Prs Algeria Sample Sheets

Algeria
Updated as of Nov 2014
Original Publication Date: June 2014
Country Report
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ALGERIA
ISSN: 1054-5220
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Algeria
Country Update
MOST LIKELY REGIMES AND THEIR PROBABILITIES
18-Month: *Military-Civilian 50%
Five-Year: *Military-Civilian 60%
FORECASTS OF RISK TO INTERNATIONAL BUSINESS

Financial Direct Export
Turmoil Transfer Investment Market
18-Month: High B+ C+ B-
Five-Year: Moderate B B- B-
( ) Indicates change in rating. * Indicates forecast of a new regime.
KEY ECONOMIC FORECASTS

Real GDP Current
Years Growth % Inflation % Account ($bn)
2009-2013(AVG) 2.8 5.3 8.70
2014(F) 3.0 2.6 -1.80
2015-2019(F) 3.4 4.5 -2.60
Implications
 President Abdelaziz Bouteflika won re-election to a fourth term in April, but
that widely expected outcome has done little to settle the question of who will
head the government over the coming years. For the moment, the assumption is
that the ailing president is orchestrating a behind-the-scenes effort to position
his preferred successor to step into power once he relinquishes it, whether he
does so voluntarily or not.
 However, there is a strong possibility that leaders of the armed forces will object
to the promotion of any successor preferred by Bouteflika. The president has
taken steps to fill high-ranking positions with loyal allies, but evidence of
factional strife within the military over the last year suggests that there is work
to be done in that regard.
 Toward that end, the government issued a presidential decree in early October
directing the powerful intelligence agency, the DRS, to remove its personnel
from all state positions not directly related to security matters. The existence of
Country Update 19-Nov-2014 • Page U-1

Political Risk Services Algeria Country Update
the document was revealed to journalists by current and former government

officials, and the details of the decree are unknown. So, too, is the reaction
within the DRS, and the potential for damage to political stability if the generals
resist efforts by civilian leaders to clip their wings will only add to the risks
stemming from a revived threat of Islamist violence.
 In September, Algerian militants kidnapped and then beheaded a French tourist

who had been hiking in the mountains. A group calling itself Soldiers of the
Caliphate (JaK) explicitly stated that the execution was carried out in retaliation
for France’s participation in the US-led campaign of airstrikes against ISIL in
Iraq and Syria.
 At the moment, the government is attempting to downplay the threat. While

there is no evidence that members of the core group headed by Abu Bakr al-
Baghdadi are playing any direct role in Algeria, the JaK has made clear its
allegiance to ISIL’s self-proclaimed caliphate.
Succession Uncertainty Continues to Pose Risks

President Abdelaziz Bouteflika won re-election to a fourth term in April, but
that widely expected outcome has done little to settle the question of who will
head the government over the coming years. The president, who suffered a
stroke last year, is so visibly infirm and so seldom seen by the public that the
topic of who will replace him is a constant source of discussion and
speculation.
For the moment, the assumption is that Bouteflika is orchestrating a behind-

the-scenes effort to position his preferred successor to step into power once he
relinquishes it, whether he does so voluntarily or not. Post-election personnel
changes in the government have brought a few noteworthy adjustments to the
political hierarchy.
In late August, Abdelaziz Belkhadem, a former leader of the ruling National

Liberation Front (FLN) who is widely believed to have presidential ambitions,
was removed from his long-held post as an adviser to Bouteflika. With
Belkhadem apparently eliminated from the succession equation, another
former prime minister, Ahmed Ouyahia, moves up the ladder. Ouyahia is
currently a minister of state and director of the president’s office (a post akin to
chief of staff), which positions him well for future opportunities.
Other frequently mentioned possible contenders include Said Bouteflika, the

president’s brother, and Abdelkader Bensalah, the speaker of the Council of the
Page U-2 • 19-Nov-2014 Country Update

Nation, the upper house of the legislature. However, neither is likely to

become president. Said Bouteflika has long been the subject of corruption
allegations, and an attempt several years ago to position him to succeed his
brother was reportedly aborted in the face of strong opposition from top
political and military leaders. As for Bensalah, his eligibility to serve as
president is unclear owing to questions about his place of birth.
The most obvious replacement for Bouteflika in the event of well-planned

succession process, whether as president or as a prime minister with expanded
authority (as proposed in a package of constitutional reforms unveiled in May
2014), is the current prime minister, Abdelmalek Sellal. A technocrat with no
formal party affiliation, Sellal has held various government positions under
Bouteflika and gained prominence as the manager of the president’s 2004 re-
election campaign, a task he took on once again in 2014 (briefly stepping down
from the prime minister’s post to fulfil those duties).
Sellal is relatively young at just 64 years of age, has a reputation as a competent

and well-meaning figure, and reportedly has managed to rise to a position of
influence within the Algerian power structure without making powerful
enemies. However, it is debatable whether he commands the respect that
would be required to unite the FLN behind his leadership. Moreover, his lack
of an independent network of political support would be a handicap should his
rise to the top post run into resistance from Algeria’s generals.
Reining in the Military

Indeed, there is a strong possibility that leaders of the armed forces will object
to the promotion of any successor preferred by Bouteflika. The president has
taken steps to fill high-ranking positions with loyal allies, but evidence of
factional strife within the military over the last year suggests that there is work
to be done in that regard.
Toward that end, the government issued a presidential decree in early October
directing the powerful Department of Intelligence and Security (DRS) to
remove its personnel from all state positions not directly related to security
matters. The ostensible aim is to sharpen the focus of the security services on
their primary task, but, if fully implemented, the change would limit the
political influence of the military, which to one degree or another has shared
power with civilian authorities since independence, while also creating
openings within the bureaucracy that can be filled by loyal supporters of
Bouteflika and his inner circle.

The details of the decree are not known with certainty. The document was not
published in the government gazette, but its existence has been revealed to
journalists by current and former government officials. What also remains
unknown is the reaction within the DRS to the push for greater civilian control.
In any case, there is little chance that the military might be completely removed
from the political arena. There remains a strong military presence in the
current executive, with the most recent Cabinet reshuffle including the
appointment of Gen. Athman Tartag as special adviser for security affairs. The
real questions are how much freedom civilian leaders will have in determining
which military figures fill government posts, and how much damage will result
if the generals resist efforts by civilian leaders to clip their wings.
Security Threats Persist

The risks in that regard stem not only from the potential for an unplanned
change of leadership at the top of the civilian political hierarchy, but also from
the very real security threats faced by the country. The bloody civil war against
Islamists in the 1990s raised the profile of the military, and the apparent victory
of the state over the extremists paved the way for the assertion of civilian
authority under Bouteflika. With Islamist violence once again on the rise,
elected leaders may not be in a strong position to fend off a power grab by the
generals.
The ease with which militants from the Islamic State in Iraq and the Levant
(ISIL) managed to seize control over a huge section of territory in Iraq in June
2014 sent shockwaves throughout the region, including among other armed
extremist groups, including those operating in Algeria. In September, Algerian
militants kidnapped and then beheaded a French tourist who had been hiking
in the mountains. A group calling itself Soldiers of the Caliphate (JaK)
explicitly stated that the execution was carried out in retaliation for France’s
participation in the US-led campaign of airstrikes against ISIL in Iraq and Syria.
It was the highest profile attack by Islamist radicals since an Al Qaeda-affiliated

group took more than 800 hostages at the In Amenas gas facility in January
2013. The appearance of the JaK confirms that the fissures opened up among
extremist groups by the emergence of ISIL, most notably in Syria, have spread
to Algeria. The JaK was formed by a faction of Al Qaeda in the Islamic
Maghreb (AQIM) that split off and allied itself with ISIL after the umbrella Al
Qaeda organization dissociated itself from the ultra-radicals in Iraq and Syria.

The AQIM itself has similar origins. It initially operated under the name of the
Salafist Group for Preaching and Combat, a die-hard faction of the Armed
Islamic Group (GIA) that refused the Algerian government’s offer of an
amnesty, but changed its name after adopting a regional jihadist strategy and
formally affiliating with Al Qaeda.
At the moment, the government is attempting to downplay the threat. During

a recent visit to the south of the country, Prime Minister Sellal insisted that
there is no ISIL presence in the country. While there is no evidence that
members of the core group headed by Abu Bakr al-Baghdadi are playing any
direct role in Algeria, the JaK has made clear its allegiance to ISIL’s self-
proclaimed caliphate. That said, the most recent developments on the security
front are consistent with the country’s already high risk profile, rather than an
indication of an increased threat.
Oil Price Decline a Warning

Otherwise, threats to stability from outside the power structure are low. The
democratic impetus generated by the Arab Spring never really took hold in
Algeria, where the political and military elite remain as entrenched as ever. Of
course, a power struggle among the elite or a significant escalation of extremist
violence could give rise to broader social upheaval in a climate of generalized
discontent, and given the evident danger of the former, it is incumbent upon
the government to take steps to guard against the latter.
It has long been acknowledged that the economy is overly dependent on oil
and gas revenues, which is why the government has spent decades talking
about the need to reform the economy. However, movement on structural
reforms needed to stimulate the development of other sectors has been uneven,
at best, and exports of oil and gas remain a crucial source of the income on
which the government relies to finance the social programs that have helped to
keep domestic discontent in check.
The recent slide in global oil prices has not yet set off alarms in Algiers. In his
presentation of the 2015 budget in August, Finance Minister Mohammed
Djellab described the price decline as a warning for the government to take
action, rather than an immediate threat to the state’s financial position. Djellab
noted that earnings from oil and gas exports totaled $46.5 billion over the first
nine months of 2014, not far below the $47.1 billion figure recorded over the
same period last year.

An 11.4% year-on-year increase in non-oil taxes was more than sufficient to

offset the impact of a 2.4% decrease in oil royalties on overall revenue flows
through the first seven months of 2014. Likewise, solid growth of agriculture,
construction, and services has helped to soften the effect of the weakness of the
hydrocarbons industry on overall real GDP growth, which is forecast to come
in near 3% this year, slightly above the average for 2009–2013.
Going forward, sustaining even that rate of expansion will require the
maintenance of the high levels of capital spending that have been a driving
force behind the recent healthy performance of the construction and services
sectors. The 2015 budget targets a steep 16% increase in spending, which is
feasible as a near-term expedient, but carries the risk of producing a very large
deficit if oil prices continue to fall.
Economic Forecasts for the Three Alternative Regimes
Military-Civilian Centrist Coalition Islamist

Growth Inflation CACC Growth Inflation CACC Growth Inflation CACC
(%) (%) ($bn) (%) (%) ($bn) (%) (%) ($bn)
2014 3.0 2.6 -1.80 3.7 2.7 -0.40 2.3 3.1 -2.20
2015-2019 3.4 4.5 -2.60 4.1 4.7 -1.30 1.0 10.5 -3.90

Algeria
Table of Contents
Page
Country Update ..................................................................................................................................................... U-1
Country Forecast
Map..................................................................................................................................................................... 2
Highlights .......................................................................................................................................................... 3
Current Data...................................................................................................................................................... 5
Comment & Analysis ..................................................................................................................................... 11
Forecast Scenarios
Most Likely Five-Year Regime Scenario: Military-Civilian (60% Probability)............................... 15
Second Most Likely Five-Year Regime Scenario: Centrist Coalition (30% Probability)................ 26
Third Most Likely Five-Year Regime Scenario: Islamist (10% Probability).................................... 28
Forecast Summary.................................................................................................................................. 31
Political Framework
Players To Watch.................................................................................................................................... 33
Country Conditions
Climate for Investment & Trade
Overview ................................................................................................................................................... 1
Tariff and Non-tariff Barriers ................................................................................................................. 2
Policies ....................................................................................................................................................... 2
Legal Framework...................................................................................................................................... 3
Infrastructure ............................................................................................................................................ 4
Corruption and other Bureaucratic Obstacles ...................................................................................... 4
International Agreements........................................................................................................................ 5
Labor Conditions...................................................................................................................................... 6
Background
Geography................................................................................................................................................. 9
Social Conditions...................................................................................................................................... 9
Government ............................................................................................................................................ 10
© 2014, The PRS Group, Inc. ISSN: 1054-5220

Political Risk Services Algeria Country Forecast
Reproduction without written permission of The PRS Group is strictly prohibited.
Mediterranean Sea
Port. Spain Annaba
Algiers ●
Italy
North ✪ Constantine ●
● Oran Sétif ●
Atlantic
a
●Sidi Bel Abbès ●Batna
isi
Ocean ● .●
S
n
Tlemcen M T
Tu
AS
c o ATL Biskra
roc
M o ● Béchar ● Ghardaïa
Algeria Libya
West ● Tindouf
Sahara
S A H A R A
Mauritania Tamanrasset ●
Mali Niger
REV2003
Page 2 Map
27-Jun-2014 Reproduction without written permission of The PRS Group is strictly prohibited.
Algeria
Country Forecast
Highlights
MOST LIKELY REGIMES AND THEIR PROBABILITIES
18-Month: *Military-Civilian 50% (65%)
Five-Year: *Military-Civilian 60%
FORECASTS OF RISK TO INTERNATIONAL BUSINESS

