Algeria - Market OverviewAlgeria - Market Overview
Algeria remains a lucrative but challenging market for many U.S. businesses. Economic growth has been primarily driven by oil and natural gas, accounting for 94% of export revenues, 27% of GDP and 38% of budget revenues. The drop in oil prices, while affecting Algeria’s main revenue stream, has spurred the government of Algeria (GoA) to attempt to lower the country’s sizeable import bill through a policy of diversification. However, the application of that policy has consisted of a tightening of imports in an attempt to reduce the outflow of hard currency. U.S. companies must overcome language barriers, distance, customs challenges, an entrenched bureaucracy, difficulties in monetary transfers, currency conversion, repatriating dividends, and price competition from Chinese, Turkish, and European businesses. International firms that operate in Algeria sometimes complain that the GoA lacks an economic vision, and that laws and regulations are constantly shifting and are applied unevenly, strengthening the perception of commercial risk for foreign companies. Business contracts are likewise subject to changing interpretation and revision, which has proved challenging to U.S. and international firms. Other drawbacks include the 49/51 investment law (which requires majority Algerian ownership of all new businesses involving a foreign partner), inadequate IPR enforcement, and limited regional trade. The lack of access to a regional market also negatively impacts Algeria, because on its own Algeria's market may not be attractive enough to firms that can locate elsewhere to create a regional distribution hub.
U.S. exporters can find substantial opportunities in Algeria if they have patience and effective Algerian agents or distributors to help translate these opportunities into sales. Given the time and resources necessary to successfully develop this market, Algeria is a challenging export market for small to medium-sized enterprises (SMEs).
U.S. companies play a significant role in Algeria’s oil and gas sector. Algerian government officials have actively sought to encourage non-hydrocarbon U.S. investment, and despite some large projects awarded to U.S. companies, Algerian government measures, have made the country’s investment climate more restrictive. As a result, and because of unanticipated regulations, heavy bureaucracy, and comparatively few incentives, there have been a relatively limited number of U.S. investments in Algeria outside of the hydrocarbon sector.
The privatization process has all but stopped due to both a general lack of interest among foreign investors and a lack of confidence among government leaders in past privatization and foreign-investment efforts. A change in the 2016 budget law allowed for the possibility of partial privatizations of state-owned firms, subject to case-by-case approval by the Prime Minister, but only for sales to Algerian companies. Bank privatization is on hold indefinitely. Slow economic reforms and an antiquated banking system have left non-hydrocarbon sectors mostly underdeveloped. Algeria has not yet joined the WTO and accession is not a current priority.
The United States enjoys a positive image in the Algerian market. U.S. goods and services are respected for high quality, and U.S. companies are well regarded for their after-sales service and transfer of know-how. The country‘s agricultural production is well below demand, and Algeria continues to import large volumes of bulk agricultural products and packaged foodstuffs, though the government has begun limiting imports of the latter through a licensing and quota system in an effort to favor domestic production. European countries such as France, Italy, Turkey, and Spain are traditional suppliers to Algeria in a wide range of sectors, and Chinese firms enjoy a growing presence. The EU-Algeria Association Agreement, which entered into force in 2005, maintains the dominance of EU countries as the major trade partners of Algeria.
U.S. businesspeople must take precautions when traveling to and within Algeria. Business travelers and companies should continue to exercise vigilance and consult the Embassy and the Department of State's travel advisories for updated information.
Algeria Trade Development and Promotion