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Liberalisation of Foreign Direct Investment (FDI) in Algeria

What impact on the pharmaceutical industry?

At a time when the stringent Foreign Direct Investment (FDI) provisions are about to be partially lifted for the pharmaceutical sector in Algeria, many local and foreign operators are questioning the extent to which easing of the 51/49 rule will boost local production.

Non-strategic sectors and easing of the 51/49 rule

Algeria’s Industry Minister, Djamila Tamazirt, has announced the establishment of an ad-hoc committee to define the sectors affected by the easing of the 51/49 rule, which should include the pharmaceutical industry.

Many converging indicators suggest   that   the   scope  of  this reform will be limited. Its aim, according to the Algerian government, is to boost local pharmaceutical production. However, the main reason that the pharmaceutical  production  and distribution sectors are suffering is the fact that regulations limiting profits have remained unchanged for over 20 years.

Pharmaceutical producers cannot pay their distributors, as they are unable to achieve the necessary profit margin. They are subject to unavoidable expenses incurred to meet constantly changing quality standards.

A pharmaceutical sector subject to local constraints

These regulatory issues are exacerbated by significant bureaucratic constraints. The various administrative procedures, such as the granting of land concessions to create factories, are so  time-consuming  that  they  put off many local and international operators.

The current political situation also appears to be an obvious source of concern for investors. The lack of transparency around the prospect of political reform is generating a wait-and-see attitude detrimental to entrepreneurialism.

The adoption of regulatory easing, whose reforms will be automatically binding on a future government, will therefore be insufficient to remedy all of the ills besetting the sector.

It is worth remembering that there is nothing new in the Algerian authorities’ willingness to create a local pharmaceutical industry. Various governments have failed to achieve this goal since the mid-90s, even with a liberal FDI policy.

To achieve the desired objective, a root-and-branch review of the regulatory framework and the authorities’ approach will be vital for this sector so highly strategic for Algeria.

Jeune Afrique november 2019


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