Financial Direct Export
Turmoil Transfer Investment Market
18-Month: High B+ C+ B-
Five-Year: Moderate B B- B-
( ) Indicates change in rating. * Indicates forecast of a new regime.
KEY ECONOMIC FORECASTS

Real GDP Current
Years Growth % Inflation % Account ($bn)
2009-2013(AVG) 2.8 5.3 8.70
2014(F) 3.7 2.7 0.85
2015-2019(F) 3.5 4.5 0.60
Dangerous Uncertainty
Key Points To Watch…
 President Abdelaziz Bouteflika secured a fourth term in office at an election held on April
17, taking 81% of the vote, compared to just 12% for his main challenger, former Prime
Minister Ali Benflis. Unfortunately, the election outcome has not lifted the cloud of
uncertainty that has contributed to rifts within the Algerian regime—and worrisome
sparring between civilian authorities and the military brass—over the past year. The
president’s visibly poor health raises serious doubts about his ability to serve out a full
term, and the mere fact that the ailing leader stood for re-election is a tacit acknowledgment
that the FLN does not have a very deep bench…
 Bouteflika has taken steps to create some space within which to lay the ground for a
smooth leadership transition, the most notable being the replacement of powerful rivals
within the military hierarchy with his allies. At this point, however, anyone taking the
mantle of power from the ailing president would lack both a popular mandate, and, to all
appearances, the solid backing of the FLN. Under the circumstances, Bouteflika’s
departure from the scene in the near term, which cannot be ruled out, would be
accompanied by a sharp increase in the risk of dangerous political instability…
Highlights 27-Jun-2014 • Page 3

 The absence of any significant post-election changes to the Cabinet lineup suggests that
Bouteflika feels confident that there is time to prepare for change, and also points to a
general preference for policy continuity, including the government’s close involvement in
the economy. A top immediate priority is ensuring the success of the latest round of
bidding for oil and gas licenses, which will test the appetite of investors in the aftermath of
the deadly attack on the In Amenas oil facility in early 2013…
 The government is hoping for changes to the terms of oil and gas deals to boost
participation in the latest bidding round, which is scheduled to conclude with the
announcement of winning bids in September. The deteriorating security conditions in both
Libya and Iraq may also facilitate the government’s efforts to draw investors, but the
deterrents to investment are substantial…
 Attacks by Islamist militants will continue to pose a background risk. Fourteen soldiers
were killed in an ambush east of Algiers shortly after the April election, the deadliest direct
attack on security forces in years. The incident serves as a reminder that, despite the
government’s pre-election boasts of improved security, the threat of extremist violence
remains. Although the latest attack was directed at the security apparatus, foreign
companies will continue to be potential targets of future terrorist operations…
Policy Uncertainty Will Hold Growth below Potential

 When the five-year plan for 2010–2014 was first unveiled, officials hailed it as an
unprecedented opportunity for domestic firms, which were to be granted preference in the
awarding of major projects. However, generous spending increases promised to dampen
discontent have forced officials to rethink policies related to the role of foreign investors in
ensuring the steady flow of income from the production of oil and gas…
 However, having been burned before, investors will be alert for signs of wavering
commitment on the part of the government, particularly given the uncertainty in the
aftermath of the 2014 presidential election…
 The lack of attention to improving the management of the agriculture sector will impede
the development of a potential alternative engine of growth, and the persistent security
threat will deter investment in tourism, another sector that figures to play a key role in any
successful diversification drive…
 Political considerations will create a persistent deterrent to implementing the program of
liberalization needed to boost investment flows, diversify the economy, and fuel a rapid
growth of jobs. Consequently, average growth rates will be disappointing under this
regime, at just 3.5% per year through 2019.
Economic Forecasts for the Three Alternative Regimes

Growth Inflation CACC Growth Inflation CACC Growth Inflation CACC
(%) (%) ($bn) (%) (%) ($bn) (%) (%) ($bn)
2014 3.7 2.7 0.85 4.0 2.9 1.10 1.3 6.7 -2.40
2015-2019 3.5 4.5 0.60 4.1 4.7 3.60 1.0 10.5 -1.90
Page 4 • 27-Jun-2014 Highlights

Political Fact Sheet
CAPITAL: HEAD OF STATE:

Algiers President Abdelaziz Bouteflika (1999)
CONSTITUTION:
December 7, 1996 HEAD OF GOVERNMENT:
Prime Minister Abdelmalek Sellal (2012)
ADMINISTRATIVE SUBDIVISIONS:
48 provinces
OFFICIALS:
POPULATION: Abdelwahab Nouri, Agriculture
2013: 39.21 million Amara Benyounes, Commerce
AREA: Abdelaziz Bouteflika, Defense
2,381,740 sq. km. Youcef Yousfi, Energy
OFFICIAL LANGUAGE: Mohamed Djellab, Finance
Arabic Ramtame Lamamra, Foreign Affairs
Abdelmalek Boudiaf, Health
STATUS OF PRESS:
Abdelmadjid Tebboune, Housing & Urban
completely controlled
Development
SECTORS OF GOVERNMENT Abdeslam Bouchouareb, Industry & Mines
PARTICIPATION: Tayeb Belaiz, Interior & Local Authorities
State-controlled enterprises dominate most Tayeb Louh, Justice
commerce and industry, but liberalization is Mohamed Ghazi, Labor & Social Security
being pursued in hydrocarbons, mining, Mounia Meslem, National Solidarity & Family
power, banking, telecommunications, Abdelkader Kadi, Public Works
pharmaceuticals, transportation, and Mohamed Aissa, Religious Affairs
tourism. Amar Ghoul, Transport
CURRENCY EXCHANGE SYSTEM:
managed float LEGISLATURE:
EXCHANGE RATE: Bicameral; 462-member National Assembly
10/27/2014 $1=85.28 dinars (Majlis) and 144-member National Council. Seat
ELECTIONS: distribution in the National Assembly: National
Presidential elections are held every five Liberation Front (FLN); 221; National Democratic
years; last, April 17, 2014; next, scheduled Rally (RND), 70; Alliance of Green Algeria
April 2019. National Assembly members are (AAV), 47; Socialist Forces Front (FFS),
elected for a maximum five-year term; last, 21;Workers' Party (PT), 17; Algerian National
May 10, 2012; next, by May 2017. Front (FNA), 9; independents, 19; other, 58.
Current Data 19-Nov-2014 • Page 5

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19-Nov-2014
Algeria
Databank
2004-2008 2009-2013
Average Average 2004 2005 2006 2007 2008
Domestic Economic Indicators
GDP (Nominal, $bn) 122.53 182.21 85.33 103.20 117.21 135.18 171.72
Per Capita GDP ($) 3528 4808 2550 3039 3396 3851 4806
Real GDP Growth Rate (%) 3.5 2.8 4.3 5.9 1.7 3.4 2.4
Inflation Rate (%) 3.2 5.3 3.6 1.6 2.3 3.7 4.8
Capital Investment ($bn) 31.24 61.70 20.50 23.09 27.11 35.53 49.99
Capital Investment/GDP (%) 25.0 34.2 24.0 22.4 23.1 26.3 29.1
Budget Revenues ($bn) 51.71 70.15 31.26 42.48 50.35 53.68 80.78
Budget Revenues/GDP (%) 41.5 38.4 36.6 41.2 43.0 39.7 47.0
Budget Expenditures ($bn) 39.94 73.27 26.73 28.66 34.21 45.35 64.77
Budget Expenditures/GDP (%) 31.9 40.2 31.3 27.8 29.2 33.6 37.7
Budget Balance ($bn) 11.77 -3.12 4.53 13.82 16.14 8.33 16.01
Budget Balance/GDP (%) 9.6 -1.9 5.3 13.4 13.8 6.2 9.3
Money Supply (M1, $bn) 48.96 89.13 30.20 33.00 43.60 61.10 76.88
Change in Real Wages (%) 1.7 1.1 1.6 1.7 1.7 1.8 1.8
Unemployment Rate (%) 14.1 9.9 17.7 15.3 12.3 13.8 11.3
International Economic Indicators
Foreign Direct Investment ($bn) 1.49 2.29 0.62 1.08 1.80 1.66 2.28
Forex Reserves ($bn) 86.07 173.95 43.11 56.18 77.78 110.18 143.10
Gross Reserves (ex gold, $bn) 86.20 176.10 43.25 56.30 77.91 110.32 143.24
Gold Reserves ($bn) 0.30 0.30 0.30 0.28 0.29 0.31 0.30
Gross reserves (inc gold, $bn) 86.50 176.40 43.55 56.58 78.20 110.63 143.54
Total Foreign Debt ($bn) 10.91 4.48 21.41 16.49 5.60 5.47 5.59
Total Foreign Debt/GDP (%) 10.7 2.6 25.1 16.0 4.8 4.1 3.3
Debt Service ($bn) 7.89 2.36 8.92 9.40 17.27 1.81 2.07
Debt Service/XGS (%) 14.8 3.2 23.2 17.9 28.0 2.6 2.3
Current Account ($bn) 25.18 8.70 11.12 21.08 28.82 30.43 34.45
Current Account/GDP (%) 20.1 4.6 13.0 20.4 24.6 22.5 20.1
Current Account/XGS (%) 39.5 11.2 28.9 40.1 46.7 43.7 38.3
Exports ($bn) 54.49 62.27 32.22 46.33 54.74 60.59 78.59
Imports ($bn) 24.57 45.96 17.95 19.86 20.56 26.41 38.07
Trade Balance ($bn) 29.92 16.30 14.27 26.47 34.18 34.18 40.52
Exports of Services ($bn ) 2.65 3.65 1.85 2.51 2.56 2.83 3.49
Income, credit ($bn) 2.76 4.25 0.99 1.43 2.42 3.81 5.13
Transfers, credit ($bn) 2.56 2.68 3.38 2.25 1.96 2.42 2.77
Exports G&S ($bn) 62.45 72.84 38.44 52.52 61.68 69.65 89.98
Liabilities ($bn) 0.77 2.32 1.10 0.47 0.80 0.75 0.73
Net Reserves ($bn) 85.73 174.07 42.45 56.11 77.40 109.88 142.81
Liquidity (months import cover) 40.5 45.8 28.4 33.9 45.2 49.9 45.0
Currency Exchange Rate 70.372 75.656 72.061 73.276 72.647 69.292 64.583
Currency Change (%) 3.5 -4.5 6.9 -1.7 0.9 4.6 6.8
Social Indicators
Population (million) 34.55 37.78 33.46 33.96 34.51 35.10 35.73
Population Growth (%) 1.6 1.9 1.4 1.5 1.6 1.7 1.8
Infant Deaths/1000 32 26 38 32 31 29 29
Persons under Age 15 (%) 30 26 34 34 29 27 27
Urban Population (%) 65 71 63 64 64 66 67
Urban Growth (%) 3.2 3.6 3.0 3.1 1.7 4.9 3.3
Literacy % pop. 70 73 70 70 70 70 70
Agricultural Work Force (%) 16 14 25 14 14 14 14
Industry-Commerce Work Force (%) 28 25 26 28 28 28 28
Services Work Force (%) 56 61 49 58 58 58 58
Unionized Work Force (%) 18 18 18 18 18 18 18
Energy - total consumption (1015 Btu) 1.53 1.97 1.26 1.48 1.54 1.62 1.74
Energy - consumption/head (109 Btu) 0.04 0.05 0.04 0.04 0.04 0.05 0.05
Current Data 19-Nov-2014 ~ Page 6-7

