Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
Multiple challenges face U.S. companies in Algeria, some common throughout Africa (e.g., language barriers, customs delays, protectionist trade policies, complicated business start-up processes, etc.) and others that are more pronounced in Algeria. The most significant issues for U.S. companies trying to enter or expand in the Algerian market include the following:
- Churn in Political Leadership– Since President Abdelmadjid Tebboune came to power in 2019, continuous cabinet reshuffles have slowed the launch of major economic initiatives. With a constant change in leadership in key agencies, U.S. companies find themselves reinvesting time and resources to rebuild relationships and reinitiate dialogues or find their initial efforts completely derailed due to sudden wholesale changes in priorities in public institutions.
- Unstable Regulatory Framework - International firms in Algeria complain that laws and regulations continually shift and are applied unevenly. Likewise, business contracts are subject to interpretation, revision, and the retroactive application of such revisions. Frequent leadership changes within state-owned enterprises that often follow cabinet reshuffles amplify this volatile regulatory environment.
- Influence of State-Owned Enterprises (SOEs) – SOEs dominate the economy, and their procurements account for 20 percent of GDP. Politics or narrow interests may govern SOEs rather than value creation and efficiency. As a result, U.S. companies are often stunned by the time and effort needed to reach the most basic business decisions.
- Procurement Regulations Favoring Low-Cost Bidders – Algerian procurement regulations favor the lowest-cost bidder over the best-value bidder. This emphasis puts American companies with newer and higher quality technology or innovative processes at a distinct disadvantage, vis-a-vis Chinese and European competitors that bid with lower up-front cost solutions that are often more expensive to operate and maintain in the long term.
- Scale and Structure of Public Tenders - The scope of public tenders is often much larger than U.S. industry norms. This requires companies to team with unfamiliar partners and assume joint and several liabilities for aspects of a project’s scope well beyond their area of expertise. These large-scale public tenders also often require large bid bonds, which exceed the risk appetite of small and medium enterprises.
- Payment Delays– Algeria’s financial regulations, currency controls, and slow-moving bureaucracy result in hurdles for international funds transfers. These obstacles result in significant payment and dividend repatriation delays. Additionally, multiple U.S. companies report payment delays of a year or more with SOEs, which expect international suppliers to bend internal rules regarding overdue invoices and continue providing equipment and services without payment. These delays are particularly damaging to small- and medium-sized American firms.