Source : https://santandertrade.com/en/portal/establish-overseas/algeria/foreign-investment
FDI in Figures
Rich in natural resources and economically stable, Algeria attracted a decent FDI flows between 2006 and 2011. However, recently, there has been a sharp decline in European investment and greater interest from Gulf investors. According to the data published by UNCTAD in the World Investment Report 2020, FDI inflows decreased slightly in 2019, reaching USD 1,38 billion, just below 1,46 billion in 2018. This drop is mainly due to disinvestments in the oil and gas sector. On the other hand, the stock of FDI increased, reaching USD 31,9 billion in 2019 (a rise of more than USD 10 billion compared to 2010). Over the last few years, it can be seen a reorientation of FDI towards the domestic market, thanks to the proliferation of development projects in transportation and infrastructure. China and Turkey have been investing heavily in Algeria, taking over France’s historical position as the largest investor in the country. This shift has been further highlighted by Turkish President Recep Tayyip Erdogan’s visit to Algeria and the Turkish-Algerian Business Forum, which took place in February 2018. One of the biggest investors is BAIC International (China), with an investment of more than $100 million in a manufacturing plant. Among the other big investors, there are Hyundai and Ford. On a country level, China, Singapore, Spain and Turkey are the leading investors; whereas industry, tourism, construction and agriculture are the sectors who receive most FDIs.
The protectionist measures, as well as corruption, bureaucracy, a weak financial sector and legal insecurity in terms of intellectual property rights are serious obstacles to investment. Until 2019, the participation of a foreign investor in an Algerian company was limited to 49% and foreign contractors are forced to find local partners for public tenders. However, the government of President Abdelmadjid Tebboune eliminated the so-called “51/49” restriction that required Algerian majority ownership of all new companies. The requirement will be maintained for “strategic sectors”, identified as hydrocarbons, mining, defence and pharmaceutical production. The government has also approved a new hydrocarbons law, improving fiscal conditions and contract flexibility in order to attract new international investors. As a result of the promulgation of this law, major international oil companies signed memoranda of understanding with the national hydrocarbon company Sonatrach. Algeria was ranked 157th out of 190 countries in the Doing Business 2020 report published by the World Bank, same place as the year before. For the time being, there are no official estimates on the impact of the Covid-19 crisis on foreign investment in Algeria, although a negative effect is expected.
| Foreign Direct Investment | 2017 | 2018 | 2019 |
|---|---|---|---|
| FDI Inward Flow (million USD) | 1,232 | 1,466 | 1,382 |
| FDI Stock (million USD) | 29,108 | 30,574 | 31,956 |
| Number of Greenfield Investments* | 22 | 18 | 24 |
| Value of Greenfield Investments (million USD) | 1,338 | 9,259 | 2,316 |
Source: UNCTAD, Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
FDI INFLOWS BY COUNTRY AND INDUSTRY
| Main Investing Countries | 2018, in % |
|---|---|
| China | 24.8 |
| Singapore | 22.0 |
| Spain | 17.9 |
| Turkey | 16.2 |
| Germany | 2.7 |
| South Africa | 2.4 |
| France | 2.3 |
| Main Invested Sectors | 2018, in % |
|---|---|
| Industry | 62.0 |
| Tourism | 18.5 |
| Construction and public works | 7.2 |
| Agriculture | 4.9 |
| Services | 3.9 |
Source: National Agency for Investment Development (Investment appraisal for the year 2018) – Latest available data.
- Form of Company Preferred By Foreign Investors
- Limited liability company, SARL
- Form of Establishment Preferred By Foreign Investors
- Subsidiary company
- Main Foreign Companies
- For further information, see the investment observatory on the Atlas Développement website.
- Sources of Statistics
- National Office of Statistics
What to consider if you invest in Algeria
- Strong Points
- Algeria’s strong points for FDI include:
- Low cost of energy (gas, fuel and electricity)
- Large liquidity reserve which lowers its vulnerability to commodity prices
- Strong potential in renewable energy and tourism
- Skilled and inexpensive workforce
- Recent laws to encourage foreign investments and various incentives for foreign investors
- Algeria’s proximity to Europe, its geographic location as an interface between Europe and Africa and inside the Maghreb.
