Algeria flag Algeria: Investing in Algeria

Foreign direct investment (FDI) in Algeria

FDI in Figures

Rich in natural resources and economically stable, Algeria has historically attracted decent FDI flows. However, inflows have been declining since the outbreak of  the COVID-19 pandemic and reached only USD 89 million in 2022 according to UNCTAD’s World Investment Report 2023, compared to a three-year average of USD 1.3 billion in 2018-20. On the other hand, the stock of FDI increased, reaching USD 34 billion in 2022, around 17.4% of GDP. Algeria witnessed a significant decline in FDI projects in the years following its peak of 28 projects in 2019. The country struggled to recover fully, experiencing only five projects in 2020 during the impact of the Covid-19 pandemic and 12 in 2022. In the same year, renewable and alternative power projects constituted 25% of the total FDI projects, reflecting the influence of Algeria's abundant hydrocarbon resources. Meanwhile, chemicals, coal, and oil and gas each contributed about one-sixth to the FDI projects in the country (data Investment Monitor). According to official data from the Algerian Investment Promotion Agency, the main investors in the country are the United States (29%), Italy (10%), France (10%), Spain (7%), United Kingdom (6%); whereas investments are mostly directed towards the industry sector (especially hydrocarbons), construction, transport, and agriculture.

Economic operators face various challenges, including complex customs procedures, bureaucratic hurdles, issues with financial transactions, and global price competition. Foreign companies in Algeria express concerns about the frequent changes in laws and regulations, increasing commercial risks for investors. Additionally, limited regional integration and import restrictions hinder the utilization of international supply chains. Until 2019, the participation of a foreign investor in an Algerian company was limited to 49% and foreign contractors are forced to find local partners for public tenders. However, the government of President Abdelmadjid Tebboune eliminated the so-called "51/49" restriction that required Algerian majority ownership of all new companies. The requirement is still in force for "strategic sectors", identified as hydrocarbons, mining, defence, the import of goods for resale in Algeria, and pharmaceutical production. In 2022, the government released supplementary regulations tied to the Investment Law issued in July. These regulations stipulate that foreign investors must cover a minimum of 25% of the total investment cost to have unrestricted repatriation of both the invested capital and its associated income. The government has also approved a new hydrocarbons law, improving fiscal conditions and contract flexibility in order to attract new international investors. As a result of the promulgation of this law, major international oil companies signed memoranda of understanding with the national hydrocarbon company Sonatrach. There are two main agencies responsible for attracting foreign investment: the Agence Algérienne de Promotion de l’Investissement (AAPI) and the National Agency for the Valorization of Hydrocarbons (ALNAFT). Algeria ranks 119th among the 132 economies on the Global Innovation Index 2023 and 164th out of 184 countries on the latest Index of Economic Freedom.

Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 1,14387089
FDI Stock (million USD) 33,10733,97734,066
Number of Greenfield Investments* 6104
Value of Greenfield Investments (million USD) 82861136

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Algeria Middle East & North Africa United States Germany
Index of Transaction Transparency* 4.0 6.4 7.0 5.0
Index of Manager’s Responsibility** 1.0 4.8 9.0 5.0
Index of Shareholders’ Power*** 5.0 4.7 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Algeria

Strong Points

Algeria's strong points for FDI include:

  • Low cost of energy (gas, fuel and electricity)
  • Large liquidity reserve which lowers its vulnerability to commodity prices
  • Strong potential in renewable energy and tourism
  • Skilled and inexpensive workforce
  • Recent laws to encourage foreign investments and various incentives for foreign investors
  • Algeria’s proximity to Europe, its geographic location as an interface between Europe and Africa and inside the Maghreb.
Weak Points

Algeria's weak points for FDI include:

  • Slow administrative procedures and large and inefficient public sector
  • Weak business climate, according to international evaluation agencies
  • The dependence of the economy on hydrocarbons, which increases dependence on imports of transformed goods
  • The insufficient development of regional markets, which restrain Algeria's appeal to foreign investors
  • The complexity of legislation, especially tax law
  • The difficulty to acquire industrial property
  • High level of unemployment among young people
  • Degraded regional geopolitical context (Libya, Mali, tensions with Morocco).
Government Measures to Motivate or Restrict FDI
To attract and encourage foreign investment, the Government has set up several attractive measures, including the reduction of corporate taxes for investment in specific locations, a reduction in social security contributions for recruitment of young employees, the concession of land by mutual agreement (which provide similar rights to ownership) and tax exemptions throughout the life of the project for exporting projects. For further details consult the investment guide by KPMG and ANDI (National Agency for Investment Development).

The government is trying hard to attract FDI in sectors that may create jobs and reduce the imports of assembled goods. Several sectors are targets for foreign investors, including the automobile industry and the renewable energy sector.  

Nevertheless, since 2008 there are many FDI restrictions. Until 2019, for each new investment project in Algeria, the majority of its capital (51%) had to be held by local partners; however such limitation has been lifted (except for “strategic sectors” such as hydrocarbons, mining, defense, and pharmaceuticals). The Algerian government has enacted protectionist economic policies (import quotas for several types of products). Nevertheless, in recent years Algeria has benefited from the support of the World Bank to improve its business climate. 
Bilateral investment conventions signed by Algeria
Algeria has signed bilateral investment conventions with more than thirty countries. They define the framework for the protection of foreign investment in Algeria for each of the signatories. For the countries of the European Union, the association agreement signed between the EU and Algeria regulates this issue.
Algeria is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention") and the Convention on the International Center for the Settlement of Investment Disputes (ICSID Convention).

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Latest Update: July 2024