Algeria Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

The EU is ADLR’s largest trading partner and takes about 60% of its exports, which are dominated by oil and natural gas, while some member states are almost dependent on these supplies, e.g. Spain covers about 50% of gas consumption from Algerian imports. The next trading partners are China, Turkey and India. The commodity structure of EU exports to ADLR is dominated by semi-finished products, consumer goods except food and engineering products. Exports from the EU to Algeria have had a downward trend in recent years, mainly due to a significant increase in protectionist measures by Algeria, including restrictions on the import of goods (the range of goods that are prohibited to import continues to grow, as well as the burden of a large number of items with additional duties). Imports into the EU increased compared to 2020 mainly due to the increase in oil and gas exports and prices for these commodities.

  • Allcountrylist: Overview of major industries in Algeria, including mining, construction, transportation, tourism, and foreign trade.
2017 2018 2019 2020 2021
Exports from the EU (million EUR) 18,450.40 18,510.50 16,906.60 13,485.20 12,645.60
Imports into the EU (million EUR) 16,976.80 18,435.70 16,217.40 11,374.60 18,805.80
Balance with the EU (million EUR) -1,473.5 -74.8 -689.2 -2 110.7 6 160.3

Source: European Commission

Trade relations with the Czech Republic

The Czech Republic traditionally exports machinery, aircraft parts, means of transport, medical equipment and material, glass products, iron and steel, chemical elements to ADLR. In recent years, there has been a slight diversification of exports with fast moving goods and live cattle. The decline in exports in 2019 is due to the introduction of quotas for the assembly of CKD/SKD car parts in June 2019, i.e. the VW Group project in cooperation with the SOVAC concessionaire in Relizane, when the assembly plants of 4 foreign investors (Renault, Hyundai, Kia and VW) were gradually closed Group). Imports from Algeria are dominated by oil, other items are negligible. Two Czech companies are represented in the region in the form of a contact office (bureau de liaison), i.e. Pamco Int. and Warrens. No Czech investments have yet been implemented in the region. With regard to the continuation of import restrictions, there was a further reduction in trade with Algeria in 2021. There was a decrease in the import of goods from the Czech Republic to Algeria and exports from Algeria to the Czech Republic. The balance remained negative for Algeria and slightly deepened in 2021 compared to the previous year.

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 0.8 6.2 2.1 1.9 ON
Imports to the Czech Republic (billion CZK) 3 0.9 0.9 0.3 ON
Balance with the Czech Republic (billion CZK) 2.2 -5.3 -1.2 -1.6 ON

Source: CZSO

Trade relations with countries outside the EU

Exports from borders outside the EU increased significantly in 2021 compared to the previous year. Imports to countries outside the EU, on the other hand, fell. The balance with these countries reached a positive value of over EUR 4 billion in 2021 after years with negative values.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 11,368.5 17,280.5 12 145.6 4,544.2 18,467.8
Imports to countries outside the EU (million EUR) 22 173.4 20,944.8 19,426.5 17,858.6 14,054.5
Balance with non-EU countries (million EUR) -10,804.9 -3,664.4 -7,280.9 -13,314.5 4,413.3

Source: EIU, Eurostat

Foreign direct investment

Foreign direct investment has been very low in Algeria for a long time. In the years 2017-2020, according to information from the World Bank, they were around 0.7-0.8% of GDP. In 2020, an amendment to the Budget Act 2020 abolished the restrictive investment rule 49/51 valid since 2009. This rule limited the share of a foreign entity in a joint venture to 49%, regardless of the amount of invested capital or the importance of the transferred know-how. The deepening economic crisis ADLR has led the government to at least partially open the economy to foreign investment during 2021, however a number of implementing regulations are still missing and the investment issue needs to be resolved in cooperation with a local lawyer. According to Regulation No. 21-145 of April 17, 2021 (OJ No. 30 of 22 April 2021) further applies to companies importing goods for resale to strategic sectors, i.e. the energy, pharmaceutical and mining sectors, logistics and transport (all activities based on rail, port and air transport), last but not least the defense sector. Within these sectors, there are exceptions that are exempt from 49/51, i.e. energy from renewable sources, production of pharmaceuticals with the transfer of technological know-how with high added value. The same amendment to the 2020 budget law also canceled the Algerian state’s right of pre-emption on the foreign stake in the event of a divestment. From 2021, foreign and domestic investors will receive a number of tax breaks, a complete list can be found in not least the defense sector. Within these sectors, there are exceptions that are exempt from 49/51, i.e. energy from renewable sources, production of pharmaceuticals with the transfer of technological know-how with high added value. The same amendment to the 2020 budget law also canceled the Algerian state’s right of pre-emption on the foreign stake in the event of a divestment. From 2021, foreign and domestic investors will receive a number of tax breaks, a complete list can be found in not least the defense sector. Within these sectors, there are exceptions that are exempt from 49/51, i.e. energy from renewable sources, production of pharmaceuticals with the transfer of technological know-how with high added value. The same amendment to the 2020 budget law also canceled the Algerian state’s right of pre-emption on the foreign stake in the event of a divestment. From 2021, foreign and domestic investors will receive a number of tax breaks, a complete list can be found inGuides to tax issues of the Ministry of Finance DZ. The awarding of investment projects takes place through the National Agency for the Promotion of Investments ANDI. Projects located in the south of the country and in areas with a high unemployment rate, or projects that have the potential to create jobs, receive the biggest tax breaks. No Czech investments have yet been implemented in Algeria.

