Country Profile:
Algeria
Algeria
In the past decade, Africa’s second-largest nation has been defined by greater stability and a drive for economic diversification. As the President Abdelaziz Bouteflika embarks on a third term, liberalisation remains a priority, as does assuming a greater regional diplomatic role and bolstering ties to the EU. While the global economic crisis rattled Algeria’s oil and gas-centric economy, the country has powered through due to excess liquidity and high international reserves, and made significant progress towards developing agriculture, tourism and other non-hydrocarbon sectors.
ISBN: 978-1-907065-12-5
ISSN (Online): 1755-2745
ISSN (Print): 1755-2737
TABLE OF CONTENTS
COUNTRY PROFILE
This section provides a quick overview of some facts about the country, its population, languages, natural resources, geography, climate, religion and history.
POLITICS
In April 2009, Abdelaziz Bouteflika was re-elected with over 90% of the vote for a third consecutive five-year term, following a constitutional revision abolishing term limits in 2008. Turnout for the presidential election was high (74.5%), with almost 15m votes cast out of a total of 20m registered voters. Unofficially, the president belongs to the National Liberation Front (Front Liberation Nationale, FLN), which is the country’s dominant political party. The Rassemblement National Democratique (RND) and Movement of Society for Peace (Mouvement de la Societe pour la Paix, MSP) are member parties of the presidential coalition, while the Socialist Forces Front (Front des Forces Socialistes, FFS) and the Rally for Culture and Democracy movement (Rassemblement pour la Culture et la Democratie, RCD) parties also have a presence, especially in the west of the country. Bouteflika campaigned on a platform of further measures for national reconciliation and the country’s second “million home” housing initiative. Economic reform is also a major pillar of his new administration, with the continuing privatisation of state-owned companies a priority. Algeria is taking pains to increase its limited skilled labour force, which has been a barrier to FDI, by increasing its education budget. The country has also ramped up its diplomatic relations with France by taking part in the Union for the Mediterranean project, while working with the EU on measures to stem illegal migration from North Africa.
This chapter provides an interview with President Abdelaziz Bouteflika; Zafer Çaðlayan, Turkish Minister for Foreign Trade; and Yu Myung-hwan, Minister of Foreign Affairs and Trade, Republic of Korea. Luiz Inácio Lula da Silva, President of Brazil, gives his viewpoint on South-South relations.
ECONOMY
Accounting for over 98% of export receipts, hydrocarbons are the engine of the Algerian economy. With the onset of the financial crisis, Algeria’s exports fell 46.62% to €10.03bnn in the first four months of 2009. Overall GDP growth slowed to 2%, while a budget deficit of 8.1% is expected for 2009. Nonetheless, the country’s exposure to the crisis has been limited as 85% of bank assets are held by state-owned institutions. Economic diversification through encouragement of small- and medium-sized enterprises, a keystone of the government’s five-year reform plan, has started to take effect – retail was the fastest-growing segment in 2008, with 39.8% of new companies, followed by services and public works contractors. The European Commission has contributed some €40m to helping Algerian firms enter new markets. Algeria has also pursued liberalisation, with membership in the EU-Algeria Association Pact and the Arab Free Trade Zone, though import companies have been ordered to open 30% of their capital to Algerian partners by the end of 2009. All new investment projects will be screened by the National Investment Council. FDI from France doubled to €250m in 2008, while bilateral trade to the US expanded to a record €16.1bn in 2008. Imports from Spain and China have also increased. Delays at Algeria’s ports have posed a hindrance to international trade, though prices on containers have been decreased 10% on average. The draft of the 2010 Finance Act passed in October estimates total income to drop 3% to €32.6bn, while GDP will grow by 4%. Inflation for 2010 has been forecasted at 3.5%.
This chapter provides an interview with Karim Djoudi, Minister of Finance; Fatma Seddaoui, General Director of the National Agency for the Support of Employment of Young People (ANSEJ); Pascal Lamy, Director-General of the World Trade Organisation; and Lars Thunell, CEO and Executive Vice-President, International Finance Corporation (WTO).
