Algeria: Set to join the World Trade Organization

Aired July 2006

Algeria, the second-largest country in Africa, extends from the Mediterranean coast and reaches deep into the hot Sahara. It is the tenth largest country in the world in terms of land area, and it is equal in size to Western Europe.

After a century of rule by France, Algeria became independent in 1962. Then following years of violence and political unrest, Algeria is now experiencing a significant economic upturn and improved domestic security as well as a better position on the international scene.

The most significant vote of confidence by the international community is the recent announcement of Algeria entering a European Union association agreement and its current status of observer within the World Trade Organization.

Despite the good news, Algeria continues to face serious economic, social, and political challenges. Although technical education is strong in Algeria, unemployment is very high. Many graduates from trade or engineering schools cannot find work. Successive government budgets have increased spending on social programs and economic development. International investment now is at the forefront of the Governments goals for the evolution of a nation with a wealth of possibilities.

Prior to declaring independence in 1962 Algeria's economy had been dominated by agriculture for a millennium and was known as 'the breadbasket of the Roman empire'. Efforts are made today to boost agriculture again.
The energy sector has become the backbone of the Algerian economy. Production of oil began in 1956 and today the country is ranked 15th in the world in terms of oil reserves. It has proven reserves of 11.8 billion barrels. But still, analysts consider Algeria under explored.
Unlike that of most OPEC producers, Algeria’s oil sector has been open to foreign investors for more than a decade. Over the last few years, there have been significant new oil and gas discoveries largely by foreign companies in partnership with the domestic Sonatrach.
With recent oil discoveries and plans for more exploration drilling, proven oil reserves estimates could climb upwards in coming years. Algeria should also see a sharp increase in crude oil exports due to the rapid substitution of natural gas for oil in domestic energy consumption.

Sonatrach, owned by the Algerian government, dominates Algeria's oil sector. It is the 12th largest oil company in the world and the second largest LNG exporter in the world as well as being Africa’s largest company. Through its subsidiaries, the company has a domestic monopoly on oil production, refining, and transportation.

Plans call for more exploration, a larger liquefaction capacity to expand LNG exports, additional pipelines, and more contracts with foreign companies skilled in enhanced oil recovery methods for use at existing oil fields.
Faced with declining oil revenues and high-debt interest payments at the beginning of the 1990s, Algeria implemented a stringent macroeconomic stabilization reform program. Priority areas developed and this initiated the advancement of the financial services sector.

The government will continue to pursue the restructuring of the financial sector by ensuring proper regulation, adherence to prudential requirements, and the exposure of public banks to foreign and local competition. It needs to continue efforts at recapitalization to allow the banks to fully reform themselves.

In 1999, the World Bank granted Algeria a $25 million loan to back banking reforms, like the purchase of new equipment and other technical assistance.
The reform process has transformed the financial sector in the last few years by allowing the proliferation of private Algerian banks and encouraging a steady and ever increasing flow of foreign financial institutions. Private Algerian banks have proliferated while foreign banks have entered the market, offering more sophisticated products and services.

The recent improvements of the financial sector and the recovery of the macroeconomic stability in Algeria offer an attractive and favorable environment for foreign investors.

INFORMATION AND COMMUNICATIONS TECHNOLOGIES

Since liberalizing and deregulating the market, the Algerian information technology and telecommunications sector has become a huge potential for investors. Its domestic telecommunications system consists of high-capacity radio-relay and coaxial-cable trunk routes that link all the major population areas along the Mediterranean. A domestic satellite system with fifteen ground stations is used for telephone and television links from the main station near Algiers to remote areas in the Sahara.

However despite all this much needs to be done to improve the present day infrastructure.

Recently the Algerian Government declared the framework plan to support and encourage its economic revival. This incorporates the concerns of very low level internet penetration in the country. The government has allocated more than 900 million US dollars for the development of the ITC sector.

Recently a law approved by the government agreed to open the telecommunication sector to Algerian and foreign private investors. Telecom privatization is expected to bring hundreds of millions of US dollars. The sale of the first private GSM license in July 2002 to Orascom Telecom represents the first step in the privatization of the sector.

Algeria's chronic housing shortage has had a consistent impact on the construction industry. This issue has ranked high on the government's priority list because of its social implications.

Algeria is almost 1 million square miles in land area and with such a big surface its infrastructure needs are large.

Taking into account this vastness it has a highly developed transport infrastructure on all fronts. This includes 31 airports, 12 of which are international. The national carrier, Air Algérie, serves 37 destinations in Europe, Africa and the Middle East. There are as yet no direct flights between Algeria and the U.S. However, several proposals for the establishment of private air transport companies are pending at the Transport Ministry.

Roads’ developments are also a major focus with important undergoing projects.

The country is presently working on the creation of vast infrastructure rehabilitation. This development is by design without heavy government funding and this is good news for investors.

The plan is to reorient the strategy of the country and mobilize alternative sources of financing by creating partnerships and offering concessions to outside investment.

TOURISM

Algeria is one of North Africa's most diverse and fascinating countries. The dramatic and green coast of the north, mountains, endless desert, breathtaking oases, blend into a mosaic with the cultivated and hospitable people.

The Mediterranean beaches are about the most popular place for tourists to gather. There are several resorts in the Atlas Mountains and tours are offered into the Sahara. The Medina is of course one place to visit with the markets and buildings of French origin and some magnificent Turkish palaces. Check out the area near the Ketchaoua Mosque on Rue Hadj Omar. For a good view of the city head out of the city center to Martyrs' Monument.

Unlike Morocco to the west and Tunisia to the east, Algeria has never developed a tourism industry. However, the government has shown greater interest in promoting tourism because of its potential as a source of foreign exchange. They have continued to encourage local private investment and foreign participation in joint ventures, hoping to increase hotel capacity. Beyond the oil and the gas, the troubled history of strife and conflict… Algeria is now a country in rebirth.