The road ahead: Modernisation in progress for land, sea and air infrastructure

Efforts to gradually open its economy are leading Algeria to enhance its infrastructure, with the transport sector an obvious centrepiece. Under the current five-year plan, the government has put aside $286bn for infrastructure development. These efforts are hoped to compensate for decades of underinvestment, to address the increased stress on existing infrastructure caused by the rising population and improve economic efficiency. The new public investment policy is geared towards improving roads, railways, port facilities and airports, as well as coordinating transport modes. Furthermore, the new drive to improve transport is expected to attract investment from international players.

MAJOR SPENDING: For the 2005-13 period, the Ministry of Public Works will invest $66bn to expand national transport networks. New highways are helping to improve the connectivity of remote areas, as well as to link production centres with port facilities. Urban expansion has prompted the need for more efficient inner city transport, leading to the extension of metro lines and new tram systems in several major cities. Upgrading port facilities is also on the agenda, and airports throughout the country are being modernised in pursuit of better integration between Algeria’s commercial air sector and the surrounding Mediterranean region. With multiple development projects running simultaneously across Algeria’s 48 wilayas (provinces), and the existing economic crisis in the EU, the country has become more attractive for European firms, and numerous foreign contractors are looking at Algeria as favourable market for their businesses. This has led to an escalation of competition between foreign players aiming to receive a share of the large number of major transport projects. Authorities hope the increase in the number of international firms working in Algeria will have a positive effect on local contractors, prompting a transfer of technical skills that will serve Algeria well over the coming decades.

ROAD EXPANSION: The concentration of most of the country’s population across the northern regions of the country, coupled with Algeria’s mountainous geography, has prompted successive governments to focus on road development. The building of two new highway networks is helping to eliminate regional disparities, but another goal is the reduction of traffic congestion on several national roads, especially on the outskirts of major coastal cities. Most of the government’s strategy for road development is guided by the National Road Development Scheme 2005-25 (Schéma Directeur Routier National 2005-25, SDRN 2005-25), which envisages a complete overhaul of the highway and road network. “The number of vehicles in Algeria has doubled in just a few years,” said Mohamed Mahiddine, director for roads at the Ministry of Public Works. “There is an overwhelming need for roads that not only connect economic areas but also alleviate traffic jams,” added Mahiddine, who estimated that around 90% of the current public works budget will be used for road construction and rehabilitation.

EAST-WEST HIGHWAY: One of the main axes of the national road strategy, the East-West Highway, is close to completion. Work on the route started in 2007 and it is set to link Annaba, on the border with Tunisia, to Tlemcen, on the Moroccan border. Along the way, the 1216-km, six-lane highway will pass close to several important cities and include 70 viaducts, 60 interchanges and 12 tunnels. Authorities expect completion before the end of 2013, with the last remaining section, and arguably the most challenging section of the route in terms of engineering, linking Constantine to the Tunisian border. This section was awarded to the Japanese consortium COOJAL, made up of Nishimatsu Construction, Itochu, Hazama, Kajima and the Taisei Corporation.

After completion of the roadway, the Ministry of Public Works expects to start building the highway’s support facilities, including 42 service stations, set to be managed by Algeria’s state-owned petroleum products retailer Naftal, as well as a toll system. The authorities expect the additional infrastructure to be completed by the end of 2015 or the beginning of 2016, at cost of $1.4bn.

The construction of the ancillary services has been awarded to three consortia by the Algérienne de Gestion des Autoroutes (AGA), the body in charge of highway-management infrastructure. Each of the consortia consists of a mix of local and international companies, including a number of Portuguese, Italian, Swedish and Spanish companies.

THE HAUTS PLATEAUX HIGHWAY: Another ambitious plan included in the SDRN 2005-25 is the construction of the Hauts Plateaux Highway, which is set to break ground before the end of 2013 and take several years. Unlike the East-West Highway, which incorporated many of the existing roads, the Hauts Plateaux Highway will be built from scratch and follow a horizontal route across the country, similar to the East-West Highway, but further south. The new highway is set to run for more than 1200 km, connecting Tébessa in the east to Naâma by the Moroccan border. The construction of the new highway will be divided into three sections: an eastern section that will be 220 km, a 495-km central section, with western section making up the remainder.

