Algeria tightens rules for foreign investment

Algeria plans to take a majority stake in any future investment project involving foreign capital, Prime Minister Ahmed Ouyahia said yesterday, outlining a measure which already applies to much of the oil and gas sector. "Regarding investment projects involving foreign capital Algeria intends to take a majority of the capital in accordance with its national interests and means," said a statement from the prime minister's office. It did not say when the measure would take effect nor did it define what types of investment the measure would apply to.

In the energy sector, state energy conglomerate Sonatrach has the right to a 51 per cent stake in any exploration and production and downstream activity. The north African country of 34 million is an important oil and gas supplier to Europe. Outside of the oil and gas sector, foreign investors at present can own a majority stake in their Algeria ventures. Until recently, some of these foreign investors could repatriate 100pc of their profits.

The main non-energy foreign investors are Egypt's Orascom Telecom, Orascom Construction Industries and Qatar Telecommunications.

Analysts said yestereday's statement appeared to be in line with comments made on July 26 by President Abdelaziz Bouteflika in which he attacked poor management of foreign investment and said he had been disappointed by its results. Speaking to local government officials, Bouteflika said weaknesses in the implementation of economic policy had allowed some foreign investors to profit at Algeria's expense and not reinvest earnings in the country.

Africa's second-largest country is struggling to reform a Soviet-style command economy dependent on oil and gas, dominated by loss-making state banks and blighted by red tape, corruption, inadequate access to credit and a weak private sector. Yesterday's statement marks a further tightening of the investment regime in Algeria following the imposition of a requirement on investors last month to reinvest locally a part of their profits to the value of any tax breaks they received. Starting this year, investors have four years in which to make the reinvestment, and those which do not comply will have to repay any tax breaks and be subject to a fine.

Guld-daily