Algeria’s Economic Revival
Wednesday, December 12th, 2007
Algeria’s population is one of the youngest in the north of the African continent. Africa’s second largest state after the Sudan with an area of 2,381,741 sq km was conquered by France in 1830 and granted independence on July 5, 1962. Most Algerians – with few exceptions, Sunni Muslims – are Arabs under 30 years of age. Close to a fifth are Berber. The transition from the former socialist planned economy to a country being opened up with a vengeance to market economy structures since the 1990s is a great opportunity and at the same time a challenge for those politically responsible in their serious efforts to transfer most of the productive economic sectors from state control into the hands of the private sector.
The government is also especially fostering the education and training of its still for the most part under-qualified working population after the massive exodus of skilled foreign workers as a result of political unrest that continues to flare up. Among its weak points are the continuing high unemployment and the still flourishing black market on this side and the other side of the Mediterranean. The 33 million strong populace has been looking with hope to the future ever since President Abdul Aziz Bouteflika took office on April 27, 1999 and was endowed with comprehensive authority and whom they have directly re-elected to a five year term for a second and last (?) time in 2004.
The Democratic People’s Republic of Algeria (Arabic = Al Jaza’ir) is one of the economically strongest countries in the Arab world. Far and away its most important exports are oil (third largest oil reserves in Africa) and gas that is being extracted for the most part in the eastern Sahara. Several Western oil companies have concluded production agreements with the country. Pipelines transport the raw petroleum to the port cities of Annaba, Oran and Algiers, where it is loaded onto ships. There are plans for what would now be a third pipeline through the Mediterranean Ocean. Further important export goods of OPEC founding member Algeria are metals and phosphates. Iron and steel works and mills dominate among the metal processing plants. A special role is played by enterprises in the building sector, food, beverage and tobacco industry, wood, paper and textile businesses and traditional handicrafts. The most important import goods are agrarian products and investment and consumer goods. The major economic factor is industry (54% of the GNP), followed by services (33%) and agriculture (13%). The gross national product in 2006 was 3.343 billion US dollars per capita.
Efforts for a widely Diversified Economic Advancement
The Algerian government has laid out state subsidy programs that are increasingly in favor of small and medium sized businesses and for the development of agriculture specifically to also strengthen the private sector and create jobs for the predominantly young population because unemployment among the youth remains one of Algeria’s number one stability risk. After his re-election in April 2004, head of state Bouteflika got a second important program off the ground to re-boost the economy for the 2005 to 2009 time period, whose total planned outlay now, after several increases and including two regional development programs, has reached around 140 billion U.S. dollars.
The revenues from energy export account for about 98% of foreign income and over 60% of the state budget. Foreign exchange reserves amounted to almost 80 billion US dollars at the end of 2006. By consistently paying off in advance the so-called Paris Club of 1976, an informal body of creditors who regularly reset debt amounts and reschedule payments of the heavily indebted developing countries (industrial countries, the World Bank and the International Monetary Fond), the foreign debt was able to be reduced in the course of the last couple of years from 16.4 to only around 5 billion U.S. dollars. The main importers of Algerian products in 2006 were the USA (27%), Italy (17%), Spain (11%), France (8%), Canada (6%) and the Netherlands (5%). Among the important countries receiving exports are France (21 %), Italy (9%), the People’s Republic of China (8%) and Germany (7%).
Agricultural rethinking and the first successes
After large numbers of farm workers had moved to the industrial cities in the 1970s, Algeria became a food importing country. State plans failed that were meant to stop the exodus from the countryside through a re-distribution of arable land and the forming of co-operatives. There has been an increase in the cultivation for export of grapes, sugar beets, potatoes, legumes, citrus fruits, tomatoes, olives, tobacco, figs and lots of dates over the last two decades in the areas north of the over 2,000 meters-high Atlas mountain range. Moreover, farmers cultivate grains, vegetables and, in the oases, date palms, of which there are now about 15 million with an annual yield of around 500,000 tons of dates of varying quality. The soft, high-quality variety goes mostly to Europe, the harder, more resistant type to many countries in Black Africa, enjoying great popularity there because they can keep longer in the tropical climate. Early vegetables are cultivated in hot houses of plastic foil for export to Europe. Only three percent of the land is permanent crop land and farmland and most of that is in private hands. About 15% of the country consisting of grazing land steppes serves an extensive and partly nomadic animal husbandry sector, particularly the raising of sheep and goats, in the highlands of the chotts and in the northern Sahara. Small cork oak woods, especially in the Tellatlas region, form the foundation of forestry.
