India-Algeria Economic and Commercial Relations

Algeria, a member of OPEC has become an important economic partner in recent years. With 32 million population and GDP of $56 billion, Algeria is the fourth largest economy in the Arab world. Hydrocarbons constitute 96% of its exports. The rise in oil prices has contributed to an augmentation of its foreign exchange reserves to more than $ 33 billion. Its annual imports are to the tune of $12 billion. The gradual but perceptible improvement in the internal situation in Algeria and the revival of growth has helped in building up international confidence in the Algerian economy. Presently, Algeria is in the process of liberalisation of its economy to create a pro-investment atmosphere.

Hydrocarbon remains the backbone of the Algerian economy. Majority of the hydrocarbon products are exported to EU countries and the US. Algeria imports almost all its basic requirements. France, Italy, Spain and some other European countries and the US dominate the Algerian market. India has opportunities in almost all sectors of economy as the market is price sensitive

Bilateral economic and commercial ties between India and Algeria are steadily improving but they are still below potentials. The basket of Indian exports to Algeria is slowly diversifying from the traditional agricultural exports to automobiles, iron & steel, pumps, light engineering items, pharmaceuticals, textiles, plastic material, etc. In 2002, the Indian exports to Algeria accounted for $83 million. It was a 130% increase in bilateral trade from 2001, which is an encouraging sign. As per trade statistics obtained from the Algerian authorities, our exports crossed $ 92 million in the 11 months of 2003 (January to November).

At present there are no joint venture projects between India and Algeria. However, there are companies which are helping Algerian entrepreneurs in setting up projects by supplying equipment, technical inputs, know-how, training manpower etc in fields like automobiles, two wheelers, electronic items, pharmaceuticals telecommunications etc.

A healthy trend of India's export to Algeria is that high value items like automobiles, steel pipes, automotive parts and pharmaceuticals form a good part of exports. In the light of the improved situation in Algeria and in view of the vast potential in this country Indian industries should have greater interaction with Algeria and make use of the opportunities. There are a number of areas that provide opportunities for Indian industries. They are:

• Construction .& Infrastructure development: There is acute shortage of housing facilities in Algeria. Following 21 May 2003 earthquake, new housing projects are coming up. The government proposes to build around 20, 000 houses for the earthquake victims. There are opportunities for construction of roads, railways and modernization of airports and also augmentation of water resources (construction of dams, reservoirs etc.)
  
• Hydrocarbon: Although oil was first discovered in Algeria 1956, Algeria is considered to be under explored. Over the last few years, significant oil and gas discoveries have been made, largely by foreign companies in partnership with state-owned Sonatrach. There is a high potential for future discoveries. All these projects are awarded thorough tendering process. There is scope for Indian companies in oil and gas discoveries and modernization of Algeria's hydrocarbon industry.
  
• Power: Algeria's electricity demand is growing at a rapid, 5% annual rate. Currently, Algeria has around 6,000 MW of installed power generating capacity and will require 8,000 MW by 2010. This will need large investments in new generating capacity, plus transmission and distribution infrastructure (i.e., lines and sub-stations). In order to accomplish this, Algerian government hopes to attract foreign capital & know-how.
  
• Pharmaceutical sector: Algeria is Africa's largest importer of medicines with annual imports of more than $500 million. Most of the medicines are imported from Europe and are expensive. Recently government has taken a decision to stop import of 128 medicines and is implementing various measures to promote local production especially generic medicines. New measures, inter-alia, include compulsory production of medicines by importers within two years timeframe. These measures will undoubtedly make Indian pharmaceutical industry more attractive for Algerian pharmaceutical companies.
  
• IT sector is still undeveloped in Algeria. Indian IT companies have opportunities in banking and telecom sectors
  
• Algeria annually imports automobiles to the extent of $1 billion. Indian vehicles like Tata, Maruti, Hundai, Bajaj have already made an entry into the Algerian market.
  
• Although the country's agricultural sector used to provide for most of its domestic requirements, this is no longer the case. Agricultural products are now the main imports of Algeria amounting to US$ 2.5 billion a year. Algeria is the world's fifth largest importer of wheat. Food and beverages are also imported in large quantities. There are good opportunities for supply of Indian wheat, spices processed foodstuff, tea and coffee, tobacco, meat products etc.
  
• Algeria imports textiles to cater to the local and European markets. It is exempted from EU quota restrictions for textiles. While Indian textile and leather are being imported, the imports are far below their potential.
  
• In areas like remote sensing, India figures among the few selected countries with which Algeria is seeking cooperation

Strategy recommended for Algeria

• Algeria is a large and attractive market. It is better to have a long term view while doing business here.
• An exclusive 'Made in India Fair' would go a long way in enhancing India's trade and economic ties with Algeria
• Regular visits by trade delegations is important. Visits by representatives of the export promotion councils and commodity boards as well as their participation in various trade fairs in Algeria is desirable.
• It is advisable to have a reliable, active, influential and an experienced local Agent.

Constraints in the Commercial Work

• No direct shipping link
  
• Absence of inter-banking arrangement between Algeria and India
  
• Language barrier. French and Arabic are business languages

Source: Indian High Commission, Algeria