Investment in Algeria
Economy -Overview
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. Strong revenues from hydrocarbon exports have brought Algeria relative macroeconomic stability, with foreign currency reserves exceeding $200 billion and a large budget stabilization fund available for tapping. In addition, Algeria's external debt is extremely low at about 2% of GDP. Long-term economic challenges include diversifying the economy away from its reliance on hydrocarbon exports, bolstering the private sector, attracting foreign investment, and providing adequate jobs for younger Algerians.
Key figures
Gross domestic product (GDP):
221 billion dollars (2014)
Share of hydrocarbons in the GDP: 40-45%
Share of hydrocarbons in the budget revenue: 66%
GDP per capita: 5,764 dollars
Budget deficit: 22.1 of GDP (estimated for 2015)
Growth rate: 4.1 % for 2014 (5.1% excluding hydrocarbons)
3.42% estimated for 2015
Exchange reserves: 159.918 billion dollars (March 2015)
External debt: 3.39 billion dollars (end 2013)
Inflation: 2.92% (2014)
Unemployment: 10.6% (2014)
Foreign trade of Algeria in 2014
Total volume: 121.28 billion dollars
Exports: 62.95 billion dollars
Imports: 58.33 billion dollars
Trade surplus: 4.62 billion dollars
Share of hydrocarbons in exports: 97.07%
Non-hydrocarbon exports: 2.93% of the total volume.
Main exports
Oil, gas, derivatives of hydrocarbons and foodstuffs
Main clients
Spain: 9.713 billion dollars , Italy: 8:369 billion dollars, France:6.744 billion dollars;
United Kingdom: 5,482 billion dollars; Netherlands: 5,08 billions dollars
Main suppliers
China: 8.197 billion dollars, France: 6,342 billion dollars, Italy: 4,983 billion dollars
Spain: 4,982 billion dollars, Germany: 3,774 billion dollars
United Kingdom (10th): 1,419 billion dollars
A general overview
As part of the different economic development programmes established in 2001, Algeria has launched a strategy to grow its economy with the specific aim of improving the competitiveness of its national commerce. The key aspects of this economic policy based primarily on developing investments, upgrading businesses, regulating industry activities, and the privatisation and redeployment of the economic sector ? aim to bring about a structural transformation of the economy in order to adapt to the changes brought about by economic globalisation. At the same time, it should enable the country to close the gap in terms of its infrastructure, particularly in the transport sector.
The Algerian state is putting large sums of money towards the initiative (200 billion dollars for the 2004-2009 programme and 286 billion dollars for the 2010-2014 programme), while leaving the doors open to foreign investment in a number of sectors (industry, agriculture, fishing and aquaculture, telecommunications, public works, improvement of the public sector and transport). There are therefore enormous opportunities on offer to foreign investors interested in intervening in the country.
Foreign investment is required to improve national production in order to, on the one hand, reduce the number of imports, and on the other hand, diversify national exports. To this end, foreign investors are expected to facilitate a transfer of technology, in particular the distribution of new technologies and the development of managerial capacities.
A number of organisations have been set up to determine the nature of foreign investment and to support it. Thus, strategic decisions relating to investments are made by the National Council of Investment (CNI), which is responsible for assessing portfolios presenting an interest in the national economy.
In terms of policy, it is the Ministry for Investment Promotion (MIPMEPI) (www.mipi.dz), which has a Directorate General of Investment, which is responsible for drafting the national policy on investment and for ensuring its application.
Two executing agencies operate under the supervision of this ministerial department and support its work in the field, namely:
- the National Agency for Investment Development (ANDI) (www.andi.dz) and
- the National Agency for Intermediation and Property Regulation (ANIREF) (www.aniref.dz).
The Investment Appeals Commission is also part of this ministry.
Investment in Algeria is governed by a number of principles, these being: the freedom to invest, non-discrimination, the protection of investments and the intangibility of benefits.
In addition, measures have been taken in relation to foreign investors in order to improve the business environment and minimise the delays and costs associated with setting up and starting new businesses.
The legal framework on investment
The legal and regulatory framework in force in Algeria encourages investments and promotes the development of the private sector. It allows any natural person or legal entity, national or foreign, to invest in economic activities pertaining to the production of goods and services, as well as investments made within the framework of awarding concessions and/or licences.
The majority of the legal framework on investment in Algeria is contained within regulation 01-03 of 20 August 2001 on the development of investment, and supplemented by regulation 06-08 of 15 July 2006.
In changing the previous legislation, the regulation of 15 July 2006 established the key points of the revision of the legal framework on the promotion of investment with a view to moving towards the best international practices.
Furthermore, this new framework has strengthened the protection of the rights of investors in so far as the right to appeal, until then limited to a few acts of the ANDI, has been extended to include all acts related to the rendering of the decision to grant incentives made by all the organisations concerned. An Investment Appeals Commission was set up on 9 October 2006 (Executive Decree No. 06-357).
