Algeria Prioritizes National Production to Boost Economic Competitiveness
Takeaway
The Algerian government's focus on boosting national production presents opportunities for international investors in targeted sectors like agriculture, renewable energy, and ICT. Investors should closely monitor policy changes, incentives, and regulatory reforms that support diversification efforts. Companies should also assess the potential impact of global trends like decarbonization on Algerian exports and adjust their strategies accordingly.
The Algerian government is placing significant emphasis on promoting national production across various sectors to enhance the competitiveness of the Algerian economy. Minister of Internal Trade and Market Regulation, Amel Abdel Latif, affirmed that her ministry is prioritizing policies aimed at advancing domestic production, recognizing the increasing capabilities of Algerian companies to effectively meet local market demands. This initiative acknowledges the ability of numerous national companies to supply high-quality products, particularly during religious holidays and special occasions.
Algeria's focus on national production is part of a broader strategy to diversify its economy and reduce its reliance on hydrocarbons. Historically, over 90% of Algeria's export revenue has come from oil and gas. The government has implemented various incentives to attract foreign investment and stimulate growth in sectors such as agriculture, renewable energy, mining, and information and communication technology (ICT). These efforts have led to a tripling of non-hydrocarbon exports since 2017, reaching $5.1 billion in 2023, although this still only represents about 2% of the country's GDP. In January 2018, the government replaced the import licensing system implemented in 2017 with a temporary import ban, later replaced by a temporary additional safeguard duty (DAPs) on a list of goods.
Key sectors targeted for diversification include agriculture, renewable energy, mining, ICT, infrastructure development, and the automotive and pharmaceutical industries. Algeria possesses substantial mineral resources, including gold, zinc, lead, uranium, and phosphates, presenting significant opportunities for foreign investors. The government is working to align Algerian products with international standards, with the National Accreditation Agency (ALGERAC) playing a key role in ensuring export product quality. By July 2024, the number of accredited laboratories rose to 135, a 75% increase from 77 in 2021.
The emphasis on national production and economic diversification is expected to benefit Algerian companies by increasing their market share and export potential. Companies like GITEX, specializing in textiles and leather, and BMS Electric, a manufacturer of electrical equipment, are already demonstrating the potential of Algerian industries. BMS Electric, for example, exports to 11 African countries. However, the shift towards decarbonization may pose challenges for carbon-intensive exports like fertilizers and cement, particularly with the EU's Carbon Border Adjustment Mechanism (CBAM).
Looking ahead, Algeria needs to address structural barriers and enhance competitiveness to sustain export growth. This includes boosting productivity, attracting more foreign direct investment (FDI), and greening industrial processes. Investors and executives should monitor Algeria's progress in diversifying its export markets, strengthening value chains in high-potential sectors like renewable energy and IT, and implementing reforms to improve the business climate and reduce social inequality. The government has pledged to continue its efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector.