Sticking to FLN-style economics, Bouteflika freezes reforms in Algeria

Independent economists argue that Algeria’s economy is outdated.
Thursday 26/04/2018
Uphill paths. Algerians ride a motorbike on the road leading to Ksar Tafilelt near Ghardaia. (AFP)
Uphill paths. Algerians ride a motorbike on the road leading to Ksar Tafilelt near Ghardaia. (AFP)

TUNIS - When Abdelaziz Bouteflika became Algeria’s president in 1999, he presented himself as the leader best equipped to build a prosperous and diversified economy. With his mastery of rhetoric and captivating speeches, he was the most charismatic leader since Houari Boumediene, Algeria’s second president.

Bouteflika’s rise to power came after a brutal, decades-long civil war that pitted the army against radical Islamists. High oil revenues sustained the economy before prices declined in 2014.

Bouteflika’s allies are extolling his achievements ahead of presidential elections in April 2019. Despite Bouteflika’s fragile health (he suffered a serious stroke in 2013 and has rarely been seen in public since), it is assumed that he will run for another term.

Independent economists, however, argue that Algeria’s economy is outdated. There are questions over how the more than $1 trillion Algeria earned from oil and gas exports since 1999 were spent.

“The problems afflicting the economy are numerous and (have been) left piling up untreated over the decades as successive governments failed to cure them,” said Algerian economist Nadir Bakhti.

“Billions and billions have been spent annually for development purposes but the promises of development did not materialise. The decline in oil prices since mid-2014 highlighted such management ineffectualness.”

During his first years as president, Bouteflika pushed for bold reforms to expand the private sector in the production of electricity and information technology as well as encouraging foreign investment. Algeria signed a trade agreement with the European Union in 2005 to open its state-command economy to free market rules.

“Algeria was in the mode to be more than an oil producer,” said economist Kadhi Ihsane, “but President Bouteflika declared his disenchantment with foreign investment in 2008 and then with the local private sector the following year.”

“In doing so,” Ihsane said, “he revived the historic consensus that it is the basis of the FLN’s policy since independence, which is founded on state control of the creation and distribution of the wealth.”

“FLN” refers to the National Liberation Front, which rules Algeria. Bouteflika is its leader.

Ihsane and other analysts said that, with oil prices averaging more than $100 per barrel for eight years, Bouteflika could have done more to speed up economic diversification and lessen reliance on oil exports.

Bouteflika’s backers argue that he needed to give priority to social and political stability, especially after the “Arab spring” in 2011 — by spending heavily on subsidies for food, housing, petroleum products and electricity, as well as increasing wages. Subsidies cost the government $40 billion a year.

“Keeping social peace has a cost and Algerians have not shown massive opposition to the regime as long as it transferred the oil rent to the society,” said economist Mourad Goumiri, who added: “This pattern is not possible now because of the decline in oil prices. The regime can only spend the revenues when it earns them.”

Bouteflika defended his policy in a rare interview with the Oxford Business Group, pointing out that economic growth has averaged 3.7% a year from 2000-16, “a figure that rises to 6% if we don’t take hydrocarbons into account” and GDP per capita has more than doubled in that time.

Bouteflika said Algeria has implemented a diversification model for the 2017-30 period when that economy is expected to grow at an average annual rate of 6.5%.

“National development cannot occur without social justice and solidarity and we will implement this while avoiding wasting resources. Algeria can be proud of appearing to be in a good position among other oil-exporting countries, with higher social transfers in comparison to GDP,” he said.

However, opposition leaders said they worry about the country’s future.

“We are witnessing many signals about a blatant power grab by the regime to ensure its survival in the upcoming presidential elections,” announced the opposition Talaie El Hourriyet (Vanguards of Freedom) party, which is led by former Prime Minister Ali Benflis. “If that is allowed to happen, it will make the crisis of the nation even more serious and push it into an unknown future.”

Some analysts say Algeria is stuck in a political stalemate as a weak and divided opposition is unable to force Bouteflika out of office in the polls and there is no inside opposition to unseat him.

“No one among Bouteflika’s entourage can ask him to leave Algeria in peace and end the rest of his days out of the torments of politics. No one can tell him about his catastrophic mismanagement of the country’s affairs. It is time to act wisely and remind him of the example of Nelson Mandela,” said El Watan editorialist Omar Berbiche.