Algeria risk analysis:

[Al-khiyal]

From the Economist Intelligence Unit:

Algeria signed an Association Accord with the EU in December 2001 and has made clear its commitment to join the World Trade Organisation (though necessary legislation - on intellectual property rights for example - has not as yet been passed, but progress has been made). Membership would help bring transparency to the legal process. However, for the moment the proper enforcement of business regulations is patchy and is subject to political pressure, as well as bureaucratic inertia. Algeria's colonial history was bloody and there is perhaps a latent suspicion of foreign motives, but this is not particularly acute. This same history gave rise to a strongly statist/protectionist system of government and this mentality still informs much of the bureaucracy. Consequently, the judiciary is neither nimble nor brave (decisions are often referred upwards). Nor is it particularly well versed in more contemporary issues such as intellectual property rights. Corporate accounting practices also leave much to be desired.

SCENARIOS

Deregulation of some sectors is blocked by vested interests (High Risk)

The government is moving cautiously towards deregulation of certain economic sectors; however, a majority of the military elite are wary of the entry of foreign firms into areas that might threaten their own interests. This means that the government will be forced to "debate" proposed regulatory reforms with various vested interests, leading to their delay and dilution. Even where reforms are passed, their consistent application might be undermined by the vagaries of a legal system that is not well versed in contemporary commercial issues and that remains susceptible to political pressure. Foreign companies should therefore seek to settle disputes through discussion and compromise. However, if local legal arbitration is unavoidable then companies should retain the services of a reputable legal firm with good political connections. Again, the "safest" sectors in this regard are power, water, housing and telecommunications.

Implementation of trade agreements is blocked by vested interests (Moderate Risk)

Algeria signed an Association Accord with the European Union in December 2001 and has expressed its intention to join the World Trade Organisation (WTO). The Association Accord commits the government to reduce tariff barriers to trade with the EU. However, this process is to be phased in only gradually (up to ten years for some reforms) and - due to political resistance from some quarters - the required reforms may be subject to further delay or uneven application. Foreign firms that feel that EU requirements are not being properly applied should seek to settle disputes amicably, cultivating senior government contacts so that they may in turn put pressure on vested interests. Local legal redress should be sought only with politically connected law firms; canvass opinion among other foreign companies before choosing a firm. Where the local legal system is ineffective, firms should seek redress from the EU or petition their own governments.

BACKGROUND

(Updated: April 18th, 2006)

Enforceability of Contracts

Some commercial contracts are subject to commercial law and others to civil law. However, implementation is usually subject to Algerias basic law, the civil law upheld by all Algerian courts. In terms of legal and regulatory risks, analysts say that Algerias judiciary, with its legal structures modelled on French civil law, is balanced and generally fair. Business contracts are honoured and, under measures introduced in 1992, disputes under international energy contracts can be taken to international arbitration. The country is also a party to the New York Convention.

Algerias laws give protection to foreign investors and to private property, and the latest government reforms are expected to strengthen that protection. A spokesman for PriceWaterhouseCoopers France says that the law upholds the rights of foreign investors and that there is no favouritism in law between a foreign or a local investor. However, it should be noted that a majority of the politically dominant military elite are still hesitant about opening up the economy to foreign investment, especially where this might impinge on their own economic interests. This struggle is at the heart of the conflict between the military and the president, Abdelaziz Bouteflika, and his allies. Consequently, while there has been progress in improving the legal environment for foreign investors, the enforcement of various laws has been and will remain patchy.

Although the government has lifted its long-standing ban on foreign companies appointing agents or partners in Algeria, business analysts caution that foreign firms looking for a local partner should take time to choose the right representative - few Algerian companies have experience in this field. Companies exporting to Algeria must obtain form EX-1 to present to customs officials, available either in the country of origin or from the nearest Algerian consulate.

