International collaboration is key in the delicate transition to an open, truly competitive economy
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frica’s second-largest country is repositioning itself as a southern
Mediterranean nation, proud to be a major energy supplier to its neighbours
across the sea. Under President Abdelaziz Bouteflika’s guidance,
Algeria is becoming more outward-looking, aiming to find its place in
the global economy.
The economic recovery plan of the Algerian President is showing signs
of being able to withstand the global downturn. The deflationary policy
which characterised much of last year is now being reversed as the country
opens up to an increasing flow of foreign investment.
The budget estimates four per cent growth in annual
gross domestic product (GDP) for 2003, although some government officials
have even predicted seven per cent growth over the next four years.
This follows a year in which Algeria reduced its foreign debt burden,
held down inflation and managed a consecutive annual growth rate of
around 5.7 per cent.
Oil and gas exports provide more than 95 per cent of the export earnings
and 60 per cent of government revenues. In 2002, Algeria’s output
of both surged, bolstered by discoveries of massive new reserves and
increasing demand.
The 2003 budget is based on oil prices averaging 19 cents a barrel and
a conservative exchange rate with the dollar. If the price rose to 22
cents a barrel, the budget deficit could be as low as 2.7 per cent,
according to Finance Minister Mohamed Terbeche.
The government’s fiscal policies have been praised by the
International Monetary Fund. The IMF’s Managing Director Horst
Kohler says: “Algeria has succeeded in restoring financial and
monetary stability and has made progress in modernising its economy.”
The IMF has urged the Algerian government to encourage private sector
development. A raft of legislation providing a more transparent regulatory
environment, cutting red tape and looking at the issue of land use will
come before Parliament in the spring.
Discovering what the free market has to offer
Mr Kohler also points out that Algeria’s
association agreement with the European Union (EU) provides further
incentives for reform and restructuring because “a more competitive
enterprise sector will allow the country to draw greater benefits from
closer economic links to the EU”.
Indeed, Italy and France are Algeria’s main export markets, followed
by the US, and then Spain in fourth place. Although most European and
US investment has been in the oil and gas sector, there is a growing
willingness to collaborate in other areas such as pharmaceuticals, chemicals,
food-processing, agriculture and service industries.
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Algeria
is emerging from years of state control and President Bouteflika is
acutely aware of the delicate path he must tread during the transition
period to a market economy. He has picked as key ministers two respected
internationalists who both returned to Algeria after many years abroad
to be in his government. They are Chakib Khelil, formerly at the World
Bank where he oversaw the restructuring of South America’s oil
companies, and who took up the post of Minister of Energy and Mines
in 1999, and Abdelhamid Temmar,
who worked for the UN in Benin, New York and Angola, and is now Minister
of Participation and Investment Promotion.
Mr Temmar has a clear strategy for economic change. “We are for
privatisation and globalisation, but there will be no company privatisation
without consulting social partners and employers,” he says.
At the same time, however, he believes Algerians
are coming round to the idea that what free market capitalism has achieved
for the Western world, it can now do for Algeria. “Everyone –
government and people – has now embarked on the liberalisation
boat,” he says. “We must transform the economy.”
Mr Temmar believes that privatisation in Algeria
cannot be compared with privatisation in Western Europe, where it was
principally aimed at public utilities such as gas or telecommunications.
“The Algerian public sector is like no other. Here, the whole productive
sector is to be privatised.” There are hundreds of state-controlled
enterprises ready to be sold, many of which have been liquidated. Some
need a fresh injection of capital and others could do with better management.
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Most
investment has been in the oil and gas sector but there is a growing
willingness to collaborate in other areas such as pharmaceuticals,chemicals
and food-processing |
Some
industries, however, such as Sonatrach, the profitable giant state oil
and gas company, are unlikely to be sold off as a whole. As it is, Sonatrach
has been involved in successful joint ventures for years, particularly
with US companies. American investors are now eyeing up the potential
of developing the upstream energy sector under the impetus of upcoming
legislation.
Mr Temmar, a former economics professor at Algiers, with doctorates
from the Sorbonne and the London School of Business Studies, expresses
disappointment at the lack of British interest in Algeria, apart from
the oil and gas sector.
But he believes that this may be about to change:
“We can now address British businessmen through this Ministry [of
Participation and Investment Promotion] and begin to show them many
interesting new projects. The economic environment is now stsructured
in a more serious way.”
There are around 1,000 public companies which are open to foreign investment,
Mr Temmar adds, with some 400 small to medium-sized companies which
should be of interest to British investors. “The Americans are
already here and have invested serious money in chemicals and pharmaceuticals,
as well as finance and technology,” he says.
“I would like to have a channel through which
we could initiate a council of Algerian and British businessmen. We
were able to achieve this with the Americans and I don’t see why
it cannot be done with the British.”
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