Algeria - Foreign investment

Under investment codes issued in 1983 and 1986, Algeria's foreign investment regime was quite restrictive. Foreign investment was permitted only in joint ventures with state-owned companies, although repatriation of profits was guaranteed. The economy's main hydrocarbon sector and many others were off limits.

The money and credit law of March 1990 allowed majority foreign-owned joint ventures in almost all sectors except the hydrocarbon sector, electricity production, railroad transport, and telecommunications. The law provided for the safe transfer of capital and terms for international arbitration. The hydrocarbon law of November 1991 allowed foreign firms to exploit existing oil fields in partnership with the state oil firm. The Investment Code of October 1993 did not distinguish between investments made by foreigners or Algerians and granted new investors limited tax exemptions and reductions in duty on imported goods.

In 1995, the Algerian government set up the National Agency of Investment Development (Agence de Promotion, de Soutien, et de Suivi des Investissements—APSI) and regional investment promotion agencies to serve as a network of regional one-stop shops to eliminate layers of bureaucracy for investors. In 1996, APSI approved 50 foreign investment projects, including American (2), French (16), Italian (11), Spanish (8), and German (4) investors. As of 2002, 20 foreign-owned businesses had been established and the government has set a goal (as of 2003) to double this number.

In 1997, foreign direct investment (FDI) was $260 million and from 1998 to 2000 averaged $482 million. In 2000, the German firm Henkel acquired 60% of the state detergent and cleaning products firm, ENAD, and an Egyptian company bought a second GSM mobile phone license. In 2001, FDI more than doubled to $1,196 million thanks mainly to the privatization and sale of one major state enterprise, the El Hadjar steel complex, SIDER, to the Indian steel firm ISPAT, which acquired 70% ownership. In August 2001, the government reorganized the public sector companies to facilitate investment. The 11 sectoral holding companies into which state economic enterprises (EPEs) had been organized in 1996 were replaced with 28 shareholding management companies and the National Privatization Council was renamed the State Shareholding Council. All sectors were opened to foreign investment in 2001, including the hydrocarbon sector, in which the government put exploratory contracts for particular blocks up for auction.

By 2003, 30 foreign oil and gas companies were working in exploration in Algeria. A plan proposed by the government to have the state oil company, Sonatrach, compete on a nearly equal footing with foreign oil companies through the creation of two independent agencies—a national agency to handle the awarding of contracts (ALNAFT) and a regulatory agency for the oil and gas industry— had still not been passed by the parliament in mid-2003.

Algeria's stock exchange, established in 1999, remains rudimentary, handling only three stocks and one bond (for Sonatrach) as of 2003,

The main obstacles to direct foreign investment in Algeria are Islamic fundamentalist terrorism, aggressive labor unions, and widespread distrust of both foreigners and privatization.

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