Seeking to diversify and modernize the Algerian economy, the Algerian government has embarked on an aggressive liberalization program to attract foreign direct investment. Foreign participation in joint ventures varies depending on sector. In hydrocarbons, foreign companies may own up to 71 percent of hydrocarbon projects. The privatization of the state-owned CPA bank recently demonstrated a policy shift by the Government of Algeria with the announcement that the purchasing bank would be allowed 51 percent ownership. This represents a change from the previous maximum of 49 percent foreign, 51 percent domestic ownership requirements. For other private entities percentage ownership varies on a case-by-case basis, depending on the agreement negotiated, with no upper limit.
New legislation continues to affect nearly all sectors, including hydrocarbons, mining, power, banking, telecommunications, pharmaceuticals, transportation, and tourism. While there are still many bureaucratic hurdles to starting a business in Algeria, the investment code clearly lays out the rules for investors.
Algeria has a legislative framework for encouraging investment. In 1993, the government adopted its primary investment code under legislative decree No. 93-12, guaranteeing investment advantages, free transfers of income, and equal treatment for domestic and foreign investors. In August 2001, the government adopted ordinance No. 01-03 to further develop and promote investment, replacing the legislative decree No. 93-12. The newest commercial code adopted in 2005 allows payments for in-country commercial transactions to be handled electronically and reduces the amount of paperwork required for the formation of a new company.
There are three national organizations responsible for investment guidance and policy. The first is the National Agency for Investment Development (ANDI) (http://www.andi.dz), which is responsible for facilitating investments, granting fiscal and parafiscal exemptions, conferring investment advantages, and assisting investors to receive special authorizations for unique investments. ANDI has a network of regional offices throughout Algeria to assist investors.
The second organization is the National Investment Council (CNI), which was created to strengthen the legal and regulatory investment framework. The CNI is in charge of defining the investment strategy and its priorities, for approving special investment incentives in each sector, and for giving final authorization to special investment schemes.
The third organization is the Ministry for Participation and Promotion of Investment. The Minister for Participation and Investment Promotion (MPPI) (http://www.mdppi.dz/) manages two distinct offices within the Ministry, one for investment policy and the other for the privatization process. The MPPI is coordinating the on-going privatization of state-owned companies, organized by sector into groupings managed by "participation management companies" (sociétés de gestion de participation, SGP). The government has refocused its efforts on large-scale privatization in order to remove itself from supporting loss-making enterprises.
An earlier privatization program was launched in 1995 under law No. 95-22 and came into effect in 1998. That law lacked transparency and created procedural difficulties for evaluating state-owned firms and the modalities of privatization. In August 2001, a new privatization law was passed aimed at accelerating the privatization of public enterprises in Algeria. The government’s intention is to privatize the remaining 1200 state-owned enterprises. The government privatized 270 enterprises from 2003 to 2005. In 2005 alone, the government privatized 67 state-owned enterprises including hotels, flourmills, cement factories and some light manufacturing industries. The government hopes to privatize an additional 300 state-owned enterprises in 2006.
In March 2005, the Algerian parliament adopted a new law to further liberalize the hydrocarbons sector. This new law separates the commercial role of Sonatrach (http://www.sonatrach-dz.com/), the state-owned hydrocarbons company, from its previous regulatory and procurement/contracting functions. (An early version of the law is available in English at http://www.mem-algeria.org/legis/prem_hydroc.htm. The official published French version http://www.mem-algeria.org/fr/legis/hydrocarbures-05-07.pdf
and Arabic version http://www.mem-algeria.org/fr/legis/hydrocarbures-5-7-ar.pdf) are currently available online.
Sonatrach is now required to bid on domestic projects alongside foreign firms; it will no longer be an automatic partner in all projects. In tenders that Sonatrach does not win, the company will retain a right to exercise an option to hold 20-30 percent of the equity of the project, allowing it to become a regular stakeholder with associated responsibilities. The Regulatory Agency for Hydrocarbons (ARH) will monitor compliance by foreign firms with various health, safety, and environmental regulations as well as use of the pipeline transport system. A new contracting organization, the National Agency for Contracts (or "ALNAFT"), will be responsible for bidding, concluding and supervising contracts with engineering and procurement investors. These reforms will enable Algeria to encourage greater foreign investment in oil and gas, leading to greater production capacity.