Algeria is implementing a new investment strategy to promote home-grown industry, even if that risks deterring foreign investors, the head of the country’s main business lobby said.

Government measures adopted this year have set fresh caps on foreigners’ shareholdings and, analysts say, signal growing economic nationalism in Algeria, a big exporter of oil and gas.

The government says it remains open to foreign investors and has not publicly acknowledged any change in investment strategy this year.

But Reda Hamiani, head of Algeria’s Business Leaders’ Forum, told press in an interview that official thinking had changed.

But some commentators say it is evidence that Algeria’s investment climate has just grown much tougher.

One Algerian newspaper, La Tribune, predicted a wave of re-nationalisations. It drew a comparison with Russia’s former president, Vladimir Putin, who restored some privatised assets to state control after their owners were hit with tax demands.

“The recent tax claim on OT (Orascom Telecom) indicates that the investment environment in Algeria has worsened beyond the already low point reached in 2008,” investment bank EFG-Hermes said in a research note.

Although Algeria is Africa’s fourth-biggest economy, foreign direct investment (FDI) is modest.

In 2008, Algeria received $2.33 billion in FDI, a sharp rise on 2007 but still behind neighbouring Morocco, which attracted about $4.5 billion despite its smaller economy.

International energy firms operating in Algeria, the world’s fourth biggest gas exporter, have been affected by some of the government measures adopted in the past few years.

The biggest impact though is likely to be felt outside the energy sector. ArcelorMittal, Lafarge, Danone, and Orascom are among the biggest non-energy foreign investors.

KNOW-HOW NEEDED

Hamiani said the new policy aimed to address two related problems: the large volumes of imports skewing Algeria’s balance of trade and its local industry that has been overshadowed by the oil and gas sector.

Foreign investment was still welcome but must be focused on manufacturing and to bring a transfer of technology to Algeria.

“It’s not pennies that we need, it is not financing. In that respect, Algeria has no problems. It is essentially to show us the way to do things, the processes, the know-how,” he said.

Hamiani said that until all the facts in the Orascom Telecom tax case were known, it was not possible to make a judgement about what lay behind it.

“We don’t hide that this new policy risks having a repelling effect,” said Hamiani, a former minister with close government ties.

“In relation to the liberal context in the world and … the countries that organise themselves to best attract foreign investment, Algeria has perhaps shot itself in the foot.”

Reblog this post [with Zemanta]