Spotlight Algeria. Fortune will crown the bold before the worthy.
Algeria has always been a notoriously closed economy. It has a history of very strict protectionist laws that make it hard for foreigners to invest directly, such as a requirement for majority 51% Algerian ownership in all new business ventures (49/51 investment law). In the most recent “Doing Business” global survey (June 2016) it ranked at 156 out of 190. It has a few tricks up its sleeve though.
Unsurprisingly, oil and gas has been the one area that countries like the United States have directed their money when it comes to investing in Algeria, but there is now a push to change this.
In June 2016 Algeria’s Prime Minister Abdelmalek Sellal announced a recovery plan known as the New Economic Growth Model. The aim is to diversify the national output away from hydrocarbons and the associated damage that their fluctuating prices can cause to an economy too heavily reliant on them as a source of income. Not an uncommon theme across oil dependent nations.
If the country is to have a chance of acheiving the lofty targets they have set themselves then they will need to continue to shed the legacy of vested interests, problems with repatriating profits, convoluted bureaucracy and a lack of intellectual property enforcement. No mean feat, but they are serious. Tax revenues increased 6% year on year in September 2016 and much of this gain was as a result of the growth of non-oil and gas businesses in the country rather than austerity measures.
Measures such as VAT and custom duty exemptions for imports related to foreign direct investment, tax breaks on property and other incentives were announced in April 2016 in order to attract outside money to help with an economy suffering from volatile energy prices.
With barriers to entry being removed to many key markets in the region there is real hope that they will replicate the advances of neighbouring Morocco who have a well-diversified workforce.
There is little doubt that Algeria has taken some bold steps towards supporting its economic vision. Don’t pop the champagne just yet though. Companies will still have to overcome language barriers, distance, customs challenges, an entrenched bureaucracy, difficulties in monetary transfers, currency conversion, repatriating dividends, and of course price competition from Chinese and Turkish business, amongst others.
Nobody said it would be easy, but in the words of Thomas A. Edison, “Opportunity is missed by most people because it is dressed in overalls and looks like work.”