The Report: Algeria 2012
In the Algeria 2012 book, OBG delves into the facets of the country’s economy and outlines where its growth trajectory lies. Despite ongoing efforts to expand the non-hydrocarbons sector, the economy remains largely reliant on oil and gas, which account for around a third of GDP. State spending on infrastructure will support growth in the near term, with the IMF forecasting expansion of 2.6% in 2012 and 3.4% in 2013, although in the longer run much will depend on the price of oil. Additional opportunities for growth and investment are rich in energy, insurance, small and medium-sized enterprises and transport.
Country Profile
Algeria is the largest African country by geographical size, as well as the largest country in the Mediterranean region. Although 85% of the country is desert, Algeria is topographically diverse, in particular in the north, which consists of the Tell Atlas, the High Plateaux and the Saharan Atlas. Roughly 91% of the population lives in less than 13% of the country’s territory, mostly in the north along the Mediterranean. The population was an estimated 35.6m in 2010, with over 68% under 35 years of age. Arabic is the official language, although many Algerians are fluent in French as well. Hydrocarbons are the mainstay of the economy, representing 97-98% of exports, 60% of government revenue and upwards of 30% of GDP This chapter contains a viewpoint with President Abdelaziz Bouteflika; and interviews with Lady Olga Maitland, Chair, Algeria Britain Business Council; Mourad Medelci, Minister of Foreign Affairs; Daniel Kawczynski, British MP and Former Member, International Development Select Committee; and Shigeo Matsutomi, Director-General, Middle Eastern and African Affairs Bureau, Japanese Ministry of Foreign Affairs.
Explore chapterEconomy
Oil and gas production continues to dominate the Algerian economy, accounting for almost all of exports, close to half of government revenue and over a third of GDP. Hydrocarbons accounted for 34.7% of GDP in 2010, up on 2009 rates, but still lower than the figures of between 43% and 45% seen in the three preceding years. The decline is primarily attributed to a fall in oil prices. To diversify the economy away from a reliance on hydrocarbons revenues, one of the government’s aims is to boost industry’s share of GDP to 10% by 2014. The government also plans to spend €228.7bn on public works between 2010 and 2014 on both new and existing projects. However, limited administrative capacity means it is doubtful whether the government will be able to meet the investment commitments on schedule. This chapter contains interviews with Khedidja Belhadi, President and Founder, Association of Algerian Managers & Entrepreneurs (AME); Jim O’Neill, Chairman, Goldman Sachs Asset Management; and Réda Hamiani, President, Forum des Chefs d’Entreprises.
Explore chapterEnergy
Algeria is ranked the fourth-largest producer of crude oil in Africa, with an estimated 12.2bn barrels of proven reserves as of January 2012. The country was also estimated to have 159trn cu feet (tcf) of proven natural gas reserves as of January 2012 and produced 2.83 tcf of natural gas in 2010. Given its substantial reserves, Algeria has maintained its position as a major global player in the hydrocarbons sector. Numerous contracts have been signed with international firms for new projects, which include plans to develop gas fields and unconventional sources. With new, long-awaited revisions to the hydrocarbons law, collaboration with international oil and gas firms is expected to intensify in the future. Algeria also has proven deposits of valuable minerals such as gold, zinc, copper, lead, uranium and phosphates. However, these have so far been largely unexplored. Therefore, as part of its economic development and diversification plans, Algeria is now setting up joint ventures with international mining companies to exploit these mineral reserves. The government offers incentives for investors in the mining sector, including tax exemptions and rebates. This chapter contains interviews with Youcef Yousfi, Minister of Energy and Mines; Abdelhamid Zerguine, CEO, Sonatrach; Jean-Marie Dauger, Executive Vice-President, Global Gas & LNG Business Line, GDF Suez; and Farid Benhadji, CEO, Manal.
Explore chapterBanking
High levels of liquidity and a total loan book that accounts for just half of deposits characterise the Algerian banking sector. The industry remains dominated by publicly owned banks, which constitute around nine-tenths of deposits and loans, though foreign-backed private banks are major players in trade finance and are highly profitable. Penetration is roughly in line with neighbouring countries and well above that of the wider North African region, but the level of banking sophistication and financial intermediation remains low, with relatively few retail clients borrowing money from banks or using debit cards. Public banks are expected to continue to dominate the industry for the foreseeable future, but the private sector should gain further market share on the back of such factors as network expansion and product innovation. This chapter contains a viewpoint from Mohammed Laksaci, Governor, Bank of Algeria; and a dialogue with Boualem Djebbar, CEO, Banque de l’Agriculture et du Développement Rural, and Karim Eddine Khellili, CEO, Banque Nationale d’Algérie. It also includes an interview with Abderrazak Trabelsi, General Delegate, Professional Association of Banks and Financial Establishments (ABEF).
