Algeria is a lucrative but challenging market with significant potential for U.S. businesses. Economic growth has been primarily driven by oil and natural gas production, which have traditionally accounted for more than 90 percent of export revenues, 60 percent of state budget revenues, and 40 percent of GDP. Rising oil prices in the latter half of 2017 helped reduce the trade deficit and restore some revenue in the government budget, the principal engine of the country’s economic growth. The 2018 budget increased state spending by 25 percent, with the bulk of the increase directed toward infrastructure projects. The Algerian government continues to pursue its goal of diversifying its economy, with an emphasis on attracting more foreign direct investment (FDI) to boost employment and offset imports via increased local production.
Private sector interlocutors report that multiple sectors potentially offer substantial opportunities for long-term growth for U.S. firms, with many having reported double-digit annual profits. Sectors targeted for robust investment include agriculture, tourism, information and communications technology, manufacturing, energy (both fossil fuel and renewable), construction, and healthcare. A 2016 investment law offers lucrative, long-term tax exemptions, along with other incentives.
However, some challenges remain. U.S. companies must overcome customs challenges, an entrenched bureaucracy, difficulties in monetary transfers, currency conversion restrictions, and price competition from international rivals, particularly from China, Turkey, and France. International firms that operate in Algeria sometimes complain that laws and regulations are constantly shifting and applied unevenly, raising the perception of commercial risk for foreign investors. Business contracts are likewise subject to changing interpretation and revision, which has proved challenging to U.S. and international firms. Other drawbacks include limited regional trade and the 51/49 rule that requires majority Algerian ownership of all new foreign partnerships. Arduous foreign currency exchange requirements and overly bureaucratic customs processes combine to impede the efficiency and reliability of the supply chain, adding further uncertainty to the market.
Algeria’s adoption of an import substitution policy has sharply restricted foreign trade. The government enacted a series of import restrictions in 2017, including a short-lived policy requiring importers of certain goods to obtain import licenses from the Ministry of Commerce. Authorities scrapped the import licensing scheme in December 2017, retaining it only for the automobile industry, which did not receive any new import licenses in 2017. A new decree effective January 1, 2018, barred imports of 851 products, ranging from meats, cheeses, and certain fruits and vegetables to carpets, cell phones, and various home appliances. The import substitution policies have generated some supply shortages and price increases.
|TI Corruption Perceptions Index||2017||112 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report “Ease of Doing Business”||2017||166 of 190||http://www.doingbusiness.org/rankings|
|Global Innovation Index||2017||108 of 127||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, stock positions)||2016||$4.5 billion||https://www.bea.gov/international/
|World Bank GNI per capita||2016||$4,220|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Algerian economy is both challenging and potentially highly rewarding. While the Algerian government publicly welcomes FDI, a difficult business climate, an inconsistent regulatory environment, and contradictory government policies complicate foreign investment. There are business opportunities in nearly every sector, including energy, power, water, healthcare, telecommunications, transportation, recycling, agribusiness, and consumer goods. Lower oil prices since mid-2014 have spurred the Algerian government to initiate reforms to drive economic diversification, but progress has been slow. The government has sought to reduce the country’s trade deficit through an openly-espoused policy of import substitution and import bans. A rebound of oil prices in the latter half of 2017 has also helped the government with its balance sheets. Companies that set up local manufacturing operations can receive permission to import materials to produce finished products the government would not approve for import. Certain regulations explicitly favor local firms at the expense of foreign competitors, most prominently in the pharmaceutical sector, where an outright import ban remains in place on more than 360 medicines and medical devices. The arbitrary nature of the government’s frequent changes to business regulations has added to the uncertainty of the market.
