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The author is grateful to Henri Ghesquiere, Karim Nashashibi, Philip Swagel, and Natalia Tamirisa for helpful comments.
One option to deal with this issue is to cut the direct link from oil revenues to the budget by increasing other sources of revenues or by establishing an oil fund to manage revenues from the oil sector. Another option is to encourage diversification of the economy.
See a paper on Egypt by Mongardini (1997).
The real appreciation can take place either via nominal appreciation (if exchange rates are flexible) or via increases in domestic prices. As the increased income is spent domestically mostly on nontraded goods, and if the goods’ markets are in equilibrium, the excess demand will tend to increase the price of nontradables. The increase in prices on nontraded goods can be mitigated if a large share of the labor force in unemployed. The increased profitability in turn of the nontraded goods sector will tend to attract resources from tradables goods sectors. The real appreciation will also tend to reduce the competitiveness of other exports.
Changes in the fiscal balance can also effect overall spending via its impact on the real interest rate and thereby on the current account.
These are below 10 percent; 10–15 percent; 15–20 percent; 20–25 percent; and above 25 percent.
NTBs cover up to 1 percent, between 1 and 25 percent, or above 25 percent of trade.
However, in practice tariff dispersion is likely to be higher in countries with higher average tariffs.
Between 1994 and early 1997 the maximum tariff was lowered from 60 percent to 45 percent. The unweighted average tariff at present is 22 percent with 6 bands (0, 3, 15, 25, 40, 45) compared to 24 percent in 1996. In addition, there is a 2 percent customs fee and a 0.4 percent additional customs fee on all imports bringing the total average of customs duties to 24.8 percent.
Based on a World Bank study reflecting 1996 tariffs, which had seven bands (0, 3, 7, 15, 25, 40, and 60).
The weighted average of customs duties was about 17 percent, and revenue collection from customs duties was about 14 percent of the value of imports in 1996. The latter measures indicate high dispersion of rates leading to important differences in incentives between sectors.
About 100 items at 6-digit level are exempt from customs duties (cereals as seed, oil products for certain projects, military equipment, air and sea transport equipment, medical equipment art). In addition the Investment Code provides customs duty rebates—all inputs to projects approved under the Investment Code enter at a 3 percent duty. Oil sector imports enter duty free.
Exports of 10 8-digit HS items (national treasures, palm tree seedlings, live bovine and ovine breeding animals, raw and semi-finished coral) are banned for reasons of protection of animal and plant life and national treasures. Certain imports such as firearms, books, tobacco, medicinal products, certain animal and plant products require prior authorization (cultural and health reasons).
To engage in activities like exploration, and research foreigners are required to conclude a contract with the national monopoly in hydrocarbon related services, or with a national company in mining services.
The main benefits on establishment are reduction in customs duties to 3 percent on inputs, exemption of real estate transfer tax, reduced incorporation fee, exemption from VAT on inputs, and lower profit taxes during 3 years.
According to the authorities (Agence de Promotion des Investissements-APSI) over 2000 projects were approved in 1996 with an average size of US$1.4 million. The positive trend continued in 1997, when about 1900 projects were approved during the first half of the year. Foreign investors participated in a small number of projects (49 in 1996), and the average investment per project was quite small (US$ 5.7 million)
Under the Investment Code exporters benefit from lower profit taxes in relation to their exports. A special export promotion fund (financed by the proceeds of a tax of imports and local production) provides subsidies (50 percent of cost) for information gathering and to facilitate transport from Algerian ports. So far these export subsidies have been approved for participation in international fairs only.