Algeria’s transition to uncertainty

Friday 01/01/2016
Algerian opposition MPs invade the hemicycle to prevent the voting of the Finance Bill 2016 at the Algerian People’s National Assembly (APN) in Algiers, last November.

Barcelona, Spain - The political turmoil that has engulfed Algeria since the head of the Intelli­gence and Security De­partment (DRS), General Mohamed Mediene, was dismissed in September has no precedent in the recent history of the country.

The bitter fight and unusually public brawling between powerful clans as the succession to an ever-weaker President Abdelaziz Boutef­lika draws closer will probably be the graveyards of many political reputations in Algeria. The fact that it is occurring as the price of oil and gas, Algeria’s exports mainstays, have collapsed, sharpens what is a rather strange affair as the succes­sion could turn a once revolution­ary country into one where one family member succeeds another. Not something Houari Boumediene would have condoned, but times change.

Where economic policy is con­cerned, Prime Minister Abdellatif Sellal appears to have lost his script. He did not see the fall in prices com­ing, did not think through the eco­nomic and social consequences and seems to be letting his ministers cut budgets right, left and centre with the result that major investment projects are in a mess. Confusion is all the greater as projects are being postponed without any publicity so towns and regions wake up one morning and discover by rumour or stealth that an investment they were counting on has simply van­ished.

Sellal has certainly lost control of the government. His minister of in­dustry openly defies him and recent parliamentary debate on the budget degenerated into fistfights and in­sults. The secretary-general of the former ruling — but still most impor­tant party — the National Liberation Front (FLN) resorted to abusive lan­guage towards anybody who dared oppose his views. Meanwhile, sen­ior DRS officers were arrested in a sinister ballet that resemble a battle of shadows. “It is a dangerous job being an Algerian,” wrote a young writer a few years ago. It certainly feels that way today.

The absence of any forward-thinking economic policy is fuel­ling a crisis of confidence, which is illustrated by the fast decline of the dinar on the black market.

Unlike Turkey, Brazil, China or India, Algeria has utterly failed over the past 30 years to gain any traction in international affairs. Its diplo­mats are smart, well-educated and the Foreign Ministry does weigh in on regional affairs but an ever-more corrupt and rentier economy de­prives it of much influence abroad.

Tens of billions of dollars have been wasted in overpriced, bad­ly built, infrastructure projects. Funds have been embezzled and moved abroad or lavished on state subsidies — estimated at a stagger­ing 29% of gross domestic product (GDP) — to oil, gas and food. Social peace has been bought at a huge cost, not the least of which is the billions of dollars every year from smuggled petrol into neighbouring countries, especially Morocco and Tunisia.

The average Algerian’s income may have reached $5,000 in 2011 but it is unevenly distributed. Un­employment of young people is much more than the official level of 20% while living standards are im­possible to ascertain with any de­gree of precision in a country where half the non-oil and -gas production is informal.

Capital flight is rife with Algerian money contributing to the real es­tate boom in Alicante, Mallorca, Paris and Geneva. Algerian leaders boast the country has no foreign debt but only someone who is eco­nomically illiterate would dare ut­ter such words. Rabah Arezki, who heads the commodity unit at the In­ternational Monetary Fund’s (IMF) research department, explained to a meeting of the National Economic and Social Council in Algiers last September that the country’s oil and gas sectors ran the risk of be­coming “obsolete assets” because of the rise in the use of renewable energy, the revolution wrought by US shale oil and Iran’s probable re­turn to the market.

This means trouble for an econ­omy that is little diversified and where too many private businesses operate within shadowy mafias and yield increasing political influence. Large amounts of informal, not to say dirty, money are seeping into an ossified political system whose members pay little attention to the needs of genuine entrepreneurs — and there are many in Algeria, who crave clear and transparent rules and a less overbearing bureaucracy.

They would also benefit from a banking system not akin to Jurassic Park and a judicial system worthy of the name. Algeria has, economi­cally speaking, gone back in recent years. This inevitably spells trouble.

Forty years ago, 30% of GDP was invested in the industrial sec­tor, give or take a few percentage points. That figure has fallen to 10% over the past decade. However misguided some of the industrial projects initiated under Boume­diene were, they spoke of a noble ambition. For instance, he invested heavily in education.

