Interview: Michael Lally
What can be done to help diversify US trade and investment ties with Algeria?
MICHAEL LALLY: With Algeria’s sizable pool of labour, vast geography and strategic location, there is significant untapped potential for US trade and investment. Increased foreign direct investment (FDI) will drive diversification through technology transfer, the development of human capital through training – including managerial skills – and the enhanced competitiveness of the receiving industries. Foreign investment will support the diversification of Algeria’s exports, 97.3% of which were driven by oil and gas in 2014. More FDI will deliver prompt gains by offsetting the impact on the balance of payments and the rising trade deficit which resulted from the fall in oil prices.
According to the recently released World Bank “Doing Business” 2016 report, Algeria remains a difficult environment for the private sector. The ability of international companies to operate in Algeria is significantly limited by a number of factors, including bureaucratic hurdles, difficulties in monetary transfers, currency conversion, repatriating dividends and the majority domestic ownership requirement, termed the 51/49 rule. The business climate has become more complicated in the past 12 months, and the measures designed to limit imports have also hampered investment and manufacturing in Algeria. US companies face challenges, including investment restrictions, import bans and regulatory decisions implemented with minimal notice, which all undermine the predictability of the business environment that investors need to make sound decisions. Import bans, such as those on over 150 medicines and pharmaceutical devices, unnecessarily limit Algeria’s openness to international commerce. These measures can also harm Algerian consumers (by reducing the availability of products and driving up prices) and have forced several international companies to lay off Algeria-based workers. We believe these import restrictions are not consistent with the goal of diversification. Companies are typically averse to investing in markets where they do not have a significant presence in, or access to, the market.
In which areas might the US be able to help Algeria improve its trade environment?
LALLY: The US Department of Commerce stands ready to assist Algeria in the World Trade Organisation (WTO) accession process, should Algeria renew its efforts to accede to the WTO. The United States government already supports technical exchanges between Algerian and US experts on a range of issues, including banking regulation and franchising.
How can US trade links help foster transfers of technology and know-how?
LALLY: US firms will contribute to the expansion of the skills base of the Algerian labour force by investing in Algeria and partnering with Algerian firms. As mentioned, FDI is associated with training, including the development of managerial talent, as well as exposure to a wide array of business practices. As the Algerian economy opens up to foreign investment and international trade, US firms will increasingly seek to invest locally and trade with Algeria, as well as looking to employ qualified Algerians.
What can the US do to help boost regional integration in North Africa and the Maghreb?
LALLY: We support policies that increase regional trade and economic integration. Most recently, our North Africa Partnership for Economic Opportunity works with the private sector to advance entrepreneurship and intra-Maghreb trade relations. However, the most important factor is the commitment of the governments in the region to eliminate existing barriers to regional trade and to work towards facilitating business by harmonising their trade regimes.
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