Like a number of energy producers around the world, Algeria has struggled to cope with the sharp drop off in oil prices in over the last two years as the deep impact of the decline weighs on pivotal state revenue.
Deeply dependent on energy revenue for government spending, countries like Algeria have been forced to cut spending and adjust generous subsidy programs to keep match the deep decrease in incoming revenue. The decline has forced a discussion of economic diversity among a number of energy producers, most notably Saudi Arabia as governments have been forced to eat into funds usually sustained and increased by oil and gas revenue.
In the case of Algeria, the decline in pricing came as the country was already dealing with waning interest from foreign investors amid a rash of unfavorable developments and institutional corruption at the state-backed Sonatrach.
In the earlier case, Algeria’s political leadership moved to improve conditions for needed production partners and investors and sought out potential new production efforts, including the domestic possibilities of shale fracturing, or fracking.
However, as prices collapsed, Algeria and others in the region have been forced to consider what lies beyond such a deep dependence on energy revenue. In Algeria’s case, which saw revenues fall by about half over the last two years, according to media reports, this effort has included legislation meant to roll out the welcome mat for non-energy investors.
This past week saw the government introduce legislation offering incentives to foreign businesses willing to enter the Algerian market beyond energy opportunities.
“The bill provides for new mechanisms to ensure support to investors, the improvement of the business climate, local decision making and the creation of a new one-stop shop,” said Industry Minister Abesslem Bouchouareb, according to media reports.
The legislative push comes as part of a broader effort to cut government spending and the financial weight of oil and gas subsidies, which a number of international lending institutions have pushed for in recent years. Like Egypt, Algeria was saddled with unsustainably generous subsidy programs which would have to be amended to reign in spending.
As for the new legislation, which currently exists as a draft, foreign investors will be allowed an exemption on value added taxes and customs fees and a ten-year exemption on property taxes should it for a new project.
Further, the government will provide partial or total funding for any needed infrastructure.