ALGERIA: An Introduction to Corporate/Commercial

Algeria, boasting an extensive territory of 2.4 million square kilometres and a dynamic demographic, ranks as one of the largest economies on the African continent – with a GDP of USD191.91 billion in 2022. The Algerian economy has traditionally been reliant on hydrocarbon exports, contributing to 93% of the country’s exports and 19% of its GDP between 2016 and 2021.

In the aftermath of the global post-pandemic recession and the geopolitical developments in Ukraine, hydrocarbon prices have experienced an upswing. This shift has translated into a notable increase in Algeria’s revenues and economic prospects.

Business Environment and Opportunities

Algeria remains an attractive market for foreign investors, thanks to the following factors.

• Strategic geographical position – situated at the crossroads of Europe, Africa and the Middle East, Algeria’s strategic location offers access to multiple markets.
• Rich resources – Algeria’s abundant natural resources, particularly in hydrocarbons, continue to attract investors seeking to tap into its vast reserves.
• Population dynamics – with a population of 44 million and a youthful demographic, Algeria presents a growing consumer market with considerable potential.

In addition, Algeria offers access to a skilled and cost-effective labour force. It also offers competitive utility prices for essentials such as electricity, gas and water.

Major Reforms

Several reforms have been introduced during the past three years. These reforms span key sectors such as energy and pharmaceuticals, as follows.

• New Investment Law – published in 2022, this legislation streamlines market entry for foreign investors by removing the previous 49% cap on foreign equity in non-strategic sectors.
• Hydrocarbons Law and implementing regulations – envisioned to foster a more competitive and adaptable environment for oil and gas investments, the revised Hydrocarbons Law of 2019 promises appealing opportunities for investors. For comprehensive details, please refer to the Algerian chapter of Chambers and Partners’ Global Practice Guide to Oil, Gas and the Transition to Renewables 2024.
• Pharmaceutical regulations – these regulations published between 2020 and 2021 aim to ensure the sustained availability and affordability of pharmaceutical products for all residents, reflecting Algeria’s commitment to healthcare accessibility.

Green ambitions: embracing energy transition

Algeria has embarked on an ambitious journey towards energy transition. Initiatives such as the launch of the first solar tender in December 2021 for the deployment of 1 GW of solar capacity under the “Solar 1,000 MW” project are indicative of its commitment to sustainable energy solutions.

Investment Legal Framework

In a noteworthy development, Algeria introduced the aforementioned new Investment Law, No 22-18, dated 24 July 2022 (“Law 22-18”), published in the Official Gazette on 28 July 2022. This law is accompanied by eight implementing texts and can be summarised as follows.

• Opening foreign ownership – the scope of the “51/49 rule”, which limited foreign investors to a maximum of 49% ownership in Algerian companies for more than a decade (2009–20), has been drastically reduced. Foreign investors can now invest up to 100% of the share capital in all sectors of the economy, with the exception of five strategic sectors.
• Investment guarantees – Law 22-18 reiterates the transfer guarantee for foreign investors, granting them the right to transfer outside Algeria invested capital, income generated from it, and proceeds from the sale and liquidation of investments. This guarantee is subject to specific requirements, including capital contributions in cash denominated in a freely convertible currency or contributions in kind subject to certain conditions.
• Legal stability – Law 22-18 incorporates a legal stabilisation mechanism, ensuring that future revisions or repeals of Law 22-18 will not affect investments made under its provisions unless investors expressly request otherwise.
• Recourse to international arbitration – Law 22-18 allows for recourse to international arbitration in the event of disputes between foreign investors and the Algerian State, provided an international arbitration convention exists. In the absence of such a convention, arbitration remains an option through a compromise between the Algerian Investment Promotion Agency and the investor.
• Incentive schemes – Law 22-18 outlines three investment incentive schemes aimed at creating favourable conditions for investors, as follows. These incentives include exemptions from customs duties, VAT, real estate tax, and taxes on profits and professional activities. Access to these incentives requires registration of investments with a one-stop shop.
  • Sectoral regime – certain sectors (such as renewable energy, pharmaceuticals, petrochemicals, agriculture, mining, quarrying, tourism, and IT) are eligible for this regime.
  • Zone regime – this regime is applicable to investments made in specific regions (notably, the Highlands and the South) or localities targeted for resource development.
  • Structuring investment regime – designed for projects creating a minimum of 500 jobs and valued at least DZD10 billion (approximately EUR75 million), this regime encourages significant investment.

Outlook

In conclusion, Algeria stands on the brink of transformation, offering a wealth of opportunities for investors seeking to engage with this dynamic North African nation. As Algeria diversifies its economy and embraces global trends, it remains a compelling destination for business ventures in the years to come.