Mohsen Abdelmoumen: What is today the equilibrium threshold, the price of a barrel that allows Algeria to not draw from its foreign currency reserves, but to reconstitute them?
Dr. Abderrahmane Mebtoul: Foreign exchange reserves come mainly from hydrocarbons exports (98% with derivatives) whose average price per barrel of Algerian oil went from $ 112 in June 2014 to $ 45 average annual 2016 to $ 53.97 in 2017. They evolved as follows: $ 162.2 billion in 2010, 182 in 2011, 190 in 2012, 194 in 2013, 180 in 2014, 144 in 2015, 114 in 2016, and $ 96 billion (excluding SDRs) at the end of 2017 and excluding gold reserves, Algeria owning 173 tons of a worth, at the current price, of about 7 billion dollars and, according to the IMF in its report of July 20, 2018, which is likely to end at $ 12-13 billion at the end of 2022 with a very strong economic recession. According to the International Monetary Fund (IMF) in its new report on growth prospects in the Middle East-North Africa-Afghanistan-Pakistan (MENAP) region, Algeria needed a barrel at 87.6 USD to achieve a balanced budget in 2016 against 60 dollars-barrel in 2007, $ 80 in 2009, $ 125 in 2010, $ 140 in 2012, $ 110 in 2015. For 2017, under the 2017 Finance Law, the level is close to $ 75 on the basis of expenditure and the closed deficit. For 2018, the Supplementary Finance Bill of 2018, approved on June 5, 2018 by the Council of Ministers, provides an envelope of 500 billion additional dinars (about 4.4 billion dollars) in program permissions, to revive a series of projects, including social projects, which had been frozen in recent years because of the financial strain on the state budget and which will be financed by the National Investment Fund (NIF). This will include railways and ring roads to be built or modernized for the benefit of the new Port center of El Hamdania (Cherchell) and increased exploitation of phosphate mines as well as the modernization of the port of Annaba in connection with the same project and the mega project of the Port Center of El Hamdania. This project was entrusted to a mixed company under Algerian law composed of the public Group of port services and two Chinese companies that are CSCEC (China State Construction Corporation) and CHEC (China Harbour Engineering Company) with the aim of being also an industrial development pole connected to the rail and motorway networks and benefiting, in its immediate vicinity, two sites totaling 2,000 hectares destined to host industrial projects. By 2050, port cargo traffic in the central region of the country is expected to reach 35 million tons of goods/year, and 2 million of 20-foot containers annually, compared with the current 10.5 million tons handled by the ports of Algiers and Ténès. The $ 3.3 billion project will be financed under a long-term Chinese credit, with a total project completion time of seven years.
To answer your question directly, given current public spending, unproductive spending, generalized subsidies without targeting, incremental costs and mismanagement to not say corruption, it takes a barrel of about $ 100 to not tap into foreign exchange reserves and possibly increase them. But with great fiscal discipline, better governance, a change in the current economic policy, with a barrel between 60/70 dollars, Algeria can get by, because it has assets. Indebtedness is low, 20% of GDP, external debt 2.5% of GDP and the banking sector remains capitalized, the solvency ratio being 17% at 01 January 2017.
How does this threshold evolve? I understand that it is going up over time, the government raising public spending year after year.