Explore chapterCapital Markets
Operational since 1999, the Algerian stock exchange, Bourse d’Alger, is characterised by low levels of activity and liquidity, with just three equities and two corporate bonds currently listed and government bonds accounting for over 90% of trading. The total volume of transactions on the bourse was €36.8m in 2011, down from €47.8m in 2010. Trading of government bonds accounted for €33.7m of this. Authorities are working on a project that will significantly overhaul the framework of the exchange to boost activity. Implementation of the reforms is due to begin in 2013. Plans to establish an exchange for small and medium-sized enterprises (SMEs) are also close to being finalised. If planned reforms go ahead, the market could see a notable expansion in the mutual fund and SME fields in particular. This chapter contains an interview with Mustapha Ferfera, Director, Bourse d’Alger.
Explore chapterInsurance
Although underdeveloped by both international and regional standards, Algeria’s insurance market has seen rapid growth in recent years. Publicly owned insurance firms dominate the sector and held a market share of 70.2% in the first quarter of 2012. Accounting for 91.4% of the total in 2011, property and casualty products make up the majority of premiums, while the life market share stood at 7.6%. Motor insurance is still the most popular product, accounting for almost 50% of premiums. The sector has recently seen a number of important developments, such as the compulsory separation of life and non-life businesses, which came into force in 2011 and which the government hopes will boost the life segment in the long term. The segment remains small, with just 1% market share in 2011. However, this is expected to grow rapidly. This chapter contains an interview with Jean-Laurent Granier, CEO Mediterranean-Latin American region, Axa Assurances.
Explore chapterConstruction & Real Estate
With an extensive array of public works projects stretching across sectors as varied as transport, tourism, construction materials and culture, opportunities are numerous for further exploitation in Algeria’s construction sector. Roads are a priority, and special efforts have been made to develop urban rail systems as an additional measure to help ease congestion. Projecting an estimated value of $21.7bn in 2012, the construction industry will continue to be a primary driver of growth for the medium to long term. In real estate, development remains largely positive, driven by significant government and private sector investments to increase housing availability and realise several major real estate projects. Efforts are also being made to attract foreign investment by offering tax exemptions, new payment methods for raw materials and revisions to the commercial code, among other incentives. This chapter contains an interview with Robert Card, President and CEO, SNC-Lavalin Group.
Explore chapterTransport
Under the previous and current five-year plans of 2005-09 and 2010-14, a major government objective has been the modernisation and expansion of Algeria’s transport networks. With some €229bn having been allocated to the development of railways, airports, public transport, roadways and ports, major public works projects are under way to facilitate mobility, reduce congestion and encourage the use of more environmentally friendly transport. The country has seen a sizeable expansion of air transit in recent years, in both the passenger and cargo segments. In terms of the rail segment, some 2000 km of projects are now under way, while studies are looking at another 5000 km of potential rail links. As these projects take shape, international firms will play a key role in the development and management of transport systems. This chapter contains an interview with Jean-Marc Janaillac, Chairman of the Management Board, RATP Dev.
Explore chapterIndustry & Retail
As part of the 2010-14 National Development Plan, Algeria intends to reduce its dependency on oil and gas by nurturing the development of local non-hydrocarbons industries. The government is now pushing ahead with large-scale infrastructure projects to facilitate the movement of goods and passengers and improve logistics, leading to heightened demand for construction materials. Industrial development zones have been established under the umbrella of the National Development Master Plan 2025, and in 2011 there were a total of 77 such zones. The sector is likely to see strong growth ahead, and there are signs that the government’s strategy is boosting the development of value-added and niche segments. The retail sector is benefitting from rising income levels supported by economic growth and strong hydrocarbons receipts. However, around 40% of Algerians still prefer to do their shopping in the more informal markets. Mall development is set to expand beyond the capital, however, land availability, particularly in urban areas, has proven to be an issue for developers. The growth in internet users bodes well for the development of online retailing. This chapter contains an interview with Chérif Rahmani, Minister of Industry, Small and Medium-Sized Enterprises (SMEs), and Investment Promotion.