Given the size of the project, it is expected to attract several major Algerian and international construction firms. The Hauts Plateaux Highway is set to establish a new economic trade route, connecting some of the country’s main towns in the northern region and with those in the southern Sahara.

OTHER HIGHWAY PROJECTS: To maximise the economic benefits of both the Hauts Plateaux and the East-West Highways, Algerian road planners are establishing a series of connecting highways running from north to south and linking both highways to the main port infrastructure.

Currently under construction is the 100-km Béjaïa auxiliary highway, linking the port city in the Kabylie region to the East-West Highway, with the construction contract being awarded to the Chinese CRCC group. The new Béjaïa auxiliary highway will also help alleviate traffic congestion in one of the busiest areas of the country, and will connect to the Béjaïa port, Algeria’s second-largest in terms of traffic.

Another thoroughfare under construction is the auxiliary highway connecting Djen Djen to the East-West Highway at El Eulma, which is set to be completed by 2016. The project is budgeted at AD160bn (€1.5bn), and will be constructed by a consortium made up of Italian company Rizzani de Eccher and Algerian firms SAPTA and ETRHB HADDAD. The 111-km road will be especially important for increasing logistical efficiency in the eastern region of the country, as it will link to Djen Djen, the deepest port in Algeria, which is currently undergoing expansion.

Closer to Algiers, but still in the Kabylie region, a shorter auxiliary road will cover 36 km to connect the city of Tizi Ouzou to the East-West Highway, with the AD50bn (€460m) contract for its construction awarded to a consortium that includes Turkish companies Norul and Özgün Group and Algerian builder Enterprise Nationale des Grands Ouvrages d’Art.

Construction of an AD30bn (€276m) auxiliary road connecting Skikda with the East-West Highway also started in 2013. Work on additional auxiliary highways will follow in other urban centres, including Tizi Ouzou, Tipaza, Ténès, Mostaganem and Oran, with the final highway being mostly finished and only requiring the last stretch connecting to the port.

A NEW NORTH-SOUTH HIGHWAY: Also under way is the widening of National Route No.1 (NR1), which runs from Blida to the Malian border. Hakim Aberkane, general manager of Anderson Logistique, told OBG, “The East-West Highway has helped reduce transportation times significantly, although much work remains to be done on southbound corridors. Security is an issue but transport to our southern neighbours offers a key opportunity.” Initial efforts will be focused on the northern section, from Blida to El Menia. Once this first stretch has been completed, further extensions will be studied.

However, with most of the existing traffic concentrated on the first half of the thoroughfare, authorities will likely focus road expansion efforts on more areas with more pressing needs. The NR1 upgrade is also set to improve connectivity with Algeria’s African neighbours to the south. “The plan aims to give Algeria a new lease of life in terms of road infrastructure,” Mahiddine told OBG. “The design of our road network is guided by the current economic necessities across the country.”

URBAN COMMUTE: Population growth has also become a significant factor driving transport sector development. This is putting pressure not only on transport networks across the country, but more specifically on larger cities. The Algiers metro, which began operations in November 2011, is the country’s first attempt at underground urban transport and, despite a slow start, passenger figures reached the 12m mark in the first year, and climbed 25-30% midway through its second year, according to the Algerian subsidiary of France’s Régie Autonome des Transports Parisiens (RATP), RATP El Djazaïr, which manages the system. Even with the growing popularity of the metro, the number of passengers travelling on a monthly card is still only about 5% of total traffic, suggesting that it has still not become a routine method of transportation.

Pascal Garret, general manager of RATP El Djazamuters will increase in the coming years. This will be driven by several factors, including growing integration with the city’s tram system and the addition of new lines and extra metro stops. The linkage with the Algiers tram service, operational since June 2012, will help to coordinate the two systems. However, a revision in tariffs and universally integrated tickets – which are available for metro users but not tram riders – will also help to cement commuter habits.

EXPANDING SYSTEM: Several metro expansion schemes are currently under way. The extension from Haï El Badr to El Harrach Centre will run eastwards and add four new stations and another 4 km of line. An extension is also planned to run southwards from Haï El Badr to Aïn Naâdja, covering a new 3.6 km of track and three metro stations. Going westwards, additional track and two metro stations are planned to reach from the Tafourah Grande Poste metro station to Oued Koriche. All three extension projects are set to be finalised by 2016.