The figures contained in the current government’s action plan show public spending of $ 70 billion between 2000 and 2004, $ 193.8 billion between 2005 and 2009, $ 202.41 billion between 2009 and 2014, and $ 64.3 billion from 2015 to 2017. In total, the development programs required an envelope of 531.8 billion dollars during the period from 2001 to 2017, of which a large part in foreign exchange, and the operating and management budget for the same period required an expenditure of about 649.9 billion, totaling $ 1187.7 billion. Algeria still faces significant challenges, posed by the decline in oil prices four years ago. Despite an important budgetary adjustment in 2017, the budget deficits and the external current account remain high. The 2018 budget law provides for budget expenditure to rise sharply compared to 2017. These expenditures are expected to amount to more than 8 600 billion dinars (nearly 75 billion dollars), which will also cause a sharp rise in the budget deficit programmed to 2 100 billion dinars (about 18 billion dollars). So public spending related to growth will depend on the evolution of oil and gas prices. However, I caution the government against the excessive use of printing money without specific goals (see the case of Venezuela, the first world oil reserve, certainly heavy oil, but a country in semi-bankruptcy) which will have an inflationary impact and accelerate foreign exchange outflows indirectly through imports, enclosing us in a vicious circle penalizing the most disadvantaged strata, and so social tensions are coming. Contrary to some populist speeches, this mode of financing has an inflationary effect, Algeria suffering from structural rigidities contrary to developed countries where a flexibility of factors of production is. Thus, despite all the often bureaucratic measures without strategic vision, between 2009/2017, some import restrictions that paralyzed several sectors and favored the inflationary process, the result is very mixed. This recent embellishment of the price rising, if maintained, would limit the use of unconventional financing of $ 17/18 billion planned for 2018 alone. Indeed, the finance law established at 50 per barrel for an average price of 70 dollars throughout the year would result in approximately $ 12 billion compared to that ceiling. Hence the importance for Algeria to understand the evolution of global energy changes crucial for its economy, with an OPEC quota of 1.2 million barrels a day. The price of Brent was June 10, 2018 at $ 76.40 the Brent and $ 65.57 the WTI, still that 33%’s recipes from Algeria come from natural gas whose course for June 2018 was 2.90 dollars. The MBTU (in sharp decline compared to April 2017) is disconnected from oil, especially with the accelerated development of the global spot market. I identify several interrelated determining factors of 2018/2020/2030 oil prices to evaluate the evolution of the threshold, essentially exogenous factors for which Algeria has a limited margin of action.
First, there are the geostrategic tensions in the Middle East, particularly in Syria, the position of the US in relation to the agreement with Iran, certainly attenuated by the European position, and the fact that world having experienced an unparalleled cold increasing the demand. Then, as just highlighted the January 2018 report of the World Bank, there is a recovery of growth for 2018, but with a forecast of a slowdown for 2019 without reforms of the world economy in Europe, in the US and in particular in China and India. An other reason is the respect, overall, of the quota of the OPEC members decided in December 2016 in Vienna with prospects for the renewal of the agreement, in particular of Saudi Arabia. OPEC, in its entirety, represents 33% of global marketing, 67% being outside OPEP, the introduction of American oil-gas shale having upset the entire global energy map. According to international observers, the desirable price should not be 70 to not penalize global growth in order to avoid the massive influx of US shale oil and gas whose marginal fields, which are the most numerous, are profitable at a price greater than $ 60, flooding in this way the market. The IEA has just announced in January 2018, that US production for 2018, and if the price remains above 60 dollars, exceed for the first time the production of Saudi Arabia. Let us also consider the non-OPEC agreement between Saudi Arabia and Russia, these two countries producing more than 10 million barrels/day. There is also the political situation in Saudi Arabia, the stock markets not yet clear in the action of the crown prince in the fight against corruption, with the fear of internal political tensions, but especially the sale of 5% shares of a part of the large company Aramco, to maintain the stock at a high level – sale that has been postponed. Let us add the tension in Kurdistan, this area producing about 500 000 barrels a day, the decline in Venezuelan production, and the tensions in Libya and Nigeria. There is also the weakness of the dollar against the euro. And finally, we must consider the decline or rise of US stocks, while not forgetting the Chinese stocks.
What efforts have been made in recent years to get out of the dependency on oil exports, and with what result?