Foreign investors in the hydrocarbons sector have been granted an exemption from customs duties to import all materials and equipment needed for their projects. UK legal firm Denton Wilde Sapte says that, in the hydrocarbons sector at least, the terms and conditions of import and export taxes and the fiscal regime applied are all spelled out in the initial project documentation, and the relevant contracts usually contain a stabilisation clause.

Independence of the Judiciary

Algerias 1996 investment code makes no distinction between foreign and domestic investment, prompting the US State Department to pronounce that there are no absolute barriers or limitations on foreign investment in Algeria.

Other critics point out that although, constitutionally, the judiciary is independent, the government does not always respect this independence -most notably in human rights issues. Corruption remains an issue, though it is one that comes to the fore more in the practical running of businesses. Setting up a business is still dogged by bureaucracy and red tape.

Foreign Investment: Discriminatory Practices

The government has been soliciting foreign direct investment in sectors such as telecommunications, power and water. Efforts will continue to attract more foreign investment into the non-hydrocarbons sector. Considerable progress has already been made, with robust foreign involvement in utilities provision, as well as cement and telecoms. Investment guarantees and protection includes: equal treatment for all investors; capital and income transfer; and recourse to international arbitration. Various incentives are also available.

The government has set up a National Investment Council to give advice on the best ways to attract foreign investment and a National Agency for Investment Development to assist new investors directly. The Agency will open offices in foreign countries to be close to potential investors and explain the changes to them, according to the official.

A new law, which was approved by both houses of parliament in August 2001, allows foreign operators to tender for large exploration and exploitation blocks in mining, a largely untapped sector. Similarly, a new electricity and gas law, approved later in the year, establishes the framework for major private investment in the domestic power and gas market through the lifting of the state monopoly. The law commits the government to opening up a minimum of 30% of the market to competition within three years.

The hydrocarbons bill, passed in early 2005, separates the regulatory and commercial roles of Sonatrach. This is intended to eliminate the inherent conflict of interest in Sonatrachs dual roles, allowing it to function as a purely commercial entity, and improving the operating environment for foreign oil companies. Sonatrach will compete for exploration and production contracts on very similar terms to foreign firms.....

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Unfair Competitive Practices

Formed in 1964 to transport crude oil by pipeline to the coast, Sonatrach became the main producing company following nationalisation in 1971. Sonatrach has been operating both as a regulator - overseeing the operations of the sector, including those of foreign firms - and as a firm actively pursuing its own development and extraction opportunities. The conflicting incentives created by this structure have been a major factor behind delays in bidding processes and a consequent decline in foreign investor interest since the mid-1990s.

To address these problems, in 2001 the energy minister, Chakib Khelil, drew up a draft hydrocarbons bill, which was eventually passed in early 2005 after being shelved in 2002, in the face of strong trade union opposition. The law provides for the establishment of a new three-tier regulatory structure. At the apex of this is the minister of energy, who frames broad policies towards the sector and approves exploration and production contracts. The minister will oversee two new bodies: Agence nationale pour la valorisation des hydrocarbures (Alnaft), which will be in charge of awarding exploration contracts and approving development plans; and Autorite de regulation des hydrocarbures, which will oversee midstream and downstream operations, including access to pipelines and storage facilities.

Under this arrangement Sonatrach would be treated as just another potential investor in competition with foreign firms for contracts. Article 48 of the new law does give Sonatrach the option to take a stake in new ventures, but this is limited to 20-30% and must be exercised within 30 days. Under the previous regime a foreign firm had to allow Sonatrach a 51.5% stake in any joint venture.

There are no minimum requirements to use local content in production, whether raw materials or local staff, but companies that do use local content benefit from government incentives such as tax holidays.

