President of the Algerian-Spanish Trade Circle: "The pandemic has helped Algeria to accelerate the diversification of its economy"

Djamal-Eddine Bou Abdallah explains the challenges and opportunities offered by the North African country after the economic reforms during a virtual interview with Atalayar
The President of the Algerian-Spanish Trade Circle, Djamal-Eddine Bou Abdallah

PHOTO/ATALAYAR  -   The President of the Algerian-Spanish Trade Circle, Djamal-Eddine Bou Abdallah

The protests that took place in Algeria in 2019 have led to one of the most important political changes in the Maghreb since the Arab Spring. Political reforms have now been joined by transformations to diversify the economy, leave behind dependence on oil and attract foreign investment. Although the pandemic is making the Algerian transition difficult, Djamal-Eddine Bou Abdallah, president of the Algerian-Spanish Trade and Industry Circle, is optimistic about the future. "Algeria is changing its model. Our commercial openness is an opportunity for investors," he says during a virtual interview in which he outlined the keys to the new Financial Law and the impact of the coronavirus on the economy. 

How is the coronavirus affecting the Algerian economy?

In a similar way as in the rest of the world, but in Algeria the health crisis has been combined with the political crisis that took place in 2019 and that we are still dragging along. For companies, the situation is now very complicated. Confinements have hit businesses and the paralysis of public transport has been lethal to their activity. In addition, our economy is highly dependent on oil and the drop in the barrel due to the pandemic has also had a very negative impact. Fortunately, we had foreign exchange reserves and a public deficit that was less than 50% of GDP before the arrival of COVID-19. We have a little bit of room for manoeuvre in the difficult months ahead. 

Which companies have suffered most from the crisis?

They have all been badly affected. Right now there is no public transport and many companies have had to reduce their activity. The service companies have been the hardest hit. However, supermarkets and pharmacies have held up better, but are also having a hard time due to the lack of transport. Added to that is the lack of investment, as everything is at a standstill.

Mercado Argelia
AFP/ RYAD KRAMDI - Algerians go shopping in the capital Algiers on June 7, 2020, after authorities relaxed some restrictions against the coronavirus pandemic

What measures has the government put in place to help businesses?

The government has proposed many things, for example, to stop paying taxes, holiday leave for workers... but companies are very fragile, these measures are not enough because we were already in a crisis. They need more help, the government is also encouraging commercial banks to facilitate credit to the productive fabric. But the problem is that the Executive also has little room for manoeuvre due to the collapse of oil prices. A new budget has been drawn up taking into account the current situation, with the forecast of charging 30 dollars for each barrel of oil instead of 50. 

Is the pandemic an opportunity to reorient the country's production model?

Yes, exactly. But before the pandemic, work was already under way on economic reforms to diversify activity. With a barrel of oil at $50 or $60 a nation like Algeria, which will have 50 million inhabitants by 2028, cannot continue to function, and now it is at 40. Diversifying the economy is urgent and the pandemic is helping to accelerate that process. Ordinary taxation has exceeded oil revenues for the first time this year. 

What are the advantages of Algeria now for a European entrepreneur?

Since the end of May, a foreign company can take over 49% of the shares of an Algerian company. He can also set up a company in Algeria with foreign funds. Production can be relocated to Algerian territory and that was not possible before. The country is now open to foreign investment with the new Financial Law. Many Spanish companies have decided to invest here and are growing, like Dulcesol, for example. 

We still have to improve legal security, open up the whole country to investment or stabilise the markets. We also need to be more transparent with the economic data, but there is a willingness to open up the country and invite entrepreneurs from all over the world to come. This is a very interesting moment for Africa because from January 2021 a customs unit will be set up with the rest of the continent and we will be one of the gateways to this great market. 

Bolsa
PHOTO/REUTERS - Algiers Stock Exchange (Algeria)

Can Algeria benefit from the relocation of factories from Asia to closer parts of Europe? 

Yes, we are working to take advantage of that opportunity. We have a very interesting infrastructure, with good airports, highways, ports, rail transport... we are prepared to receive investment in all economic sectors. 

Why would you recommend Algeria to a Spanish businessman compared to Latin America?

Algeria is very close to Spain and will have facilities to settle down. We can help you as a professional organization. Now is the time to come because in a few years the competition will be greater to enter the Algerian market. We have enormous potential. Our energy prices are the lowest in the Mediterranean and there is good infrastructure. Right now Algeria is a market to be explored because until now it was closed to the world and very focused on the exploitation of oil. We have a virgin market waiting to receive investment and one of the largest in the whole region, with nearly 50 million inhabitants. 

Can the war in Libya or the insecurity in the Sahel pose a problem for investment in Algeria?

Not a priori. The instability of the region can be a bit scary, but Algeria has managed to manage security within its borders very well. Although the conflict in Libya is open and Mali is very unstable, Algeria has made the country safe and is working to end the Libyan conflict. 

Instalación petrolera
AFP/FAROUK BATICHE - Archival photograph of an oil installation outside In Amenas, near the Algerian-Libyan border

Can the lack of diplomatic relations with Morocco affect business in the country?

That is a political issue, but it is true that it affects business. North Africa should be an economically integrated market, just like the European Union. We have to overcome the political problems to reach that goal. The closure of borders does not help either the Algerian or the Moroccan economy. We advocate using diplomacy to end the conflict.