In this August 2018, we must be realistic, Sonatrach is Algeria and Algeria is Sonatrach. Algeria is the first African gas producer and the third largest oil producer behind Nigeria and Angola. In terms of renewable energy, the national program aims to install a capacity of 22 000 megawatts, as well as saving 9% of energy by 2030. Although the objectives set by the government are ambitious, they seem to be achievable in a wider timeframe given the efforts made by Algeria in this area and in case they persist. However, Algeria has significant non-hydrocarbon potential: more than 1 000 km of coastline, a diversified landscape (north-Highlands, desert), new technologies, and important agriculture (while being realistic because Algeria is a semi-arid country). The industrial development according to the program of the government aims at the promotion of the industrial activity by the establishment of a territorial dynamics around the industrial technical centers, consortia and clusters, to enable capacity-building and the diversification of products from industrial sectors. In the context of industrial development policies, the priority sectors that should benefit from tax advantages are: iron and steel, mechanical and metallic, electrical and electronic, agro-food, manufacturing, chemistry-plastic (Sonatrach aspiring to develop this sector with large companies), and pharmaceuticals (the pharmaceutical industry sector is estimated at 3.3 billion euros at the end of 2016), the building materials (in 2017, we experienced the self-satisfaction in cement and the subsidiary Lafarge Algiers began the export). Cluster projects will encourage the creation, participation and strengthening of the professional associations constituting an intermediary space for consultation, in order to identify consensual views on the medium and long term concerning the industrial development as well as the emergence of a genuine subcontracting, currently embryonic, by the strengthening industrial-university-college-institute relations for the promotion of research, development and innovation in industrial enterprises. The research efforts relayed by the clusters will enable companies to persevere and stay in the context of innovation for a better competitiveness at national and international level. But we have to be realistic, their share in exports is very low, because we have to take into account both very tough international competition (globalization is a reality), cost and quality standards, the solution being to work in networks through a win-win partnership with renowned multinational firms to penetrate markets and acquire technology transfer. The objective is the creation of competitive export consortia that combine know-how, international reach and adaptability. Indeed, the economic fabric according to the NSO is made up of 83% small shops-services with the dominance in legal terms of partnerships and LLCs, and very few joint-stock companies. First of all, the majority of Algerian private SME’s are often managed with the restricted family who have to open their capital if they want to be competitive, before they want to enter the capital of public companies. The industrial sector represents 6.3% of the gross domestic product (GDP) and of these 6.3%, 95-97% are small SMI-SMEs little initiated to strategic management and technological innovation, the concentration of the private sector being in the construction-public works which depends fundamentally on the public expenditure. The productive private sector in the real sphere, especially the majority SME-SMEs, knows a fairly high level of indebtedness with banks. The private exporting sector is marginal; the few cases that export are also faced with many constraints. They alone can not provide an overall boost to non-hydrocarbon production, requiring thousands of dynamic entrepreneurs. Although the private sector generates 80% of the country’s non-hydrocarbon value added, which is less than 2/3% of total exports, compared to 97/98% for Sonatrach, its share in productive investment is negligible, some sources giving less than 2/3% per year of the total investment between 2010/2017.
In general, what does the Algerian private sector represent in the face of Sonatrach’s turnover, which contributes directly and indirectly, via public spending, via hydrocarbons, to more than 80% of the gross domestic product? In addition, the public and private sectors depend on more than 75% of imported equipment and raw materials, which are therefore dependent on the hydrocarbon resource. A clear example for the assembly of cars only for 2017: the cruise speed has not been reached; we are moving towards nearly $ 2 billion in imports, the amount can double or even triple. What will be the rate of integration and export prospects? As for the non-hydrocarbon commercial public sector, it is not only a question of financing since the public sector has been stabilized up to more than 70 billion dollars between 1971 and 2017 and more than 75% have been back to the start. This sector needs managerial and technological know-how and we return to the knowledge of economy without which no development is possible in the 21st century. Finally, the informal sector accounts for more than 50% of gross domestic product non-hydrocarbons, to be not confused with the money supply in circulation. With regard to the informal sphere, there are contradictory data whereas three methods of evaluation exist: in relation to GDP, relative to the money supply in circulation and in relation to the employment held giving different rates (see the study of Professor Abderrahmane Mebtoul at the French Institute of International Relations -IFRI- Paris, December 2016: “the weight of the informal sphere in the Maghreb”).
