| COUNTRY PERSPECTIVES
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ALGERIA |
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Business opportunities & territorial marketing |
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After years of economic stagnation, Algeria is today confronted with an important challenge: strengthening and diversifying its economy. This challenge is analysed in development plans and priority initiatives programmed. Algerian authorities are using various tools to encourage and facilitate investments in strategic sectors. Various supporting funds are also available. |
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Algeria |
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Algeria |
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Introduction |
After years of economic stagnation, Algeria is today confronted with an important challenge: strengthening and diversifying its economy. This challenge is analysed in development plans and priority initiatives programmed. Algerian authorities are using various tools to encourage and facilitate investments in strategic sectors. Various supporting funds are also available.
To improve the external competitiveness of enterprises and prepare them for a widespread privatisation programme, several upgrading programmes for public and private enterprises have been launched, including the Programme for Industrial Competitiveness managed by the Ministry of Industry with assistance from the United Nations Development Programme (UNDP), the United Nations Industrial Development Organisation (UNIDO) and the Euro-Development Programme for Small and Medium-sized Enterprises (Programme Européen de Développement des PME – EDPME), with support from the European Commission. In addition to these co-operative programmes, a new programme for upgrading small and medium-sized enterprises was announced in June 2005 and entrusted to the national agency for the development of small and medium-sized companies (Agence Nationale de Développement des PME), set up for this purpose. All this public support will hopefully enable small businesses to stand up to the increased competition resulting from the association agreement with the European Union and application of WTO multilateral rules. |
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Agriculture, fishing and agro-food |
The sector has considerable economic potential and agricultural imports amount to the equivalent of US$ 3 billion per annum. During the years of centralised economy, Algeria gave high priority to heavy industry, neglecting the strategic value of agriculture. In the National Plan for Agricultural and Rural Development (PNDA), the Government has developed a new vision for agricultural and rural development, outlined in the 2004 Sustainable Rural Development Strategy. These programmes seek to reduce imports and provide food security by diversifying farm production: cereal crops, tree cultivation (especially olive trees), wine growing, market gardening and husbandry.
However, the question of foreign ownership of land is a burden likely to act as an obstacle to investment in agriculture and industry. This issue needs to be resolved soon.
Many opportunities exist in the fields of food processing, conservation technologies, and marketing initiatives as well as in transfer of expertise/capacity building and sharing of knowledge.
With 1,250 km of coastline on the Mediterranean, Algeria has major potential for fishing, long underestimated and unexploited. Since 2003, several protocol agreements for fishing, conservation, and supply of equipment have been signed by Algerian economic operators and foreign companies. Thus an aquaculture project to breed sea perch and sea bream has been launched, with investment of EUR 8 million, under the supervision of the National Office for Aquaculture Development with the support of the Arab Organisation for Agricultural Development (AOAD). The private “Union Bank” has set up a specialised subsidiary company to develop industrial fishing. |
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Hydraulics |
Algeria suffers from a chronic water deficit, worsened by persistent bad weather and high population growth in large urban centres. The water resources strategy focuses on expanding storage facilities by building new dams and desalination plants and better rehabilitation/management of existing infrastructure. A new water code was adopted in 2005, targeting reduction of the critical supply-demand gap, and the Government has earmarked public investment for a 10 year integrated water resource management initiative. A number of BOT and concession projects will be launched over the short and medium terms. |
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Building and construction |
According to the authorities, there is a housing shortage exceeding one million units and high demographic growth means that this figure will be increasing. At least 150,000 residences will have to be built over each of the next ten years in order to keep up with requirements. Over the period 2005-09, the sector will absorb almost half of the PCSC’s budget. To carry out these ambitious goals for new housing and real estate, the government must secure private sector involvement, from architects and promoters to engineering and building companies as well as building material and equipment suppliers. |
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Public works, transport and infrastructure |
A comprehensive roadmap for reforms throughout the sector is under way. The Government’s strategy is to modernise, expand transport infrastructure, and attract private foreign and local investment. Large-scale building, replacement, upgrading, and enhancement efforts are needed in Algeria, from roads and highways to railways, ports/airports, and civil engineering. The objective for commercial services is to privatise the remaining public enterprises and encourage competition in the market. For public goods or services, private sector participation will be sought under concession contracts.
A substantial budget of almost EUR 2 billion has been allocated to upgrade overall transport infrastructure, which deteriorated over the ten years of terrorism. Thus, it is expected that work on the Algiers subway, launched more than 20 years ago, will be resumed, with line 1 slated for start up at the end of 2005. |
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Energy |
The energy sector is the backbone of Algeria’s economy, accounting for roughly 60 percent of budget revenues, 30 percent of GDP, and over 95 percent of export earnings. With reserves of 16 billion cubic meters of oil equivalent discovered in 1948, Algeria is the third largest oil-producing country in Africa and twelfth in the world. Only 25 percent of initial proven oil reserves of approximately 10 billion barrels of liquid hydrocarbons are considered recoverable with available processes. Half of these recoverable crude oil reserves have already been pumped and current estimates of probable remaining reserves stand at more than 400 MCM. The Energy Information Administration reported that as of 2005 Algeria had 160 trillion cubic feet (Tcf) of proven natural gas reserves, eighth largest in the world.
Algeria is a major exporter of oil and gas. It is the world’s 14th largest oil exporter and it supplies some 20 percent of Europe’s natural gas. Oil production reached 1.9 million barrels/day in 2004 (about 2.5 percent of world production) and marketed gas production stood at 225 MCM/day (about 3 percent of world production).
Reforms in the power sector are defined in the 2002 electricity law, which allows private sector investment and competition, unbundling of this national utility, creation of a separate company for system operations and subsidiaries for generation/ transmission/ distribution of gas and electricity, and creation of a regulatory agency the Electricity and Gas Regulatory Commission (CREG) to oversee the newly-opened industry and to ensure non-discriminatory access to the sector. |
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Health and pharmaceutical products |
The Algerian health system continues to suffer from multiple problems, is short of financing and needs to align to the country’s changing circumstances (medical, epidemiological, demographic and economic). The population’s medical needs are considerable. National production is insufficient to meet needs and so Algeria is a major importer of drugs. The market for pharmaceutical products is estimated at more than EUR 700 million per year, of which 80 percent are imported. |
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