1

Algeria

RomainRosenberg

BasicInformation(CIA):

AftermorethanacenturyofrulebyFrance,Algeriansfoughtthroughmuchofthe
1950stoachieveindependencein1962.Algeria'sprimarypoliticalparty,theNational
LiberationFront(FLN),hasdominatedpoliticseversince.ManyAlgeriansinthesubsequent
generationwerenotsatisfied,however,andmovedtocountertheFLN'scentralityinAlgerian
politics.ThesurprisingfirstroundsuccessoftheIslamicSalvationFront(FIS)intheDecember
1991ballotingspurredtheAlgerianarmytointerveneandpostponethesecondroundof
electionstopreventwhatthesecularelitefearedwouldbeanextremistledgovernmentfrom
assumingpower.ThearmybeganacrackdownontheFISthatspurredFISsupporterstobegin
attackinggovernmenttargets.Thegovernmentlaterallowedelectionsfeaturingpro
governmentandmoderatereligiousbasedparties,butdidnotappeasetheactivistswho
progressivelywidenedtheirattacks.Thefightingescalatedintoaninsurgency,whichwas
intensifiedfrom199298resultinginover100,000deathsmanyattributedtoindiscriminate
massacresofvillagersbyextremists.Thegovernmentgainedtheupperhandbythelate1990s
andFIS'sarmedwing,theIslamicSalvationArmy,disbandedinJanuary2000.However,small
numbersofarmedmilitantspersistinconfrontinggovernmentforcesandconductingambushes
andoccasionalattacksonvillages.

ThearmyplacedAbdelazizBOUTEFLIKAinthepresidencyin1999inafraudulent
electionbutclaimedneutralityinhis2004landslidereelectionvictory.Longstandingproblems
continuetofaceBOUTEFLIKAinhissecondterm,includinglargescaleunemployment,a
shortageofhousing,unreliableelectricalandwatersupplies,governmentinefficienciesand
corruption,andthecontinuingactivitiesofextremistmilitants.TheSalafistGroupforPreaching
andCombat(GSPC)in2006mergedwithalQaidatoformalQaidaintheLandsoftheIslamic
Maghreb,whichhassincelaunchedanongoingseriesofkidnappingsandbombingsincluding
highprofile,masscasualtysuicideattackstargetedagainsttheAlgeriangovernmentand
Westerninterests.Algeriamustalsodiversifyitspetroleumbasedeconomy,whichhasyielded
alargecashreservebutwhichhasnotbeenusedtoredressAlgeria'smanysocialand
infrastructureproblems.

DemographicData:

Population:
33,769,668(July2008est.)

Agestructure:
014years:26.3%(male4,528,919/female4,349,746)
1564years:68.7%(male11,699,701/female11,509,619)
65yearsandover:5%(male779,467/female902,217)(2008est.)

MedianAge:
Total:26years
Male:25.8years
3

Female:26.2years(2008est.)

Ethnicgroups:
ArabBerber99%,Europeanlessthan1%
Note:almostallAlgeriansareBerberinorigin,notArab;theminoritywhoidentifythemselves
asBerberlivemostlyinthemountainousregionofKabylieeastofAlgiers;theBerbersarealso
MuslimbutidentifywiththeirBerberratherthanArabculturalheritage;Berbershavelong
agitated,sometimesviolently,forautonomy;thegovernmentisunlikelytograntautonomybut
hasofferedtobeginsponsoringteachingBerberlanguageinschools.

Religion:
SunniMuslim(statereligion)99%,ChristianandJewish1%

EconomicStatistics:

GDPandGDPperhead:
GDP(purchasingpowerparity):$240.2billion(2008est.)
GDP(officialexchangerate):$171.3billion(2008est.)
GDPrealgrowthrate:3.4%(2008est.)
GDPpercapita(PPP):$7,100(2008est.)

GDPbysector:
Agriculture:8.1%
Industry:62.5%
Services:29.4%(2008est.)

Hydrocarbonsindustryrepresents60%ofbudgetrevenues,30%ofGDP,andover95%of
exportearnings.

Unemploymentrate:12.9%(2008est.)
Inflationrate(consumerprice):3.6%(2008est.)

