from South Africa make up more than 90 percent of its exports to
France and Algeria may have kissed and made up and
Europe is still on top of the trading agenda, but it is the African continent
that the government of President Abdelaziz Bouteflika sees as its favoured
partner on the road ahead.
Algeria has been described as being part of
several concentric circles in which Europe, Africa and the Arab states overlap.
"We know we should not choose one over the other," says an Algerian diplomat.
"But in the past, when we have had to choose between being Arab or African,
from the political point of view we have chosen Africa."
Such is Algeria's commitment to being part of
Africa despite the great divide of the Sahara.
President Abdelaziz Bouteflika, as one of the chief
architects of Africa's recovery plan, now called the New Partnership for
Africa's Development (Nepad), is, unsurprisingly, upbeat about the
opportunities and linkages it can provide.
Algeria is particularly focused on some kind of
partnership with South Africa, whose president, Thabo Mbeki, is also one of the
Nepad kingpins. Algeria's relationship with South Africa is underpinned by
support by each country for the other's liberation struggles. A presidential
bi-national commission has been formed to forge stronger political and business
However, business has been slow to follow. There is limited trade between the
two countries and arms sales
"We are looking for mutually advantageous
co-operation. You can't base a strategic relationship only on trade," says
Boudjema‚ Delmi, Director General for Africa in the Ministry of Foreign
"We have made some profound moves towards economic
reform. We cannot understand why Europe, the UK and US are here making
investments but not South Africa. Nepad will never work if the big countries in
Africa don't develop favourable business relations."
Big projects with other African countries are going
ahead under the Nepad umbrella. These include the building of a gas pipeline
between Algeria and Nigeria, a trans-Sahara highway south to Nigeria through
Chad and Niger and a fibre optic cable along the same route. This type of
co-operation, where third countries benefit from the activities of the regional
powers, is what Algeria is looking for with South Africa.
Despite the logistical problems for South Africans
of trading with a country on the other end of the continent, Algeria's unstable
political history has been a factor in holding back business, as is the fact
that the economy is dominated by the hydrocarbon industry.
South Africa's trade with Algeria's neighbour,
Morocco, has been brisk with exports from South Africa rising by more than 43
percent in 2002 over 2001, and imports rising by 250 percent in the same time.
This is despite the fact that diplomatic relations
between South Africa and Morocco have been cooled by South Africa's unofficial
support for Algeria over the Western Sahara issue (Algeria is headquarters for
the Polisario Front which is fighting for the self-determination of Western
Sahara, an area which Morocco has laid claim to).
Bouteflika: courting Europe and Africa
The Western Sahara dispute has cost both Algeria
and Morocco in terms of trade and business. Despite the difficult conditions,
trade between the two countries amounts to around $1.4 billion a year but it
could be a lot higher. Before Morocco introduced a visa requirement for
Algerians, an estimated one million Algerians visited their western neighbour
each year. Now Algerians visit Tunisia instead.
But Algeria's traditional business ties are with
Europe. Around 80 percent of its trade is with the European Union and most of
the balance is with the US. Trade with the Arab League countries and Africa is
Algeria has concluded free trade agreements with
the European Union and is a member of the planned Euro-Mediterranean free trade
Algeria's gas and oil have a ready market in the
European Union which sources a quarter of its gas imports through two pipelines
across the sea into Spain and Italy.
Algeria's prospects for success with its economic
reform programme, first put in place in 1994, have improved markedly in the
It has regained international acceptance since the
September 11 US attacks because of its help in the US's war against terror.
Shortly after the attacks, it provided the US with a list of some 350 Islamic
militants it believed had links to Osama bin-Laden and his Al-Qaeda movement.
The new relationship was sealed by a visit by Bouteflika to the US later that
year. The US's lead prompted many other countries to renew relations with
Algiers, particularly under the able leadership of Bouteflika.
Prior to this, Algerians were subjected to the
perception that they were all terrorists and as a result, the country had
little support in its own fight against terrorism during the 1990s perpetrated
by Islamic fundamentalists.
However, officials in Algiers are quick to point
out that support for the US's anti-terrorism campaign does not imply support
for the war against Iraq. In fact they believe the Iraq war will undermine any
gains in the war against terror. However, they are clear that their anti-war
stance does not imply support for Iraq's President Saddam Hussein.
Algiers has been chosen as the site of the African
Union's institute of terrorism, which is to be established to increase the
capacity of African countries to fight terrorism.