Intellectual Property Rights

The country is committed, at least in theory, to protecting intellectual property; in practice, levels of piracy remain high, and anti-piracy measures can be half-hearted. The country is a signatory to the 1952 Convention on Copyright and the International Convention for the Protection of Industrial Property and a member of the Paris Industrial Property Convention. Trademark authorisation and enforcement is carried out by the Centre National du Registre du Commerce, and national law provides copyright protection for books and other artistic works, films, sculpture and photographs. New moves are planned to extend protection to video and computer software. Subsidised Algerian foodstuffs are frequently smuggled into neighbouring countries, and smuggling of electronic goods and textiles -both subject to high tariffs - into Algeria is widespread. However, international bodies have praised laws to protect intellectual property rights, saying that enforcement is strict and efficient.

Unless there is a reciprocal agreement, foreign brand owners seeking a patent must appoint an Algerian agent resident in Algeria. Patents are generally granted for 20 years, subject to annually renewable fees. Trademarks may be registered for ten years, but must be in use, or the trademark is deemed to have expired. Renewal applications must be submitted at least six months before the trademark registration expires.

Price Controls

Algeria subsidises basic foodstuffs such as dairy products and wheat, although it is committed to eliminating all subsidies on foodstuffs, as well as those on energy and public transport. There are price controls on certain commodities, such as tobacco, and on certain state-controlled services, such as the transport of hydrocarbons. In effect, companies are free to set prices except on those products that remain subsidised by the government.

Algeria risk: Legal & regulatory risk

Considering this release is dated August the 11th, 2006, caution has to be attached to the overall usefulness of this assessment as whoever compiled it seems to be utterly ignorant of the recent - and internationally reported on - reversal of the hydrocarbon law cited and commented on above. Nor is there any reference to Sonatrach's recent agreements with LukOil and Gazprom. If whoever researched this piece is so out of touch with such major developments a question mark has to be placed over the entire assessment.

[Al-khiyal]

From The Economist Intelligence Unit:

Algeria risk: Legal and regulatory risk

Algeria signed an Association Accord with the EU in December 2001 and has made clear its commitment to join the World Trade Organisation (though necessary legislation - on intellectual property rights for example - has not as yet been passed, but progress has been made). Membership would help bring transparency to the legal process. However, for the moment the proper enforcement of business regulations is patchy and is subject to political pressure, as well as bureaucratic inertia. Algeria's colonial history was bloody and there is perhaps a latent suspicion of foreign motives, but this is not particularly acute. This same history gave rise to a strongly statist/protectionist system of government, and this mentality still informs much of the bureaucracy. Consequently, the judiciary is neither nimble nor brave (decisions are often referred upwards). Nor is it particularly well versed in more contemporary issues such as intellectual property rights. Corporate accounting practices also leave much to be desired.

Scenarios

Deregulation of some sectors is blocked by vested interests (High Risk)

The government is moving cautiously towards deregulation of certain economic sectors; however, a majority of the military elite are wary of the entry of foreign firms into areas that might threaten their own interests. This means that the government will be forced to "debate" proposed regulatory reforms with various vested interests, leading to their delay and dilution. Even where reforms are passed, their consistent application might be undermined by the vagaries of a legal system that is not well versed in contemporary commercial issues and that remains susceptible to political pressure. Foreign companies should therefore seek to settle disputes through discussion and compromise. However, if local legal arbitration is unavoidable then companies should retain the services of a reputable legal firm with good political connections. Again, the "safest" sectors in this regard are power, water, housing and telecommunications.

Implementation of trade agreements is blocked by vested interests (Moderate Risk)

Algeria signed an Association Accord with the European Union in December 2001 and has expressed its intention to join the World Trade Organisation (WTO). The Association Accord commits the government to reduce tariff barriers to trade with the EU. However, this process is to be phased in only gradually (up to ten years for some reforms) and - due to political resistance from some quarters - the required reforms may be subject to further delay or uneven application. Foreign firms that feel that EU requirements are not being properly applied should seek to settle disputes amicably, cultivating senior government contacts so that they may in turn put pressure on vested interests. Local legal redress should be sought only with politically connected law firms; canvass opinion among other foreign companies before choosing a firm. Where the local legal system is ineffective, firms should seek redress from the EU or petition their own governments.

