Investing in the automotive sector in Algeria ~ Investment,finance for businesses

Tuesday, August 17, 2021

Investing in the automotive sector in Algeria

Investing in the automotive sector

Investing in the automotive sector in Algeria

The used car sector in Algeria?

Owning a car for a citizen

Former Minister of Industry, Farhat Ait Ali Berham, salivated low-income Algerians - who can't own new cars - over a year ago, making them wait for his final decision on whether to re-enact a law allowing citizens to import used cars

Owning any car in Algeria is a luxury for many. A thirteen-year-old Hyundai GLS manual car, for example, will cost you 110 million Algerian cents, or more than four thousand dollars.

This amount is about 55 times the legal minimum wage or monthly salary according to the Finance Law of 2020, which automatically eliminates the possibility of owning a new car for people with limited income

About five years ago, the law allowed citizens residing in Algeria to import cars three years old or newer, until the authorities decided to ban this in 2016, which was a disappointment for many

Why is the import of used cars banned?

However, the authorities defended the ban on the grounds that aspects of the car market were controlled by gangs on both sides of the Mediterranean, without providing any details of the identity of these gangs

In his speech before Parliament, former Minister of Industry Ait Ali accused what he called "suspicious groups with suspicious motives behind this campaign" to reactivate what is known locally as the "vehicles less than three years" law, and to return "old practices"

The minister did not mention anything about the identity of these gangs, but he said that they "work mainly between Marseille and Algeria," adding that he personally "was pressured to submit to them, but when they failed, they went directly to the media in an attempt to apply more pressure."

However, Senator Abdelwahab bin Zaim, who questioned the minister in the National Assembly, explained that "the law on importing cars less than three years old is ready and the President of the Republic has ratified it"

The senator referred to Section 110 of the Finance Act of 2020, which he approved, similar to the one repealed five years ago that allows the general public to import used cars

But the minister has strong objections to that article, as he insisted that the application of this article as it is currently is not possible at the present time due to "practical, technical, legal and financial" factors that make it economically unfeasible

TVA tax on used cars

The minister, who was alarmed by the senator's challenge, emphasized that importing used cars would not bring "value-added tax to the public treasury"

Senator Bin Zaim replied in a strong tone, saying: "No matter how correct your opinion is, the law is superior to it, and citizens must be given the freedom to decide for themselves the cars they want to own"

The legislator also questioned why this law had not entered into force when it was “already signed by the president”

In practice, it remains difficult to imagine how this law can be applied in a way that serves the country's economy, since the banking system in Algeria does not provide the means to conduct such financial transactions for ordinary citizens

Remittances of hard currency for overseas clients are only allowed for import-export professionals “with a commercial register,” according to the minister, who served as a former tax inspector

The black market to finance the import of cars

In a voice of frustration and regret, the government member said that "the only other way an Algerian can import a used car is to resort to the black market to obtain hard currency"

In Algeria, where there are no currency exchange offices, small merchants, who wish to acquire goods in a small quantity from abroad, as well as ordinary people who wish to travel abroad for tourism or medical treatment, exchange their dinars for euros, sterling or dollars on the black market

Since the arrival of the new government led by Abdelaziz Jarad more than a year ago, the demand for new cars has become almost non-existent, which has led to a significant increase in used prices

And the journalist specializing in the car market, Nabil Mogherif, believes that "the suspension of the import of new cars, along with the closure of foreign car assembly plants, contributed to the exacerbation of the current car market situation"

He explained that "the heads of these companies are currently in prison awaiting trial, as they are charged with charges related to enjoying excessive benefits and other crimes related to the old regime"

The journalist is referring here to the rule of big businessmen who allegedly had a wide influence on the auto industry as a result of their close relationship with those close to former President Abdelaziz Bouteflika, who was forced to resign in April 2019, at the beginning of a popular movement against his rule and those close to him

In practice, it remains difficult to imagine how this law can be applied in a way that serves the country's economy, since the banking system in Algeria does not provide the means to conduct such financial transactions for ordinary citizens

Reason for freezing used car import law

In addition, the journalist McGirv says, "some bad faith practices by some dealers in the car market" have created speculation in the used car market "with the aim of maximizing profits"

But the government insists that it puts the interest of the citizen first

Among the reasons listed by the Minister are those cases in which “customs officials are unable to determine the exact date of manufacture of the imported used car” upon its arrival at the port in Algeria

Ait Ali lamented that in this case, "the customs are holding the car, which means that its owner finds himself in a situation where he has lost both the car and the car's money"

Oversight of diplomatic used cars

However, Bin Zaim objected to this point, pointing out that there is "strict control over the quality of vehicles in Europe for used cars that have been operating for less than three years," adding that "the forgery of car documents in Europe is impossible

But the most interesting issue during this disclosure remains what Minister Ait Ali revealed, stating that "some diplomatic representations in the country were benefiting from the law" when it was in force

According to the minister, "diplomats were selling their used cars to citizens" when they completed their assignments in Algeria

In a sarcastic tone, Ait Ali asked, "Why would any diplomatic representation resort to selling a car less than three years old?" before replying to himself, "Unless it wants to create speculation in the car market in Algeria"



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