ALGERIAN INDUSTRY MINISTER REAFFIRMS INTEREST IN

C O N F I D E N T I A L ALGIERS 000887

SIPDIS

STATE FOR NEA/MAG
STATE PASS FOR USTR
COMMERCE FOR NATE MASON

E.O. 12958: DECL: 10/01/2019
TAGS: ETRD EINV EFIN ECON AG
SUBJECT: ALGERIAN INDUSTRY MINISTER REAFFIRMS INTEREST IN
WTO

Classified By: David D. Pearce, Ambassador. Reason: E.O. 12958 1.4 (b
),(d)


1. Summary: Minister of Industry told USTR Director Burkhead
that Algeria remains interested in acceding to the WTO and
engaging with the U.S. in the framework of our bilateral
Trade and Investment Framework Agreement. He nevertheless
believed the government had to exert more control over
imports and repatriations of profits by foreign companies.
End summary.


2. USTR Director for Middle Eastern and European Trade
Affairs Paul Burkhead, accompanied by the Ambassador and
Pol-Econ Chief (notetaker),met with Minister of Industry and
Investment Promotion Abdelhamid Temmar in his offices
September 27. Temmar was accompanied by his chief of staff,
and the ministry's Director General for Investment, Hamoud
Benhamdine. The meeting was conducted in English. Burkhead
led off by emphasizing that the U.S. wanted to expand trade
and investment ties with Algeria. Terrar immediately
volunteered that Algeria still wanted to accede to the WTO
and join the world economy. The more open the Algerian
economy was, the more Algeria would win. After discussions
three years ago, Algeria thought all had been settled, but
progress had then stalled. Algeria did not know how to
proceed or how to ''improve our answers.''


3. Burkhead underscored that the U.S. stood ready to partner
with Algeria in its accession efforts. He proposed an
informal meeting between USTR and Algerian representatives to
discuss where we stood on WTO accession, and our bilateral
trade and investment relationship -- the latter in the
context of the U.S.-Algeria Trade and Investment Framework
Agreement, which had not been used since 2004. Temmar agreed
this would be desirable, although the Minister of Commerce
would take the lead.


4. Temmar brought up the 2009 Complementary Finance Law,
which he admitted included measures that business questioned,
and that could be interpreted as the beginning of a
restoration of state management of the economy. He noted as
background that while the private sector was responsible for
75-80 percent of GDP, state owned industry produced 70
percent of Ageria's industrial product, a legacy of Algeria's
socialist past. Algeria had to protect and build up this
industry. Temmar explained that the Algerian state was rich,
and had decided to emphasize joint ventures between Algerian
and foreign partners as the preferred form of foreign
investment. He claimed discussions were underway for
approximately 15 such ventures, including in automobiles and
aluminum. The government would give foreign partners full
management rights for at least 10 years.


5. Burkhead interjected that the minimum 51 percent Algerian
share requirement for all new foreign investments would be an
obstacle for U.S. investors. Temmar replied that the
Algerian government envisaged the government taking an
average 15 percent share, leaving the rest of the Algerian
component to domestic private investors, which would leave
the U.S. investor a relative majority stakeholder.


6. Burkhead stated that the limitation on repatriation of
profits would also discourage investors. Temmar argued that
the government had reacted to the Egyptian wireless operator
Jezzi's attempt to transfer USD 600 million in a single
transaction. Officials had also discovered that Jezzy had
not paid all its taxes. Temmar admitted that officials who
were ''old socialists'' like himself had been shocked by the
news of the $600 million transfer. Jezzy would have been
better advised to alert the government ahead of time about
such large transfers. The Minister of Industry would follow
up on the case with the Ministry of Finance and Customs.
Burkhead suggested to the minister that the government might
have addressed the Jezzy case individually rather than
implementing a response that affected all foreign companies.


7. Burkhead also commented that Algeria had high rates of
piracy of intellectual property. Temmar admitted that IP was
a new concept in Algeria, which was progressing slowly in

protecting it. Algeria's IP protection office, the National
Office of Copyright and Intellectual Property (ONDAPI),was
under his ministry. He had just replaced its chairman.
Algeria would welcome assistance from and brainstorming
sessions with the U.S. Burkhead pointed out that Algeria has
had a legal framework for IP protection for several years.
It remained for Algeria to educate the people to create a
culture of IP protection, and to enforce the law.
PEARCE