Foreign Investors Continue to Dodge Algeria

Foreign investment in Algeria plummeted to $1.2 billion in 2017, a drop of 26 per cent compared to 2016, according to the UN Conference on Trade and Development (UNCTAD).

The figures show Algeria’s perceived unfriendliness among foreign investors who are expecting genuine reforms that inspire confidence instead of superficial measures.

In the Doing Business Index, Algeria was ranked 166th along with war-torn countries where business is fraught with all sorts of risks. The business climate in Algeria was comparable with conflict-stricken countries such as Iraq (168th), Syria (174th) and Libya (185th). The country came far behind Egypt (128th) and Tunisia (88th).

Algeria was ranked among the ten worst performing countries in the 2018 Economic Freedom Index, established by The Heritage Foundation, an American public policy think tank based in Washington, DC.

The recent investment reforms undertaken in the country have left unchanged a rule requiring 51% of national ownership of any projects.

The 51/49 rule provides that at least 51% of the shares of Algeria-based companies must be owned by Algerian nationals residing in Algeria or by companies, which are wholly owned by Algeria resident shareholders.

The archaic banking system has also been pushing investors away. Algeria’s banks remain state-dominated and highly corrupt thus thwarting foreign direct investments.

The political instability and the uncertainty surrounding the successor to the ailing president Bouteflika also contribute to undermining the flow of FDIs, badly needed to diversify the economy.

Algeria’s foreign exchange reserves are expected to drop to $85 billion at best by the end of 2018 down from $194 billion in 2014, barely enough to cover 18 months of imports.