The guarantees granted to investors
Algerian legislation on investment provides essential guarantees to investors, in particular:
- non-discrimination in relation to Algerian natural persons or legal entities;
- legal security/intangibility of the law: future revisions of or repeals to legislation on investment do not apply to projects undertaken in the framework of the legislation in force at the time of the investment, unless the investor expressly requests it;
- settlement of disputes: any dispute between the foreign investor and the Algerian State resulting from an act of the investor or a measure taken by the Algerian State against the investor will be presented to the competent jurisdictions, unless multilateral conventions concluded by the Algerian State concerning conciliation and arbitration or a specific agreement contain an arbitration clause or allow the parties to reach a compromise through ad hoc arbitration.
Incentives granted to investors
A new system to verify eligibility to the incentives was established by the promulgation of Decree No. 07-08 of 11 January 2007, which determines the list of goods and services excluded from the incentives. This new system introduces the general rules uniformly applicable to all investors.
The procedure for granting incentives was also simplified. The handling of investment portfolios is now codified by two executive decrees ruling on the form and conditions of the investment declaration, the request for advantages and the decision to grant advantages.
Noticeable progress has been made in this area, towards a declarative approach. The prior conformity check, previously conducted by the ANDI, has been replaced by an examination of the admissibility of the request submitted by the investor.
Regulating the observance of investor commitments is now the responsibility of the relevant administrative bodies (tax and customs), and is carried out a posteriori.
Launch of a partnership clearing-house
In order to encourage and facilitate foreign investment in Algeria and enable Algerian operators to find foreign partners and vice versa, the National Agency for Investment Development (ANDI) has decided to establish a partnership clearing-house, to be used as a tool for liaison between Algerian operators and foreigners. It comprises a database which enables the two parties to find business contacts and implement partnership activities, in conformity with the 51-49% requirement.
Thus, foreign investors interested in investing in Algeria will have the opportunity to research the projects submitted to the partnership clearing-house, which will give them an idea of the investment proposals from local operators. In addition, through this mechanism, Algerian operators will be able to find foreign business partners more easily to whom they have previously submitted their project ideas.
Foreign investors who use the partnership clearing-house will have a better chance of carrying out their projects as they will not need to find a site or carry out the bank formalities related to credit applications. Instead, they will submit their proposals to Algerian investors before their documents are screened by the National Investment Council (CNI).
The partnership clearing-house currently includes 159 proposals across different sectors (see the section “Partnership portfolio” on the ANDI website). Projects can be registered in the framework of the partnership clearing-house by sending an email to the following address: partenariat-algerie@andi.dz
Supporting investors
Through its network, the National Agency for Investment Development supports foreign operators in their search for partners and projects in Algeria at a central and local level. The agency currently has a network of 27 one-stop services across the country which help investors to complete the formalities involved in setting up businesses and implementing investment projects and facilitate their access to technical and regulatory information, as well as monitoring projects. ANDI is also involved in making decisions on the granting of incentives for investors. The agency is the ideal intermediary for all investment opportunities in Algeria.
New features introduced since 2009
The 2009 Complementary Finance Act
The 2009 Complementary Finance Act (LFC) introduced the 51-49% law, under which the Algerian partner or partners should retain at least 51% of the share capital compared to, at most, 49% for the foreign operator in all investment projects. Nevertheless, the latter can be the majority shareholder if he is an associate of several Algerian operators who share the 51%, in the same way as he may be responsible for managing the company or project.
Despite this measure being criticised by foreign firms, the number of projects put forward by foreign partners tripled in 2010 compared with 2009 and tripled in 2011 compared to 2010. Furthermore, a number of foreign operators who have come to Algeria have said that they are satisfied with the business climate in the country, regardless of this new requirement.
The new public procurement code (2010)
(Applies to public procurement only)
The new public procurement code (Presidential Decree No. 10-236 of 7 October 2010) has replaced the presidential decree of 24 July 2002 on the same subject.
This new code on public procurement introduced the notion of “a preference margin” for domestic bidders, under which Algerian businesses are favoured over foreign firms (Article 23). As such, the foreign company, in order to win the contract, should be 25% cheaper than the Algerian company, compared to 15% under the previous code.
The text also introduces three different commissions to examine the bids, while under the previous law one single commission was responsible for examining bids related to works, supplies and services, and feasibility studies. Since 2010, each of these three categories has had its own commission (Article 42 of the new public procurement code).
In addition to the national preference margin, the new law provides an obligation to use a domestic bidder if the products and services from the Algerian bidder satisfy the conditions of offer (Article 54). This requirement does not apply to companies operating in the private sector who can launch an international call for tender without the obligation to have local supplier.
Furthermore, in regard to international bids, the new text requires that foreign companies who win the bid will be obliged to establish an investment partnership with a local firm (Article 24).
Additional measures have also been introduced in order to fight corruption, notably a declaration of probity is now required on the part of the bidder, as well as an anti-corruption clause which could result in penal sanctions.
Foreign importing companies
As a result of new legislation adopted in May 2009, foreign companies importing goods into the country are required to have at least a 30% Algerian participation in its capital. Foreign companies already established in Algeria before the entry into force of this new regulation were given until 1st January 2010 to conform to this requirement, i.e. find an Algerian partner.
