: A number of reports by international organizations, including the International Bank for Reconstruction and Development, the World Bank and the International Monetary Fund (IMF), have examined the Algerian insolvency regime and concluded that the legislative framework for insolvency in Algeria is in need of modernization. The 2004 Financial Sector Assessment by the World Bank found Algeria's bankruptcy legislation, procedures, and enforcement deficient, adding that Algeria's failure to promulgate a modern legal framework surrounding its bankruptcy regime is among the most significant of these deficiencies. The IMF's 2004 Financial System Stability Assessment also asserts that, although Algeria has been active in legal reforms since the late 1980s, these reforms have not included the modernization of its bankruptcy regime. The lack of a modern bankruptcy framework is combined with a court system in which proceedings tend to be long, and enforcement is problematic, due to high costs. The IMF further found that in terms of its adherence to the rule of law, the quality of its regulatory practice, and its control of corruption, Algeria ranked among the bottom 40% of all countries included.

General Overview

In a 2004 Financial Sector Assessment (FSA) generated by the World Bank, Algeria's bankruptcy legislation, procedures, and enforcement were found lacking. The report asserts that "the texts of laws and regulations display significant deficiencies, while a number of provisions are incompatible with international standards" (p. 13). The report added that Algeria's failure to promulgate a modern legal framework surrounding its bankruptcy regime is among the most significant of these deficiencies. It goes on to suggest that one positive step would be to encourage the use of extrajudicial procedures as an alternative to bankruptcy. The IMF's 2004 Financial System Stability Assessment (FSSA) asserts that Algeria has been active in legal reforms since the late 1980s, but essentially agrees with the 2004 World Bank's FSA, stating that these reforms have not included the needed modernization of its bankruptcy regime. The lack of a modern bankruptcy framework is combined with a court system in which proceedings tend to be long and drawn out, and officiators (judges and lawyers) do not have training in the fields of commerce and finance. Enforcement, too, is problematic, due to high costs. Although the FSSA found that shareholder and creditor rights are protected in theory, this has not been demonstrated in practice. A contributing factor is that "ownership and control are one and the same in state- or family-based business entities" (p. 16). According to the report, Algeria ranks in the bottom 40% of countries with regard to "regulatory quality, rule of law, and control of corruption" (p. 16). In their 2007 IMF working paper on financial integration in the Maghreb region, Amor Tahari et al. briefly discussed the legal challenges facing the Maghreb states (Algeria, Libya, Mauritania, Morocco, and Tunisia), including issues in the area of bankruptcy law. According to this report, Algeria lacks any modern bankruptcy framework -- a distinction it shares with Libya and Mauritania. However, among the Maghreb countries, Algeria is one of only two (the other is Morocco) that has established commercial courts.

The World Bank "Doing Business" project evaluates the business environment of 178 countries in 2007 along a number of dimensions, using key indicators to assess performance. In a joint publication by the International Finance Corporation and the World Bank which summarizes the results of the "Doing Business" project for Algeria, the Algerian business environment was investigated along several dimensions, including closing a business. According to this report Algeria ranked 125 out of 178 for overall ease of doing business and 45 out of 178 with specific regard to closing a business. For "closing a business," these indicators are time, cost, and recovery rate. In Algeria, the average time for such procedures is 2.5 years, which compares with a regional average of 3.7 years and an average among member states of the Organization for Economic Cooperation and Development (OECD) of 1.3 years. The average cost (expressed as a percentage of the bankrupt's estate) in Algeria is 7%, whereas the regional average is 13.9% and the OECD average is 7.5%. The recovery rate (expressed as cents on the dollar) averages 41.7 cents in Algeria. For the region, the average recovery rate is 25.8 cents, and for the OECD member states, the average is 74.1 cents.