The National Agency of Investment Development (ANDI) is the primary Algerian government agency tasked with recruiting and retaining foreign investment. ANDI runs branches in each of Algeria’s 48 governorates (“wilayas”) which are tasked with facilitating business registration, tax payments, and other administrative procedures for both domestic and foreign investors. In practice, U.S. companies report that the agency is under-staffed and ineffective; its “one-stop shops” only operate out of physical offices, and there are no efforts to maintain dialogue with investors after they have initiated an investment. The agency’s effectiveness is undercut by its lack of decision-making authority, particularly for industrial projects, which is exercised by the Ministry of Industry and Mines, the Minister of Industry himself, and in many cases the Prime Minister.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. However, the 51/49 rule requires majority Algerian ownership (at least 51 percent) in all projects involving foreign investments. This requirement was first adopted in 2006 for the hydrocarbons sector and was expanded across all sectors in the 2009 investments law. The rule was removed from the investments law in 2016, but it remains in force by virtue of its inclusion in the 2016 annual finance law. Algerian government officials have defended the law as necessary to prevent capital flight, protect Algerian businesses, and provide foreign businesses with local expertise. The government has argued the rule is not an impediment to attracting foreign investment and is needed to diversify investment in Algeria’s economy, foster private sector growth, create employment for nationals, transfer technology and know-how, and develop local training initiatives. Additionally, officials contend, and some foreign investors agree, that a range of tailored measures can mitigate the effect of the 51/49 rule and allows the minority foreign shareholder to exercise other means of control. Some foreign investors use multiple local partners in the same venture, effectively reducing ownership of each individual local partner to enable the foreign partner to own the largest share.
The 51/49 investment rule poses challenges for various types of investors. For example, the requirement hampers market access for foreign small and medium-sized enterprises (SMEs), as they often do not have the human resources or financial capital to navigate the complex requirements. Large companies can find creative ways to work within the law, sometimes with the cooperation of local authorities, because larger companies usually create more jobs and may have technology and equipment the government desires. SMEs usually do not receive this same consideration. There are also allegations that Algerian partners sometimes refuse to invest the required funds in the company’s business, require non-contract funds to get projects, and send unqualified workers to job sites. Manufacturers are also concerned about intellectual property rights (IPR), as foreign companies do not want to surrender control of their designs and patents. Several U.S. companies have reported they have internal policies that preclude them from investing overseas without maintaining a majority share, out of concerns for both IPR and financial control of the local venture, which correspondingly prevent them from establishing businesses in Algeria.
Since 2013, the Algerian government has not officially screened FDI. However, foreign investments are still subject to approvals from a host of ministries that cover the proposed project, most often the Ministries of Commerce, Energy, and Industry and Mines. U.S. companies have reported that certain high-profile industrial proposals, such as for automotive assembly, are subject to informal approval by the Prime Minister. In 2017, the government instituted an Investments Review Council, which the Prime Minister chairs, for the purpose of “following up” on investments; in practice, the establishment of the council means FDI proposals are subject to additional government scrutiny. Approval by the National Investments Council, also chaired by the Prime Minister, is necessary to obtain benefits and incentives for any project totaling more than 5 billion dinars (approximately $44 million).
Other Investment Policy Reviews
In the past three years, Algeria has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or the United Nations Conference on Trade and Development (UNCTAD). The last such review was conducted by UNCTAD in 2003.
Algeria’s online information portal dedicated to business creation and registration ( ) is clear and well-designed and allows quick navigation to the appropriate registration process for a firm. The website is in French and Arabic. The website lists a maximum of nine steps involving seven agencies and taking approximately three weeks to register a firm in Algeria. Only an individual seeking to create a business for self-employment can follow a relatively streamlined process of six steps. The website offers information on the process for registering with the social insurance authorities but lacks information on creating an official corporate seal or receiving a required court stamp, additional requirements for establishing a business in Algeria.
In the World Bank’s 2018 Doing Business report, Algeria’s ranking for starting a business remained low, at 145 ( ), with rankings ranging from 1 to 190. The report lists a total of 12 procedures that cumulatively take an average of 20 days to complete to register a new business. Algeria improved on the indicators for gaining construction permits and access to electricity, but remained near the bottom of the rankings for property registration (162) and obtaining credit (175).
Algeria does not currently have any mechanisms that promote or incentivize outward investment, though there are also no restrictions on domestic investors from investing overseas, provided they can access foreign currency for such investments. The exchange of Algerian dinars outside of Algerian territory is illegal, as is carrying abroad more than 3,000 dinars in cash (approximately $26; see section 7 for more details on currency exchange restrictions).
2. Bilateral Investment Agreements and Taxation Treaties
Algeria has signed bilateral investment treaties with Argentina, Austria, Bahrain, BLEU (Belgium-Luxembourg Economic Union), Bulgaria, China, Cuba, Denmark, Egypt, Ethiopia, Finland, France, Germany, Greece, Indonesia, Iran, Italy, Jordan, Kuwait, Libya, Malaysia, Mali, Mauritania, Mozambique, Netherlands, Niger, Nigeria, Oman, Portugal, Qatar, Romania, Russian Federation, Serbia, South Africa, South Korea, Spain, Sudan, Sweden, Switzerland, Syria, Tajikistan, Tunisia, Turkey, Ukraine, United Arab Emirates, Vietnam, and Yemen.
