US embassy cable - 05ALGIERS1624

UNCLAS SECTION 01 OF 09 ALGIERS 001624 
 
SIPDIS 
 
DEPT PLEASE PASS USTR 
 
E.O. 12958: N/A 
TAGS: KTDB, AG, OPIC, USTR 
SUBJECT: ALGERIA 2005 INVESTMENT CLIMATE STATEMENT 
 
REF: 04 STATE 250356 
 
Attached is post's submission for the Algeria 2005 Investment 
Climate Statement (ICS).  The ICS text is being emailed in 
its Country Commercial Guide format, with active URL links, 
to EB/IFD/OIA as per reftel request. 
 
Begin text. 
 
Algeria 2005 Investment Climate Statement 
 
Summary 
------- 
 
Algeria,s market of 32 million inhabitants and its growing 
demands for modern infrastructure have generated immense 
interest from governments and companies around the world.  A 
modern legislative framework, Algeria,s continued progress 
in the WTO accession process, and the 2005 ratification of an 
EU Association Agreement that will gradually lower trade 
barriers over 12 years all indicate that the Algerian market 
is willing and ready to accept foreign investment across most 
sectors. 
 
There are practical obstacles to investing in Algeria, most 
notably the lack of a modernized banking sector and a large, 
"legacy" bureaucracy which presides over a broader patchwork 
of business and investment rules and regulations.  The 
government of Algeria has announced plans to privatize some 
of the public banks over the coming year as a first step to 
reform the banking and financial industry and make it conform 
to international standards, which will facilitate the 
establishment of businesses in Algeria.  The government's 
sizable bureaucracy means that it can still take much time 
and energy to set up a business in Algeria, even for seasoned 
multinationals. 
 
This Investment Climate Statement provides a general outline 
of the most recent developments in Algeria,s investment 
codes, and highlights some of the major policies, events, and 
statistics that would be of interest to the U.S. business and 
investment community. 
 
 
Openness to Foreign Investment 
------------------------------ 
 
Seeking to diversify and modernize the Algerian economy, the 
Algerian government has embarked on an aggressive 
liberalization program to attract foreign direct investment. 
New legislation continues to affect nearly all sectors, 
including mining, power, banking, telecommunications, 
pharmaceuticals, transportation, and tourism.  While there 
are still many bureaucratic hurdles to starting a business in 
Algeria, the investment code clearly lays out the rules for 
investors. 
 
Algeria has a legislative framework for encouraging 
investment.  In 1993, the government adopted its primary 
investment code under legislative decree No 93-12, 
guaranteeing investment advantages, free transfers of income, 
and equal treatment for domestic and foreign investors.  In 
August 2001, the government adopted a new ordinance No. 01-03 
to further develop and promote investment, replacing the 
legislative decree No. 93-12. 
 
There are three national organizations responsible for 
investment guidance and policy.  The first is the National 
Agency for Investment Development (ANDI) 
(http://www.andi/dz), which is responsible for facilitating 
investments, granting fiscal and parafiscal exemptions, 
conferring investment advantages, and assisting investors to 
receive special authorizations for unique investments.  ANDI 
has a network of regional offices throughout Algeria to 
assist investors. 
 
The second organization is the National Investment Council 
(CNI), which was created to strengthen the legal and 
regulatory investment framework.  The CNI is in charge of 
defining the investment strategy and its priorities, for 
approving special investment incentives in each sector, and 
for giving final authorization to special investment schemes. 
 
The third organization is the Ministry for Participation and 
Promotion of Investment.  The Minister for Participation and 
Investment Promotion (MPPI) (http://www.mdppi.dz/) manages 
two distinct offices within the Ministry, one for investment 
policy and the other for the privatization process.  MPPI is 
coordinating the on-going privatization of state-owned 
companies, organized by sector into groupings managed by 
"participation management companies" (socits de gestion de 
participation, SGP).  The government has refocused its 
efforts on large-scale privatization in order to remove 
itself from supporting loss-making enterprises. 
 
