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Corruption is a serious obstacle for companies operating or intending to invest in Algeria. A culture of patronage permeates several aspects of Algeria’s economy, strengthening the practices of nepotism and the use of connections to “get things done.” Bribery and facilitation payments are also common practice, despite being criminal offenses. Bribes and “grease money” are mainly employed to overcome bureaucratic hurdles. The legal framework criminalizes a large range of corruption offenses, but enforcement remains a challenge and government officials engage in corruption with impunity.
The judiciary carries a high corruption risk for companies operating in Algeria. The courts are subject to political influence and are susceptible to corruption (HRR 2014). Firms do not perceive the courts as effective in settling disputes or in challenging government regulations (GCR 2015-2016). Algerians perceive the judiciary to be the most corrupt public institution, with almost three-quarters of surveyed households sharing this opinion (GCB 2013).
Foreign judgments are not recognized by the courts (ICS 2015) despite Algeria being a signatory of the New York Convention 1958 and the International Centre for Settlement of Investment Disputes (ICSID).
Companies face a moderate corruption risk when dealing with police. Impunity among police officers is believed to be a problem in Algeria, and authorities rarely disclose information on actions taken against police abuse (HRR 2014). Businesses consider the police to be moderately reliable in enforcing the law and in protecting business from crime (GCR 2015-2016). Most surveyed households believe corruption is widespread among the police (GCB 2013).
Algeria’s public services sector carries a high corruption risk for companies. Local administrations are plagued by inefficiency, corruption, and patronage (BTI 2014). Inefficient government bureaucracy represents a major constraint for business, and policies and regulations are inconsistently applied in practice (ICS 2015). Indeed, bureaucracy in the country is opaque and lacks transparent oversight (HRR 2014), and bribes are sometimes used as a means to bypass bureaucracy and to avoid government interference (ICS 2014). It is more time-consuming to start a business in Algeria than in the rest of the region, but the process is less costly; the same applies for dealing with construction permits (DB 2016).
There is a high risk of corruption for companies dealing with Algeria’s land authorities. Property rights are recognized and protected by law, but the effective protection of property rights is limited by lengthy court proceedings, the unpredictability of outcomes, political influence, and corruption (BTI 2014; ICS 2015). Companies complain about the difficulty of obtaining land; the government limits the ability of foreigners to purchase land in Algeria to avoid speculation (ICS 2015; BTI 2014). Registering property has also proved difficult for companies (BTI 2014).
The construction of Algeria’s East-West Highway, which is dubbed the most expensive highway in the world (estimated at USD 13 billion), has been plagued by corruption since its start in 2006 (FitW 2015). In mid-2015, courts jailed 14 people connected to the case, including two former workers from the public works ministry, to two years in prison; an ex-intelligence officer to three years; while a former director of highways, Mohamed Khelladi, and a Chinese company advisor, Chani Mejdoub, were sentenced to ten years in jail and fined USD 35,000 for money laundering connected to the case. Seven international companies connected to the case were fined USD 55,000 each (World Highways, May 2015).
Algeria’s tax administration sector carries a high corruption risk. Irregular payments and bribes are often exchanged when meeting tax officials (GCR 2015-2016). Paying taxes in Algeria is more time-consuming and more costly than the regional average, yet only a small proportion of businesses report that tax rates and regulations represent a significant obstacle to business (DB 2016; GCR 2015-2016).
There is a high risk of corruption in Algeria’s customs sector. The level of transparency within the border authorities is low, and demands for irregular payments are frequent (GETR 2014). Business executives perceive customs procedures as burdensome (GCR 2015-2016). Algeria has eased the process of trading across borders by upgrading the infrastructure at the port of Algiers, but the time and cost required to trade across borders remain higher than regional averages (DB 2016). Furthermore, companies report they routinely face delays of weeks and even months when clearing goods through customs (Export.gov, May 2015).
The Algerian public procurement sector carries a high corruption risk. Business executives contend that funds are often diverted to companies and individuals due to corruption and believe favoritism is widespread among procurement officials (GCR 2015-2016).
