Distribution Channels


Using an Agent or Distributor
Foreign manufacturers and exporters are represented in the market either through their own branch offices or through authorized agents and distributors.

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
It is advisable for foreign companies to hire well-established local legal representation and other consultative services to assist in establishing an office in Algeria. issues particularly related to registration and visas and security arrangements are elements of opening an office in Algeria.

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.

Franchising
Franchising by foreign companies is not widespread in Algeria, largely because of strict foreign exchange controls that generally do not allow the repatriation of revenues from the sale of goods. Restrictions on the repatriation of revenues for services were loosened in 2007, and the Algerian government has been considering a franchise law to allow for greater use of this investment vehicle.

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.

Direct Marketing
Direct marketing in Algeria, such as sales through catalogs, television programs or flyers, is still in its infancy. Credit cards are rarely used in Algeria, although there is a growing debit card and ATM system. Even in urban areas, the difficulties regarding addresses and street names, as well as postal regulations and the inability to make purchases on the Internet, leave this sector significantly underdeveloped.

Joint Ventures/Licensing
Algerian companies are increasingly interested in joint venture opportunities with foreign partners as a way to modernize their factories or license technology. This includes state-owned enterprises. Many internationally branded products and services are manufactured, bottled, assembled or provided in Algeria.

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
Algerian government institutions, including ministries, agencies and local governments, buy foreign-made goods and services by way of competitive or restricted tenders. For most security-related tenders, foreign bidders must deal directly with the client agency without the use of local agents, but tender requests and documents may be obtained through local representatives. Although the law on public tender does not require the state-owned companies to purchase goods and services through tenders, many do.

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 has a fairly well-developed distribution system with mostly wholesale and retail outlets. State-owned marketing firms mainly sell wholesale imported foodstuffs, pharmaceuticals, and industrial supplies and equipment. Private wholesalers are increasingly active in these sectors as well. Private businesses almost exclusively control the retail trade.

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.

Selling Factors/Techniques
The Algerian market is generally characterized as price-sensitive. European and Asian brands have gained considerable market share.

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.

Electronic Commerce
Under current law, Algerian citizens may not purchase items online from abroad. Businesses, however, may purchase items online from abroad for internal use.

Pricing
Pricing has traditionally been the most important consideration in government tenders, although technical offers are being more carefully scrutinized and ministries are trying to tie technology transfers to tender bids.

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
Suppliers of capital goods to the Algerian market are required to provide sales service and customer support. Free after sales service is usually required for a period of one year. Suppliers may enter into agreements thereafter to provide customers remunerated after sales service, which is referred to as “technical assistance” in Algeria.

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.