Opening remarks from the Ambassador
I thank you Lady Olga and Lord Risby for your presentation and kind words. I would like to say Hello to the participants and those who are present with us this afternoon. As you remember more than two weeks ago we organized a similar event dedicated to the Algerian-British business relations with the presence of the Algerian minister of Industry and the British minister for Investment. On that occasion, both ministers reiterated the commitment of their governments to further develop, reinforce and diversify the economic relations between the two countries.
We strongly believe that British firms with their expertise, know how, experience and huge capacities will know how to seize the numerous investment opportunities in Algeria as have succeeded the 130 British companies operating in Algeria in sectors such as oil and gas, pharmaceuticals, banking and engineering.
I believe that our two countries, already linked by a non double taxation agreement, can do much more in terms of trade and investment as the UK is about to leave the European Union and as Algeria has embarked on a series of deep political, economical, social and cultural reforms even though it is confronted to a sharp fall of its oil and gas revenues and the formidable challenges posed by COV19.
On the political front and in order to reinforce state institutions, democracy and civil liberties which are essential conditions for an efficient economy and social justice, the Algerian government has proposed substantial amendments to the Constitution which is the country’s fundamental law. These amendments will be submitted to the Algerian people in a referendum in two weeks.
In the economic field and to further improve the business climate, the government introduced a new investment law, which will simplify and clarify the investment procedures, reduce the bureaucracy and provide more guarantees and more protection to investors. This new law makes no distinction between foreign and local investors. Furthermore, this law includes other tax incentives, which will be measured on the basis of the added value of the project and its capacity to create jobs.
What are the most main reforms that are in the process of implementation ?
We can name a few of them such as the abrogation of the rule “51/49” restriction that requires Algerian majority ownership of new businesses in many sectors of the economy. This rule will remain in effect only in a limited number of sectors called “strategic sectors,” identified as hydrocarbons, mining, defence, railway, ports, airports and pharmaceuticals manufacturing (with the exception of investments in the manufacture of innovative, high-value-added products requiring complex and protected technology).
The other measure is the government’s decision to repeal the state enterprises’ “right of first refusal” transfer of foreign holdings to foreign shareholders. Exceptionally, the strategic sectors mentioned above will need only an authorization. Let’s also mention that Foreign companies have now the possibility of resorting to external financing and are no longer compelled to ask for local financing.
Another important reform concerns the law on money and credit which is in effect
since 1990. This law will be amended with a view to guaranteeing the independence and the autonomy of the central bank in order for it to conduct an effective monetary policy with the implementation of foreign exchange laws and more flexible regulations in line with an open economy.
The New Hydrocarbon law
This new law introduces several measures to encourage investment in the hydrocarbon sector in Algeria. It introduces in particular a set of new tax measures which focus on stimulating the oil and gas sector and on a substantial reduction of the tax burden borne by companies operating in this sector.
While maintaining the rule 51/49 governing SONATRACH’s partnerships with foreign companies, this law redefines the roles of the various national actors in the hydrocarbons sector. Hence, the Ministry of Energy intervenes mainly in strategic decisions relating to energy policy and the National Company SONATRACH is simply an economic operator and not a regulator.
The law establishes three contractual forms for the exploration and exploitation activities with the objective of allowing a more equitable and attractive distribution of profits to foreign partners, and to give them the latitude to choose the contractual form most appropriate to the type of activity they wish to conduct. The three types of contracts proposed to them are: Participation Contract; Production Sharing Contract and Risk Services Contract.
Finally, I would like to mention the creation of a new fund dedicated to the financing of start-ups created largely by young entrepreneurs . This fund, based mainly on Venture Capital (financing without guarantees), permits project leaders to avoid difficulties of obtaining loans from commercial banks.
Thank you for listening.
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