Using an Agent or Distributor
Many foreign firms use Algerian agents, consultants or contracted representatives as a means to test, enter or maintain a basic presence in the market. Agents may provide a full range of services for companies selling products, but are not allowed to enter into negotiations directly on some government contracts.
Although it is legal for corporations to be an independent distributor, local agents and distributors are commonly used to assist foreign firms with documentation in French, and with local laws and practices.
Establishing an Office
There are three basic organization types for establishing a presence in Algeria; the liaison office, the branch, and the permanent establishment.
A branch office may be opened to allow the parent company to conduct commercial activity in Algeria. The branch is considered a resident Algerian entity without full legal authority. Drawbacks to this form include foreign exchange controls and the inability for the branch to sign contracts with the parent company.
The permanent establishment is a tax entity allowing for a full but temporary presence associated with a particular contract to be performed in Algeria. This form is more nimble and allows for substantial repatriation of revenues. However, due to the temporary nature of this business form, a number of tax benefits are not available.
A business entity can also be incorporated as a joint stock company (JSC), a limited liability company (LLC), a private limited company under sole ownership (PLCSO), a limited partnership (LP), a limited partnership with shares (LPS), or an undeclared partnership. Groups and consortia are also used by foreign companies when partnering with other foreign companies or with local firms.
Several companies operate what appear to be franchise stores in the fast food and retail sectors, and international hotel names are licensed in Algeria. Companies manage their franchises in Algeria through the invoicing of goods imported
by the franchisee, rather than through the payment of royalties or other franchise fees.
Private firms are showing increasing interest in leasing, particularly construction equipment, and banks are beginning to offer credit options for leasing.
Selling to the Government
Most government contracts are awarded through a two-step tender process: first, technical bids are reviewed to ensure compliance with tender requirements and to evaluate competing specifications, and then financial bids are reviewed. Competitors are sometimes short-listed after the technical offers are opened, and sometimes companies are pre-qualified for large tenders, particularly in oil and gas development. Lowest bids are not always accepted, as government agencies place heavy emphasis on technology and know-how transfer, local investment, and the diversification of suppliers.
Recent government tenders have highlighted the need for careful adherence to specific tender guidelines. The government makes little use of counter-trade policies or of policies to encourage local production or employment.
Distribution and Sales Channels
Algeria’s current road network extends 100,000 kilometers, 26,000 km of which comprise secondary roads and highways and 23,000 km of which comprise provincial roads. A major east-west highway is still under construction, and long-range plans involve a second, parallel highway, with more than a dozen north-south connector highways feeding the system from Algeria’s port cities.
Algeria has 36 airports open for civil air traffic: 16 international and 20 domestic. The national carrier, Air Algerie, serves 37 destinations in Europe, Africa and the Middle East. A number of international airlines serve Algeria from major hubs. Three international express mail delivery services operate in Algeria: UPS, DHL and FedEx.
Algeria has 13 multipurpose ports and 2 hydrocarbons terminals. The railway network covers mainly northern Algeria. It includes 4,200 kilometers of tracks, 3,060 of which are standard gauge and 1,140 narrow gauge.
Sales promotional material and technical documentation should be in French and/or Arabic. Algerian managers, both private and parastatal, are very keen on technology and know-how transfer.
While some consumers look for quality, the market remains very price sensitive. Tariffs are generally not excessive, but European exporters benefit from Algeria’s participation in the EU Association which exempts their products from duties.
Sales Service/Customer Support
Foreign suppliers provide customer support via liaison offices in Algeria. These offices are prohibited from engaging in commercial activities and thus cannot import or distribute equipment and spare parts. These items must be imported by the Algerian end-users either directly or through distributors.
Sales service for consumer goods is a relatively new development in Algeria. Recent legislation makes it compulsory for distributors of foreign products to provide a six- to eighteen-month warranty, depending on the type of goods, to stock parts in Algeria or provide after-sales service to customers.