Though the North African country boasts unspoiled mountains, a long Mediterranean coastline and spectacular deserts, foreign visitors did not exceed 2 million last year, according to the minister. Many were put off by a civil conflict that raged through the 1990s, fear of attacks by Islamist extremist groups, a lack of tourism infrastructure and bureaucratic visa rules.

"The Algerian authorities have ambitious plans to launch the tourism sector, aiming to raise the accommodation capacity from 90,000 beds to 160,000 beds in three years," Tourism Minister Smail Mimoune told Reuters.

Speaking on the sidelines of a regional tourism conference on the Tunisian island of Djerba, Mimoune said al Qaeda in the Islamic Maghreb AQIM.L, the Algerian-based North African franchise of al Qaeda, did not pose a threat to those plans.

"We aim to receive 3.5 million tourists (per year) in three years and hope that income from the sector rises to $600 million in the same period," he said.

Tourism still makes up a tiny proportion of national income for Algeria, which earned some $70 billion from oil and gas revenues last year, compared to $400 million from tourism, according to Mimoune.

That pales in comparison to its oil-poor neighbours Tunisia and Morocco, which have long promoted tourism and rely on the sector for a sizeable chunk of their income.

Algeria's policy for the past few years has been to use its cash reserves to stimulate economic growth and job creation, through infrastructure investments, higher public sector wages, food subsidies and grants to promote small businesses.

But the government has been spending more than it earns and the outlook for gas exports has worsened on global markets.

The consequence, say analysts, is that Algeria's model of state-driven growth may become unaffordable, forcing it to relinquish its grip to the private sector and diversify income.

The government plans to use a combination of private and public investment to improve its hotel offer - including building 70 new hotels - and overseas promotion of its cultural sites and mountain resorts to attract more visitors, Mimoune said.

"These plans are very realistic because the private sector in Algeria will earmark $4 billion for tourism investments, including in luxury hotels, and the government has decided to invest $1 billion to upgrade existing hotels to meet the demands of modern tourists because most of the hotels in Algeria are old," he said.

"We will intensify promotion abroad through the media and external communications to revive this important sector with the aim of diversifying the economy."

(Writing by Lin Noueihed; Editing by Alessandra Rizzo)

• A Permanent Economic Emergency