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                            A Special International Report Prepared by
                           The Washington Times Advertising Department - Published on July 2, 1999
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Advertisers

(1) Sonatrach, An International Petroleum Group

(2)Council of Privitisation

(3)Bank of Agriculture and Rural Development

(4)CNEP

(5)Group Touring Club of Algeria

(6)Groupe Enad

(7)Wines from Algeria

(8)Blanky Industry Company

(9)EFG - Hermes

(10)DHL Worldwide Express

(11)Enterprise De Travaux Publics Batiments & Hydraulique

(12)Office National des Aliments du Betail (ONAB)

(13)Hotel El Djazaïr

(14)Halliburton Company

(15)Algeria National Enterprise for Tourism

(16)Investment Promotion, Support and Monitoring Agency, APSI

(17)Hôtel El-Aurassi

(18)Saïdal Group

(19)Mechanical Public Holding

(20)ENCG

(21)Sonatrach, Partnership the strategic choice

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A Special International Report Prepared by The Washington Times
Advertising Department

Written by:
Rod Craig

Propject Director:
Hala Nasreddine

Photography by:
Rod Craig

For more information, call
The Washington Times International Advertising Department
at (202) 636-3035
(202) 635-0103 fax
e-mail: natlad@wt.infi.net

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The Privatization Process in Algeria

Letter of THE CHAIRMAN OF THE PRIVATIZATION COUNCIL

Algeria is oriented toward accelerating the market economy institution for the economic efficiency and the social justice.

Program extract of the
president of the republic.

The new organizational form of the public enterprises does not always permit, at the orientation systems level, control and management or the promotion of competencies and of appropriate profiles. However, the new relations models as regards the public power, through the Holdings, did not completely free the enterprises from the administrative supervision constraint.

It will also be convenient in restructuring the private sector to clarify the options in setting the methods and accelerating their implementation. Privatization should not be envisaged as an aim, but as one of the public sector restructuration modalities that must permit the financial resources growth by encouraging private investment and foreign direct investment, to ameliorate performances, keep standing employment, and to ensure a better adaptation as concerns the market economy's new requirements.

Letter of the chairman

In the past few years, Algeria has become resolutely committed in the economic reformations which are inseparable from the social and political reforms; in fact, this is to establish a real democracy and legal state. It is mentioned in the constituion as a basic principal - the non reverse move toward the free market economy. So, progressively in substitution to the previous centralized planification management, the price becomes the central vector of the scarce resources allocation, and the contract which is based on dialogue and permanent consultation between the different political, social, and economical partners.

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The macroeconomic stabilization, which was achieved thanks to the sacrifice of the huge majority of the Algerian population between 1994-1997, implies to be everlasting, that Algeria should urgently proceed deep structural reforms to adapt ourselves with world changes and, at the same time rapidly switch on the growth, the only condition to reduce the social tensions.

If the privatization is not a PANACEA, it constitutes the central element of the structural adjustments. But, to be successful, the reforms require coordinated action, mainly financial, customs, fiscal, socieducative, administrative system and a new policy of social readjustment as the procedure should be based on the transparency? Coherence? Avoiding confusion of the centers of decision, an active communication to win the approval, and the pragmatism taking into consideration the real social condition of the Algerians.

The privatization must be in the center of the new economical policy for four (4) essential reasons:

The first positive effects concern its impact on the budgetary deficit reduction and, therefore, slow down inflation.

The second positive effect is that the privatization is the unavoidable element of the dynamizion of non-oil exportations, so that Algeria will not be depending only on short-lived resources and matters of fluctuating price.

The third positive effect is that the state structures are rigid by definition in spite of the manager's good will who are subject to administrative interferences. The privatizaton is the only one way for the growth of the national economy from the fact that it gives value to work and intelligence which are the only sources or wealth. Then it could not be taken as growth of poverty as it is tastified by the bankruptcy of the economist block and the prosperity of the capitalist countries.

Finally, the fourth positive effect is the adaptation of our country with the world economy, which natural area is the Euro-Mediterranenan area and collect the benefit of membership to the world trade organization (WTO), and the free exchange zone with Europe and the fact of the geographic situation of Algeria develop the Arabo-African cooperation.