An earlier privatization program was launched in 1995 under 
law No. 95-22 and came into effect in 1998.  The law lacked 
transparency and created procedural difficulties for 
evaluating state-owned firms and the modalities of 
privatization.  In August 2001, a new privatization law was 
passed aiming at accelerating the privatization of public 
enterprises in Algeria.  The government,s intention is to 
privatize the remaining 1,200 state-owned enterprises. 
In March 2005, the Algerian parliament adopted a new law to 
further liberalize the hydrocarbons sector.  This new law 
separates the commercial role of Sonatrach 
(http://www.sonatrach-dz.com/), the state-owned hydrocarbons 
company, from its previous regulatory and 
procurement/contracting functions.  (An early version of the 
law is available in English at http://www.mem-algeria.org/ 
legis/prem hydroc.htm.  The official published Arabic version 
is available at http://www.mem-algeria.org/fr/ 
legis/hydrocarbures-5-7-ar.pdf.) 
 
Sonatrach is now required to bid on domestic projects 
alongside foreign firms; it will no longer be an automatic 
partner in all projects.  In tenders that Sonatrach does not 
win, the company will retain a right to exercise an option of 
20-30% of the equity of the project, allowing it to become a 
regular stakeholder with the same responsibilities.  The 
Regulatory Agency for Hydrocarbons (ARH) will monitor 
compliance by foreign firms with various health, safety, and 
environmental regulations as well as use of the pipeline 
transport system.  A new contracting organization, the 
National Agency for Contracts (or "ALNAFT"), will be 
responsible for bidding, concluding and supervising contracts 
with engineering and procurement (E&P) investors.  These 
reforms will enable Algeria to encourage greater foreign 
investment in oil and gas, leading to greater production 
capacity. 
 
 
Conversion and Transfer Policies 
-------------------------------- 
 
Algeria began liberalizing its foreign trade in 1991, at 
which time the Algerian dinar (officially the Dinar Algerien, 
or "DA") became fully convertible for all commercial 
transactions.  Only registered economic operators may have 
access to foreign currency to make payments, which are 
subject to domiciliation rules.  In 1995, the rules were 
modified to permit payments in foreign currency for 
individual Algerian citizens for special medical needs, 
education, and, since 1997, a very limited amount (DA 15,000 
per year, or about $200) for travel abroad.  This limited 
exchange capability has created a highly visible black market. 
 
The same transfer procedures apply to both goods and 
services, including insurance, transportation, maintenance, 
technical assistance, and even training contracts.  However, 
for other categories of services, transfers can be more 
difficult and usually require several justifications and 
permissions from the Bank of Algeria (La Banque d,Algerie, 
which is the nation's central bank). 
 
Algerian exporters must repatriate their receipts and can 
only convert 50% of those receipts into hard currency. 
 
The Central Bank (http://www.bank-of-algeria.dz/) controls 
foreign exchange and manages Algeria,s foreign exchange 
reserves.  Transfers of revenue can sometimes be problematic, 
such as in the case of franchising revenue.  Residents are 
prohibited from making hard currency transfers abroad of 
revenues from certain activities, including areas such as 
investment property income.  However, it is possible to 
obtain authorization from the Central Bank to transfer funds 
abroad to conduct activities that support business activities 
in Algeria. 
 
According to the investment code and the 2003 Law on Money 
and Credit (ordinance No. 03-11), foreign investors are 
allowed to repatriate their profits within 60 days, even if 
revenues exceed the original amount invested.  Foreign 
workers in Algeria can transfer a portion of their salaries 
abroad (generally about 50%).  Due to the inefficiency of the 
banking system, it may take longer than the legally-mandated 
60 days to obtain official permission from the central 
bank,s General Directorate of Exchange to make 
transfers/payments. 
 
These strict foreign exchange controls serve to restrict the 
movement of capital and prevent illegal activities (such as 
money laundering).  The controls are also intended to 
maintain a balance of payment during oil price shocks, since 
some 98% of the nation,s hard currency comes from exports of 
hydrocarbons. 
 
Expropriation and Compensation 
------------------------------ 
 
The government of Algeria has not engaged in expropriation 
actions against U.S. or other foreign firms, nor have they 
otherwise discriminated against foreign firms. 
 
