Business Tenders: Is Algeria Business-Friendly and Foreign Investment-Ready?

The tender marketplace in Algeria is one of the most complicated business fields in the country. The Algerian government is forever eager to improve the transparency of its contracting process, hence the five different versions of presidential decrees that have governed public procurement since 1967 (the last version is N°15-247 enforced in 2015).

Until 2019, the participation of a foreign investor in an Algerian company was limited to 49% and foreign contractors were forced to find local partners for public tenders in Algeria. However, in 2020, the government of President Abdelmadjid Tebboune eliminated the “51/49” restriction that required Algerian majority ownership of all new companies. While it remains applicable for certain strategic sectors such as hydrocarbons, mining, defense, and pharmaceuticals.

Essentially, the Algerian government wants to attract foreign direct investment. Rich in natural resources and economically stable, Algeria has historically attracted decent FDI flows. In fact, the country’s geographic qualities, its demographic makeup, its oil wealth, and its modern and experienced security sector clearly outline its future potential as a business-friendly location. Algeria is a developing country. No one is denying this. Yet, it has enormous possibilities to boost its economic growth soon.

For many reasons, which we’ll cite below, Algeria is now ready for foreign investment and foreign tender participation. Accordingly, before we talk about the current overall legal framework for investment, let’s see how the tender marketplace ensures fairness.

Tender marketplace in Algeria:

Public Sector markets in Algeria conform to several constraints neutrally imposed on all agents taking part in the public tender process.

The principles of protection of the general interests of the public essentially motivated these constraints. They guarantee the efficiency of the public tender process and the valid use of funds or public monies. This process is based on the combination of three principles:

• Free access to the public tender process.
• Equal treatment of applicants.
• Transparency of procedures.

Accordingly, the public authorities abide by specific regulations governing public sector markets. These regulations are established by the presidential decree No 15/247 of 16 Sept 2015. The decree contains regulations and provisions of the new code of public sector markets and public service commissions.

Foreign Direct Investment Legal Framework:

Whereas Algeria previously limited the participation of foreign investors, the country, in 2019, introduced a new law that eased the flow of business for foreigners and eliminated the past restrictions.

Briefly put, On 11 December 2019, the finance law for 2020 limited the 51/49 rule to strategic and importation activities. Moreover, it authorized the use of foreign financing for strategic activities from development financial institutions.

The 51/49 rule, however, remained in force for all activities until the establishment of the list of strategic sectors via the publication of the Supplementary Finance Law for 2020 and its implementing regulation. The list contained the following sectors: hydrocarbons, mining, defense, and pharmaceuticals.

On 4 June 2020, the Official Gazette published the Supplementary Finance Law for 2020. The new law represents a major turning point in the country’s foreign investment policy, in contrast to the approach taken ten years ago.

The main feature of the Supplementary Finance Law for 2020 is a striking reversal of principle: a foreign investor may now invest in all economic sectors up to 100% of the share capital of an Algerian company except for strategic sectors defined in a relatively restricted manner and for importations of goods intended to be resold in the same condition.

Furthermore, the investment law legislated protections granted to investors. Mainly:

• Fair and equitable compensation for expropriation
• Fair and equitable treatment of foreign investments
• Stability of the Investment Law
• Dispute resolution

Conclusion:

Algeria is a country with many features that make it business-friendly. A large market, low labor costs, and well-trained workforce characterize the Algerian economy. With the constant initiatives that the government is taking, Algeria is an attractive and promising outsourcing supplier to businesses. As a business owner, you should keep Algeria in your mind. Stay tuned to relevant tender opportunities-Articlesz, and get ready to win the top tenders there, to take your business a step further up the success ladder.

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