GDPrealgrowth:3.4%(2008est.)

Bankingsystem

Thereare20banksinAlgeriatoday,withsixpublicsectorbanksandfourteenprivate
sectorbanks,allofwhicharesubsidiariesoflargeinternationalbankinggroups.

Sixpublicbanksare:
BanqueExtrieuredAlgrie(BEA)
BanqueNationaledAlgrie(BNA)
BanquedelAgricultureetduDeveloppementRural(BADR)
CaisseNationaledEpargneetdePrvoyance(CNEP)
4

CreditPopulairedAlgerie(CPA)
BanquedeDveloppementLocal(BDL)
CaisseNationaledeMutualiteAgricole(CNMA)
BEAandBNAarethetwolargestbanksinthecountry,holdinghalfofthebankingsectorstotal
assets.

The14privatesectorbanksaresmallerentitiesandaresubsidiariesofmajorinternational
banks:
CalyonAlgeriaSPA
SocitGnrale
BNPParibasElDjazair
Natixis
AlgeriaGulfBank
ArabBankingCorporation
Citibank
HSBC
ArabBankPLCAlgeria
FransabankElDjazair

Islamicbanks:
IslamicbankAlBarakaBank(ABB)
AlSalamBank

Therearecurrentlyrequests(around10)forbankinglicensespendingbutthegovernment
decidedin2008tofreezenewauthorizations.

Foreignversusdomesticownership:
Theprivatesectorbanksaresubsidiariesofinternationalbanksandthereforearefullyowned
byforeigncapital.Howeverthesebanksrepresentasmallshareofthebankingsector(around
10%oftheassetsanddeposits):
CalyonAlgeriaSPA(fullyownedbyGroupCreditAgricolefromFrance)
SocitGnrale(fullyownedbySocGen)
BNPParibasElDjazair
Natixis(subsidiaryofBanquePopulairedAlgrieetCaissedEpargne)
AlgeriaGulfBank
ArabBankingCorporation
Citibank
HSBC
ArabBankPLCAlgeria
IslamicbankAlBarakaBank(BADR(50%)andSaudigroupDallah(50%))
FransabankElDjazair(subsidiaryofLebanonsFransabank)

Sourceoffunds:
HoldingsofdepositsbanksinJune2008(ADm)(approximateexchangerateusedinthis
section1USD=65AD):
Reserves:488,509or$7,515million(6.43%)
ForeignAssets:129,221or$1,988million(1.70%)
LoanstotheState:862,940or$13,276million(13.35%)
Loantothepublicsector:1,043,005or$16,046million(13.71%)
Loantotheprivatesector:1,279,246or$19,680million(16.82%)
Sightdeposits:2,933,771or$45,135(38.57%)
Termdeposits:1,869,333or$28,759million(24.58%)
Advanceimportdeposits:278,160or$4,279million(3.66%)
Shorttermbonds:96,813or$1,489million(1.27%)
Mediumandlongtermbonds:12,870or$198million(0.17%)
Statedeposits:311,484or$4,792million(4.10%)
Readyfundsdepositedbythestate:27,315or$420million(0.36%)
BankofAlgeriacredit:0(0%)
Misc.:1,726,822or$26,566million(22.70%)

Investmentoffunds:
Publicsectorbanks:financelargegovernmentprojects(mainlyinfrastructureprojects)

Privatesectorbanksfocuson:
o privatesectorcompanies
o largeandsmallandmediumsizedenterprises(SMEs)
o internationalcompaniesoperatinginAlgeria

Privatizations:partialversusfull
Thesectorremainsdominatedbypublicsectorbanks,whichtogethercontrolover90%
oftotalbankingdepositsandassets.Thegovernmenthasenteredalongtermprivatization
strategytobutthecancellationoftheprivatizationofCrditPopulairedAlgrie(CPA)dueto
theglobalsubprimecrisiswilllikelypostponeanyprivatizationmoveafterthepresidential
electionsareheldin2009.TheCPAprivatizationaloneshouldpushthemarketshareofprivate
sectorbanksupto25%overall.Thefirstbankprivatizationhasyettohappen.