FTAs and treaties

Agreements with the EU and other countries

  • Association Agreement 2005 (due to numerous protectionist trade policy measures by the ADLR, which ranged from banning the import of certain items through licenses, quotas and safeguards to almost all available restrictions, the EU proceeded to activate Article 100 of the Association Agreement on International Arbitration, to fulfill criteria for the removal of customs barriers only partially occurred in September 2020)
  • Bilateral preferential treatment with Tunisia: exports increased by almost 21% in 2019 (while imports from Tunisia to ADLR fell by an Algeria-pleasing 32.8%) Similarly, but less successfully, the bilateral agreement with Jordan works.
  • GAFTA (Arab free trade area: preferential trade with EGP, SA)
  • ZLECAF / AfCFTA (African Free Trade Area, ratified in May 2021, DZ promises easier access to sub-Saharan markets from it in particular)
  • WTO (the longest accession process in history, currently 34 years, the obstacle is the required increase in fuel prices and the removal of most tariffs)
  • Union for Mediterranean Trade (non-tariff barriers, small trade exchange)
  • Union du Maghreb Arabe (DZ was to unsuccessfully promote a common Maghreb policy with regard to agricultural and industrial infrastructure)

Contracts with the Czech Republic

Most of the agreements were concluded during the time of the Czechoslovak Republic, apart from the above there are a number of agreements in the cultural and academic fields.

  • Defense Cooperation Agreement (2015)
  • Agreement on Economic and Industrial Cooperation (2012)
  • Debt Adjustment Agreement (1995)
  • Treaty between the Czechoslovak Republic and ADLR on the avoidance of double taxation of income from the use of international air transport (1987)
  • Credit agreement between Czechoslovakia and ADLR (1985)
  • Agreement on cooperation between the MF Czechoslovakia and the MF ADLR (1981)
  • Air Transport Agreement between Czechoslovakia and ADLR (1964)

Missing: Double Taxation Agreement, Mutual Investment Protection Agreement (negotiations are currently suspended in both cases)

Algeria also has no free trade zone, only a few technological parks, the only one of which is fully functional in Sidi Abdellah. Industrial zones are imperfectly developed, functional ones include Sidi Bel Abbes, Rouiba, closer to CALPIREF.

Developmental cooperation

Algeria is not one of the priority countries set out in the Development Cooperation Strategy of the Czech Republic, and due to the current law on financing the non-profit sector from 2012 and the lack of a framework bilateral agreement on development cooperation between the Czech Republic and ADLR, it is not possible to implement small local projects or transformational and human rights projects in the country support of the non-profit sector. Czech development aid in Algeria thus aims at developing the capacities of institutions. In 2019, a technical cooperation project between the MFČR and the Ministry of Finance of the Czech Republic was held, focusing on the management of public finances, as well as a seminar on the economic transformation of the 1990s and good practice for Algeria in cooperation with the V4 countries.

The Czech Republic participates in development assistance for ADLR through EU contributions. Within the framework of the European Neighborhood Policy (ENP), it provided development assistance in the amount of EUR 125 million in 2018-2020. Thematically, the projects focused on three pillars: economic diversification and public finance management, climate and renewable energy sources, local development and participatory democracy. As part of the EU Multiannual Financial Framework for the years 2021-2027, it is preparing a new financial instrument in the currently ongoing programming, which will be used in bilateral development cooperation between the EU and ADLR. In March 2020, ADLR also joined the EBRD and anticipates drawing financial support and implementing projects, especially with a focus on clean energy sources and green cities.

From 2020, Algeria has its own development agency, Agence algérienne de la coopération internationale pour la solidarité, which intends to combine projects to support the education of Algerians abroad with projects for the benefit of third countries in the sense of humanitarian-development projects.

Czech business entities can use the Guarantees of Development Cooperation of the Czech Moravian Guaranteed Development Bank for their activities in the region. You can also apply for support from the B2B program of the Czech Development Agency, which assumes a business plan in the region with a development impact in the given country.