ENERGY
In 2008, Algeria was the world’s fourth-largest supplier of liquefied natural gas, delivering 10% of the gas consumed by Europe. One-sixth of total oil output is consumed at home, with the rest exported as crude, LPG or refined oil products. However, domestic energy consumption is on the rise: demand for petrol in 2008 increased 10% and diesel 13% in 2008. Natural gas accounts for 60% of Algeria’s hydrocarbons consumption, with public distribution systems supplying gas to households. The energy sector is dominated by state-owned Sonatrach, which achieved record exports of €56.2bn in 2008 due to high oil prices. In the same year, the company’s investments increased by over 40% to €6.22bn. Current crude oil extraction capacity is around 1.45m barrels per day, though currently running at roughly 1.2m due to OPEC quotas. The petrochemicals sector is small relative to the country’s hydrocarbons output, though an €8.77bn programme was launched in 2005 envisaging a series of six petrochemical plants, which have been delayed. The gas-fired electricity sector, accounting for 44% of gas use in 2008, is expected to gain 9000 MW in capacity in the next decade. Renewable energy is also being developed, and is expected to provide 20-30% of electricity by 2040. Algeria has high uranium reserves of up to 30,000 tonnes, which could power a 1000-MW reactor for 50 years.
This chapter provides an interview with José Maria Botelho de Vasconcelos, Angolan Minister of Petroleum and OPEC Conference President for 2009, and Badis Derradji, CEO of New Energy Algeria (NEAL). John Krenicki, Vice-Chairman, General Electric (GE), on developing long-term commitments
BANKING
Algerian banks have a surplus of cash, with official international reserves (OIRs) worth €97.7bn and excess liquidity in the banking system of AD2.42trn (€25bn). The challenge, however, is putting this extra capital into value-creating projects. The country ranks high for the region in terms of bank profitability, yet lower household savings during the financial crisis poses a risk, as does excess liquidity. In December 2008 the central bank raised minimum capital requirements to AD10bn (€104m) – as a result, banks have exhibited aggressive market behaviour due to a pressure to perform. A law passed in July 2009 stipulates that all foreign direct investment projects must have an Algerian partner with a 51% share of the capital. The law also limited consumer loans such that they may only be made for real estate purchases. With a huge market, a small number of players and ample room for innovation, the sector has potential for massive growth. The public sector banks, with 85% of total assets, are the economy’s sole financial intermediaries. There are currently 55 new bank licences awaiting approval from the central bank. Private banks have increased their spending on project finance for large-scale public works, oil and gas contracting, trade finance and consumer lending. Although the per-capita penetration rate for post offices is lower than that for banks, the postal service has been able to provide basic banking services to more remote locations. In July 2009, Algeria debuted the interbank card (carte interbancaire), which functions as an ATM and credit card, allowing customers to make e-payments. Two Islamic banks, ABB and Al Salam Bank, operate in the Algerian market, with a third offering a sharia-compliant line of products. However, there is large market potential and Gulf investors have sought to broaden their operations.
This chapter provides interviews with Sadek Alilet, CEO of Fonds National d’Investissement (FNI); and El Hadj Alouane, General Manager of Société d’Automatisation des Transactions Interbancaires et de Monétique.
CAPITAL MARKETS
Algeria’s financial system was largely insulated from the global downturn, with public banks holding more than 85% of assets and receipts from the oil and gas industry providing a vital cushion. In 2008, GDP grew by 3%, while inflation averaged 4.3%. Trading volume on the Bourse d’Alger, which reached €223,000, is set to increase once an efficient system is in place. Market capitalisation also remains low, growing 0.62% to €68m over the course of the year. Three new corporate bond issues worth €375m were held in 2008, a sign that large state-owned enterprises (SOEs) have warmed to medium-term debt instruments. The first public bond by a private company, Arcofina subsidiary Spa Dahli, was launched in December 2008. EGH El Aurassi and Saidal are the only traded companies on the bourse’s primary market. The privatisation of the Credit Populaire d’Algerie, announced in 2007, was postponed on account of the financial crisis. No IPOs took place that year, also due to the crisis and to the underdevelopment of private equity and risk capital in Algeria. Following a six-year debt issue by state-owned Sonelgaz in 2008, the stock market regulator authorised a further sale of bonds in June 2009. As part of the Barcelona Process, stock market regulators from eight countries signed on the Mediterranean Partnership of Securities Regulators in March 2009. A five-point action plan to overhaul the Bourse d’Alger, which will focus on the privatisation of SOEs and the financing of small- and medium-sized enterprises, will conclude in 2011.