In 2001, Algeria and the U.S. signed a Trade and Investment Framework Agreement (TIFA), and its council met most recently in Algiers in April 2017.
Algeria has trade agreements with the European Union and the Arab League, although neither has yet been fully implemented. Recently instituted import barriers violate the terms of both agreements. The Algerian government concluded two years of “renegotiation” talks with the European Union in March 2017. None of the trade terms of the 2005 EU-Algeria Association Agreement were modified, but the European Union committed to approximately $43 million of technical assistance for various Algerian ministries.
Algeria does not have a bilateral taxation treaty with the United States. Algeria has bilateral taxation treaties with the Arab Maghreb Union (Libya, Mauritania, Morocco, and Tunisia), Austria, Bahrain, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China, Egypt, France, Germany, Indonesia, Iran, Italy, Lebanon, Portugal, Qatar, Romania, South Africa, South Korea, Spain, Switzerland, Turkey, and United Arab Emirates.
4. Industrial Policies
Any incentive offered by the Algerian government is generally available to any company, though there are multiple tiers of “common, additional, and exceptional” incentives under the 2016 investments law ( ). “Common” incentives available to all investors include exemption from customs duties for all imported production inputs, exemption from value-added sales tax (VAT) for all imported goods and services that enter directly into the implementation of the investment project, a 90 percent reduction on tenancy fees during construction, and a 10-year exemption on real estate taxes. Investors also benefit from a three-year exemption on the corporate and professional activity taxes and a 50 percent reduction for three years on tenancy fees after construction is completed. “Additional” incentives are available for investments made outside the coastal regions, namely the reduction of tenancy fees to a symbolic dinar ($.01) per square meter of land for 10 years in the High Plateau region and 15 years in the South of Algeria, plus a 50 percent reduction thereafter. The law also charges the state to cover, in part or in full, the necessary infrastructure works for the realization of the investment. “Exceptional” incentives apply for investments “of special interest to the national economy,” including the extension of the common tax incentives to 10 years. An investment must receive the approval of the National Investments Council in order to qualify for the exceptional incentives; the sectors of “special interest” have not yet been specified.
Regulations passed in a March 2017 executive decree exclude approximately 150 economic activities from eligibility for the incentives ( ). The list of excluded investments is concentrated on the services sector but also includes manufacturing for some products. All investments in sales, whether retail or wholesale, and the imports business are ineligible.
The 2016 investments law also provided state guarantees for the transfer of incoming investment capital and outgoing profits. Pre-existing incentives established by other laws and regulations also include favorable loan rates well below inflation from public banks for qualified investments.
Foreign Trade Zones/Free Ports/Trade Facilitation
Algeria does not have any foreign trade zones or free ports.
Performance and Data Localization Requirements
The Algerian government does not officially mandate local employment, but businesses have reported instances of the government pressuring foreign companies operating in Algeria, particularly in the hydrocarbons sector, to limit the number of expatriate middle and senior managers so that Algerians can be hired for these positions. Contacts at multinational companies have alleged this pressure is applied via visa applications for expatriate workers. Companies usually must provide extensive justification to various levels of the government as to why the expatriate worker is needed. U.S. companies in the hydrocarbons industry have reported that, when granted, expatriate work permits are usually valid for no longer than six months and are delivered up to three months late, requiring firms to apply perpetually for renewals.
Goods, Technology, and Data Treatment
In 2017, the Algerian government began instituting forced localization in the auto sector. Industry regulations issued in December 2017 require companies producing or assembling cars in the country to achieve a local integration rate of at least 15 percent within three years of operation. The threshold rises to between 40 and 60 percent after a company’s fifth year of operation. Since 2014, the government has required car dealers to invest in industrial or “semi-industrial” activities as a condition for doing business in Algeria. Dealers seeking to import new vehicles must obtain an import license from the Ministry of Commerce. Since January 2017, the Ministry has not issued any licenses. As the Algerian government further restricts imports, localization requirements are expected to broaden to other manufacturing industries over the next several years.
Information technology providers are not required to turn over source codes or encryption keys, but all hardware and software imported to Algeria must be approved by the Agency for Regulation of Post and Telecommunication, under the Ministry of Post, Information Technology and Communication. There are no data sovereignty rules mandating data storage within the country; due to IT infrastructure issues, most Algerians use email services with foreign domains.