 
Dispute Settlement 
------------------ 
 
Algeria is a signatory to the convention of the Paris-based 
International Center for the Settlement of Investment 
Disputes (http://www.worldbank.org/icsid/).  Algeria has 
ratified its accession to the New York Convention on 
arbitration (http://arbiter.wipo.int/arbitration 
/ny-convention/index.html) and is a member of the 
Multilateral Investment Guarantee Agency 
(http://www.miga.org/).  The Code of Civil Procedures allows 
both private and public sector companies full recourse to 
international arbitration. Algeria permits international 
arbitration clauses. With more than 400 legislative and 
regulatory texts, investors consider the Algerian commercial 
law difficult to understand, leading investors to rely on 
local counsel and agents to ensure compliance with all 
procedures and rules.  The government of Algeria is revising 
its commercial law to conform to WTO requirements. 
 
 
Performance Requirements 
and Incentives 
------------------------ 
 
For an investment to be considered foreign, it must meet a 
minimum threshold level of foreign equity relative to the 
total value of the investment.  For investments less than or 
equal to $25,000, the threshold is 15%.  For investments 
between $25,000 and $125,000, the threshold is 20%.  For 
investments greater than $125,000, the threshold is 30%.  The 
central bank monitors all foreign direct investment involving 
foreign currency transactions. 
 
Incentives under the new investment code are offered on a 
case-by-case basis by the approval of the National Investment 
Council. General incentives may include: 
 
-- Exemption from property taxes; 
-- Exemption from corporate income taxes; 
-- VAT exemption for goods and services directly related to 
the investment; and 
-- Exemption from transfer taxes for real estate purchases 
directly related to the investment. 
 
In addition to the above mentioned incentives, special 
incentives are also offered for investments in special 
development zones and for privileged investments that utilize 
environmentally-friendly or energy saving technologies. 
 
Special incentives may include: 
 
-- Partial or total state funding for infrastructure 
investments; 
-- Application of reduced customs duties on imported goods 
directly related to the investment; 
-- Exemption for ten years from the corporate income tax 
(IBS), Gross Income Taxes (IRG), flat rate payment (VF) and 
Tax of Professional Activity (TAP); 
-- Exemption for ten years from property taxes; and 
-- Additional incentives to improve or facilitate the 
investment, such as the carry-forward of losses and 
depreciation. 
 
Additional incentives may be offered to companies whose 
production and investment are export-oriented. 
 
 
Right to Private Ownership 
and Establishment 
-------------------------- 
 
Foreign and domestic private entities may establish and own 
businesses as well as engage in all forms of business 
activity.  Private entities may freely establish, acquire and 
dispose of interest in business enterprises.  Private 
enterprises have equal status with public enterprises and 
compete on an equal basis with respect to access to markets, 
credit, and business operations. 
 
Protection of Property Rights 
----------------------------- 
As part of Algeria's negotiations for WTO accession, the 
government adopted new laws in July 2003 for copyright and 
related rights, trademarks, patent and integrated circuits. 
To reinforce existing laws, three decrees related to 
trademarks, patents and integrated circuits were adopted in 
2004.  These laws are in compliance with the WTO,s TRIPS 
Agreements. 
 
Algeria is a signatory of the Paris Industrial Property 
Convention on Copyrights, the Berne convention for the 
protection of literary and artistic works, as well as the 
Madrid Arrangement and Lisbon Agreement for the protection of 
appellations of origin and their international registration. 
As of May 2005, Algeria intended to ratify the 1996 WIPO 
Copyright Treaty (WCT) and the WIPO Performance and 
Phonograms Treaty (WPPT) during the course of 2005.  Patents, 
copyrights, trademarks and integrated circuits are currently 
protected under 2003 laws, industrial designs and models 
under 1966 laws, and appellations of origin under 1976 laws. 
 
The Government introduced a new order on July 15, 2002, 
(article 22 of the Customs Code) which seeks to stop the 
entry of counterfeit goods at ports and borders. 
 
Sector Specific Comments: 
 
Pharmaceuticals: Current laws do not provide data exclusivity 
protection for pharmaceutical products/molecules. The 
government,s official policy is to encourage the domestic 
production of generics.  There are concerns that Algeria does 
not properly recognize registered patents and protect them 
from premature generic competition. 
 