Relations with France, which have been rocky for a
long time mostly because of their colonial history, have also improved
post-September 11. In March this year, President Jacques Chirac paid a full
state visit to Algiers - the first by a French president since the former
colony won independence in 1962 - and was given a standing ovation by the
parliament, signalling a new dimension in the relationship.
The economy has regained pace
|- GNI, Atlas method (current US$)
|- GNI per capita, Atlas method (current US$)
|- GDP (current $)
|- GDP growth (annual %)
|- Inflation, GDP deflator (annual %)
|- Agriculture, value added (% of GDP)
|- Industry, value added (% of GDP)
|- Services, etc., value added (% of GDP)
|- Exports of goods and services (% of GDP)
|- Imports of goods and services (% of GDP)
|- Gross capital formation (% of GDP)
|- Current revenue, excl. grants (% of GDP)
|- Overall budget balance, incl. grants (% of GDP)
|Technology & Infrastructure
|- Fixed lines and mobile telephones (per 1,000
| - Telephone average cost of local call (US$ per
|- Personal computers (per 1,000 people)
|- Internet users
|- Paved roads (% of total)
|Trade and finance
|- Trade in goods as a share of goods GDP (%)
- High-technology exports (% of manufactured
| - Foreign direct investment, net inflows in
reporting country (current US$)
|- Present value of debt (current US$)
| - Total debt service (% of exports of goods and
|- Short-term debt outstanding (current US$)
|- Aid per capita (current US$)
Source: World Development Indicatiors Database, April 2002
Algeria is confident that its economy has turned
the corner and that there is no turning back on reform despite the short-term
social problems it is likely to cause.
The focus on macroeconomic stability has paid
dividends. It has pushed inflation down from 39 percent in 1994 to four percent
at end-2001, its deficit at under nine percent of GDP in 1993 has become a
healthy surplus, gross official reserves have increased to $22 billion on the
back of high oil prices and debt as a percentage of GDP has shrunk from more
than 70 percent in the mid-1990s to less than 50 percent.
But Algeria has yet to diversify its economy and is
still reliant on the hydrocarbon sector, which provides more than 95 percent of
exports, 60 percent of state revenue and represents around 30 percent of GDP.
The hydrocarbon sector is expanding as demand for
Algeria's oil and gas increases. Oil revenues continue to shore up the economy
and attract investment. US investment alone in the sector is around $4 billion.
But Algeria has already had its fingers burned by
its reliance on one sector. A massive decline in the oil price in the
mid-1980s, which pushed average per capita income down from $4,000 to $1,300,
was a turning point in the country's economic political fortunes. The
government, with its revenues in freefall, was suddenly unable to be the
generous benefactor that Algerians had come to expect. This resulted in
political and economic dislocation, exacerbated by economic austerity measures
that played a large role in the political instability that dogged the country
Attempts to increase agriculture's contribution to
GDP are slowly gaining ground and while it is not yet an export sector, renewed
production has mean a major drop in food imports. Algeria is also promoting its
But probably the most ambitious economic programme
embarked on so far is privatisation. It is ambitious not only in the number of
state-owned companies due to be privatised - 1,300 representing 800,000 workers
- but also because of the inherent social and economic consequences.
Economic reform programmes are promising
There is major resistance to the programme from
trade unions, which fear more job losses in a situation where unemployment is
already very high. Given that three-quarters of the population is under 25, and
that most people are already struggling to make ends meet, the prospects for
political instability are high. Already anti-privatisation strikes have taken
Although the violence of the 1990s was politically
motivated, it was fuelled by economic hardship, poverty, political exclusion
and a restless youth, a combination of factors, which the government is working
to address. But some fear that tangible results may be too long in coming to
keep the process on track.
As much as people understand that the path of
reform is necessary for long-terms gains, they are finding the short-term
sacrifices difficult to sustain.
Legislation passed in 2001 put in place the legal
framework to back privatisation and government has budgeted around $20 billion
to support it. It is planning a road show in Europe and parts of Africa to
publicise its big sale which covers a wide range of activities including
tourism, hotels, transport services, housing, agro-industry and various areas
To kick off the programme, the government has
restructured the financial sector to play its part and has begun the
restructuring of state industry, the first sector targeted. In the first year,
it plans to sell off 40 companies and concedes that the process will have to
speed up once all the problems are ironed out. The major utilities are not
included in the programme at this stage.
Foreign ownership has been welcomed although the
state has provided for 10 percent of free shares for workers who have an option
to take up more at a 15 percent discount. This is an attempt to get their buy
Apart from internal resistance in a country used to
state patronage and a socialist economy, other problems include a lack of
expertise and commercial skills, communication problems, challenges in the
legal environment and the problem of access to credit locally. But probably the
biggest problem is the high debt exposure - around $7 billion - to public banks
and the financial community by state-owned enterprises. Companies buying these
enterprises will have to assume the debt.
