Interview: Samer Khoury
How have decreased oil revenues affected the Algerian construction market?
SAMER KHOURY: Algeria’s hydrocarbons wealth and substantial consumer base offer significant opportunities in construction and related services. Algeria is one of the world’s main exporters of oil and gas, and it will remain one, regardless of whether the prices are high or low. The business is a long-term business. Prices can be subject to fluctuations, and consequently national companies like Sonatrach will keep spending to maintain production even when oil prices are low. We still believe the construction market in Algeria is, and will remain, attractive, and will continue to stimulate demand.
Which inputs account for the greatest portion of costs when carrying out projects in Algeria?
KHOURY: Materials and labour constitute the biggest portion of construction project costs for international firms when expatriate salaries and other services such as transport, deployment and accommodation are factored in. Local building materials such as cement, as well as energy prices, are partially supported by the government. Imports of project equipment and materials are subject to up to 30% Customs’ duties. In general the lack of skilled, specialised labour, a supervisory labour force and the lack of local building materials are major issues that lead to increased costs.
To what extent does construction activity rely on public sector programmes such as major infrastructure or energy projects?
KHOURY: The public sector remains the major employer in Algeria. However, a change in policy aims at encouraging the private sector into industrial activities to reduce the import bill and encourage tourism. Other private sector production activities include cement and steel production, as well as building hotels and major commercial centres. Car assembly and vehicle production have started in Algeria and are expected to grow. These activities provide construction projects for international contractors, but they are still of limited volume when compared to the public sector projects.
Other than oil and gas production and transport, these projects include infrastructure works such as roads, electricity production and distribution, dams, desalination plants, sewage treatment and networks, ports and airports, as well as other programmes aimed at modernising the country.
What are the main challenges that contractors face in Algeria, and how do you rate the ease of doing business as compared to other markets?
KHOURY: Starting a business in Algeria remains a lengthy, bureaucratic and often difficult process. The overall attractiveness of the Algerian investment environment is limited by the perception that laws and measures might be imposed suddenly and without consultation with the business community. This contributes to a sense of unpredictability about doing business and investing in Algeria, and it underscores the requirement to appoint solid Algerian partners and/or consultants who can foresee and manage these changes.
The right human resources can be difficult to recruit, manage and retain in Algeria, at both the skilled and unskilled levels, even as unemployment remains high. In Algeria, the difficulty is in trying to find a correct formula to work with local national engineering and construction firms to achieve the local content required. However, in conclusion, concerning large emerging markets in Africa, each country has its own challenges and difficulties with respect to doing business. Nevertheless, Algeria has a considerably more favourable business environment when compared to other African countries.
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