Interestspread(Bank)
Interestratespreadastheinterestratechargedbybanksonloanstoprimecustomers
minustheinterestratepaidbycommercialorsimilarbanksfordemand,time,orsavings
depositsis6.25%(2006,mostuptodatedataavailableattheWorldBank).Thehistoricdatais
asfollows:
6

2006 6.25
2005 6.25
2004 5.5
2003 2.875
2002 3.333333333
2001 3.25
2000 2.5
1999 3.25
1998 3
1997 5.958333333
1996 4.5
1995 2.416666667
1994 4

Bankcredittotheprivatesector:
In2007,ofthetotalcredits(totalingAD2.18trnor$33.1bn),AD1.2trn($18.2bn)wentto
privatesectorfinancing.

Bankcredittothepublicsector:
In2007,ofthetotalcredits(totalingAD2.18trnor$33.1bn),AD950bn($14.3bn)wenttopublic
sectorfinancing.
Depositinsurance:partialversusfull:(DemirgucKunt,2005)
ThedepositinsurancesysteminAlgeriawasestablishedin1997inresponseoftherapid
growthofthebankingsectorbothwithnationalandinternationalbanks.Thesystemcoversup
to600,000AD(orApprox.$9,230)perdepositorinstitution.Asof2004,thesystemhas
remainedunchanged.

Insurancecompaniesandotherfinancialinstitutions:(TheReport:EmergingAlgeria,2008)

TheinsuranceindustryisstillinitsearlystageinAlgeria,withautomobile,propertyand
casualtyrepresentingalmost80%ofthepremiums.ThetotalpremiumsamounttoAD53.4bn
7

($811m).Insurancecompaniesaccountforlessthan3percentoftotalfinancialsystemassets.
Theinsurancedensitystandswellbelowtheneighboringcountries(TunisiaandMorocco)with
$21percapita.

Thereare16insurancecompaniesintotalinAlgeriabuttheindustryremainshighly
concentratedsincethethreepubliccompaniesholdapproximately80%ofthemarket.Thereis
nocurrentplantoprivatizetheindustry.

Thethreepublicinsurancecompaniesare:
SocitNationaledAssurance(SAA)
CompagnieAlgriennedAssuranceetdeRassurance(CAAR)
CompagnieAlgriennedAssuranceTransport(CAAT)

Thereisapublicprivatecompany:
CompagniedAssurancesdesHydrocarbures

AndaStateownedreinsurancecompany:
CompagnieCentraledeRassurance(CCR)

Thereissevenprivateinsurancecompanies:
CompagnieInternationaledAssuranceetdeRassurance
AlgriennedesAssurances
AllianceAssurances
GnraleAssuranceMditrranenne(subsidiaryofforeigncompany)
CardifElDjazair(subsidiaryofforeigncompany)
TrustInsuranceandSalama(subsidiaryofforeigncompany)
Insurancecompaniesareallowedtodistributetheirproductsthroughcommercialbanks,
andthereforenewalliancesbetweeninsurancecompaniesandbankshaveemerged.However,
banksarenotallowedtoofferinsuranceproductsandtheirownershipininsurancecompanies
islimitedbylawat20%.

Lifeandpropertyandcasualty:
Breakoutofthepremiums(ADbn):
Automobile:23.96(45.4%)
Fireandvariousotherrisks:19.10(36.2)
Transport:5.03(9.5%)
Agricultural:0.54(1%)
Personal:3.4(6.4%).Thepersonalbranchincludeslifeinsuranceandallothertypesof
coverageconcerningindividuals(travel,credit,liabilityinsurance)
Creditguarantee:0.71(1.3%)

Theadvantageouspensionsystemforsalariedemployeesandthehighlevelofbenefitsofthe
healthsystemexplaintheunderdevelopmentofthecomplementarypersonalinsurance
segment(lifeandhealthinsurance).

Centralbankanditsroleintheeconomy(Algeria,2009)

sources:1)Annualreportonexchangearrangementsandexchangerestrictions2006,by
InternationalMonetaryFundand2)AlgeriabyLegalMediaGroup,2005)

ThevalueoftheAlgerianDinarisdeterminedintheinterbankforeignexchangemarket
wherethecentralbank(BankofAlgeria)isthemainbuyerandseller.TheBankofAlgeria
regulatestheforeignexchangemarketaccordingtotheforeignexchangepolicydecidedbythe
CouncilandincompliancewithAlgeriasinternationalcommitments.Thedinarcannotbe
subjecttomultipleexchangerates.

