Executive Summary

Algeria is an interesting and active market for exporters and investors, particularly in the oil and gas sector, as the country’s political situation remains stable and its security situation has improved in comparison to the first half of the decade.

Algerians have increasingly greater access to credit, fueling demand for consumer goods such as automobiles. However, new government tax policies are beginning to restrict such import-driven sectors. The country’s agricultural production is still below demand, and Algeria continues to import large volumes of bulk agricultural products and packaged foodstuffs.

Hydrocarbons have long been the backbone of the economy, accounting for roughly 60% of budget revenues, 30% of GDP, and over 95% of export earnings. Algeria has the eighth-largest reserves of natural gas in the world and is the fourth-largest gas exporter. It ranks 16th in oil reserves. Algeria has a cushion of $150 billion in foreign currency reserves and a large hydrocarbon stabilization fund. In addition, Algeria's external debt is about 1% of GDP. The government's efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector have done to reduce youth unemployment rates. In 2010, Algeria began a five-year, $286 billion development program to update the country's infrastructure and provide jobs. The costly program will boost Algeria's economy in 2011.

There is strong interest on the part of Algerians for partnerships in the information and communications technology sector, and consumers are increasingly tech-savvy.

Market Challenges
Starting a business in Algeria has been streamlined to some degree in recent years, though it remains a difficult process. A new, restrictive investment policy announced by the prime minister in August 2008, if fully implemented, will require an Algerian majority stake in any investment. The Algerian tax law was also modified in August 2008 to require companies to re-invest within four years the value of any tax incentives received or face a 30-percent penalty.

2007 law allows for the repatriation of income from services without pre-approval by the central bank, but repatriation of income from the sale of goods remains limited.

Counterfeit goods remain a problem for Algeria’s economy, but government seizures are increasingly effective.

Algeria’s licensing of generic pharmaceuticals and lack of coordination between the ministry of health and the patent and trademark office sometimes exacerbates the uncertain landscape for the registration and sale of brand-name products.

Market Entry Strategy
Partnerships and joint ventures are viable forms of market entry. Companies should also consider the benefits of establishing a local office through direct visits. Many foreign firms continue to explore the Algerian market through representational offices.

Foreign. firms are encouraged to consult with local attorneys or consultants on specific strategies. Relationships are important to finding a partner in Algeria.