Pilot Investment Climate Assessment Algeria Investment Climate Assessment

102 Pages·2004·0.45 MB·English

Pilot Investment Climate
Assessment
Algeria Investment
Climate Assessment
June 2002
Contents ii
Preface v 2.2 On the interpretation of survey data
Acknowledgments vi on corruption, illegal behavior, and
informal activities 23
Acronyms and Abbreviations viii
3.1 A private sector development strategy
Executive Summary xi
for Algeria: short-term action plan for
1 Algeria’s Economy: Overview and “quick wins” 40
Recent Developments 1
Figures
Growth record and recent economic
developments 2 1.1 Annual change in selected economic
The enterprise sector 4 indicators, Algeria, 1974–2000 3
The growth challenge 6 1.2 Terms of trade volatility, selected
countries, 1974–2000 3
2 The Investment Climate in Algeria 1.3 Average unit labor costs in public and
as Lived by 562 Local Firms 8 private manufacturing enterprises,
A closer look at the main constraints to 1998–2000 6
doing business 11 2.1 Most severe obstacles to doing business,
Productivity and the investment climate 31 Algeria 9
The view of foreign investors 34 2.2 Most severe obstacles to doing business
for old and new firms, Algeria 10
3 Looking Ahead: Short- and Medium-
2.3 Most severe obstacles to doing business
Term Strategies for Fostering
for private and public firms, Algeria 10
Private Sector Development 37
2.4 Most severe obstacles to doing business
Designing a private sector development
for small and medium-size enterprises and
strategy: a tradeoff between
large firms, Algeria 10
comprehensiveness and realism 38
2.5 Sources of working capital finance in
Initiating a dynamics of reform and working
previous three years by type of firm,
on a medium-term agenda 39
Algeria 12
Annex 3.1 A private sector development
2.6 Sources of investment finance in previous
strategy for Algeria: medium-term policy strategy 44
three years by type of firm, Algeria 12
2.7 Delay in obtaining last loan approval
Appendixes
by type of firm, Algeria 13
1 Investment Climate Survey Methodology
2.8 Share of firms required to provide collateral
and Sample 56
for last loan by type of firm, Algeria 14
2 Technical Appendix on Data Analysis 61
2.9 Collateral required as a share of
3 Cross-Country Investment Climate Indicators
investment loan value by type of
and Macroeconomic Performance Indicators 73
firm, Algeria 14
Boxes 2.10 Average time required for banking
operations, Algeria 15
2.1 Lack of access to industrial land a
constraint to a firm’s ability to invest 2.11 Firms’ sources of finance, selected
and grow 17 countries 15
Contents iii
2.12 Firms looking for land or offices and 2.26 Bribes, kickbacks, underreporting,
length of search, Algeria 17 and informality, Algeria 24
2.13 Share of firms that are land tenants 2.27 Firms’ perception of the judiciary, Algeria 26
or owners, Algeria 17 2.28 Reasons cited by firms for recruiting
2.14 Firms’ reasons for choice of location, problems, Algeria 27
Algeria 17 2.29 Average education of textile industry
2.15 Delays in obtaining administrative or workers by occupation, selected countries 27
public services, Algeria 17 2.30 Competitors, suppliers, and clients
2.16 Delays in obtaining administrative or of private and public firms, Algeria 28
public services for small and large firms, 2.31 Distribution of sales by type of firm,
Algeria 19 Algeria 29
2.17 Power outages and ownership of 2.32 Decisionmaking horizons of
generators by type of firm, Algeria, 2001 19 managers of small and large firms, Algeria 30
2.18 Water supply interruptions and ownership 2.33 Productivity of large firms and small and
of wells by type of firm, Algeria, 2001 20 medium-size enterprises, Algeria 31
2.19 Share of firms with own generator 2.34 Productivity of public and private
or well, selected countries 20 firms with size controlled for, Algeria 32
2.20 Interruptions in telephone and natural 2.35 Productivity of new and old firms, with
gas service by type of firm, Algeria, 2001 21 size controlled for, Algeria 32
2.21 Mobile and mainline telephones, 2.36 Productivity of firms by region, Algeria 33
selected countries, 2001 21
2.37 Median value added per worker in the
2.22 Average and longest waits for imports to garment industry, selected countries 33
clear customs by type of firm, Algeria,
2.38 Median wage paid by firms in different
2001 22
investment climates, Algeria 34
2.23 Average and longest waits for imports
to clear customs, selected countries 22 Tables
2.24 Main constraints in dealing with the 1.1 Output, prices, and unemployment,
tax administration, Algeria 23 Algeria, 1990–2002 4
2.25 Firms’ use of informal payments and 1.2 Formal enterprises and employees
connections to obtain services, Algeria 24 by sector, Algeria, 2001 5
iv
What is an investment climate assessment?