To answer your question, it suffices to analyze both the balance of trade and the balance of payments. The value of exports (source Algerian customs) was $ 45.0 billion in 2005, 54.6 in 2006, 60.1 in 2007, 79.3 in 2008, 45.2 in 2009 (with the global crisis ), 57.0 in 2010 and 73.5 billion in 2011. In 2012: $ 71.8 billion, of which 69.8 (Hydrocarbons – H -), in 2013: $ 64.8 billion, of which $ 63.8 (H), in 2014: $ 60.1 billion, including 58 (H), in 2015: $ 34.5 billion of which $ 33.1 (H); in 2016: 29.3 billion, of which 27.9 (H), in 2017: 34.5 billion USD including 33 (H). The latest data from the first three months of 2018 show that hydrocarbons accounted for the bulk of Algerian sales abroad (93,6% of the total amount of exports) being 10.03 billion USD compared to US $8.388 billion from January to March 2017, an increase of 1.64 billion USD (19,6%). The value of imports was $ 20.0 billion in 2005, 21.4 in 2006, 27.6 in 2007, 36.5 in 2008, 39.3 in 2009, 40.5 in 2010 and 47.2 in 2011. According to the various official reports from 2012 to the end of March 2018 on the evolution of the trade balance, imports have evolved as follows: 2012: $ 51.5 billion; 2013: 54.9; 2014: 59.6; 2015: 52.6; 2016: 49.7; 2017: $ 48.7 billion. For the first quarter of 2018, imports decreased slightly to 11.2 billion dollars against 11.92 billion dollars in the same period last year, that is to say a decrease of 714 million dollars (only – 6%), which would give us an annual trend end 2018: about 45 billion dollars. The only reference document not being the balance of trade, but the balance of payment. Foreign currency outflows of approximately $ 45 billion worth of goods by the end of 2018 should be supplemented by foreign currency payments for services, which fluctuated annually between $ 10/11 billion between 2010 and 2017 and legal capital transfers, which would give us an amount of foreign exchange outflows fluctuating between $ 55/60 billion for 2018. Taking into account exports, the net outflow balance would be between 15/16 billion dollars giving foreign exchange reserves end 2018: between 83/85 billion dollars. This is why the World Bank expects the budget deficit to worsen in 2018 due to continued high levels of public spending not offset by higher revenues. The fiscal deficit is expected to reach 11.4% of GDP. The outlook is even worse for the foreign exchange reserves whose amount (17 months of imports at the end of 2017) could not represent more than five months of import by the end of 2020, that is to say a level close to $ 30 billion. Same analysis on the side of the French COFACE and of the IMF which do not see a significant improvement of the deficit of the current payments of Algeria which will continue to be raised to 9,3% of the GDP in 2018 then to 9,7% in 2019.
How to boost Algeria’s non-hydrocarbon sectors?
As discussed earlier, this goes beyond the strictly economic framework. Huge challenge of power, the big challenge is to boost the financial system, the lung of development, so that it is no longer a passive player in the redistribution of hydrocarbon rent in the wake of the spheres of customers. Algeria has a public economy with centralized management, and the structural reforms are slow to materialize on the ground. The Algerian financial system is currently unable to empower the financial sphere of the public sphere, because it is totally articulated to the public sphere. All activities, whatever their nature, feed on budget flows, i.e. the very essence of financing is linked to the real or assumed capacity of the treasure via the hydrocarbon rent. It can be considered that the irrigation conduits, the commercial and investment banks in Algeria, do not operate from a savings from the market, possibly a residual of the work, but by recurrent advances from the bank of Algeria for the public enterprises which are then refinanced by the public treasury in the form of sanitation, since for Algeria, this transformation is no longer in the field of the company but moves in the institutional field (distribution of the hydrocarbon income), in this relation, the Algerian financial system is passive. Thus, the Algerian banking market is totally dominated by the public banks, the private banks, despite their number, being marginal in volume of transactions, with, at the public level, the dominance of the BEA, commonly called the bank of Sonatrach. The Algiers Stock Exchange, administrative creation of 1996 that could have boosted the productive sector, is in lethargy, the largest Algerian companies such as Sonatrach, Sonelgaz and several large private groups being not listed on the stock market. The important thing for a reliable stock market is the number of reliable players in this market, for the moment limited. Imagine a beautiful football stadium that can accommodate more than 200 000 spectators without a team to play the game. The Algerian authorities therefore contented themselves with building the stadium, but without players. This involves the synchronization of the real sphere and the financial sphere, economic dynamics and social dynamics, in a strategy that takes into account the geostrategic stakes and the rapid transformation of the world facing a disruption of the global value chain and asking this question: in which segments of sectors can Algeria have a comparative advantage? In addition, the new approach for the Algerian government, if it wants to boost non-hydrocarbon sections, is to have a strategic vision of the demonopolization/privatization couple. Privatization and complementary demonopolization should not be confused, as both are highly political processes leading to the State’s disengagement from the economic sphere to devote itself to its role as a strategic regulator. Privatization is a transfer of ownership from existing units to the private sector and demonopolization encourage new private investment. The goal of demonopolization and privatization must reinforce the systemic shift in the transition from