Doing Business In: Algeria

Loucif + Co

Loucif + Co logo View Firm Profile


Algeria is the leading natural gas producer in Africa and the second-largest natural gas supplier to Europe outside of the region.

With a territory of 2.4 million km² and a dynamic demography (+900,000 inhabitants/year, 44 million inhabitants on 1 January 2020), Algeria has the 4th largest GDP on the African continent (144 billion USD in 2020) and the highest GDP per capita in North Africa.

The Algerian economy is heavily reliant on hydrocarbon exports. On average, hydrocarbons represented 93% of the country’s exports, 43% of tax revenues and 21% of GDP over the period 2004-2020.


GDP per capita, USD PPP (2020): 10 656
GDP growth (2020): -4.9
Inflation (average 2020): 2.4
External debt (2020): 2% of GDP
USD/DZD exchange rate (2020 average): 127.1
EUR/DZD exchange rate (2020 average): 145.1


Algeria remains a sizeable and lucrative market for foreign investors.

Several factors clearly outline Algeria’s future potential: the country’s strategic geographical position, its infrastructure, its oil wealth and abundant natural resources, and its growing population which recently reached 44 million.

In addition, Algeria offers a skilled and affordable workforce as well as electricity, gas, and water at competitive prices.

Although hydrocarbons remain the backbone of the Algerian economy, accounting for more than 90% of exports, there are business opportunities in numerous other sectors such as agriculture, infrastructure, housing, clean energy, and pharmaceuticals.

In 2020 the Algerian Government launched ambitious efforts to improve the investment climate and respond to the Coronavirus pandemic.

Steps taken have included revising the country’s investment legislation to ease market entry for foreign investors and ending the 49% cap on foreign equity in all non-strategic sectors. See below for further details.


The COVID-19 pandemic seems to have acted as a catalyst for the pace of transformation: no less than three reforms have been initiated in less than two years, covering key sectors such as energy and pharmaceuticals.

  • First solar tender: On 23 December 2021, the Ministry of Energy Transition and Renewable Energy launched a long-awaited solar tender for the deployment of 1 GW of solar capacity (“Solar 1,000 MW”), marking the beginning of Algeria’s energy transition.
    The tender relates to the construction of solar photovoltaic power plants with a total capacity of 1,000 MW divided into lots ranging from 50 MW to 300 MW each, according to a schedule specified in the tender documents.
    The Algerian Renewable Energy Company (SHAEMS), a joint venture between state-owned Sonatrach and Sonelgaz to participate and facilitate the renewable energy projects, will partner with the selected developers by acquiring a stake of up to 25% of the share capital of the selected project companies.
    Foreign investors can acquire a majority stake in the project company due to the recent abrogation of the 51/49 rule concerning the renewable energy power generation sector.
    The electricity produced will be sold through a 25-year Power Purchase Agreement (PPA).
    The deadline to submit project proposals is 30 April 2022 at 10:00 a.m. (local time).


  • Green hydrogen: The Minister for Energy Transition stated that green hydrogen could be used to replace natural gas, as part of the energy mix. The development of the green hydrogen industry from renewable electrical energy appears to be one of the key solutions for a successful energy transition in Algeria.
    In the framework of the Algerian-German energy partnership, and with the participation of the German Federal Ministry of Economy and Energy (BMWi), and the Algerian Ministries of Energy (MEM) and Energy Transition (MTEER), an exploratory study on the potential of Power-to-X (green hydrogen) for Algeria has been published by the German development agency, Deutsche Gesellschaft für internationale Zusammenarbeit (GIZ) GmbH.
    The study reveals a significant potential for green hydrogen production in Algeria. It shows it is technically and economically possible to develop a green hydrogen industry in Algeria, thus contributing to the decarbonisation of several sectors and the reduction of dependence on hydrocarbons.
    Algeria’s existing infrastructure in the oil and gas industry, its exceptional potential in wind and solar energy, and its geographical proximity to Europe make it a reliable future supplier of green hydrogen and/or other valuable gases.
  • New hydrocarbons law: a new law on hydrocarbons was published at the end of 2019. Law No. 19-13 of 11 December 2019 governing hydrocarbon activities which, in addition to a more favourable tax reform for foreign investors, provides for a more flexible contractual regime for the exercise of hydrocarbon exploration and exploitation activities.
    The new law marks the return of the production sharing contract that existed in the previous law No.86-14 of 1986, which allowed the realisation of major hydrocarbon discoveries and the development of the Berkine basin in the 1990s.
    The risk services contract has also been reintroduced, which should encourage the use of improved hydrocarbon recovery technologies to optimise the performance of deposits, particularly mature ones, and whose positive impact on production could be felt in the short/medium term.
    The Ministry of Energy, the Governmental Agency ALNAFT, and the National Oil Company Sonatrach are preparing an international call for tenders for the exploration and exploitation of several blocks. The tender process is expected to begin in the second half of 2022.
  • New pharmaceutical regulations: The life sciences, health, and pharmaceutical sectors have undergone significant recent developments. The Council of Ministers adopted an action plan to promote the sector in July 2020, resulting in an overhaul of the legislative and institutional framework.


