PRIVATIZATION PDF Print E-mail
Algeria has a very large public sector due to the choices that have been made in the past. In fact, even if a small private sector has always existed since independence, the general organization of the national economy has been centralized until the mid 1980s: agricultural lands were collectivized, all industry was under public control and the priorities were to develop heavy industry and mechanical industry.

At the end of the 1980s, Algeria started to engage in far-reaching reforms and set in place the mechanisms necessary for a market economy. Deep changes resulted, such as the practice of freedom of prices, the abolition of external trade monopoly, and access to capital of certain public firms by private shareholders.

Privatization plays a fundamental role as the Algerian economy starts to pen up to the market economy. As part of the reforms, the privatization program of government-controlled firms was launched in 1995, and implemented in 1998. A new Ordinance 01-04 was adopted on August 20, 2001, providing more changes and modernization of the privatization regulatory framework mentioned above.

Definition of privatization:

Per the new ordinance, privatization refers to any transaction that consists in the transfer to individuals or legal entities of private law other than public enterprise owners, of:
  • All or part of the share capital of companies under direct or indirect government control and/or of legal entities of public law, through the cession of stocks or shares or the subscription to a capital increase;
  • Assets that form an autonomous operational unit of public companies.

Algerian entities in charge of privatization process:

Three national entities are in charge of the privatization program:
  • The Ministry of Industry and Promotion of Investment (Ministère de l’Industrie et de la Promotion de l’Investissement) whose mission is to assess the value of the firm or assets to be yielded, study and select offers, prepare a detailed report on the selected offer, ensure the confidentiality of the information and transmit the cession file to the Commission for Control of Privatization Transactions (“Commision de Contrôle des Opérations de Privatisation”).

  • The Council on Government Participations (Le Conseil des Participations de l’Etat): The responsibilities of this Council are to develop a global strategy for Government participations and privatization, define and implement policies and programs on Government participations, to define and approve privatization policies and programs for government controlled corporations and examine and approve privatization requests
  • The Commission for Control of Privatization Transactions
    (La Commission de Contrôle des Opérations de Privatisation): The role of this Commission is to ensure that the rules set for transparency, sincerity and equity during privatization transactions are fully respected.
Privatization procedures:

The ordinance stipulates that, prior to completion of any privatization transaction, the assets of titles to be privatized must be evaluated by experts, following commonly accepted procedures. In this respect, the following methods can be used for privatization transactions:
  • Use of financial market mechanisms (trading on the stock market or public sale offer at fixed price);
  • Issuance of a Request for Proposals (R.F.P.);
  • Setting up of an amicable procedure to be authorized by the Council on Government Participations (Conseil des Participations de l’Etat) after its review of a detailed report from the Minister in Charge of Participations;
  • Use of any other privatization modality that encourages the general public to become shareholders.


Guarantees and advantages offered to investors :

Guarantees offered:
The guarantees offered to foreign investors are of a classic nature. On the one hand, equal salaries are guaranteed since foreign investors have the same status as local investors with respect to privatization; and texts do not set any limit to foreign investors’ participation. On the other hand, they benefit from the 29 guarantees provided by the Code on Investments for privatization transactions. The said guarantees are as follows:
  • free transfer of capital and of their products;
  • full protection against expropriation;
  • possibility of recourse to international arbitration in case of disputes.
Negotiated advantages:
Buyers who are committed to rehabilitate or modernize a company, maintain all or part of the jobs, and keep the company running, can benefit from specific advantages that are negotiated on a case-by-case basis.

Payment modalities and ownership transfer:

Payment modalities:
In principle, buyers must pay cash. However, the Government can decide to grant to certain buyers, under certain conditions, the option of paying by installments.

Ownership transfer: The conditions to be complied with for ownership transfer are stipulated in a Schedule of Specific Conditions (Cahier des Charges Particulières) that is a full component of the cession contract in which the rights and obligations of the seller and of the buyer are prescribed.
 
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