In 2015, the government launched a major corruption investigation into the state-owned company Sonatrach. The case involves the direct award of public contracts without open tenders, inflated contract prices and USD millions in bribes (US News, Feb. 2016). Several persons and companies connected to the case have been sentenced for embezzlement, money laundering, and bribery, among other offenses. The convicted include a former Sonatrach vice-president, Belkacem Boumediene, who was sentenced to five years in prison, and a former Sonatrach CEO, Mohamed Meziane, who received a five-year suspended sentence and a fine of USD 18,600. The latter’s two sons, Mohamed Reda Meziane and Bachir Fawzi Meziane received six and five years in prison respectively. A former CEO of Credit Populaire d’Algerie, Meghaoui Hashemi, and his son were sentenced to five and six years in prison respectively (FCPA Blog, Feb. 2016). Several others also received prison sentences, and three companies (German Funkwerk Plettac, Italian Saipem Contracting Algeria and German-Algerian Contel-Funkwerk) were each fined between USD 37,000 and USD 47,000 (US News, Feb. 2016).
Algeria’s natural resources and extractive industries carry a high corruption risk, and this is particularly true for the energy sector, in which high-levels of corruption are reported (FitW 2015). The government provides minimal information to the public on licensing and contracting in extractive industries, and it discloses very little on environmental assessments and resource revenues, despite natural resources recently accounting for 97% of total exports (Natural Resource Governance Institute).
The government has generally not been effective in implementing anti-corruption laws. The Algerian Penal Code and Anti-Corruption Law criminalizes passive and active bribery, facilitation payments, illicit enrichment, abuse of power, kickbacks, and influence peddling. Punishments for the latter offense are higher when committed by government officials than by natural persons. Official corruption is punished by prison terms that range between two and ten years (ICS 2015). Money Laundering is regulated by the Law on Money Laundering and Terrorism Financing (in Arabic). Government officials are subject to disclosure laws and have to declare their assets within a month upon taking office if they gain substantial wealth and before leaving their positions, but the regulations are poorly enforced and very few officials have complied (HRR 2014). The Algerian legal framework provides for the protection of whistleblowers (ICS 2015).
Algeria has ratified the UN Convention Against Corruption and the African Union Convention on Preventing and Combating Corruption. Algeria is also a member of the Middle East and North Africa Financial Action Task Force, which combats money laundering and terrorist financing.
Freedoms of the speech and press are protected under Algeria’s Constitution, but these freedoms are not protected in practice. The media is severely restricted (HRR 2014). Criminal and civil charges hinder journalists from engaging in critical reporting on government actions, and the government sometimes restricts foreign reporting by rejecting or severely delaying visas for foreign journalists (FotP 2015; FitW 2015). There is no freedom of information law in Algeria. The government monitors the internet and retains the right to block websites that are deemed “contrary to public order or decency” (FotP 2015). The media environment is described as “not free” (FotP 2015).
Algeria has strong traditions of civil society (BTI 2014). The government has consulted with NGOs when drafting some laws, and civil society’s role in Algeria has gained increasing importance in recent years, particularly in regards to raising the public’s general awareness of corruption issues (BTI 2014).
- World Bank Group: Doing Business 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- FCPA Blog: “Algeria jails six for corruption linked to Sonatrach contracts,” 8 February 2016.
- US News: “An Algerian court has fined German and Italian companies and convicted eight people of corruption or related crimes in a vast trial into wrongdoing around state-run oil giant Sonatrach,” 3 February 2016.
- US Department of State: Investment Climate Statement – Algeria 2015.
- Freedom House: Freedom in the World – Algeria 2015.
- Freedom House: Freedom of the Press – Algeria 2015.
- World Highways: “Algerian court gives verdict on East-West motorway corruption case,” 21 May 2015.
- Export.gov: Algeria – Market Challenges, 10 May 2015.
- US Department of State: Investment Climate Statement – Algeria 2014.
- World Economic Forum: Global Enabling Trade Report 2014.
- US Department of State: Human Rights Practices Report – Algeria 2014.
- Bertelsmann Foundation: Transformation Index – Algeria 2014.
- Natural Resource Governance Institute: Algeria Profile.