This chapter provides an interview with Ismail Noureddine, President of the Commission d’Organisation et de Surveillance des Opérations de Bourse (COSOB). Lies Kerrar, President of the Humilis Corporate Finance Advisory, gives his viewpoint on the development of the financial markets.
INSURANCE
Growing household income in Algeria led to 26.1% turnover growth in 2008. However, with gross written premiums making up 0.61% of GDP, the country is still considered under-insured. Its insurance density, measured by premiums per capita stood, at $26.37 in 2008, lower than Tunisia and Morocco. Four state-owned companies dominate the insurance industry with a total share of 75%, though the private sector has steadily expanded, capturing one-fifth of turnover in less than a decade. With the exception of credit insurance, most segments showed growth in 2008 – property and casualty insurance grew 32.8%, motor 20.9% and transport 12.2%. Agricultural insurance expanded 98.2% thanks to a bumper vegetable crop at the sector’s main producer, though it accounts for only 0.5% of the market. Bancassurance was a key driver of products in 2009, while liberalisation and deregulation sparked interest in French insurers. Personal insurance, which accounted for only 7.5% of industry turnover, is likely to attract the most foreign direct investment. Operational guidelines for Fonds de Garantie des Assurés (FGAS) were laid out by Decree 09-111 in April 2009 to cover the debts of bankrupt insurers.
Amara Latrous, President of the Algerian Union of Insurance and Reinsurance Companies and Director-General of the Société Nationale d’Assurances, gives his viewpoint on the development of the insurance industry.
TRANSPORT
Despite the global financial slowdown, air transport continues to see sustained growth and demand, leading the national carrier Air Algérie to launch a large-scale development programme. Other airlines have added new flights between Algeria and European cities. Oran, the country’s second-busiest airport, is getting a temporary terminal to accommodate the influx of travellers coming for the International Conference and Exhibition on Liquefied Natural Gas in April 2010. Maritime traffic decreased slightly in 2008, mainly due to a global decline in hydrocarbons trade. To meet growing container traffic demand, annual container-handling capacity will be extended. The rehabilitation and electrification of the rail line linking Oran, Algiers, Constantine and Annaba is due for completion by end-2009, while contracts for the construction of the Hauts Plateaux Railway have been awarded.
This chapter contains an interview with Taher Allache, CEO of Algiers Airport. Antonio Tajani, EU Vice-President for Transport Policy, provides a viewpoint on sharing resources and expertise.
IT & Telecoms
While the sector has expanded in recent years, IT penetration is still low. The e-Algérie 2013 plan, budgeted at $4bn, targets improving ICT infrastructure, availability and usage, with a focus on developing the public sector to reduce dependence on foreign companies. Additionally, the Ousratic programme aims to provide Algerian households with low-cost computers. Two IT associations composed of private sector companies have also been instrumental in encouraging development and formulating strategy: the Association Algérienne des Fornisseurs de Service Internet and the Algerian Information Technology Association. Fixed broadband connections account for 70% of total internet connections, with few companies offering ADSL – Djaweb, the internet subsidiary of national telecoms operator Algérie Télécom (AT), has 89% of the country’s 600,000 ADSL subscriptions. Due to repeated network disruptions, companies are looking to increase the use of alternative technologies, such as WiMAX, to achieve faster, more reliable connectivity, while e-Algérie 2013 plan includes AD100bn (€1.04bn) to improve the country’s fibre-optic network. Meanwhile, AT has invested in developing a nationwide WiFi network. To increase local Internet content, the Centre de Recherche sur l’Information Scientifique et Technique is offering free domain name registration. An increasing number of government services can be conducted online, including downloading application forms for official documents, such as passports and birth certificates.
