On the Algerian Economy: A Widening Gap Between Resources and Achievements

Source: Getty
Op-Ed Al-Hayat
Summary
Although Algeria has the third largest oil reserves and second largest natural gas reserves in Africa, most Algerians complain of worsening social and economic challenges.
Related Topics
Related Media and Tools
 

Several weeks ago, Algerian Prime Minister Abdelmalek Sellal revealed that the 2015–2019 five-year plan for the country had been finalized. It follows the 2010–2014 plan, for which the government had allocated $286 billion from the public budget. With no official reports, figures on the achievements of the current plan in different economic and social sectors are conflicting. But it is possible analyze the economic progress—or lack thereof—under the plans by examining the extensive gap between the country’s natural and human resources on one hand and the economic and living conditions of many households on the other. 

The largest country in Africa by land area and the tenth largest globally, Algeria holds the third largest oil reserves in Africa, behind Nigeria and Libya, with proven oil reserves estimated at 12.2 billion barrels. Algeria also holds the second largest natural gas reserves in Africa after Nigeria, and is ranked among the ten countries with the largest shale gas reserves in the world. With foreign currency reserves reaching $200 billion, Algeria is able to fund its imports for more than three years. 

Despite these impressive figures, Algerian households are facing an increasing number of social and economic challenges. Most Algerians lament the declining quality of basic social services, namely education, healthcare, and access to housing. Unemployment rates are still soaring, reaching 21.5 percent among people aged fifteen to twenty-four according to official estimates. Most of the jobs created over the past decade are low-wage and unstable and offer no social coverage.

For the past five years, public investment in Algeria has been more than twice that of neighboring countries such as Morocco and Tunisia. Yet Algeria has failed to achieve similar economic growth. Compared to other countries in the Middle East, Africa, Asia, and Latin America, Algeria stands out as an exception with its high public spending and modest economic growth.

Corruption plays a crucial part in widening the gap between, one the one hand, the available resources and, on the other, the modest achievements as well as the failure of the five-year plans to achieve real economic takeoff and improve social welfare for the entire Algerian society. Algeria ranked 105 out of 176 in the 2012 Transparency International Corruption Perceptions Index and came in 12 among 17 countries in the Middle East and North Africa (MENA) region.

In 2004, Algeria ratified the United Nations Convention Against Corruption, with some reservations. A law for the prevention of corruption in the public sector was enacted. A national anticorruption commission was created that same year, but Algerian President Abdelaziz Bouteflika did not appoint its seven members appointed until 2010, and the commission has yet to achieve any tangible results. The World Economic Forum’s Global Competitiveness Report 2012–2013 indicates that the Algerian judicial system is crippled by interference from the executive authority, companies, and influential individuals. In the report, Algeria is ranked 123 among 144 countries, in terms of judicial independence, trailing behind all MENA countries, with the exception of Lebanon.

The energy sector accounts for more than one-third of Algeria’s gross domestic product (GDP), two-thirds of government revenues, and 98 percent of exports. Successive governments have failed to sever the economy’s excessive reliance on the global oil and gas market, making the Algerian economy one of the least diversified: agriculture accounts for only 8 percent of the GDP, while the manufacturing industry accounts for 5 percent. Only a few sectors contribute to economic growth, such as construction and public works. 

Furthermore, the Algerian government has failed to create a legal and regulatory environment, to encourage entrepreneurship, private investment, and economic diversification, all key to long-term economic growth and stability. Most small and medium enterprises face market access barriers and limited access to funding from banks. Consequently, local and foreign investors find few incentives to launch industrial and service-related projects, which have the potential to improve the Algerian economy and its competitiveness. In the World Bank’s Doing Business 2014 report, Algeria ranks 153 out of 189 countries in terms of the ease of doing business—behind most MENA countries. 

Developing the Algerian economy and enabling it to face challenges of diversification, competitiveness, and decent job creation will be difficult if the current management of economic resources is not radically changed. The five-year plans should include a clear development strategy, drafted with the participation of the private sector and civil society, instead of being a mere tool to attract voters and distribute proceeds. Public projects should be improved, and mismanagement limited by promoting governance mechanisms through monitoring and accountability. The parliament’s supervisory role should be upheld, and the legislature enabled to form fact-finding commissions to inquire into misuse of public funds. The independence of the judiciary and its role must also be strengthened. Otherwise, despite the available resources, chances of economic recovery are dim.   

This article was originally published in Arabic in Al-Hayat.

End of document

Comments

 
Source http://carnegie-mec.org/2013/11/12/on-algerian-economy-widening-gap-between-resources-and-achievements/guny

More from The Global Think Tank

In Fact

 

45%

of the Chinese general public

believe their country should share a global leadership role.

30%

of Indian parliamentarians

have criminal cases pending against them.

140

charter schools in the United States

are linked to Turkey’s Gülen movement.

2.5–5

thousand tons of chemical weapons

are in North Korea’s possession.

92%

of import tariffs

among Chile, Colombia, Mexico, and Peru have been eliminated.

$2.34

trillion a year

is unaccounted for in official Chinese income statistics.

37%

of GDP in oil-exporting Arab countries

comes from the mining sector.

72%

of Europeans and Turks

are opposed to intervention in Syria.

90%

of Russian exports to China

are hydrocarbons; machinery accounts for less than 1%.

13%

of undiscovered oil

is in the Arctic.

17

U.S. government shutdowns

occurred between 1976 and 1996.

40%

of Ukrainians

want an “international economic union” with the EU.

120

million electric bicycles

are used in Chinese cities.

60–70%

of the world’s energy supply

is consumed by cities.

58%

of today’s oils

require unconventional extraction techniques.

67%

of the world's population

will reside in cities by 2050.

50%

of Syria’s population

is expected to be displaced by the end of 2013.

18%

of the U.S. economy

is consumed by healthcare.

81%

of Brazilian protesters

learned about a massive rally via Facebook or Twitter.

32

million cases pending

in India’s judicial system.

1 in 3

Syrians

now needs urgent assistance.

370

political parties

contested India’s last national elections.

70%

of Egypt's labor force

works in the private sector.

70%

of oil consumed in the United States

is for the transportation sector.

20%

of Chechnya’s pre-1994 population

has fled to different parts of the world.

58%

of oil consumed in China

was from foreign sources in 2012.

$536

billion in goods and services

traded between the United States and China in 2012.

$100

billion in foreign investment and oil revenue

have been lost by Iran because of its nuclear program.

4700%

increase in China’s GDP per capita

between 1972 and today.

$11

billion have been spent

to complete the Bushehr nuclear reactor in Iran.

2%

of Iran’s electricity needs

is all the Bushehr nuclear reactor provides.

78

journalists

were imprisoned in Turkey as of August 2012 according to the OSCE.

Stay in the Know

Enter your email address in the field below to receive the latest Carnegie analysis in your inbox!

Personal Information
 
 
Carnegie Middle East Center
 
Emir Bechir Street, Lazarieh Tower Bldg. No. 2026 1210, 5th flr. Downtown Beirut, P.O.Box 11-1061 Riad El Solh, Lebanon
Phone: +961 1 99 12 91 Fax: +961 1 99 15 91
Please note...

You are leaving the Carnegie–Tsinghua Center for Global Policy's website and entering another Carnegie global site.

请注意...

你将离开清华—卡内基中心网站,进入卡内基其他全球中心的网站。