Algeria is still a relatively unknown market in the UK, which is strange given that it’s the largest country on the Mediterranean and the second largest country in Africa. Algeria has real potential as a market for UK companies. The economic fundamentals are strong and there are plans for significant government spending over the next 5 years, in particular on infrastructure projects. But if people in the UK are aware of Algeria they think of it as being too difficult, too dangerous or too French. These perceptions, if they were ever true, are considerably out of date.
As with any emerging market bureaucracy is an issue, but the business environment is improving with the drive to increase transparency and recent anti-corruption initiatives.
During the 1990s Algeria was a dangerous country to do business in because of a vicious civil insurgency. The main terrorist group declared a ceasefire in 1997 and government reconciliation initiatives combined with stronger security measures have contained terrorism to more remote areas of Algeria meaning that foreign companies can do business in Algeria safely. Under President Bouteflika there have been a series of political reforms, and he has promised to extend the national reconciliation programme to include a major government spending programme which would create 3 million new jobs, construct one million new housing units as well as continuing public sector and infrastructure modernisation programmes.
Algeria also emerged relatively unscathed from the ‘Arab Spring’, with protests in 2011 not reaching the same levels as other Arab countries. President Bouteflika was sworn in for a fourth term in April 2014. In his inauguration speech he spoke of technological advancement and measures to diversify the economy away from hydrocarbons.
UK - Algeria relations
The UK has been traditionally strong in the oil & gas sector, with BP among the largest foreign investors in Algeria.
Some of the major UK companies who are currently active in Algeria include:
- British Airways
- British American Tobacco
- Glaxo Smith Kline
- United Insurance Brokers
- British Arab Commercial Bank
- Wood Group
Algeria is reassessing its relationship with France and is keen to diversify its trading partners. British companies will find themselves pushing at an open door. And while the business language is French, it’s not a difficult linguistic environment for any UK exporter to operate in.
There is great potential in Algeria for UK companies because the market is just beginning to open up. Companies that persevere and decide to enter the market now will reap the dividends.
Strengths of the market
- Algeria enjoys strong economic fundamentals and the economy has proven to be resilient to the global economic downturn and regional unrest. Research by BNP Paribas bank in December 2012 predicts non-hydrocarbon growth to be 5-6% in 2013 and overall economic growth to be 2.5-3.5%. Inflation, however, remains a concern.
- Labour costs are low. Foreign currency reserves are around $150 billion.
- Algeria is the 4th largest crude oil producer in Africa and the 6th largest gas producer in the world. It is an increasingly important energy supplier for the EU – currently the 4th largest – and will increase its share as new distribution networks come on line.
- Algeria is also blessed with many other natural resources such as gold, iron, zinc, uranium, copper, phosphate, tungsten and kaolin. And it has enormous potential for renewable energy, in particular solar, wind and tidal energy.
- UK visible exports continue to grow. They totalled £363 billion in 2012, and have risen significantly over the past three or four years. Among EU nations the UK is one of largest foreign investors in Algeria, investing $114.9m in 2008.
- The UK has a strong reputation for quality, innovation, customer service and know-how meaning that Algerians are keen to see more UK companies doing business here.
- Algeria is a strategic hub for Europe, the Maghreb and sub-Saharan Africa.
- Algiers is only 2.5 hours away from the UK with at least one flight every day from London Heathrow. An East-West highway is being built to improve trans-Maghreb links and a trans-Saharan highway is planned.
Opportunities in Algeria
There are many opportunities in Algeria, across most sectors but especially in infrastructure where there are a large number of government-funded projects planned. Priority sectors identified by UK Trade & Investment are:
- Advanced Engineering
- Education & Skills
- Financial & Professional Services
- Food & Drink
- Infrastructure (Construction, Environment & Water, Ports, Rail)
- Life Sciences
Algeria’s economy is dominated by its export trade in petroleum and natural gas, which accounts for around 98% of the country’s export revenues. Algeria is the 4th largest crude oil producer in Africa (1.42m barrels per day) and the 6th largest gas producer in the world (3.03 trillion cubic feet of natural gas). Sonatrach has announced a $1 billion refurbishment programme of the existing production and distribution networks and there are a number of new projects planned such as the trans-Saharan, Medgaz and Galsi pipelines.
The country is in the process of moving to a more diversified economy and the government has taken a number of measures to encourage this, for example by cutting corporation tax to 19% for certain sectors. The government has agreed a $286 billion 5-year spending programme, largely focused on infrastructure projects including housing, water supply, road & rail links and developing new port facilities. An initiative has been launched to promote technology start-ups linking Algerian companies with foreign entrepreneurs. And the government is keen to develop the tourism industry, introducing tax cuts and low-interest bank loans, reduced customs tariffs, subsidised land purchases and a streamlined bureaucracy.
There is a growing private sector in Algeria - the Forum des Chefs d’Enterprise (www.fce-dz.org) and the World Trade Center Algeria (www.wtcalgeria.com) involve the main players – but most business is still done in the public sector. In 2006 Algeria concluded an Association Agreement with the European Union and the government is working towards accession to the World Trade Organisation.