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19-Nov-2014
Algeria
Databank
2004-2008 2009-2013
Average Average 2009 2010 2011 2012 2013
Domestic Economic Indicators
GDP (Nominal, $bn) 122.53 182.21 137.75 161.21 199.16 206.15 206.77
Per Capita GDP ($) 3528 4808 3786 4350 5274 5357 5273
Real GDP Growth Rate (%) 3.5 2.8 1.6 3.6 2.8 3.3 2.8
Inflation Rate (%) 3.2 5.3 5.8 3.9 4.5 8.9 3.3
Capital Investment ($bn) 31.24 61.70 52.46 58.49 63.35 63.86 70.36
Capital Investment/GDP (%) 25.0 34.2 38.1 36.3 31.8 31.0 34.0
Budget Revenues ($bn) 51.71 70.15 51.54 58.88 79.38 80.97 79.98
Budget Revenues/GDP (%) 41.5 38.4 37.4 36.5 39.9 39.3 38.7
Budget Expenditures ($bn) 39.94 73.27 58.16 60.43 80.25 87.04 80.49
Budget Expenditures/GDP (%) 31.9 40.2 42.2 37.5 40.3 42.2 38.9
Budget Balance ($bn) 11.77 -3.12 -6.62 -1.55 -0.87 -6.07 -0.51
Budget Balance/GDP (%) 9.6 -1.9 -4.8 -1.0 -0.4 -2.9 -0.3
Money Supply (M1, $bn) 48.96 89.13 69.12 77.39 97.91 98.27 102.95
Change in Real Wages (%) 1.7 1.1 1.4 1.6 2.0 0.4 0.3
Unemployment Rate (%) 14.1 9.9 10.2 10.0 9.7 10.0 9.8
International Economic Indicators
Foreign Direct Investment ($bn) 1.49 2.29 2.54 3.47 2.04 1.52 1.88
Forex Reserves ($bn) 86.07 173.95 147.22 160.57 180.57 189.01 192.36
Gross Reserves (ex gold, $bn) 86.20 176.10 149.04 162.61 182.82 191.30 194.71
Gold Reserves ($bn) 0.30 0.30 0.31 0.30 0.30 0.30 0.30
Gross reserves (inc gold, $bn) 86.50 176.40 149.35 162.91 183.12 191.60 195.01
Total Foreign Debt ($bn) 10.91 4.48 5.33 5.56 4.41 3.68 3.40
Total Foreign Debt/GDP (%) 10.7 2.6 3.9 3.5 2.2 1.8 1.6
Debt Service ($bn) 7.89 2.36 1.00 2.78 4.35 1.90 1.78
Debt Service/XGS (%) 14.8 3.2 1.8 4.1 5.2 2.3 2.4
Current Account ($bn) 25.18 8.70 0.41 12.16 17.77 12.30 0.85
Current Account/GDP (%) 20.1 4.6 0.3 7.5 8.9 6.0 0.4
Current Account/XGS (%) 39.5 11.2 0.7 17.9 21.2 14.9 1.1
Exports ($bn) 54.49 62.27 45.18 57.09 72.89 71.74 64.43
Imports ($bn) 24.57 45.96 37.40 38.89 46.93 51.57 55.02
Trade Balance ($bn) 29.92 16.30 7.78 18.20 25.96 20.17 9.41
Exports of Services ($bn ) 2.65 3.65 2.99 3.57 3.75 3.96 3.99
Income, credit ($bn) 2.76 4.25 4.74 4.60 4.45 3.92 3.52
Transfers, credit ($bn) 2.56 2.68 2.63 2.65 2.65 3.17 2.28
Exports G&S ($bn) 62.45 72.84 55.54 67.91 83.74 82.79 74.22
Liabilities ($bn) 0.77 2.32 2.30 2.35 2.63 2.52 1.82
Net Reserves ($bn) 85.73 174.07 147.05 160.56 180.49 189.08 193.19
Liquidity (months import cover) 40.5 45.8 47.2 49.5 46.2 44.0 42.1
Currency Exchange Rate 70.372 75.656 72.647 74.386 72.938 78.174 80.133
Currency Change (%) 3.5 -4.5 -12.5 -2.3 1.9 -7.2 -2.5
Social Indicators
Population (million) 34.55 37.78 36.38 37.06 37.76 38.48 39.21
Population Growth (%) 1.6 1.9 1.8 1.9 1.9 1.9 1.9
Infant Deaths/1000 32 26 29 27 26 23 23
Persons under Age 15 (%) 30 26 25 25 24 28 28
Urban Population (%) 65 71 68 70 72 73 73
Urban Growth (%) 3.2 3.6 3.3 4.9 4.8 3.3 1.9
Literacy % pop. 70 73 75 73 73 73 73
Agricultural Work Force (%) 16 14 14 14 14 14 14
Industry-Commerce Work Force (%) 28 25 29 24 24 23 23
Services Work Force (%) 56 61 57 62 62 63 63
Unionized Work Force (%) 18 18 18 18 18 18 18
Energy - total consumption (1015 Btu) 1.53 1.97 1.80 1.81 1.97 2.10 2.15
Energy - consumption/head (109 Btu) 0.04 0.05 0.05 0.05 0.05 0.05 0.05
Current Data 19-Nov-2014 ~ Page 6-7

Algeria Country Forecast
27-Jun-2014 Comparison: Algeria
Regional Real GDP Growth (2013): MidEast/North Africa

United Arab Emirates
Morocco
Iraq
Oman
Saudi Arabia
Israel
Tunisia
Algeria
Egypt
Kuwait
Iran
Libya
Syria
-25 -20 -15 -10 -5 0 5 10

(percent)
Regional Inflation Rates (2013): MidEast/North Africa

Syria
Iran
Egypt
Tunisia
Saudi Arabia
Algeria
Kuwait
Libya
Morocco
Iraq
Israel
Oman
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0
(percent)
Page 8 • 27-Jun-2014 Current Data

Reproduction without written permission of The PRS Group is strictly prohibited
Algeria Country Forecast
27-Jun-2014 Comparison: Algeria
Regional Current Account/GDP (2013): MidEast/North Africa

Kuwait
Saudi Arabia
Oman
Iran
Iraq
Israel
Algeria
Egypt
Libya
Morocco
Tunisia
Syria
-50.0 -40.0 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0
(percent)
Economic Performance Profile

Country's Ranking Relative to All Countries
Covered by Political Risk Services
2009-2013
GDP Per Capita ($)  4797

Real GDP Growth (%)  2.8
Inflation (%)
 5.3
Unemployment (%)
 9.9
Capital Investment
 34.0
(% of GDP)
Budget Balance  -1.9

(% of GDP)
Current Account  4.7

(% of GDP)
Debt Service Ratio  3.2
Currency Change (%)  -4.5
BEST 25% NEXT 25% NEXT 25% WORST 25%
Current Data 27-Jun-2014 • Page 9

Reproduction without written permission of The PRS Group is strictly prohibited
Social Indicators as of 2013
Primary Energy
Energy Consumption (1015 Btu): 2.15
9
Per Capita Consumption (10 Btu): 0.05
Population
Annual Growth 1.9%
Infant Deaths per 1,000 23
Persons Under Age 15 28%
Urban Population 73%
Urban Growth 1.9%
Literacy 73%
Work Force Distribution

Agriculture 14%
Industry-Commerce 23%
Services 63%
Unions 18%
Ethnic Groups
Arab-Berber (99%), other (1%)
Languages
Arabic, French, Berber dialects
Religions
Sunni Muslim (99%), other (1%)
Page 10 • 19-Nov-2014 Current Data

Algeria
Country Forecast
Comment & Analysis
Bouteflika Again…
President Abdelaziz Bouteflika secured a fourth term in office at an election held on April
Minister Ali Benflis. The election was marred by localized protests, some of which ended
in clashes with security forces, but the more general mood of the electorate was apathy;
official figures put turnout at just 51.7%, a steep decline from the reported turnout of
slightly less than 75% at the last presidential election in 2009.
Benflis and some other defeated candidates complained of serious irregularities, and
dismissed the official turnout figure as grossly inflated. In fact, absent a challenge from
within the political establishment in Algiers, Bouteflika’s victory was never really in
doubt, given the enormous advantages he enjoyed in terms of financial and
organizational support, as well as his access to the state media.
Bouteflika’s victory was also facilitated by the boycott of the polls by six opposition
parties that claimed there was no point to contesting the election as long as the ruling
National Liberation Front (FLN) controlled state institutions, a view no doubt shared by
many of the Algerian voters who could not be bothered to cast a ballot. The division of
the opposition along Islamist/secular lines further undermined its chances of seriously
challenging Bouteflika.
…But for How Long?

Unfortunately, the election outcome has not lifted the cloud of uncertainty that has
contributed to rifts within the Algerian regime—and worrisome sparring between civilian
authorities and the military brass—over the past year. The president’s visibly poor health
raises serious doubts about his ability to serve out a full term, and the mere fact that the
ailing leader stood for re-election is a tacit acknowledgment that the FLN does not have a
very deep bench.
Bouteflika has taken steps to create some space within which to lay the ground for a
Comment & Analysis 27-Jun-2014 • Page 11

accompanied by a sharp increase in the risk of dangerous political instability.
Stability a Priority
The absence of any significant post-election changes to the Cabinet lineup suggests that
Bouteflika feels confident that there is time to prepare for change. Abdelmalek Sellal has
resumed his duties as prime minister, after temporarily handing the job to Youcef Yousfi
while he managed Bouteflika’s re-election campaign.
The only notable personnel change was the replacement of Karim Djoudi as finance
minister by Mohamed Djellab, a former head of state-run CPA Bank. Djellab served as
deputy minister under Djoudi, and his promotion does not appear to portend any
substantial policy departures. Otherwise, key positions in the Cabinet were untouched,
which points to a general preference for policy continuity, including the government’s
close involvement in the economy.
Yousfi remains the minister of energy, but he no longer controls the Mining portfolio,
which was handed over to Minister of Industry Abdelsalem Bouchouareb. In all
likelihood, the rebalancing of responsibilities is intended to allow Yousfi to focus his
attention on the latest round of bidding for oil and gas licenses, while rewarding
Bouchouareb for his contributions to the president’s re-election campaign.
A total of 31 new licenses covering 92 oil and gas blocks was put up for bid in January,
including opportunities for shale gas exploration. The previous bidding round in 2011
resulted in only two contracts, one of which was won by state-owned Sonatrach, and the
deadly attack on the In Amenas facility in early 2013 further dampened the interest of
potential investors.
The government is hoping for changes to the terms of oil and gas deals to boost
participation in the latest bidding round, which is scheduled to conclude with the
announcement of winning bids in September. Under revisions to the energy law
approved earlier this year, taxes on oil and gas producers will be assessed on profits,
rather than gross income. In addition, prospecting licenses for non-conventional
resources will be valid for up to 11 years, compared to seven years for conventional
licenses. Likewise, investors will be granted exploitation rights for 40 years in the case of
shale gas and 30 years for shale oil, with conventional contracts will remain at 25 years for
oil and up to 30 years for gas.
Page 12 • 27-Jun-2014 Comment & Analysis

The deteriorating security conditions in both Libya and Iraq may also facilitate the
government’s efforts to draw investors. However, the deterrents to investment are
substantial. In addition to security risks, investors face daunting bureaucratic obstacles,
and, in all cases, investors are required to form joint ventures, with Sonatrach holding a
majority stake.
Political Reforms Aimed at Protecting the Status Quo

The likelihood of significant changes in investment-related policies will be diminished in
the near term by the government’s focus on implementing a package of constitutional
reforms unveiled by the government in May. The proposed amendments are ostensibly
designed to establish a more equal balance of power among the three branches of
government, and to enhance opportunities for the opposition to play a constructive role
in the governance process. Key proposals include the expansion of the executive
authority of the prime minister and the strengthening of legislative oversight of the
Cabinet by granting lawmakers the power to summon ministers for questioning.
Notwithstanding any merit the reforms might possess from the standpoint of democracy,
the general thrust of the proposals suggests that the top priority is protecting against a
dangerous power vacuum in the event that Bouteflika becomes unable to perform the
duties of his office. Enhancing the powers of the prime minister in advance of such a
development could reduce the likelihood that an unscheduled vacancy in the presidency
would trigger a political crisis.
A national consultation process has been launched with the goal of refining the proposals
and implementing the changes by the end of the year. Several of the opposition parties
are boycotting the process, which they contend—with justification—is designed to repair
the damage to the foundation of FLN dominance, rather than create a basis for pluralistic
governance.
Potential for Power Struggle Will Add to Risk

A combination of worsening social problems and the disappointing performance of the
economy creates a risk of episodes of popular unrest. However, still-vivid memories of
the deadly violence that prevailed throughout the 1990s will continue to dampen public
enthusiasm for militant political tactics, a factor that will mitigate the risk of a protracted
campaign of mass protests that might undermine the foundation of the regime. Indeed,
the possibility that the uncertainty surrounding Bouteflika’s tenure might contribute to
escalating tensions between the civilian and the military factions within the upper reaches
of the power structure is a more salient concern in the near term.
Comment & Analysis 27-Jun-2014 • Page 13

At the same time, attacks by Islamist militants will continue to pose a background risk.
Fourteen soldiers were killed in an ambush east of Algiers shortly after the April election,
the deadliest direct attack on security forces in years. The move came on the heels of a
military offensive that according to the Ministry of Defense resulted in the killing of
dozens of militants, and is believed to have been carried out by a group tied to Al Qaeda
in Islamic Maghreb (AQIM).
The incident serves as a reminder that, despite the government’s pre-election boasts of
improved security, the threat of extremist violence remains. Although the latest attack
was directed at the security apparatus, foreign companies will continue to be potential
targets of future terrorist operations.
Political Uncertainty Clouds Growth Outlook

Real GDP growth slowed to 2.7% in 2013, as private demand and investment by public-
sector enterprises only failed to counter the negative effect of weaker oil production on
both exports and public-sector spending levels. The 2014 budget targets faster economic
growth of 4.5% this year, as the containment of inflation, which eased to 3.3% last year,
creates room for further fiscal expansion. Government spending is programmed to rise
by 11.3% compared to 2013.
However, the actual growth rate is forecast to come in below 4%, as the political
uncertainty stemming from Bouteflika’s health issues reinforces the dampening effect of
security concerns on activity in the energy sector, and non-oil growth slows moderately
from the 6.3% pace set last year.
Inflation fell fairly steadily throughout 2013, and has averaged just 0.65% over the first
four months of 2014. The disinflation trend is almost entirely attributable to the
significant moderation of food inflation, which is expected to persist over the coming
months. Increased government spending and a lower base of comparison will contribute
to somewhat higher inflation over the second half of the year, but the annual average will
be held to less than 3%.
A combination of stagnating oil production and the high cost of energy subsidies will
contribute to an increase in the fiscal deficit and the narrowing of the current account
surplus in 2014. Official data indicates that income from oil exports fell by 3.8% (year-on-
year) in the January–April period. The government’s focus on ensuring stable domestic
conditions will discourage any near-term moves to reduce spending on subsidies, which,
given the potential for a shortfall in oil revenues, could negatively affect capital spending,
with implications for the growth forecast.
Page 14 • 27-Jun-2014 Comment & Analysis