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This does not mean in any way that the social matter should be sacrificed, but encourage the privatization techniques which conciliate the economic efficiency and social justice: this shall be the main and STEADY concern of the privatization
council.

This comes into the framework of the new assignment of the state regulator, strategy market as it is the nerve of the social cohesion, The basic principle of the reforms in general, and, particularly the privatization, is to re-establish the natural vocation of the state with obligation to comply with the principal of efficiency, and enforce to him, other methods in its functioning, and progressively get him rid of its function as owner-manager in order to avoid bad relationships between the state and citizens.

The state as regulalator must take better decisions, evaluate more, and organize a better coordination, and optimalize the economic and social welfare.

The state does not oblige, but incite and mobilize, by the elaboration of coherent aim in order to give the philosophical understanding to the action. In this context of removal from an economy strongly handled by the state to the competitive market economy based on the social consultation, within the framework of he work interdependence, the cultural element is fundamental.
Here above are some short thinkings about the reforms and the privatization. It seems to me, this is the basic foundation of democracy.

The privatization is not a technical aspect, but it is a complicated political operation which should IMPLY all the partners. (Ministries, Holdings, Operators, Trade Union, Civil Community, All the Media) because this is a national project. The national council of privatization that is open to any suggestions considering the principal the most ignorantk, is he who thinks he knows
everything.

Algeria grants important advantages to national and international investors

Executive Decree number 97-329 of September 10,1997, fixing the specific advantages to be granted, and the payment by instalment in favour of the prchases of the privaitized public enterprise.

Investors: The law over privitization grants you advantages

Chapter I.
Specific Advantages

Art.2. The following specific advantages may be granted to the purchsers who rehabilitate or renew the entreprise and/or carry on its activity:

• Reduction of the transfer price to 25% maximum

• Payment by instalments over a period not exceeding fifteen years or the granting of an additional discount going up to 15% in case of cash payment. However, it is possible to negotiate further advantages with the purchasers depending on the importance of the committments taken upon.

Art.3. The payment by instalments is applicable under the following conditions:

. Cash payment representing at least 20% of the transfer price

. Settlement of the balance in equal amounts every six months with an annual interest rate of 6%

. deferred repayment of two years without interest, after the conclusion of the transfer contract.

Art.4. The purchasers granted specific advantages are bounded to carry out one or several of the following operations:

• Investment in view of rehabilitating or modernizing, within are the most, two years after transfer.

• maintain all or some of the employments within at least a five-year period

• carry on the activity of the entreprise within at least a five-year period

Chapter II.
Payment By Instalments

Art.5. the payment by instalments is granted:

• At the request of the employees of the entreprise to be privatized

• To other purchasers at the suggestion of the privitization council and the decision of the government.

Art.6. The payment by instalment cannot be granted over a period exceeding ten years. The period could be extended to twenty years at the most in case of the transfer in favor of the employees.

Art.7. The payment by instalments is granted under the following conditions:

• Payment of 30% of the transfer price at the moment when the transfer contract is concluded. the rate could lesser in case of the transaction in favour of the employees and it is fixed in the sale contract.

• The balance would be setteled in equal amounts every six months with an annual interest rate of 6%.

• Defer the repayment, without interest, to a one-year period after the conclusion of the transfer contract. The repayment could be deffered to a five-year period in case of the transfer in favour of the employees.

Chapter III.
The Guarantees

Art.8. When the purchaser is granted the payment facilities stated in the above articles 3 and 17, the ownership is transferred at the moment when the contract is concluded. However, the purchaser should mortgage the real estate in favor of the grantor.

Art.9. The transfer conditions are recorded in the sale contract.

Art.10. The specific advantages granted in conformity with this decree could be cancelled out if the committments are not observed by the purchaser, consequently, they asked to settle the ba;ance immediately.

Art.11. The establishemnt charged with the privitization get in contact with the concerned administrations, especially the financial and labor administrations and the ministries to follow up the application of the dispositions of this decree, mainly those related to the observation of the commitmants taken upon by the law.

Art.12. This decree is published in the official gazette of the Democratic and Popular Republic of Algeria.

Issued in Algeria September 10, 1997