5. Protection of Property Rights
Secured interests in property are generally recognized and enforceable, but court proceedings can be lengthy and results unpredictable. All property not clearly titled to private owners remains under government ownership. As a result, the government controls most real property in Algeria, and instances of unclear titling have resulted in conflicting claims of ownership, which has made purchasing and financing real estate difficult. Several business contacts have reported significant difficulty in obtaining land from the government to develop new industrial activities; the state prefers to lease land for 33-year terms, renewable twice, rather than sell outright.
Property sales are subject to registration at the tax inspection and publication office at the Mortgage Register Center and are part of the public record of that agency. All property contracts must go through a notary.
Intellectual Property Rights
Patent and trademark protection in Algeria remains covered by a series of ordinances dating from 2003 and 2005, and representatives of U.S. companies operating in Algeria reported that these laws were satisfactory in terms of both the scope of what they cover and the penalties they mandate for violations. A 2015 government decree increased coordination between the National Office of Copyrights and Related Rights (ONDA), the National Institute for Industrial Property (INAPI), and law enforcement to pursue patent and trademark infringements. However, U.S. companies note that enforcement remains an issue.
ONDA, under the Ministry of Culture, and INAPI, under the Ministry of Industry and Mines, are the two separate entities within the Algerian government that have primary responsibility for IPR protections. ONDA covers literary and artistic copyrights as well as digital software rights, while INAPI oversees the registration and protection of industrial trademarks and patents.
Despite strengthened efforts at ONDA, INAPI, and the General Directorate for Customs (under the Ministry of Finance), which have seen local production of pirated or counterfeit goods nearly disappear since 2011, imported counterfeit goods are prevalent and easily obtained. Algerian law enforcement agencies annually confiscate roughly 1.5 million counterfeit items, including clothing, cosmetics, sports items, foodstuffs, automotive spare parts, and home appliances. ONDA destroyed more than 100,000 copies of pirated media in its annual destruction campaign in 2017, but software firms estimate that more than 85 percent of the software used in Algeria, and a similar percentage of titles used by government institutions and state-owned companies, is not licensed.
For assistance, please refer to the U.S. Embassy local lawyers’ list, as well as to the .
6. Financial Sector
Capital Markets and Portfolio Investment
The Algiers Stock Exchange has five stocks listed—each at no more than 35 percent equity—with a total market capitalization representing less than 0.1 percent of GDP. Daily trading volume on the exchange averages less than $2,000. Despite its small size, the market functions well and is adequately regulated by an independent oversight commission that enforces compliance requirements on listed companies and traders.
Officials aim to reach a capitalization of $7.8 billion in the next five years and enlist up to 50 new companies. However, attempts to list additional companies have been stymied both by a lack of public awareness and appetite for portfolio investment and by private and public companies’ unpreparedness to satisfy due diligence requirements that would attract investors. Proposed privatizations of state-owned companies have also been opposed by nationalist politics. Algerian society generally prefers material investment vehicles for savings, namely cash. Public banks, which dominate the banking sector (see below), are required to purchase government securities when offered, meaning they have little leftover liquidity to make other investments. Foreign portfolio investment is prohibited—the purchase of any investment product in Algeria, whether a government or corporate bond or equity stock, is limited to Algerian residents only.
Money and Banking System
The banking sector is roughly 85 percent public and 15 percent private as measured by value of assets held, and is regulated by an independent central bank. Estimated total assets in the sector in 2015 were roughly 9.2 trillion dinars ($83.6 billion) against 7.3 trillion dinars ($66 billion) in liabilities. The central bank had mandated a 12 percent minimum ratio for assets to liabilities until mid-2016, when in response to a drop in liquidity the bank lowered the threshold to eight percent. The decrease in liquidity was a result of all public banks buying government bonds in the first public bond issuance in more than 10 years; buying at least five percent of the offered bonds is required for banks to participate as primary dealers in the government securities market. The bond issuance essentially returned funds to the state that it had parked in funds at local banks during years of excess hydrocarbons profits.
