Algeria prepares new law to improve business climate

In order to improve on its current business climate, Algeria is reviewing its investment legislation with a view to attracting foreign expertise and in so doing, hopefully depart from heavily relying on its oil and gas exports.  These by the way account for about 96% of Algerian exports expected to earn for this year to fall to around $60 billion, while the value of imports is projected at $65 billion.

Past political orientations coupled with a certain economical ‘dirigisme’ have marked the country despite the government often calling for diversification and investment in sectors other than oil and gas.  The International Monetary Fund (IMF) has repeatedly urged Algeria to liberalise its economy as the only way to lift it out of stagnation.  Now however with the recent falling crude prices, it is felt the new reform plans seem to coincidently be more attractive.

The sought after legislation is part of a whole range of reforms intended to diversify the economy and better comply with international standards, Abdelkrim Mansouri, head of the National Agency of Investment Development (ANDI), told Reuters.

Government red tape, bureaucratic red tape and an outdated banking system are the main reasons behind foreign investors’ reluctance to enter the country.  The main hurdle to investment is excessive centralization of decisions regarding approvals and long waiting time periods.

“After diagnosing the business environment, the government is now launching a vast revival programme,” Mansouri told Reuters, adding “A new investment law is under discussion.”

Reforms are meant to include the removal of most of the existing provisions so as to ease business applications and most importantly the reduction of the time periods whilst dealing with investment requests.  The current investment legislation that includes restrictions on partnerships between private, state businesses and foreign firms with as a rule the requirement of a majority stake for the state in any partnerships will be on the agenda as well.

Mansouri gave no date for the new legislation’s finalization but said it will be implemented as soon as parliament approves it.   He added that the banking sector would be amongst those concerned by these reforms and some officials even say that the financial sector overhaul would be ready towards the end of 2014.

Meanwhile, Algeria has approved a $262 billion expenditure plan for the 2015-2019 period and some experts predict that those investment plans based on the reformed investment legislation may have little impact due to the likely slow speed of change.

Still, Industry Minister Abdesselam Bouchouareb has said the government aims to attract investments to sectors such as cars, petrochemicals, medicine, agribusiness and textile as well as public works and construction.

With Reuters, 13 November 2014