Inversió estrangera directa (IED) a Algèria

FDI in Figures

Rich in natural resources and economically stable, Algeria has historically attracted decent FDI flows. However, FDI flows were negatively impacted by the social unrest followed by the COVID-19 pandemic these last years. According to the data published by UNCTAD in the World Investment Report 2021, FDI in Algeria decreased by 19% to USD 1.1 billion in 2020 (down from USD 1.3 billion in 2019) with inflows directed primarily to the natural resources sector, in the wake of the global health and economic crisis triggered by the Covid-19 pandemic. On the other hand, the stock of FDI increased, reaching USD 33 billion in 2020.Over the last few years, it can be seen a reorientation of FDI towards the domestic market, thanks to the proliferation of development projects in transportation and infrastructure. China and Turkey have been investing heavily in Algeria, taking over France's historical position as the largest investor in the country. European investments have recently decreased in favour of a greater interest from Gulf investors. One of the biggest investors is BAIC International (China), with an investment of more than USD 100 million in a manufacturing plant. Other major investors include Hyundai and Ford. On a country level, China, Singapore, Spain and Turkey are the leading investors; whereas industry, tourism, construction and agriculture are the sectors who receive most FDIs.

Protectionist measures, as well as corruption, bureaucracy, a weak financial sector and legal insecurity in terms of intellectual property rights are serious obstacles to investment.Until 2019, the participation of a foreign investor in an Algerian company was limited to 49% and foreign contractors are forced to find local partners for public tenders. However, in 2020, the government of President Abdelmadjid Tebboune eliminated the so-called "51/49" restriction that required Algerian majority ownership of all new companies. The requirement will be maintained for "strategic sectors", identified as hydrocarbons, mining, defence and pharmaceutical production. The government has also approved a new hydrocarbons law, improving fiscal conditions and contract flexibility in  order to attract new international investors. As a result of the promulgation of this law, major international oil companies signed memoranda of understanding with the national hydrocarbon company Sonatrach. Algeria was ranked 157th out of 190 countries in the Doing Business 2020 report published by the World Bank, same place as the year before.

What to consider if you invest in Algeria

Strong Points

Algeria's strong points for FDI include:

• Low cost of energy (gas, fuel and electricity)
• Large liquidity reserve which lowers its vulnerability to commodity prices
• Strong potential in renewable energy and tourism
• Skilled and inexpensive workforce
• Recent laws to encourage foreign investments and various incentives for foreign investors
• Algeria’s proximity to Europe, its geographic location as an interface between Europe and Africa and inside the Maghreb.

Weak Points

Algeria's weak points for FDI include:

• Slow administrative procedures and large and inefficient public sector
• Weak business climate, according to international evaluation agencies
• The dependence of the economy on hydrocarbons, which increases dependence on imports of transformed goods
• The insufficient development of regional markets, which restrain Algeria's appeal to foreign investors
• The complexity of legislation, especially tax law
• The difficulty to acquire industrial property
• High level of unemployment among young people
• Degraded regional geopolitical context (Libya, Mali, tensions with Morocco).

Government Measures to Motivate or Restrict FDI

To attract and encourage foreign investment, the Government has set up several attractive measures, including the reduction of corporate taxes for investment in specific locations, a reduction in social security contributions for recruitment of young employees, the concession of land by mutual agreement (which provide similar rights to ownership) and tax exemptions throughout the life of the project for exporting projects. For further details consult the investment guide by KPMG and ANDI (National Agency for Investment Development).

The government is trying hard to attract FDI in sectors that may create jobs and reduce the imports of assembled goods. Several sectors are targets for foreign investors, including the automobile industry and the renewable energy sector.  

Nevertheless, since 2008 there are many FDI restrictions. Until 2019, for each new investment project in Algeria, the majority of its capital (51%) had to be held by local partners; however such limitation has been lifted (except for “strategic sectors” such as hydrocarbons, mining, defense, and pharmaceuticals). The Algerian government has enacted protectionist economic policies (import quotas for several types of products). Nevertheless, in recent years Algeria has benefited from the support of the World Bank to improve its business climate. 

Bilateral investment conventions signed by Algeria

Algeria has signed bilateral investment conventions with more than thirty countries. They define the framework for the protection of foreign investment in Algeria for each of the signatories. For the countries of the European Union, the association agreement signed between the EU and Algeria regulates this issue.
Algeria is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention") and the Convention on the International Center for the Settlement of Investment Disputes (ICSID Convention).

Find out more about Investment Service Providers in Algeria on GlobalTrade.net, the Directory for International Trade Service Providers.