Dataontheratesitsetsandontheexchangerate:
Granularityofthedate:MonthlyfromJanuary1900April1974anddailyfromApril1974
April2009

Seedocument:DINAR_USD_Xrate1900_2009.xls

TheBankofAlgeriaisresponsibleforregulatingthemoneysupply,directingand
supervisingthedistributionofcredit,supervisingthepropermanagementoffinancial
commitmentswithregardstoforeigncountriesandregulatingtheforeignexchangemarket.
TheBankestablishesthenormsthateachandeverybankmustconformtosuchastheliquidity
ratios,theauthorizeduseofbanks'fundsorriskmanagement.

Governmentbondmarket:

Treasurybondsissuedwithmaturitydatesgreaterthanfiveyearshavebeenlistedon
theAlgiersboursesincethebeginningof2008.Thereare14listedTreasurybondissuesin
total,withanoutstandingvalueofaroundAD145bn($2.2bn).Treasurybondsarelistedonthe
exchangeduetotheMinistryofFinancesgoalsofgivingmoredepthtogovernmentbond
issuesandtoencouragetheprivatesectortousethecapitalmarketsasachanneltoraise
funds.

Maturitydates:sevenyears,10yearsand15years.

Volume:Treasurybondsaretradedduringthreesessionsperweek.GovernmentTreasury
bondsaretradedthroughauthorizedintermediaries.Therearesixintermediariesmadeupof
representativesofthesixpublicbanks.(TheReport:EmergingAlgeria,2008)

TreasuryBillYields
9

MonthlyfromJune1998November2008(Data)
Date Close
1/31/2007 2.20
2/28/2007 2.25
3/31/2007 2.00
4/30/2007 1.46
5/31/2007 0.99
6/30/2007 0.79
7/31/2007 0.48
8/31/2007 0.48
9/30/2007 0.23
10/31/2007 0.14
11/30/2007 0.28
12/31/2007 0.33
1/31/2008 1.53
2/29/2008 0.63
3/31/2008 0.31
4/30/2008 0.24
5/31/2008 0.17
6/30/2008 0.15
7/31/2008 0.13
8/31/2008 0.13
9/30/2008 0.09
10/31/2008 0.24
11/30/2008 0.20

Source:(Data)

Stockmarket:

TheAlgerianStockExchangewasofficiallyopenedin1999.Tothisday,theexchangeis
stillinitsinfancyandplaysaveryminorroleinthefinancingofthecountry'seconomy.There
arecurrentlytwocompaniestradedontheASE:Saidal(alocalpharmaceuticalfirm)andEHGEl
Aurassi(ahotelmanagementfirmwhichoperatesafivestarhotellocatedinAlgiers).Only20%
ofeachfirm'ssharecapitalispublicallylisted.Thepasteightyearshaveseennoadditional
listings.

ThetotalmarketcapitalizationoftheAlgerianexchangewas[US$97mmattheendof2007].
Thisrepresents[0.1%]ofthecountry'sGDP.

10

FollowingtheadoptionbytheBankofAlgeriaofRegulationNo.200004,foreignershavethe
samerightsaslocalinvestorspertainingtotradingoflocalsecuritiesandrepatriationof
dividends,interestandprofits.Despitetheliberalization,foreigncapitalhasbeenslowtoenter
Algeriaduetosecurityconcernsandlackofliquidityandinvestmentopportunities.Inaddition,
TunisiaandMoroccobothofwhichhavesignificantlybetterdevelopedequitycapitalmarkets
(withmarketcapitalizationsofUS$5bnandUS$75bn,respectively),competewithAlgeriafor
foreigninvestmentdollars.
CurrentlytheAlgerianStockExchangeconductstwotradingsessionsperweek,andtrading
volumesareverysmall.Overthecourseof2007(fullyear),US$200mwastradedonthe
exchange,resultinginannualturnoverof~2x.Thisrepresents0.2%ofAlgeria'sGDP.Tradingis
conductedmanually,throughapricefixingsystem.

