"Within one month our revenues had jumped over 50%."

Trade in Algeria

business in Algeria

How is trade in Algeria? Algeria is the largest country in Africa and the Arab World , and also of the countries bordering the Mediterranean Sea; it is also the tenth-largest country in the world, according to the MSN Encarta. With an estimated population of 36.3 million as of 2011, according to a government census, it is also a member of the African Union, the Arab League, OPEC and the United Nations. The country is also a founding member of the Arab Maghreb Union. Algeria is considered  an authoritarian regime, according to the Democracy Index 2010. The Freedom of the Press 2009 report gives it rating “Not Free”.

Fossil fuels are a major part of trade in Algeria

The fossil fuels energy sector is the backbone of Algeria’s economy, accounting for roughly 60 percent of budget revenues, 30 percent of GDP, and over 95 percent of export earnings. The country ranks 14th in petroleum reserves, containing 11.8 billion barrels of provenoil reserves with estimates suggesting that the actual amount is even more. The U.S. Energy Information Administration reported that in 2005, Algeria had 160 trillion cubic feet of proven natural-gas reserves, the tenth largest in the world. By far, Algeria’s most significant exports today (in terms of financial value) are petroleumand natural gas. The government’s continued efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector have had little success in reducing high unemployment and improving living standards. Other significant exports are sheep, oxen, and horses; animal products, such as wool and skins; wine, cereals, vegetables, fruits and seeds, esparto grass, oils and vegetable extracts, iron ore, zinc, natural phosphates, timber, cork, and tobacco. The import of wool exceeds the export. Sugar, coffee, machinery, metal work of all kinds, clothing and pottery are largely imported. In 2001, the government signed an Association Treaty with the European Union that will eventually lower tariffs and increase trade.

Algeria and trade with other countries

As a result, Algeria has significantly increased its trade with European countries. Algeria trades most extensively with France and Italy, in terms of both imports and exports, but also trades with the United States and Spain. Algeria currently has only one stock exchange, the Algiers Stock Exchange. The government has announced plans to sell off state enterprises: sales of a national cement factory and steel plant have been completed and other industries are up for offer. According to the IMF, Algeria had a nominal GDP of approximately $241 billion in 2009, with GDP per capita of $7100. The growth rate was relatively low in 2009, with a rate of 2.2%. The GDP can be broken down into sectors according to the following categories, agriculture: 8.4%; industry: 61.1%;services: 30.5%. Algeria’s agricultural sector, which contributes about 8 % of GDP but employs 14% of the workforce, is unable to meet the food needs of the country’s population. As a result, some 45 percent of food is imported. Algeria is rich in minerals; the country has many iron, lead, zinc, copper, calamine, antimony and mercury mines. Algeria’s tourism industry, which contributes only about 1 percent of GDP, lags behind that of its neighbors Morocco and Tunisia. Algeria receives only about 200,000 tourists and visitors annually.

Is business in Algeria worth investing in?

Overall, Algeria is a relatively poor country to invest or do trade in. According to the World Bank, Algeria was the 148th easiest country to do business in for 2012, with a ranking that went down five places from 2011. In the same survey, it was ranked 79th in protecting investors, 122nd in enforcing contracts, and 127th in trading across borders. In most of those rankings, Algeria actually went down in the survey from 2011. In addition, Algeria was hit by the wave of protests that went through the Middle East and was known as the Arab Spring. Causes cited by the protestors include unemployment, the lack of housing, food-price inflation, corruption, restrictions on freedom of speech and poorliving conditions. While localised protests were already commonplace over previous years, extending into December 2010, an unprecedented wave of simultaneous protests and riots, sparked by sudden rises in staple food prices, erupted all over the country starting in January 2011. As a result, Algeria is truly a volatile place to do business as of this time and is not recommended for businesses.

 

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Author:Globial International Business Team

The Globial International Business Team researches, analyzes, and reports on all things related to global trade and business.

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