What actions have been taken by the ministry to help diversify the economy?
HADJI BABA AMMI: The diversification of the economy remains our main challenge to ensure sustainable, long-term growth. Since 2011 the contribution of various non-hydrocarbons sectors to GDP has increased. The oil and gas sector represented only 19% of GDP in 2015, while it represented 34% in 2001 and 27% in 2014. Today trade services represent 27% of GDP, while the construction of public works and agriculture both account for 12%.
The Ministry of Finance is also making efforts to enhance the development of industrial infrastructure and boost financial services by expanding the role of the stock market. The latter needs to play a more important role in terms of financing of the economy through the mobilisation of savings towards productive investment.
In addition, the ministry has coordinated the new finance law to be implemented in 2017. This law will not only improve the transparency of public finances but also unlock a series of fiscal measures for the country without damaging growth and the purchasing power of the most vulnerable populations.
What are the plans to reduce the size of the informal sector?
BABA AMMI: The informal sector is a phenomenon that can be found everywhere in the world. It constitutes an economic, social and political problem. In addition to its negative impact on trade, the informal sector generates a significant loss of fiscal profits for the state.
To address this major issue, the Ministry of Finance has, for example, pushed to ease the opening of bank accounts to increase financial inclusion. Payments for certain purchases are also now required to be done through banking and financial channels if they exceed AD1m (€8270) for goods and services and AD5m (€41,400) for real estate.
The ministry has simplified the administrative processes linked to investment, and we have introduced fiscal benefits for investors. A programme to ease the transition of informal trade activities to the formal sector is also in place, granting a two-year tax exemption for those willing to formalise their activities.
The taxation system has been amended by increasing the threshold of a single flat-rate tax from AD10m (€82,700) to AD30m (€248,000). At the same time significant efforts have been made to ease access to land ownership by granting tax allowances on concession royalties and making efforts to develop new banking products.
Citizens who want to legalise their finances have been offered a plan that enables them to deposit their non-registered funds in a bank against the payment of a 7% prosecution-free rate before December 31, 2017. Lastly, fees will be tightened in case of transgression.
What incentives are available for local and foreign investors?
BABA AMMI: Enhancing the business environment through a new growth framework adopted by the Council of Ministers in July 2016 is a key government priority. This programme aims to develop the economy and boost employment through the main objective of gradually reducing dependency on hydrocarbons revenue. It requires an investment promotion dynamic that will allow us to modernise our industrial base and harness Algeria’s agricultural and tourism potential. To do so, we require partnerships with foreign operators on the basis of mutual interest as well as know-how and technological transfer. Foreign direct investment holds a fundamental position in our development goals.
The new investment code issued in August 2016 reviewed investment incentives on three different levels. General incentives are now available for all eligible investors, while additional benefits are offered for job creating and targeted sectors, such as industry, agriculture, and tourism. In addition, there is a specific drive to boost investment that is beneficial for the national economy. This law grants benefits to all projects below AD5bn (€41.4m), while the limit was AD2bn (€16.5m) in the past. An investor can claim these incentives with a single document. Projects that exceed these figures still have to be validated by the National Investment Council.
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