an administered economy toward a competitive market economy. We are in limbo due to contradictory speeches by some officials and lack of strategic vision. Historically, the Algerian private sector has long developed in the shadow of the state sector according to the famous slogan, private sector complementary factor of the state sector. A truly productive private sector needs autonomy. However, all international reports are unanimous: between 2010 and 2017, the binding business community, whose crippling bureaucracy and the dominant informal sphere, has curbed the real wealth-producing entrepreneurs. The main reason is related to environmental constraints: bureaucracy for more than 50%, a financial system administered (more than 90% of credits granted are made by public banks), a socio-educational system unsuitable and finally the thorny problem of land. Added to this is a mistrust of the local and international private sector, as income holders are afraid of losing parcels of power. This also explains these alliances between the bureaucratic sphere and some speculative private spheres motivated by short-term gains via income. However, the true dynamism of the enterprise, whether public or private, presupposes autonomy of decision in the face of both internal and international constraints, evolving within globalization characterized by uncertainty, turbulence and urgency to make decisions in real time. It is necessary to tackle the essential thing that is the renewal of governance, linked to a deep moralization of those who manage the City. Without a strategic vision, how can Algeria be adapted to globalization by more spaces of freedom, by raising environmental constraints in order to enable the flourishing of the wealth-creating enterprise? We must not expect a real economic recovery whose foundation is the acceleration of reforms that must be based on total transparency and broad social support. In the absence of a strategic vision focused on competition, the process of liberalization, which must be controlled by the regulator state, will prove a clear failure with the risk of a new private monopoly speculator, favored by Monopoly, source of inefficiency. As we have shown in several recent national and international contributions in posing the problem of the future role of the State in its relations with the market, it is a question of giving birth to the market in a non-market context through this systemic change upsetting the coherence of the old networks to create a new dynamic through new networks acquired to reforms (new social forces) as part of a new coherence synchronized with the changes in the global economy. This social dynamic is the only way to avoid this lack of coherence and visibility in socio-economic policy, whose perpetual changes of legal frameworks (function of balance of power at the level of power) are the illustration where several centers of political decision-making, atomizing decisions, voluntarily render opaque the decisions. Also, inserting the private sector without distinction with a state sector, as stipulated by the new Constitution, assumes a political will of liberalization conciliating the economic efficiency and a deep social justice, which does not mean the end of public companies with brilliant managers who have to evolve in a competitive framework supposing their autonomy in management in this turbulent and uncertain world and having to make strategic management decisions in real time. However, the return to managed administered can only block the creative energies. The successful revitalization of the economic sector, the competitive state sector, the national and international private sector, is closely linked to the deepening of the global reform, whose success is conditioned by greater visibility in socio-economic policy, the rule of law and the democratization of economic decisions. We must avoid this hollow slogan of selling off public heritage; avoid demonizing both the national and international private sector that creates wealth. In short, the entrepreneurial state and direct operator must gradually fade to give way to a state exercising public power and will be strengthened in its natural missions of arbitration and regulation. Generally speaking, what is strategic today may to not be it tomorrow. Because what we mean by strategic and non-strategic sector must be understood not in static but in dynamic because of both the evolution of the world and the structure of the Algerian economy. Thus the 51/49% rule, which is based on an outdated ideological vision, has scared away potential foreign investors to create value-added in the long term, especially innovative SMEs. This is reflected in the 2018 World Investment Report, issued June 6, 2018 by the United Nations Conference on Trade and Development (Unctad). FDI (foreign direct investment) fell by 26 %, 1.2 billion in 2017, despite the set of incentives granted under the new law on investment, while in 2016 they had reached $ 1.665 billion, where some foreign partners take little risk, the extra costs being borne by Algeria, always via the annuity, which seems to me inappropriate without having defined what is strategic and what is not based on objective criteria (see interview A. Mebtoul in Jeune Afrique 2012). The blockage of investment in Algeria does not lie in changes in laws or the development of utopian strategies, a bureaucratic vision, as we do not fight the informal sphere by authoritarian administrative measures but by attacking the functioning of society, We must orient ourselves towards a participative and civic society, in a word, to establish democracy while not denying our authenticity, the dialogue of cultures fighting all forms of intolerance.
What are the reasons for the delays and additional costs accumulated on the East-West motorway and how administrative deficiencies can be explained?
