: 1 ALGERIA AT THE CROSSROADS PARTNERSHIP WITH ALGERIA CONFERENCE OCTOBER 8, 2015 London Algeria’s economy is heavily reliant on revenues generated from its oil & gas sector which still account for 1/3 of GDP, more than 95 % of export receipts and about 2/3 of fiscal revenues. Oil & gas is the backbone of the economy With the collapse in oil and gas prices and volumes, economic vulnerabilities are now apparent and acute. Current account and fiscal balance have been adversely affected and Algeria is now facing its greatest economic challenge since The need for change of the growth model, away from Oil and public spending, through the implementation of wide-ranging structural reforms aimed at diversifying the economy is clear and a must..

2 But Algeria is still an enviable position as mentioned by IMF External and fiscal buffers remain substantial. External reserves reached $ 159 billion by end of last June Oil stabilization fund (FRR / “Fonds de Regulation des Recettes) stood at DZD 3441 billion at the same period The country has an extremely low foreign debt ($ 3.3 billion) Local public debt is low at around 8% of GDP The country can so afford to implement reforms gradually but it cannot afford to let the moment pass without taking action KEY CHALLENGES AND TOP PRIORITIES Action is the name of the game and it is time to speed up the path of reforms The long term challenges facing the Algerian economy are well-known: A stronger and more sustainable economic growth An enhanced competitiveness An economic diversification (local production and exports) Job creation

3 The main pillars of an integrated strategy to address those challenges are as follows: A full review of public expenditure is crucial as past fiscal policy was unsustainable A more efficient approach to reduce poverty. Current welfare and social programs (notably for natural gas, power and water) will have to be progressively replaced by cash transfers to the most vulnerable populations. These changes require careful preparations as social pressures are high An improved efficiency of public investment A more disciplined approach of current spending

4 Improve business environment for local investors and FDI Despite some enhancement, Doing Business in Algeria could be challenging due to a quite complicated regulatory environment and slow and complex decision making processes Algeria needs a more friendly business climate The issue is now at the Top of the agenda as the Government, fully aware of the situation, has established a Committee to come up with an action plan to address it.

5 Enhance of private sector development, foster investment and strong support to entrepreneurship Stronger and broader private sectors need to emerge and become a complementary engine for growth This will suppose an improve access to credit for SMEs Attracting more foreign investment (FDI) is crucial for know-how and technology transfer and will undoubtedly necessitate a review of some actual restrictions.

6 Improve economic governance Two issues need to be addressed bureaucracy (streamlining of administrative procedures) and corruption. Reforms to turn around the observed contraction in the hydrocarbons production A full review of national energy policy as domestic consumption needs to be contained and diversified (energy efficiency and renewable energy) A more attractive Institutional framework for investment in the sector An On-time implementation of Sonatrach’s ambitious investment plan.

7 TO CONCLUDE CHALLENGES CAN BE TURNED INTO OPPORTUNITIES OPTIMISM REMAINS HIGH There is a large consensus for economic reforms among the Algerian society The authorities are fully aware of the situation and agree with most of the above recommendations and have clearly reoriented their focus Dialogue with private sector is much better than before and political commitment for diversification is now much stronger All parties are determined to accelerate the path of reforms. The country benefits of a full range of natural and human resources and is a reliable gas partner for Europe Algeria is like “a well kept secret” with real opportunities across the board for UK investors and not only inside the hydrocarbons sector The country is waiting for you. But kindly remember the Algeria is a story of Perseverance and Return (as opposed to Risk and Return)