Prospective fields of study (MOP)

Mining, mining and oil industry

In addition to the traditional extraction of natural gas and oil, the Algerian government is increasingly emphasizing the use of other mineral resources. For this purpose, on the basis of the Rock Mining Program 2021-2023, prospecting and mining of iron ore, lithium, phosphates, manganese, lead, zinc, as well as gold and diamonds are planned. Algeria intends to invest up to 67 million Euros in the mining sector for the period 2018 – 2028. In this area, there are opportunities for Czech companies in the field of prospecting and mining of rocks and subsequent processing of mineral raw materials.

Algeria, which still holds the 18th largest reserves of oil and the 10th largest reserves of natural gas under the pressure of the economic and health crisis, is focusing its interest on other important raw material sources. The Ministry of Energy and Mines under the leadership of Mohamed Arkab is now preparing a Comprehensive Geological Map showing Algeria’s raw material potential, a new mining strategy, and the related amendment to Mining Law 14-05. Indebted state-owned enterprises and the currently insufficient network of trading companies do not have sufficient capacity for mining development, therefore mining will be opened to foreign investors despite the restrictive investment rule 49/51 (ext. 49% for a foreign partner). Algeria intends to invest up to 67 million Euros in the mining sector for the period 2018 – 2028. As part of the plan to diversify the national economy, which until now has relied primarily on oil and natural gas resources, the expansion of mining to other mineral resources is a logical step. Indeed, Algeria controls the world’s reserves of some critical raw materials, especially phosphates. Up to 80% of labor jobs are currently provided by private companies, and the Algerian government wants to continue the trend of opening up to private foreign investment, thereby opening up space for foreign direct investment for Czech companies as well.

Energy industry

As the 5th largest producer of natural gas and the 13th largest producer of oil, with 98% of its income derived from the export of these raw materials, Algeria is aware of the need to gradually reduce its dependence on these two commodities. In 2020, the Algerian government set the energy transition as one of the three main axes of the Economic Development Plan. Rapidly growing domestic energy consumption, increasing energy efficiency and the introduction of renewable sources require significant investment in this sector. In the period 2021-2035, the government plans to build renewable energy projects with a total capacity of 15 TW. Other opportunities for Czech companies relate to the modernization of existing power plants and distribution networks.

Since the 1980s, Algeria has alternately introduced legislation targeting the energy mix with an emphasis on solar energy sources. While electricity consumption in the country has doubled in the last 5 years to today’s 75 TWh, the outlook for 2050 threatens to increase by another order of magnitude to 250 TWh (i.e. 60% of the energy produced would be consumed domestically, which significantly threatens gas reserves and revenues from its export). Given the drastic drop in oil prices in recent years and the associated significant drop in government revenues, the Algerian government is increasingly aware of the need to diversify the economy and not rely on the volatile oil and gas markets. The Government therefore approved the Revised Program for the Introduction of Renewable Energy Sources for the Period 2021-2030, which sets approximately 4 times higher goals for the introduction of renewable energy sources and expects to issue international public contracts for photovoltaic power plant projects on an ongoing basis. In the longer term, the government plans to build renewable energy projects with a total capacity of 15 TW in the period 2021-2035.

Defense industry

Algeria has long had the largest army budget in Africa and is one of the leading importers of arms. The massive investment in the defense sector reflects Algeria’s complex geopolitical situation and the proliferation of unconventional threats in the Sahel region. The Algerian army is interested in security and defense technologies, weapons and ammunition, aviation technology as well as telecommunications and radar systems.

According to a survey by the SIPRI Institute, Algeria is the 6th largest arms importer in the world and has even increased its arms imports by 64% in the last 5 years. The biggest partners here are Germany, China and Russia. Algeria also has the largest military budget in Africa for a long time, and for 2022 defense represents 23% of the Algerian state budget, i.e. €8 billion (an increase of 6% compared to 2021). The long-term priority remains the diversification of sources of supply of weapon systems and defense equipment. Algeria remains interested in the consolidation of the local military industry and its development. An overview of public contracts in this sector can be viewed on the portals www.baosem.com, www.algeriatenders.com and www.mdn.dz. The Algerian Ministry of the Interior has also increased the number of security forces by an additional 6,000 table positions in 2020, which are likely to require additional equipment, and further tenders can be expected to be published.

Water management and waste industry

Algeria is facing a water shortage due to the ever-increasing demand for water and climate change, and water management is becoming a strategic sector. The Algerian government plans to finance projects aimed at making new water resources available, irrigation, desalination of sea water, drinking water supply and wastewater treatment with subsequent use in agriculture. The government plans to allocate 1 billion euros per year for water management projects.

