A focus on expanding economic and trade relationships

After decades of non-alignment during the Cold War, the development of Algeria’s foreign relations has taken on a decidedly liberal economic character. The country is expanding its links with foreign partners in an effort to develop a diversified, knowledge-based economy and has also redoubled efforts to advance its bid to join the World Trade Organisation (WTO).

Algerian-French Relations

Despite their painful break, Algeria and France remain deeply linked. Shared usage of the French language makes Algeria a natural destination for investment, business outsourcing and some tourism, not to mention the presence of large expat communities in both countries.

France is the second-largest supplier of imports to Algeria with 11.4% market share (€5.9bn), having ceded first place to China (12.4%) in 2013. Algeria is France’s 14th-largest export market, and the largest in the Arab world. French exports consist mainly of cereals (19% of total exports), automobiles (12.5%) and pharmaceuticals (12.4%). The state visit of French President François Hollande in 2012 led to the establishment of a joint economic commission that should help to strengthen overall relations. The two countries signed nine cooperation agreements in areas such as education, research and the media at the first commission meeting in 2013.

Trade & Investment

Along with other countries in the Maghreb, Algeria is seen as a promising market for European companies seeking to offset stagnant growth at home. France, Italy, Spain and Germany are among Algeria’s top five suppliers, all of whom saw exports to Algeria increase by over 8% in 2013, except France. Given its proximity, Europe is also the primary consumer of Algerian energy products, with Spain, Italy, the UK and France standing as the top four export markets in 2013, followed by the US.

The economic downturn in Europe has reinforced Algeria’s efforts to diversify its economic partners. In the last five to 10 years, Asian countries such as China and South Korea have become important trade and investment partners for Algeria, which should drive stronger relations with the region in the future. China is now the leading source of Algerian imports, representing 12.4% of total imports in 2013 (€5bn), an increase of 14.3% year-on-year (y-o-y).

Maghreb Integration

A standoff between Algeria and Morocco over Western Sahara – a 266,000-sqkm region that Morocco claims but which the Sahrawi independence group, the Polisario Front, claims sovereignty over, with Algerian support – has limited efforts to forge greater political and economic integration in the Maghreb. The Arab Maghreb Union (AMU), created in 1989, groups Mauritania, Morocco, Algeria, Libya and Tunisia in a collaborative platform for political, security, economic and development issues. At the July 2012 AMU summit, held in Algiers, member states agreed on a joint strategy to protect the principal transportation routes in North Africa.

Algeria pushed for the creation of an integrated economic bloc that would encourage collaboration in high-potential areas such as agriculture, water resources, infrastructure and renewable energies; however progress so far has been marginal.

Algeria’s trade with UMA countries increased by 31% y-o-y in 2013, up from an increase of 26.3% in 2012, for a total value of €2.78bn. However, this still represents just 3% of Algeria’s total foreign exchange volume. Efforts to encourage economic integration and to complete the region’s first continuous highway link, the Maghreb Highway, should help to pave the way for greater cooperation in the future. The broader Union for the Mediterranean (Union pour la Méditerranée, UPM), was launched in Barcelona in 2008 as a continuation of the Euro- Mediterranean Partnership established in 1995. The UPM provides a platform for 43 countries in Europe, North Africa and the Eastern Mediterranean to collaborate on business creation and trade, as well as important issues such as renewable energy, maritime and land transport, civil protection and higher education.

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The Report: Algeria 2014

Country Profile chapter from The Report: Algeria 2014

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