Algeria
Country Forecast
Forecast Scenarios
SUMMARY OF 18-MONTH FORECAST

REGIMES & PROBABILITIES 50% 45% 5%
SUMMARY OF FIVE-YEAR FORECAST

Most Likely Regime Scenario
18-Month Forecast Period: Military- Growth Inflation CACC

Military-Civilian (50% Probability) Civilian (%) (%) ($bn)
Five-Year Forecast Period: 2014 3.7 2.7 0.85
Military-Civilian (60% Probability) 2015-2019 3.5 4.5 0.60
President Abdelaziz Bouteflika secured a fourth term in office at an election held on April
Minister Ali Benflis. Unfortunately, the election outcome has not lifted the cloud of
uncertainty that has contributed to rifts within the Algerian regime—and worrisome
sparring between civilian authorities and the military brass—over the past year. The
president’s visibly poor health raises serious doubts about his ability to serve out a full
term, and the mere fact that the ailing leader stood for re-election is a tacit
acknowledgment that the FLN does not have a very deep bench.
Bouteflika has taken steps to create some space within which to lay the ground for a
accompanied by a sharp increase in the risk of dangerous political instability.
Forecast Scenarios 27-Jun-2014 • Page 15

An extended bout of uncertainty will not be tolerated by the country’s military and
civilian power brokers (collectively known as Le Pouvoir) who are capable of exerting
tremendous political influence behind the scenes. It is an open secret that the generals
opposed Bouteflika seeking a fourth term, a fact that contributed to heightened tensions
between the military brass and the president’s close allies in the run-up to the April
election.
In early February, FLN Secretary-General Amar Saidani called for the resignation of Gen.
Mohamed Mediene, the head of Algeria’s powerful military intelligence agency, which in
recent years has used its authority to instigate corruption investigations targeting close
allies of the president. Saidani claimed that Mediene’s penchant for meddling in political
affairs had distracted him from focusing on more important responsibilities, resulting in
setbacks in the area of domestic security.
Saidani’s public criticism of Mediene was unprecedented, and provoked a strong

backlash. The most troubling response came from Hocine Benhadid, a retired general
who, claiming to be speaking on behalf of other top military leaders, characterized the
public criticism of Mediene as an act of treason. He further claimed that Gen. Ahmed
Gaid Salah, the current chief of staff of the National People’s Army and an ally of
Bouteflika, has no credibility among his fellow generals and lacks the allegiance of the
rank and file, assertions that are hard to interpret as anything other than a warning of a
high potential for mutiny.
The claims of a fissure in the unity of the military brass came amid an overt split in the
ranks of the FLN. Abderahmane Belayat, who served as interim leader of the FLN
following the removal of Abdelaziz Belkhadem in January 2013, accused Saidani of
undermining the authority of the FLN by provoking the military, and declared that his
faction no longer recognized Saidani as leader of the party. Mohamed Charfi, who was
replaced as justice minister in a Cabinet reshuffle carried out in September 2013,
submitted an open letter to the El Watan newspaper in which he warned Saidani that he
risked criminal prosecution for his public display of contempt for the military.
Against that backdrop, it is reasonable to assume that Le Pouvoir will exploit the
opportunity to fill a vacancy with their preferred candidate. The installation of a military-
backed president will be accompanied by a more assertive political role for the top
leadership of the armed forces. As was the case in the decade following the election of
Liamine Zeroual in 1993, the generals will operate behind the scenes, eschewing a formal
role in government, but no significant policy decisions will be made without the explicit
approval of the armed forces brass.
Page 16 • 27-Jun-2014 Forecast Scenarios

Among the potential candidates believed to be favored by the military, one frequently
mentioned is Ahmed Ouyahia, the former longtime leader of the RND who resigned from
his party post under pressure in January 2013. During two stints as prime minister,
Ouyahia maintained a hard-line stance on security issues—a position that contributed to
his sometimes testy relationship with Bouteflika—that impressed the generals. Another
name that circulated ahead of the election was Zeroual, who is widely viewed as a leader
of great integrity and a consensus-builder.
The fact that Zeroual’s name is even being mentioned 15 years after he left office in part
reflects the re-emergence of security threats as a key political issue. Zeroual led the
government during the height of a bloody, decade-long armed struggle against Islamist
militants that erupted in early 1992, following the cancellation of multistage elections that
prevented the victory of the Islamic Salvation Front (FIS). Given the still-unsettled
situation in neighboring countries, the risk of jihadist attacks inside Algeria will remain
high for the foreseeable future, a prospect that will encourage the country’s military
leaders to keep a close watch on the actions of the civilian government, and to intervene
behind the scenes to force a reconsideration of policies seen as increasing threats to
internal order and domestic security.
Emphasis on Stability an Impediment to Liberalization

The military’s top priority under this scenario will be taking all steps necessary to
minimize domestic disorder, an objective that will impede the aggressive pursuit of
structural reforms opposed by the unions and, in general, dimming the prospects for any
significant progress toward reducing the public-sector’s role in the economy. Although
some incentives may be offered in hopes of attracting foreign investment in priority
sectors, especially tourism and banking, the maintenance of a dominant position for the
state in hydrocarbons and utilities will limit the opportunities available to investors in the
most attractive sectors.
Under any likely scenario, the main focus of a civilian government will be addressing the
socioeconomic weaknesses—including housing shortages, inadequate services in rural
areas, and a very high unemployment rate, particularly among younger Algerians—that
contribute to a chronic risk of an outbreak of destabilizing domestic disorder. Under its
five-year plan for 2010–2014, the Bouteflika administration set a target of creating a total
of 3 million new jobs, with massive public works projects accounting for about 700,000 of
the total. Rapid expansion of the non-oil private sector, especially labor-intensive
industries such as agriculture, construction, and manufacturing, were to generate the
other 2.3 million new jobs.

Bouteflika has characterized the five-year program as a new direction for Algeria, in that
it focuses on bolstering the private sector while also reducing the country’s reliance on
foreign direct investment (FDI) to finance development and steering clear of “an
uncontrolled liberalism that threatens the interests of the national group.” The clear
message is that every effort will be made to attract domestic investors and promote the
growth of a home-grown private sector by means of incentives, the rehabilitation of state
enterprises, and the establishment of “quality” (read Algerian) public-private
partnerships.
Bouteflika’s stress on self-reliance was formalized in December 2010, when the

government announced new investment rules that confirmed the preference for domestic
firms. One measure requires that bidding for state contracts initially be limited to
Algerian companies, and only in the event of failure to award the contract will foreign
firms be permitted to submit bids. In such cases, domestic firms submitting bids up to
25% higher than those of foreign firms can be awarded a contract.
Significantly, the restrictions do not apply to contracts in the energy sector or to foreign
firms that enjoy national status by virtue of partnerships with Algerian companies. The
exception for oil and gas projects reflects an acknowledged lack of local skills, experience,
and technology that makes foreign investment essential to the development of oil and gas
resources.
The increased spending commitment assumed by the government in a bid to fend off the
contagion of rebellion that swept across North Africa in early 2011 has forced officials to
confront anew the vulnerability created by dependence on revenues from oil and gas for
state income. Production of oil and gas has stagnated in recent years, reflecting the
negative impact of policy U-turns—most notably, the surprise reversal of plans to ease
equity restrictions in the hydrocarbons sector—on inflows of FDI. A requirement that
state-owned Sonatrach hold a majority stake in all investment projects in the oil-and-gas
sector has contributed to weak interest in exploration licenses put out for bid by the
government, and the outbreak of corruption scandals that prompted an overhaul of the
top leadership of the company in 2011, and has embroiled the current top managers of the
firm in 2013, have done nothing to reassure nervous investors.
In the wake of the 2011 scandal, the government announced plans to revise provisions of
the hydrocarbons law dealing with tax obligations and production requirements, with the
aim of attracting investment in exploration and production required to boost reserves and
output, focusing in particular on exploitation of Algeria’s shale gas reserves. Under the
changes, which were finally approved earlier this year, taxes on oil and gas producers
will be assessed on profits, rather than gross income. In addition, prospecting licenses for

non-conventional resources will be valid for up to 11 years, compared to seven years for
conventional licenses. Likewise, investors will be granted exploitation rights for 40 years
in the case of shale gas and 30 years for shale oil, with conventional contracts remaining
at 25 years for oil and up to 30 years for gas.
If official estimates of shale-gas reserves (approximately 2 trillion cubic meters) are close
to reality, Algeria could enjoy an investment boom if the new incentives lure major
players. However, investors were burned back in 2006, when attractive provisions
included in the 2005 Hydrocarbons Code were reversed before the law came into force,
and given the recent tumult at the top levels of the political structure, the danger of
another politically motivated reversal cannot be ignored. The emergence of security
concerns as yet another negative may be more than oil and gas investors are willing to
tolerate.
A total of 31 new licenses covering 92 oil and gas blocks was put up for bid in January,
including opportunities for shale gas exploration. The government is hoping for changes
to the terms of oil and gas deals to boost participation in the latest bidding round, which
is scheduled to conclude with the announcement of winning bids in September. The
deteriorating security conditions in both Libya and Iraq may also facilitate the
government’s efforts to draw investors. However, the deterrents to investment are
substantial. In addition to security risks, firms investing in the Algerian energy sector
face daunting bureaucratic obstacles, and, in all cases, investors will still be required to
form joint ventures, with Sonatrach as the majority partner.
Likewise, the uncertain intentions of the military only add to the risk potential. Although
the military does not oppose foreign investment, security will be the top priority of a
regime that is heavily influenced by the generals, and other considerations, such as
ensuring a hospitable climate for investment, will be deemed less important if security
risks are not contained. Of course, in that event, the opportunities for investment in
Algeria will be decidedly less attractive anyway.
Outside of the oil and gas sector, the government will promote export-oriented industries
and the domestic production of food, with the aim of diversifying the sources of foreign
exchange and reducing the country’s dependence on imports to meet its basic needs.
Bouteflika has called for a “cleansing” of public-sector firms with the aim of determining
which are viable and which would benefit from the sale of their assets to a “credible”
(preferably local) private partner. However, given the underdeveloped state of Algeria’s
capital markets and its lack of skills and technology, local firms are not capable of doing
the heavy lifting when it comes to expanding the private sector. Unfortunately, the same
factors that pose obstacles to drawing investment in oil and gas projects, including the

uncertainty arising from the prospect of increased military influence over policy, will
make foreign investors reluctant to take the plunge in other sectors.
The government is also making a big push to increase the country’s power-generating
capacity. The immediate goal is addressing electricity shortages that have provoked
outbursts of sometimes violent unrest, but the longer-term objective is to significantly
increase the power generated from alternative sources, with the aim of reducing domestic
consumption of oil and gas output.
The government’s five-year investment program initially targeted an increase in

electricity production to 15,000 megawatts (MW) by 2016. However, in July 2012, Energy
and Mines Minister Youcef Yousfi announced an upward revision of the target to 19,000
MW, noting that a 13% year-on-year increase in peak usage indicated that the lower
target would not be sufficient to meet demand.
In late 2011, state-owned Sonelgaz joined the Desertec Initiative, a program sponsored by
Germany to develop North Africa’s potential to become an exporter of renewable energy
to Europe. More recently, the state power company, CEEG, has invited bids for the
construction of solar and wind farms. Plans call for increasing solar- and wind-energy
capacity to 650 MW by 2015, and to 22,000 MW by 2030.
Assuming an easing of the current elevated threat to stability and security following the
2014 presidential election, military leaders may grant government officials some space to
implement a reform agenda aimed at creating a more attractive climate for foreign
investment, which holds the key to producing the large number of jobs required to
reduce the appeal of extremism among Algerian youth and generate the improvements in
living standards required to foster social stability more generally.
The Ministry of Labor promised to pursue reforms of labor legislation as part of the
government’s strategy for boosting employment under the current five-year plan, but no
steps have been taken as yet, and action on this front is unlikely as long the risk of a
disruptive popular backlash is present. Labor policies have changed radically with the
end of the monopoly of the General Union of Algerian Workers (UGTA) and the
expanded use of employment contracts under which pay is based on performance.
However, the government will continue to favor generous salary increases and hikes in
the minimum wage as a means of containing social discontent.
The government has moved to offset the impact of large wage increases on business costs
by reducing the top corporate tax rate from 30% to 25%, and establishing a lower rate of
12.5% that can be obtained by companies that reinvest profits in their local operations.