Software:  To stop the use of non-licensed software within 
government and other public entities, the Prime Minister 
circulated a February 2005 directive to prevent government 
use of pirated software and initiated a formal software 
licensing process through procurement channels.  The National 
Algerian Institute for Industrial Property (INAPI) 
administers patents, trademarks, integrated circuits, 
appellations of origin, design and industrial models, and 
geographical indicators.  The National Copyright Office 
(ONDA) administers copyrights and related rights. 
 
While the legal framework for intellectual property rights 
(IPR) has improved, the enforcement of these rules is still 
generally inadequate due to lack of public knowledge about 
counterfeiting and a lack of training in the customs services 
and the judiciary.  Few foreign firms have sought legal 
recourse, which would require establishing the patent, 
trademark, or copyright in Algeria before filing suit.  As a 
result, counterfeiting is common, especially in cosmetics, 
automotive aftermarket products, computer hardware components 
and software, some consumer and food products (such as 
shampoo and baby formula), and even medicine.   In software, 
only an estimated 20% of users pay licensing fees.  The 
Business Software Alliance estimates software piracy in 
Algeria to be 84% (2003 data).  (For comparison, the BSA 
estimated software piracy in Morocco and Tunisia to be 73% 
and 82% respectively.)  According to Algeria's ONDA, the 
piracy rate for music and video works on cassette is about 
37%, and has been estimated to be 87% for CDs.  Solid piracy 
statistics are difficult to gather. 
 
The anti-counterfeiting office within the Ministry of 
Commerce operates through seven regional offices.  In 2004, 
more than 10 informal marketplaces were replaced gradually by 
authorized public markets.  The same year, 100 counterfeit 
claims were registered, half of which were brought before the 
courts. 
 
To reinforce inter-agency cooperation, ONDA has prepared a 
draft decree proposing the creation of an inter-agency 
National Council on Counterfeiting and Piracy with 
representatives from Customs, Police, and the Ministries of 
Commerce, Interior, Justice, and Finance, among others. 
 
The government of Algeria is working with U.S. firms in 
Algeria, the Business Software Alliance, and the U.S. 
government to reduce the rate of counterfeiting in Algeria 
through seminars and specialized training programs for judges 
and customs officials.  In 2004, a private "business 
protection group" led by major U.S. companies in Algeria and 
other foreign firms was created to fight counterfeiting. 
 
Transparency of 
Regulatory System 
----------------- 
The government adopted a new directive in July 2003 to define 
the conditions of competition practices in the market and 
prohibit restrictive practices. 
 
Created in 1995, the Competition Council continues to play a 
role in the regulatory system. Reporting to the Head of 
Government, the group makes proposals and recommendations, 
including provisions for sanctions, to maintain a competitive 
market system.  The Council also regulates prices for some 
goods and services that are considered strategic (such as 
prices for bread), but otherwise allows prices to be freely 
determined by market forces.  Energy prices will eventually 
be freely set by the market over a gradual period, beginning 
after the passage of the hydrocarbons reform in 2005.  In 
other sectors, such as telecommunications, Algeria is moving 
toward a more transparent regulatory system.  Regulation of 
the health sector, particularly pharmaceuticals, is not 
transparent. 
 
 
Efficient Capital Markets 
and Portfolio Investment 
------------------------- 
 
The banking and financial market has been open for private 
and foreign investment since 1995.  In 2003, the Government 
adopted a new law on money and credit and has since engaged 
in a reform program to improve the underdeveloped banking and 
financial systems. 
 
The banking system continues to be dominated by the six major 
public banks, although there are about 10 foreign, 3 private 
banks, and 8 other financial institutions operating in 
Algeria (http://www.bank-of-algeria.dz/ banque.htm).  The 
number of private banks, however, continues to dwindle as 
managers come under scrutiny for improper actions and banks 
struggle to keep pace with changes in the banking law, such 
as exchange reserve requirements. 
 
In 1996, the central bank started open market operations with 
the establishment of an inter-banking currency exchange 
market. This market is widely dominated by the intervention 
of the central bank that is the sole supplier of hard 
currency for the partially-convertible Algerian dinar.  To 
improve the payment system, the central bank is introducing a 
real time gross settlement (RTGS) system with World Bank 
assistance. 
 
