Production of up to 10,000 vehicles a year in Algeria is expected to start this year as the UAE seeks closer ties with the North African country.
Aabar Investments , owned by the Abu Dhabi Government, signed a deal in August 2009 with the Algerian government and five German companies to construct three manufacturing plants in the country to build cars, lorries, coaches and engines.
The deal is at the forefront of the Government's aim to boost trade and investment with Algeria as the country's economy diverges from the troubles entangling its near neighbours. Production should start this year, Karim Joudi, the Algerian minister of finance, said in Abu Dhabi yesterday.
"We are striving to build our manufacturing capacity," he said. "The market for vehicles is increasing and this investment will cover not only the local market but the export market as well."
The project would have a "double benefit" for the Algerian economy through the creation of jobs as well as providing opportunities to subcontract deals to local companies, said Mr Joudi.
Daimler, in which Aabar has a 9.1 per cent stake, and MAN Ferrostaal, a machinery supplier, are also involved in the agreement with the Algerian ministries of defence and industry. Aabar's parent company, the International Petroleum Investment Company, owns 70 per cent of MAN Ferrostaal. No one was available to comment from Aabar or Ferrostaal.
Trade between the UAE and Algeria has grown by almost 60 per cent annually over the past five years, rising from about US$16 million (Dh58.7m) in 2005 to about $173m last year. Civil aviation, energy, industry and finance were among the areas for closer links discussed by officials from Algeria and the UAE Ministry of Economy yesterday.
"One of the hindrances to trade is we don't have direct flights between the UAE and Algeria," said Sultan al Mansouri, the UAE Minister of Economy. "If there were, we would seem more people travelling between the countries and more trade."
Both Emirates Airline and Etihad Airways are in talks with Algerian officials about the possibility of starting direct flights, said Mr al Mansouri.
Although Algeria was hit by pockets of unrest its economy has remained largely unaffected by more widespread disruptions in Tunisia, Libya and Egypt.
Revenues from higher oil production and stronger private-sector activity are expected to help sustain economic growth. GDP would accelerate by 3.2 per cent this year from about 2.5 per cent last year, said Mr Joudi.
"There's a big willingness of foreign investors to come to Algeria and benefit from what's happening in terms of public expenditure," he said.
Algeria's government announced last year it planned to spend $280 billion on infrastructure over the next five years.