Despite falling liquidity, the banks are still considered financially healthy, with only about five percent of assets considered non-performing, which is standard for emerging markets. The quality of service in public banks is generally considered low; generations of public banking executives and workers trained to operate in a statist economy lack familiarity with modern banking practices. Most transactions are still materialized (non-electronic). Many areas of the country suffer from a dearth of branches, leaving large amounts of the population without access to banking services. ATMs are not widespread, especially outside the major cities, and few accept foreign bank cards. Outside of major hotels with international clientele, hardly any retail establishments accept credit cards. Algerian banks do issue debit cards, but the system is distinct from any international payment system. In addition, approximately 4.6 trillion dinars ($40 billion), or one-third, of the money supply is estimated to circulate in the informal economy.
Foreigners can open foreign currency accounts without restriction, but proof of a work permit or residency is required to open an account in Algerian dinars. Foreign banks are permitted to establish operations in the country, but they must be legally distinct entities from their overseas home offices. Of the handful of foreign banks with a presence in Algeria, all are engaged exclusively in commercial banking; none offers retail banking services.
In 2015, the FATF removed Algeria from its Public Statement, and in 2016 it removed Algeria from the “gray list.” The FATF recognized Algeria’s significant progress and the improvement in its anti-money laundering/counter terrorist financing (AML/CFT) regime. The FATF also indicated Algeria has substantially addressed its action plan since strategic deficiencies were identified in 2011.
Foreign Exchange and Remittances
There are few statutory restrictions on foreign investors converting, transferring, or repatriating funds, according to banking executives. Monies cannot be expatriated to pay royalties or to pay for services provided by resident foreign companies. The difficultly with conversions and transfers results more from the procedures of the transfers rather than the statutory limitations: the process is heavily bureaucratic and requires almost 30 different steps from start to finish. The slightest misstep at any stage can slow down or completely halt the process. In theory, it should take roughly one month to complete, but in reality, it often takes three to six months. Also, the Algerian government has been known to delay the process as leverage in commercial and financial disputes with foreign companies.
Expatriated funds can be converted to any world currency. The IMF classifies the exchange rate regime as an “other managed arrangement,” with the central bank pegging the value of the Algerian Dinar (DZD) to a “basket” composed of 64 percent of the value of the U.S. dollar and 36 percent of the value of the euro. The currency’s value is not controlled by any market mechanism and is set solely by the central bank. As the Central Bank has full control of the official exchange rate of the Dinar, any change in its value could be considered currency manipulation. When dollar-denominated hydrocarbons profits fell starting in mid-2014, the central bank allowed a slow depreciation of the dinar against the dollar over 24 months, culminating in about a 30 percent fall in its value before stabilizing around 110 dinars to $1 in late 2016. However, the dinar lost only about 10 percent of its value against the euro in the same time frame.
There have been no recent changes to remittance policies. There are no specific time limitations, although the bureaucracy involved in remittances can often slow the process to as long as six months. There is no legal parallel market by which investors can remit; however, there is a substantial black market currency exchange system in Algeria. Exchange rates for the dollar and euro are about 50 percent stronger on the black market than the official rates. With the more favorable informal rates, local sources report that most remittances occur via foreign currency hand-carried into the country. Under central bank regulations revised in September 2016, travelers to Algeria are permitted to enter the country with up to 1,000 euros or equivalent without declaring the funds to customs. However, any non-resident can only exchange dinars back to a foreign currency with proof of initial conversion from the foreign currency. The same regulations prohibit the transfer of more than 3,000 dinars ($26) outside Algeria.
Sovereign Wealth Funds
Algeria does not have a sovereign wealth fund.
7. State-Owned Enterprises
More than half of the formal Algerian economy is comprised of state-owned enterprises (SOEs), led by the national oil and gas company Sonatrach, although SOEs are present in all sectors of the economy. SOEs are so prevalent that a comprehensive public list does not exist; rather all SOEs are amalgamated into a single line of the state budget. SOEs are listed in the official business registry. To be defined as an SOE, a company must be at least 51 percent owned by the state.
Algerian SOEs are generally heavily bureaucratic and may be subject to political influence. There are competing lines of authority at the mid-levels, and contacts report mid and upper-level managers are reluctant to make decisions because internal accusations of favoritism or corruption are often used to settle political scores. Senior management teams at SOEs report to their relevant ministry; CEOs of the larger companies such as Sonatrach, electric and gas utility Sonelgaz, and airline Air Algerie report directly to ministers. Boards of directors are appointed by the state, and the allocation of these seats is considered political. SOEs are not known to adhere to the OECD Guidelines on Corporate Governance.
