Wednesday, 03 Oct 2012
Overseas Business Risk - Algeria
Political and Economic
Politically, Algeria remains stable. Historical and cultural factors meant that it did not experience large scale social unrest as many of its neighbours did. Algeria’s violent civil war of the 1990s still marks the population and means that Arab-spring style unrest is very unlikely.
The Algerian government launched a 5 year investment programme worth US $285 billion for the period 2010 – 2014. This programme aims to connect the vast country by upgrading transport links, develop Algeria’s human capital by improving education and healthcare and respond to demands for housing by delivering 1.2 million new houses by 2014. This programme means that the Algerian government will need to procure a range of goods and services and therefore creates significant opportunities for UK business.
Energy is the backbone of Algeria’s economy. The hydrocarbons sector accounts for roughly 60% of budget revenues, nearly 30% of GDP, and over 97% of export earnings (US$ 38.3 billion in 2010/11). Proven crude and natural gas reserves are estimated at 12.2 billion barrels and 4.5 trillion cubic feet, respectively the 14th and 4th largest in the world. Algeria has historically supplied 5% of the UK’s gas needs and will become an even more important supplier as our own imports grow. Algeria’s renewable energy and energy efficiency programme envisages installing 22 000 MW of generating capacity from renewable sources by 2030 – with 10 000 MW destined for export to Europe.
UK IOCs and EPC contractors have been working here for many years. Their projects, like Petrofac’s US$ 1.2 billion El Merk site, create supply chain opportunities for everything from safety systems to cable ties. In December 2011, Algeria announced reforms to the legal regime governing hydrocarbons with the stated aim of attracting more foreign investors.
Outside of hydrocarbons key sectors of opportunity are education (particularly English language, technical and vocational training), infrastructure (engineering, design and project management), healthcare (pharmaceuticals) and professional services (finance, accounting, legal).
Doing business in Algeria can be challenging. Bureaucracy means that decision making can be slow and complex. Competition is stiff; companies from other EU countries and from further afield like China and Turkey are already very active. However, Algerians are open to the UK, the bilateral relationship is in good shape, and companies can rely on HMG support. HMRC figures show that UK – Algeria bilateral trade increased 96% in 2011.
More information on political risk, including political demonstrations, is available in the FCO Travel Advice
Bribery and Corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.
In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
In 2011 Algeria was ranked 112 out of 178 in Transparency International’s corruption perception index.
Government tendering follows strict guidelines to reduce the risk of corruption in the awarding of contracts. Numerous British businesses report successful business operations in Algeria free of corrupt practices. However, there are still some isolated anecdotal reports of low level corruption. It is important to develop close business relationships with your potential clients but this should not be confused with corruption. A local business partner or agent will be well placed to advise you on normal business practice. You should familiarise yourself with British bribery legislation which, since 2002, also applies to UK registered companies and UK nationals committing acts of bribery wholly outside the UK.
companies and UK nationals committing acts of bribery wholly outside the UK.
Read the information provided on our Bribery and corruption page.
Algeria has acceded to the seven major United Nations conventions on human rights and the eight International Labour Organization (ILO) conventions on human rights, with some reservations. Details of the specific conventions, accession dates and reservations are available on the Arab Human Rights website.
In previous reports, the UN has highlighted some concerns from member countries on Algeria’s position on freedom of assembly, freedom of association (e.g. forming societies), implementation of laws on religion and some forms of discrimination. Companies can mitigate this by implementing their own equal opportunities policies internally.
Further details can be found on the UN’s Universal Periodic Review page for Algeria.
The UGTA (l’Union générale des travailleurs algériens) is the only union officially recognised by the state. It has around 4 million members and is part of the International Trade Union Confederation.
Worker strikes to demand higher wages are common but usually small scale and isolated to a particular sector or a particular company (e.g. pharmacists, airline cabin crew etc). There does not appear to be a culture of general strikes. For public sector employees, oil revenue allows the government to respond favourably to demands for wage rises in many cases.
The Centre for the Protection of National Infrastructure also provides protective security advice to businesses
There is a high threat of terrorism in Algeria. Please refer to the FCO Travel Advice.
Read the information provided on our Terrorism threat page
Protective Security Advice
Foreign businesses have not been a significant target of terrorism, however most companies take preventive measures such as engaging private security firms for guarding of property. Companies active in the oil and gas sector may need to work in Hassi Massaoud, Algeria’s petroleum hub in the desert. Particular logistical and risk management considerations will apply due to the hub’s remote location. From a security perspective, the hub is well protected by the Algerian security forces.
Read the information provided on our Protective security advice page.
Hi-tech manufacturing industry and R&D facilities are virtually nonexistent in Algeria. Intellectual Property Rights (IPR) infringements associated with technology transfer is not an issue currently. IPR abuses may become a problem in the future as Algeria advances and enters the technological age.
Counterfeit consumer products sourced from third countries - particularly China - is a major problem as is piracy of music and films. Black markets trading in counterfeit goods ranging from toiletries, over the counter medicines, branded clothing and household electrical goods exist in almost every area. The Government is active in combating counterfeit goods and has invested heavily in improving Customs controls. The International cooperation department and customs invites foreign companies to work with them in developing their ability to detect counterfeit products. In addition, recently introduced legislation on imported goods requires specific quality and conformity certification. Foreign exporters should contact Algerian Customs and the Ministry of Commerce for advice on the appropriate certification of their goods.
IPR Protection in Algeria
Algerian law adheres to NAFTA and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). IPR laws in themselves are robust but the difficulty is in lax enforcement. Specialist legal advice on IPR matters is difficult to find. The cumbersome judicial system based on French and Islamic Sharia law is complicated to understand; therefore legal proceedings can be lengthy and expensive.
High level lobbying via the Embassy and industry representative groups such as the Algeria Brand Protection Group has proved to be a more popular and effective route to resolving major disputes.
Algeria has signed up to the relevant international IPR and copyright agreements. However, piracy remains a major problem. Pirated films and music recordings are available often on the same day as their official release in Europe and elsewhere.
Read the information provided on our Intellectual Property page.
There are no specific threats to foreign companies as a result of organised crime.
Read the information provided on our Organised crime page.
More information is available on overseas business risk in a range of markets.