Samy Laghouati, Partner, Gide Loyrette Nouel: Interview

Interview: Samy Laghouati

The government intends to revise the legal framework applicable to foreign investments. What can be said so far of the new measures?

SAMY LAGHOUATI: The government has broadly expressed its will to increase the attractiveness of Algeria to foreign investments. In particular, it is intending to continuously encourage the implementation of industrial projects in the manufacturing sector. At this point, in early December 2015, two important draft laws are being discussed: the 2016 Finance Law and a revised Investment Code. These new texts are expected to reassert the principle of the 51:49 rule, pursuant to which foreign investments in Algeria can only be conducted through partnerships with Algerian investors holding at least 51% of the share capital.

This principle will even be extended to wholesale and retail activities in order to be consistent with the fact that import activities have to comply with the 51:49 rule. In the meantime, these texts will improve the general framework in which foreign investments can be implemented in Algeria.

Could you give some examples of the improvements that are expected?

LAGHOUATI: The upcoming draft regulations contemplate the removal of certain mechanisms that have not proved to be essential in regulating foreign investments in Algeria.

For instance, the obligation for any foreign investment to generate a positive balance of foreign currency is expected to be removed. In the same way, amounts corresponding to tax incentives granted to facilitate the implementation of a project shall not have to be reinvested in the project any more. On this topic, the government has the will to make the Algerian investment incentive regime one of the most attractive in the MENA area, and especially attractive to foreign investors. One of the most remarkable improvements would be that the benefit of the investment incentives would no longer depend on the granting of formal approval from the National Agency for Investment Development. As soon as an investment implemented by an operator becomes eligible to incentives, the operator could apply for the incentives directly, under the supervision of the Customs and tax administration.

The will of the Algerian government to focus on industrial investments is also expressed through the stricter control that it intends to impose on the setting up and activities of representative offices, for which a new legal regime was released in December 2015. In another domain, the president of the Competition Council has announced a revision of the competition regulations in 2016.

What adjustments can be expected as regards the conditions and modalities for the financing of foreign investments in Algeria?

LAGHOUATI: One of the specificities of the foreign investment regime in Algeria was the obligation for joint ventures created pursuant to the 51:49 rule to resort to local financing for their investments and development. Financing by foreign banks was not possible. It is expected that the new regulations will give more flexibility in this domain. This would be consistent with the 2013 regulations, which have again authorised the granting by foreign shareholders of shareholders’ loans under certain conditions.

In the meantime, minimum requirements regarding a company’s capitalisation in terms of shareholders’ equity may be defined in relation to the transfer of dividends outside Algeria. In order to encourage foreign investors to improve the level of capitalisation of their joint ventures, the authorities may also contemplate making the process for a foreign investor to invest in an Algerian firm more flexible, for example through contributions in kind.