Legally, public and private companies compete under the same terms with respect to market share, products and services, and incentives. Private enterprises have the same access to financing as SOEs, but they tend to work more with private banks and they are far less bureaucratic than their public counterparts. Public companies generally refrain from doing business with private banks. In 2008, a government directive ordered public companies to work only with public banks. The directive was later officially rescinded, but the effect has held as a self-imposed practice by public companies. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors, but business contacts report that the government favors SOEs over private sector companies in terms of access to land.
SOEs are subject to budget constraints. Audits of public companies are conducted by the Court of Auditors under the jurisdiction of the Office of the President. The Court is generally considered independent, but may be subject to pressure or interference from government officials, particularly with regard to politically sensitive financial results. It is widely believed that the Court is reluctant to release potentially controversial results. The General Inspectorate of Finance (IFG) is a public auditing body under the supervision of the Ministry of Finance authorized to conduct “no-notice” audits of public companies. The results of these audits are sent directly to the Minister of Finance, and the offices of the President and Prime Minister. They are not published publicly.
There has been a very limited privatization of certain projects previously managed by SOEs in the water sector and likely other sectors, but the privatization of SOEs has been halted.
8. Responsible Business Conduct
Multinational, and particularly U.S., firms operating in Algeria are spreading the concept of responsible business conduct (RBC), which has traditionally been less common among domestic firms, with a few notable exceptions. Companies such as Anadarko, Cisco, Microsoft, Boeing, Dow, and Berlitz support programs aimed at youth employment, education, and entrepreneurship. RBC activities are gaining acceptance as a way for companies to contribute to local communities while often addressing business needs, such as a better-educated workforce. The national oil and gas company, Sonatrach, funds some social services for its employees and supports desert communities near production sites. Still, many Algerian companies view social programs as areas of government responsibility and do not consider such activities in their corporate decision-making process. While state entities welcome foreign companies’ RBC activities, the government does not factor them into procurement decisions, nor does it require companies to disclose their RBC activities. Algerian laws for consumer and environmental protections exist, but are weakly enforced.
Algeria does not adhere to the OECD or UN Guiding Principles and does not participate in the Extractive Industries Transparency Initiative. In 2011, Algeria received a “failing” score of 38, and ranked 73rd out of 89 countries, in its most recent rating on the Natural Resource Governance Institute’s Resource Governance Index.
In 2013, the Algerian government created the Central Office for the Suppression of Corruption (OCRC) to investigate and prosecute any form of bribery in Algeria. The current number of cases currently being investigated by the OCRC is not available. In 2010, the government created the National Organization for the Prevention and Fight Against Corruption (ONPLC) as stipulated in the 2006 anti-corruption law. The Chairman and members of this commission were appointed by a presidential decree. The commission reviews financial holdings of public officials and carries out studies. Since 2013, the Financial Intelligence Unit has been strengthened by new regulations that have given the unit more authority to address illegal monetary transactions and terrorism funding. In 2016, the government updated its anti-money laundering and counter-terrorist finance legislation to bolster the authority of the financial intelligence unit to monitor suspicious financial transactions and refer violations of the law to prosecutorial magistrates.
The Algerian government does not have a policy that requires private companies to establish internal codes of conduct that prohibit bribery of public officials. The use of internal controls against bribery of government officials varies by company, with some upholding those standards and others rumored to offer bribes. Algeria is not a participant in regional or international anti-corruption initiatives. While Algeria does not provide protections to NGOs involved in investigating corruption, there are whistleblower protections for Algerian citizens who report corruption.
U.S. firms have not identified corruption as an obstacle to FDI. Investigations into conflicts-of-interest and corruption have been opened in the last several years in several sectors, most prominently in the award of contracts for hydrocarbons development and government procurement.
Resources to Report Corruption
Official government agencies:
National Organization for the Prevention and Fight Against Corruption (ONPLC)
Mohamed Sebaibi, President
14 Rue Souidani Boudjemaa, El Mouradia, Algiers
+213 21 23 94 76
Algerian Association Against Corruption (AACC)
+213 07 71 43 97 08
10. Political and Security Environment
Algeria’s political and security environment is stable, with the government having largely routed Islamist rebels who fought government forces during the widespread civil strife of the 1990s. The government’s efforts to reduce terrorism have focused on active security services and social reconciliation and reintegration. Isolated terrorist incidents still occasionally occur, but they are rare. There have been two major attacks on oil and gas installations in the last 10 years. In March 2016, terrorists launched a home-made rocket attack on a gas facility in central Algeria that caused limited damage but no casualties. In January 2013, there was a major attack at a remote oil and gas facility near the town of In Amenas in south-east Algeria (approximately 1,500 kilometers from Algiers) in which nearly 40 people – mostly western energy sector workers, including three Americans – were killed. Other terrorist attacks claimed by ISIS include an August 2017 suicide attack in Tiaret that killed two police officers and a February 2017 attack that injured two policemen in Constantine. Each of these attacks prompted swift counter-terrorism responses by Algerian security services to uproot the militants responsible for the attacks.
