Interview: Samy Laghouati
Does the Organic Law for Finance Laws indicate progress in implementing a comprehensive framework for public-private partnerships (PPPs)?
SAMY LAGHOUATI: Even if we cannot yet talk in terms of a new legal framework dedicated to PPPs, the steps being taken already represent a recognition on the part of the legal system of the principles behind these partnerships, and of how the state can activate them to support public investments. They can be seen, too, as embedding within Algerian law the three-party charter that was signed in December 2017 by the government, business leaders’ associations and the General Workers’ Union of Algeria, Algeria’s main trade union.
Article 37 of the Organic Law for Finance Laws makes very clear that the state can invite public or private entities to finance public investment projects within the framework of a partnership or a contractual relationship. This does not entail the state surrendering any prerogative, however, but rather enables it to delegate a public or private entity to finance and conduct public investment projects.
By itself this recognition constitutes a positive evolution, since there have been numerous debates around this topic, and often some confusion has arisen regarding the concept of privatisation as opposed to PPPs. Privatisation is about opening a public entity’s capital to private investors, while PPPs are contracts tailored to specific projects through which public and private bodies can share both risks and revenues in order to better finance and complete a project.
PPPs could become an important source of partnerships between Algerian and foreign companies, as well as of the transfer of know-how to local companies. However, beyond debates over their efficiency, the structuring and management of PPP projects are complex and require a certain degree of expertise, whatever the sector. In order to clarify this framework, it would be necessary to implement a more extensive law on PPPs, such as exists in many countries, and in particular in our close neighbours Tunisia and Morocco. This regulation should be based on international best practices in this area, in order to encourage both national and foreign investors.
What are the top priorities for improving business conditions, and facilitating both foreign and local private investment in Algeria?
LAGHOUATI: Confidence must be strengthened. However, trust cannot be decreed, of course, and thus fostering it must remain a constant priority for all actors, among them the authorities and administrations, and also economic entities themselves, in their daily operations. The ease of doing business reflects a combination of factors, such as the ease of investment, efficient infrastructures and administration, transparency and fair competition, among others.
On an international scale the countries that attract the most foreign direct investment today are continually striving to be ever more attractive in the face of global competition. Algeria cannot stay on the sidelines, and it has to deploy mechanisms to value its assets internationally and encourage investors to come here. The first thing an investor seeks is, naturally, a market, but also, and above all, predictability over the medium and long term. In short, investors need to have visibility not only up to the time they make the investment, but much beyond it.
We must offer stability by avoiding changing the rules. In other words, it is essential that we have clear legislation and apply it in a transparent and consistent manner in order to avoid legal uncertainties, which are the main obstacles for both national and international investors. Besides this, and contrary to popular belief, significant tax benefits do not play as key a role in investment decision-making as one might imagine. They may have an impact in terms of profitability, but they remain a temporary measure, while productive investments bring in revenues over the long term.
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