As violence rages on, Algeria’s economy moves forward

Published May 17th, 2001 - 02:00 GMT

News from Algeria continues to present a wildly divergent image of a country racked by vicious conflict and of a nation committed to substantial economic development.  


On May 13, Algerian radio reported that a loan agreement worth 31 billion Japanese yen ($260 million) had been signed at the Algerian embassy in Tokyo, between the national hydrocarbons company, Sonatrach, and the Japanese bank for international cooperation, Eximbank. It will be used to boost the pumping capacity at Hassi R'mel oil field, and so extend the life of the facility through to 2020.  


That same day, suspected Islamic rebels killed 11 militiamen in an ambush on a road near the city of Batna, about 435 kilometers east of Algiers. During the previous week, in the country’s northeast Kabylie region, gunmen shot and killed eight policemen. Seven days of rioting in the region have left up to 80 people dead, causing President Abdelaziz Bouteflika to set up a commission of inquiry into the exact causes of the clashes.  


The violence in Kabylie was particularly ominous. The rioting was sparked by the killing in police custody on April 18 of a Berber student, in the area that is the heartland of Algeria’s Berber minority, who constitute roughly 30 percent of the country’s 30-million population. The violence and bloodshed that followed provided a distinctly ethic tone to the religious struggle that is already tearing the nation apart.  


But, as the death toll rises, the Algerian government continues to press ahead with bold plans to modernize its economy and to open it to foreign investment. Plans were recently announced to open Algeria’s mobile phone sector to international competition. Mobile telephones are currently available only through the national telecom monopoly.  


In its pitch to potential foreign investors, the Algerian government claimed that the domestic wireless market holds tremendous potential, with only one in 300 citizens presently owning a mobile set. The government is inviting investors to apply for GSM licenses with a capacity for approximately 500,000 connections. France Telecom and Spain’s Telecfonica are said to be considering throwing their hats into the ring. 


By opening the mobile telephone market to competition, the Algerian authorities are predicting not only lower prices, but also an increase in the number of mobile phone subscribers to two million in 2002 from the approximately 100,000 registered at present. 


The government also has plan to partially liberalize its oil and gas sectors—a move that it says will lead, over the next five years, to a 30 percent rise in gas sales and to a doubling of LNG production capacity. A draft hydrocarbons law, which could be approved before the end of this year, would allow private companies to hold much larger stakes in upstream developments than currently is possible. The government hopes that, by sweetening the terms of upstream contracts, it will attract more foreign exploration and production companies. 


As things are at present, privately owned oil companies must be partnered with the state-owned Sonatrach in any upstream development and may not hold more than 49 percent of any venture. But, as early as 2002, privately run companies—Algerian or foreign—will be permitted to own up to 100 percent of individual projects.  


Algeria’s is also preparing to sign an association agreement with the European Union, which would gradually open the Algerian market to EU imports. Within this framework, over the next four years the government will inject $7.3 billion into the economy in infrastructure projects and public sector subsidies.  


On paper the signs are encouraging. Over the coming few years, the Algerian economy is expected to grow between four and six percent annually. With unemployment officially standing at 22 percent—although others claim it is as high as 30 percent—growth is essential if a semblance of domestic stability is to be achieved. However, when the conflict is fought on religious and ethnic grounds, the national economy is bound find it difficult to maintain stability. ― (MENA Report)

© 2001 Mena Report (

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