COVID-19: Algeria Moves to Boost Foreign Direct Investment
SAARPE Association / Algeria
In Algeria, the supplementary Finance Law for 2020 has just been published in the Official Gazette. This law materializes the authorities’ will to significantly ease the control of foreign investments in order to boost Foreign Direct Investment (FDI) and to accelerate the diversification of the national economy.
Despite several competitive advantages, including low cost of energy, skilled and inexpensive workforce, and geographic location at the crossroads of Europe, Africa, and the Middle East, FDI flows into Algeria have remained very modest since the adoption of the 51/49 rule in 2009.
The so-called 51/49 rule, which has so far limited participation of foreign investors to 49 percent of share capital, has been relaxed and is now only applicable to Algerian companies engaged in trade of products, or in production of strategic goods and services.
According to amendments to the investment rules, manufacturing projects in the pharmaceutical sector will no more be regulated by the 51/49 rule if related to innovative products of high added-value, regardless of whether they are intended for the domestic market or for export.
While in-country pharmaceutical manufacturing is extremely developed for basic drugs and has demonstrated its resilience during the COVID-19 crisis, it is markedly less so for innovative products and biologicals such as many oncology drugs.
This recent amendment is aiming to boost foreign investments in biopharmaceutical plants alongside existing incentives that include customs duties and tax exemptions throughout the project life, and concession of land by mutual agreement (under provisions of Investment Law No 16-09).
Other major amendments include abrogation of the state’s preemptive right on shares transfers carried out by or for the benefit of foreign party replaced by a simple government prior authorization for strategic activities). The obligation to resort to local financing was also abolished.
Finally, pharmaceutical products, medical devices, detection equipment, accessories and spare parts for this equipment, used in the response to COVID-19 were temporarily exempted from value-added tax and customs duties (with retroactive effect from March 21st, 2020).