Investment climate assessments systematically analyze the conditions for private investment and enter-
prise growth in a country, drawing on the experience of local firms to pinpoint the areas where reform is most
needed to improve the private sector’s productivity and competitiveness. By providing a practical foundation
for policy recommendations and involving local partners throughout the process, the assessments are de-
signed to support policy reforms that can speed the private sector’s growth, leading to faster economic growth
and poverty reduction.
Produced by the World Bank Group in close partnership with a public or private institution in each coun-
try, the investment climate assessments are based on a survey of enterprises to find out what difficulties they
encounter in starting and running a business—and, if the business fails, in exiting. The survey captures firms’
experience in a range of areas—financing, governance, regulation, tax policy, labor relations, conflict resolu-
tion, infrastructure services, supplies and marketing, technology and training. These are areas where difficul-
ties can add substantially to the costs of doing business. The survey attempts to quantify these costs. Using
a standard methodology, the assessment then compares the survey findings with those in similar countries to
evaluate how the country’s private sector is faring and how well it can compete.
The findings of the survey, combined with relevant information from other sources, provide a practical
basis for identifying the most important areas for reform aimed at improving the investment climate. The
assessments look in detail at policy, regulatory, and institutional factors that hamper the provision of good-
quality infrastructure services and the functioning of product, financial, and other markets, linking the con-
straints to firms’ costs and productivity.
In each country the investment climate assessments draw on the guidance and expertise of local partners
in government and the business community. The findings and policy recommendations emerging from the as-
sessments are discussed extensively with the private sector and other stakeholders in the country. This broad
dissemination of the findings is aimed at engaging not only policymakers but also business leaders, investors,
nongovernmental organizations, and the donor community in shaping the national private sector development
strategy, forging consensus on the priorities for reform of the investment climate, and laying the groundwork
for concrete responses to the problems identified. Updates of the assessment can help track progress in im-
proving the investment climate.
Recent investment climate assessments include those for China, Eritrea, India, Morocco, Mozambique,
and Pakistan. This report benchmarks Algeria mainly against China, India, and Morocco, countries for which
comparable survey data are available. While the selection of comparators is largely a matter of judgment and
data availability, international benchmarking against the achievements and constraints of economies at simi-
lar levels of development (such as Morocco) helps in inferring what is feasible—or imperative—in Algeria’s
economy or in its policy reform.
Preface v
This investment climate assessment is part of a series • A survey of 57 foreign investors from France, Italy,
of analytical works on Algeria prepared by the World and Spain. All had recently expressed interest in
Bank to lay out the basis for its Country Assistance investing in Algeria but had not yet invested, either
Strategy for that country. The assessment is based on because they had delayed their decision or, in a
three pieces of work undertaken in parallel between few cases, because they had abandoned their in-
January 2002 and March 2003: vestment project. This survey used the standard
foreign investors questionnaire developed by the
• An investment climate survey of 562 Algerian firms Foreign Investment Advisory Service. The main
in nine wilayas (administrative regions). The survey survey findings are summarized in this report and
covered formal private and public enterprises with detailed in “Algérie: enquête d’image auprès
at least five employees, operating in the main d’investisseurs étrangers potentiels” (World Bank,
urban centers and in 10 sectors in industry, con- Middle East and North Africa Region, Finance,
struction, and services. The sample excludes agri- Private Sector, and Infrastructure Group; and
culture, the trade sector, and the hydrocarbon (oil Foreign Investment Advisory Service, Washington,
and gas) sector as well as government agencies, D.C., 2003).
universities, and research centers (see appendix 1
for details on the sample and methodology). The report also draws on international compara-
• A series of four missions to Algeria to assess the tive studies and indicators as well as some World
main institutional issues underpinning the con- Bank reports. In particular, the macroeconomic
straints to private sector development. Combining overview in chapter 1 draws from the World Bank’s
the survey results with this policy work led to the “Medium-Term Macroeconomic Strategy for Algeria”
private sector development strategy summarized (Washington, D.C., 2003) and its April 2003 Algeria
in chapter 3 of this report and detailed in the Economic Monitoring report.
World Bank’s “Algeria Private Sector Development
Strategy Note” (Washington, D.C., 2003).