The Treasury Bond market was initiated in 1995.  The Algerian 
Treasury authorized 13 primary dealers (called "SVT"), 
including state-owned banks, state-owned insurance companies, 
and one private insurance company (Citigroup).  In 2004, 
Algerie Clearing, a joint stock company, was officially 
established as the central depository for all securities in 
Algeria. Algerie Clearing monitors a computerized settlement 
and delivery system. 
 
The stock exchange was established in 1998 but remains in an 
embryonic stage, with only four companies listed: Saidal 
Group, Eriad Setif, and the El Djazair and El Aurassi Hotels. 
As part of the Government,s ambitious privatization program, 
11 other state-owned companies are expected to trade on the 
stock exchange. 
 
To absorb the over-liquidity in the market estimated at $10.0 
billion, some stated-owned companies including the national 
airline Air Algerie, the state-owned hydrocarbons giant 
Sonatrach, the state-owned energy utility Sonelgaz, and an 
assortment of others, have launched corporate bonds to 
finance their development projects. 
 
 
Political Violence 
------------------ 
 
Political violence continues to recede following the peaceful 
April 2004 reelection of President Bouteflika to a second 
5-year term.  The government,s dual approach to reducing the 
terrorist threat through military engagement and a general 
amnesty plan has achieved significant results.  While 
security conditions are stable in the capital city and other 
major cities, the U.S. Embassy in Algiers maintains a high 
level of security, and security preparation must be 
considered when doing business in Algeria.  Visitors should 
read the State Department,s Consular Information Sheets and 
Travel Advisory before traveling to Algeria, at 
http://travel.state.gov/. 
 
Corruption 
---------- 
 
Fighting corruption is a priority for the Algerian 
government. In January 2005, an anti-corruption bill was 
adopted by the Government Council and was passed by both 
Parliament and the Senate in June 2005. The law reinforces 
existing legislation to comply with the U.N. Convention 
against Corruption, which Algeria ratified on August 25, 
2004.  The law contains five main provisions to promote 
transparency in government and public procurement and also 
introduces new crimes such as illicit enrichment.  It will 
also reinforce existing penal sanctions and allow for the 
creation of a national organization to design and implement a 
national anti-corruption strategy.  In April 2005, the 
Ministry of Justice investigated 40 judges for corruption and 
abuse of power, dismissing eight of them.  Similar actions 
were taken in the Customs office. 
 
Algeria is not a financial center and the extent of money 
laundering through formal financial institutions is believed 
to be minimal because of stringent exchange control 
regulations and an antiquated banking sector.  Despite money 
laundering controls, official statistics show that 
approximately 500 million Euro leave the country illegally 
every year in part due to over-invoicing. 
 
On January 5, 2005, the government adopted a new law 
pertaining to money laundering and terrorist financing to 
comply with international standards and measures against 
organized crime.  The new law will require the use of checks, 
rather than cash, above a certain sum as yet unspecified.  It 
also requires banks to verify the identities and addresses of 
clients before opening bank accounts or completing any 
transactions.   The legislation gives wide-ranging powers to 
the banking commission of the Bank of Algeria (the central 
bank).  In an effort to fight money laundering and terrorism 
financing, a Financial Intelligence Unit (CTRF) was 
established in 2002. 
 
The Transparency International Corruption Perception Index 
(CPI) for 2004 ranked Algeria number 97 out of 145 countries. 
 
Algeria is a signatory of the OECD Convention to Fight 
Bribery. 
 
The following is a link to the Department of State's 2005 
International Narcotics Control Strategy Report, whose Part 
II on Money Laundering includes a chapter on Algeria: 
http://www.state.gov/g/inl/rls/nrcrpt/2005/vo l2/ 
 
 
Bilateral Investment 
Agreements 
-------------------- 
 
On July 13, 2001, the U.S. and Algeria signed a Trade and 
Investment Framework agreement (TIFA) to create a forum for 
involved discussion.  The first TIFA Council meeting was held 
in Algiers on April 8, 2001, and the second one was held in 
Washington D.C on December 2-3, 2004.  The discussions could 
eventually lead to a Bilateral Investment Treaty (BIT) and a 
Free Trade Agreement. 
 