- Weak Points
- Algeria’s weak points for FDI include:
- Slow administrative procedures and large and inefficient public sector
- Weak business climate, according to international evaluation agencies
- The dependence of the economy on hydrocarbons, which increases dependence on imports of transformed goods
- The insufficient development of regional markets, which restrain Algeria’s appeal to foreign investors
- The complexity of legislation, especially tax law
- The difficulty to acquire industrial property
- High level of unemployment among young people
- Degraded regional geopolitical context (Libya, Mali, tensions with Morocco).
- Government Measures to Motivate or Restrict FDI
- To attract and encourage foreign investment, the Government has set up several attractive measures, including the reduction of corporate taxes for investment in specific locations, a reduction in social security contributions for recruitment of young employees, the concession of land by mutual agreement (which provide similar rights to ownership) and tax exemptions throughout the life of the project for exporting projects. For further details consult the investment guide by KPMG and ANDI (National Agency for Investment Development).
The government is trying hard to attract FDI in sectors that may create jobs and reduce the imports of assembled goods. Several sectors are targets for foreign investors, including the automobile industry and the renewable energy sector.
Nevertheless, since 2008 there are many FDI restrictions. Until 2019, for each new investment project in Algeria, the majority of its capital (51%) had to be held by local partners; however such limitation has been lifted (except for “strategic sectors” such as hydrocarbons, mining, defense, and pharmaceuticals). The Algerian government has enacted protectionist economic policies (import quotas for several types of products). Nevertheless, in recent years Algeria has benefited from the support of the World Bank to improve its business climate.
Protection of Foreign Investment
- Bilateral Investment Conventions Signed By Algeria
- Algeria has signed bilateral investment conventions with more than thirty countries. They define the framework for the protection of foreign investment in Algeria for each of the signatories. For the countries of the European Union, the association agreement signed between the EU and Algeria regulates this issue.
Algeria is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) and the Convention on the International Center for the Settlement of Investment Disputes (ICSID Convention). - International Controversies Registered By UNCTAD
- UNCTAD’s Investment Dispute Settlement Navigator contains information about known international arbitration cases initiated by investors against States pursuant to international investment agreements.
- Organizations Offering Their Assistance in Case of Disagreement
- ICCWBO , International Court of Arbitration, International Chamber of Commerce
CACI , Algerian Chamber of Commerce and Industry (in French) - Member of the Multilateral Investment Guarantee Agency
- Yes
| Country Comparison For the Protection of Investors | Algeria | Middle East & North Africa | United States | Germany |
|---|---|---|---|---|
| Index of Transaction Transparency* | 4.0 | 6.0 | 7.4 | 5.0 |
| Index of Manager’s Responsibility** | 1.0 | 5.0 | 8.6 | 5.0 |
| Index of Shareholders’ Power*** | 5.0 | 4.0 | 9.0 | 5.0 |
Source: Doing Business – Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
Procedures Relative to Foreign Investment
- Freedom of Establishment
- According to the edict n°01/03 of 20 August 2001, any legal entity or natural person, public or private, can invest in economic activities concerning production of goods and services as well as in investments carried out in the framework of granting concessions and/or licenses. Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. In 2019, the government eliminated the “51/49” restriction that required majority Algerian ownership of all new businesses, which remains in vigour only for certain strategic sectors such as hydrocarbons, mining, defense, and pharmaceuticals.
- Acquisition of Holdings
- Acquiring a majority interest in a local company is authorized in Algeria (with the exception of strategic sectors, including hydrocarbons, mining, defense, and pharmaceuticals).
- Obligation to Declare
- An investment declaration is necessary; it must be made to the National Agency for development and investment (ANDI). Consult the websites of these organizations to find out further details.
- Competent Organisation For the Declaration
- National Agency for Development and Investment
- Requests For Specific Authorisations
- Many products are subject to procedures to obtain prior authorization. See the list of controlled activities on the Register of Commerce website.
Learn more about Foreign Investment in Algeria on Globaltrade.net, the Directory for International Trade Service Providers.
Office Real Estate and Land Ownership
- Possible Temporary Solutions
- There are several temporary solutions: domiciliation of the company at the private address of the director, domiciliation in a business center, and renting professional premises.
- The Possibility of Buying Land and Industrial and Commercial Buildings
- Investors can buy industrial and commercial property. There are several possibilities: either buying land from a private owner (the most expensive solution), or making an application to the Government, through the CALPI (Local Assistance and Promotion of Investment Committee), which allows you to acquire land at affordable prices. However, you must have an eligible and reliable project and the government generally prefers to lease land for 33-year terms, renewable twice, rather than sell. The CALPI office can be found in the one stop shop of the ANDI (National Agency for Development and Investment). To see the list of one stop shops and their location, click here (in French).