After years of high growth, the mobile market is reaching saturation with a penetration rate of 83%. Some 27m mobile subscriptions were reported at the end of 2008, up from 86,000 in 2000. Mobile operators are now looking to increase their revenues via value-added services. The fixed-line market has expanded at a slower rate, with 9.06% penetration. While there are nominally two fixed-line operators, AT and Lacom, the former dominates and the latter may soon be exiting the market. Plans for AT’s privatisation, which had been expected since 2004, were ruled out in February 2009. A tender for a 3G licence, launched in 2008, has not yet been decided, and is not a priority, according to the Ministry of the Post and ICT. A wireless mobile communications network is to be installed along the Haut Plateaux railway line by Canadian telecoms group Nortel, while AP launched a joint venture dubbed Algeria Connect, offering voice over internet protocol (VoIP). In May 2009, the telecoms regulator issued a moratorium on new VoIP licences. In addition, new mobile regulations enacted in late 2008 required all customers to register their SIM cards or face deactivation.This chapter provides interviews with Hamid Bessalah, Minister of Post, Information and Communication Technologies; and Zohra Derdouri, President of the Regulatory Authority for Post and Telecommunications (ARPT).
CONSTRUCTION & REAL ESTATE
Construction and Real Estate A five-year national development plan culminating in 2009 has helped the formerly stagnant construction sector to meet the Algeria’s building needs. In the first five months of 2009, the government authorised building contracts worth $8.2bn. The next five-year plan beginning in 2010 targets up to $150bn in investments in transport and other infrastructure projects. Several large-scale petrochemicals projects are under way, including a joint venture between Egypt’s Orascom Construction Industries and Sonatrach for the Sorfert Algérie complex, which will produce urea and ammonia. Financed by the Algerian Development Bank, the East-West Highway passing through half of the country’s wilayas is due for completion in January 2010. Chinese firms offering competitive prices and quick construction have been active in the Algerian housing sector – in June 2009 the Zhejiang Construction Investment Group won a €10m contract to build 450 homes in Oran. One of the most important urban developments is the $8bn makeover of Algiers’s waterfront, which is set to include the third-largest mosque in the world. As a result of consistent shortages, cement prices soared in the first half of 2009, leading the state to issue a price cap in July.
While the Algerian real estate sector was largely insulated from the global economic downturn, some Gulf developers have postponed their projects. Though around 912,000 new homes were built between 2005 and mid-2009, demand for housing continues to exceed supply. The next five-year plan aims to produce another 1m housing units while encouraging higher-quality construction. To reduce urban congestion, several new cities are planned for construction, while the city of Hassi Messaoud will be relocated to access petroleum reserves underneath. Office space is also in demand in Algiers, where many businesses work out of converted apartments. With tourism on the rise, developers are addressing the lack of mid-range and business-oriented hotels. SIDAR, a local developer, has three Tourist Villages of Excellence (Villages Touristiques d’Excellence, VTE) planned on the coast, part of the Master Plan for Tourism Development (Schéma Directeur d’Aménagement Touristique, SDAT). The year 2009 saw the opening of Algeria’s largest mall in the Bab Ezzouar development – constructed by the Société des Centres Commerciaux d'Algérie, it offers 31,000 sq metres of commercial and leisure space.This chapter provides an interview with Amar Ghoul, Minister of Public Works.
INDUSTRY
Growth in the increasingly vital industrial sector, which contributes 5% of GDP and has expanded 2% annually, is being propelled by the National Development Master Plan 2025. Outside of the petrochemicals industry the sector is dominated by family-owned small and medium-sized enterprises (SMEs). The most developed segments in the country are mining, the agri-food industry, pharmaceuticals and construction materials. Integrated industrial zones (zones industrielles intégrées, ZIIs) will be created across the country to promote the upgrading of the sector and attract investment. FDI totalled €515m in 2007 but jumped to €5.25bn in 2008. Several reform laws were passed in 2009 increasing the participation of Algerians in industry, including an executive decree for foreign companies that export to Algeria to partner with a local firm. Algeria’s mining reserves remain under-exploited, and there is much room for investment, particularly FDI. A feasibility study for zinc and lead mines at Talma Hamza will be completed by end-2009. Growing 27% in 2008, the local pharmaceuticals industry is expanding due to improving health awareness and increased purchasing power. The government banned the import of 409 pharmaceuticals that are being locally produced and aims for local production to meet 60% of domestic needs in the medium term (compared to 30% in 2008). Local manufacturing is also expanding thanks to transport infrastructure projects, ZIIs and laws limiting imports. To help bridge the gap between local production and construction needs, significant sector investments are under way in steel, aluminium and cement, while the Ministry of Industry and Investment Promotion is spearheading the creation of a local car industry.