Algerian law is mostly based on the French civil law system. Accordingly, it is a codified system of law where the legislation is divided into codes which contain the primary legislation.

Furthermore, the Algerian Constitution dated 8 December 1996 and amended several times, contains, amongst others, provisions on division of powers, the tasks and the election procedure of institutions, and values of the Algerian society.


The Algerian Commercial Code provides for five types of corporate forms of commercial companies, namely:

  • Partnerships (société en nom collectif) ;
  • Limited partnerships (société en commandite simple) ;
  • Limited partnerships by shares (société en commandite par actions) ;
  • Limited liability company (société à responsabilité limitée) ;
  • Joint stock company (société par actions).

The shareholders of partnerships and the general partners of limited partnerships and limited partnerships by shares are indefinitely and jointly and severally liable for the company’s debts.

The limited liability company and the joint stock company are, in practice, the most used corporate forms because they limit the liability of their members to their contributions to the company’s share capital.


The incorporation of an Algerian company involves the signing, in front of a public notary, of the articles of association. The articles must be drafted in Arabic and governed by Algerian law. Foreign investors must import foreign currencies through legitimate banking channels in order to subscribe and pay the Algerian company’s share capital in front of the notary.


Since 2016, aware of the competition between Mediterranean countries, particularly within the Maghreb, to attract quality Foreign Direct Investments (FDIs), and given Algeria’s longstanding need to diversify its economy away from hydrocarbons, Algeria initiated a process to reform its investment law.

In 2016, Law No. 16-09 on the promotion of investment dated 3 August 2016, as amended (the “Investment Law”) repealed the former investment law and relaxed several existing rules, notably the 49% cap on the participation of any foreign investor in the capital of an Algerian company (“the so-called 51/49 rule”)

On 11 December 2019, the finance law for 2020 limited the 51/49 rule to strategic and importation activities and authorised the use of foreign financing for strategic activities from development financial institutions.

The 51/49 rule, however, remained in force for all activities until the list of strategic sectors was set via the publication of the Supplementary Finance Law for 2020 and its implementing regulation.

On 4 June 2020, the Supplementary Finance Law for 2020 was published in the Official Gazette. The new law represents a major turning point in the country’s foreign investment policy, in contrast to the approach taken ten years ago.

The main feature of the Supplementary Finance Law for 2020 is a striking reversal of principle: a foreign investor may now invest in all economic sectors up to 100% of the share capital of an Algerian company except for strategic sectors defined in a relatively restricted manner and for importations of goods intended to be resold in the same condition.

Key aspects of the recent reform of Algerian investment law are discussed below to provide foreign investors with an understanding of the current overall legal framework for investment.

  1. End of the obligation for foreign investors to set up a joint venture with a local partner holding at least 51% of its share capital

Before the publication of the Supplementary Finance Law for 2020, foreign investors had to find one or more Algerian partners in order to set up a joint venture. Algerian national resident(s) had to hold at least 51% of the share capital in the joint venture company regardless of the market sector the company planned to operate in.

In the decade following the introduction of the 51/49 rule the level of foreign direct investment drastically decreased, leading the Algerian Government to limit the 51/49 rule to a restricted list of activity sectors.

The Supplementary Finance Law for 2020 repeals the 51/49 rule except for the importation of goods in order to resell them in the same condition and for five strategic sectors (as defined below).