Protests in Algeria occur frequently concerning housing and other social programs. While the majority of these protests are generally peaceful, there are occasional outbreaks of violence that result in injuries, sometimes resulting from efforts of security forces to disperse the protests. In January 2018, clashes between police and protesters broke out during a demonstration in Algiers (where protests are illegal) by medical residents, injuring several protesters.
Government reactions to public unrest typically include tighter security control on movement between and within cities to prevent further clashes and promises of either greater public expenditures on local infrastructure or increased local hiring for state-owned companies. During the first several months of 2015, there was a series of protests in several cities in the south of the country against the government’s program to drill test wells for shale gas. These protests were largely peaceful but sometimes resulted in clashes, injury, and rarely, property damage. Announcements in 2017 that authorities would recommence shale gas exploration have not, to date, generated protests.
The Algerian government requires all foreign employees of foreign companies or organizations based in Algeria to contact the Ministry of Foreign Affairs before traveling in the country’s interior so that the Government can evaluate need for police coordination. The Algerian government also requires U.S. Embassy employees to coordinate all staff travel outside of the Algiers wilaya (province) with the government; for this reason U.S. consular services may be limited outside of the Algiers wilaya.
U.S. citizens living or traveling in Algeria are encouraged to enroll in the Smart Traveler Enrollment Program (STEP) via the State Department’s travel registration website, https://step.state.gov/step, to receive security messages and make it easier to be located in an emergency.
11. Labor Policies and Practices
There is a chronic shortage of skilled labor in Algeria in all sectors. Business contacts report difficulty in finding sufficiently skilled plumbers, electricians, carpenters, and other construction/vocational related areas; many of the engineers employed by foreign construction companies active in the country are Chinese or Turkish. Oil companies report they have difficultly retaining trained Algerian engineers and field workers because these workers often leave Algeria for higher wages in the Gulf. White collar employers also report a lack of skilled project managers, supply chain engineers, and even sufficient numbers of office workers with requisite computer and business skills.
Official unemployment figures are measured by the number of persons seeking work through the National Employment Agency (ANEM). Official Algerian government statistics listed overall unemployment in 2017 as 11.7 percent, up 1.2 percent from the previous year, and 23.9 percent for youth aged 16-24, down 0.1 percent from the previous year. The International Labor Organization (ILO) estimates that more than one-third of all labor in Algeria is employed in the informal economy.
The Ministry of Vocational Training sponsors programs that, according to government figures, train 40-50,000 Algerians annually in various professional programs. There are no current laws requiring companies to hire nationals, although contacts at foreign companies report pressure to do so under implied threat of not approving the visa applications for expatriate staff. Employers are required to pay severance, with slight variations in the law regarding lay-offs and firings. There are no special economic zones or foreign trade zones in Algeria.
The constitution provides workers with the right to join and form unions of their choice provided they are citizens. The country has ratified the International Labor Organization’s (ILO’s) conventions on freedom of association and collective bargaining but failed to enact legislation needed to implement these conventions fully. The General Union of Algerian Workers (UGTA) is the largest union in Algeria and represents a broad spectrum of employees from both the public and private sectors. The UGTA, an affiliate of the International Trade Union Conference, is an official member of the Algerian “tripartite,” a council of labor, government, and business officials that meets annually to collaborate on economic and labor policy. The Algerian government chooses to liaise almost exclusively with the UGTA, sometimes putting other labor unions in Algeria at a disadvantage. Collective bargaining is permitted under a law passed in 1990 and modified in 1997, but is not mandatory, and in practice the UGTA is the only union authorized to engage in collective bargaining. Algerian law provides mechanisms for monitoring labor abuses and health and safety standards, and international labor rights are recognized within domestic law, but are only effectively regulated in the formal economy.
