Algeria: Business Environment, Risks, and Market Opportunities
Country overview:
IOA has conducted extensive research and consulting in Algeria, which is Africa’s largest country in terms of physical size. It is also North Africa’s second largest economy behind Egypt. The largely-desert nation finds 75% of its people living in urban areas along the Mediterranean, where transportation ties link them to employment in Europe, and Europeans in return to tourism opportunities in North Africa. Citizens are politically oppressed, with governance dominated by the long-ruling National Liberation Front. Our research has identified relations with neighbouring Morocco as a key security concern, relating to Algiers’s support of an independent Western Sahara, which Morocco claims as its own territory.
Oil reserves provide the nation’s wealth. IOA research finds that fossil fuel products comprise Algeria’s top three export items. Other exports like wheat and sugar are of significantly lesser value. Trade and cultural ties are also strong with the Middle East, and while this has provided a pool of foreign investors interested in the country, their operations are hindered by bureaucratic encumbrances to doing business. The arid country is behind in climate change adaptation.
Key opportunities in Algeria:
- Positioned as “the gateway to Europe,” ensures continued tourism from a key trading partner
- Oil and natural gas reserves represent the country’s largest long-term economic assets
- While the economy’s dependency on oil exports is a concern, recent accumulation of foreign cash reserves will cushion impact of oil price volatility
Key concerns/risks in Algeria:
- Private sector response has been slow to meet the US$ 22 billion needed by 2030 to adequately respond to climate change, with low investment in the energy transition and the green economy
- A generally robust investor environment is damped by opaque and shifting regulations
- Concentration of the fossil fuel sector has skewed investment away from manufacturing, resulting in a need to import basic goods
Tips on doing business in Algeria:
Starting a business:
- As of July 2022, Algeria’s Law 22‑18 relating to investment introduced a freedom-to-invest principle, abolished the general 51/49 foreign-ownership rule for most sectors (except strategic) and established a national one-stop investment portal and digital platform
- Foreign ownership restrictions now mainly apply to five strategic sectors; most sectors allow full foreign ownership without local partners. A lease for office space must be signed, and all documents must be translated into Arabic, Berber or French
- Incorporating a company can take up to 12 weeks
(Read more at: https://algeriainvest.com/)
Doing business:
- Algerian authorities offer various incentives for foreign investors. These include 5-year tax exemptions on manufacturing projects and 10-year exemptions for projects of certain sizes, waiver of VAT and customs duties on equipment imports; and renewable 33-year land concessions
- The country nevertheless poses challenges for operators exposed to more developed markets. Foreign businesses face complicated customs procedures, cumbersome bureaucracy, difficulties in monetary transfers, and price competition from international rivals
Culture and society:
- As an Islamic society, Algeria maintains standards of dress and behaviour which would be considered very conservative to visitors from non-Islamic countries. Women are expected to wear headscarves. Public displays of affection between sexes are frowned upon. Local marketing campaigns will generally need to keep these limitations in mind
- Personal relationships and reputation are considered paramount and so negotiations have to be conducted in-country to be effective
Crédito: Link de origem