The east-west motorway has a distance of 1 216 km with a cross-profile: 2 × 3 lanes where 24 wilayas are served by having provided rest areas, service stations, truck stops and maintenance and operation centers of the highway. The East-West motorway has not changed the national road landscape since it has essentially followed the route of the national 4 and 5, which rally Algiers to Oran and Algiers to Constantine. On the other hand, it risks upsetting the economic life of the 19 wilayas directly crossed and 24 served. In a country where 85% of trade is carried out by road, the impact is likely to be felt quickly. Eleven tunnels were drilled on two three-lane track and 390 engineering structures have been completed, including 25 viaducts, to join the borders Tunisian, in the east, and Moroccan, in the west. The equipment program consists of the construction of 42 service stations, 76 rest areas (motels, parking areas, playgrounds, etc.), 57 toll stations, 70 interchanges and 22 gendarmerie guard posts, as well as guard points of the Civil Protection. To that, it will be necessary to foresee the maintenance costs because one often forgets that a road is maintained and, according to the international standards, it varies between 84 000 dollars to 135 000 dollars/year and per km. This raises the problem of toll costs. Originally programmed at 7 billion dollars and to be delivered in 2010, the last segment delivered at the beginning of the year 2019 with 12 lanes to connect the east-west highway to the Highlands highway project with a cost estimated by the government in 2017 at about 13 billion dollars for 1 216 kilometers, which sets the average completion price of one kilometer of highway at nearly $ 11 million. To the $ 13 billion already spent, annual maintenance costs will have to be added. These amounts will, no doubt, be higher than normal because of the numerous malfunctions committed during its implementation and the delay in the transition to the paying plan. Motorists will pay for travel on the East – West Highway starting in 2018. According to the project prepared by the Ministry of Public Works and Transport, the toll on this highway will be calculated on the basis of a tariff of 1.2 DA per kilometer. Some directors of public works justify the delay in delivery of the East-West Highway by problems related to the compensation of landowners who have been expropriated. To illustrate their comments, some of these directors stated that in the city of Medea, the price per square meter does not exceed 450 dinars (average price 115 dinars = one dollar in 2017) and between 700 and 1 000 dinars in Bejaia. In the wilaya of Tizi-Ouzou, the services of the estates offered the expropriated sum of 1 200 dinars per square meter and between 700 and 900 dinars in Bouira. A large part of the owners refused the proposed price. To return to the cost of the East-West Highway, any reliable project must clearly highlight the hierarchy of objectives, the expected results by sector, scope, performance indicators, indicators of specific objectives and deadlines, and finally the risk hypothesis. However, the people in charge of this project stick vaguely to the technical description without worrying about the costs, which should in principle be the main concern of the government, the minister and the managers. For international comparisons, there are variations depending on whether there is a constraint or not, but it is necessary to avoid risky comparisons and to compare only what is comparable. In Algeria, all the factors are favorable: the labor force is at least 10 times less expensive than in Europe; there is relatively little bad weather; the materials used in large quantities, aggregates (tuff, sand and gravel) cost practically only their extraction costs and crushing, fuel is 5 to 7 times cheaper, rents, electricity and gas too, the temporary occupations of land that cost fortunes in Europe are not even paid in Algeria when it comes of the public domain; but there are administrative problems and bureaucratic procedures, not to mention the expropriations and demolitions that are sources of extra costs.
What about the unemployment rate and the official inflation rate in Algeria? Are the numbers reliable?
There is a universal economic law; the employment rate depends on the demographic pressure, the growth rate and the structures of the productivity rates of competitive value-added firms which must in future reconcile flexibility and security of the workers’ collective, at the dawn of the fourth world economic revolution. Jobs are not created by decree, the easy way being to create jobs in the administration. The official unemployment rate is highly biased including the overmanning of both administrations and public enterprises, fictitious temporary jobs (5 months non-creators of added value as for example to do and redo sidewalks) and jobs in the informal sphere. Paradoxically, because of the sector-based allocation of investment via highly biased public spending favoring very low-skilled jobs such as the construction and public works (70% of public expenditure), graduates are more likely to be unemployed, and this explains the low rate of growth and productivity. It will be necessary to create between 300 000/400 000 jobs per