However, with high levels of government spending pointing to persistent large fiscal
deficits, no further reduction of tax rates is likely in the near term, and there is a distinct
danger that existing tax rules will be applied in a manner that discriminates against
foreign-owned firms.
Foreign exchange reserves are currently sufficient to provide more than four years of
import cover, the debt-service burden is minimal, and the recovery of oil prices since 2009
has contributed to some easing of fiscal strains. Even so, political considerations will at
times trump objective necessity when it comes to policies affecting the transfer of capital
out of the country, and the possibility of a tightening of restrictions on profit repatriation
or other foreign currency transactions cannot be ruled out.
Little Progress on Trade Liberalization

The government has reduced its customs duties under negotiations for Algeria’s entry
into the WTO, and trade rules are also being relaxed under an association agreement with
the EU, which came into force in September 2005. The agreement with the EU, which was
initialed by both sides in December 2001, was an important step toward the creation of a
Euro-Mediterranean Free Trade Area (EMFTA), which was originally planned for 2010.
However, the establishment of the Union for the Mediterranean (UPM) in 2008 has
thrown the more ambitious EMFTA project into doubt, and the Algerian government’s
recent moves to tighten restrictions on foreign investment have set back efforts to join
the WTO.
Recent trends point to a loss of impetus for trade liberalization during the five-year
forecast period. On the one hand, Algeria’s trade imbalance with the EU has grown since
the 2005 agreement came into force, amid frequent complaints that Algeria’s non-energy
exports, especially agricultural products, continue to face obstacles in European markets.
On the other hand, the military’s re-emergence as an active political force will stir the
suspicions of the international community, potentially dimming the prospects for WTO
membership or closer relations with the EU. In both cases, the result is likely to be a
decreased incentive to pursue vigorous liberalization of trade restrictions.
Turmoil Risks Apparent on Numerous Fronts

The healthy economic growth rates recorded during 2002–2005 stemmed primarily from
the strong performance of the oil and gas sectors, and so had little positive impact on
either unemployment or general living standards. Conditions worsened thereafter, as the
pace of real GDP growth slowed markedly, and protest demonstrations over poor social
and economic conditions occurred in dozens of towns throughout the country in 2008. In
some cases, a combination of frustration over immediate circumstances and the pent up
resentment over the government’s failure to address longstanding grievances contributed

to the eruption of rioting, stirring fears of a repeat of the events in 2001, when an uprising
by the Berber majority in the northern Kabylie region was quickly transformed into a
more generalized anti-government movement that for a time threatened to bring an early
end to Bouteflika’s tenure as president.
Bouteflika’s 2009 campaign platform was chock full of grand promises, including pledges
to construct one million new housing units, create three million jobs, and commit
$150 billion of public money to investment projects over a period of five years. Although
the president coasted to victory in the election, the persistence of simmering discontent
became apparent in October 2009, as strikes and other demonstrations were organized in
towns throughout the country to protest a lack of jobs and poor public services,
sometimes resulting in violence. The capital, Algiers, was rocked by the most serious
social disturbance in years, as a dispute over housing policy escalated into violent clashes
that left dozens of people injured.
Against that backdrop, Algerian officials were keenly aware of the potential for the mass
revolts that erupted in Tunisia and Egypt in early 2011 to foment instability in Algeria.
Domestic protests triggered by surging food prices never gained the critical mass that
might have posed a realistic threat to political stability, as President Bouteflika moved
quickly to address the most immediate grievances of the population. Neighboring
Libya’s descent into civil war later in 2011 no doubt dampened the revolutionary zeal of
an Algerian population still traumatized by a brutal civil war that resulted in an
estimated 200,000 deaths.
Nevertheless, many of the ingredients that proved to be a recipe for rebellion in Egypt
and Tunisia—including high unemployment, a large wealth gap, widespread corruption,
and limited opportunities for the very large youth population—are present in Algeria,
and the possibility of widespread upheaval cannot be ruled out, especially if the
government fails to deliver on its promises.
Although Algeria has thus far managed to avoid the popular unrest that toppled three
North African governments in 2011, the turmoil elsewhere in the region has provided
extremist groups with ready access to arms, fresh recruits, and safe havens from which to
wage an invigorated campaign of violence. Algeria’s vulnerability was dramatically
demonstrated in mid-January 2013, when a militant group affiliated with Al Qaeda took
more than 800 people hostage at a sprawling Tigantourine natural gas facility near In
Amenas, an eastern town located about 60 kilometers from the border with Libya.
The Algerian government responded forcefully, launching an operation to reclaim control

of the facility that resulted in the deaths of dozens of militants, but also 40 hostages. The

decision to act unilaterally, rather than waiting for international assistance, was guided
by the government’s desire to send a clear message to the militants that Algeria is fully
capable of dealing with security threats on its own, and will do so by means of brute
force, swiftly applied.
The military operation was also a signal to foreign investors that Algeria can and will
defend oil and gas facilities, whatever the cost. However, the foreign partners of state-
owned Sonatrach remain unconvinced, and the continued uncertainty in the aftermath of
the April 2014 presidential election will limit the effectiveness of the government’s efforts
to reassure foreign oil investors.
Oil production is running at slightly less than 1.5 million barrels per day (bpd),
unchanged from the levels immediately prior to the January 2013 attack, while receipts
from energy exports totaled $63.5 billion in 2013, a 10% decline compared to 2012. The
Amenas gas facility was operating at about two-thirds of capacity in the first quarter
of 2014.
Some 20,000 Algerian troops have been deployed to the Libyan border to beef up defense
against the infiltration of militant groups, and Algeria and Libya signed cooperation deals
on border security in December 2013. The government is also building a new airstrip at
In Amenas, which will facilitate travel between the remote Tigantourine facility and hubs
located in more secure areas, such as Hassi Messaoud.
However, Algeria’s reluctance to allow foreign companies to deploy private security

guards remains a major stumbling block, as was noted in Statoil’s report on its
independent investigation into the In Amenas attack. Some of Statoil’s foreign staff
began returning to Hassi Messaoud in late 2013, but foreign workers have only recently
begun returning to In Amenas. BP’s expatriate workers have also begun to return, but
the company’s expansion plans at the In Salah site have been put on hold pending an
analysis of the effectiveness of new security measures.
Substantial progress toward a resolution of a prolonged battle between the government

and the dominant Berber ethnic group in the troubled Kabylie region was made in early
2005, when representatives from Algiers accepted, in its entirety, the so-called El-Kseur
Platform, a list of non-negotiable demands first presented by Berber tribal leaders in mid-
2001. Among the key demands are greater investment in the development of the Kabylie
region, the withdrawal of security forces from the area, and official recognition of Berber
culture, in particular, the Berber language, Tamazight. Another important forward step
was made in July 2005, when Bouteflika signed a decree calling for the dissolution of the

mainly pro-government municipal and local assemblies in the provinces of Tizi Ouzou,
Boumerdes, Bejaia and Bouira.
However, the decision of the main Berber parties to boycott the 2009 presidential election
and the refusal of the Rally for Culture and Democracy (RCD) to participate in the more
recent consultations on political reform indicate that there is more work to be done in
laying a foundation for lasting peace in Kabylie. More generally, the eruption of violent
conflict between Arabs and the minority Berber population in the southern town of
Beriane in May 2008 underscores the potential for ethnic unrest in a climate of heightened
frustration over economic conditions.
Slow Pace of Diversification Will Hold Growth below Potential

The government will continue to rely on robust public-sector spending to fuel economic
growth and contain social unrest. Under the 2014 budget, spending is programmed to
increase by 11.3% compared to last year’s plan.
The Finance Ministry is once again projecting a budget deficit of close to 20% of GDP, but
with regional unrest and the building crisis in Iraq expected to sustain global oil prices
above the $90 per barrel assumed in the budget, the actual shortfall will be significantly
smaller than the projected figure. Officials plan to dip into the Revenue Regulation Fund
(the repository of surplus oil revenues) to finance one-half of the deficit, with the
remainder covered by the Treasury, avoiding the need for new taxes.
The government sees real GDP growth accelerating to 4.5% in 2014, from 2.7% last year.
Official data indicates that income from oil exports fell by 3.8% (year-on-year) in the
January–April period. The government’s focus on ensuring stable domestic conditions
will discourage any near-term moves to reduce spending on subsidies, which, given the
potential for a shortfall in oil revenues, could negatively affect capital spending, with
implications for the growth forecast. On balance, the actual growth rate is forecast to
come in below 4%, as the political uncertainty stemming from Bouteflika’s health issues
reinforces the dampening effect of security concerns on activity in the energy sector, and
non-oil growth slows moderately from the 6.3% pace set last year.
Inflation has moderated since drought conditions sent food prices soaring in 2012,
pushing the average inflation rate up to 8.9%. The consumer price index rose by a much
more manageable 3.3% last year, and averaged just 0.65% over the first four months of
2014. The disinflation trend is almost entirely attributable to the significant moderation
of food inflation, which is expected to persist over the coming months. Increased
government spending and a lower base of comparison will contribute to somewhat

higher inflation over the second half of the year, but the annual average will be held to
less than 3%.
The ample reserves held by the central bank will enable monetary authorities to manage
the dinar’s exchange rate against the US dollar and the euro. In the near term, the dinar
will appreciate slightly against the US currency, as increased income from oil and gas
exports leads to healthy inflows of dollars. The more pronounced strengthening of the
dinar against the euro will undermine the competitiveness of Algeria’s non-energy
exports to the euro zone, but the central bank will be hesitant to adjust the value of the
dinar downward as long as inflation remains a threat to political stability.
The growth pattern of recent years underscores the degree to which overall economic
health remains dependent on the performance of the hydrocarbons sector. The lack of
attention to improving the management of the agriculture sector will impede the
development of a potential alternative engine of growth, and security threats will deter
investment in tourism, another sector that figures to play a key role in any successful
diversification drive.
Political considerations will create a persistent deterrent to implementing the program of

liberalization needed to boost investment flows, diversify the economy, and fuel a rapid
growth of jobs. Consequently, average growth rates will be disappointing under this
regime, at just 3.5% per year through 2019.
Given the dim prospects for significant progress in reducing the structural imbalances
that impede private-sector growth, the government will continue to rely on state
spending to fill the void. The risk of social unrest and the security threats posed by
extremist groups will create a further disincentive to fiscal tightening. The resulting
strong demand will contribute to persistent inflation averaging 4.5% annually over the
five-year forecast period.
Increased Gas Exports Will Sustain External Surpluses

The underlying weakness of Algeria’s economy remains its dependence on energy
exports, which is being brought into focus as the US reduces its gas imports. With an
expansionary fiscal policy underpinning strong demand for imports, the trade surplus
narrowed significantly in 2013, shrinking the current account surplus to an estimated
0.4% of GDP last year.
Given the outlook for production in the energy sector, the current account surplus is
likely to remain small once again in 2014, and the possibility of a move into deficit cannot
be ruled out. Even so, a tiny foreign-debt burden and an ample supply of foreign

exchange reserves all but eliminate any danger of balance-of-payments difficulties except
in the event of a dramatic fall in oil prices.
Over the medium term, increased gas exports may serve as a buffer against the impact of
fluctuations in oil prices. However, the associated increase in demand for capital imports
will weigh on the current account surplus, which is forecast to average less than $1 billion
annually through 2019.
Second Most Likely Regime Scenario
18-Month Forecast Period: Centrist Growth Inflation CACC

Centrist Coalition (45% Probability) Coalition (%) (%) ($bn)
Five-Year Forecast Period: 2014 4.0 2.9 1.10
Centrist Coalition (30% Probability) 2015-2019 4.1 4.7 3.60
As long as Bouteflika remains an active presence on the political scene, he will be able to
keep rivals for power at bay, and will be able to govern with the support of a legislative
majority based on an alliance of the FLN and the RND. However, it is debatable whether
that condition can be satisfied even through the 18-month forecast period, and, given the
likelihood that he will not serve out a full term, the probability is even lower over the
longer-term forecast horizon. That said, careful planning could make it possible for a
post-Bouteflika administration to continue governing with only limited interference from
the military brass.
In May 2014, the government unveiled a package of constitutional reforms that are
ostensibly designed to establish a more equal balance of power among the three branches
of government, and to enhance opportunities for the opposition to play a constructive
role in the governance process. Notwithstanding any merit the reforms might possess
from the standpoint of democracy, the general thrust of the proposals suggests that the
top priority is protecting against a dangerous power vacuum in the event that Bouteflika
becomes unable to perform the duties of his office. Key proposals include the expansion
of the executive authority of the prime minister, a move that could reduce the likelihood
that an unscheduled vacancy in the presidency would trigger a political crisis.
The most obvious replacement for Bouteflika in the event of well-planned succession
process, whether as president or as a prime minister with expanded authority, is
Abdelmalek Sellal, who is currently the prime minister, and whose highly publicized pre-
election tour of the country launching government projects fueled rumors that he was
being groomed for the top job. A technocrat with no formal party affiliation, Sellal has

held various government positions under Bouteflika and gained prominence as the
manager of the president’s 2004 re-election campaign, a task he took on once again in
2014 (briefly stepping down from the prime minister’s post to fulfil those duties).
Sellal is relatively young at just 64 years of age, has a reputation as a competent and well-
meaning figure, and reportedly has managed to rise to a position of influence within the
Algerian power structure without making powerful enemies. However, it is debatable
whether he commands the respect that would be required to unite the FLN behind his
leadership. Moreover, his lack of an independent network of political support would be a
handicap in the likely event that he needs to fend off challenges from the generals.
Nevertheless, it is possible that Bouteflika or a successor claiming a reliable majority in

the National Assembly might be able to implement a policy program with limited
interference from the armed forces. At the very least, that would require civilian leaders
to steer clear of initiatives that ignite worrisome social unrest and to grant the country’s
security services the freedom they need to keep the threat of violent religious extremism
at bay.
Slight Improvement in Business Climate