Apart from revenue generation, the privatisation
programme has three main aims. Firstly, it aims to push GDP growth up from 2.5
percent currently to four percent in 2004 by generating economic activity;
secondly to help diversify exports away from hydrocarbons and thirdly, to
increase the private sector and overall commercial activity.
It also hopes to boost its small stock exchange,
set up 10 years ago, through privatisation. Currently there are only three
companies listed, all of them state-owned.
privatisation to succeed, foreign investment is essential as the
private sector is too small to support such a wide-ranging
programme. In addition, many skills and a lot of money have moved
abroad. The government is hoping to lure back people and these funds
as the economy presents new opportunities.
Algeria: A brief history
Algeria annexed by France;
the principal Algerian nationalist movement, the Front de liberation nationale (FLN) begins a war for
France agrees to a ceasefire and independence is declared in July. In August, the provisional government
transfers its functions to the Political Bureau of the FLN. In September, a
National Constituent Assembly is elected from a single list of FLN candidates
and a Republic proclaimed. FLN founder Ahmed Ben Bella becomes prime minister;
A draft constitution approved by referendum providing for a presidential regime with the FLN as the sole
party. Ben Bella is elected president;
Ben Bella is deposed in a coup by defence minister Col Houari Boumedienne who takes control of the country
as president of a Council of the Revolution composed of army officers;
a National Charter is drafted enshrining a socialist system and the maintenance of Islam as the state
religion. A new constitution is drawn up;
Boumedienne stands for election unopposed and wins 99 percent of the vote;
Boumedienne dies; the Council of the Revolution takes over the government;
The FLN elects a Central Committee as the highest policy-making body;
Col Ben Djedid Chadli becomes president after winning 95.4 percent of the vote;
a new National Charter is drawn up keeping the principles of Islam and socialism in place but also
encouraging private enterprise;
1985 - 1989 . Opposition to the government
increases, opposition members are imprisoned and battles begin with Islamists.
The international petrol price dives and economic austerity measures are
introduced which provoke strikes and rioting. In response, Chadli introduces
constitutional amendments, which include allowing non-FLN candidates to take
part in elections. Chadli is elected for a third term;
A new constitution signifying the end of the one-party socialist state is approved by referendum. By 1991,
47 parties are registered including radical Islamist group, the Front Islamique
due Salut (FIS). State control of the economy is reduced to allow foreign
investment. However, strike and riots persist;
In June, the FIS wins 55 percent of the votes in local elections and FLN only 32 percent. Chadli acceded
to FIS demands for an early general election and an amnesty for political
detainees but also adopts a controversial law decreeing that after 1997
Arabic would be Algeria's only official language. This leads to massive protests;
The country's first general strike, over price increases, is held prompting the government to increase
subsidies and introduce other benefits. FIS protests against Chadli's
suggestion that an early presidential election be held separately from the
general election. Violent confrontations lead Chadli to declare a state of
emergency and postpone elections. The military crackdown on FIS begins.
However, in the two-stage election held finally in December, FIS wins 47.5
percent of votes and the FLN 15 percent. The FLN alleges intimidation and
irregularities by FIS. It cancels the second round of legislative voting and a
High Council of State is established to govern the country until Chadli's
term expires in 1993. This prompts widespread protests and security forces
crack down on FIS. Another state of emergency is declared;
Protests continue and the state of emergency is renewed indefinitely. Terror attacks begin targeting
senior government officials and later intellectuals, journalists and civilians
are attacked and killed by the GIA, the most radical Islamist militant group.
The security forces retaliate and thousands are killed;
a presidential election is held, boycotted by many parties including the FIS. The five-year term is won by
Liamine Zťroual, a retired general. The FIS says it will negotiate under
certain conditions but the GIA threatens reprisals if it does so and steps up
its terror campaign;
Abdelaziz Bouteflika wins the presidential election amid wide support from other parties, the military and
the trade union umbrella. However, there are allegations of massive electoral
fraud and opposition parties dispute his 73.8 percent win. Negotiations with
FIS begin and steps to end the violence are taken;
There is a sharp escalation in violence and reports of conflict between Bouteflika and his military
command on appeasement with Islamist fundamentalists;
Violence continues. A bomb goes off in Algiers - the first in two years - and rumours of major human
rights violations by security forces surface;
Violence is dramatically reduced and confined to the
countryside. The government steps up its economic reform