Algeria's very own oil for food program
Algeria is especially sensitive to food price fluctuations due to its high dependency on food imports.
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Buoyed by considerable revenues from its hydrocarbons exports, the Algerian government is embarking on a series of initiatives aimed at modernising the agricultural sector and boosting food production. Although similar strategies are being implemented to generate activity in a number of different areas of the economy, authorities will likely pay special attention to agriculture given an historic reliance on imports and the traditional emphasis on self-sufficiency, Global Arab Network reports according to OBG.
Food security is a sensitive issue in Algeria, as it has been throughout North Africa in recent years. With large swathes of the region’s populations sensitive to price fluctuations, governments have gone to great lengths to reduce the impact of commodity volatility. In response to January 2011 riots that were in part caused by a rise in the price of sugar and cooking oil, Algeria’s government reduced taxes and import duties on the two goods. The state has also continued to heavily subsidise the price of key foodstuffs, including flour and milk, in addition to oil and sugar.
The cost of these subsidies can be substantial, in 2013 estimated to reach 1.1% of GDP. Moreover, because Algeria is heavily dependent on food imports, it is vulnerable to shifts in global prices. Nearly 70% of the wheat consumed is purchased abroad, with imports of the cereal projected to hit 5.8m tonnes in 2012/13, largely coming from France, Canada, Germany and the US.
It is this context that the government is pursuing its Agricultural and Rural Renewal Policy (La Politique du Renouveau Agricole et Rural), which focuses on improving management in the agriculture sector, developing more effective regulations and promoting the use of more modern technology and practices.
So far, many of these efforts have been focused on reforming land access, both by consolidating farmland and by improving access to state-owned territory. Between 2000 and 2010, there was an 11% increase in the usage of previously non-exploited arable land and, since the establishment of the National Office for Agricultural Land in 2010, more than 195,000 applications for access to state land have been received. In addition to land reform, new programmes to encourage public-private partnerships, provide better training to farmers and implement modern technology are all promising to boost agricultural production.
The strategy seems to be paying off, with the value of agricultural output growing 23.7% in 2011 and a further 32% in 2012. While there remain opportunities for investment in production, attention is now turning to the development of supporting infrastructure and downstream industries.
Although it is the largest country in Africa, only about 8.2m ha of its 2,381,740 sq km is arable, equivalent to 19.5% of agricultural land or 3.4% of total land area, according to the World Bank. Moreover, just 1.1m ha of farmland is irrigated, a figure that the government would like to see grow to 1.6m ha by 2014. The state has also committed more than AD150bn (€1.45bn) to improving existing irrigation systems.
Due to Algeria’s size and the government’s focus on underdeveloped areas, transportation infrastructure will also be key to managing agricultural growth. This will include ensuring that rail and road links are in place and creating transfer stations and storage infrastructure such as grain silos. In January 2013, the Algerian Inter-professional Office of Cereals announced plans to construct nine new silos at a cost of nearly AD19bn (€184m).
Furthermore, the government is working to boost dairy and meat production, which will require more refrigerated facilities, milk processing plants and slaughterhouses. The dairy industry is in its nascent stages, with Algeria still largely reliant on imported milk powder, although domestic milk production has increased in recent years, rising from 390m litres in 2010 to 688m litres in 2012. Developing better infrastructure could help bring down transport costs, reduce spoilage and make Algerian agricultural products more competitive both in the domestic and international markets.
As the state strives to boost food production, reduce unemployment and diversify the economy away from hydrocarbons, all segments of the agriculture sector should expect ongoing government attention. Indeed, considering the politically sensitive nature food prices, the sector will likely continue to receive support. (OBG)
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