In terms of general policy direction, the differences between the most likely scenario and
this alternative would be more a matter of degree than of kind. Enjoying greater
independence from military influence, a centrist coalition government could be expected
to be more aggressive in terms of its approach to liberalization and promoting economic
diversification, particularly if generally stable domestic security conditions increase the
likelihood of a quick return on efforts to attract foreign investment.
The disruptions associated with a change of administration would contribute to an

increase in operations restrictions, regardless of the composition of the regime, but the
higher risk would be a temporary phenomenon under a centrist coalition government.
Otherwise, investment-related risks would either remain at current levels or, as in the
case of equity restrictions, would be reduced over the forecast period.
A centrist coalition government would press ahead with efforts to secure membership in
the WTO and to strengthen commercial relations with the EU, both of which would entail
moves to eliminate barriers to foreign trade and investment.
Economic Hazards
Although the prospects for forward movement on economic liberalization would be
brighter under this scenario than under circumstances where the military plays a more
active role in political affairs, reforms would be implemented with caution, as officials

sought to avoid triggering a backlash that might create a pretext for military intervention.
However, assuming hydrocarbons revenues continue to provide the government with the
resources required to finance a significant program of public investment, and assuming
some advances on the diversification front, annual growth rates of 4%–4.5% could be
expected later in the forecast period, resulting in average economic expansion of about
4.1% per year through 2019. Demand pressures generated by high levels of government
spending would sustain inflation at an average of 4.7% per year over the five-year
forecast period.
The greater certainty stemming from a civilian government’s freedom to set the economic
policy course with limited interference from the military brass would bolster efforts to
attract investment in sectors other than oil and gas, and confidence in the ability of
security forces to contain the threat of attacks on foreign facilities and personnel would
encourage firms in the oil-and-gas sector to invest in new and existing projects,
contributing to production increases that would offset the impact of stronger demand for
capital imports on the external balances. Barring a global economic setback that sends the
price of oil plummeting, the current account balance would remain in positive territory
throughout the five-year forecast period, with surpluses averaging $3.6 billion per year.
Third Most Likely Regime Scenario
18-Month Forecast Period: Islamist Growth Inflation CACC

Islamist (5% Probability) (%) (%) ($bn)
Five-Year Forecast Period: 2014 1.3 6.7 -2.40
Islamist (10% Probability) 2015-2019 1.0 10.5 -1.90
Bouteflika’s health-related absence from the country in late 2005, and the general
confusion over who was actually in charge of the government in the president’s absence,
highlighted the potential for an unexpected vacancy at the top to trigger dangerous
political instability. Although the constitution outlines the process for filling a vacancy in
the president’s office, there is a high probability that powerful political factions might
seek to deviate from that course in a bid to ensure their rise to power. In that event, an
Arab Spring-style uprising could erupt, and, if military leaders were divided over how to
proceed, the resulting breakdown of order could create an opening for an Islamist regime
to take power.
The probability of such a scenario is extremely low, as it is very unlikely that the mass of
Algerians would back a power grab by religious parties, or elect an Islamist regime in a
post-revolutionary election, as occurred in both Egypt and Tunisia. Although the

religious conservatism of the FIS positioned the party to emerge as a dominant political
force in the early 1990s, the viciousness of the terrorist campaign that followed the
military’s cancellation of the second round of parliamentary elections in January 1992
turned much of the population against the party. Given the deep divisions among the
various groups capable of founding a credible Islamist political force—not to mention the
guaranteed hostility of the military to such a development—fundamentalists would find
it exceedingly difficult to form a regime capable of governing the country.
Tighter Controls
A fundamentalist government would increase restrictions in order to reduce non-Islamic
influences and would emphasize Islamic tenets of social justice. The FIS rejects all
international agreements Algeria has signed since the cancellation of the 1992 elections,
and all such agreements with foreign companies could be at risk under an Islamist
government. A fundamentalist regime would impose tighter restrictions on the
employment of expatriates. Repatriation restrictions and exchange controls would be
tightened to protect against capital flight.
The country’s export potential and its quest for imports would not change even under a
fundamentalist regime. However, such a government would be much less inclined to
cooperate with multilateral organizations. In keeping with Islamic tenets of social justice,
it might raise tariff barriers in order to protect local industry and increase subsidies on
foodstuffs and other essentials.
Business conditions and government policies under an Islamic regime would be highly
uncertain, prompting capital flight. Social unrest could disrupt oil and gas production.
The reduced foreign exchange available for imports would lead to increased payment
delays.
Chaotic Conditions
The country would be polarized by the emergence of a fundamentalist regime, whose
attempts to impose strict Islamic standards would produce even greater lawlessness. It
would experience immense difficulty in trying to control violence and might even face a
full-scale civil war. The Berbers, who are already struggling to promote their culture and
prevent its subordination to Arabism, would become further alienated. Algerians living
in France and elsewhere would form a powerful force against this regime.
Serious Economic Setbacks

A sharp economic slowdown in the immediate aftermath of a fundamentalist takeover
would be followed by weak growth averaging just 1% per year through 2019. Inflation

would rise to double digits, averaging 10.5% annually. This government would increase
spending in order to satisfy new constituencies and establish order. It would make few
changes in fiscal and monetary policies over the short run; but restrictions on banking
and credit would result in capital flight, draining domestic liquidity and dampening
prospects for investment growth.
A fundamentalist regime would be hard-pressed to maintain its popular support. Wage

increases might be more generous. Government-financed projects would be undertaken
in a bid to reduce unemployment, which would nevertheless increase as private-sector
business activity was sharply reduced.
The current account balance would show a deficit amounting to $1.9 billion per year on
average over the forecast period. The country would maintain its position as a major oil
exporter, but some trade relations could be disrupted, hampering non-oil exports.
An Islamist regime would encounter great difficulty in obtaining loans. If disturbances

associated with the Islamists’ rise to power lasted long enough to disrupt the production
or export of hydrocarbons, this regime would need new credits, and would have to pay
dearly for such funds.

Forecast Summary
SUMMARY OF 18-MONTH FORECAST
*Military-Civilian Centrist Coalition Islamist

RISK FACTORS CURRENT
Turmoil High SLIGHTLY MORE Same MORE
Investment
Equity High Same SLIGHTLY LESS MORE
Operations Very High Same SLIGHTLY LESS SLIGHTLY MORE
Taxation Moderate SLIGHTLY MORE Same MORE
Repatriation Moderate Same Same MORE
Exchange Moderate Same Same SLIGHTLY MORE
Trade
Tariffs Moderate Same SLIGHTLY LESS MORE
Other Barriers High Same Same MORE
Payment Delays Moderate SLIGHTLY MORE Same MORE
Economic Policy
Expansion Low SLIGHTLY MORE SLIGHTLY MORE MORE
Labor Costs Low SLIGHTLY MORE Same Same
Foreign Debt Low SLIGHTLY MORE Same MORE
SUMMARY OF FIVE-YEAR FORECAST
*Military-Civilian Centrist Coalition Islamist

RISK FACTORS BASE
Turmoil Moderate Same Same SLIGHTLY MORE
Restrictions
Investment Moderate SLIGHTLY MORE Same MORE
Trade Moderate Same Same MORE
Economic Problems
Domestic High SLIGHTLY LESS SLIGHTLY LESS MORE
International Moderate SLIGHTLY MORE Same MORE
* When present, indicates forecast of a new regime

Algeria
Real GDP Growth Under Alternative Regimes
4.5
4.0
3.5
(percent)
3.0
2.5
2.0
1.5
1.0
0.5
2009 2010 2011 2012 2013e 2014f 2015-
2019f
Algeria
Inflation Under Alternative Regimes

11
10
9
8
(percent)
7
6
5
4
3
2
2009 2010 2011 2012 2013e 2014f 2015-
2019f
Algeria
Current Account Under Alternative Regimes
20.0
15.0
($billions)
10.0
5.0
0.0
-5.0
2009 2010 2011 2012 2013e 2014f 2015-
2019f

Algeria
Country Forecast
Political Framework
Players To Watch
Abdelaziz Bouteflika: The president won re-election to a fourth five-year term in April
2014 with slightly more than 80% of the vote, reflecting both popular appreciation of his
strong leadership and the impotence of the divided opposition. However, the very fact
that the ailing president stood for re-election is indicative of the dearth of qualified
successors within the ranks of the governing FLN, and the distinct possibility that health
issues will prevent Bouteflika from completing his full term creates a risk of political
instability, especially if the president were to become incapacitated (he suffered a stroke
in early 2013) without a solid succession plan in place. The uncertainty will compound
the wariness of foreign investors, who have been put on their guard by past
unanticipated reversals of investment-friendly policies and hostile moves by the
government against foreign “profiteers” in non-oil sectors of the economy.
National Liberation Front: The main governing party won 221 seats in the expanded
National Assembly at legislative elections held in May 2012, and together with the
smaller National Democratic Rally (RND) controls a three-fifths majority in the
462-member body. However, the coalition’s questionable mandate—the alliance claimed
the support of less than 10% of eligible voters in an election marred by an opposition
boycott—and evidence of power struggles within the upper reaches of the party point to
a risk of damaging factional strife within the FLN over the medium term.
Abdelmalek Sellal: A technocrat with no formal party affiliation, Sellal held various
government positions under Bouteflika before being named prime minister in September
2012, and gained prominence as the manager of the president’s 2004 re-election
campaign. He was widely identified as a possible presidential candidate if Bouteflika did
not stand for re-election in 2014, and briefly stepped down as prime minister to oversee
the president’s campaign earlier this year. Sellal is relatively young at just 64 years of
age, has a reputation as a competent and well-meaning figure, and reportedly has
managed to rise to a position of influence within the Algerian power structure without
making powerful enemies. Assuming Bouteflika’s health issues prevent him from
serving out a full term, Sellal could be an appealing compromise choice as his successor.
Indeed, the government is already putting together a package of political reforms that
Political Framework 27-Jun-2014 • Page 33

would transfer significant executive power to the prime minister, a strategy that is clearly
aimed at creating the basis for a smooth succession process if Bouteflika cannot serve his
full term. However, Sellal does not have an independent base of support within the FLN,
nor is it clear that he enjoys the confidence of Algeria’s generals, factors that could create
impediments to his path to leadership in the event of Bouteflika’s early departure.
Ahmed Ouyahia: The former leader of the RND, a junior partner in the governing
coalition, and an advocate of liberal reform, Ouyahia twice served as prime minister
under Bouteflika. His return to the post in 2008 fueled speculation that Bouteflika
planned to resume reform efforts, but the move appears to have been motivated almost
entirely by the president’s desire to gain the RND’s backing for his third-term bid in 2009,
which Ouyahia had opposed, and he was replaced by Sellal in September 2012. Although
he resigned as leader of the RND under pressure in January 2013, Ouyahia is closely tied
to the military establishment, and the clear signs that the generals’ are reasserting their
political influence could boost his chances of succeeding Bouteflika in the event of an
unplanned exit by the ailing president.
Military: Although the military retreated from the center of political affairs after
Bouteflika won re-election in 2004, concern that the president’s consolidation of power
had created a high risk of instability once he steps down has drawn the generals back into
the political fray since Bouteflika won a third term in 2009. Although the military does
not oppose foreign investment and trade, a re-emerging security threat—one of the
factors contributing to the military’s reassertion of its political muscle—will take priority
over the pursuit of reforms aimed at creating a more hospitable business climate under
any scenario in which the generals exert influence over the direction of policy.
Al Qaeda in the Islamic Maghreb: The most hard-line of the militant Islamist groups
that have waged war against the government, AQIM represents the last remnant of the
rebel force still in the field following the extension of a generous amnesty offer in 2006.
AQIM has stepped up its attacks amid the turmoil that has engulfed the region since late
2010, and it has reportedly exploited conflicts in neighboring Libya and Mali to attract
new recruits and build a stockpile of weapons. The group’s alliance with Al Qaeda was
marked by the adoption of suicide bombings as a weapon. Some of AQIM’s attacks have
targeted foreigners, a development that may complicate efforts to woo investors from
western countries.
Page 34 • 27-Jun-2014 Political Framework

