Algeria's proximity to Europe encourages economic activity and trade

Challenges and opportunities that Algeria offers to Spanish companies

REUTERS/ZOHRA BENSEMRA - Algiers Port Terminal, Algeria 

In the current context of COVID-19 and, as a result, of the restriction on mobility, with the aim of accompanying companies in their international development, on 25 November Banco Sabadell offered the possibility of participating and finding out online about the challenges and opportunities that Algeria offers Spanish companies in a new event in the 'International Business Days' cycle.

This initiative was carried out to accompany Spanish companies with a presence abroad and operating in the international sphere. A cycle of 'International Business Days' was organised, focusing on the main markets of interest to Spanish companies, with the aim of obtaining expert advice so that companies can successfully advance in their activities abroad.


Under the title 'Learn about the challenges and opportunities offered by Algeria', Banco Sabadell offered a macroeconomic overview of the country, with the participation of Carlos Dalmau, Director of International Solutions at Banco Sabadell, and Nezli Osmani, Commercial Manager of the Representative Office in Algeria of Banco Sabadell. The management of the office abroad provided practical information on the services offered to companies interested in setting up or doing business in this geographical area of North Africa.

Banco Sabadell has been present since 2004 and was the first Spanish financial institution in Algeria. It also has extensive operational and commercial experience and in-depth knowledge of the Algerian financial system. It is a member of the Círculo de Comercio y de la Industria Argelino-Española (CCIAE) and has very good relations with the main players and public and private organisations.

Algeria is a country that offers many opportunities for foreign companies, but despite official rhetoric in favour of foreign direct investment (FDI), the business climate remains difficult due to an inconsistent legal environment and contradictory policies that complicate the entry of foreign capital flows.


However, as Nezli Osmani, commercial manager of Banco Sabadell's Representative Office in Algeria, points out, there are "significant business opportunities in almost all sectors of activity, including energy, electricity, water, health care, telecommunications, transport, recycling, food, agri-food and consumer goods". "Algeria's proximity to Europe encourages the relocation of energy-consuming industrial activities and trade".

Osmani adds that, in the context of the import substitution and foreign purchase reduction policies introduced by the government since the fall in oil prices in 2014, "some regulations explicitly favour local companies over foreign competitors". But "the government has been establishing and strengthening a series of import restrictions to reverse the situation, balance its trade balance and boost the local industrial fabric". Osmani refers to the generalisation of rule 49/51, in force since 2009, which requires a majority of Algerian residents in all foreign investment projects.


The country's strengths are:

  • The low cost of energy inputs (gas, fuel and electricity)
  • A large liquidity reserve that reduces its vulnerability to changes in international commodity prices.
  • A significant potential for renewable energy and tourism.
  • A qualified and cheap labour force.
  • Reforms to encourage foreign investment, as well as various incentive schemes to encourage investment.
  • Algeria's proximity to Europe, its geographical position as an interface between Europe and Africa and within the Maghreb.

The country's weaknesses are:

  • A slow administration and an oversized public sector.
  • A bad business climate according to international rating agencies.
  • The economy's dependence on hydrocarbons, which leads to a dependence on imports of processed goods. The economy is completely dependent on oil revenues (98% of exports), which makes it very vulnerable.
  • The insufficient development of the regional market, which limits Algeria's attractiveness to foreign investors.
  • The complexity of the legislation, particularly tax legislation, and uncertainty in the interpretation of certain contracts.
  • Access to industrial land.
  • The high rate of youth unemployment.
  • A degraded regional geopolitical context (Libya, Mali, tensions with Morocco).


The government's promises are backed by a strategy of economic diversification to establish sustained growth in which small and medium-sized enterprises and start-ups play a dominant role, with ROI and impact on wealth and job creation occurring more rapidly. The government aims to preserve transparency, remove bottlenecks and reduce losses from projects that are against the country's interests.


As an alternative, public-private investment can be made in the agriculture and tourism sectors, which are alternative sectors to hydrocarbons and which are capable of creating thousands of jobs. Growth based on public expenditure is not aimed at the country's development, so the development of these sectors, in addition to generating wealth, added value and employment, is a symbol of the diversification of the oil-dependent economy.

Although the Algerian government has not set a maximum duration for tariff increases, they could be reviewed or updated according to the needs of the economy and the local market.

For the time being, this was the government's last major move with respect to the import regime, but it should not be forgotten that the Algerian administration still maintains other barriers to market access, both in relation to trade, such as restrictions on foreign bidders in public procurement, and in relation to investment, where equal treatment between national and foreign investors is still a long way off.


All these restrictions and prohibitions on imports that have been introduced in recent years in Algeria have led to its current trade openness being classified as medium-low. But even so, all this has enabled Algeria to consolidate its position as the second largest market for our companies on the African continent, behind only Morocco.

However, as Nezli Osmani pointed out, "the Algerian market remains attractive thanks to growing demand and continues to offer business opportunities". Some of the best options are to be found in the import of machinery and those products that are not made locally or that are necessary for the development of the country's economic fabric and which can therefore benefit from special import conditions.