Marketanalystsattributethecurrentstateoftheequitymarkettoseveralfactors:alackof
privatizationsofstateownedcompaniesviathestockmarket,anabsenceofstockmarket
cultureamonglocalinvestors,andlackofforeigninvestment.Withregardtoprivatizations,the
governmenthadplanstofloatseveralstateownedentities,includingCPA,onthestock
exchangeinthecourseof2008,butpoormarketconditionsasaresultoftheglobalfinancial
crisishaveresultedinacancellationorpostponementofthefloat.

TheCommissionforOrganizationandSurveillanceofBourseOperations,whichoverseesthe
functionandoperationsofthestockexchange,hasformedataskforcewhichplansto
modernizetheexchangeanddevelopamarketforequitycapitalinAlgeria.Thereareplansto
movetoanelectronictradingplatformwhichwillaccessibleremotelybymarketparticipants
andtointroducetelevisionreportingofstockmarketactivity.AnewlawrequiringAlgerian
companies(bothpublicallytradedandcloselyheld)tomaintaintheiraccountsaccordingto
InternationalFinancialReportingStandards(IFRS)beginningin2010wasrecentlyintroduced.
Whileallofthesereformsshouldfacilitateamovetowardpublicequitymarketsforindividual
companies,thedevelopmentofastockmarketculturewilltakemuchlonger,andwillrequire
developmentandeducationofanincreasednumberoffinanceprofessionalswhowillsupport
anddrivethestockexchangesystem.

Othertypesoffinancialmarkets:

Debtmarkets:
PublicenterprisescurrentlyneedsignificantsourcesofnewfinancingallowingAlgeriathe
opportunitytodeveloplocalcapitalmarkets.Amoderngovernmentdebtmarketwas
launchedin2002,withmaturitiesnowextendingto15years.Theauthoritiesthenencouraged
largepublicenterprisestoissuecorporatebonds.Thetreasuryplanstoprovideadditionaltier2
capitalforpublicbanks,whichwouldallowthemtoincreasecreditby25percent.(Loko,2008)

CorporatebondMarket:Thetotalsizeofcorporatebondissuedthrough15January2008has
beenapproximatelyAD208bn($3.4bn).(TheReport:EmergingAlgeria,2008)(The
Report:EmergingAlgeria,2008)TheAlgeriancorporatemarketissignificantlylargerthanin
othercountriesattheperipheryoftheEU15.In2002,debtissuancethroughauctionsona
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regularcalendarwasintroducedandthecorporatemarkettookoffafterthegovernmentbegan
issuingdebtmorepredictably.Secondarymarketactivityislimitedandanewcorporatebond
offeringmaysometimeshavetowaituntiltheissuanceofagovernmentbondofcomparable
maturity.Thegovernmenthasencouragedlargenonfinancialpublicenterprisestoissuebonds
since2003.Twoprivateentitieshavefollowedsuitin2006.Maturitiesextendto11years,with
amedianofsix,partlyreflectingthetaxadvantagegiventomaturitiesexceedingfiveyears
(Loko,2008)

36newbondissueshaveoccurredsinceJuly2003.Theseissuancesoccurredin22separate
originations,18ofwhichweretargetedtoinstitutionalinvestorsandfourtargetedthepublic.
10companies7publicsectorand3privatesectorraisedfundsintheseissuances.Thebond
issuesweremostlytofinancetheinvestmentprojectsoflargepubliccompanies,suchas
Sonelgaz,AirAlgrie,AlgrieTlcom,Enafor,SocitdeRefinancementHypothcaire(SRH),
andalsosomelargeprivategroups,suchasCevital,ArabLeasingCorporationandEepad.Some
wereissuedwithspecificguarantees,suchasmortgages,collateral,oraguaranteefromthe
mothercompany,andothersonlyhadthesignatureoftheissuerasaguarantee.
Reimbursementmethodsvaryandincludetheuseoftranchesorfinesandsomeare
retractable.Thefourissuancesofferedtothepublicandlistedonthestockexchangewere
madebythepubliccompanies:AirAlgrie,AlgrieTlcomandSonelgaz.(The
Report:EmergingAlgeria,2008)ThelargestbondissuerisSonelgaz.HalfofSonelgazsbonds
wereissuedinthesevenelevenyearsegment.ThesizeoftheAlgrieTlcom5yearbondof
October2006wasdoubledduringthepublicofferingperiod,duetodemand.(Loko,2008)