Acknowledgments vi
This investment climate assessment was prepared by same team along with Patrick Tardy (consultant) and
Najy Benhassine and Christian Schmidt of the World Mohammed Bekhechi (World Bank, Legal Depart-
Bank’s Middle East and North Africa Region, Finance, ment, Environment and International Law Unit) as the
Private Sector, and Infrastructure Group. Geneviève main authors. That document includes details on the
Boyreau-Debray of the World Bank’s Development institutional background, policy issues, and policy
Economics Research Group conducted the productiv- recommendations that are not reproduced here (ex-
ity analysis and the international comparisons and cept for the summary policy matrix in annex 3.1).
wrote the corresponding sections of the report. The report also draws from “Algérie: diagnostic
Research assistance and data analysis were provided sur le climat de l’investissement etranger” (Foreign
by Nabila Assaf (Middle East and North Africa Region, Investment Advisory Service, Washington, D.C., 2002)
Finance, Private Sector, and Infrastructure Group), and “Algérie: enquête d’image auprès d’investisseurs
Antoine Frédéric Bozio (Harvard University and Ecole étrangers potentiels” (World Bank, Middle East and
Normale Supérieure, Paris), and Sergio Kurlat North Africa Region, Finance, Private Sector, and
(Development Economics Research Group). Albert Infrastructure Group; and Foreign Investment Ad-
Zeufack (World Bank, East Asia and Pacific Region, visory Service, Washington, D.C., 2003). The foreign
Poverty Reduction and Economic Management investors survey was conducted in France, Italy, and
Sector Unit) provided guidance in the initial stages Spain during the spring of 2002 by a team of gradu-
of the survey launch. Peer reviewers were Uma ate students from HEC Junior Conseil (a students’
Subramanian (World Bank, Private Sector Advisory consulting arm of Ecole des Hautes Etudes
Services, Investment Climate Unit) and Samy Boukeila Commerciales, France). The team was led by Brice
(of the Algerian business association Cercle d’Action Garnier and Ngoc Tram Lai and carried out its work
et de Réflexion autour de l’Entreprise, or CARE). under the supervision and guidance of Najy Ben-
The survey was conducted by the National Center hassine. Enumeration in Spain and Italy was con-
for Population and Development Studies (Centre tracted out by HEC Junior Conseil to its counterparts
National d’Etudes et d’Analyses pour la Population et at the Bocconi University Business School (Milan) and
le Développement—CENEAP) between June 2002 ESADE Business School (Barcelona).
and March 2003, in collaboration with and under the The team benefited from the support and guid-
supervision of the World Bank. Mohammed-Cherif ance of many government officials in Algeria, includ-
Belmihoub (Graduate School of Public Administration ing staff from the Ministry of Small and Medium-Size
—ENA, Algeria) contributed to its preparation and Enterprises (the official counterpart); the Ministries of
launch. The database was provided by the Algerian Industry, Finance, Participation and Investment Pro-
National Office of Statistics. Enumeration was con- motion, Commerce, Labor, and Justice; the one-stop-
ducted by a group of about 50 graduate students shop investment promotion agency (Agence Na-
contracted by CENEAP. The United Nations Develop- tionale de Développement de l’Investissement, or
ment Program office in Algiers funded part of the sur- ANDI); and the wilayas of Algiers and Annaba.
vey. And the World Bank liaison office in Algiers pro- Moreover, the team benefited from extensive advice
vided logistical assistance. and comments during presentations at different
Parts of the report build on the “Algeria Private stages of the project at the World Bank and in Algeria.
Sector Development Strategy Note” (World Bank, Participants included more than 100 business owners;
Washington, D.C., 2003), written in parallel by the representatives from most Algerian banks and the
Acknowledgments vii
Algerian bankers association (Association Algérienne search and academic institutions (CENEAP, CREAD,
des Banques et Etablissements Financiers); business the University of Algiers, and the business schools of
associations (CARE, Forum des Chefs d’Entreprises, Institut Supérieur de Gestion and Ecole Supérieure de
Confédération des Entrepreneurs et Industriels de la Commerce d’Alger).
Mitidja, Association des Entrepreneurs de la Vallée du Steve W. Wan Yan Lun, Lin Wang Chin, and Mehdi
M’Zab, and Savoir et Vouloir Entreprendre, an associ- Benyagoub contributed to the production of the
ation of women entrepreneurs); the chambers of com- document.
merce and industry of Algiers and Annaba; and re-
Acronyms and Abbreviations viii
ANDI Agence Nationale de Développement CPE Conseil des Participations de l’Etat
de l’Investissement CREAD Centre de Recherche en Economie
CALPI Comité d’Assistance pour la Localisation Appliquée au Développement
et la Promotion des Investissements EGZI Entreprise de Gestion des Zones
CARE Cercle d’Action et de Réflexion autour Industrielles
de l’Entreprise GDP gross domestic product
CENEAP Centre National d’Etudes et d’Analyses HEC Ecole des Hautes Etudes Commerciales
pour la Population et le Développement (France)
CNAS Caisse Nationale de l’Assurance Sociale SGP Société de Gestion des Participations
CNRC Centre National du Registre de ZAC Zone d’Activité Commerciale
Commerce
Currency equivalents
(As of March 9, 2004)
Currency unit: Algerian dinar (DA)
Exchange rate: US$1 = DA 78.17
Weights and measures
The metric system is used throughout this report.
