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Algeria report

Algeria’s hesitation in relaxing banking laws and rules on foreign investment is understandable, considering the change that more financial independence would represent for an economy that has been tightly controlled. “They will get there, they are quite sincere about moving on, but it is just very slow,” says Maitland.

President Abdelaziz Bouteflika has led the country since 1999, facilitating the process of national reconciliation after the civil war that pitted government against Islamists in the 1990s and is estimated to have killed up to 200,000 people. He was most recently re-elected for a fourth term in 2014, although the voter turnout was

“Turning Algeria around could take 10 years. The timeframe depends on Bouteflika’s departure.” Jeremy Keenan, SOAS

Whether the government will be successful in achieving the targets it has set itself to diversify the economy remains to be seen, particularly as lower oil and gas revenues could make it difficult to direct spending towards that goal, and infighting is delaying key decisions on the foreign investment rule.

Regime uncertainties Keenan claims the diversification policy is being implemented, but in the worst possible conditions, as the state of the economy requires the imposition of austerity measures to rein in government spending. “This is tough medicine,” he says, adding that “the fear of social unrest is real”. But Keenan concedes there are also reasons to remain optimistic about the country’s prospects of stability. “The sentiment is moving in the right direction, and there is huge international pressure on the government,” he says.

only 51.7% and he lost almost 5 million votes in comparison to the 2009 election. Bouteflika is almost 80 years old. He suffered a stroke in 2013, did not personally campaign and turned up to vote in a wheelchair. Rumours about his ailing health concern analysts, who anticipate a political struggle for his succession. Yet, for those who deal with Algeria on a regular basis, the country’s experience of the civil war will prevent further infighting. “They have no appetite to return to a civil war. The system around the presidency is very carefully structured. In the short term, it will be managed. They have a great fear of instability,” says Maitland. Sekak agrees: “Instability is not yet on the table. The country is still quite rich, but the money will have to go to the poor and only to the poor. If that is the case I don’t see any social unrest in the next five years.” Despite sharing a border with war-torn Libya, the possibility that the conflict

Corruption concerns

T

he spread of corruption in Algeria is a key issue in the economic crisis affecting the country – even more so than the fall in the oil price, according to some. “That crisis was really self-made as a result of the regime insisting on maintaining a rentier economy and corruption,” said professor Jeremy Keenan, of the School of Oriental and African Studies (SOAS) in London. In Transparency International’s 2015 Corruption Perception Index, Algeria was ranked right in the middle: 88th out of 167 countries, a position shared with Indonesia and Egypt. The state-owned oil company Sonatrach has been involved in lawsuits and corruption scandals. In February, an Algerian court jailed six former Sonatrach employees, including a former vice-president and an ex-state

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bank chief, in a corruption case involving equipment supplies. As part of the same trial, Saipem Contracting Algérie, part of Italy’s Saipem group, was fined €34,000 for inflating prices on a gas pipeline contract and “taking advantage of the authority or influence of [its] representatives”. The fine related to a bid procedure for a US$580mn deal struck with Sonatrach in 2009. In July, Total and Repsol made an arbitration referral against Sonatrach over the introduction of a “tax on exceptional profits”. President Abdelaziz Bouteflika appointed a national board for the prevention of, and fight against, corruption in September, but it is unclear yet whether the body will be effective in denouncing and preventing corruption at all levels of society.

could spill over to Algeria seems remote. A Menas Associate bulletin on the country says the risk of IS fighters arriving in the country is low: “We do not think these IS elements will make their way towards the Algerian border.” Rumours about political instability are, according to Mamour, exaggerated. “There is a deficit of communication and information and because of that it fuels all sorts of rumours,” he tells GTR. According to him, what can be trusted is that, slowly but surely, the reforms will happen. “Changes are happening and they make sense,” he adds.

Untapped potential While the political processes involved in reforming the country have been slow, those who best know the business environment are all in agreement: Algeria offers huge opportunities for those who are willing to commit for the long term. According to Keenan, in a decade the Maghreb may become one of the few major growth regions in the world. “The growth potential for the region is absolutely staggering,” he said in his speech. He highlighted the fact that while intra-regional trade is still pretty minimal, especially between Morocco and Algeria, there have been signs of recent progress. This would add to the manufacturing and tourism potential of the country and region. What needs to happen, he said, is a cultural and regime change: “Turning Algeria around could take 10 years. The timeframe depends on Bouteflika’s departure.” Maitland seems positive about Algeria’s prospects. “Algeria has been overlooked; it is time to make amends. It has made a lot of progress. Even today, with the low oil price, it is interesting to see how the private sector has really developed and moved on,” she says. But she warns that patience is of the essence, as those who go into the country cannot expect quick returns. “There are companies who want to go in, get an incredible amount of support, and then they go on retreat because there are investors who say they want results now, they do not want to wait five years,” she says. Mamour also shares the optimism and invites people interested in the country’s opportunities to go see it for themselves: “Take time to go there and know the people and the opportunities will be huge.”

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November/December 2016 issue  
November/December 2016 issue  
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