Algeria, which is growing in population, is intensively dealing with issues related to water and waste management not only in response to the deterioration of the environment. The current policy of the Algerian Ministry of Water Management is governed by the National Water Resources Management Plan for the period 2009-2030. This plan mainly talks about economical consumption of water resources by means of economical irrigation, improvement of public services in water management, rehabilitation and development of distribution network, irrigation network and network of treatment stations. The government is planning new seawater desalination projects with the aim of increasing the production of drinking water from the current 561 million m³ per year to two billion m³ by 2024. The 11 seawater desalination stations in 9 regions are counted only for the growing needs of the capital with the construction of another 4 desalination stations in the suburbs of Algiers.

Healthcare and pharmaceutical industry

As Algeria invests in the modernization of existing and the construction of new medical facilities in both the public and military sectors, it requests various medical facilities and materials for this purpose. Along with South Africa, Algeria also has the strongest pharmaceutical industry in Africa. The export potential could generate up to USD 400 million per year, creating opportunities for the export of production lines and chemical ingredients.

Together with South Africa, Algeria has the strongest pharmaceutical industry in Africa, the export potential could generate up to 400 million USD per year. Algeria’s pharmaceutical market is among the most important in the North Africa and Middle East region thanks to strong and sustained growth for almost 15 years, with growth reaching 8% annually. Currently, the turnover of this sector is around 4 billion USD and the forecasts are at 5 billion USD in 2021. The country produces oncology drugs with high added value, during 2021, Saidal started to produce the CoronaVac vaccine against the coronavirus in cooperation with China by the Sinovac company, in 2022 Algeria should also be self-sufficient in insulin production. In 2020, 320 domestically produced medicines were traded on the Algerian market. Algeria covers ¾ of its own pharmaceutical consumption with local production (more precisely, domestic production covers 66% of the value and 76% of the volume of total consumption). The government plans to export medicines worth 50 million Euros in 2022. Although the strategic sector is protected by the unattractive investment rule 49/51, it creates opportunities for the export of production lines and chemical ingredients.

Agricultural and food industry

Algeria’s economic development plan relies heavily on the development of the agricultural sector in order to ensure the country’s food security. The plan talks about modernizing agriculture, improving its performance and competitiveness with a view to strengthening the export of agricultural products in the horizon of 2024. The government plans investment incentives for projects located mainly in the southern parts of the country and on plateaus with a focus on strategic crops and their processing, other projects are emerging in the area of ​​importing cattle and building dairies and processing plants.

From January 2021, the import of fresh and frozen red meat is prohibited in Algeria. The country’s annual imports of red meat came to an incredible 122 million USD and reached 5,000 tons in annual volume. The goal of the Agricultural Development Plan was, among other things, an overall evaluation of the perspectives of domestic cattle breeding. As part of efforts to develop domestic breeding, the Algerian Ministry of Agriculture announced new zootechnical requirements establishing age, weight, health status and selected breeds that can be imported into the country. The priority given by the Algerian Ministry of Agriculture to the import of live animals is also reflected in the reduction of customs duties, which in some cases are close to zero. The Algerian Ministry of Agriculture also supports organic farming and has created a bio-certification department in its structure together with ALGERAC. Algeria, despite its considerable potential, in view of the growing demand for basic foodstuffs, it is dependent on the import of foodstuffs such as wheat, but also milk powder. In addition, domestic cereal production saw a 34% drop in the 2020-2021 season compared to the previous season due to drought. The shortfall in production had to be replaced by imports.

Transport industry and infrastructure

Further development of the road, rail and air infrastructure is planned in Algeria, which is still insufficient even with regard to the vastness of the territory and the need to modernize the existing transport network. In large cities, the concept of smart cities with a focus on transport telematics is increasingly emphasized. In October 2021, the Ministry of Transport prepared an action plan and emergency measures to lead to the revival of land, sea and air transport. The government plans to set conditions for the entry of private companies into the air and sea transport sectors.

In both air and sea transport, according to press reports, the Ministry of Transport has given preliminary approval for several private companies to enter the Algerian market, but the 49/51 rule (where foreign investors can own a maximum of 49% of shares) will be maintained. Currently, domestic passenger air transport is in the hands of the state-owned company Air Algérie and, to a lesser extent, Tassili Airlines, which falls under the state-owned energy company Sonatrach. In the area of ​​maritime passenger transport, the transport is provided by the state company Algérie Ferries. At the end of 2021, the Ministry of Transport proposed an action plan for the reorganization of public maritime transport companies for passengers and goods, as well as measures aimed at ensuring the import of strategic products and strengthening the passenger transport company.

Algeria Trade