What is the most significant legislative change expected in the next 18 months?
The main legislative change, although already introduced by the 2020 finance law, concerns the abolition of the 49/51 rule for foreign investments (a limitation to 49% of foreign participation in Algerian companies) in “non-strategic” sectors. “.
This change will facilitate and rationalize foreign direct investments which were previously blocked by this obligation (namely for foreign investors to create a joint venture with a local partner), regardless of the sector and the value of the investment envisaged.
Furthermore, it should be noted that the law on investments which covers the entire legislative framework for investments in Algeria, whether local or foreign, will undergo a major revision. The date of promulgation of this amending text has not yet been specified, but everything suggests that it will be published as part of the 2022 finance law.
Finally, to facilitate the financing of the economy, the Algerian government has put the privatization of certain public banks on the agenda. This has been announced several times by the authorities since 1997 but has never been implemented. Given the predominance of public banks in the Algerian banking sector and the lack of financing for private projects, whether local or international, this measure should stimulate and facilitate investment.
What impact, in terms of foreign investment or on the business climate, should this change have?
The repeal of rule 49/51 will give foreign investors the possibility of investing alone or of holding the majority of the capital of a company in Algeria, which was impossible until now.
There are many foreign direct investment projects through the creation of small and medium enterprises and industries that do not necessarily require a joint venture with a local investor. If a local investor is required, his participation in the capital can be freely negotiated between the foreign investor and the local partner.
At the beginning of 2021, an economic recovery and reform plan was mentioned by the government as a means of restoring the country’s macroeconomic balance. This recovery plan will focus on taxation, monetary policy, the foreign exchange market and the banking system.
In addition, and to consolidate and open the banking market to competition, other plans include:
- authorize the opening of new banks with ratios in line with international standards (minimum capital of 260 million dollars);
- facilitate the opening of bank branches, the number of which is currently insufficient;
- the introduction of new banking products; and
- strengthening regulation and supervision of the banking system by the central bank.
Where do you see the main areas of growth or opportunity for companies operating in your country?
Algeria, which has a large deficit in its trade balance (15% of GDP on average in recent years), imports most of its manufactured products, in particular food and agricultural products.
The Algerian authorities, aware of the need to reduce this deficit and to diversify the sources of export income (which are almost exclusively covered by the export of hydrocarbons), have expressed their interest in promoting investments in the agro-food industry. and transformation in the broad sense.
This sector, considered today as almost virgin, will receive several investments of different formats and sizes from Algerian and foreign investors. Similarly, a facilitation strategy has been extended to the agriculture and tourism sectors, which already benefit from numerous support mechanisms.
What is the current investment appetite in the region? Do you see that changing in 2022?
Since its independence, Algeria has not been able to diversify its economy and remains largely dependent on its hydrocarbon exports subject to the vagaries of the international economy.
In this sense, most economic sectors in Algeria are potential sources of growth for local and foreign investors. The country has a sizeable market with a population of over 45 million, whose needs are mainly met by imports. The national production of goods remains very low compared to the needs of the country.
In Algeria almost everything remains to be done in most sectors, which is why investors’ appetite remains very high. It is important to note that the foundations of Algerian investment legislation and in particular the principles of freedom of investment, transfer of capital and fair treatment were imposed by the investment laws of 1993 and 2001. .
Although these laws are applicable, they are still largely insufficient to give confidence to investors, given the country’s bureaucratic sluggishness, poor governance and weaknesses in the financial sector that prevent Algeria from guaranteeing legal certainty to foreign investors. .
Given the significant reforms needed to remove these obstacles and establish legal certainty, things are not expected to change significantly in 2022. The country is now at a crossroads and the authorities have become aware of the urgency of getting out of dependence on hydrocarbons and to diversify the economy. .