 PRIVATIZATION |
 A Significant Appeal To Investors |
With Globalization Algeria had no other choice than opting for a controlled liberalism after years of planned economy system. Involved in a bunch of reforms , the government of Mr. Benflis established priorities among which the reinforcement of the private sector role and the warranty of a favorable macro-economic environment for its development. In this respect, a more flexible legal framework has been implemented mainly to attract investors either nationals or foreigners. Meanwhile, a program of public enterprises privatization has been launched with different success rates.
| A Favorable Legal Framework |
Considering the legal side, the freedom of investment has been established by the 1994 investment code which allocated the necessary guaranties as well as the substantial advantages for the private investors. This step was followed by a period of stabilization from 1996 to 1998. On the other side, two major enactment's have been adopted by parliament in august 2001. One relative to the development of the investment and the other one dealing with privatization and the management of the public sector. These measures are showed by an important decrease of taxes, fiscal fees and social dues. The easing of the administrative procedures as well as the allocation of different advantages are also in force. Noureddine Boukrouh, Minister of Commerce, formerly in charge of the ministry of participation and of the reforms coordination, asserts: " Algeria has realized significant results in the past few years with its market opening to the world exchanges and to direct foreign investment. It is thus obvious that the new laws had to offer more flexibility in the acquisition of interests in the public enterprises capital and mainly give more opportunities for the development of the direct foreign investments". All these incentives bring an extremely attractive fiscal system to Algeria. The Algerian government clearly showed its will to fit the tax system to the new economic and social environment of the country, but also to the globalization process which will bring about a standardization of the laws and processes. The reform of the tax system turned to be essential to ensure a better transparency and fight against the black market, smuggling and tax dodging.
Used to rely mostly on the oil taxation, the government is now turning to a more ordinary tax system undependable from the oil rate fluctuations. New taxation rules have been introduced in the new finance law notably those concerning companies. In fact, the standard tax system is presently contributing up to 40% in the performance budget and equipment against 60% for the oil taxation. Considering the low taxation rates , the economic operators have significant advantages in matters of investment.
However, despite of the creation of the ANDI ( Agence Nationale de Developpement de l'Investissement) National Office for The Development of the Investment, essentially meant to facilitate the enforcement of the tax procedures, the very slow administrative procedures are real drawbacks and barriers to lots of investors and entrepreneurs. Speaking of these, they have to encounter with several administrative upheavals such as the repatriation of their profits. Therefore, a one slop shop investment has been established and already operational in Algiers and in four other departments .It is envisioned to extend it , in a short run, to all the Algerian territory. This initiative has been supported by the creation of a Backing Funds to Investment which will be in charge of the expenses inherent to the external infrastructures such as, roads, electrification and gas & water supply.
Nevertheless, many things that hinder investments have to be reviewed in spite of all the efforts intended to simplify the administrative procedures. The industrial property is a good illustration since it is highly difficult for either a national or foreign investors to get hold of a property.
| ANDI et CPE |
A National Office For The Development Of The Investments has been created by the government in order to fill both the role of a one slop shop investment and manage the aid funds to investments. Being the General Manager of the Office , Mr. Madjid Baghdadli hereby explains the strategic missions of his Office: " The first mission concerns the assistance and provide the property developers with information. This latter consists of welcoming, assess and consider the projects, provide the necessary information, and the establishment of a data bank (…). As for the assistance, the creation of a one slop shop investment will help the investors to get all the required documents easily. The second mission of the office is the delivery of the certificate of eligibility for benefits". The ANDI grants the benefits as well as the tax immunity over periods that can reach 10 years. The office also assumes responsibility for the easiness of the administrative procedures and the land property acquisition since it can put the investors through the other administrations ( taxation, customs, local authorities) within the framework of the one slop shop investment.
| Being under the authority and the presidency of the Prime Minister, the State Council For Participation (CPE) is considered as the supreme institution that defines the national policy of the economic public enterprises whether dealing with their general policy in the public sector or their privatization. The said council is constituted by the whole economic ministries and is able to take prompt decisions when necessary. As illustrated by Mr. Boukrouh: " When we signed a contract of partnership with the Indian group Ispat-LNM, last June, within the framework of collaboration with the Sider Iron &steel complex, the Indian partner required additional benefits related to the energy price. The request was beyond what our former laws stipulate(…) but due to the importance of the complex, employing more than 13 000 people and producing 800 000 tons/year, the government decided to favorably answer the request".
see table
| Dissolution of The Former State Holdings |
The new laws show a deep change of the economic attitudes and is clearly illustrated by the reduction of actors and contributors in the process of the public enterprises privatization. In fact , this highly facilitates the procedures of acquisition. According to Mr. Boukrouh: " When Algeria launched its process of reforms to break up with the state controlled economy and move to a free-market economy, people were not ready and well prepared to accept the idea of privatization(…) The new legislation implemented in 1995 has seriously taken into consideration this mental apprehension and reserve , even economic and political. But things have changed since then as the market economy has too". The new Edict ,of august 2001, relative to the management and the privatization of the public enterprises, stipulates that all the sectors of economic activity , formerly public, are now eligible for privatization. Even the Giant Sonatrach has been submitted to certain restructuring actions mainly through joint venture operations with international oil companies.
see graph
The 2001 law also includes the winding-up of the 11th former state holdings. These holdings were managing more than 1 400 companies all over the country and now are replaced by a more practical system of organization and performance gathering companies according to their sector of activity. 28 companies of management and participation(SGP) are being established. In fact the sole mission of these companies is to prepare the companies under their authority to privatization and partnership. Thereby, it is not their prerogative to interfere in the companies' decisions taking as it used to be. As for the privatization process, this is conducted according to certain established rules: the national and international call for bids, mutual agreement, listing or cession in favor of the workers.
| International Support |
In order to better conduct the process of privatization, the Ministry of Participation works in collaboration with specialized international institutions. In this respect Mr. Boukrouh asserts: " Being new in the privatization mechanisms, we thought of retaining the services of the world bank in order to assist us and provide us with expertise and counseling(…). In fact, the presence of the world bank is rather a guaranty for the international opinion and the business circles; it certifies the transparency in which privatization is being conducted".
The decommitment of the government from most of the sectors previously under its authority should not be considered as a release of the Algerian economy to a wild capitalism. The state shall be the regulatory authority and the guarantor of the basic social needs. This is clearly illustrated by the housing program implemented by the government in order to solve the housing crisis in which Algeria is involved. The passage from a disastrous state controlled economy to a market economy makes of privatization an instrument of economy stimulation. It should undeniably participate in the economic activity diversification and lessen the country dependence on its oil production. However, this process of privatization is greatly influenced by the governmental priorities among which the medium run economic development of the sectors of industry and services based on the preservation of the labor force. |
