian Chamber of Commerce and Industry (CACI), the nationwide, state-supported chamber of commerce, has the authority to arbitrate investment disputes as an agent of the court. Algeria is a signatory to the convention on the Paris-based International Center for the Settlement of Investment Disputes (ICSID Convention) (http://www.worldbank.org/icsid). The Algerian code of civil procedure allows both private and public-sector companies full recourse to international arbitration. Algeria permits the inclusion of international arbitration clauses in contracts. Local courts recognize and have the authority to enforce foreign arbitral awards. Algeria is a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention).

Key development challenges

The challenges facing Algeria include weak governance, industrial pollution of water bodies due to poor industrial waste disposal, soil erosion and desertification due to over grazing and poor farming. The country is affected by natural hazards that include earth quakes and floods.

Corruption index

Algeria is the 108 least corrupt nations out of 175 countries and scored 34 points out of 100, according to the 2016 Corruption Perceptions Index reported by Transparency International.

Security

Algeria is politically stable and President Abdelaziz Bouteflika government is expected to remain in power until about 2021. Although there is uncertainty over Mr Bouteflika’s health and simmering social discontent that may affect political stability. The risk of terrorist attacks will remain high, but overall stability is expected to be maintained.

Unemployment and skilled labour

According to the International Labour Organization (ILO), unemployment as of September 2014 was 10.6 percent: 9.2 percent for males and 17.1 percent for females. Algerian government figures listed overall unemployment at 11 percent at the end of 2015. For youth aged 16-24, the figure was 25.2 percent. ILO estimates that 37 percent of all labour in Algeria is employed in the informal economy. Outside the public sector and state-run industries, many Algerians struggle to find work. Unemployment is high, particularly among the young. As part of its five-year investment plan (2009-2014), the government has stated its aims to create 3 million jobs.

 Attitude to Foreign Direct Investment

The government is keen is attracting FDI despite the difficult business climate that includes inconsistent regulatory environment. The government seems to be torn between protecting the status quo and liberalizing the economy. Algeria National Investment Development Agency (ANDI) was created from Assistance Protection Securite Incendie (APSI) in 2001. It is responsible for facilitating both national and foreign investors.

Restrictions on Foreign investment

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. However, the 49/51 investment law requires a majority of Algerian ownership of at least 51 percent in all projects involving foreign investments. There is no screening of FDI and all potential foreign investors work with the relevant ministry or ministries to negotiate register and set up their business

Intellectual Property (IP) Rights

The National Office of Copyrights and Related Rights (ONDA), under the Ministry of Culture, and the National Institute for Industrial Property (INAPI), under the Ministry of Industry and Mines, are the two separate and only branches of government  that deal with IP protection. Since 1973, INAPI has overseen the registration and protection of industrial trademarks and patents. INAPI is responsible for monitoring domestic producers for patent infringements, but, in practice, it is the companies holding the patents that have to bring possible violations to INAPI’s attention.

National Parks

Algeria’s major National parks include Belezma National Park, Chréa National Park, Djurdjura National Park, El Kala National Park, Gouraya National Park, Tassili n’Ajjer, Taza National Park, Théniet El Had National Park, Tlemcen National Park among others

Natural Resources

Algeria is endowed with significant natural resources, including petroleum, natural gas, uranium, zinc, lead, iron ore and phosphates

 

Information on investment climate in Algeria also includes;

Source

https://www.state.gov/e/eb/rls/othr/ics/2016/nea/254433.htm

http://www.worldbank.org/en/country/algeria/publication/economic-outlook-spring-2016

https://en.portal.santandertrade.com/establish-overseas/algeria/foreign-investment

http://algerienetwork.com/usa/2013-investment-climate-statement-algeria/

http://www.doingbusiness.org/data/exploreeconomies/algeria/

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