* New law says foreign contractors must have local partner
* Algeria is a lucrative source of infrastructure contracts
* Government says it wants to favour domestic firms
By Hamid Ould Ahmed
Sept 6 (Reuters) - Algeria is to require any foreign company seeking a share of its $286 billion infrastructure budget to form a joint venture with an Algerian firm to qualify for state contracts.
The measure, included in a law published on Monday, is the latest sign of Algeria's shift towards greater economic nationalism, which has already seen government pressure applied to some foreign investors.
Construction and engineering firms including SNC-Lavalin, Alstom, Siemens and Orascom Construction Industries have won billions of dollars worth of state contracts in Algeria.
The new rules do not apply to existing contracts, but could create complications for firms when they tender for new business.
"The list of conditions in international tenders must include a requirement for foreign bidders that they invest within the framework of a partnership ... with an Algerian-registered company which is majority-owned by resident citizens," says the text of the law.
LUCRATIVE CONTRACTS
The rule was part of a supplementary budget law published on Monday in the government's official journal.
Algeria has already announced a separate series of rules giving preferential treatment to domestic firms over foreign rivals when bidding for state contracts.
The government has said it will spend $286 billion on modernising the economy over the next five years, with projects likely to include new roads, dams, water desalination plants and construction of housing.
Algerian President Abdelaziz Bouteflika has said foreign contractors still have a role to play, but new rules are needed to give local firms a bigger stake in the economy and help reduce unemployment.
Some analysts have pointed to a row between Algeria and Egypt's Orascom Telecom as a sign of the hardening attitude towards foreign investors.
The firm is negotiating the sale of its lucrative local mobile operator to the Algerian government after it was hit by back-tax demands, blocked from transferring money abroad and prevented from selling the business to a South African firm. (Writing by Christian Lowe; editing by Andrew Roche)