Background

(Updated: February 6th, 2007)

Enforceability of contracts

Some commercial contracts are subject to commercial law and others to civil law. However, implementation is usually subject to Algerias basic law, the civil law upheld by all Algerian courts. In terms of legal and regulatory risks, analysts say that Algerias judiciary, with its legal structures modelled on French civil law, is balanced and generally fair. Business contracts are honoured and, under measures introduced in 1992, disputes under international energy contracts can be taken to international arbitration. The country is also a party to the New York Convention.

Algerias laws give protection to foreign investors and to private property, and the latest government reforms are expected to strengthen that protection. A spokesman for PriceWaterhouseCoopers France says that the law upholds the rights of foreign investors and that there is no favouritism in law between a foreign or a local investor. However, it should be noted that a majority of the politically dominant military elite are still hesitant about opening up the economy to foreign investment, especially where this might impinge on their own economic interests. This struggle is at the heart of the conflict between the military and the president, Abdelaziz Bouteflika, and his allies. Consequently, while there has been progress in improving the legal environment for foreign investors, the enforcement of various laws has been and will remain patchy.

Although the government has lifted its long-standing ban on foreign companies appointing agents or partners in Algeria, business analysts caution that foreign firms looking for a local partner should take time to choose the right representative - few Algerian companies have experience in this field. Companies exporting to Algeria must obtain form EX-1 to present to customs officials, available either in the country of origin or from the nearest Algerian consulate.

Foreign investors in the hydrocarbons sector have been granted an exemption from customs duties to import all materials and equipment needed for their projects. UK legal firm Denton Wilde Sapte says that, in the hydrocarbons sector at least, the terms and conditions of import and export taxes and the fiscal regime applied are all spelled out in the initial project documentation, and the relevant contracts usually contain a stabilisation clause.

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Independence of the Judiciary

Algeria's 1996 investment code makes no distinction between foreign and domestic investment, prompting the US State Department to pronounce that there are no absolute barriers or limitations on foreign investment in Algeria.

Other critics point out that although, constitutionally, the judiciary is independent, the government does not always respect this independence - most notably in human rights issues. Corruption remains an issue, though it is one that comes to the fore more in the practical running of businesses. Setting up a business is still dogged by bureaucracy and red tape.

Foreign investment: Discriminatory practices

The government has been soliciting foreign direct investment in sectors such as telecommunications, power and water. Efforts will continue to attract more foreign investment into the non-hydrocarbons sector. Considerable progress has already been made, with robust foreign involvement in utilities provision, as well as cement and telecoms. Investment guarantees and protection includes: equal treatment for all investors; capital and income transfer; and recourse to international arbitration. Various incentives are also available.

The government has set up a National Investment Council to give advice on the best ways to attract foreign investment and a National Agency for Investment Development to assist new investors directly. The Agency will open offices in foreign countries to be close to potential investors and explain the changes to them, according to the official.

A new law, which was approved by both houses of parliament in August 2001, allows foreign operators to tender for large exploration and exploitation blocks in mining, a largely untapped sector. Similarly, a new electricity and gas law, approved later in the year, establishes the framework for major private investment in the domestic power and gas market through the lifting of the state monopoly. The law commits the government to opening up a minimum of 30% of the market to competition within three years.

The hydrocarbons bill, passed in early 2005, separates the regulatory and commercial roles of Sonatrach. This is intended to eliminate the inherent conflict of interest in Sonatrachs dual roles, allowing it to function as a purely commercial entity, and improving the operating environment for foreign oil companies. Sonatrach will compete for exploration and production contracts on very similar terms to foreign firms.

