World Report

With new legislation to kick-start greater competition and attract investment from farther afield, the government is clearly pursuing a strategy of opening up to the global community

Most of Algeria’s exports head for Europe, and the bulk of these comprise oil and gas. But worldwide bilateral trade accords, including the two-year-old association agreement with the European Union (EU), are beginning to open more markets to a wider range of products.
Algeria’s exports totalled £8.52 billion in the first nine months of last year, of which £8.26 billion were oil and gas – more than 96 per cent of the total. Italy and France were the two main export destinations, followed by the US and Spain.

The challenge is to maintain export growth, modernise state-owned enterprises and develop a more diverse industrial base. Many industries and enterprises remain in state control and require considerable investment to prepare them for competition in the global marketplace.

Noureddine Boukrouh
‘Algeria should meet universal standards through WTO accession’

Apart from increasing investment in upstream industries in the oil and gas sector, Trade Minister Noureddine Boukrouh also stresses the need to improve the quality of other Algerian products to boost exports. These include processed foods, semi-finished goods, pharmaceuticals, steel, construction materials, textiles and ready-to-wear clothes, leather goods, furniture and handicrafts. French tyre manufacturer Michelin is also returning to the country after a 10-year gap.

Two new joint-venture pharmaceutical plants were inaugurated last summer (Pfizer-Saidal Manufacturing and Aventis Pharma Saidal). Algeria hopes to produce more than half of its essential medicines domestically and to become a pharmaceuticals exporter by 2011, with some 10 per cent of production directed towards African and Arab countries.

Algeria has developed new markets through the Arab Maghreb Union, whose members include Tunisia, Morocco, Libya and Mauritania. There are even tentative plans to develop an Algerian tourism industry which could one day rival those of Tunisia and Morocco.
China is also a growing market. Exports, mainly liquefied natural gas, have grown substantially. Algeria is itself a key market for Chinese construction contractors and deals have been signed for projects worth nearly £1.24 billion in the past year.

Algeria’s vision encompasses European countries

But the country’s dependence on oil and gas continues to exercise the minds of both politicians and entrepreneurs. “We are aware of our economic weakness,” says Mr Boukrouh. “We are still in the same situation we were in 20 years ago – more than 90 per cent of our export earnings come from hydrocarbons. Our economy is still vulnerable to the fluctuating price of oil.”

Algeria’s association agreement with the EU, similar to other EU-southern Mediterranean country agreements, is designed to gradually remove import duties. “There is a new vision regarding the Euro-Mediterranean countries,” he says.

The country is determined to meet the challenge of moving away from dependence on the energy sector and developing a more diverse industrial base, so creating wider export opportunities

All this is a prelude to Algeria’s goal of joining the World Trade Organisation (WTO). “The Algerian market is still rather protected – overprotected in my opinion – so consumers have no choice other than to buy the products that are imposed on them,” Mr Boukrouh says.

Once regarded as a patriotic act to
purchase nationally-made goods, “we now realise that customers should be provided with a wide range of quality products and be able to choose whatever suits them best”, he adds.

Negotiations to join the WTO are expected to take several years, during which time Algeria must create codes of practice to meet international standards, rehabilitate its industrial and service sectors, and develop the institutes necessary to regulate them. Mr Boukrouh says Algeria has about four years in which to meet international trading standards.

Although there is widespread concern among ordinary working Algerians over job losses as former state-owned enterprises are privatised and as competition drives out weaker players, Mr Boukrouh dismisses these fears. Instead, he says the “unfair competition” comes from the informal market, which he estimates represents 30 per cent of gross domestic product and involves up to 1.5 million people.

“In this informal market there is counterfeiting, smuggling and sub-standard production, but it also includes a whole range of activities by traders, importers, dealers and manufacturers that could be integrated into the formal market,” he says. The government is introducing a raft of legislative reforms to tackle this problem, as well as to stimulate production for export and domestic consumption.

The government aims to stimulate export production

Mr Boukrouh wants the private sector, particularly small and medium-sized enterprises, to drive the economy forward. In the 1970s and 1980s the private sector was sidelined by the public sector, but now “it should accept competition from other countries’ products”, he says. “Algeria should meet universal standards through its accession to the WTO.”

Mr Boukrouh believes that by 2006 tariffs and duties should be at a level that will meet WTO demands, although a longer period will inevitably be required before there is a completely level playing field. “This process should be carried out smoothly, although I am not saying that all customs barriers should be lifted to allow any product to enter our country,” he adds.

The kick-start to the reforms is contained in legislation due to be presented to parliament in the spring. “The ministry is mobilised to lead these reforms,” says Mr Boukrouh. “We are going to change the legislation on competition and consumption, and we are especially going to review the trade code. That is a central issue, because our code is a dinosaur dating back to an obsolete epoch.”

Lachemi Djaaboube
‘If we want to convince someone to come here, we have to make a better offer’

Industry Minister Lachemi Djaaboube also believes there must be reforms which will attract greater investment. “We have created legislation and regulations to guarantee and secure the industrial sector,” he says. “There are tax advantages granted to investors. If we want to convince someone to come to Algeria rather than Morocco, we have to make a better offer.”

The legislation due before parliament contains moves to reduce red tape and invest a national agency for the development of industry with the power to settle industrial land issues. “Its only duty will be to seriously take charge of this issue and to sort it out once and for all,” says Mr Djaaboube.

The minister points to the flurry of non-hydrocarbon foreign investment in the past two years – from the new pharmaceutical plants to the new El Hadjar steel plant established in partnership with an Indian firm. There is also a growing number of foreign firms operating in joint partnerships in other sectors, such as agriculture and food-processing.

“We are basically in favour of privatisation, despite a few reservations,” adds Mr Djaaboube.