Algeria.The abolition of the 49/51% law alone is not sufficient to attract significant investment

How Algeria’s New FDI Law Could Help Unlock Investment Opportunities

Algeria has recently passed a new Foreign Direct Investment (FDI) law, which could help unlock investment opportunities in the country. This law is designed to make it easier for foreign investors to do business in Algeria, and to encourage more investment in the country.

The new FDI law includes a number of measures that are designed to make it easier for foreign investors to do business in Algeria. These measures include the elimination of the requirement companies  to obtain prior approval from the government before investing in Algeria, as well as the introduction of a simplified registration process . The law also provides for the establishment of a one-stop shop for foreign investors, which will provide them with access to all the necessary information and services they need to invest in Algeria.

In addition, the new FDI law provides for the establishment of a special investment fund, which will provide financial support to foreign investors who wish to invest in Algeria. This fund will be managed by the Algerian government, and will be used to provide financial assistance to investors

Overall, the new FDI law could help to unlock investment opportunities in Algeria, and could help to attract more foreign investment into the country. This could help to create jobs and stimulate economic growth in Algeria, and could help to improve the country’s overall economic situation.

But Is it enough to attract investment ?

Foreign companies seeking investment opportunities in Algeria have the potential to establish local production facilities for specific products and export them to third countries. .

The companies want to establish production facilities for specific products intended for export to a third country. They plans to bring their own machinery and purchase raw materials, importing them using their own foreign currency, bypassing the Algerian central bank. By doing so, they aim to benefit from lower production costs, reduced overheads, and the advantage of lower wages. The investing company intends to invoice their client, who is based in the third country, directly from their country of origin. This approach ensures that the payment process will not involve any transactions through Algeria.”.Would the Algerian Law allow this exercise which is the most popular investment model?  Not clear

  1. Payment for Algerian Workers: One important aspect to address is how the investing company would pay their Algerian workers, considering they do not generate revenue in Algerian dinars. In such cases, Algeria can require the investing company to exchange some of their foreign currency for dinars in order to meet wage obligations. This approach would benefit Algeria’s central bank by creating a source of revenue. Additionally, this arrangement would lead to employment opportunities and valuable experience for local workers.
  2. Trade Agreements: The absence of trade agreements with other countries, particularly a zero-tariff agreement, presents a challenge. Establishing a zero-tariff agreement between Algeria and various countries would greatly incentivize investment. For instance, if Algeria were to establish such an agreement with the United Kingdom after Brexit, it would encourage investors from around the world to invest in Algeria for manufacturing products to export to the UK. This arrangement would enable investors to take advantage of low wages and zero tariffs, ultimately benefiting from Algeria’s manufacturing capabilities.

Improving Investment Laws and Competitiveness:

Algeria needs to revamp its investment laws to remain competitive in the Mediterranean region and attract more investors. Despite having advantageous infrastructure and low production costs, the country still struggles to attract substantial investments. The gap between existing laws and their implementation is often a significant deterrent for companies that have attempted to invest in Algeria. To address this, Algeria must “refresh its browser” and learn from what other countries are offering. The government needs to adopt a business-oriented and marketing-focused approach to position Algeria on the international investment stage effectively.

In my opinion, although Algerian governments have been known for their diplomatic and political skills since 1962, it can be argued that Algeria has not had a business-oriented government.
By Riad Beladi



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