In December 2001, Algeria and the EU concluded negotiations 
on the Association Agreement that was ratified by the 
Algerian Senate on March 31, 2005 and, as of May 2005, by all 
but one of the EU member state parliaments.  The Association 
Agreement (http://europa.eu.int/comm/ 
external relations/algeria/ docs/index.htm) will commit both 
sides to further liberalization of bilateral trade and is 
intended to make Algerian businesses and consumers benefit 
from the development of trade and investment ties.  The 
Agreement provides for the gradual removal of import duties 
on EU industrial products over twelve years, and removes 
duties immediately on 2,000 other products.  The Agreement 
will lay an important foundation for economic liberalization 
in Algeria.  It also provides for an exchange of concessions 
regarding trade in services.  On December 12, 2002 a joint 
declaration of cooperation was signed between the European 
Free Trade Association (EFTA, http://www.efta.int/) with the 
European Union providing for expanded and liberalized trade 
with EFTA members Iceland, Liechtenstein, Norway and 
Switzerland. 
 
Algeria has signed bilateral investment agreements for the 
protection and promotion of investments with the following 
countries in the indicated years: Belgium/Luxembourg (1991), 
Italy (1991), France (1993), Romania (1994), Spain (1994), 
China (1996), Germany (1996), Jordan (1996), Mali (1996), 
Vietnam (1996), Egypt (1997), Bulgaria (1998), Mozambique 
(1998), Niger (1998), Turkey (1998), Denmark (1999), Yemen 
(1999), Czech Republic (2000), Greece (2000), and Malaysia 
(2000).  There is no bilateral investment treaty between 
Algeria and the United States.  Prospects for a U.S.-Algeria 
BIT were discussed at the December 2004 TIFA meetings. 
 
Algeria has also signed bilateral treaties to prevent double 
taxation with the following nations: United Kingdom (1981), 
France (1982), Tunisia (1985), Libyan Arab Jamahirya (1988), 
Morocco (1990), Belgium (1991), Italy (1991), Romania (1994), 
Turkey (1994), Syrian Arab Republic (1997), Bulgaria (1998), 
Canada (1999), Mali (1999), Vietnam (1999), Bahrain (2000), 
Oman (2000), Poland (2000), Ethiopia (2002), Lebanon (2002), 
Spain (2002), and Yemen (2002).  There is no double taxation 
treaty between Algeria and the United States. 
 
In 1990, Algeria signed both investment protection and double 
taxation agreements with the Arab Maghreb Union (UMA) 
countries (Libya, Morocco, Mauritania and Tunisia). 
 
 
OPIC and Other Investment 
Insurance Programs 
------------------------- 
 
The U.S. Overseas Private Investment Corporation (OPIC) 
(http://www.opic.gov/), the U.S. Export-Import Bank (Ex-Im) 
(http://www.exim.gov/), and the U.S. Trade and Development 
Agency (USTDA) (http://www.exim.gov) are increasing their 
support of U.S. trade and investment in Algeria. 
 
Beyond the oil and gas sectors, Ex-Im is working on expanding 
its activities in sectors including telecommunication, 
capital equipment, and pharmaceuticals.  Ex-Im Bank remains 
one of Algeria,s leading creditors.  Its exposure in Algeria 
is USD 1.65 billion as of July 2004.  In 2004, Ex-Im Bank 
expressed its readiness to make available to Sonatrach, the 
state-owned oil and gas company, a USD 1 billion credit 
facility intent for its five-year procurement plan.  U.S. 
firms intent on bidding on tenders in the Algerian energy 
sector must inform Ex-Im of their wish to make a credit offer 
to Sonatrach, which Ex-Im then must authorize.  For more 
details, please visit http://www.exim.gov/portals/ 
usexporter/index.cfm.   In December, 2003, Ex-Im announced a 
USD 176 million long-term loan guarantee (U.S. content only) 
for the Skikda Power Project.  Because of current high oil 
revenues, Sonatrach's need for financing applies more to 
large-scale, long-term projects than to short-term, 
small-scale procurements. 
 
