Interview : Abdelaziz Bouteflika

What is Algeria’s model for growth to 2030?

ABDELAZIZ BOUTEFLIKA: In the current context of uncertainty, especially after the financial crisis of 2008, economies around the globe have been searching for a growth model that ensures the economy is both resilient and adaptable. In particular, the environment after 2014 has impacted our economy, as we saw our revenue from hydrocarbons exports – which represent an important source of financing for Algeria – reduce dramatically. Such a situation was expected, and therefore a plan to cushion the impact had already been put in place. As a result, we were able to fund most of our external debt, reduce internal indebtedness, contribute to financing domestic development, consolidate levels of currency reserve and create a public savings fund. Our strategy over the last two decades has allowed for sustained expenditure, infrastructure upgrades, a reduction in unemployment, controlled inflation, increases in the purchasing power of our citizens and improvements in the main indicators of human development.

Now, however, we must develop an approach that tackles the challenges of the new economic reality, ensuring our sustainable growth while also reducing our vulnerabilities. This has become even more urgent as the erratic oil and gas markets adversely affect our financial equilibrium, both internally and externally. In the previous edition of OBG’s report I had the opportunity to present the foundations of this new economic model and the goals set for 2030, under horizon 2030. This is founded on the principles of rationalisation and efficacy of public expenditure; solidarity and social justice; the prominent role of the private sector within the national economy; continued improvement of governance in all fields; and social dialogue in all our economic processes. To this end, the government is focusing on infrastructure investment that will not hamper our production capacity in order to progressively reduce deficit levels, make our sector strategies more visible and improve our business climate to promote exports, with a particular focus on non-hydrocarbons sectors. We continue to encourage domestic and foreign investment, especially in high-value-adding sectors such as renewable energy, agro-industry, the digital economy, the downstream segments of oil and gas and mining, tourism and logistics. We expect this approach will contribute to regaining balance in the national public accounts, increasing GDP and GDP per capita growth, boosting manufacturing and industry, and transforming our model for the energy sector in the 2020-30 period. While we work towards a productive economy that is both socially effective and less dependent on hydrocarbons revenue, we may also need to adjust our policies to account for current global economic uncertainties.

How does Algeria add to African development?

BOUTEFLIKA: Algeria is committed to developing its relations with and within Africa, as we believe that continental integration has a very positive impact on domestic and regional growth. Trade and investment, together with social and political cooperation, are essential elements of this. Dedicated to the South-South cooperation model, Algeria has engaged with the New Partnership for Africa’s Development Planning and Coordinating Agency to execute major projects. Notable examples include the deployment of fibre-optic cables; the Trans-Saharan gas pipeline, which will run from Nigeria to Algeria; and the new port centre project, which would be of significant value for the development of commercial and social relations in Africa. Our solidarity with African countries is also shown in many other ways, such as our role in multilateral financial institutions, and support in the development of borders. In addition, we contribute to alleviating the burden of over-indebtedness, an issue that affects some of our partner countries in the region. We also understand it is very important to contribute to the development of people. Many thousands of Africans have received an education at our institutions, and will continue to. Algeria is also involved in the institutional reform of the African Union (AU), with a focus on guaranteeing its financial independence and the autonomy of its projects, particularly those related to achieving peace. Economic development and trade must happen in a secure context. To this end, the AU Mechanism for Police Cooperation, headquartered in Algiers, has been created to put in place a harmonised strategy against crime. While business and trade between Algeria and African actors remains poorly developed to date, we are seeking to rectify this. In December 2016 we held the African Investments and Business Forum in Algiers, which contributed to enhancing the relations of the continent’s economic actors. Algeria never ceases advocating for and actively leading participation in various forums. These are valuable occasions for promoting our local products and opening new horizons in the African economic space. This particularly applies to the revival of our manufacturing industry, which is very open to cooperation. The sector has benefitted from the African Development Bank’s initiative to create a platform to actively involve private actors in delivering projects through to the point of financing. There is significant potential for new partnerships between Algerian and African firms; however, we need to keep enhancing the legal framework for investment and economic cooperation, notably putting in place agreements on investment protection and double taxation.

The country is involved pursuing regional peace, integration and development, as defined in the AU’s Agenda 2063. Algeria actively participates in the negotiations for a continental free trade zone that would facilitate trade, and contribute to the structural development of our country and continent. With a population of over 1bn and a GDP of more than $2.2trn, Africa has huge scope for the evolution of continental trade, especially as intra-African trade only represents 10% of its trade with the rest of the world. Africa can become a rich region, full of youth, energy and rising demand. For Sustainable Development Goals to be achieved, the continent needs to invest $600m-700m per year, with $100m-130m per year for infrastructure development.

How can economic diversification and private actors support domestic growth?

BOUTEFLIKA: Economic diversification is one of our key goals; however, it is not an easy task, as it requires new economic, industrial and agricultural long-term policies that are well implemented. It also requires all actors – including public bodies, local players, public and private companies, and foreign firms – to mobilise. Our interest in diversification is not recent. We committed to this goal years ago and have been working towards it ever since. For instance, we have made progress in terms of enhancing the infrastructure network through state projects, creating more jobs, opening investment opportunities and improving citizens’ quality of life.

We have equally allowed for the re-emergence of industrial activities through our industrial redevelopment and investment-friendly policies. These have helped launch industries such as pharmaceuticals, automobile manufacturing, electronics, agri-foods, cement and, more recently, phosphates. The level of diversification that has been reached is not insignificant, but it remains insufficient to sustainably balance the economy or present a range of exports that can be a serious alternative to hydrocarbons. Therefore, we need to persevere. I believe there are three main elements that will allow us to succeed in diversification.

First, diversification will not be achieved without the strong presence and participation of private actors in all economic sectors. We must continue to enhance the tools for business creation and related support policies. We must also enhance the investment framework for small and medium-sized enterprises to help them integrate properly into manufacturing chains and subcontracting activities. With regards to foreign investment, its positive impact on development capacities, innovation and technology, knowledge of foreign markets and overall competitiveness is recognised.

Second, diversification requires improved economic governance to succeed. This needs to happen in the government, and public and private companies, and new initiatives are necessary. We have already set the axis of our industrial policy, and have recently started with a redeployment plan for public holdings to enable them to better participate in industrial development, economic integration and diversification processes.

Lastly, economic diversification will also require efforts to minimise excessive bureaucracy. In terms of removing administrative barriers, we have made some significant progress since we began enhancing the business climate years ago. The results of these efforts are now visible in multiple domains, though further improvements are still required in this area.

What is being done to facilitate PPPs?

BOUTEFLIKA: The 2018 Finance Law enables investment in public projects in the frame of partnerships between private and public institutions. This represents an avenue for achieving a financial balance while also maintaining public expenditure. In our country, the public budget for equipment represents 15-20% of GDP. PPP projects have already been started, including the port in Cherchell, with an investment of over $3m.

However, PPPs have been designed for more than supporting public operations. In priority productive sectors – such as industry, agriculture and energy – these partnerships should reduce our vulnerabilities. We therefore support every dynamic investment that promotes collaboration between public and private operators, local or foreign. The most recent partnership of this type is related to the production of phosphates, with a project launched in the east of the country. We are now working on making the framework for this more attractive. In the case of energy, the revision of the hydrocarbons law will definitely contribute to developing win-win partnerships with foreign companies in the sector. Algeria offers a stable political context, 20-year dynamic growth, external and internal financial solvency, infrastructure and policies to improve the business climate, which will help attract such investors.