year between 2017/2020, which is added to the current rate of unemployment, underestimated because of demographic pressure and the entry into the labor market of the female population underestimated in the statistics, to solve the nagging problem of unemployment. What will become of the 2 million students graduating from universities between 2018 and 2020? Between 2000 and 2017, Algeria’s average growth rate did not exceed 3% on average. Although this rate can make dream many European countries, it is necessary to put into perspective, because the rate of growth is calculated compared to the preceding period and an increase applied to a low gross domestic product (GDP) overall gives a low rate. Although the UNDP Human Development Index (HDI) is more reliable for measuring a country’s performance, gross domestic product (GDP) evolved from 2001 to 2017 as follows: 2001, 4 227 billion dinars; – 2005, 7 562 billion dinars; – 2009, 9 968 billion dinars (effect of the crisis); – 2010, 11 191 billion dinars; – 2015, 16 952 billion dinars and 175.49 billion dollars in 2016. In its latest report for 2017, the IMF ranks the Maghreb countries in terms of nominal GDP as follow: – 1st Egypt, GDP $ 336.3 billion; – 2nd Algeria, GDP 156.1 billion dollars; – 3rd Morocco, GDP $ 101.4 billion; – 4th Tunisia, GDP 42.06 billion dollars. And for Africa: – 1st Nigeria, GDP $ 405.4 billion; – 2nd Ghana, GDP $ 42.69 billion; – 3rd Ivory Coast, GDP $ 36.16 billion; – 4th Senegal, GDP $ 14.77 billion; – 5th Mali, GDP 14.05 billion dollars. According to the World Bank and the IMF, it will be difficult for Algeria’s GDP growth rate to exceed the 2% threshold over the 2019/2020 period, which represents an anemic progression for a middle-income country with a very high proportion of young people, and this makes urgent the rebalancing of public finances. But to have an objective assessment of the evolution of the Algerian GDP, it must be corrected by the evolution of the dinar-dollar quotation at the official rate (any devaluation of the dinar against the dollar lowers the GDP in nominal value) of which here is the evolution: in 1970, the dinar was quoted at 4.94 dinars for 1 dollar; in 1980, 5.03 dinars for 1 dollar; in 1995, 47.68 dinars for 1 dollar; 69.20 dinars for 1 euro and 77.26 dinars for 1 dollar; in 2002, 69.20 dinars for 1 dollar; in 2010, 74.31 dinars for 1 dollar; in 2013, 79.38 dinars for 1 dollar; in 2014, 80.06 dinars for 1 dollar; in 2015, 99.50 dinars for 1 dollar; and June 10, 2018, 116 dinars for 1 dollar and 137 dinars for 1 euro. This official slippage of the dinar veils the importance of the budget deficit, by artificially inflating the oil taxation and ordinary taxation through the taxes of imported products (calculated in dinars) and thus the effectiveness of public spending. Then comes the determining factor of the unemployment rate, the demographic pressure. The Algerian population has evolved as follows: in 1950, 8.87 million inhabitants; in 1960, 11.27; in 1970, 14.69; in 1980, 19.47; in 1990, 26.24; 2010, 37.06; as of January 1, 2016, 40.61; as at 1 January 2017, 41.3; as of January 1, 2018, 42.4 million inhabitants. The figures given by the ONS (National Office of Statistics) on the forecasts of the evolution of the Algerian population by 2030 would be 51.026 million. And according to the assumption of the current rate of 2.4 children per woman by 2050 to reach 65 million inhabitants, data that must be correlated with life expectancy. While it is 77.1 years for men and 78.2 for women, life expectancy will be 81 years for men and 83 years for women by 13 years. What is the spatial distribution of the population? According to data for 2016, the 12 wilayas with a density of less than 20 inhabitants per km² (Djelfa, Laghouat, El Oued, Naama, El Bayedh, Ouargla, Ghardaïa, Adrar, Bechar, Tamanrasset, Illizi and Tindouf), account for 89% of the country’s surface area for just 13% of the population. The 36 other wilayas, all located in the North, have a density greater than 20 inhabitants per km², represent 11% of the surface area (about 240 000 km2) and include 87% of the population. As a result, given the low rate of growth and demographic pressure, the unemployed population, according to the official Algerian organ of the ONS statistics, was 15.3% in 2005, 10% in 2011, 11% in 2012, 9.8% in 2012/2013, 10.6% in 2014, 11.2% in 2015, 10.5% in 2016 and remains particularly high among young people (28.3%) and women (20.7%). In its 2018 report, the IMF lowered its projections for unemployment in Algeria to 11.2% in 2018, after having expected 13.2% in October 2017, with a projection of 11.1% in 2019. According to the ONS, the employment structure, according to the sector of activity, highlights a tertiary sector (trade and service-administration). According to the Directorate-General of the Civil Service, the number of civil servants on 1 January 2015 was 20 020 172 civil servants, of whom 1 608 964 are full-time (79.64%) and 411 208 are contract staff (20.30%) and is growing, absorbing more than 60% of the total labor force, followed by construction (16.6%), industry (13.0%) and finally agriculture (10.6%). According to the legal sector, the division reveals a relative share of 58.8% of total employment, including the