Unfair competitive practices

Formed in 1964 to transport crude oil by pipeline to the coast, Sonatrach became the main producing company following nationalisation in 1971. Sonatrach has been operating both as a regulator - overseeing the operations of the sector, including those of foreign firms - and as a firm actively pursuing its own development and extraction opportunities. The conflicting incentives created by this structure have been a major factor behind delays in bidding processes and a consequent decline in foreign investor interest since the mid-1990s.

To address these problems, in 2001 the energy minister, Chakib Khelil, drew up a draft hydrocarbons bill, which was eventually passed in early 2005 after being shelved in 2002, in the face of strong trade union opposition. The law provides for the establishment of a new three-tier regulatory structure. At the apex of this is the minister of energy, who frames broad policies towards the sector and approves exploration and production contracts. The minister will oversee two new bodies: Agence nationale pour la valorisation des hydrocarbures (Alnaft), which will be in charge of awarding exploration contracts and approving development plans; and Autorite de regulation des hydrocarbures, which will oversee midstream and downstream operations, including access to pipelines and storage facilities.

Under this arrangement Sonatrach would be treated as just another potential investor in competition with foreign firms for contracts. Article 48 of the new law does give Sonatrach the option to take a stake in new ventures, but this is limited to 20-30% and must be exercised within 30 days. Under the previous regime a foreign firm had to allow Sonatrach a 51.5% stake in any joint venture.

There are no minimum requirements to use local content in production, whether raw materials or local staff, but companies that do use local content benefit from government incentives such as tax holidays.

Intellectual property rights

The country is committed, at least in theory, to protecting intellectual property; in practice, levels of piracy remain high, and anti-piracy measures can be half-hearted. The country is a signatory to the 1952 Convention on Copyright and the International Convention for the Protection of Industrial Property and a member of the Paris Industrial Property Convention. Trademark authorisation and enforcement is carried out by the Centre National du Registre du Commerce, and national law provides copyright protection for books and other artistic works, films, sculpture and photographs. New moves are planned to extend protection to video and computer software. Subsidised Algerian foodstuffs are frequently smuggled into neighbouring countries, and smuggling of electronic goods and textiles--both subject to high tariffs - into Algeria is widespread. However, international bodies have praised laws to protect intellectual property rights, saying that enforcement is strict and efficient.

Unless there is a reciprocal agreement, foreign brand owners seeking a patent must appoint an Algerian agent resident in Algeria. Patents are generally granted for 20 years, subject to annually renewable fees. Trademarks may be registered for ten years, but must be in use, or the trademark is deemed to have expired. Renewal applications must be submitted at least six months before the trademark registration expires.

Price controls

Algeria subsidises basic foodstuffs such as dairy products and wheat, although it is committed to eliminating all subsidies on foodstuffs, as well as those on energy and public transport. There are price controls on certain commodities, such as tobacco, and on certain state-controlled services, such as the transport of hydrocarbons. In effect, companies are free to set prices except on those products that remain subsidised by the government.

Algeria risk: Legal & regulatory risk

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Algeria risk: Infrastructure risk

Algeria's infrastructure risk is high - reflecting a hiatus of investment during the civil war ravaged 1990s - though the government has begun to spend money on its improvement. The road network is sparse and in disrepair in many areas. Until recent years, construction and repairs were hampered by the threat of Islamist attacks, particularly in the west, but the government has recently started a vast programme of road-upgrading. The country's port facilities are reasonable, if poorly managed, but air links are poor, if improving - both Air France and British Airways have restored direct routes to Algeria. After years of neglect, Algeria's telecoms infrastructure is beginning to be upgraded, though most of the effort has focused on upgrading the cellphone network, which has expanded rapidly. Land-line connections remain meagre and unreliable and Internet use is still in its infancy. Water supply is being upgraded, but from a very low base. A severe earthquake in May 2003 further debilitated the housing stock.