(i) Strategic sectors

Pursuant to the Supplementary Finance Law for 2020 (as amended), the strategic sectors subject to the 51/49 rule are defined as follows:

  • The military industry and related activities placed under the authority of the Ministry of National Defense.
  • Railways, ports and airports.
  • The pharmaceutical industry except for investments related to the manufacturing of essential, innovative, high value-added products which require complex and protected technology and are intended for domestic market and export.

Pursuant to separate sets of laws and regulations, the following important sectors are also subject to the 51/49 rule:

  • The exploitation of the national mining domain as well as all underground or surface resources relating to an extractive activity, except for quarries and sandpits of non-mineral products.
  • The upstream sector as well as operating the distribution network and transportation of electrical energy by cable and transportation of hydrocarbons (liquids and gas) by overhead or underground pipelines.

An implementing regulation has been published and provides further details regarding the definition of strategic sectors.

Executive Decree No. 21-145 of 17 April 2021, published in the Official Gazette of 22 April 2021, has defined the list of strategic activities (“Decree 21-145”).

To this end, Decree 21-145 lists 44 activity codes considered as “strategic”.

As a general comment, it is interesting to note that Decree 21-145 marks an opening of the energy sector to foreigners: foreign investment will be unlimited in (i) the electricity production from renewable energies and in (ii) the downstream of the hydrocarbon sector (except transport by pipeline) such as oil services, refining or oil drilling.

In contrast, most of the activities in the pharmaceutical industry sector are qualified as strategic, thus restricting the participation of foreigners in the project companies to 49%.

(ii) Importation of goods for resale in the same condition

The objective of maintaining the 51/49 rule to activities of importing raw materials and finished goods for resale in the same condition is to discourage the development of these costly activities for the Algerian external balance and to limit the transfers of foreign currencies outside Algeria.

Given the above, all other activities associated with producing goods and services – including the telecommunication, banking and insurance, agri-food, and construction sectors – are now open to foreign investment without any obligation to create a partnership with a local party.

  1. End of the State preemptive rights

The Supplementary Finance Law for 2020 repeals the pre-emptive right of the Algerian Government over any direct transfer of shares by or to a foreign investor.

Indirect transfers of shares in an Algerian company, up to 10% or more, provided that the Algerian company had benefited from advantages or incentives were also subject to the Algerian State right to repurchase. The Supplementary Finance Law for 2020 repeals such State right to repurchase.

The State pre-emption right has been replaced by the requirement that authorisation must be obtained from the “competent authorities” before any direct transfer of share capital

The Supplementary Finance Law for 2020 remains silent as to the way this authorisation can be obtained and refers to further regulations. It is, of course, desirable that any implementing legislation be adopted swiftly to a) mitigate the risk of blocking situations developing, b) clarify the law, and c) provide a uniform approach for supplying authorisation.

  1. Opening up external financing for foreign investors

The Supplementary Finance Law for 2020 permits foreign investors to finance their investments from abroad. The explanatory notes view this measure as a prerequisite for opening up Algeria to serious foreign investors who have their own capital.

There are, however, areas of uncertainty regarding the technical application of this measure. For example, the question of whether borrowing from foreign banks is compatible with the banking monopoly (whereby only duly licensed credit institutions may perform banking transactions in Algeria regularly), is crucially important in practice.

In addition, it is vital that the Algerian resident borrower can transfer into foreign currencies the repayment of loan maturities, interest, the principal in case of a default, or any other form of remuneration to the foreign bank.

It would be desirable for the Algerian Central Bank – in order to reassure foreign lenders – to publish guidelines clarifying the procedures for repatriating loan repayments and interests under the new law (although a few scattered texts already exist).

Finally, several statements by the Algerian Government show a strong willingness to call on international financial institutions to finance strategic projects.

For example, in the renewable energies sector, where the ambitious SOLAR 1,000 MW call for tenders has been recently launched, recourse to organisations such as the World Bank / IFC or French AFD / Proparco would provide access to global packages including financing and would give the project “credibility” vis-à-vis the international community.


An important question that frequently arises is how the repatriation of investment proceeds operates under Algerian law, and how it is effectively implemented in practice.

The Investment Law expressly provides in favour of foreign investors for the transfer guarantee of dividends and investment proceeds.

