Presentation On Bilateral Trade with Algeria
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- 1. Indo-Algerian Foreign Trade Relations PAST, PRESENT and FUTURE Akash N. Bhowmick-02 Pankaj Rastogi-25 Himanshu Titoria-16 Zoheb Zuber-54 Anshul Jain-05 Presention Date: 20 February 2010 Algeria
- A brief profile of Algeria
- Indias present trade relations with Algeria composition of exports and imports
- India-Algeria bilateral agreements
- Major Indian projects in Algeria
- Major trade barriers in Algeria
- Identifying major trade items for the future
- Indias strategy for improving trade relationship with Algeria
At a glance 3. Profile of Algeria
- Algeria is located in North Africa midway along the Mediterranean coastline. It is bound by the Mediterranean Sea to the north, Morocco to the west,Libya to the east and Tunisia to the northeast. The two mountain ranges of the Tell Atlas and Sahara Atlas divide the country into three topographical zones.
- The principal ethnic majority are the Arabs who account for around 83% of the population while the remaining 17% are Berbers.
- The official religion is Islam with 99% of the population Sunni Muslims while Roman Catholics and Jews combined represent less than 1% of population.
- The official language is Arabic which is spoken by approximately 81% of the population. Rest speak French.
- The official currency is the Dinar (DA) divided into 100 Centimes.
- MAIN TRADING PARTNERS
- Algeriasmain trading partners are France, Germany, Japan, US, Italy, UK, Spain, Belgium andNetherlands.
- MAIN EXPORTS
- Crude Oil, Dates, Liquefied Natural Gas (LNG), Petroleum Products, Wine, Dates, Fruits and Vegetables.
4. At a glance (Profile) 5. Macroeconomic Profile of Algeria
- FISCAL POLICY
- Governments revenue fell sharply in 2009 as oil and gas prices remained below their 2008 highs. Fiscal policy will remain expansionary driven by the governments five year infrastructure programme to boost economic activity. Government released a supplementary budget in July 2009 which introduced a variety of measures to lower the countrys import bill. The budget is based on an oil price of US$37/barrel. As oil prices are well above the budgeted level, revenue is therefore expected to exceed government forecast.
- MONETARY POLICY
- The official policy aim ofBanque d Algerie(the central bank) is to control the expansion of the money supply in order to contain inflation though it does not publish its target for monetary growth. The BdA is likely to keep the interest rates low to encourage the development of the banking sector.
6. Macroeconomic profile (contd)
- ECONOMIC GROWTH
- Growth in hydrocarbons production was low in 2008 thereby restricting GDP growth.Non-hydrocarbons sectors however posted robust growth rates owing to steady expansion in construction and public works backed by intensive government sponsored initiative to upgrade Algerias infrastructure and to provide affordable homes. Strengthening oil prices will support investment and will help to counteract the slowdown in export growth caused by the economic downturn in U.S.A and Europe. The GDP growth is expected to be 4.5% in 2010 .
- Inflation averaged 4.3% in 2009. It is expected that average inflation will fall to 3.4% in 2010.Governemt will continue to subsidize many food products in order to maintain artificially low inflation.
7. Macroeconomic profile (contd)
- EXCHANGE RATES
- The BdA continues to operate a managed float of the Algerian dinar. The main aim is to maintain exchange-rate stability particularly with the US dollar and the euro. To curb the rising inflation, BdA allowed the currency to appreciate against the dollar during 2008 when it averaged AD65:US$1. Since then they have allowed the currency to depreciate to around AD73:US$1 to reduce the demand for imports. The government is likely to continue to depreciate the currency further in 2010.
- EXTERNAL SECTOR
- Strong domestic demand and higher commodity prices, specially for food and construction materials, in 2010 will pressurize the import bill to move upward but it would be outweighed by higher exports stemming from rising oil prices. The trade surplus is expected to widen to US$17.8bn in 2010.
