These Are The Strategic Sectors Concerned With Applying Investment Rule 51/49

Algerian government decided about the strategic sectors concerned with the adoption of the investment rule related to foreign investment, which was the subject of controversy or what is known as the rule 51/49 that the government dropped within the Finance Law on several sectors in a step to encourage and activate investment and attract foreign capital.

The preliminary draft of the supplementary finance law for the current year that will be approved at the cabinet meeting next Sunday included a proposal that considered the hydrocarbons and mines sectors as two strategic sectors that are directly concerned with applying the rule of 51/49 to all foreign investments in these sectors.

According to government sources, the proposal that was included in the legislative component of the supplementary finance bill, confirms that the exploitation of the national mining field and all internal and surface resources related to underground mining activity and above it is a strategic activity except for quarries and rubble.

The proposal indicates that all activities regulated by the hydrocarbons law are also strategic, in particular the upstream activity in the energy sector in addition to exploiting the electric power distribution network via gas and liquid gas and cables through the interior and surface channels.

The supplementary finance bill also included industries related to the military industries that are under the tutelage of the Ministry of National Defense within the strategic sectors concerned with the investment rule 49/51, and the proposal also applies to the railways, ports, airports and pharmaceutical industries.

According to the initial justifications for the owners of the legislative text, reducing the application of the rule 51/49% is due to the desertification situation that affected the investment field that has become unpolarized for foreign direct investment compared to the neighbouring countries where qualifications do not rise to the level of Algeria’s natural and material qualifications, which is confirmed by the report of the United Nations Conference on Trade Development, which is the situation that the government attributed to the negative impact of implementing the rule 51/49 starting from the year 2009, which was the subject of frequent inquiries and other criticism by delegations of foreign businessmen, and during the visits of senior officials and politicians as well.

The government also justifies its proposal by limiting the scope of application of the rule 51/49, by not accepting foreigners in the conduct of their projects that they set up in Algeria, to avoid the adventurous factor that the investor’s logic rejects, and possessing small shares of the projects ’shares, which is one of the factors that prevented the goal of transferring technology to Algeria. In addition to another factor that constituted a repulsive factor for foreign investment, which was related to the narrowing of the operations of transferring profits of foreign companies, which the 49/51 rule limits at 49%, which fueled the resort to fraud in the declaration and inflating the bills.

It is known that official statistics confirm that since the adoption of the foreign investment base 49/51 in 2009, Algeria recorded a significant decline in foreign direct investment compared to the previous years. At a time when foreign investment projects reached 93 investment projects in 2007, they declined to only 4 projects since the year of the adoption of this rule and the evasion of foreigners from investing in Algeria continued, as the total of foreign direct investments did not exceed 34 projects during the years 2010-2011, that is, less than the sum of one year before the application of this rule, and the foreign investment trend in Algeria continued to decline to its lowest levels and the desires of the investment remained just figures that sometimes exceeded $10 billion without finding a way to realize them.