Algerian businesses want government to stick to reforms

ALGIERS, Oct 23 (Reuters) – Algerian businesses say they are starting to benefit from new rules to encourage investment and exports in one of the world’s most closed economies, but they fear a petrodollar surprise The wealth could push the government back to a country-focused model.

Recent regulations aimed at diversifying the economy to reduce reliance on oil and gas sales include new investment regulations that took effect this month and cash incentives for non-oil exporters.

“Algeria is in a race against time. It has to generate revenue from oil and gas before prices are pushed down again,” said a former government minister who still advises on economic issues, speaking on condition of anonymity.

For decades, Algeria has used its high energy revenues to run a top-down economy in which private or foreign investment is difficult, large sectors are reserved for the state and entrepreneurs are stifled by bureaucracy.

But after oil prices fell in 2014, cash reserves plummeted, jeopardizing state finances and weighing on social spending, fueling public anger at the political stagnation that sparked the massive protests that rocked the state in 2019-20 .

With Algeria’s foreign exchange reserves falling by two-thirds in six years and the risk of long-term instability growing, President Abdulmajid Teben’s government has pushed for reforms to strengthen the private sector and boost local businesses.

“We are still heavily influenced by bureaucracy, and often corrupt bureaucracy. It’s still a reality,” said Mohammad, an entrepreneur who waited three years with foreign partners for permission to open a refrigerator factory.

“I know Tebboune is trying to do something. But it’s too early to say if he’ll be successful, so it’s a wait-and-see for me,” added Mohammed, who did not give his last name for fear it would make his work complication. business effort.

Beset by arbitrary policy changes, plagued by corruption, hampered by bureaucracy and constrained by strict rules, Algeria’s private sector has struggled to prosper for years.

This is 2019 after previous president Abdelaziz Bouteflika emerged from a civil war in the 1990s that killed hundreds of thousands and his previous reform efforts ended in public outrage over corruption Another factor in the mass protests.

The army has been the main political force in the country of 44 million since Algeria gained independence from France in 1962, and it pushed Bouteflika to step down to help quell protests.

Tebboune was elected in late 2019 with an extremely low turnout, inheriting political turmoil and economic downturn even before the COVID-19 pandemic hit. He passed some reforms, but now demand for Algeria’s energy is high and incomes are surging.

“A friendlier economy”

Sami Agli, president of the Chamber of Commerce, said the new rules were aimed at making Algeria a “more friendly and open economy” but acknowledged it would be a long process.

“The first step is obvious. Free zones will be established, customs codes will be changed to make them more attractive for foreign investment, and we have a new investment code,” Agri said.

To boost exports, the government provides substantial tax exemptions and helps reduce shipping costs. However, Agri said any long-term growth in exports would require further investment in non-oil sectors.

In a sign that the government is taking more urgent steps, unlike in 2016, where investment regulations were agreed but never finalized, the Official Gazette has published rules to bring the new regulations into effect.

Meanwhile, non-oil exports, including cement, pharmaceuticals, pipes, turbine parts and refined sugar, will hit a record $7 billion this year, despite massive state aid to private exporters, including financing some transportation costs .

Tebboune also suggested that Algeria wants to join the BRICS group – one of the few countries to leave the World Trade Organization.

Like other major energy exporters, Algeria has historically adopted reform measures during periods of low incomes, then reverted to a country-focused approach when prices rose again.

A former government economic affairs adviser said the authorities understood the need to move forward with reforms despite an increase in energy revenue this year.

“Selling more from oil and gas is our priority. We’re running out of time because oil prices are so volatile and a global recession is very likely,” the former adviser said.

Reporting by Lamine Chikhi; Writing by Angus McDowell; Editing by Andrew Cowsan

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