Scenarios

Under-investment in infrastructure continues (Low Risk)

After years of under-investment, infrastructure of all types (water and sewerage, transport and telecoms) is in need of a major overhaul. Water shortages are common in the capital during the summer. Transport infrastructure is relatively well developed in the coastal region, but poor road and rail links between the ports and the mineral-rich south of the country have inhibited the development of the mining sector. The road network has been extended only slightly since 1970, but a new project to build a motorway linking Tunisia and Morocco across the north of Algeria is underway. Telephone lines in many parts of the country are analogue. The government of President Abdelaziz Bouteflika has made infrastructure investment a priority, and there are now robust levels of foreign investment flowing into telecoms, power, water and housing. An ambitious project to extend and upgrade the east-west motorway, linking Algeria to Morocco and Tunisia, was launched in May 2006. Nevertheless, infrastructural stagnation and further decay are possible in other sectors if oil prices decline. Companies should keep an eye open for signs of a slowdown or halt to the government's infrastructure push. Companies involved in infrastructure development, particularly those outside the power and telecoms and hydrocarbons sectors, should keep abreast of all oil price forecasts.

Algeria continues to be hampered by poor air links (Low Risk)

Algeria received a major vote of confidence when Air France resumed air links to the country in 2003; this was followed by an announcement from British Airways that it would also resume direct links. Since then, a number of European airlines have also started or re-started routes. As investor interest in Algeria grows, so new connections to Algeria are likely to be established.

Background

(Updated: February 6th, 2007)

Natural resources and the Environment

Algeria is the second-largest country in Africa (after Sudan), with a total land area of 2,381,741 sq km. The northern part of the country, where the majority of the population lives, is mountainous and comparatively humid. Along the coast annual rainfall in some areas averages more than 1,000 mm. Further inland the climate becomes semi-arid and rainfall is more erratic, averaging 200-400 mm per year. This region is bordered by the Sahara desert, which extends for about 1,500 km to the country's southern border. The climate in the Sahara is characterised by low levels of rainfall, averaging less than 130mm per year, and extremes of temperature, reaching over 55C.

The country has an estimated 39.6m ha of agricultural land, of which 31.7mha are pasture and bush. Crops are grown mainly on Algeria's fertile but narrow coastal plain, which still dominates agriculture despite government measures to develop steppe and desert farming in the high plateaux and Saharan regions.

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Transport, Communications and the Internet

The government has been considering plans to enable private investment in upgrading the rail network for some time. However, as the financial constraints on the state have eased with the continued rise in oil prices, these plans have gathered dust. In the meantime, the government has increased its capital spending allocations for the railway sector, and a number of major new projects are getting under way. The state railway company, the Societe nationale de transport ferroviaire (SNTF), controls 4,200 km of track, most of which is in urgent need of new investment, following decades of neglect. The government has allocated some US$7bn to the railways from its 2005-09 growth support programme. These funds are being used to finance several contracts to install new track and signalling equipment on existing lines, as well as for the construction of new lines. In early 2006 a number of international firms submitted bids for three high-speed lines connecting Bordj Bou Arredij to Khemis (320km), Boumedfaa to Delfa (220 km) and Touggourt to Hassi Messaoud (200km). Three more high-speed rail schemes are to be tendered by end-2006, and SNTF aims ultimately to build some 1,200 km of such lines. Other projects include the electrification of the suburban railway network serving Algiers and the surrounding area.

Meanwhile, the Algiers metro, which has been progressing in fits and starts since the 1980s, is scheduled to go into service in 2008. The project took an important step forward at the start of 2006 with the award of a contract worth AD36.2bn (US$515m) to a consortium led by Siemens France for the electrification of the metro's first line. Entreprise du Metro dAlger is in charge of a project to build a tram system serving the capital, which has also registered progress after a long delay. A consortium led by Alstom of France was awarded a contract in June 2006 to build the 16.3-km eastern section of the line. Costs are estimated at AD27bn, and the line is scheduled to become operational in 2009.

