For sports, the game is over. Business-wise, the headache will drag on and on. Sherine Nasr reports A football game has overnight turned into a businessman's nightmare. Widespread acts of violence and looting of Egyptian companies were reported immediately after the Egypt-Algeria football match in Cairo on 14 November. Most of the damage was suffered by Orascom Telecom Algeria (OTA), better known as Djezzy, whose head offices were completely destroyed. Others were partly burned and ransacked. According to reports by OTA, thousands of fans burned down Orascom's compound in Algiers and stole or destroyed mobile phones. Attacks on Ring Algeria, another company of Orascom Telecom (OT), were reported. Naguib Sawiris, executive chairman of OT, told reporters then that the situation was escalating and that the company had started to evacuate Egyptian staff members and their families from Algeria. According to OT, initial damages and losses are estimated at $54 million. That was not the end of it. Early this week, the French La Tribune referred to intentions by the Algerian government to nationalise branches of foreign companies working in Algeria if they seek to quit the country. The newspaper underlined that the Algerian government, having advocated free market economy principles for the past 15 years, is now seeking to tighten its grip on the economy. Early this year, a 1.5 billion euro fund was established to maintain full acquisition or purchase major shares of foreign companies operating there. Stricter rules for direct foreign investment and capital transfer in the country have been established. A study on the impact of Algeria's new investment regulations on Egyptian firms conducted by EFG-Hermes showed that on 24 July, Algeria issued regulations requiring foreign companies that benefit from tax breaks to reinvest an amount equivalent to the tax breaks back into the economy. Moreover, Algerian Prime Minister Ahmed Ouyahia announced on 10 August that his government plans to take a majority stake in any future investment project involving foreign capital, without specifying the date and the industries to which the measures would apply. The move was considered by foreign companies working in Algeria as a step backwards. However, EFG-Hermes underlined that the new regulations will have but little impact on subsidiaries of Egyptian companies working in Algeria. "The affected companies, namely, Ezz Steel Rebar, Al-Sewedy Cables and Orascom Construction Industries [OCI] will be able to spread the investments over a number of years to reduce the effects of regulation. OT had already started paying taxes since the third quarter of 2007," the study said, adding that the Algerian government's decision to take a majority stake in foreign projects will only be applicable to new projects. "We assume it will not be implemented retroactively." But the Algerian government's latest encounter with OTA may prove otherwise. In an immediate reaction after the football match, OTA received an official tax notification from the Algerian Direction des Grandes Enterprises (DGE), the Algerian body in charge of collecting taxes, in respect of the years 2005, '06 and '07. The DGE assessed taxes and penalties owed by the company at $596.6 million. "The reassessment was based primarily on the unfounded and unacceptable allegation that OTA did not keep proper accounts for the three years, notwithstanding that OTA's accounts were fully audited and approved by both OTA's international auditors and its local statutory auditors," said a statement by OTA which indicated that Orascom will appeal the reassessment. In 2005 alone the variance between OTA's audited figures and DGE's claim reached 36 per cent. "DGE did not consider OTA's invitation to revisit its decision by performing a thorough audit on the company's switches and IT systems responsible for the recording and reporting of the company's revenues," said the statement. "We managed to beat insurmountable problems over the past decade and make profits, and now the Algerian government is seeking to acquire these companies on a silver platter," said an official from OTA who preferred that his name be withheld. Obviously, foreign companies working in Algeria must put up with the Algerian government's growing resentment over the fact that foreign entities can actually make substantial capital gains through acquisition or mergers with others without its direct intervention. A perfect example is when Orascom Construction Industries (OCI) sold its entire assets, including those in Algeria, to France's Lafarge. OCI employed more than 2,000 Algerians across the country. However, expectations by the Algerian government nationalising foreign companies have had an adverse impact on the stocks of Egyptian companies operating in Algeria. OT and Al-Sewedy Cables' shares retreated by 3.7 per cent and 2.03 per cent successively during Tuesday's transactions. The OTA (Djezzy) operation in Algeria has been highly successful since the Egyptian company acquired its mobile licence in 2001 for $737 million, a cost that was regarded by many as rather high at the time. By the end of September 2009, Djezzy had 14.7 million subscribers, giving it a market share of 63 per cent and $1.42 billion in revenues from January to September. Meanwhile, Chairman of the Arab Contractors Ibrahim Mehleb dismissed the notion that the company's branches in Algeria might be nationalised. "This will be an unnecessary escalation that will have very serious consequences on the relationship between both countries," Mehleb was reported by Rose El-Youssef newspaper as saying. Mehleb said the Arab Contractors company in Algeria is not a private entity. "This is a 100 per cent Egyptian company. Nationalising its assets will be an infringement on Egyptian property," said Mehleb who added that if the situation escalates, Egypt will resort to international arbitration. "If this should happen, the Egyptian government would withdraw the company from Algeria. In this case, the company's assets will be put up for sale to whoever will pay a higher price, governmental or private, Algerian or otherwise," he said. According to the General Authority for Investment and Free Zones, Algerian investment in Egypt is estimated at LE90 million compared to LE7 billion of Egyptian investment in Algeria. There are 29 Algerian companies that have been working in Egypt since 1970. Major projects are in the tourism, real estate, construction and land reclamation sectors.
