Opportunities for German business beckon in Algeria, a trade official said in Berlin before Chancellor Merkel's arrival later Wednesday in the North African nation at the head of a business delegation.

Andreas Hergenroether, chief executive of the German-Algerian Chamber of Commerce, said Algerians had high respect and awareness of the quality of German goods and would buy more if offered more.

In an interview with Deutsche Presse-Agentur dpa, he said, 'A lot more trade could be done in the natural-gas business, where Algeria is the world's fourth largest producer.'

Germany, which has no liquefied natural gas (LNG) shipping terminal of its own, hardly buys any Algerian gas at all, although Berlin is politically committed to reducing dependence on any single supplier such as Russia, Hergenroether noted.

After beating Islamist rebels in the 1990s in a conflict that cost 100,000 lives, Algeria has achieved annual growth rates of 5 per cent in recent years thanks to its oil and gas exports, and needs to invest in filling the gaps in its infrastructure and modernizing.

Economists say youth unemployment is one of its gravest problems. German Foreign Office figures show last year's German exports to Algeria were worth 1.7 billion euros (2.7 billion dollars), surpassing trade the other way of 1.2 billion euros.

Of the German imports, 98 per cent comprised oil and petrochemicals.

Hergenroether added, 'German companies have only a minor involvement in the fields. Apart from US oil companies, it's been mainly southern European companies who have got involved.'

He said German investors in Algeria, including industrial gases group Linde, detergents and glues company Henkel, building materials maker Knauf and engineering group Siemens had been satisfied with their business there.

While French business has a head start in the former French colony, German business is well respected, having helped Algeria rebuild after the country gained independence in 1962.

The investment climate had improved in recent years after the Islamists were beaten. Hergenroether said Algeria had also improved legal safeguards for investors, and the danger to expatriate business executives was 'tiny' despite a rash of terrorist attacks last year.

During Merkel's two days of talks she will seek to put some immediate vitality into closer Mediterranean links agreed at a summit in Paris on Sunday, government sources in Berlin said earlier.

She would discuss with President Abdel-Aziz Bouteflika anti-terrorist policy, illegal migration of Africans to Europe and the lingering conflict in Western Sahara.

The sources said Merkel would continue in Algeria her practice when abroad of meeting with non-government groups to hear alternative views. Algeria remains dominated by the caste that led the war of independence and by the military.

Her Wednesday programme was to include meetings with religious leaders to ask about the place of Islam in Algeria. On Thursday she is set to meet with a panel of women leaders from business, the arts and the media.