The Report: Algeria 2018
Algeria is one of the main African producers of hydrocarbons, ranking first in gas production and among the top-three oil producers. The country remains highly dependent on the hydrocarbons sector for the majority of government revenues and almost the entirety of its exports. Despite reforms to encourage private sector development, promote diversification and attract foreign direct investment in recent years, the state still plays a preponderant role, meaning that changes to government expenditure and investments continue to have a significant impact on overall economic performance.
Country Profile
Since achieving independence in 1962, Algeria has pursued an activist foreign policy, pushing interests of developing countries through the Non-Aligned Movement, as well as in groups like the G-77. Algeria holds close trading links with its Mediterranean neighbours to the north, and is an important source of EU natural gas imports, particularly to France, Spain and Italy. The country has greatly increased its diplomatic and economic relations with China, which has become an important source of official development finance and discounted lending. Moreover, the state continues to play a dominant role in the Algerian economy, depending on oil and gas exports for some 60% of public revenue and 96% of exports. The sharp decline in global oil prices since 2014 resulted in several challenging years for the Algerian economy. This chapter contains interviews with President Abdelaziz Bouteflika; Ferid Belhaj, Vice-President for MENA, World Bank; and a viewpoint with Xi Jinping, President of the People’s Republic of China.
Explore chapterEconomy
As Africa’s most important gas exporter, Algeria remains highly dependent on the hydrocarbons sector for the majority of government revenues and almost the entirety of its exports. Despite reforms to encourage private sector development, promote diversification and attract foreign direct investment in recent years, the state plays a preponderant role, meaning that expenditure and investments continue to have a significant impact on overall economic performance. The drop in global oil prices since 2014 is at the root of Algeria’s most recent economic challenges, giving rise to large twin deficits in the fiscal and current accounts. The strategy embarked by the authorities in late 2017 has brought some relief to Algeria, though the sustainability of this approach rests on the adoption of necessary corrective measures from 2019 onwards. This chapter contains interviews with Abderrahmane Raouya, Minister of Finance; Richard Lesser, CEO, Boston Consulting Group; and Ali Haddad, President, Algerian Business Leaders’ Forum.
Explore chapterFinancial Services
The decision by authorities to embark on a programme of monetary financing towards the end of 2017 marked somewhat of a turnaround in a difficult year for Algeria’s banks. A competitive dynamic has remained in recent years, with no new entrants, exits, mergers, acquisitions or privatisations of note. Efforts to improve financial inclusion are under way, however, attempts to grow the banking sector through the mobilisation of domestic resources have been dampened by Algerians’ strong cultural preference for cash and a certain distrust of financial intermediaries. Over the medium term, the end of the monetary financing programme has the potential to add impetus to capital market development, as it is likely to be accompanied by a tightening of bank liquidity and a need for public and private sectors alike to explore alternative sources of funding to bank lending. This chapter contains interviews with Mohamed Loukal, Governor, Bank of Algeria; Brahim Semid, CEO, Banque Extérieure d’Algérie; and Lazhar Sahbani, Partner, PwC Algeria.
Explore chapterEnergy & Renewables
The steep fall of oil prices in 2014 underlined the extent to which the Algerian economy, already under pressure from growing domestic demand for energy and decreasing output, was dependent on hydrocarbons. Algeria is now facing the challenges of reforming and revitalising this strategic sector and, through state-owned energy company Sonatrach and its SH2030 Leading the Change strategy, is giving shape to long-term developments in offshore and shale. Renewables, meanwhile, are set to become an increasingly prominent component of the energy mix. While diversification will need to remain a top priority to avoid economic crises such as that of the 2015-17 period, energy will remain the most prominent sector for the country in the long run. This chapter contains interviews with Abdelmoumen Ould Kaddour, CEO, Sonatrach; Claudio Descalzi, CEO, Eni; Hesham Mekawi, Regional President, BP North Africa; and Fatma Zohra Zerouati, Minister of Environment and Renewable Energy.
Explore chapterUtilities & Water
Despite being rich in fossil fuels, Algeria faces challenges in its utilities sector in terms of distribution and efficiency. While the provision of electricity is a non-issue – though sustainable generation notably is – the rate of household connections to the natural gas network is in need of improvement, especially outside major cities. Drinking water is largely secure, yet business needs are straining resources, prompting increases in desalination and wastewater treatment. Future investment opportunities in the utilities sector are set to be focused on rural gas needs, green electrification and unconventional water resources. This chapter contains interviews with Mohamed Arkab, CEO, Sonelgaz; and Hocine Necib, Minister of Water Resources.
Explore chapterIndustry & Mining
The industrial sector is seen as having potential to drive economic diversification and reduce the import bill. In addition to heavy industrial subsectors such as steel and cement, pharmaceuticals, agri-business and automotive manufacturing hold promise in becoming key exporters. For the sector as a whole, and particularly for small businesses, investment in logistics and transport capacities will be crucial to building a local ecosystem that is robust enough to position industry as a key driver of growth. In addition to its hydrocarbons wealth, Algeria is rich in a variety of minerals, such as phosphate, gold, iron, zinc, lead and others. These ores are still largely untapped, but the diversification drive deployed by the government to reduce the country’s reliance on oil and gas and direct it towards more sustainable growth could lead to greater development of this heretofore marginal industry. This chapter contains an interview with Amara Charaf-Eddine, CEO, Madar Holding.