1-Sep-2014 Reproduction without written permission of The PRS Group is strictly prohibited.
Algeria
Country Conditions
Climate for Investment & Trade
Overview
Openness to Foreign Investment
Algeria, with its population of more than 38 million, hydrocarbon wealth, expanding infrastructure needs,
and growing consumer product demand, is attracting interest from companies around the world. U.S. firms
continue to consider Algeria an emerging and growing market. The climate for international firms
considering direct investments in Algeria has stabilized in the wake of a series of restrictive foreign
investment rules enacted in 2009 and 2010, one of which imposed a requirement of at least 51 percent
Algerian ownership of foreign investments. Foreign Direct Investment (FDI) in Algeria waned as a result of
those measures. Investors highlight regulatory uncertainty, tight foreign exchange controls, lax intellectual
property rights (IPR) protections, customs delays, and a large informal sector among ongoing commercial
challenges. However, the Government of Algeria (GOA) has invested more than USD 286 billion in
infrastructure development between 2010 and 2014, making the local market sufficiently profitable for firms
adapted to emerging markets to weather those challenges and explore new opportunities, especially in
sectors like energy, power, water, health, telecommunications, transportation, and agribusiness.
The number of foreign trade missions to Algeria grew from 30 in 2010 to 60 in 2012, but then fell in 2013 to
about 30. Additionally, in recent years several sectorial trade fairs were organized locally to boost
partnerships with local SMEs. In 2013, Algeria concluded commercial agreements with several Arab and
European nations, as well as China. U.S. firms, such as Northrop Grumman, General Electric, Boeing, Pratt
& Whitney Power Systems and Varian Medial Systems won multi-million dollar tenders. President
Abdelaziz Bouteflika was reelected to a new five year term in April 2014. After running a successful re-
election campaign for President Bouteflika, Prime Minister Abdelmalek Sellal retained his position. Sellal is
trusted by the political elite and viewed as a pragmatic politician who seeks new economic partnerships to
tackle long-standing issues, such as housing shortages and unemployment. Algerian leadership remains
focused on building domestic production capacity and reducing imports and seeks U.S. expertise and
partnership. Negotiations have continued with the Office of the U.S. Trade Representative related to
Algeria’s World Trade Organization (WTO) accession and cooperation under the U.S.-Algeria Trade and
Investment Framework Agreement (TIFA). Formal meeting sessions in Geneva and informal digital video
conferences between key officials on both sides were held in 2013 and early 2014.
The signs of change are positive and Algeria’s macroeconomic outlook is stable, but vulnerabilities and
challenges persist, including dependence on hydrocarbon revenue and risks posed by rising inflation. The
public sector still dominates the economy and inefficient state-owned enterprises are a drag on
productivity. The GOA has supported state-owned companies experiencing financial difficulties by
cancelling their debts and providing investment credits and technical assistance. Such economic
vulnerabilities have prodded the GOA to court FDI and reconsider the importance of private-sector
development. This trend should continue through 2014. Algeria’s legalistic and bureaucratic regulatory
environment and apprehension about foreign exploitation of natural resources hangs over foreign
companies considering investing in Algeria.
Climate for Investment & Trade 1-Sep-2014 • Page 1

Political Risk Services Algeria Country Conditions
Transparency of the Regulatory System

Generally, Algeria’s regulatory system is transparent, but decision-making authority remains opaque. Each
ministry defines its rules for doing business in the sectors it manages, and regulatory bodies are established
to administer them. Challenges arise in managing the bureaucracy, because authority is generally vested at
the top of every organization, and access to decision-makers is often limited. Furthermore, the Algerian
bureaucracy is slow and protocol-oriented, such that even minor deficiencies in paperwork can lead to
significant delays and fines. In some cases, authority over a matter may rest among multiple ministries,
which imposes additional bureaucratic steps and the likelihood of inaction due to errors or unusual
circumstances. In 2013 the National Competition Council was created to ensure fair practices between local
economic operators.
Foreign/Free Trade Zones/Ports

There are currently no free trade zones in Algeria.
Tariff and Non-tariff Barriers

Algeria applies a value-added tax (VAT) to all sales in the country. The VAT rates are 7 percent and
17 percent, depending on the product. Staples such as bread or milk are not subject to VAT. The reduced
rate of 7 percent is applied to most non-luxury goods.
Getting goods cleared through Algerian customs represents the single most frequently reported problem
facing foreign companies operating in Algeria. Delays can take weeks or months. In addition to a certificate
of origin, the GOA requires importers to provide certificates of conformity and quality from an
independent third party.
Policies
Conversion and Transfer
The Algerian dinar is considered fully convertible for all commercial transactions. The Bank of Algeria
(Banque d’Algerie, the nation’s central bank) manages Algeria’s foreign reserves and controls foreign
exchange. The 2010 CFL reinforced the lead role of the Bank of Algeria in overseeing the banking sector. A
network of public banks still controls roughly 90 percent of the banking market. International banks in
Algeria primarily serve private multinationals and Algerian private-sector firms. Legally registered
economic operators can access foreign currency to make payments, subject to bank domiciliation, without
pre-authorization. Operators must possess a clean audit report and a certificate from the tax authority in
order to repatriate funds. The Central Bank put in place new restrictions on foreign shareholders’ loans to
Algerian subsidiaries in December 2010. These new provisions mandate that firms receiving such loans
after July 26, 2009 must book them as additions to capital.
Foreign investors can repatriate dividends, profits, and real net income out of their assets through transfers
or liquidation. In certain cases, due to the inefficiency of the banking system and the heavy bureaucracy, it
may take longer to obtain official permission from the Central Bank to make transfers/payments, or for the
local bank to proceed with the transfer. In 2011 and 2012, businesses and international banks faced stricter
interpretations of the foreign exchange control rules. Commercial disputes developed because the Central
Bank, over reportedly small paperwork details, delayed repatriation of dividends. Certain cases were
referred to the courts to reach a resolution. Foreign investors and the international banks serving them
repeatedly have told Embassy officials this process is confusing and inconsistent, with one banking
Page 2 • 1-Sep-2014 Climate for Investment & Trade

executive saying the process “is different each time we go through it.” These executives are seeking greater
clarity on the rules around repatriating dividends, a central concern for foreign investors.
U.S. suppliers can benefit from faster and more predictable payments as a result of the mandatory letter of
credit requirement. The 2014 financial law was updated to authorized imported products—to be sold in
their present condition—to be paid either by letter of credit or documentary remittances. In addition,
payment delays may result due to the new regulation that limits Algerian importers’ payment options to
letters of credit. Direct wire payments are no longer authorized. Letters of credit are now limited to a
maximum of 60 days and are not required for raw material import transactions amounting to less than
4 million DZD (approximately USD 53,000) per year.
Performance Requirements
Algeria does not impose general performance requirements on foreign investments. However, in
accordance with the 2009 Complementary Finance Law, foreign investments in any sector require a
51 percent Algerian partnership.
The investment code provides a number of incentives for investment in Algeria, which are primarily related
to VAT and other tax exemptions, for periods of time that are dependent on the type of investment and the
nature of the package agreed between the investor and the National Agency for Investment Development
(ANDI). The 2009 Complementary Finance Law requires foreign investors to reinvest in Algeria the
equivalent of any tax benefits bestowed upon them, in a manner similar to the offset investment
requirements commonly seen in Gulf countries.
Legal Framework
Expropriation and Compensation
The government of Algeria has not engaged in expropriation actions against U.S. or other foreign firms.
Dispute Settlement
Algeria is a signatory to the convention on the Paris-based International Center for the Settlement of
Investment Disputes (http://www.worldbank.org/icsid). Algeria ratified its accession
(http://arbiter.wipo.int/arbitration) to the New York Convention on Arbitration, and is a member of the
Multilateral Investment Guarantee Agency (http://www.miga.org/). The code of civil procedure allows
both private and public-sector companies full recourse to international arbitration. Algeria permits the
inclusion of international arbitration clauses in contracts.
In 2010 an American oil company exercised the dispute settlement mechanism in its contracts with the state
oil company Sonatrach to contest the implementation of a windfall profits tax imposed long after the
company began doing business in Algeria. Negotiations prior to arbitration were very slow. The dispute
resolution process, including arbitration, can take 18 to 24 months and in some cases longer.
Right to Private Ownership and Establishment

Foreign entities have largely equal rights to establish and own business enterprises in Algeria and engage
in most forms of remunerative activity, within the framework of the requirement for majority (51 percent)
Algerian participation in all new foreign investments, including those in the banking sector. In principle
private enterprises have equal status with public enterprises and compete on an equal basis with respect to
access to markets, credit, and business operations.

Protection of Property Rights

Secured interests in property are generally recognized and enforceable, but court proceedings can be
lengthy and results unpredictable. Most real property in Algeria remains in government hands, and
controversy over the years has resulted in conflicting claims for real estate titles, which has made
purchasing and financing real estate difficult. One prospective U.S. investor seeking to build a factory in
Algeria tried in vain for two years to obtain approvals from a local governor to purchase suitable land for
the project.
Intellectual Property. While there is legislation protecting copyright and related rights, trademarks,
patents, and integrated circuits, implementation has been inconsistent and enforcement remains lax.
Algeria was again named to the USTR Special 301 Priority Watch List in 2013, notably for insufficient
protections for data associated with the development and market approval for pharmaceuticals, as well as a
protectionist policy which bans the import of roughly 230 pharmaceutical products manufactured abroad
that have generic equivalents produced in Algeria.
The Ministry of Culture organized a ceremony in April 2014 to highlight its commitment to IPR protections
by destroying approximately 1million units of counterfeit or pirated music, software, and film that had
been seized by Algerian customs and border police. However, Algeria’s vast informal economy remains a
major source of counterfeit goods, especially in sportswear and consumer goods.
The Embassy’s webpage also offers a link to local lawyers, some of whom specialize in IPR and/or patent
law. http://algiers.usembassy.gov/list_of_local_attorneys.html
Embassy point of contact: Theodore Brosius brosiusta@state.gov
For additional information about treaty obligations and points of contact at local IP offices, please see
WIPO’s country profiles at http://www.wipo.int/directory/en/.
Infrastructure
A number of international airlines serve Algeria. There are no direct flights between Algeria and the U.S.,
though a direct Algiers–New York City flight is under consideration. Air Algérie and Tassili Airlines
provide domestic service. There is railway passenger service between the major northern cities and bus
services to many of the smaller cities and towns. Good paved roads cover the northern region and connect
some oases, but congestion and security checkpoints impede overland travel. Rental cars are available but
expensive. Parking is also an issue in urban areas, and many companies hire a car and driver for daily
meetings of executives.
Corruption and other Bureaucratic Obstacles

There is an ongoing government effort to root out corruption, notably in key GOA agencies, such as
Customs. Many Algerian citizens believe that corruption is a problem within the upper reaches of
government. Some evidence suggests that bribes are paid to bypass Algerian bureaucracy or to avoid
government interference.
In June 2012, the Algerian lower court found two Algerian citizens and three Chinese citizens guilty of
corruption. The court sentenced the Algerian citizens to 15 years in prison, and sentenced the Chinese
citizens in absentia to 10 years in prison and issued an international warrant for their arrest.

The government investigated several high-profile corruption scandals in 2009 and 2010. One investigation
implicated officials at the Ministry of Public Works on charges of fraud related to the construction of the
East-West highway. Another involved senior officials of the state oil company Sonatrach investigated for
corruption in procurement. Several former Sonatrach senior officials are in custody, while others are under
investigation. Lower-level investigations involved customs officials and private sector executives charged
with embezzlement, illegal currency transfers, and misuse of public funds.
In 2013, GOA created the Central Bureau Fighting Corruption (OCRC), mandated to investigate and
prosecute any form of bribery in Algeria. OCRC current has a docket of 40 cases. In 2010, GOA created the
National Commission for the Prevention and Fight Against Corruption as stipulated in the 2006 anti-
corruption law. The Chairman and members of this commission were appointed by a presidential decree.
The commission studies financial holdings of public officials and carries out investigations. Algeria is not a
financial center, and financial transactions are tightly regulated. However, it is estimated that half of the
country’s economic transactions are carried out within the informal sector, effectively escaping the purview
of state auditors.
In 2006, GOA adopted an anti-corruption bill that reinforced existing legislation and brought Algeria into
compliance with the UN Convention against Corruption, which Algeria ratified in August 2004. The law
was designed to promote transparency in government and public procurement, introduce new crimes such
as illicit enrichment and reinforce existing penal sanctions.
In 2013, the Financial Intelligence Unit was strengthened by a new regulation for more freedom in dealing
with illegal money transaction and terrorism funding. In 2012, the government updated 2005 anti-money
laundering and counter-terrorist finance legislation to bolster the authority of the financial intelligence unit
to monitor suspicious financial transactions and refer violations of the law to prosecutorial magistrates.
International Agreements
Trade Agreements. Algeria has ratified a number of bilateral trade agreements with other countries though
there are currently no bilateral trade agreements between the U.S. and Algeria. In 2001, the U.S. and Algeria
signed a Trade and Investment Framework Agreement (TIFA) that created a platform for discussions on
trade provisions. Algeria ratified an EU association agreement in September 2005 and began active
membership in the Arab Free Trade Zone in 2009. The Algerian government says it is working towards
accession into the WTO (negotiations in Geneva have taken place as recently as March 2014), but real
progress has proceeded at a glacial pace and the country actually regressed over the last few years in terms
of opening up its market to trade and investment.
Bilateral Investment Agreements. The United States and Algeria signed a Trade and Investment
Framework Agreement (TIFA) in 2001 to create a forum for economic and trade discussion. The last TIFA
council meeting was held in 2004. Negotiations have continued with the Office of the U.S. Trade
Representative related to Algeria’s World Trade Organization (WTO) accession and cooperation under the
U.S.-Algeria TIFA. Formal meeting sessions in Geneva and informal digital video conferences between key
officials on both sides were held in 2013 and early 2014. Algeria executed a European Union association
agreement in 2005. The agreement provided for the gradual removal of import duties on EU industrial
products over 12 years and removed duties immediately on 2,000 other products. However, the EU
complained that some provisions in the 2009 Complementary Finance Law violated that agreement. In
December 2010, Algeria requested a three year extension (to 2020) of the deadline for completing the tariff
dismantling process with the EU under the EU-Algeria Association Agreement.

