Algeria: law on foreign company stakes could be changed

Law 51/49 of the capital discourages investors from abroad

07 November, 12:12

    Amenas facility: a joint venture with  Sonatrach, BP and Statoil. Amenas facility: a joint venture with Sonatrach, BP and Statoil.

    (by Diego Minuti) (ANSAmed) - ROME, NOVEMBER 7 - Ever since a law regulating the percentage of Algerian and foreign company stakeholders was approved in 2009, it has been considered key in preserving Algerian businesses from predatory foreign investors.

    The law provides for Algerian investors to get 51% of stakes and foreign partners 49% in order to protect local businesses - both startups and well-established firms. The measure has obtained results - with strict rules which cannot be ignored - but has fostered a climate of doubt among foreign investors who are not always willing to place their capital in the hands of the 'hosts'.

    This is not difficult to understand given that firms have often been created almost exclusively thanks to foreign capitals, leaving the logistics to Algerian partners, or business management.

    But in the long run this, at times, praise-worthy model has made foreign investors feel that their efforts (including the capital they spend) is in the hands of the majority stakeholder.

    So leading economists and policy-makers have been progressively evaluating whether the so-called '51/49' law should remain in place as it is or whether the time has come to change it in order to encourage foreign investment.

    The logic to preserve local businesses makes it hard right now to substantially change the law. But the evolution of international finance places Algeria one step behind other countries with no '51/49' limits, which are now welcoming investors who are choosing them based on the conviction they will be the ones to directly manage capital, rather than their local partners. Indeed local partners can be capable but are majority stakeholders in Algeria only thanks to the law and not for financial merit.

    A first hypothesis is to limit the rigid division between Algerian and foreign capital, perhaps changing it for non-strategic sectors and thus modifying percentages to benefit foreign partners.

    Apart from energy, a key sector for Algeria, a different solution could be found for the food industry and manufacturing- a change which could encourage foreign investors to return to a country that relies too much on fluctuations of the energy market to make long-term plans. (ANSAmed)

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