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Algeria Builds on Solid Economic Growth
On 4 November, the International Monetary Fund made this positive assessment of the Algerian economy: “Despite a deteriorated international environment, Algeria has continued to post good economic performance, consistent with its trend in recent years, and characterized by solid non-hydrocarbon growth, control of inflation, and reduction of unemployment… Thanks to prudent financial policies, comfortable external reserves and fiscal savings have been built up, and external debt has been kept at a very low level. Macroeconomic performance remains robust in 2009. Non-hydrocarbon growth is expected to reach 9 percent, thanks to exceptional grain harvests and good performance by sectors driven by the public investment programme. However, the marked reduction in hydrocarbon output is expected to reduce overall GDP growth to about 2 percent.”
Algeria has been and remains keen to diversify its economy away from oil and gas, which currently still account for over 90 percent of its exports. The country aims to diversify its economy in order to create more jobs especially for its younger people who are coming onto the labour market.
The economy has been demonstrating its strength despite the global downturn and is expected to achieve a positive growth of 3.9% in 2009, according to government ministers. ”For 2009, we bank on a 3.9% growth that will mainly be the outcome of a non-hydrocarbon development of more than 6%,” Algeria’s Finance Minister Karim Djoudi told a conference in Istanbul recently.
The minister was speaking at a meeting of the Development Committee of the World Bank (WB) and the IMF. His forecast is in line with latest estimates made in an IMF report which foresaw a positive growth rate of +2.1% in 2009 and +3.7% in 2010.
More good news for Algeria came with record production in the agriculture sector this year which saw the harvest achieving an unusually high cereal crop yield. The bumper crop will substantially reduce the country’s dependence on foreign food imports and is expected to save it two billion dinars in 2009.
This year’s domestic harvest of 6 million tonnes is the biggest since 1978 and double the 3 million tonnes of 2008, Magharebia reported. Next year’s harvest will be even bigger, the country’s Agriculture Minister Rachid Benaissa has said.
Algeria’s success reflects the strong economic performance that the MENA region is expected to demonstrate in coming years. According to a study conducted by the Economist Intelligence Unit (EIU), released in August 2009, the MENA economies as a whole are set to consistently outperform every other region in the world for the next five years.
The region is the only place in the world that will register a positive real GDP growth rate this year although the 0.9% GDP growth forecast by EIU is a fraction of the 5.9% the region witnessed in 2008. Going forward, the regional economies are estimated to witness sharp GDP growth with 4.3 per cent in 2010, rising to 4.9% in 2012 on average, according to the EIU.
Following the global downturn, economic growth in the MENA region fell sharply but will remain positive: 2.8% in Algeria, 2.4% in Lebanon, 3.7% in Libya, 2.1% in Syria and only 0.2% in Tunisia in 2009.
Algeria, both a Mediterranean and an African country by geography and an Arab and Muslim nation in terms of culture, is the tenth largest country in the world and the second largest in Africa after Sudan. It shares common borders with the Arab states of Morocco, Tunisia, Libya and Mauritania, as well as the African nations of Mali and Niger. Historically, it has been subject to successive interventions from neighbouring powers which have each left their mark in terms of archaeological remains and cultural influences. Algeria is thus a land where vastly different cultures merge and where trade has long played its part in moulding the nature of the people and their relationships.
The country is rich in a diverse range of natural resources, it has huge oil deposits and its gas reserves are among the largest in the world. Apart from hydrocarbons, however, Algeria enjoys substantial deposits of various other valuable resources such as gold, iron, zinc, phosphate, uranium, tungsten and kaolin.
Algeria has been described as a “true energy giant”. In the global context, it ranks 15th in its oil reserves, 18th in its production and 12th in terms of exports. In the Mediterranean region, Algeria enjoys a dominant position as the leading producer and exporter of both oil and natural gas. The country is the European Union’s third most important supplier of natural gas and its fourth supplier of energy overall, according to a report by KPMG.
Algeria is making efforts to develop its new technology industries and to this end a new Algerian Start-up Initiative (ASI), has been launched in partnership with “Sillicon Valley” companies in the United States to promote cooperation in the field between companies from the two countries.