OPIC continues to evaluate projects in Algeria in 2005 for 
potential financing.  In January 2005, OPIC approved $200 
million in loans for Ionics (now part of G.E. Infrastructure: 
Water and Process Technologies), for a 25-year 
build-own-operate (BOO) seawater desalination project in 
downtown Algiers, Hamma district.  OPIC will provide the 
loan to the project company, Hamma Water Desalination SpA 
(HWD), owned 70% by G.E. Ionics and 30% by the Algerian 
Energy Company (AEC) (http://www.aec.dz/).  The project 
contracts were signed in Algiers on June 25, 2005. 
 
 
Labor 
----- 
 
Algeria,s labor code sets minimum work standards, including 
a minimum work age (16 years), a 40-hour workweek, and rates 
for overtime pay.  Employers pay 26 percent of gross salaries 
in social security taxes, including provisions for both 
retirement and health/accident insurance. 
 
To reduce labor costs, the government since 2001 has exempted 
employers from paying family allowances, estimated at USD 377 
million.  However, the government decided in 2005 that 
employers will pay these charges, but no timetable for 
implementation has been set. 
 
Algeria,s labor force in 2003 was 8.7 million people.  (The 
2004 total population was 32.6 million, with annual 
population growth of 1.52%, down from 1.8% in 2003.) 
According to the National Office of Statistics, 63.8% of the 
population is under age 30.  The monthly minimum wage was 
raised to DA 10,000 (USD $140) from DA 8,000 (USD $100) in 
2004. 
 
The Algerian labor market is very competitive given the 
depreciation of the Algerian currency since 1994. Reducing 
high unemployment rate and strengthening social protection is 
a key objective in the government,s reform program. 
According to Algerian official statistics, the unemployment 
rate decreased from 23.7% in 2003 to 17.7% in 2004, and the 
government expects it to reach 13% by 2005.  However, some of 
the jobs included in this calculation are temporary and are 
funded mainly through government programs. 
 
US companies have been able to hire trained technical staff. 
However, English speakers remain difficult to find.  Arabic 
is the official language, and French is the de facto language 
of business.  There are no restrictions on the number of 
expatriate supervisory personnel a company may bring.  Entry 
visas for foreign workers must be requested through the 
Ministry of Employment and Social Solidarity 
(http://www.massn.gov.dz/).  Foreign workers must then obtain 
work permits from the Ministry of Labor 
(http://www.mtss.gov.dz/) and a residency card from the local 
police office where they will be working.  The Employer is 
responsible for submitting all tax payments for individual 
workers to the proper local tax collection authorities. 
 
Algerian regulations allow foreigners to repatriate 50% of 
their salaries. 
 
Algeria has ratified social security contribution conventions 
with France, Belgium, Romania, Tunisia and Egypt, effectively 
exempting workers from two different sets of social security 
taxes.  There is no social security convention between 
Algeria and the United States. 
 
 
Foreign-Trade Zones/ 
Free Ports 
-------------------- 
 
On December 1, 2004, the government of Algeria signed an 
executive decree to dismantle its only free trade zone, at 
Bellara, in preparation for WTO accession.   This zone had 
never been operational since its creation in 1997.  Bellara 
has since been transformed into an industrial zone for 
regional development. 
 
 
Foreign Direct 
Investment Statistics 
--------------------- 
 
According to Foreign Direct Investment (FDI) statistics 
released by the National Agency for Investment Development 
(ANDI), the total value of investment declarations in 2004 
was $3.5 billion, of which $2.0 billion was in 
non-hydrocarbons areas. 
 
The National Agency for the Development of Investment 
recorded 105 foreign investment projects in 2004, out of 
which 40 are partnership projects and the rest are 100% 
foreign owned.   Foreign investment projects that contributed 
to this positive performance include the $260 million El 
Hamma desalination plant; the second GSM license awarded to 
the Kuwaiti company El Wataniya for $1.2 billion (of which 
$421 million is for the purchase of the license and the 
remainder for investment in equipment); and two cement plants 
(one by Swiss Olcim valued at $180 million and the second one 
by the Egyptian company Orascom Cement Algeria valued at $260 
million).  A third cement unit is underway for an investment 
of $190 million.  Hotel chain Accor/Ibis has announced plans 
for 36 hotels across Algeria over the next 5 years.  The 
value of the pharmaceuticals market is estimated at $850 
million.  Pfizer and the GlaxoSmithKline (UK) / Asac Pharma 
(Spain) partnership are the primary domestic investors. 
 
