Algeria: Businessmen Gear Up For Repeal Of 51/49 Investment Rule During 2017

The controversy is again heating up in Algeria about the contentious investment rule 51/49%, through the Finance Act of 2017, after businessmen within the national forum of heads of enterprises and abroad, put forth new proposals to the Ministry of Finance, which include a mandatory withdrawal of this rule, and its abolition for non-strategic economic sectors, in the wake of the adoption by Parliament of the revised investment law at its latest Spring session.

 This hubbub comes amid partisan differences over the fate of this investment rule, despite its “desperate” defense by the Minister of Industry and Mines, Abdeslem Bouchouareb, who confirmed that the period between the years 2009 and 2016, saw the largest percentage of the flow of foreign investments in the history of independent Algeria, while stressing: “We are currently in need of this rule, though the government considers it is necessary to scrap it in the near future for non-strategic economic sectors.

However, he emphasized that this rule is nowadays needed by the country because of pressing economic concerns without however excluding its partial scrapping in the coming years.

Mr Bouchouareb made such a statement came during a press briefing held recently at the Foreign Ministry premises, in preparation for the upcoming Algerian-African business forum scheduled for next December 2016.

Furthermore, several foreign embassies posted in Algeria, led by the US, French, Italian, Spanish, Chinese diplomatic representations, which are the largest client countries in terms of trade and investment with Algeria, have pointed to the importance of  abolishing the 51/49% investment rule in some sectors of economic activity.

This option was also advocated by some political parties in the country notably by the FLN party and others.

Regarding the rule 51/49% governing foreign investment in Algeria and introduced by the 2009 Finance Act, the relevant bill proposed to extirpate the Investment Code to be governed by the texts of Laws of Finance, recalling that a step in this direction was made by the FL in 2016.

This proposal is motivated, according to the authors of the new Code, by the difficulty of monitoring all incoming flow of foreign investment since only those eligible and wishing to benefit from advantages are registered with Andi.

 A situation which allowed addition, during the period 31 December 2008 to 31 December 2013, to 5.141 foreigners to infiltrate to perform trading operations, including 711 under import, while for the same period the Andi Agency recorded only 110 statements of foreign investment approved by the CNI.

The draft revision of the Code provides, in addition, the movement of two other measures: the rule of mandatory recourse to domestic financing and the rule governing the partnership with the public economic enterprises (FIEs) by opening the capital.

According to the designers of the text, the first rule must be entered either in a budget law or by a resolution of the Bank of Algeria, the fact that the Code “is limited to investments in two sectors among the six that includes nomenclature economic activities subject to registration in the trade register.”

Privatization of public enterprises should be governed, in turn, by a budget law, according to the same document which points out that a provision to this effect was introduced by the FL 2016 that authorizes FIE open its capital to national private participation provided they keep 34% of its shares. The recently-adopted bill also proposed to repeal the balance sheet rule of surplus currencies.