In July 2006 the SNTF signed an agreement with Siemens to supply Algeria with new railway infrastructure for 43.5m (US$56m). The order is for the supply and installation of safety and telecommunications systems for the new Tebessa-Ain M'Lila and Gue de Constantine-Oued Smar railway lines. Siemens will form a consortium with a local company, Estel, to fill the order. The Tebessa-Ain M'Lila line is 204 km long and is a part of the government's new five-year (2005-09) plan to upgrade and revive Algeria's railways.

An estimated ten people a day die on Algeria's roads, many of which are in poor condition, and accidents are thought to cost the state AD10bn a year. Algeria has 88,853 km of national roads, of which one-third are trunk routes. Around 29,394 km are dirt roads and tracks accessible to motor vehicles. The government has recently embarked on a major programme to upgrade the road system. The centrepiece is the 1,000-km East-West Highway, for which contracts worth some US$11.5bn in total were awarded to three consortia, two Chinese and the other Japanese. Each team was allocated a stretch of the road, which is supposed to be complete within 40 months. However, work on the project had still not commenced in late August, four months after the provisional award of the contracts, and there have been reports in the Algerian press that the government is considering renegotiating the prices and the scope of work.

Algeria has nine major ports, including those at Algiers, Oran, Bejaia, Annaba, Skikda and Arzew. Algiers port, the most important, is scheduled for expansion. As with other segments of the transportation sector, the country's ports have suffered from a long legacy of under-investment, and generally offer inefficient services, adding to business costs. In an effort to address these shortcomings the government has proposed to award management contracts to international firms for the country's main ports. This move has provoked adverse reaction from trade unions representing dockworkers, but the government has provided assurances that there will be no job losses. Dockers have also been promised substantial salary increases. Plans are also being studied for the construction of a second container terminal in the Port of Algiers. The Bejaia container terminal to the east of Algiers is also being upgraded following an agreement signed in August 2004 between Entreprise Portuaire de Bejaia and Singapore's Portek International. This will entail setting up a joint operating company for two berths, with Portek investing in new equipment and providing management services. The terminal currently handles about 50,000 TEU/year, according to Portek, although it has the capacity to deal with up to 300,000 TEU/y. A recent presentation by the venture claimed that it had made significant gains in productivity since starting operations, with 30 containers being processed per hour, compared with 10 per hour previously.

Before the onset of sustained political violence Algerian airports were among the busiest in North Africa, handling some 6m passengers and 27,851 tonnes of goods in 1992. There are four major airports, located in Algiers, Oran, Annaba and Constantine, and more than 60 smaller airports, many of which are being modernised to take international traffic and more domestic flights. Until 2003 security concerns ensured that only one major European airline, Italy's Alitalia, was serving Algeria. However, an important mark of progress was made in mid-2003 when Air France resumed flights to the country nine years after they were interrupted following the hijacking of one of the company's planes on the tarmac in Algiers in December 1994. Militants from the Groupe islamique armee were accused of the attack, in which the hijackers killed three passengers before flying to Marseilles where the plane was stormed by the French security forces. In a further mark of confidence, British Airways resumed flights to Algiers in January 2004, and inaugurated a weekly flight to the oil and gas centre at Hassi RMel in June 2005.

A long-running project to build a new terminal at Houari Boumedienne airport in Algiers was finally completed in mid-2006, and the terminal was inaugurated by Mr Bouteflika on July 5th as part of the Independence Day celebrations. The project was launched in 1987, but was interrupted by the violence that started in 1992. After a number of abortive efforts to revive the scheme, including an attempt to involve international private investors, the government allocated funds at the end of 2002 to the state-owned Entreprise de Gestion de Services Aeroportuaires to complete the work, at an estimated cost of AD23bn. The original terminal was built in 1945 with a planned annual capacity of only 450,000 passengers, whereas the number of passengers using the airport has risen to more than 4m a year. The new terminal has an annual capacity of 6m passengers, and will be dedicated to international flights, leaving the old terminal to deal with domestic traffic. Aeroports de Paris has signed a four-year management contract for the terminal.