Hydrocarbons FDI registered $1.8 billion in 2003, up from 
$671 million in 1999. This amount represents 10% of all FDI 
inflows in Africa (excluding South Africa). The state owned 
oil and gas company Sonatrach signed 8 contracts during 2004. 
 Norwegian Statoil and the Australian firm BHP Billiton 
started production in 2003. 
 
From 1999 to 2003, more than 50 foreign companies, in 
partnership with Sonatrach (State-owned Oil & Gas Company) 
invested $8.6 billion (of which 89.5% for field development 
and 10.5% for exploration).  For exploration, U.S. firms are 
the most active with 35% of the market, followed by Italy 
(14%), Australia (9%), UK, Canada, Indonesia (8% each), 
France (7%) and the remaining for Russia, Spain and others. 
Field development projects worth USD 7.7 billion were 
conducted during this period by British, American, 
Australian, and Spanish companies. 
 
Total FDI in the mining sector reached $33 million in 2003. 
 
The U.S. Trade and Development Agency (http://www.ustda.gov/) 
has been actively involved in Algeria. 
 
Web Resources 
------------- 
 
Algerian Government: 
 
Algeria Energy Company (AEC): http://www.aec.dz/ 
Algerian Embassy in Washington, D.C.: 
http://www.algeria-us.org/ 
Bank of Algeria (central bank): http://www.bank-of-algeria.dz/ 
Ministry of Employment and Social Solidarity: 
http://www.massn.gov.dz/ 
Ministry of Energy and Mines: http://www.mem-algeria.org/ 
Ministry of Finance: http://finances-algeria.org/ 
Ministry of Labor and Social Security: http://www.mtss.gov.dz/ 
Ministry of Participation and Investment Promotion: 
http://www.mdppi.dz/ 
National Investment Development Agency: http://www.andi.dz/ 
Sonatrach: http://www.sonatrach-dz.com/ 
 
United States Government: 
 
U.S. Department of State: http://www.state.gov. 
-- (For travel information, please visit 
http://travel.state.gov/.) 
U.S. Embassy Algiers: http://algiers.usembassy.gov/ (links to 
the Economic and Commercial Sections are contained within the 
link "Embassy News/About the Embassy") 
U.S. Department of Commerce: http://www.export.gov/ 
Export Import Bank: http://www.exim.gov/ 
Overseas Private Investment Corporation (OPIC): 
http://www.opic.gov/ 
U.S. Trade and Development Agency: http://www.ustda.gov/ 
 
Non-Governmental: 
 
Business Software Alliance (BSA): http://www.bsa.org/ 
U.S.-Algeria Business Council: http://www.us-algeria.org/ 
 
International: 
 
E.U. Association Agreement: 
http://europa.eu.int/comm/ external relations/ 
euromed/med ass agreemnts.htm 
European Free Trade Association (EFTA): http://www.efta.int/ 
IMF Algeria information: http://www.imf.org/external/ 
country/DZA/index.htm 
International Monetary Fund (IMF): http://www.imf.org/ 
Multilateral Investment Guarantee Agency: http://www.miga.org/ 
United Nations Conference on Trade and Development: 
http://www.unctad.org/ 
-- View the 2003 UNCTAD Investment Policy Report on Algeria 
(in French) here: 
http://www.unctad.org/fr/ docs/iteipc20039 fr.pdf 
World Bank: http://www.worldbank.org/ 
 
Laws: 
 
Hydrocarbons reform law (non-final English version): 
http://www.mem-algeria.org/ legis/prem hydroc.htm. 
Hydrocarbons reform law (final, official Arabic version): 
http://www.mem-algeria.org/fr/legis/ hydrocarbures-5-7-ar.pdf 
 
Conventions: 
 
New York Convention on the Recognition and Enforcement of 
Foreign Arbitral Awards http://arbiter.wipo.int/arbitration 
/ny-convention/index.html 
Paris-based International Center for the Settlement of 
Investment Disputes: http://www.worldbank.org/icsid/ 
 
ERDMAN