Explore chapterAgriculture
The high food import bill, a growing population and effects from climate change are behind Algeria’s drive to increase local food output. Food production improved between 2007 and 2018 thanks to efforts to clear some of the obstacles that have traditionally hindered the sector’s development, such as financing, legislation, insufficient infrastructure and land ownership. While the record cereals harvest was a highlight of 2018, Algeria is still quite a way off from significantly reducing its import bill for food products. However, great gains wait to be made with the wider application of irrigation and mechanisation, in addition to ensuring underutilised land is reallocated to players who will develop it to its full potential. This chapter contains interviews with Nabil Assaf, Representative, Food and Agriculture Organisation of the UN; and M’hamed Metidji, CEO, Metidji Group, and President, National Interprofessional Council for Cereals.
Explore chapterTransport
Meeting the country’s growing transport needs remains a priority, thus the national development plan 2015-19 allocates €6bn to upgrading, modernising and expanding air, rail, road and maritime capacities. Foreign investment is actively being sought to incorporate the latest technologies and know-how into the modernisation process. However, efforts to expand the sector face some challenges, such as a cumbersome and opaque bureaucracy, the effect of which is acutely felt in certain segments such as logistics, and the drop in international oil prices. However, evidence suggests that the authorities are actively seeking solutions to overcome these issues. The transport and communications sector remains an important contributor to the economy, accounting for 14% of GDP in 2017, up from 13.4% in 2016. This chapter contains an interview with Abdelghani Zalène, Minister of Public Works and Transport.
Explore chapterConstruction & Real Estate
In an effort to meet the infrastructure needs of a growing population and facilitate increasing exports of industrial and agricultural products and minerals, the government sees a robust and stable construction industry as a key component of its vision for the future. Even as the overall economy has slowed, the sector has remained a consistent engine of growth. The building materials segment, which grew by 16.3% in the first quarter of 2018, is particularly promising as Algeria builds on recent investments in manufacturing plants and shifts its focus to scaling up exports. After a decade of rising prices, the Algerian real estate market experienced a gradual slowdown in 2017 and through most of 2018. This chapter contains interviews with Abdelwahid Temmar, Minister of Housing and Urban Planning; and Li Jian, Assistant President, China State Construction Engineering Corporation (CSCEC), and Chairman, CSCEC Algeria.
Explore chapterICT
Algeria has witnessed significant progress in the development of its ICT sector in recent years. Following strong investment in the recent rollout of key ICT infrastructure, the country has also updated its legal framework and introduced a series of new regulations to accompany growth. While telecoms still dominate the ICT sector, signs of diversification, digitisation and cybersecurity efforts are combining for a positive outlook. In a large market that is ideally located between developed and developing countries, the country’s ample opportunities for growth for new players, increased competition and an educated workforce can turn it into a regional leader. This chapter contains an interview with Steve Tzikakis, President, SAP South Europe, the Middle East and Africa.
Explore chapterAlgiers Smart City
The Algiers Smart City initiative, established to advance multiple aspects of the tech industry, such as technology transfer, talent mobilisation and cross-sector synergies, demonstrates the benefit of approaching development from a less conventional perspective. Players in IT and other contingent sectors are increasingly aware of the opportunities created by adopting an approach to progress predicated on the adoption of leapfrog technologies and experimentation with new development models. However, the foundations for an ambitious and multidimensional project like this are only partially set, and Algeria will need to continue making conventional progress, particularly regarding its regulatory environment and economic policy strategies.
Explore chapterTourism
A diverse land of thermal springs, mountains, historic sites, vast desert and unspoilt Mediterranean coastline, Algeria offers a remarkable variety of activities for travellers. However, a decade-long civil war ending in 2002 and an antiquated transport infrastructure network have curtailed growth in the tourism sector, alongside negative perceptions abroad and a cumbersome visa regime. The flip side of underdevelopment is that the sector has massive potential to grow with the right sort of political will in place. As evidence of the latter, the government is currently implementing its long-term development blueprint for the sector. Known as the Tourism Development Masterplan 2030, it seeks to increase the sector’s share of GDP to 10%. Four new hotels are to be opened in the wilaya of Algiers in 2017, bringing the total there to 182, and growth in room numbers has been recorded across the country. In short, Algeria seems to be making the right moves to ensure that the capacity is there to support rising guest numbers. This chapter contains an interview with Abdelkader Benmessaoud, Minister of Tourism and Handicrafts.
Explore chapterHealth & Education
Opportunities to invest in the health care sector continue to increase as the population grows at an annual rate of 2.1%, applying pressure on existing hospital infrastructure, especially in the urban centres where 72% of the population resides. The health infrastructure has made considerable strides in recent years in a number of important areas, nevertheless, there are still challenges in providing equal access to care across Algeria’s vast territory and overcoming the shortage of medicines. In line with a sustained government budget allocated to health, attracting new investment from the private sector will be critical for meeting the growing demand for health care. In regards to education, Algeria has maintained a high level of investment in recent years, despite the general economic contraction caused by the collapse of the hydrocarbons market in 2014. While the Ministry of National Education continues to focus on improving education practices and reforming teacher training, the Ministry of Higher Education and Scientific Research is concentrating on extending existing networks and institutions. This chapter contains interviews with Amine Sekhri, Country Manager, Roche Algérie; and Tahar Hadjar, Minister of Higher Education and Scientific Research.
Explore chapterTax
In conjunction with Mazars, this chapter explores the taxation system and Algeria’s efforts to build an investor-friendly environment. It also contains a viewpoint with Samir Hadj Ali, Chartered Accountant and Managing Partner, Mazars Algeria.
Explore chapterLegal Framework
This chapter introduces the reader to the different aspects of the legal system in Algeria, in partnership with Gide Loyrette Nouel. It also contains an interview Samy Laghouati, Partner, Gide Loyrette Nouel.
Explore chapterThe Guide
This section includes information on hotels, government offices and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress code, business hours and electricity.
Explore chapterTable of Contents
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