8. Composition of Trade Exports and Imports -118,400.95 -88,521.83 -59,321.19 -46,075.20 -27,981.49 India's Trade Balance17 -399.49 -861.78 -420.42 256.74 224.9 TRADE BALANCE 16 0.35 0.39 0.35 0.11 0.12 %Share15 17.89 32.88 23.74 29.33 %Growth 14 488,991.67 414,786.19 312,149.29 252,256.26 195,053.37 India's Total Trade13 5.54 48.2 281.25 20.42 %Growth 12 1,705.65 1,616.12 1,090.51 286.03 237.53 TOTAL TRADE 11 0.35 0.49 0.41 0.01 0.01 %Share10 20.68 35.49 24.52 33.76 %Growth 9 303,696.31 251,654.01 185,735.24 149,165.73 111,517.43 India's Total Import8 -15.04 64 5,057.45 132.01 %Growth 7 1,052.57 1,238.95 755.46 14.65 6.31 IMPORT 6 0.35 0.23 0.27 0.26 0.28 %Share5 13.59 29.05 22.62 23.41 %Growth 4 185,295.36 163,132.18 126,414.05 103,090.53 83,535.94 India's Total Export3 73.15 12.57 23.46 17.37 %Growth 2 653.08 377.17 335.04 271.39 231.22 EXPORT 1 2008-2009 2007-2008 2006-2007 2005-2006 2004-2005 Year S.No. Country: ALGERIA (Values in US $ mn) 9. Major Items of Trade
- Indias Exports to Algeria
- Diary, agro products that include coffee, tea, raisin, skimmed milk, seeds, nuts, groundnut, cashew fruits, processed and semi-processed fruits and vegetables, sauces, jams, jelly, some minerals and metal products.
- Indias Imports from Algeria
- Liquefied natural gas, petroleum oils, bituminous minerals, fuel oil and natural calcium phosphate.
10. India-Algeria bilateral agreements
- Important bilateral treaties and agreements
- Double Taxation Avoidance Agreement( Signed in January 2001 ) To avoid double taxation and promote economic cooperation.
- Phytosanitary Agreement( Signed in January 2001 ) To establish cooperation and protection of natural vegetation of the respective countries against diseases and destructive agents.
- Veterinary Sanitation Protocol( Signed in January 2001 ) To enhance cooperation between the veterinary authorities of both the countries.
- Air Services Agreement( Signed in 2000 ) To improve connectivity between the two countries.
- Cultural Exchange programme for 2004-05( Signed in October 2003) To strengthen and proper culturalrelations between the two countries.
- Agreement on Cooperation in SMEs( Signed in October 2003 )
11. Major Indian projects in Algeria
- Projects for Indian Cos. awarded recently in Algeria
- Indian Railway Construction Co. (IRCON) won a US$240 mn. contract for construction of 108 km railway line.
- An Indian construction co. M/s Era Construction Group won a US$21 mn. Contract for construction of 3000 bed hotel in Tizi Ouzou in Algeria.
- M/s Transrail Structures Ltd., Maharashtra, won a contract for laying transmission lines with optic fibre in a section of 110 km in Algeria.
12. Major Trade Barriers
- Algerias supplementary budget was published on 26 thJuly 2009.
- It includes imposition of a ban on consumer credit and new rules have been formulated for companies importing goods and services from abroad. Their main aim is to promote the interest of local businesses at the expense of their international counterparts and lower the rapidly expanding import bill which contributed to a fall in the trade surplus to US$1bn in the first half of 2009 from US$20bn during the same period of 2008.
- Article 75prohibits banks from providing consumer loans except for the purchase of property. The purpose is to divert credit from the purchase of imported cars. The budget also includes direct measure to reduce car imports. Taxes introduced a year ago on new cars have been doubled.
- Article 69of the budget states that LC must be secured for import payments of over AD100,000.
13. Major Trade Barriers (contd)
- Article 63of the supplementary budget extends a 3% tax on funds placed in the bank accounts for the purpose of importing goods. This is also done to curb imports.
- Article 58clarifies that companies importing goods must cede a 30% share of their capital to local bodies. It also states that foreign companies would be restricted to a minority share in joint ventures with local companies. This would in turn deter foreign investments.
- Consequence: The proposed 3m-tonnes/year steel plant set up at Jijel by Ezz Steel of Egypt on the verge of cancellation because it wanted to keep a majority stake in the project.
14. Major Trade Barriers (contd)
- Some major non-tariff barriers include:-
- Road and rail infrastructure in some parts of the country is patchy thereby leading to excessively high logistics cost.
- Islamic militancy is re-emerging in Algeria under the new nameAl-Qaeda in the Maghreband this would positively deter foreign investors.
- Bureaucracy is a big problem