Property sales are subject to registration at the tax inspection and publication office at the Mortgage Register Center. All property contracts must be registered by a notary. - Risk of Expropriation
- According to Algerian law, foreign investors are entitled to a just and equitable compensation if they are victims of expropriation. The Constitution of 8 December 1996 provides legally-binding guarantees against expropriation and confers the right to equitable compensation.
Investment Aid
- Forms of Aid
- There are several types of advantages for setting up a foreign company in Algeria. You can consult the Investmen guides published by the National Agency for Development and Investment.
The various measures take the form of tax advantages, especially tax exemptions from 3 to 5 years, depending on the kind and the size of the business. Such incentives are subject to the application of a specific request with the ANDI. Companies must make their application when they make their investment declaration. Investors also benefit from the State taking over certain expenses (duty on transfers against payment for all purchases of real estate intended for investment, fixed duty as regards reduced rate registration for charters and increase of capital, etc.).
- Privileged Domains
- A temporary exemption from corporate income tax is available for investing companies creating 100 jobs or more, as well as for those investing in certain strategic sectors (i.e. advanced technologies, food industry, mechanics, automotive sector). Furthermore, the law provides a five-year reduction of IBS for companies who introduce securities on the stock exchange.
- Privileged Geographical Zones
- Areas of economic expansion have been established, located on the high plateau and in areas in the south. They allow investors taking part in regional industrial development, to enjoy exemption, for 5 to 10 years, from property tax on real estate purchases intended for economic activity and a reduction of 50% of the reduced rate applicable to reinvested profits.
- Free Zones
- Activities carried out in the Southern regions of the country (Illizi, Tindouf, Bordj Badji Mokhtar, Adrar, Djanet, Timimoun In salah, Tamenghasset, In Guezzam) enjoy a 50% reduction on the paid amounts of corporate income tax for a five-year period (does not apply to the hydrocarbon sector).
There are no special economic zones or foreign trade zones in the country. - Organizations Which Finance
- The FGAR, credit guarantee fund for SMEs/SMIs ( In French)
Investment Opportunities
- The Key Sectors of the National Economy
- Hydrocarbons, food processing, real estate, chemicals and retailing.
- High Potential Sectors
- In terms of needs, Algeria suffers from a housing shortage and has extensive needs in the health care sector. Furthermore, manufacturing is underdeveloped: Algeria imports most of its manufactured goods. Many sectors are booming: health, agriculture (nowadays, an important percentage of agrarian products is imported), information and communication technologies (mobile phone and internet), hydrocarbons, renewable energies, tourism, construction industry, infrastructure development (roads, railways, airports, ports, etc.), treatment and water management, banking sector, food processing sector, defence, automobile, mass retail.
- Privatization Programmes
- Most public industrial and service companies are eligible for privatisation. Privatisation covers 1,200 economic public companies (EPE) and is a way of opening up the Algerian economy to the free market, legally recognised by the promulgation of a new legislative framework. The Pro investments organisation is available on-line on the website of the Ministry of Industry. In 2016, the government announced that 66% of the shares of a state-owned unprofitable company may be purchased by a private interest, provided that it is predominantly owned by one or several Algerian citizens. However, privatization programs of state-owned companies have been criticized by the public, as it remains a sensitive subject. To date, state-owned enterprises represent more than half of the formal Algerian economy; and privatizations have been limited to the water sector.
Foreign companies have been able to have complete ownership of an oilfield. Furthermore, the Algerian government softened the exceptional tax on profit (ETP) made by foreign companies in this sector, after numerous foreign investors had been discouraged by the legislative framework applied in this sector. Shale gas should also be open to foreign investors. - Tenders, Projects and Public Procurement
- Tenders Info, Tenders in Algeria
DgMarket, Tenders Worldwide
Sectors Where Investment Opportunities Are Fewer
- Monopolistic Sectors
- In principle, there are no longer any monopolies in Algeria. However, some sectors of activity remain difficult to enter, such as the tobacco and hydrocarbon sectors.
Finding Assistance For Further Information
- Investment Aid Agency
- National Agency for Development and Investment
- Other Useful Resources
- Algeria Investment Guide
- Doing Business Guides
- Algeria Commercial Guide – export.gov
International Tax and Business Guide from PwC