However, he must be aghast at the utter betrayal of his ambition to make Algeria a modern economy. The Algerian government has given up investing in its youth. That part of society is seeing no help in set­ting up small companies or making available financial instruments to help it achieve such ends or helping it become computer literate. Hu­man resources just go to waste.

It has chosen to concentrate large foreign investments in cer­tain regions, not least the west, from where many of its leaders hail, and punish the region of Kab­ylia, due east of Algiers, for having “rebelled” in 2000 and demanded that its Berber identity — and that of millions of Algerians beyond that region — be respected. It even bans private Algerian investors from making large investments there.

A decade ago, the government sold off most of the country’s com­mercial fleet to a sulphurous Saudi businessman, Ghaith Pharaon, and it did the same with the steel works at El Hajjar to Indian businessman Lakshmi Mittal in a deal that were the country run with a modicum of seriousness would have been denounced as a sham. It has out­rageously favoured Middle East­ern and Gulf interests that seem to be interested in short-term gains, knowing full well that long-term in­dustrial projects backed by Western and Asian companies are far more worthwhile.

In such a climate, Mediene’s at­tacks against the head of state have a hollow ring. In the 20 years he ran the DRS, he hollowed out the ranks of its most deserving officers. The same process has been at work in the army officer corps. Too many of those who Mediene has supported have milked the cash cow for their own benefit.

Attacking the system that he has done so much to consolidate over two decades rings hollow. He could do worse than to explain the whereabouts of the thousands who “disappeared” during the civil war when the security forces were forced into a dirty war to fight Is­lamic terrorism.

To denounce an alleged miscar­riage of justice is fine but why does he stop at a particular case, be it that of a senior officer? Is no other Algerian who has suffered a mis­carriage of justice worthy of his knowledge of the inner workings of the system — and help in shedding light? He could choose to enlighten his countrymen and international observers of Algeria on the “pri­vate” Gulf and Saudi funds that fi­nanced the Islamic Armed Group in the 1990s. These funds originated in countries that had no love for a once revolutionary state which, to its eternal honour, backed the Pal­estinian Liberation Organisation and the African National Congress in their hour of need.

In the recent past, too many Al­gerian leaders have chosen to bury their heads in the sand, refuse to see the economic forces at work that are changing the world, buy so­cial peace but deny the next genera­tion of Algerians the tools to earn a decent living and stand on their two feet.

There is plenty of sand in Alge­ria; it is easy to bury your head in the stuff. However, considering the turbulent nature of the region, the speed at which changes are sweeping away economic certain­ties, which seemed cast in bronze and the lack of forward thinking, it might be worth paying attention to the only prime minister who, a quarter of a century ago, dared ush­er in bold economic reforms.

In a hard-hitting speech to an audience of veterans of the war of independence, that prime minister, Mouloud Hamrouche, warned of the dire future the country faced. Lest his detractors forget, he is a military officer who joined the Na­tional Liberation Army when he was 16.

There are many other officers who could help put Algeria back on its feet but they are probably too old. Many younger officers in the army and security forces feel deeply ashamed and despondent when they watch the pathetic spec­tacle that passes for politics in Alge­ria today, but they lack experience and access to the levers of money and power. They understand that if home-grown reforms are not forth­coming, the IMF will ultimately oblige.

The debate about economic re­form is far more open and well-informed than it was in the 1980s but the government has chosen to be deaf. What has changed is that there are no teams of good econo­mists capable of writing a blueprint for reform, let alone enacting it.

Plenty of good analyses exist, however, and there is no short­age of talent in Algeria. One is left wondering what is left of Algeria’s famous pride when its leaders seem to be handing the country, in slow motion, over to the IMF rather than use the political and economic tal­ent that exists in the country.

Bouteflika was never the slight­est bit interested in economics, un­like his illustrious predecessor, but leaving the country in a state of eco­nomic ruin will hardly earn a place in the pantheon of Algerian leaders.

Turning into a bateau ivre is not an option for Africa’s largest country. Neither its neighbours, nor Europe nor the United States, desperate to maintain a modicum of stability on southern Mediterranean shores, can relish the sight of a government losing control of the economic and financial situation.

The IMF will intervene, as it did in 1994. Were that to happen, Al­gerian leaders will, yet again, have demonstrated their extraordinary talent for discarding — some would say spitting out — their most talent­ed sons and daughters.