{"id":12783,"date":"2019-09-23T11:48:23","date_gmt":"2019-09-23T09:48:23","guid":{"rendered":"https:\/\/www.lpalaw.com\/?p=12783"},"modified":"2019-09-23T15:42:07","modified_gmt":"2019-09-23T13:42:07","slug":"client-alert-algeria-september-2019","status":"publish","type":"post","link":"https:\/\/www.lpalaw.com\/en\/client-alert-algeria-september-2019\/","title":{"rendered":"Client Alert Algeria | September 2019"},"content":{"rendered":"

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Finance Law for 2020:
\nIs Algeria relaxing FDI rules?<\/h2>\n

The draft finance bill for 2020 provides for the removal of two key measures from the current FDI rules: the 49% cap on the participation of any foreign investor in the capital of an Algerian company (“so-called 51\/49 rule”) and the local financing obligation.<\/p>\n

This reform is part of a process to improve the business climate in Algeria initiated by the Government in 2016.
\nAs a reminder, Law No.16-09 of 3 August 2016 on investment promotion (the “Law 16-09”) repealed the former Investment Law (Ordinance No.01-03 of 20 August 2001 on investment development).<\/p>\n

The 51\/49 rule and the local financing obligation were not included in Law 16-09 and were only provided in the Finance Law for 2016, which suggested an easier amendment in the future.<\/p>\n

If the draft finance bill were to be implemented in the 2020 finance law, it would represent a major turning point in Algerian foreign investment policy that would boost the flow of FDI, in contrast to the approach taken 10 years earlier.<\/p>\n

The Finance Law for 2020 will be published in the Official Journal on 31 December 2019.<\/p>\n

1. Removal of the 51\/49 rule<\/strong><\/p>\n

The draft finance bill for 2020 provides for the application of the 51\/49 rule to be limited to the production of goods and services in sectors of a strategic nature for the Algerian economy.
\nThe list of these strategic sectors will be determined by regulation.
\nIn our opinion, the strategic sectors that will remain subject to the 51\/49 rule will be hydrocarbons, banking, insurance or telecommunications.
\nThe explanatory notes relating to the draft finance bill for 2020 clearly indicate that ten years after its adoption, the 51\/49 rule must be limited to strategic sectors only, in order to enable the country to adapt to recent developments in the national economy and to attract FDI.<\/p>\n

2. Access to external financing<\/strong><\/p>\n

The draft finance bill for 2020 authorises the use of external financing for strategic and structuring projects for the national economy, from development financial institutions, after consulting the competent authorities.<\/p>\n

The obligation to resort to local financing had already been relaxed in the 2016 Finance Law, which allowed for the use of external financing for the completion of strategic investment subject to case-by-case approval by the Government. In the absence of implementing texts, this measure had not been implemented.
\nAccording to the explanatory notes to the draft finance bill for 2020, the objective is to benefit from loans from international and regional financial institutions of which Algeria is a member in order to finance \u201cproductive, strategic, structuring and targeted\u201d projects.<\/p>\n

Another stated objective: to improve the country’s visibility among these organizations, and ultimately, to increase foreign investment in Algeria.<\/p>\n

3. Other relevant provisions<\/strong><\/p>\n

Imports<\/strong><\/p>\n