As a reminder, the transfer guarantee is the right for any foreign investor to transfer in foreign currency the dividends and other revenues resulting from its investment, subject to certain conditions being met.

Practice shows that in most cases, foreign investors can transfer in foreign currencies the dividends and other revenues distributed by their Algerian subsidiary, although such transfers are subject to a cumbersome administrative process with local banks, particularly for the first transfer.


The Investment Law provides for traditional guarantees that are usually granted under bilateral investment treaties.

Algeria has entered into bilateral treaties on investment protection with numerous countries such as France, Germany, Switzerland, Italy, China, the UAE, Qatar and Turkey.

The Investment Law grants a certain number of guarantees to foreign investors, such as:

  1. Fair and equitable compensation for expropriation: investments carried out under the Investment Law may not, except in limited cases provided by the law, be subject to requisition by administrative means, and the requisition and expropriation give rise to fair and equitable compensation.
  2. Fair and equitable treatment to foreign investments: foreign nationals receive fair and equitable treatment regarding the rights and obligations resulting from their investment.
  3. Stability of the Investment Law: the effects of revisions or repeals, likely to intervene in future, do not apply to investments performed under the Investment Law, unless expressly requested by the investor.
  4. Dispute resolution: the competence of the Algerian jurisdiction has been affirmed in the event of disputes between foreign investors and the Algerian State, except where bilateral or multilateral treaties or an agreement between the parties (including an arbitration clause) are in place.


Although it is generally not considered good practice to attract foreign investors through investment incentive schemes because of the cost to the host state, the Investment Law does provide for a generous investment incentive regime.

  1. General investment incentive framework

The Investment Law provides for an incentive scheme organised around three levels of advantages:

  1. the “general” advantages that are common to all eligible investments;
  2. the additional advantages for privileged activities and/or employment-generating activities; and
  3. the exceptional advantages for projects providing a unique opportunity for the national economy.

In terms of eligibility, any investments registered with the National Agency for the Development of Investment (“ANDI”) that are not included on the lists of activities excluded from all advantages (“negative lists”), automatically benefit from the general advantages provided for by the Investment Law, except in specific cases.

  1. A new set of specific incentives for industrial investments introduced in 2020

To promote the diversification of its economy, Algeria wants to encourage the development of industrial activities and local integration. To achieve this ambition, three new investment incentive regimes have been introduced by the Supplementary Finance Law for 2020:

  1. Exemption from customs duties and value-added tax, for two years (renewable), for imported components and raw materials or acquired locally by subcontractors involved in the production of assemblies and sub-assemblies to be integrated into equipment and products in the mechanical, electronic and electrical industries, as well as subcontractors involved in the maintenance of production equipment and the production of spare parts and components in all sectors of activity.
  2. Customs clearance authorisation for release for consumption of refurbished production lines and equipment. Previously, the import of renovated production lines was subject to the authorisation of the Ministry of Industry and Mines. A forthcoming regulation will set out the practical details of such a regime.
  3. Exemption from customs duties and the value-added tax for the raw materials imported or acquired locally as well as for the components acquired from subcontractors involved in the production of assemblies and sub-assemblies to be integrated into equipment and products in the mechanical, electronic, and electrical industries. All imported assemblies, sub-assemblies, and accessories by the operators who have reached the integration rate stated in the specifications for their sector benefit from a 5% duty rate of customs and a rate of 19% value-added tax.

Implementing texts and specifications for each of these industries should be published to ensure the effectiveness of these incentive schemes.

  1. Tax exemptions and other facilitation measures in favour of start-up companies

To address young people’s economic aspirations, the Algerian Government has put in place a policy to encourage the development of start-ups.

Several measures have thus been adopted in the Finance Law for 2020 and the Supplementary Finance Law for 2020: various tax exemptions (VAT, corporate income tax, reduced customs duties, etc), permission for investment companies to hold more than 49% of the share capital of start-ups to encourage fund-raising. More recently, a fund dedicated to start-ups operating in innovative sectors has been established.


Algeria will host in June 2022 the 19th edition of the Mediterranean Games, celebrated every four years, which constitute for the countries of the Mediterranean Basin the most important multi-sport event after the Olympic Games and bring together 26 countries (