Algeria will maintain tough restrictions on foreign investment in 2011-15 in an effort to protect its national economic interests and to promote domestic industries. Since 2009 the government has taken an increasingly restrictive line towards foreign investment in the country through a variety of measures including a tougher tax regime, a limit of 49% on foreign ownership and policies to reduce the amount of imports coming into the country. The hydrocarbons sector will receive preferential treatment, with projects likely to get under way again in the first half of 2011 after major upheaval in 2010, when the chief executive of Sonatrach and much of the leadership were removed, following charges of corruption, and the energy minister was replaced.

The privatisation or consolidation of small state-owned firms is unlikely to proceed with much enthusiasm over the forecast period. Limited capital market financing for domestic private firms and foreign-ownership caps mean there are few possible buyers of public enterprises in any case. A rumoured sale of a stake in Algérie Télécom, a state-owned operator, was quickly denied by the technology and communications minister. The state will assume a large role in the telecommunications sector as the government proceeds with its acquisition of the local mobile-phone operations of Egypt's Orascom Telecom. Algeria's private sector is comparatively small because of the security problems of the 1990s, the underdevelopment of financial services and excessive bureaucracy. The government is attempting to address these issues, but private-sector leaders have complained of the increasing role of the state in industry and of difficulties in obtaining bank finance or property.

The government will continue to restrict private credit to consumers, despite the IMF's recommendation that an expansion of credit was crucial to Algeria's growth prospects. At present, credit is extended only for mortgages and not for consumer goods such as cars. Most Algerian banks are highly liquid, having taken significant government deposits since 2004, and a credit reference bureau does exist, but we do not expect a relaxation of the consumer credit policy over the next 12 months.