Publicofferingshavegrownincomparisontoprivateplacementsin2006andsomebonds
wereoversubscribed.Privateplacements,limitedtoinstitutionalinvestors,representedthree
quartersofthevalueofbondssoldin200305,mostlyboughtbybanks.In2006public
offerings,whicharenotlimitedtoinstitutionalinvestors,accountedformorethanhalfof
bondssold.Thissuggestsstrongdemandofthegeneralpublicfornonbanksavingvehicles.
(Loko,2008)

Thestockofcorporatebondshasincreasedslightlyin2007,fromDA150billiontoDA170
billion,allinprivateplacements.Uncertaintimingofbudgetaryoutlaysunderthepublic
investmentprogramhasmadegovernmentdebtissuancedifficulttopredictin2007.Large
bridgefinancingrequirementsweregeneratedbylargeoutlaysinthebeginningoftheyear.As
aresult,thestockofauctionedgovernmentsecuritiesincreasedby45percentinthefirsttwo
monthsof2007thendropped20percentuntilSeptember2007.Thispatternhascontributedto
lowyields.Goingforward,theauthoritiesplantoincreasepredictabilitybystabilizingthedebt
stock.(Loko,2008)

Othertypesoffinance:

PrivateEquity:
PrivateequityasanindustrydoesnotcurrentlyexistinAlgeria,despitegovernmenteffortsat
creatingafavorableenvironmentforitsdevelopment.
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Microfinance:
Microfinanceandmicrocreditsectorsarenotwelldeveloped.Theonlyprogramscurrently
availabletothebottomofthepyramidaregovernmentalones,administeredthroughpublic
institutionssuchastheSocialDevelopmentAgency,ANSEJandFNRDA.Thesewereputinplace
followingeconomichardshipsforalargepercentageofthepopulationsresultingfrom
structuraleconomicreformsofthe1990s.Theseprogramsdifferfromtypicalmicrofinance
modelsinanumberofways:
governmentsubsidizesinterestrates
lendingisfocusedonnewventuresandfinancingofcapitalexpendituresrather
thanworkingcapital
governmententitiesdonotmaintainmonitoringsystemsthathavemade
microfinancesosuccessfulelsewhere
theseinitiativesarenotsupportedbyspeciallytrainedstaffthatwouldtypically
focusonarepaymentandnewaccountcreationontheground
loanportfoliosaremanagedbypublicbanksratherthanspecializedmicrofinance
providerswithspecializedriskmanagementmodels.

Consequentlytheseprogramshaveenjoyedlimitedsuccesstheyhavesignificantlylowerrates
ofrepayment(~56%)thanistypicalinmicrofinance,muchhigherrejectionrates(nearly96%of
allapplications),andmuchlongerapprovalperiods(13months).
ii

[ii]FinancialSectorAssessmentReportforAlgeria(2004).WorldBank/IMFp.14

Sources:

1. Algeria,B.o.(2009).BankofAlgeriaWebsite.http://www.bankofalgeria.dz/).
2. Bank,K.f.KnowledgeforDevelopmentattheWorldBank.
http://info.worldbank.org/etools/kam2/KAM_page3.asp).
3. CIA.CIAWorldFactbook.https://www.cia.gov/library/publications/theworld
factbook/geos/ag.html.
4. Data,G.F.Algeria3monthTreasuryBillYield.
https://www.globalfinancialdata.com/index_tabs.php?action=detailedinfo&id=8468.
5. DemirgucKunt,K.a.(2005).DepositInsurancearoundtheWorld:Acomprehensive
database.
6. Loko,G.S.(2008).InternationalMonetaryFund:Algeria.
7. (2008).TheReport:EmergingAlgeria.OxfordPublishingGroup.