Algeria has in its tax law attractive incentives to enhance research and development (R&D), such as allowing for the deduction of operating expenses incurred for scientific or technical research in the year in which these expenses were incurred. An additional incentive is for companies to deduct expenses incurred within the framework of R&D within a limit of 10% of their profits capped at AD100m (€930,000), provided that the amount allowed in the deduction is reinvested in this research. The forthcoming finance act for 2015 is expected to develop further incentives to promote innovation in companies from the industrial sector, such as exemptions for value-added tax and Customs duties, with subsidies available for investments made by companies in R&D. It is also expected that the Treasury will take charge of bank loans that are contracted by manufacturing companies for the purpose of enhancing their industrial integration rate and the competitiveness of their products.

Tax incentives associated with direct or indirect subsidies are not enough if a clear vision of R&D is not designed for the development of a country. A clear vision means a long-standing process of supporting R&D programmes on long-term projects, leading to sustainable R&D. R&D is a collective exercise, and it is also a collective mission that requires direct input from different stakeholders. Allowing the deduction of R&D expenses, including operating expenses, is indirectly a government expense since it is retention of tax income for the Treasury, but tax incentives cannot by themselves be the key role without useful side measures. Side measures shall include better proximity between companies, schools, universities and research centres, with a direct operational contribution from the state to the different stakeholders.

In addition to tax incentives, the state can support productive investment through a well-conducted policy of public investment; for example, public investment funds may also play a role in supporting start-up companies that introduce innovating processes and technologies to the market. Existing provisions of the Algerian tax law have so far allowed companies to deduct their R&D expenses from taxable profit. Such provisions could be improved by allowing more deductions should the R&D result in a successful registered patent. The coming provisions of the 2015 finance act include both cash-flow and financing savings for R&D promoters. The aim is to promote innovation, which needs to be clearly framed, scrutinised and measured.

Innovation cannot be achieved unless measures are put in place that both promote public-private investment and develop technology through interaction among research institutes, universities, and public and private companies. Stakeholders from research centres and universities should be encouraged to join companies involved in scientific and technologic research, and they should also be encouraged to pursue projects through an operational commercial entity by setting up companies. New forms of partnership between the public and private sectors, through public procurement to companies involved in technological development projects or via the creation of technology centres, may enhance this process. Associations and non-profit institutions may also be involved through patronage granted by companies, for which costs could be recognised as R&D costs even if they profit a third-party entity. Last but not least, the leverage of foreign investment shall be used to ease the process of transferring know-how with joint research projects, the main objective of which shall be knowledge acquisition and production among Algerian companies.

To further develop the Algeria economy, the resources of the Algerian diaspora should be tapped, not only among those who have already contributed to successful R&D overseas but also those who have the potential to create successful projects.

The reduction of human resources volatility for those trained in R&D should be a permanent concern, because human capital is definitely the key resource for an effective and growing contribution of R&D to the economy.