Algeria: Assessing the Present and Looking to the Future

The Maghreb Center in collaboration with the World Bank’s InfoShop
and Maghreb Department (MENA Region), has organized on Thursday, November 15, 2007 (12:30 to 2:30PM), at the World Bank InfoShop, 701 18th Street N.W. Washington, D.C., a discussion on

Algeria: Assessing the Present and Looking to the Future

Chair

Nejib Ayachi, Founder and President of the Maghreb Center

Discussants

Hugh RobertsFormer Director of the North Africa Project (ICG); former Senior Research Fellow of the Development Studies Institute at the London School of Economics and Political Science, and author of several publications on contemporary Algeria.

Miria PigatoSector Manager, MNSED, the World Bank.

Azzedine LayachiAssociate Professor, St John’s University, New York, and author of several publications on Algeria and North Africa

Comments by:

Amor NedjaiMinister Plenipotentiary (Economic Affairs) Embassy of Algeria, Washington DC

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Summary of presentations prepared by the World Bank public information center

Stable Economy

According to Miria Pigato, sector manager, MNSED, Algeria is on the right track. Algeria’s economic situation is good and stable [in terms of macro-economic indicators], Pigato said, despite several challenges it faces. Pigato pointed out that Algeria’s economic  growth is almost wholly driven by the export of hydrocarbons’ oil and gas.  Two thirds of oil revenues go directly to the budget. The good news, she said, is that the  Algerian Government has been managing the recent oil boom very well, keeping inflation low, and recording record current-account and fiscal surpluses.

It has almost repaid its entire external debt. Algeria no longer borrows from the World Bank, and it has embarked on a massive investment program, creating thousands of jobs. As a result, unemployment has dropped in the recent past [but remains a source of serious concern].

Economic Diversification a Challenge

The Algerian economy is currently moving along at a respectable four to five percent annual growth rate. This is a commendable achievement, observed Pigato. She enumerated the challenges Algeria faces, perhaps the most of which is to frame a new vision for a well-diversified economy.

The jobs that the Algerian economy has created are often temporary and offer low productivity. Thus, there are mismatches between demand and supply. There is a skills mismatch, as many  job openings are for the low skilled, while many young unemployed are highly educated; and there is an expectations mismatch,  as many educated unemployed do not see the characteristics of available jobs as adequate for their education level and experience.

This phenomenon is observable throughout the Middle East and North Africa, Pigato said.  The way forward is for the Algerian government to continue reforms, emphasizing careful use of hydrocarbon funds and speedier privatization, and to ensure a high quality of public investments in light of limited absorption capacity; goals that can only be achieved if a powerful coalition backs the implementation. As in other countries, the Bank supports the reform efforts of the government.

Potential Speed of Reforms

Hugh Roberts, former director of the North Africa Project at ICG, and former senior research fellow of the Development Studies Institute at the London School of Economics and Political Science addressed the feasibility and potential speed of reforms.

Roberts dissected the political economy of Algeria. He pointed to the imbalance between the executive branch, the legislature, and the judiciary and observed that real power is heavily tilted toward the executive. The executive branch of government in Algeria is massively preponderant, partly because of the legacy of Algerian history, especially the long liberation war, he said.

Roberts noted that the movement toward rule of law is a condition for Algeria’s successful economic take-off in the short and medium term. The characteristic of executive dominance has led to popular disaffection with and alienation from the state by ordinary Algerians, Roberts said. In the long term, he reiterated, the balance between the branches of government must be recalibrated in order to ensure long-term stability in Algeria.

Roberts said that currently the civilian wing of the Algerian government, especially parliament, is extremely weak. Ordinary Algerians are aware that parliament is not a locus of key decision-making and as a result, participation in elections is extremely low–35 percent turnout rate in the last elections, he added.

The Algerian state is recovering its development functions, given the superabundance of funds at its command, but the public remains highly suspicious about how the state uses these funds, Roberts said. The result is a tension between popular expectations and the state’s capacity to meet them.

There is also an apparent breakdown of consensus among the ruling group, which is supposed to push the reforms alluded to by Pigato.

Speaking on similar themes, Azzedine Layachi, associate professor, St. John’s University, New York, emphasized the need by development institutions engaged with MENA countries to pay particular attention to political dimensions in countries such as Algeria.

He said Algeria is not ready for fundamental reform yet, a fact he ascribed to Algeria’s troubled history. Layachi, who is Algerian by birth, acknowledged that the country has come a long way since independence. The country has nonetheless accomplished several nation- and state- building targets. However, Layachi observed, reforms of the kind urged by the World Bank are still far off in the horizon.

 

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