International Trade in Algeria

News Related to International Trade in Algeria

Business outline for Algeria

Main Industry Sectors

Agriculture contributes about 12% of the GDP and employs almost one fifth of the active population. The main crops are wheat, barley, oats, citrus fruit, wine grapes, olives, tobacco and dates. Algeria produces a large quantity of cork and has a significant amount of livestock farming.

The industry contributes nearly 55% of the GDP and employs a quarter of the population. The oil and gas sector accounts for the majority of budgetary income, and almost all of export income. Algeria is the 2nd biggest gas exporter in the world. It ranks 18th for its petroleum reserves and 10th for its gas reserves. The ores mined in big quantities are iron, lead, phosphate, uranium, zinc, salt and coal. The main activities of the manufacturing sector are industrial food processing, textile, chemical products, metals and construction materials.

The tertiary sector contributes about a third of the GDP and employs more than half of the workforce.

Economic Overview

After having slowed down due to the global economic crisis and a drop in the prices of oil and gas, the Algerian economy resumed its growth in 2010. Driven by the resumption of demand in the hydrocarbon sector and the strong performance of the service and construction sectors, aided by a program of public investment (PIP), growth reached 3.8% in 2010 (compared to 2.4% in 2009) and should continue in 2011.

In order to promote the growth of the domestic market, the Algerian government has launched a major construction policy, namely in the sector of transport infrastructures. Today, this policy is criticized because of two reasons. Firstly, at the time this program was started, the price of the oil barrel was very high. Current global market conditions have changed considerably and some observers question the suitability of this policy. More so because Algeria is running on a "negative multiplier", which means that the resources injected into the economy are much higher than the wealth generated. The new five-year plan for 2010-2014, which follows in the direction of the previous one, emphasizes modernization the infrastructures and privatization of the economy.

The current unemployment rate in Algeria is officially at 10% but some claim it is closer to 20%. The per capita GDP was USD 4,600 in 2008. It should be noted that there is a large discrepancy between the urban and rural living conditions.

FDI in Figures

Rich in natural resources and enjoying economic stability, Algeria has been attracting record levels of FDI in the recent years, reaching 17.3 billion USD in 2009. These extremely encouraging figures nevertheless hide two opposing trends: a net decrease in European investments and a revival of interest from the Gulf investors.

The series of protectionist measures taken by the Algerian government, including a new regulation concerning the FDIs and imposing an Algerian majority stake of 51%, can also be seen as a discouraging factor in terms of the FDIs. Likewise, corruption and heavy bureaucracy, as well as the weak financial system and legal insecurity in terms of intellectual property rights, constitute an impediment to investment. Officially, the government remains committed to economic liberalization and continues to seek foreign investment in sectors such as the infrastructures, telecommunications, energy and water supply. There has also been a noticeable reorientation of the FDI toward the domestic market, through an efflorescence of developmental projects in transport and infrastructure.

The sectors attracting most FDI are the energy sector, followed by the telecommunications and tourism.

FDI Government Measures

To attract and encourage foreign investment, the government has set up various attractive measures. You can consult these mesures on the ANDI website.

At the same time, on the 22^nd December 2008, the Algerian prime minister published a directive which leans towards restricting foreign FDIs. In effect, it has been provided that all new investment projects in Algeria have to have local majority (51%) shareholding.  This directive further provides that foreign investors should only revert to local financing.  Finally, FDI projects will no longer come under ANDI (National Agency for Investment Develompment) but under CNI (National Investment Council), something which would engender delays in the handling of files.  More information on these new mesures is available.

Country Strong Points

- The low cost of energy constituents (gas, fuel and electricity): industrial gas is 22 times cheaper than the European average, electricity is 6 times cheaper. See the summary of factors costs on the ANDI website.

- The workforce is skilled and cheap; it is 10 times cheaper than in France.

 - Algeria's proximity to Europe. This motivates the relocation of industrial activities which consume energy.

- A country in the middle of an economic metamorphosis.

Country Weak Points

- Slow administrative procedures are often pointed out;

- The legislation is very complex, especially tax law.

- It is difficult to acquire industrial property.

Foreign Trade Overview

Algeria has an open economy, foreign trade representing three quarters of the GDP.

Algerian exports grew by 223% between 2002 and 2008, mainly due to the explosion of world's oil prices, oil representing the near totality of the country's exports. During this period, the trade balance has generated a significant surplus giving Algeria comfortable foreign currency reserves (USD 150 billion in 2009). Unfortunately, in 2010, the drop in global oil prices and the sustained high levels of imports have lead to a significant worsening of the Algerian trade balance. This should nevertheless remain in surplus in 2011.

The main trade partners of Algeria are the European Union, the NAFTA countries (Free Trade Agreement between United States, Canada, and Mexico) and China.