In regards to FDI, it can clearly be noticed a sharp decline of European investments and a revival of interest from the Gulf investors. A re-orientation of FDI towards the domestic market is also noticeable through an efflorescence of developmental projects in transportation and infrastructure. Rich in natural resources and economically stable, Algeria has attracted growing levels of FDI in the recent years, even if their stock remained weak. In 2012, the FDI stock dropped, according to some, it was the result of the introduction of a 49/51 rule, which limits the participation of a foreign investor in local companies to 49%. In addition to this, foreign bidders for public contracts are now required to find local partners. After a sharp reduction in 2012, new FDI inflows increased again during the first semester of 2013, surpassing EUR 2 billion. The total for the entire year should reach EUR 3 billion. The authorities are trying to improve the investment climate in 2014 and to develop partnerships among public companies and foreign entities. Despite a substantial potential, the business climate still needs to make progress. Algeria ranks 153 out of 189 countries in the classification Doing Business 2014 issued by the World Bank. Investors could also become more cautious after the hostage-taking incident at the gas site of In Amenas which ended up tragically (40 dead victims) in January 2013. Following this drama, the oil companies Statoil and BP withdrew their personnel. The site should restart its operations in the first months of 2014. Lastly, an oil field of about 1.3 billion barrels was discovered in December 2013, this discovery should attract new investors.
A series of protectionist measures taken by the Algerian government, as well as corruption, heavy bureaucracy, a weak financial sector and the legal insecurity in terms of intellectual property rights are hindrances to investment. Officially, the government remains committed to its economic liberalization and continues to seek foreign investment in sectors such as infrastructures, telecommunications, energy and water supply. Currently, the sectors attracting most FDI are the energy sector, followed by the telecommunications and tourism sectors.
|Algeria||Middle East & North Africa||United States||Germany|
|Index of Transaction Transparency*||6.0||6.0||7.0||5.0|
|Index of Manager’s Responsibility**||6.0||5.0||9.0||5.0|
|Index of Shareholders’ Power***||4.0||9.0||5.0|
|Index of Investor Protection****||5.3||5.0||8.3||5.0|
Source: Doing Business - Last 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.
|Foreign Direct Investment||2011||2012||2013|
|FDI Inward Flow (million USD)||2,581||1,499||1,691|
|FDI Stock (million USD)||22,108||23,607||25,298|
|Performance Index*, Ranking on 181 Economies||103||-||-|
|Potential Index**, Ranking on 177 Economies||62||-||-|
|Number of Greenfield Investments***||27||17||16|
|FDI Inwards (in % of GFCF****)||4.1||2.2||2.5|
|FDI Stock (in % of GDP)||11.1||11.4||12.3|
Source: UNCTAD - Last Available Data.
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field 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. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
- The workforce is skilled and cheap; it is 10 times cheaper than in France.
- Algeria's proximity to Europe. This motivates the relocation of industrial activities which consume energy.
- A country in the middle of an economic metamorphosis.
- The legislation is very complex, especially tax law.
- It is difficult to acquire industrial property.
At the same time, on the 22nd December 2008, the Algerian prime minister published a directive which leans towards restricting foreign FDIs. In effect, it has been provided that all new investment projects in Algeria have to have local majority (51%) shareholding. This directive further provides that foreign investors should only revert to local financing. Finally, FDI projects will no longer come under ANDI (National Agency for Investment Development) but under the CNI (National Investment Council), something which would engender delays in the handling of files. More information on these new measures are available.
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Last Updates: November 2014