Explore chapterTelecoms & IT
Since the liberalisation of the telecommunications sector in 2000, Algeria has become one of the highest teledensity markets on the continent. With a mobile penetration rate nearing 100% and a fixed-line segment at 8% and growing, the sector is on a steady rise with numerous growth opportunities. The mobile market accounts for most of the growth, with a turnover of AD222bn (€2.13bn) in 2010. The success of the mobile telephony industry gave the sector its largest revenue share yet, growing 17% from €3.75bn in 2010 to €4.4bn in 2011. Indeed, as the total mobile penetration rate approaches 100% and demand for both fixed and mobile services continues to rise, the telecommunications sector is poised to experience significant expansion in the coming years. But despite its considerable population size, internet usage in Algeria remains low. However, growth indicators are encouraging, as subscribers grew to 1m in 2012 from 900,000 in 2010. Given the significant room for expansion, a sense of cooperation, rather than competition, prevails among industry players in the sector. This chapter contains an interview with Nasser Marafih, CEO, Qtel.
Explore chapterAgriculture
On the back of significant growth over the last decade, Algeria continues to witness an increase in local agricultural production owing to efforts to modernise the sector and boost investment. Growth in the sector rose from 8.5% in 2010 to 10.6% in 2011 and there are encouraging signs that increased support from the government will aid development. By virtue of the 2010-14 Public Investment Programme, a total of AD1trn (€9.9bn) will be allocated to raise local production and guarantee food security, specifically to boost output of key crops, develop rural land, and strengthen human resources and technical support. While the country is still dependent on imports to ensure food-sufficiency, the government is committed to plans to intensify production and reduce the food import bill. This chapter contains interviews with Rachid Benaissa, Minister for Agriculture and Rural Development; and Mohamed Laid Benamor, General Manager, Amor Benamor.
Explore chapterTourism
Algeria is looking to develop its tourism sector as it aims to ease dependence on hydrocarbons revenues by pursuing more sustainable sources of growth, capitalising on attractions such as its extensive desert and a coastline that stretches more than 1200 km. The National Tourism Development Plan is targeting an increase in sector revenues, from the current annual average of €344m to €480m by 2015. Tourism is also being developed as a year-round business to evolve around five niches: Saharan, business, seaside, cultural and wellness. Almost 1.5m tourists visited Algeria during the first half of 2012, and a total of 3m are expected by the end of the year. With the rise in foreign visitor numbers and increased investment in hospitality, the country seems to be on track to deliver an attractive and competitive sector. This chapter contains interviews with Mohamed Benmeradi, Minister of Tourism; and Karim Cherif, President, National Federation of Algerian Hôteliers, and Managing Director, Eden Hotels.
Explore chapterHealth & Education
With significant improvements in education over the past decade, Algeria now has a primary enrolment rate over 95% and has made considerable progress in eliminating illiteracy, the rate of which is now under 8% for those aged 15-24. However, with more than 70% of the population under the age of 30, the number of students entering the school system every year is expected to continue to rise. The private sector is also taking on an increasing role in providing specialised degrees and absorbing the rising number of higher education students. In health care, significant improvements have been made since independence and more are under way to increase access to quality services and align the sector with international standards. However, demographic growth, increased urbanisation and changes in lifestyles have resulted in a rise in chronic diseases. Therefore, Algeria will invest AD619bn (€5.94bn) under its five-year plan (2010-14) to improve health care access and quality, including upgrading existing hospitals and building specialised infrastructure. This chapter contains interviews with Brahim Benabdeslem, Director, Algiers Management Development Institute (MDI); and Abdelaziz Ziari, Minister of Health, Population and Hospital Reform.
Explore chapterMedia & Advertising
Since the liberalisation of the press in 1986, Algeria has had a flourishing media industry, publishing approximately 300 newspapers with two main reader profiles – Francophone and Arabic-speaking populations. Experts however assert that while a preponderance of dailies creates the perception of a saturated print market, there is actually a lack of serious and credible media. Online newspapers are poised to become a lucrative market as interest in print media decreases and internet user numbers expand. Valued at approximately €123m in 2008, the advertising sector in Algeria has demonstrated steady growth over the last several years, having doubled in value between 2008 and 2012 to around €250m. Mixed-media campaigns have been described as the most successful in attracting Algerian customers, with the combination of written press, radio and outdoor adverts accounting for 80% of such campaigns.
Explore chapterLegal Framework
OBG introduces the reader to the different aspects of the legal system in Algeria, in partnership with Gide Loyrette Nouel. Samy Laghouati, Managing Partner, Gide Loyrette Nouel Algeria, talks to OBG.
Explore chapterTax
In conjunction with Mazars, OBG explores the taxation system, examining Algeria’s investor-friendly environment. OBG talks to Samir Hadj Ali, Country Managing Partner, Mazars, on integrating the tax system into the larger regulatory regime.
Explore chapterThe Guide
This section includes an article about archaeological offerings in Algeria, as well as information on hotels, government and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress, business hours and electricity.
Explore chapterTable of Contents
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