Algeria signed bilateral investment agreements for the protection and promotion of investments with the
following countries in the indicated years: Belgium/Luxembourg (1991), Italy (1991), France (1993),
Romania (1994), Spain (1994), China (1996), Germany (1996), Jordan (1996), Mali (1996), Vietnam (1996),
Egypt (1997), Bulgaria (1998), Mozambique (1998), Niger (1998), Turkey (1998), Denmark (1999), Yemen
(1999), Czech Republic (2000), Greece (2000), and Malaysia (2000). There is no bilateral investment treaty
between Algeria and the United States.
Algeria has also signed bilateral treaties to prevent double taxation with the following nations: United
Kingdom (1981), France (1982), Tunisia (1985), Libyan Arab Jamahirya (1988), Morocco (1990), Belgium
(1991), Italy (1991), Romania (1994), Turkey (1994), Syrian Arab Republic (1997), Bulgaria (1998), Canada
(1999), Mali (1999), Vietnam (1999), Bahrain (2000), Oman (2000), Poland (2000), Ethiopia (2002), Lebanon
(2002), Spain (2002), and Yemen (2002). There is no double taxation treaty between Algeria and the United
States.
In 1990, Algeria signed both investment protection and double taxation agreements with the Arab Maghreb
Union (AMU) countries (Libya, Morocco, Mauritania, and Tunisia).
OPIC and Other Investment Insurance Programs. The U.S. Overseas Private Investment Corporation
(OPIC) (http://www.opic.gov/), the U.S. Export-Import Bank (Ex-Im) (http://www.exim.gov/), and the
U.S. Trade and Development Agency (USTDA) (http://www.ustda.gov/) have supported projects in
Algeria. However, GOA announced in 2009 that all financing for foreign investments in the country must
be financed through Algerian banks. There are no projects currently under way in Algeria using support
from these programs.
A USD 250 million water desalination project in Algiers was completed in 2008 with OPIC support. Ex-Im
Bank supported the U.S. content of a power project in Skikda in 2003. USTDA supplied a grant to the
Ministry of Water resources to support a feasibility study of wastewater management practices in Oran in
western Algeria in 2010.
Labor Conditions
Algeria’s labor force consists of roughly 11 million people out of a total population of over 38 million.
According to the National Office of Statistics, in 2011 over 55 percent of the population was under age 30.
Beginning January 1, 2012 the monthly minimum wage increased to DA 18,000 (USD225) from DA 15,000
(USD188). The official unemployment rate is approximately 10 percent, but international organizations and
other observers believe it to be as high as 25 percent.
Algeria’s labor code sets minimum work standards, including a minimum work age of 16, a 40-hour
workweek, and higher rates for overtime pay. Employers pay 26 percent of gross salaries in social security
taxes, including provisions for both retirement and health/accident insurance.
U.S. companies are able to hire trained technical staff. However, recruiting and retention has become more
difficult as well-educated and trained Algerians are increasingly lured by higher salaries offered in the Gulf
region. English speakers remain difficult to find, but English-language acquisition is increasing among
youth. Arabic is Algeria’s official language and French is the most common language of business.
There are no restrictions on the number of expatriate supervisory personnel a company may establish as
long as they are able to justify that no local persons can be found that meet the requirements for the
position. Entry visas for foreign workers can be requested through Algerian embassies overseas with the

employer providing, among other requirements, a certified true copy of the work contract or the
provisional work permit issued by the Ministry of Labor, Employment and Social Security (MTESS), and an
attestation certified by the same authorities stating that the employer will bear the repatriation expenses of
the foreign worker once the work relation is completed. Foreign workers must then obtain work permits
from MTESS (http://www.mtess.gov.dz/mtss_fr_N/index.htm) and a residency card from the local police
office in the district where they will be working. The employer is responsible for submitting all tax
payments for individual workers to the proper local tax collection authorities.
Sources: 2014 INVESTMENT CLIMATE STATEMENT–ALGERIA, BUREAU OF ECONOMIC AND BUSINESS

AFFAIRS, US DEPARTMENT OF STATE; ALGERIA COUNTRY COMMERCIAL GUIDE FY 2014, US & FOREIGN
COMMERCIAL SERVICE AND US DEPARTMENT OF STATE; PRS FILES.

Algeria
Country Conditions
Background
Geography
Algeria encompasses nearly 2.4 million square kilometers, making it the 10th largest country in the world
and the second largest in Africa. Morocco lies to its west, Tunisia and Libya to the east, and on its southern
borders are Mauritania, Mali, and Niger. Despite heavy migration to coastal cities, much of the population
lives in villages. Except for the fertile coastal belt on the Mediterranean Sea, Algeria consists mainly of arid
mountains and desert. Inadequate water supplies limit agriculture to 3% of the land. Hydrocarbons are its
major natural resources; Algeria’s reserves of natural gas rank among the top 10 countries in the world and
its proven oil reserves rank 16th. It is the largest natural gas producer and second largest oil producer in
Africa. The country’s exports include oil, condensates, liquefied natural gas, other minerals, and
agricultural products.
During January, the coastal capital of Algiers averages low temperatures of 5ºC, high temperatures of 17ºC,
and receives an average of 12 days of rainfall. During July, its average low and high temperatures are 19ºC
and 32ºC, and it receives an average of three days of rainfall.
Social Conditions
Ethnic and Racial Divisions. Under the constitution, Islam is the state religion, authorizing governmental
control over such religious practices as providing financial support to mosques, overseeing the training of
imams, assigning preachers, and providing general guidance on the content of sermons. The government
also monitors activities in mosques for possible threats to security. The constitution also prohibits
discrimination based on religious belief; the tiny Christian and Jewish communities practice their faiths
without government interference. However, in June 2008, four Islamic converts to Christianity were jailed
for worshipping illegally, and during the 1990s especially, many non-Muslims were inhibited from public
professions of faith because the Groupes Islamiques Armés (GIA), a terrorist band previously associated
with the FIS and now linked to al-Qaeda, had pledged to expel Jews, Christians, and polytheists.
Berbers comprise the largest minority group, perhaps a third of the population. Their leaders maintain close
connections with Algerian expatriates in France. Berber nationalists have sought to counter the
government’s imposition of Arab culture through efforts to maintain their own ethnic and linguistic
identity. As part of the National Charter signed in 1996, the government and several major political parties
acknowledged that the Berber culture and language, Amazigh, were major political components of the
Algerian identity. However, in 1998, the government established Arabic as the official language, triggering
widespread protests in Berber regions. The month before these protests there were massive riots in
response to the death of Matoub Lounes, a popular Berber singer and outspoken advocate of the Berber
language and culture who had been killed under suspicious circumstances after his car was stopped in the
Kabylie region. The government conceded to recognize the Berber language, Tamazight, as a national (but
not official) language in March 2002, but violent demonstrations still occur in Berber areas such as Kabylie.
Regional and Class Divisions. Although conflict has, at times, been rooted in religious beliefs, much of the
violence stems from the disparities in wealth that have resulted from years of economic depression. About
5% of the population holds 45% of the country’s wealth. Islamic fundamentalism has proved popular
among the urban poor, who are disillusioned not only by their desperate conditions but also by
Background 1-Sep-2014 • Page 9

government corruption. Economic reform policies spurred by the IMF since the mid-1990s have added to
the hardships for many. Although the overall rate of unemployment was reduced by more than 50%
between 2002 and 2006, it is nonetheless pervasive, particularly among the young where it may reach
almost 25%. A high birth rate skewed age distribution, heightening employment strains. Inadequate
infrastructure in urban areas and severe shortages of housing and consumer goods add to public
dissatisfaction.
Education. About 23% of the national budget is devoted to education. Primary education is free and
compulsory for children between the ages of six and 15, but less than half attend secondary school.
Enrollment rates for girls and for students of both sexes in rural areas are lower than the general figures,
but have improved since independence. The share of females in secondary school is larger than that of
boys, and two-thirds of university graduates are women. Nevertheless, overall literacy is just 73%,
considerably higher for men then for women, and among the lowest rates in the world. Rapid population
growth has strained the educational system as the number of school-age children rises. All children
between six and 15 years must be educated in Arabic, creating teacher shortages that have led to the
recruitment of foreign teachers.
Health. The huge proportion of young people in Algeria has encouraged an emphasis on preventive health
care, marked by reliance on clinics and health centers rather than hospitals. Most medical care is provided
at no cost, although a sliding scale of charges applies to the wealthy. Health spending accounts for 8% of
public spending. All doctors and dentists are required to work in public health for a minimum of five years.
As a result, most people, except those in remote areas, have access to adequate medical facilities, but
poverty and problems such as a shortage of housing and inadequate sanitary conditions in some areas
create health issues. Average life expectancy is 73 years, and the infant mortality rate remains high,
23 deaths per 1,000 live births.
Government
Under the 1976 Constitution (as modified 1979 and amended in 1988, 1989, 1996, and 2008), Algeria is a
multi-party state. The ministry of the interior must approve all political parties. According to the
Constitution, no political association may be formed “based on differences in religion, language, race,
gender or region.” Algeria has universal suffrage at the age of 18.
The head of state and of government is the president of the republic. The president, elected to a five-year
term, is the head of the Council of Ministers and of the High Security Council. He appoints the prime
minister as well as one-third of the upper house of parliament (the Council of the Nation).
The Algerian parliament is bicameral, consisting of a lower chamber, the National People’s Assembly
(APN), with 462 members and the upper chamber, the Council of the Nation, with 144 members. APN
members are elected for a maximum five-year term. Legislative elections for the APN were last held in May
2012. Two-thirds of the Council of the Nation is elected by regional and municipal authorities; the rest are
appointed by the president. The Council of the Nation serves a six-year term with one-half of the seats up
for election or reappointment every three years. Either the president or one of the parliamentary chambers
may initiate legislation. Legislation must be brought before both chambers before it becomes law, but this
cannot happen without the support of the presidency. If the APN vetoes legislation, it must technically be
dissolved. Sessions of the APN are televised.
Algeria is divided into 48 wilayat (states or provinces) headed by walis (governors) who report to the
minister of interior. Each wilaya is further divided into communes. The wilayat and communes are each
governed by an elected assembly.
Page 10 • 1-Sep-2014 Background

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Algeria

Updated as of Nov 2014

Original Publication Date: June 2014

FORECASTS OF RISK TO INTERNATIONAL BUSINESS

KEY ECONOMIC FORECASTS

Country Update 19-Nov-2014 • Page U-1

the document was revealed to journalists by current and former government

 In September, Algerian militants kidnapped and then beheaded a French tourist

 At the moment, the government is attempting to downplay the threat. While

Succession Uncertainty Continues to Pose Risks

For the moment, the assumption is that Bouteflika is orchestrating a behind-

In late August, Abdelaziz Belkhadem, a former leader of the ruling National

Other frequently mentioned possible contenders include Said Bouteflika, the

Page U-2 • 19-Nov-2014 Country Update

Nation, the upper house of the legislature. However, neither is likely to

The most obvious replacement for Bouteflika in the event of well-planned

Sellal is relatively young at just 64 years of age, has a reputation as a competent

Reining in the Military

Country Update 19-Nov-2014 • Page U-3

Security Threats Persist

It was the highest profile attack by Islamist radicals since an Al Qaeda-affiliated

Page U-4 • 19-Nov-2014 Country Update

At the moment, the government is attempting to downplay the threat. During

Oil Price Decline a Warning

Country Update 19-Nov-2014 • Page U-5

An 11.4% year-on-year increase in non-oil taxes was more than sufficient to

Economic Forecasts for the Three Alternative Regimes

Military-Civilian Centrist Coalition Islamist

Page U-6 • 19-Nov-2014 Country Update

© 2014, The PRS Group, Inc. ISSN: 1054-5220

FORECASTS OF RISK TO INTERNATIONAL BUSINESS

KEY ECONOMIC FORECASTS

Highlights 27-Jun-2014 • Page 3

Policy Uncertainty Will Hold Growth below Potential

Economic Forecasts for the Three Alternative Regimes

Military-Civilian Centrist Coalition Islamist

Page 4 • 27-Jun-2014 Highlights

Political Fact Sheet

CAPITAL: HEAD OF STATE:

Current Data 19-Nov-2014 • Page 5

Current Data 19-Nov-2014 ~ Page 6-7

Current Data 19-Nov-2014 ~ Page 6-7

Regional Real GDP Growth (2013): MidEast/North Africa

-25 -20 -15 -10 -5 0 5 10

Regional Inflation Rates (2013): MidEast/North Africa

United Arab Emirates

Page 8 • 27-Jun-2014 Current Data

Regional Current Account/GDP (2013): MidEast/North Africa

United Arab Emirates

Economic Performance Profile

GDP Per Capita ($)  4797

Budget Balance  -1.9

Current Account  4.7

Debt Service Ratio  3.2

Currency Change (%)  -4.5

BEST 25% NEXT 25% NEXT 25% WORST 25%

Current Data 27-Jun-2014 • Page 9

Social Indicators as of 2013

Work Force Distribution

Page 10 • 19-Nov-2014 Current Data

…But for How Long?

Comment & Analysis 27-Jun-2014 • Page 11

Page 12 • 27-Jun-2014 Comment & Analysis