4. Industrial Policies
While the government previously required 51 percent Algerian ownership of all investments, the 2020 budget law restricted this requirement to the hydrocarbons, mining, defense, and pharmaceuticals manufacturing sectors.
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 tax (VAT) for all imported goods and services that enter directly into the implementation of the investment project, a 90 percent reduction of tenancy fees during construction, and a 10-year exemption on real estate taxes. Investors also benefit from a three-year exemption on 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 of Algeria’s coastal regions, to include the reduction of tenancy fees to a symbolic one dinar (USD.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. The sectors of “special interest” have not yet been publicly specified. An investment must receive the approval of the National Investments Council in order to qualify for the exceptional incentives.
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 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.
The government does not issue guarantees for private investments, or jointly financed foreign direct investment projects. In practice, however, the government is disinclined to let companies that employ significant numbers of Algerians – whether private or public – to fail, and may take on fiscal responsibilities to ensure continued employment for workers. President Tebboune’s administration also indicated more flexibility in considering alternative financing methods for future projects, which might include joint financing.
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 companies usually must provide extensive justification to various levels of the government as to why an expatriate worker is needed. Any person or legal entity employing a foreign citizen is required to notify the Ministry of Labor. Some 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. 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.
In 2017, the Algerian government began instituting forced localization in the auto sector. 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. In 2020, the Algerian government announced its intention to increase the baseline local integration for automotive assembly from 15 percent to 35 percent. 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. For example, a tender launched in 2018 for 150 megawatts of photovoltaic solar energy power plants mandated that bidders be Algerian legal entities.
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 Electronic Communications (ARPCE), under the Ministry of Post and Telecommunications. In practice, the Algerian government requires public sector entities to store data on servers within the country.
11. Labor Policies and Practices
There is a 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. 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. Some white-collar employers also report a lack of skilled project managers, supply chain engineers, and sufficient numbers of office workers with requisite computer and soft skills.
Official unemployment figures are measured by the number of persons seeking work through the National Employment Agency (ANEM). Unemployment in 2019 dropped slightly to 11.4 percent. Unemployment is significantly higher among certain demographics, including 29 percent of young people (ages 16-24). The rate of unemployed young men decreased in 2019, from 9.9 to 9.1 percent. The percentage of unemployed young women increased from 2018 from 19.4 percent to 20.4 percent. Roughly 70 percent of the population is under 30.
An important factor in the increased unemployment rate in 2019 is the government’s continued austerity policy since 2015, which has resulted in the cancellation of several investment projects, the freezing of recruitment in the public sector, and the decision not to replace government positions lost to normal attrition. Additionally, the subsidy allotted to finance vocational integration (le dispositif d’insertion professionnelle) decreased from 135 billion dinars in 2013 to 44.1 billion in 2019. In general, finding a job is regulated by the government and bureaucratically complex. Prospective employees must register with the labor office, submit paper resumes door to door, attend career fairs, and comb online job offerings. According to the Office of National Statistics, 81 percent of university graduates say that they favor “family relationships” or “the family network” as the best way to look for a job.
The private sector accounts for 62.2 percent of total employment with 7.014 million people, with 37.8 percent in the public sector, employing 4.267 million people. Additionally, the International Labor Organization (ILO) estimates that more than one-third of all employment in Algeria takes place in the informal economy. The Ministry of Vocational Training sponsors programs that offer training to at least 300,000 Algerians annually, including those who did not complete high school, in various professional programs.
Companies must submit extensive justification to hire foreign employees, and report pressure to hire more locals (even if jobs could be replaced through mechanization) under the implied risk that the government will not approve visas for expatriate staff. 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 Algerian citizens. The country has ratified the ILO’s conventions on freedom of association and collective bargaining, but failed to enact legislation needed to implement these principles fully. The General Union of Algerian Workers (UGTA) is the largest union in Algeria and represents a broad spectrum of employees in the public 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 liaises almost exclusively with the UGTA, however unions in the education, health, and administration sectors do meet and negotiate with government counterparts, especially when there is a possibility of a strike. Collective bargaining is legally permitted but is not mandatory.
Algerian law provides mechanisms for monitoring labor abuses and health and safety standards, and international labor rights are recognized under domestic law, but are only effectively regulated in the formal economy. The government has shown an increasing interest in understanding and monitoring the informal economy, evidenced by its 2018 partnerships with the ILO and current cooperation with the World Bank on several projects aimed at better quantifying the informal sector.
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 a majority vote of the 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 agreed to in mediation are binding on both parties. If mediation does not lead to an accord, workers may strike legally after they vote by secret ballot. The law requires that a minimum level of essential public services must be maintained, and the government has broad legal authority to requisition public employees. The list of essential services includes banking, radio, and television. Penalties for unlawful work stoppages range from eight days to two months imprisonment.
In 2019, there were strikes at the end of the year, largely in the public health and public education sectors. Medical residents went on strike demanding higher pay, better working conditions, and male residents sought an exemption from mandatory military service requirements. After weeks of strikes, the Ministry of Health made some concessions in terms of additional benefits for doctors, and the residents resumed work. Teachers also went on strike for higher pay and complained of perceived inequalities in the pay scale. After weeks of strikes and a closed-door meeting, the Ministry of Education and unions came to an agreement, but to date no changes have been implemented and periodic teacher strikes continue.
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. For example, employers are generally required to pay severance when laying off or firing workers. Unemployment insurance eligibility requirements may discourage job seekers from collecting benefits due to them, and the level of support claimants receive is minimal. Employers must have contributed up to 80 percent of the final year salary into the unemployment insurance scheme in order for the employees to qualify for unemployment benefits.
The law contains occupational health and safety standards but enforcement of these standards is uneven. There were no known reports of workers dismissed for removing themselves from hazardous working conditions. If workers face hazardous conditions, they may file a complaint with the Ministry of Labor, which is required to send out labor inspectors to investigate the claim. Nevertheless, the high demand for unemployment in Algeria gives an advantage to employers seeking to exploit employees.
Because Algerian law does not provide for temporary legal status for migrants, labor standards do not protect economic migrants from sub-Saharan Africa and elsewhere working in the country without legal immigration status. However, migrant children are protected by law from working.
The Ministry of Labor enforces labor standards, including compliance with the minimum wage regulation and safety standards. Companies that employ migrant workers or violate child labor laws are subject to fines and potentially prosecution.
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. While there is currently no list of hazardous occupations prohibited to minors, the government reports it is drafting a list which will be issued by presidential decree. Although specific data was unavailable, children reportedly worked mostly in the informal sector, largely in sales, often in family businesses. They are also involved in begging and agricultural work. There were isolated reports that children were subjected to commercial sexual exploitation.
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. In 2018, the Ministry of Labor focused one month specifically on investigating child labor violations, and in some cases prosecuted individuals for employing minors or breaking other child-related labor laws. While the government claims to monitor both the formal and informal sectors, contacts note that their efforts largely focus on the formal economy.
The National Authority of the Protection and Promotion of Children (ONPPE) is an inter-agency organization, created in 2016, which coordinates the protection and promotion of children’s rights. As a part of its efforts, in 2018 ONPPE held educational sessions for officials from relevant ministries, civil society organizations, and journalists on issues related to children, including child labor and human trafficking.