Sector-specific strikes occur often in Algeria, though general strikes are less common. The law provides for the right to strike, and workers exercise this right, subject to conditions. Striking requires a secret ballot of the whole workforce, and the decision to strike must be approved by majority vote of workers at a general meeting. The government may restrict strikes on a number of grounds, including economic crisis, obstruction of public services, or the possibility of subversive actions. Furthermore, all public demonstrations, including protests and strikes, must receive prior government authorization. By law, workers may strike only after 14 days of mandatory conciliation or mediation. The government occasionally offers to mediate disputes. The law states that decisions reached in mediation are binding on both parties. If mediation does not lead to an agreement, workers may strike legally after they vote by secret ballot to do so. The law requires that a minimum level of essential public services must be maintained during public-sector service strikes, and the government has broad legal authority to requisition public employees. The list of essential services included services such as banking, radio, and television. Penalties for unlawful work stoppages range from eight days to two months’ imprisonment.
Stringent labor-market regulations likely inhibit an increase in full-time, open-ended work. Regulations do not allow for flexibility in hiring and firing in times of economic downturn. Unemployment insurance eligibility requirements are so stringent as to discourage many job seekers from collecting benefits probably due them. Employers must have contributed up to 80 percent of the final year salary into the unemployment insurance scheme in order for them to qualify for unemployment benefits.
The law contains occupational health and safety standards that are not fully enforced. There were no known reports of workers dismissed for removing themselves from hazardous working conditions. If workers face such conditions, they may reserve the right to renegotiate their contract or, failing that, resort to the courts. While this legal mechanism exists, the high demand for employment in the country gave an advantage to employers seeking to exploit employees. Labor standards did not protect economic migrants from sub-Saharan Africa and elsewhere working in the country without legal immigration status, which made them vulnerable to exploitation. The law does not adequately cover migrant workers employed primarily in construction and occasionally as domestic workers.
The Labor Ministry generally enforces labor standards, including providing for compliance with the minimum wage regulation and safety standards. Companies that employee undeclared workers are subject to fines.
The law prohibits participation by minors in dangerous, unhealthy, or harmful work or in work considered inappropriate because of social and religious considerations. The minimum legal age for employment is 16, but younger children may work as apprentices with permission from their parents or legal guardian. The law prohibits workers under age 19 from working at night, but there is no list of hazardous occupations prohibited to minors. Although specific data was unavailable, children reportedly worked mostly in the informal sales market, often in family businesses, or on family farms. There were isolated reports that children were subjected to commercial sexual exploitation. According to UNICEF, six percent of children ages 5 to 14 were economically active.
The Ministry of Labor is responsible for enforcing child labor laws. There is no single office charged with this task, but all labor inspectors are responsible for enforcing laws regarding child labor. The ministry conducted inspections and in some cases investigated companies suspected of hiring underage workers. Monitoring and enforcement practices for child labor were inconsistent.
The Ministry of Labor leads a national committee composed of 12 ministries and NGOs that meets yearly to discuss child labor issues. The committee was empowered to propose measures and laws to address child labor as well as conduct awareness campaigns. In 2017, the committee established a new national program calling for several initiatives to combat child labor, including efforts to increase awareness of the issue and to provide assistance to needy families.
12. OPIC and Other Investment Insurance Programs
An Overseas Private Investment Corporation (OPIC) agreement between the U.S and Algeria was signed in June 1990. In 2005, the Algerian Energy Company entered a deal with Ionics Inc. of Watertown, Massachusetts, in which Ionics agreed to build a water desalination plant and the state water authority took a minority stake in the plant and agreed to purchase the bulk of the clean water produced. OPIC provided a $200 million loan to Ionics, a desalination equipment manufacturer that was later acquired by General Electric. In 2017, GE sold its stake in the Algiers water desalination plant, OPIC’s first and only project in Algeria to date.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Table 3: Sources and Destination of FDI
No information for Algeria is available on the IMF’s Coordinated Direct Investment Survey (CDIS) website. Neither World Bank nor Algerian sources break down FDI to and from Algeria by individual countries.
Table 4: Sources of Portfolio Investment
No information for Algeria is listed in the IMF’s Coordinated Portfolio Investment Survey (CPIS) web site. Neither World Bank nor Algerian sources break down FDI to and from Algeria by individual countries.
14. Contact for More Information
U.S. Embassy Algiers
(+213) 770 08 22 00