This chapter provides an interview with Miguel Sebastián Gascón, Spanish Minister of Industry, Trade and Tourism. Slim Othmani, CEO of NCA Rouiba and Chairman of Algeria’s Corporate Governance Task Force (GOAL), provides his viewpoint on priorities for industrial development.
ORAN
With a growing, urban and youthful population, Oran is an attractive target for investors. About 1.58m people live in the province, with some 685,300 in the municipality itself. Founded by the Spanish Arabs in 903, Oran was once the most European city in the Maghreb. The region is home to five industrial zones and 18 operational “zones of activity”. Important industrial branches include food processing, plastics and rubber, wood and paper, medical materials and pharmaceutics/cosmetics, while hydrocarbons and petrochemicals are also large economic contributors. Home to the country’s second-busiest port, Oran has upped its port investments in recent years. In 2010, Oran will host the International Conference and Exhibition on Liquefied Natural Gas. Due for completion in 2010, the East-West Highway running across Algeria should improve transport links in the region, while Oran’s urban centre will also soon be receiving its first mass transit system. Demand for upscale real estate has increased, with people moving out of traditional villas and into high-end apartments. Oran’s beaches are a huge draw for domestic tourists and Algerians living abroad, though the development of international-class leisure tourism will require more time.
This chapter provides an interview with Brahim Hasnaoui, CEO of Groupe Hasnaoui.TOURISM
Launched in February 2008, the National Tourism Development Plan (Schéma Directeur d’Aménagement Touristique, SDAT) aims to attract 2.5m tourists by 2015. Of the 1.77m tourists that visited in 2008, 1.22m were Algerians living abroad. The SDAT will focus on creating public-private partnerships and incentivising FDI. The Quality Tourism Plan Algeria (Plan Qualité Tourisme Algérie, PQTA) supports the SDAT by increasing the quality of existing tourism infrastructure via international-standard classification of facilities and modernisation incentives for operators. In August 2009, the State Finance Act was reformed, lowering interest rates on loans for improving tourism establishments. French tourism development agency Atout France audited 50 hotels, awarding seven five-star status. In contrast to neighbouring Tunisia and Morocco, Algeria’s strategy is centred on developing niche tourism. Tourism villages and marinas are being developed to promote Sahara and seaside tourism, while business tourism is getting a boost from increased infrastructure, including the building of a convention centre in Oran to host the 16th International Liquefied Natural Gas Conference in April 2010. With over 200 geothermal springs, thermal and health tourism is another key niche for Algeria to exploit. The Company for the Management of State Tourism Participation (Société de Gestion de Participation de l’Etat du Tourisme), managing the privatisation of state-owned tourism organisations, is tendering the renovation of nine government-owned hotels.
This chapter provides interviews with Cherif Rahmani, Minister of Tourism, Environment and Land Planning.AGRICULTURE
The agriculture sector, which has registered an average 6.5% growth per year since 2000, is expected to expand 10% in 2009 as a range of government measures start to take effect. The 10-year National Agricultural and Rural Development Plan, launched in 2004, led to the addition of 500,000 ha of agricultural land and 1m jobs. These reforms are designed to make Algeria agriculturally self-sufficient – agriculture made up 31.3% of imports and just 0.39% of exports in 2008. Because of strict import standards to the EU, Algeria is looking to the Gulf and South-east Asian markets for its agricultural products. Having suffered in the 2007-8 season, cereal harvest rebounded due to plentiful rainfall, though the country still imported 6.3m tonnes of cereal in 2008 at a cost of €2.7bn. With rising international cereal values, the government has nearly doubled the prices that it pays farmers for barley, wheat and durum wheat. Strict government controls on the use of fertilisers led to a sharp rise in potato prices in some regional markets. Launched in July 2008, Syrpalac, a Ministry of Agriculture programme, aims to control prices by buying surplus stocks. The fish industry, in the midst of a massive three-phase development programme, is targeted to double its output by 2025. Three-fifths of Algeria’s milk is imported, with the government subsidising milk purchases and controlling consumer prices. The Ministry of Agriculture has prioritised developing the country’s wine production, which accounts for 25% of agricultural exports.
