Country Risk: Algeria

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Location and Size

Algeria is located in Northern Africa, bordering the Mediterranean Sea, between Morocco and Tunisia. Its territory covers a total of 2,381,7410 sq. km., making it slightly less than 3.5 times the size of the U.S. state of Texas. Its capital, Algiers, is located on the Mediterranean Sea.

Government

Algeria is a presidential republic comprised of 48 provinces.

Branches:

• Executive: Chief of State – President Abdelmadjid TEBBOUNE (since December 2019); Head of Government – Prime Minister Abdelaziz DJERAD (since September 2019); Cabinet of Ministers appointed by the president. The president is elected by popular vote for a five-year term (no term limits).
• Legislative: Supreme Court and Constitutional Council
• Judicial: Supreme Court and Constitutional Council
  

Legal System

Algeria has a mixed legal system of French civil law and Islamic law. It provides for judicial review of legislative acts in an ad hoc Constitutional Council composed of various public officials including several Supreme Court justices.

Algeria has not submitted an International Court of Justice (ICJ) declaration.

Interesting Facts About Algeria

1. French and Arabic are the official languages of Algeria.
2. About 70% of all lawyers and approximately 60% of all judges are women, as are 60% of all college students. In general, women make a larger household income contribution than men.
3. Algeria has the highest cost of living in North Africa.
4. It is the largest importer of agricultural goods in Africa and has the largest oat market in Africa.
5. Couscous is the national dish of Algeria.
6. Only 12% of the total land is inhabited. More than 90% of the population lives along the Mediterranean coastlands.
7. About 90% of the land is covered by the Sahara Desert, high plateaus, steppes, wasteland and mountains.
8. Temperatures in northern Algeria sometimes reach 100° F (38° C) in summer and fall below freezing in winter.
9. Alcoholic drinks are seldom found in Algeria, largely because of the country’s Islamic orientation. Even if they are available in restaurants, they are not usually listed on the menu.

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Economy

Algeria has a lower-middle-income economy largely dominated by the state. In recent years, the Algerian government has halted the privatization of state-owned industries and imposed restrictions on imports and foreign involvement in its economy, pursuing an explicit import substitution policy.

Hydrocarbons have long been the backbone of Algeria’s economy. It ranks 16th in oil reserves and 10th in reserves of natural gas. It is the sixth-largest exporter of gas in the world. While strong revenues from hydrocarbon exports created macroeconomic stability, Algeria has struggled to develop non-hydrocarbon industries due to heavy regulation and an emphasis on state-driven growth.

Algiers has increased protectionist measures since 2015 to limit its import bill and encourage domestic production of non-oil and gas industries. Since 2015, the government has imposed additional restrictions on access to foreign exchange for imports, and import quotas for specific products, such as cars. In January 2018 the government imposed an indefinite suspension on the importation of roughly 850 products, subject to periodic review.

In 2017, then President BOUTEFLIKA announced that Algeria intended to develop its non-conventional energy resources. Algeria has struggled to develop non-hydrocarbon industries because of heavy regulation and an emphasis on state-driven growth. Algeria has not increased non-hydrocarbon exports, and hydrocarbon exports have declined because of field depletion and increased domestic demand.

Leading Markets (2017): Italy 17.4%, Spain 13.0%, France 11.9%, US 9.4%, Brazil 6.2%, Netherlands 5.5%

Leading Exports – Commodities: Petroleum, natural gas, and petroleum products 97%

Leading Suppliers (2017): China 18.2%, France 9.1%, Italy 8.0%, Germany 7.0%, Spain 6.9%, Turkey 4.4%

Leading Imports – Commodities: Capital goods, foodstuffs, consumer goods

Top Industries: Petroleum, natural gas, light industries, mining, electrical, petrochemical, food processing

Top Agricultural Products: Wheat, barley, oats, grapes, olives, citrus, fruits; sheep, cattle

Comparative Economic Indicators – 2021

* 2018 estimate
** PPP – Purchasing Power Parity

Economic Data from CIA World Factbook

Credit and Collections

Dispute Resolution

Algeria is a signatory to the convention on the Paris-based International Centre for the Settlement of Investment Disputes. It ratified its accession to the New York Convention on Arbitration, and is a member of the Multilateral Investment Guarantee Agency. The code of civil procedure allows both private and public-sector companies full recourse to international arbitration and Algeria does permit the inclusion of international arbitration clauses in contracts. The dispute resolution process, including arbitration, can take 18 to 24 months and in some cases longer.

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Risk Assessment

Coface Country Rating: D — The overall risk is a combination of business-specific factors and factors relating to the country in which the business operates. The analyses use a seven-level ranking. In ascending order of risk, these are: A1, A2, A3, A4, B, C and D.

Coface Business Climate Rating: C — Evaluating the business environment involves measuring the quality of a country’s private sector governance. In other words, businesses’ financial transparency and the effectiveness of the courts in settling debts. Evaluations use a seven-level ranking. In ascending order of risk these are: A1, A2, A3, A4, B, C and D.

Credendo Political Risk Rating: 3.5 — Moderate
Credendo Commercial Risk Rating: C — High

Business Climate

Algeria’s economy remains dominated by the state, a legacy of the country’s socialist post-independence development model. In recent years, the Algerian government has halted the privatization of state-owned industries and imposed restrictions on imports and foreign involvement in its economy, pursuing an explicit import substitution policy.