informal sphere, which according to the Ministry of Labor, would occupy between 25/30% of the population. Salaried employment is the main form of employment with 65.3% in the formal private sector and in the public sector but with significant wage disparities and also large disparities observed by gender. Female employment is characterized by greater concentration in the public sector (61.2% of total employment). As for the rate of inflation, the index is calculated in relation to the previous period. Thus a low inflation rate in Q1 compared to a high inflation rate compared to Q0 gives, cumulated, a high inflation rate, and asks the question of the evolution of the real wage compared to this cumulated rate. The official rate was, according to the ONS, 4.5% in 2012, 8.9% in 2013, 2.92% in 2014, 4.78% in 2015, 6.40% in 2016, 5.59% in 2017. The price of the dinar on the parallel market has increased in one year, from January 2017 to June 2018, from 190 dinars for 1 euro to 210 dinars pour 1 euro, many products sold to consumers align with the market price and accelerate the inflation process. For the IMF in its April 2018 report, inflation would be 7.4% in 2018 and 7.6% in 2019, the WB being more pessimistic by announcing 8.1% in 2019 and 9% in 2020. This global index masks disparities and needs that are historically dated, with needs evolving. The official rate of inflation is biased, it must be broken down by products according to the consumption model by social strata (function of the stratification of the national income), being moreover artificially compressed by the subsidies, otherwise it would exceed the 10%. In general, these results raise the urgency of a new governance, foundation of a reorientation of the current socio-economic policy to necessarily have a growth rate higher than the population growth rate, otherwise the unemployment rate will increase (growth rate greater than 7/8% over several years to create 350 000/400 000 new jobs per year). Does not this also pose the need to abandon the old patterns of the 1970s especially in industrial policy, in order to adapt to the fourth global economic revolution which promises to be irreversible between 2020-2030, based on networks, more social consultation and more decentralization, not to be confused with devolution, avatar of the annuitant bureaucratic mentality?
Interview realized by Mohsen Abdelmoumen
Who is the Professor Abderrahmane Mebtoul?
Professor Abderrahmane Mebtoul is a State Doctor in Economics and a member of several international organizations. He is the author of 20 books on international relations and the Algerian economy and more than 700 national and international contributions. He was Director of Studies at the Ministry of Energy – Sonatrach (from 1974 to 1979 – from 1990 to 1995 – from 2000 to 2007) and led the first audit on Sonatrach. He was Director General and High Magistrate at the Court of Auditors (first Counselor) from 1980 to 1983, independent Expert in the Economic and Social Council from 1997 to 2008, president of the National Privatization Council from 1996 to 1999 at the rank of delegate Minister, independent expert to the Presidency of the Republic from 2007 to 2008, and independent expert not paid to the Prime Minister from 2013 to 2016.
Prof. Mebtoul led the first audit on Sonatrach between 1974 and 1976, the balance of industrialization from 1977 to 1978, the first audit for the central committee of the FLN on the private sector between 1979 and 1980. He led the demurrage and surcharge audits at the building and public works industry level in conjunction with the Ministry of the Interior, the 31 Walis and the Ministry of Housing in 1982, carried out in the Court of Auditors, the audit on employment and salaries on behalf of the Presidency of the Republic in 2008, the audit of the global changes and the axes of the socio-economic revival of Algeria by 2020/2030 for the Prime Ministry in February 2014, assisted audit of Sonatrach Executives, Independent Experts and Ernest Young Consulting « The price of fuels in a competitive environment » for the Ministry of Energy in Algiers in 2008, and the « shale oil and gas, opportunities and risks » audit for the Prime Ministry in Algiers in January 2015.
Prof. A. Mebtoul wrote « Algeria has a break of only three years to change course » for the French financial daily international latribune.fr ; « Destabilization of Algeria would have Geo-strategic Repercussions on all the Mediterranean and African Space » in American Herald Tribune ; see also his contributions on the financing constraints of the Algerian economy at the international level on the Mena Forum website (Brussels – London) « How to Energize the Algiers Bourse ? » ; his interview for the Algerian daily EL Moudjahid « The need to boost the national financial system ». In addition, Professor A. Mebtoul will give a lecture at the European Parliament in October 2018 on the following theme: « Facing the geostrategic challenges in the Mediterranean and Africa, for a win-win partnership Algeria-Europe ».
Published in American Herald Tribune August 11, 2018: https://ahtribune.com/interview/2424-abderrahmane-mebtoul.html
In French in Palestine Solidarité: http://www.palestine-solidarite.org/analyses.mohsen_abdelmoumen.120818.htm