This chapter provides an interview with Rachid Benaissa, Minister of Agriculture and Rural Development (MARD).
HEALTH & EDUCATION
The health sector is undergoing large-scale reforms as the government strives to improve services and human resources. The 2005-09 Programme for the Support of Economic Growth has contributed €1.4bn towards increasing hospital bed space and improving medical technology, while another €20bn in sector funding is expected before 2025. About 80% of spending comes from the public sector, although private clinics are cropping up in large cities. A state-issued electronic card, dubbed “chifa”, which contains the patient’s health history and insurance information, is gaining widespread usage. Basic markers of health have improved, with life expectancy rising from 72.2 in 2002 to 73.5 in 2007 and infant mortality rate falling from 34.6 to 28.8 per 1000 live births. An improving standard of living has led to more health complaints linked to dietary factors (cardiovascular disease is responsible for over 30% of deaths), while cases of transmissible disease have fallen. The Ministry of Health is working with imams to encourage mothers to breastfeed, and calling for a law to require breastfeeding areas in workplaces containing more than 30 women. As Algeria now imports 70% of its pharmaceuticals, mostly from France, the ministry wants to promote local manufacturing and reduce reliance on imports.
The government’s 2009-13 development plan for the education sector aims to better prepare workers for the job market and decrease the high unemployment rate (14%). New vocational training centres will be built to meet 14% of the country’s projected training needs for 2025. In June 2009, officials from Algeria, Morocco, Tunisia, Libya and Mauritania announced their intentions to coordinate basic education curricula, potentially enabling students to find jobs in neighbouring countries. While the private sector remains limited, the government recently passed legislation allowing for the establishment of private universities. As of 2005, 90% of material must be taught in Arabic, and seven years of English instruction has been required for the past two years. In a programme with the French Embassy that ended in 2009, 890 Algerian French-language academics were trained by professors from France. A growing youth population has put pressure on Algeria’s education system – the Ministry of National Education plans to open 383 new secondary schools in the near future and reduce class size to 25 pupils by 2012.
This chapter provides an interview with Jacques Diouf, Director-General, UN Food and Agriculture Organisation (FAO).MEDIA & ADVERTISING
While Algerian media is relatively diversified, print is the most developed medium. The country currently has 291 publications, with Arabic-language dailies as the most popular newspapers. A Journalism Code enacted in April 2008, the first of its kind in the MENA region, improved the legal protection of journalists, while the president has promised reform of the 1990 Information Code, which created an independent press but still allows for some government censorship. State-run Entreprise Nationale de Télévision is being overhauled, with construction of a new headquarters outside of Algiers, while the National Entreprise Nationale de Radiodiffusion Sonore is modernising its radio network in preparation for eventual sector liberalisation. The country will switch from Analogue Television to a Digital Terrestrial Television (DTTV) system by end-2011. Several newspapers are available online, and blogging is increasing in popularity, despite a low household Internet penetration rate of 2.6%.
The advertising industry is expanding quickly, generating €113m in Q1 2009, which is nearly equal to its total revenue for 2008. The state-owned Entreprise Nationale de Communication d’Edition et de Publicité (ANEP) control government advertising, while major global firms dominate the private sector. The telecommunications sector accounted for 38.6% of advertising in 2008, with Orascom Telecom Algérie (Djezzy), Wataniya Telecom Algérie (Nedjma) and ATM Mobilis as the market’s largest clients. Television is the most popular advertising medium, with a 39% market share, followed by print media (35.1%), billboards (16.1%) and radio (9.8%). Internet advertising jumped 300% from 2007 to the third quarter of 2008, though it still accounts for less than 1% of the market. Across all mediums, advertising is highest during Ramadan, increasing approximately 40%.THE BUSINESS GUIDE
In conjunction with KPMG, OBG explores the taxation system, examining Jordan’s investor-friendly environment. Jean-Marie Pinel, CEO, KPMG Algeria, provides a viewpoint on creating an environment that is more conducive to foreign investment. OBG also introduces the reader to the different aspects of the legal system in Algeria, in partnership with Gide Loyrette Nouel. The legal coverage provides an interview with Samy Laghouati, Managing Partner of Gide Loyrette Nouel.
THE GUIDE
This section includes hotel, government and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress, business hours and electricity.