Less than forty percent of the country’s demand are covered by the production in the food industry, even though about a forth of the working population is employed in it. Most of the prices for basic foodstuffs and the gratification of other normal needs have risen sharply. There still exists a considerable gap between the political and economical elite of the country and the rest of the population that brings with it existing latent social conflicts. To alleviate this, the whole education system is being revamped.
Education and Social Matters
The majority of school age children receive a scholastic education. Literacy is increasing (66.6% in 2006). The teaching of French has been and is being reduced in favor of Arabic after 1973 since only about 6,000 French citizens remain of the approximately one million who lived in Algeria before the revolution. Moreover, the Berber dialect Tamazight was allowed in the schools in 2003. Ten universities, several colleges and technical universities offer an ever improving academic education.
All Algerians have been entitled to free medical care since 1974, which is all well and good but even in 2004, the last year a control was carried out, there was only one physician per 1,064 (in comparison, Germany has 1 doctor for just 298 inhabitants). Primary care outside of the cities, mainly in the 998 kilometer-long coastal region, is ensured only to a limited degree. For that reason, particularly the desert dwellers south of the Atlas Mountains – about 10% of the total population, who live in the Sahara region that comprises 80% of Algeria’s area – prefer traditional methods of healing. The infant mortality rate has risen despite a birth rate that is overall very high and now lies above the North African average.
The Changing Investment Markets, Transport and Tourism Economies and much more
Algiers has now tackled a couple of major projects including the c. 1,200 kilometer-long West-East highway system, a rapid transit and underground railway in the nation’s capital, the extension of the railroad systems, the construction of dams and desalination plants, the renewing of the water mains systems, the new construction of millions of social tenement buildings and sixty new hospitals; ambitious projects that can only be shouldered through massive private investment, primarily from foreign investors.
Foreign direct investments with a volume of about 3.5 billion U.S. dollars were enacted in 2005, with Kuwait (804 million US$), Egypt and Spain (c. 60 million US$ each) and France at the top of the list of investors with the largest number of smaller individual projects, and investments in the food industry, telecommunications, infrastructure development, electro-technology and building material sectors have now increased somewhat in comparison to the energy sectors.
Algiers’ new international airport is meant to give the emerging tourism a new boost. Domestic traffic is concentrated in the north of the country. The ports of Algiers, Annaba, Oran, Bejaia, Skikda and Arzew already have good connections with the railway running parallel to the coast. The whole railroad network has about 4,300 kilometers of tract with a little more than three hundred kilometers of it electric. This network is also to be expanded like the system of roads that totals 104,000 kilometers, only 71,656 kilometer of which have been asphalted. International tourism in Algeria, when compared with some neighbors like Morocco and Tunisia, has a lot of catching up to do, but recently the Algerian government has started to increase it promotion.
Algeria’s Relations to the European Union
The trade relations between the North African country and the EU states are traditionally close. In 2006, 52% of the combined value of all Algeria’s exports went to the EU region, whereas 55% of Algeria’s imports came from there. About 90% of Algeria’s natural gas exports are destined for the European market, primarily for the states bordering the Mediterranean, Spain, Portugal, Italy and France. An association agreement with the European Union was signed on April 22, 2004, in Valencia and took effect on September 1, 2005, making Algeria part of a free trade zone that will span the entire Mediterranean and should be complete by 2014.
It was made very clear at the 10th German-Arabian Economic Forum in July in Berlin that Algeria wishes strong German investment and a more intense export of its products to Germany. A large part of Algeria’s industrial plants from the 1970s and 80s were built with German assistance after the withdrawal of the French. “Made-in-Germany” still enjoys a high reputation in Algeria. German know-how is more in demand there than ever before. “Sustainable economic development” and “environment/ water” are the areas that have been the focus of bilateral economic cooperation since 1999. The need to modernize new industrial plants and the overall improvement of Algeria’s infrastructure is ideally in line with the German range of production, as was stressed by representatives of both countries during the plenary session of the above mentioned event mutually organized by the Ghorfa (the Arab-German Chamber of Commerce and Industry e.V.) and the DIHK (German Chamber of Commerce and Industry), both with their seats in Berlin.
Bernd-Dieter Fridrich (Berlin/Brussels),
journalist specializing in business, tourism and environmental protection
(AEJ / FIJET / TELI / UBJET)