The Government of Algeria has invested in infrastructure development designed to make the local market sufficiently profitable for firms adapted to emerging markets. The aim is to help such businesses weather the challenges and explore new opportunities in sectors like energy, power, water, health, telecommunications, transportation, and agribusiness.

Economic Freedom: Algeria’s economic freedom score is 49.7, making its economy the 162nd freest in the 2021 Index of Economic Freedom. Its overall score is 2.8 points higher than last year, due in part to improved fiscal health. Algeria is ranked 13th among the 14 countries in the Middle East and North Africa region, and its score remains lower than the regional and world averages.

Market Access: Algeria has two preferential trade agreements in force. The trade-weighted average tariff rate is 13.8 percent, and layers of nontariff barriers are in place. Foreign investors are generally limited to minority status, and restrictions on foreign ownership still limit much-needed investment dynamism. Capital markets are underdeveloped, and the financial sector remains dominated by public banks. In 2020, the central bank lowered the reserve requirement ratio.

Regulatory System: In general, Algeria’s regulatory system is transparent, but decision-making authority remains opaque. Each ministry defines its rules for doing business in the sectors it manages, and regulatory bodies are established to administer them. Challenges arise in managing the bureaucracy, because authority is typically vested at the top of every organization, and access to decision-makers is often limited. In addition, the Algerian bureaucracy is slow and protocol-oriented, such that even minor deficiencies in paperwork can lead to significant delays and fines.

Intellectual Property Rights: While there is legislation protecting copyright and related rights, trademarks, patents, and integrated circuits, implementation has been inconsistent and enforcement remains spotty. Algeria was again named to the USTR Special 301 Priority Watch List in 2020, notably for the country’s ban on a significant number of imported pharmaceutical products and medical devices that compete with products manufactured domestically.

Exchange Control: The Algerian dinar is considered fully convertible for all commercial transactions. The Bank of Algeria (the nation’s central bank) manages Algeria’s foreign reserves and controls foreign exchange. Foreign investors can repatriate dividends, profits, and real net income out of their assets through transfers or liquidation. In certain cases, due to the inefficiency of the banking system and the heavy bureaucracy, it may take longer to obtain official permission from the Central Bank to make transfers/payments, or for the local bank to proceed with the transfer. Foreign investors and the international banks serving them are seeking greater clarity on the rules around repatriating dividends, a central concern for foreign investors.

Corruption: Algeria scored 36 out of 100 in Transparency International’s 2020 Corruption Perception Index, ranking as the 104th most corrupt nation out of 180. There is an ongoing government effort to root out corruption, notably in key GOA agencies, such as Customs. In 2010, the government created the National Commission for the Prevention and Fight Against Corruption. Many Algerian citizens, however, believe that corruption is a problem within the upper reaches of government. Some evidence suggests that bribes are paid to bypass Algerian bureaucracy or to avoid government interference.

Political Violence: Political violence has declined since the widespread terrorism of the 1990s. The government’s effort to reduce terrorism through military pressure and social reconciliation and reintegration has been markedly effective. However, incidents of terrorism, including suicide bombings against government and international organization installations, occurred in 2006 and 2007, and armed attacks against army and police continue sporadically to this day. The U.S. Government considers the potential threat to U.S. Embassy personnel assigned to Algiers sufficiently serious to require them to live and work under significant security restrictions. Americans living or traveling in Algeria are encouraged to register with the U.S. Embassy in Algiers through the State Department’s travel registration website.

For more detailed information on these topics, visit the 2020 Investment Climate Statement – Algeria, U.S. Department of State

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Business Protocol in Algeria

• The use of titles is important in Algeria due to the hierarchical nature of the society. When introduced to someone, try to call them by their honorific, professional, or academic title and their surname.
• Algerians do not leave a great deal of personal space between each other. If someone stands close to you or holds your arm, do not back away.
• There is no formal ritual surrounding business cards. It is a good idea to have them translated into French or Arabic. Always use the right hand to give and receive a card.
• Appointments are necessary and should be made as far in advance as possible and confirmed a day or two before the meeting.
• In general, Algerians have an open-door policy, even during meetings. This means you may experience frequent interruptions. Others may even wander into the room and start a different discussion. You may join in, but do not try to bring the topic back to the original discussion until the new person leaves.
• Preserving honor/reputation is important. It is important to bear this in mind when communicating with Algerians, i.e. do not cause them to lose face especially in public.
• Using your finger to point is viewed as highly discourteous by Algerians.
• Business attire is formal in Algeria. Men wear suits and ties, women wear long dresses or skirts which reach below the knee. Women should also avoid wearing low-cut blouses.

Sources for further information on doing business in Algeria

Doing Business 2020: Algeria, The World Bank

Embassy of Algeria to the United States of America

Embassy of the United States – Algiers-Algeria

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Algeria. For further information, contact [email protected].

This report represents a compilation of information from a wide variety of reputable sources.

Comparative Economic Indicators: CIA World Factbook

Risk Assessment information: Coface Country Rating, and Credendo.

Exchange Rates: OANDA.com The Currency Site.