
Foreign Direct Investment
Rich in natural resources and economically stable, Algeria has historically attracted decent FDI flows. However, inflows were negatively impacted by the social unrest and the COVID-19 pandemic these last few years. According to the data published by UNCTAD in the World Investment Report 2022, FDIs to Algeria decreased by 23.9% to USD 870 million in 2021 (down from USD 1.1 billion one year earlier) with inflows directed primarily to the natural resources sector. On the other hand, the stock of FDI increased, reaching USD 34 billion in 2021, around 20.6% of GDP. Over the last few years, it can be seen a reorientation of FDI towards the domestic market, thanks to the proliferation of development projects in transportation and infrastructure. The United States and Italy have been investing heavily in Algeria, taking over France's historical position as the largest investor in the country. European investments have recently decreased in favour of greater interest from Gulf investors. On a country level, the United States, Italy, France and Spain are the leading investors, according to the latest investment climate statement for Algeria from the U.S. State Department. Industry, construction and transport are the sectors that have received the most of the FDI over the 2022-2023 period. The total number of investments registered for that period with the National Agency for Investment Development (ANDI) amounted to 3,120 projects for an estimated value of DZD 1,731 billion.
Protectionist measures, as well as corruption, bureaucracy, a weak financial sector and legal insecurity in terms of intellectual property rights, are serious obstacles to investment. Until 2019, the participation of a foreign investor in an Algerian company was limited to 49% and foreign contractors are forced to find local partners for public tenders. However, the government of President Abdelmadjid Tebboune eliminated the so-called "51/49" restriction that required Algerian majority ownership of all new companies. The requirement will be maintained for "strategic sectors", identified as hydrocarbons, mining, defence, the import of goods for resale in Algeria, and pharmaceutical production. The government has also approved a new hydrocarbons law, improving fiscal conditions and contract flexibility in order to attract new international investors. As a result of the promulgation of this law, major international oil companies signed memoranda of understanding with the national hydrocarbon company Sonatrach. Algeria ranks 115th among the 132 economies in the Global Innovation Index 2022 and167th out of 177 countries in the 2022 Index of Economic Freedom.
Foreign Direct Investment | 2020 | 2021 | 2022 |
FDI Inward Flow (million USD) | 1,143 | 870 | 89 |
FDI Stock (million USD) | 33,107 | 33,977 | 34,066 |
Number of Greenfield Investments* | 6 | 10 | 4 |
Value of Greenfield Investments (million USD) | 82 | 861 | 136 |
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Algeria | Middle East & North Africa | United States | Germany |
Index of Transaction Transparency* | 4.0 | 6.4 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 1.0 | 4.8 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 5.0 | 4.7 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
