By Hamid Ould Ahmed
ALGIERS (Reuters) - Algeria adopted a law on Wednesday which will allow private firms for the first time to lease state-owned farmland but it also imposed restrictions on foreign investment.
Gulf investors have shown an interest in Algerian farmland, part of a global trend for countries with large cash reserves to try to secure food supplies by targeting farmland abroad.
The upper house of Algeria's parliament approved the law, the final stage in the legislative process after the lower house had voted it through earlier this month.
The legislation allows for 40-year leases and earmarks 2.5 million hectares of land available for lease. Until now, state-owned land was either left fallow or farmed by local farmers' collectives.
The law appeared to block foreign firms from acquiring leases directly.
It said "farms can seal partnership contracts with individuals with Algerian nationality or with legal entities subject to Algerian law. All shareholders must be Algerian."
It was not clear if that still left the door open for foreign firms to take over management of farmland under contract. Officials said additional legislation is to be adopted setting out details of how the new law will operate.
Oil and gas exporter Algeria is trying to increase farm production to lessen its dependence on imported food.
"This law improves activities. It is a tool to modernize the sector," Agriculture Minister Rachid Benaissa told reporters in the upper house of parliament after the law was passed.
Benaissa told Reuters on Wednesday Algeria's cereals harvest this season would be approximately 4.5 million tonnes, down from last year's record crop of 6.1 million tonnes.
The head of Algeria's state agriculture chamber told Reuters in April that legislation would allow foreigners to bid on lease farmland, as long as they had Algerian partners.But it appeared that proposal had been over-ruled. Foreign investment is a sensitive subject for Algeria's government, which analysts say is showing a growing tendency towards economic nationalism.