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Algeria’s economy is in the midst of a difficult and halting transition from bureaucratic state control to an open market. Much has improved however in the consequence of democratisation in the region, liberalisation of trade policies (free trade agreement with the European countries, imminent accession of Algeria to the world trade organization).
Algeria economy is experiencing a rapidgrowth; this growth was led by the hydrocarbons industry, which is highly cyclical in the current high price ceiling for oil and natural gas.
Under political stability, the president Boutaflika is pursuing a strategy to reduce the level of unemployment by attracting direct foreign investment in manner to create jobs and to assist the economic development in Algeria. In a 2007 survey of businessconditions in 178 countries, the World Bank ranked Algeria 125 for ease of doing business. Algeria is seeking more DFI direct foreign investment. For example, Algeria‘s hydrocarbons law passed in April 2005 is designed to encourage foreign investment in energy exploration. Algeria has signed bilateral investment agreements with 20 different nations. In 2006 FDI in Algeria totalled U.S$ 1.8 billionthe petrochemical, transport, and utilities sectors.

The Algerian law is characterized by highly changeable nature; change is due to tremendous growth that requires revision and appropriate adaptations in all areas of the law of Algeria.

The Algerian legal system for the promotion of foreign investment

The legal system for the promotion of the investment is essentially defined in theOrdinance n°01-03 of August 20.2001 relating to the development of the investment” (thereinafter “Ordinance n°01-03” or “Algerian investment code”), amended a completed by the Ordinance 06-08 of July 15. 2006. (thereinafter: “Ordinance 06-08).

1. The investment field

Only companies incorporated under Algerian law, i.e. the Algerian sister company of foreign companies, can benefit fromadvantages provided for in the Ordinances 01-03 and 06-08.

1.1 Definition of the investment,

Article 2 of the Decree 01-03 amount to a broad definition of the investment which can benefit from the advantages envisaged by decree 01-03 and Ordinance n°06-08.
Pursuant to this provision the investment eligible to the legal advantages can take three forms

- The purchase of assets which fall withinthe framework of the creation of new activities or the extension of production capacities, or their renovation or
- Participation in the capital of a company, in the form of a cash contribution or a contribution in kind.
- Resumption of activities as part of a partial or total privatization.

The Ordinances 01-03 and 06-08 define the regime applicable to domestic andforeign investments realized in the form of a capital supply or a contribution in kind.

1.2 The principles of freedom to invest and the equality of treatment

1.2.1 The freedom to invest in Algeria

Pursuant to Article 4 of the Ordinance 01-03, the investments are made freely, subject to the legislation and regulations pertaining to the regulated activities and with respect for theenvironment”.

Regulated activities are all activities governed by specials laws and subject to an administrative authorization.

1.2.2 The equality of treatment
Pursuant to Article 14 paragraph 1. Of the Ordinance 01-03, foreign physical and legal persons shall receive a treatment identical to that awarded to Algerian physical of legal persons with regards to the rights and obligations in relationwith the investment.

2 The preliminary approach to the investment
In order to benefit from the investment must firstly be declared to the “National Agency for the Development of Investment” (“Agence pour le Development de l’Investissement”, “ANDI”).

The investor’s declaration must indicate supportive elements required for the request for advantages, i.e.: the domain of activity, the...