Fiscal year
July 1–June 30
Vice president Christiaan J. Poortman
Sector director Emmanuel Forestier
Country director Theodore Ahlers
Sector manager Zoubida Allaoua
Task team leaders Najy Benhassine
Christian Schmidt
Algeria’s Investment Climate at a Glance ix
Algeria’s investment climate at a glance
Algeria Morocco India China
Indicator 1995 2000 1995 2000 1995 2000 1995 2000
Macroeconomic environment
Gross national income per capita
(PPP U.S. dollars)a 5,110 5,840 2,860 3,320 1,850 2,340 2,650 3,929
Population (millions) 28.06 30.4 26.40 28.70 929.00 1,016.00 1,205.00 1,262.00
Average annual growth of GDP (percent)b 0.28 3.18 1.13 3.71 5.20 5.70 12.10 8.20
Imports and exports as a percentage of GDP 57.90 63.77 61.50 68.58 25.70 30.50 45.70 49.10
Private investment (percentage of GDP)c 21.86 13.51 17.75 20.74 18.20 17.00 18.60 17.30
Public investment (percentage of GDP)c 7.27 8.03 — — 8.40 7.30 22.20 19.90
Net foreign direct investment inflows
(percentage of GDP) 0.00 0.75 0.97 0.43 0.60 0.50 5.10 3.60
Unemployment rate, 2001 (percent) — 27.00 — 19.50 — 9.20 — 9.30
Microeconomic environment
Import delays (days)
Average wait to clear customs — 11.70 — 5.40 — 10.45 — 7.49
Longest wait to clear customs — 44.40 — 23.20 — 21.20 — 12.50
Export delays (days)
Average wait to clear customs — 8.60 — 1.69 — 5.07 — 5.49
Longest wait to clear customs — 14.21 — 2.75 — 9.29 — 8.13
Average years of education by occupation
Skilled professionals — 9.40 — 8.00 — 11.30 — —
Unskilled workers — 5.00 — 5.50 — 9.50 — —
Labor
Share of permanent workers who are
female (percent) — 13.65 — 47.39 — 18.34 — 44.49
Desired workforce as a percentage of
current workforce — 135.51 — 78.77 — 82.76 — 87.45
Share of firms offering formal training (percent) — 31.84 — 16.30 — 27.17 — 69.61
Infrastructure
Share of firms with own generator (percent) — 29.00 — 17.00 — 69.00 — 16.00
Share of firms with own well (percent) — 32.00 — 29.00 — 51.00 — 16.00
Mainline telephones per 1,000 people, 2001 — 60.00 — 39.00 — 34.00 — 138.00
Mobile telephones per 1,000 people, 2001 — 3.00 — 157.00 — 6.00 — 112.00
Finance
Share of firms with an overdraft or
line of credit (percent) — 37.50 — 77.40 — — — 21.80
Share of credit currently unused (percent) — 39.60 — 25.50 — — — 29.70
Share of firms with a loan from a bank or
financial institution (percent) — 50.40 — 45.10 — — — 57.00
continued . . .
Algeria’s Investment Climate at a Glance x
Algeria’s investment climate at a glance (continued)
Algeria Morocco India China
Indicator 1995 2000 1995 2000 1995 2000 1995 2000
Share of loans requiring collateral (percent) — 82.39 — — — — — 82.97
Average value of collateral required
(as percentage of loan) — 184.57 — — — — — 88.87
Average interest rate on loan (percent) — 11.25 — — — — — 6.58
Equity and retained earnings as a percentage
of total liabilities — 95.71 — 28.86 — 44.33 — 42.13
Sources of finance (percent)
Retained earnings — 71.60 — 62.00 — 30.40 — 51.50
Banks and other financial institutions — 7.00 — 19.60 — 36.10 — 20.60
Days for clearing a check through financial
institution — 23.00 — — — — — 4.70
Share of land that is owned (percent) — 62.00 — — — — — 53.98
Share of land that is leased or rented (percent) — 19.30 — — — — — 25.23
Governance
Share of revenue typically reported for tax
purposes (percent) — 72.51 — — — — — 54.91
Control of corruption — –0.62 — 0.44 — –0.39 — –0.30
Rule of law — –0.97 — 0.46 — 0.23 — –0.19
Political stability — –1.27 — 0.16 — 0.39 — –0.05
— Not available.
a. PPP U.S. dollars are adjusted for purchasing power parity.
b. The data shown for 1995 refer to 1991–95; those shown for 2000 refer to 1996–2000.
c. Gross domestic fixed investment.
Source: World Bank investment climate surveys, World Development Indicators.