ALGERIA, Oct 23 (Reuters) – Algerian businesses have started to benefit from new laws to encourage investment and exports, they said. In one of the world’s most closed economies, they fear the windfall of the petrodollar could push the government into a heavy-handed model of government. .
Recent laws aimed at diversifying the economy to reduce dependence on oil and gas sales include a new investment code that took effect this month and financial incentives for non-oil exporters.
“Algeria is in a real race against time. It needs to move away from oil and gas and generate revenue,” said a former government minister who still advises on economic issues.
For decades, Algeria has used its vast energy revenues to run a top-down economy, where private and foreign investment has been difficult, large sectors have been privatized, and entrepreneurs have been mired in bureaucracy.
But in the year Cash reserves have collapsed since oil prices collapsed in 2014, straining government finances and putting pressure on social spending, adding to public anger at the political stagnation that led to protests that rocked the state from 2019-20.
As Algeria’s foreign exchange reserves have fallen by two-thirds in six years and fears of long-term instability have grown, President Abdelmajid Tebouen’s government has boosted domestic businesses by introducing reforms to strengthen the private sector.
“We are still suffering from a heavy bureaucracy, often a corrupt bureaucracy. This is still a reality,” said Mohamed, an entrepreneur who has been waiting three years with a foreign partner to manufacture refrigerators.
“I understand that Teboy is trying to do things, but it’s too early to tell if he’s going to succeed, so for me it’s still a wait and see,” added Muhammad, who did not disclose the name of his family’s business endeavors.
Confused by arbitrary policy changes, plagued by corruption, hampered by bureaucracy and constrained by strict regulations, Algeria’s private sector has struggled for years.
Reforms under former President Abdelaziz Bouteflika, which left hundreds of thousands dead since a 1990s civil war, ended in public anger over corruption, another cause of 2019 protests.
In the year
In the year Tebow, who was elected in late 2019 with extremely low turnout, inherited political turmoil and economic failure even before the Covid-19 pandemic took hold. It has gone through some reforms but now there is a huge Algerian energy demand and rising income.
‘A more friendly economy’
Business confederation chairman Sami Aghly said the new laws would try to make Algeria a more friendly and open economy, but admitted it would be a long process.
“The first steps are visible. Free zones are going to be set up, the customs code has been changed to make it more attractive for foreign investment, we have a new investment code,” Agley said.
To boost exports, the government has provided substantial duty exemptions and aid for transport costs. However, any long-term increase in exports will require more investment in non-oil industries, Agli said.
One sign that the government is taking a more urgent approach is that unlike in 2016, when an investment code was agreed upon but never finalized, the official gazette issued regulations to implement the new code.
Meanwhile, non-oil exports, including cement, pharmaceuticals, pipes, turbine parts and refined sugar, are expected to receive the largest amount of government aid this year to private exporters to finance some of the transportation costs, reaching $7 billion.
Tebouen suggested that Algeria wants to join the BRICS economic group – a move for a country that is one of the few not in the World Trade Organization.
Like other major energy exporters, Algeria has historically moved toward reforms during periods of low revenues and reverted to a heavy-handed government approach when prices rebounded.
According to a former government adviser on economic affairs, the authorities understand the need to continue the reforms despite the increase in energy revenues this year.
“Selling more of oil and gas is our priority. Because oil prices are so volatile and a global recession is a possibility, we are short on time,” said a former consultant.
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Reporting by Lamin Cheeky; Writing by Angus McDowall; Edited by Andrew Cawthorne
Our Standards: The Thomson Reuters Trust Principles.
