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Generous incentives for serious investors

Article - June 28, 2012
The government has spent heavily on its public firms, enabling better transfer of know-how for Algeria – and better results for investors
As many public enterprises lack expertise in management and the latest technology, partnerships are increasingly seen as the essential means to enable them to acquire foreign know-how from highly qualified international companies. Over the past five years, the process of setting up in partnership in Algeria has been simplified and new incentives have been implemented in order to promote foreign investment.

“We have more than 150 measures helping companies to invest, including a complete exemption from tax during the implementation of the investment and for the following 10 years. In addition to the tax exemptions, we make land available to investors for free, to construct factories, and our banks are providing money, and we do everything so that the private sector takes up the challenge,” explains Mohamed Benmeradi, Minister of Industry, SMEs and Investment Promotion.

The government has supported public companies by organising corporate restructuring, with balance sheet and technology upgrades. For example, auto manufacturer SNVI had its debts waived and received investment funding valued at up to 12.5 billion dinars (£102.5 million). In the public engineering sector the government has invested $10 billion over the past 10 years.

Investments in Algeria are subject to the 51/49 rule: the foreign investor cannot retain more than 49 per cent of the capital. However, this rule can be adjusted in order to permit to the foreign company to remain the preferred partner and keep a relative majority: the 51 per cent is then shared between the Algerian public sector and private companies.

For instance, the Sigus cement factory is going into partnership with Lafarge – one of the biggest cement companies in the world – with 49 per cent for Lafarge, 49 per cent for the public sector and the remaining 2 per cent owned by private Algerian companies.

Alternatively, a shareholders’ agreement can be made to compensate the 51/49 rule, granting management contracts to the foreign investor, as at the Meftah cement factory, where Lafarge owns 35 per cent of the shares but has management control.

The strategic orientation for foreign investment is defined by the National Investment Council (CNI), which studies projects of national economic interest. However, the practical tool for the investors themselves is the National Agency for Investment Development – ANDI. The state agency was created in 2001 in order to help foreign investors, providing them with the tools needed to invest and create business in the country. ANDI works to provides information, facilitation and the promotion of Algeria abroad, while advising and accompanying investors to meetings with local entrepreneurs and administrative bodies to aid with the implementation of their projects.

Meanwhile, Algeria’s World Trade Centre (WTC) acts as a one-stop shop for facilitating the administrative, legal and fiscal tasks facing foreign companies.

Ahmed Tibaoui, WTC’s Director General says, “We try to remove all the heavy bureaucratic work for our clients. We can create their companies, get their commercial registration and help them find a partner or gain access to the fiscal incentives offered by ANDI. Many European entrepreneurs are optimistic about regaining in Algeria what was lost in Europe during the 2008 financial crisis.”

Mr Tibaoui is similarly optimistic about his country’s improving image. “All that remains to be done is to re-establish business confidence, by promoting the real face of Algeria abroad – it is a market of 37 million inhabitants, it is stable and full of opportunities,” he says.

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