The ASI offers a platform for promoting the creation of technology startups in Algeria and aims to link up entrepreneurs abroad with local Algerian counterparts enabling them to share vital experience in business plan generation, patenting, fund raising, human resource management and marketing techniques.
The initiative was formally launched in Algiers on 18 October in the presence of the country’s Post and Information and Communication Technologies (ICT) Minister Hamid Bessalah.
The ASI will help existing Algerian companies go to the next level with the possibility of opening up offices in America’s Silicon Valley.
At the same time, Algiers hosted its first conference on the creation of start-ups in the IT sector where a call was made for the establishment of a national technology investment fund for the financing of enterprises specializing in new information and communication technologies.
Another indication of the country’s steady growth is the continuing signs of dynamism in the car market. Car sales have continued to increase, with about 5.5 million cars in the country in 2009 compared to 3 million in 2006. Algeria’s fleet of cars is the largest in North Africa and the second on the continent after South Africa. At present Algeria is not a manufacturer of motor vehicles, but the country’s Minister for Industry and Investment Promotion Abdelhamid Temmar confirmed in July that talks were taking place with major international carmakers with a view to the opening of its first car factory, according to news agency Reuters.
The possibility of setting up car assembly plants in the country as part of a partnership between Algerian and French investors has also been alluded to by the French Ambassador. Speaking in Batna province on 6 October to officials of the Aures Chamber of Commerce and Industry, economic operators and local card dealers representing French car firms, the ambassador pointed out that Algeria’s current efforts towards the development of basic infrastructure, including the East-West motorway, were encouraging investments in this field, APS news reported.
Algeria’s current and ongoing economic strategy is based on the drive towards closer integration in the global economy. Privatisation and the attracting of foreign investment are key aspects of this policy.
The promotion of investment and reforms designed to improve the country’s corporate environment are focused around the growth of SMEs whose role is seen as crucial to strengthening and diversifying the economy.
By signing its Association Agreement with the EU and taking steps towards joining the WTO, Algeria has adopted many major reforms to improve the business environment. These steps are seen as vitally necessary to attracting foreign investors.
Improvement in the country’s infrastructure and the key support services essential for making it easy to do business, such as a modern transport system, is also regarded as key to attracting investment.
Algeria has still to develop its tourism sector, although this has important growth potential. The World Tourism Organisation (UNWTO) has reported that Algeria has experienced good results as an international tourism destination in recent years. Nevertheless, much needs to be done to fully realise the country’s potential and put Algeria firmly on the tourism map. Although visitor numbers have steadily increased in recent years, it still remains far behind neighbours such as Morocco in terms of attracting foreign tourists.
The government in Algiers has started to address the challenge of attracting more investors to the tourism sector and recently announced a package of incentives designed to do just that. The country is rich in natural tourism assets: it enjoys a prime
Mediterranean location, it has a varied landscape and thousands of miles of Mediterranean coastline. In addition, it has many historical and archaeological sites that could attract a regular influx of foreign visitors from Europe and elsewhere if properly marketed.
Earlier this year Algeria announced plans to cut taxes on tourism projects to persuade investors and developers that the country has the potential to become a major new holiday destination.
The country at present faces a shortage of high-quality restaurants, holiday resorts and hotels. What needs to be done to attract more investment in these areas is now being seriously addressed.
Tourism and Environment Minister Cherif Rahmani has unveiled reforms that include tax cuts for tourist firms, low-interest bank loans for tourism investments, reducing customs tariffs, subsidising land and streamlining bureaucratic procedures.
“Of course we are aware that we are not yet at a world-class level, but we are in the process, little by little, of building Algeria as a destination,” he told a conference in Algiers. “We are going to put ourselves in a competitive position in relation to our neighbours, in terms of Algeria’s attractiveness,” he said.
Eight million people visited Morocco in 2008, while Tunisia recorded 7 million tourists. The two countries have attracted millions of dollars in foreign tourism investment, much of it from Europe and the Gulf states.
In contrast, official figures for Algeria show that in 2006, the latest year for which data was available, there were 1.64 million tourists. Only 29 percent were foreigners, while the rest were Algerians resident abroad on return trips home to visit relatives.
David Morgan
Global Arab Network