Other major plans for the sector include the partial privatisation of the national carrier, Air Algérie, as part of a liberalisation of the aviation market. In early 2001 the Algerian authorities appointed an international consultancy firm, Booz Allen & Hamilton, to advise on the best way to open up 49% of Air Algerie's capital to private investors. However, owing to political resistance we do not foresee this happening for a number of years. The airline has nevertheless been upgrading its ageing fleet, announcing plans to purchase up to 40 new aircraft. In 2003 it placed an order for five Airbus 330-200s. It has also ordered three Boeing 737-800s, for which the Export-Import Bank of the US has offered finance. As part of a plan to boost its short-haul services, it has purchased six ATR 72-500s. It has also received bids from Airbus, Bombardier of Canada and Embraer of Brazil for the supply of four 70/100-seater aircraft.

Air Algérie has resumed its position as the dominant domestic provider of aviation services following the demise of Khalifa Airways, owing to financial difficulties afflicting the parent Khalifa Group that emerged in early 2003. Khalifa was by far the biggest of the private airlines that emerged after the sector was opened up in 1999. Its entire fleet of some 30 aircraft was leased. Since 2003 the only private venture to have emerged is Tassili Airlines, an affiliate of Sonatrach, the state-owned oil and gas company. In early 2006 Tassili awarded Bombardier a contract worth US$84m to supply four 70-seat Q400 airliners, which are scheduled to be delivered in 2007 and will be used for services to Algerias hydrocarbons-producing areas. Tassili is expected to place a number of additional orders, with plans to build up a fleet of some 40 aircraft by 2010, according to El Moudjahid, a French-language state-run daily. Also bidding for the initial order were Airbus Industrie and ATR, both Europe-based.

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Internet use has grown rapidly in recent years, reaching 55 users per 1,000 people in 2005, according to the ARPT, compared with only 16 per 1,000 people three years earlier. This puts Algeria on roughly the same level as Egypt as regards Internet penetration, although it still lags behind Tunisia, where there are some 70 users per 1,000 people. Broadband (asymmetric digital subscriber line) access to the Internet became available in 2003, and there are now some 200,000 subscribers to this service. The government has stated that it intends to invest heavily in information technology infrastructure over the next five years, with the target of having one personal computer per family by 2010, and to expand the optical fibre network, which now stretches over 35,000 km. The investment plan includes the construction and equipment of a dedicated cyber-village at Sidi Abdullah.

Despite much press opposition, a new law was adopted in 2001 which imposes heavy prison terms and fines on journalists found guilty of insulting the president or any public institution. Journalists and political parties see the law as a major setback for advances in press freedom since 1989, when the state loosened its control over the media. In the past decade the state-owned daily newspapers, El Moudjahid and the Arabic-language Ech-Chaab, have been overtaken in popularity by privately-owned papers such as El Khabar, El Watan and Liberte. Although privately owned, and often vociferous in their criticism of government (or certain members of it), many of the new publications cannot be considered to be totally independent because they reflect the interests of powerful factions in Algeria's ruling military and intelligence circles. In mid-2003 a number of these papers were suspended supposedly for financial irregularities, although this probably reflected infighting between the military decideurs. In the wake of the re-election of Mr Bouteflika in April 2004, a court sentenced Mohammed Benchicou, the editor of Le Matin, a French-language daily, to two years in prison for violating foreign-currency regulations. The newspaper has since ceased publication. Mr Benchicou was released in June 2006, having served his term.

The national broadcasting system includes three radio channels and one terrestrial television channel; all tend to toe the line of the establishment. The system is being expanded to reach the remotest corners of the country. Naguib Sawiris, the head of Orascom Telecom which is a main player in Algeria's telecoms markethas expressed interest in investing in a private television station in the country. However, the government has, for the time being, ruled out opening the broadcasting sector to independent operators.