V. MARKETING U.S. PRODUCTS AND SERVICES Distribution and Sales Channels Algeria has a well developed distribution system through an extensive network of wholesale and retail outlets throughout the country, most of which are run by the private sector. The state-owned wholesale business handles mainly imported products, such as foodstuffs, industrial products, and pharmaceuticals. Private wholesalers, however, are increasingly active in these sectors. The retail trade is almost exclusively controlled by the private sector. Exceptions are Government-run stores for hardware (Aswak) and foodstuffs (Souk El-Fellah). The Algerian government recently announced that some of the state-owned distribution outlets would be among the first public enterprises to be privatized by the end of 1994. Use of Agents/Distributors The introduction of the concept of agents/distributors in Algeria in 1990 was one of the most important measures taken to deregulate Algerian foreign trade and to facilitate business development. When the implementing legislation is fully in place, it will remove a major obstacle for the U.S. exporter to this market. Foreign suppliers are permitted to use local agents and distributors, or to set up their own distribution companies. Under the Law on Money and Credit, which allowed the use of agents and distributors, distributors had to commit to invest in manufacturing, or to establish a service organization in Algeria. Since investments are now governed by the Investment Code, foreign suppliers are no longer required to invest in Algeria to set up a distributorship. From 1991 to 1993, the Council on Money and Credit approved 87 investment projects and 97 agent/distributor applications. Total projected investment was 6.7 billion dinars plus a hard currency content of $1 billion. As one would expect, most of these investments originated from France (22 projects), Italy (19 projects), and Spain (12 projects). Another six investment projects came from the U.S. The sectors that attracted the most interest were chemical and petrochemical (17 projects); steel, mechanical, and automotive (14 projects); agriculture and fisheries (12 projects); building materials/housing (6 projects); and hydrocarbon services (6 projects). Only a few agents/distributors, however, have started operating, mainly because of a lack of hard currency. Distributors currently active use their own foreign exchange resources or financing supplied by their suppliers to pay for their imports. Another disincentive for potential distributors is the lack of clear regulations. Although several laws and regulations were modified to allow implementation of the agent/distributor system, many gray areas remain to be clarified and restrictions lifted. The most important of these are: the possibility to sell goods in Algerian dinars and/or in hard currency, the percentage of earnings the foreign supplier must keep in Algeria, and the rate of exchange and administrative procedures applicable to the repatriation of earnings. Because of these uncertainties, the U.S. Embassy in Algeria has deferred introduction of the Agent/Distributor Service, but can supply a list of potential distributors to interested companies. Franchising Franchising is not a widespread commercial technique in Algeria. There is a demand for franchising, particularly from private companies, but lack of hard currency to pay for royalties is a major obstacle to the development of franchising activities. A notable exception is Coca-Cola which started a bottling operation with a private food processing company in September 1993. Joint-ventures/Licensing As Algeria's economic situation worsened in recent years, it became clear to the Algerian authorities that since they lacked the resources to modernize the local manufacturing capability, they needed to attract foreign investors to help them do so. Joint-ventures with foreign companies are seen as the best means to achieve this goal through transfer of technology and skills. Algerian companies are actively seeking to work with foreign partners to acquire technical expertise, and to gird themselves for the competition they will face from international companies when the Algerian foreign trade regime is fully liberalized. Working with local firms will give foreign partners a better understanding of the market, and access to well established wholesale and retail distribution channels. Establishing an Office in Algeria While setting up an office or a company still requires a certain amount of paperwork, the process has been simplified and streamlined. U.S. businesses here support this view. The number of company offices which have been recently opened is greater than was the case over the course of many previous years. The speed and facility with which U.S. oil companies have been setting up operations in Algeria recently is a case in point. Establishing an office in Algeria, whether a liaison bureau, a distributorship or a company, should be done through a local lawyer and an accountant/tax expert. The Commercial Section of the U.S. Embassy in Algiers maintains a list of Algerian lawyers and accountants/tax experts who work with American firms. Advertising and Trade Promotion Direct advertising for equipment and machinery has a limited impact on local end-users. Since imports are made through international tender, advertising has no influence on the importing companies as to brands to be purchased. Advertising will be most effective for consumer products, when the Algerian import market becomes more open in 1995. Below is a list of advertising agencies and major Algerian newspapers. There are no local business journals. Algerian television also carries advertising. Advertising agencies: ANEP 1, Avenue Pasteur Algiers, Algeria Tel: (213) (2) 63 30 83 Fax: (213) (2) 64 89 94 HIWAR-COM Maison de la Presse Place ler Mai Algiers, Algeria Tel: (213) (2) 66 72 04 Fax: (213) (2) 65 45 01 Major newspapers: EL WATAN 1, Rue Backir Attar Algiers, Algeria Tel: (213) (2) 66 26 41 Fax: (213) (2) 65 02 27 (Independent French-language daily) LE MATIN 16, Rue Mohamed Belhouchet Hussein-Dey Algiers, Algeria Tel: (213) (2) 59 70 50 Fax: (213) (2) 59 60 27 (Independent French-language daily) LIBERTE 37, Rue Larbi Ben M'Hidi Algiers, Algeria Tel: (213) (2) 73 64 77 Fax: (213) (2) 73 64 80 EL KHABAR 1, Rue Bachir Attar Place du ler Mai Algiers, Algeria Tel: (213) (2) 66 19 31 Fax: (213) (2) 66 19 27 (Independent Arabic-language daily) EL MOUDJAHID 20, Rue de la Libert Algiers, Algeria Tel: (213) (2) 73 70 30 Fax: (213) (2) 64 24 83 (Government-controlled French-language daily) LE SOIR D'ALGERIE 100, Rue Hassiba Ben Bouali Algiers, Algeria Tel: (213) (2) 66 09 47 Fax: (213) (2) 65 13 41 Tlx: 65187 (Independent French-language daily) Until recently, trade promotion events centered around the Algiers International Fair, the major annual trade event in Algeria. Normally held in June each year, the Algiers Fair for 1994 has been postponed until November for security reasons. The Algerian Fair Authority, SAFEX, also has made an effort to develop several trade fairs centered around industry sectors. These are becoming more successful. One of the side effects of the reforms now taking place in the country will be to encourage the development of such events. The U.S. Embassy in Algeria keeps informed of such developments, and will identify those that appear of potential interest to U.S. participants. Sales Service/Customer Support Suppliers of capital goods to the Algerian market are required to provide their customers sales service and customer support, which is referred to in Algeria as technical assistance. Free sales service is usually required for a period of one year. Thereafter, suppliers may enter into an agreement with their customers to provide them with remunerated technical assistance. Customer support is also provided by liaison offices established in Algeria by foreign suppliers. The liaison offices, however, are not allowed to engage in commercial activities, and thus cannot import and distribute equipment and spare parts. These must be imported by the Algerian end-user either directly or through distributors. Sales service for consumer goods is only beginning to develop in Algeria. Distributors of foreign products have to commit to stock spare parts in Algeria and provide their customers after-sales service.