The Algerian government has enacted controversial amendments to the country's finance law so that it now requires importers to use letters of credit (L/Cs).

The amendments - considered by many as drastic and severe - form part of Algeria's mid-term complementary finance law for 2009.

New payment methods

The new L/C requirement means an end to payment methods more commonly used by Algerian importers such as documents against acceptance and telegraphic transfers.

These payment methods are no longer legal.

Bad for SMEs

The amendments also oblige importers to set aside a minimum of 25 per cent of an import order's value as a deposit on their purchases.

The amendments are expected to have the largest negative impact on small- and medium-sized enterprises, which may struggle to finance the deposits required under the new law.

Good for exporters

Yet exporters to Algeria may welcome the legal requirement for buyers to pay on L/C terms since they essentially guarantee payment.

Other aspects of the new law are causing concern, notably the requirement for administrative procedures and applications obliging all sorts of documentation to be signed specifically by a company's highest ranked officer.

Critics of the new law point out that this means company heads will now be involved in day-to-day tasks previously undertaken by middle management.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.