Interview: Abdelaziz Bouteflika
What are the next steps for ensuring the structural emergence of Algeria in the medium term?
ABDELAZIZ BOUTEFLIKA: The country’s economic pick-up would have been unthinkable without the implementation of a network of basic infrastructure, which has experienced delays due to the nation’s tragedy of the 1990s. Equally, economic development cannot be conceived without the adequate management of the citizens’ needs, in terms of employment, housing, health, education and public services.
There has been real progress achieved in these fields, and now we can congratulate ourselves for that, while also knowing that it is necessary to reinforce this achievement and make further progress.
Economic growth has averaged 3.7% in the 2000-16 period, a figure that rises to 6% if we don’t take hydrocarbons into account. GDP per capita has more than doubled in that time, from $1800 in 2000 to $3900 in 2016. Purchasing power of households has also grown considerably, at 6.3% annually on average.
Financial resources have increased, which helped to increase budget savings. This has made the funding of public investments possible, as well as the early payment of external debt. However, the finance model that has helped to achieve such progress is now constrained by the sudden drop in the per barrel price of oil, which has heavily eroded our external resources. As a consequence, since 2014 our economy has been facing serious difficulties in relation to both public finances and the balance of payments.
We have been facing this situation while also respecting a frame of social and economic development, and while preserving our independence and social balance in particular. In 2018 the funds allocated to the equipment budget will experience an increase of 76%. That increase will help with relaunching education, health and water projects, as well as furthering support for local development plans. Social transfers will also be raised by some 8%.
We have also decided to rationalise public spending, so that we can progressively balance our accounts, while also reducing the pressure from our external resources. Additionally, we aim to address the general level of imports through a combination of rationalisation and combatting fraud.
It must be said that these restrictive measures don’t represent a return to any kind of bureaucratic management, nor are they a renouncement of any of our international commitments.
The macrofinancial rationalisation programme will be accompanied by a number of structural reforms that will contribute to transforming our economy and also help reach further export diversification.
What are the main principles governing the new economic growth model in Algeria?
BOUTEFLIKA: In July 2016 we adopted a new economic growth model, in agreement with our social and economic partners in the framework of the tripartite. This new model, implemented in 2017, which will run for five years, also includes an economic diversification project with a 2030 horizon. The new model is based on some simple principles: solidarity and social justice, efficiency of public spending, and strengthening the role of the private sector in the national economy, among others.
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, although a better use of resources must be achieved, particularly by accordingly controlling the operating expenses of the state and its different agencies.
The efficiency of public spending implies a deep reform of the mechanisms of elaboration, financing and control of the state’s budget in all its parts.
The principle of strengthening the role of the private sector in the national economy will be achieved through promoting investments and public-private partnerships (PPPs). This is dependent on the necessary improvement of the business climate, cutting red tape in the process of business creation, further agreements regarding access to industrial land and working to adjust labour regulations.
Consistent improvement in the quality of governance is also a cardinal principle of our growth model. The programme that we are running in this domain affects all fields of management, evaluation and control, and will be accompanied by the development of e-governance. This principle covers the reinforcement of social dialogue and concord between public powers, employers and the trade union movement.
The launch of the new growth model will allow public accounts to regain balance in the short term, particularly in the 2020-30 period, contributing to GDP growth outside of hydrocarbons revenue, which we expect will grow by an average of 6.5%.
The model will also make significant GDP per capita growth possible, doubling the participation of the manufacturing industry to 10%, a successful transition that will notably reduce internal consumption rates, and result in a more diversified export portfolio that will supporting financing growth.
What are the priority sectors for boosting economic diversification, and what has been done to encourage investment?
BOUTEFLIKA: Our priority is to produce a stable legal framework for private investment, clean up the business environment and make it more clear, while inspiring further trust among private investors, both local and foreign. To that end, we have revisited our legislation related to investment, and in 2016 we issued a more flexible code that eased procedures. It implemented measures to increase decentralisation in matters such as allocation of land, reducing delays in land concessions, creating 50 new industrial zones and making a territorial map available to allow investors to check on opportunities.
In 2017 we have also revisited and activated a new device that will provide small and medium-sized enterprises with easier access to finance. The revision of the Customs code will also help enhance and simplify administrative procedures for operators. Additionally, the new e-commerce law, which is currently in the approval process, will surely help improve the business environment, too.
What approach is the country taking to encourage investment via PPPs?
BOUTEFLIKA: The private sector has always found its place in our economy; it is actually inconceivable for it to grow without a strong and active private sector. Regarding public partnerships, our formula has a number of advantages, particularly when it comes to implementing new forms of management, associations and partnerships between the public and private sector, but also when it comes to mobilising financing alternatives to the budget that we hope to promote in the near future.
A charter on PPPs will be signed by the government, trade unions and employer associations in the coming months. However, PPPs are not new for Algeria. According to the UN Conference on Trade and Development, Algeria features among the top-five African countries in terms of PPPs in the last 15 years.
The implementation of the new growth model is favourable for active collaboration between public and private companies. The current revision of the law on hydrocarbons will help make conditions more attractive to foreign investment in this sector.
The financial and technical contribution that foreign businesses will make to oil will allow the country to increase the value of its energy potential.
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