In addition to the extensions of the existing line, two new metro lines are also under consideration. A second metro line will eventually run through 15 stations, connecting Tafourah with the municipalities of Dar El Beïda and Bordj El Kiffan. A third line is also planned to connect Hussein Dey and Dély Ibrahim, with a total of 11 new stations.

The expansion of the capital’s metro attracted significant interest from international contractors, and it is hoped that other projects will attract similar interest. Studies are being conducted to assess the feasibility of a metro project for Oran, the main city in the west of the country. Local media has indicated that the final project is estimated to cost AD138bn (€1.27bn) and that construction will begin in 2014. The new metro is set to run along a 17-km route with 20 stations and have the capacity to transport 32,000 passengers per day.

ABOVE-GROUND TRANSPORT: Tramway systems have become an increasingly popular way to enhance urban transport in several Algerian cities. In Algiers, the tramway started operations in May 2011, and a year later the government announced it would invest $6bn to build and establish tramway systems in 14 other cities. In Oran, the new 18.7-km tramway line began commercial operations in May 2013. The system is operated by Société d’Exploitation des Tramways (SETRAM), a joint venture between RATP and two Algerian partners, Entreprise du Metro d’ Alger (EMA) and Etablissement Public de Transport Urbain et Suburbain d’Alger. SETRAM expects the 32-stop line to transport around 90.000 people daily. Construction of the line cost €355m and was carried out by a consortium of France’s Alstom Transport and Spanish company Isolux Corsán.

The country’s third tramway system, in Constantine, started operations in early July 2013. The 8. 1-km line, also operated by SETRAM, will serve 10 stops and is expected to transport about 70,000 passengers per day. The AD44bn (€404.8m) system was built by Alstom Transport and Italian construction company Impresa Pizzarotti & C.

IN THE PIPELINE: Ouargla, one of the main oil producing cities in the Sahara region, is set to receive a new tram system, which is expected to cost €228m. EMA, which is managing the project, awarded the construction contract to a consortium of Spanish companies, comprised of Rover Alcisa Group, Elecnor and Assignia Infraestructuras. The system will include 23 stops on a 12.6-km line, which will connect the university campus with the city centre.

Tramway systems are becoming an increasingly popular option for relieving pressure on Algeria’s urban roadways, especially as car ownership increases. In addition to Ouargla, 13 other cities are set to get their own tramway lines. Studies are currently under way in Sidi Bel Abbès, Tlemcen, Béchar, Mostaganem, Sétif, Annaba, Batna, Béjaïa, Biskra, Skikda, Tébessa, Blida and Djelfa.

“There is a lot of potential for the development of urban transport infrastructure in Algeria. In a few years, about 10 cities will have more than 1m inhabitants. These are exactly the type of setting where urban transport solutions are useful,” said Samir Karoum, country president at Alstom. The increasing popularity of tram systems has also prompted Alstom the Algerian government to partner and build the country’s first tram manufacturing and maintenance factory. Construction of the plant has already started in the eastern border city of Annaba, and is set to be completed by 2014.

Expansion of Algeria’s existing railway lines has also taken on a prominent role in the country’s infrastructure upgrading plans, with several projects currently under way. Much attention is being given to the Hauts Plateaux railway, a 1300-km line that will cross the country from east to west.

GROWING PORT TRAFFIC: Although ports are the main entry point for most of the country’s imports, the existing infrastructure has suffered from the increase in traffic and limited space. “The problem with Algerian ports is that they are mostly located inside cities, with little room to expand,” said Adlane Belabdelouahab, general manager of Arkas Container Transport, a Turkish maritime transport company. The authorities expect that renovation work under way in major ports, coupled with the expansion of road connections, will increase transport efficiencies and help the country to fully benefit from its strategic position in the Mediterranean.

About 95% of international trade takes place via maritime transport, which means that increasing port efficiency could have a direct, positive impact on the country’s economy. The challenges involved with port usage in some of the country’s facilities have certainly had a negative effect on prices. The World Bank estimates that the average cost to import a shipping container into Algeria is $1330, compared to $970 in Morocco or $860 in Tunisia.

Despite the challenges, demand for port facilities is set to increase in the coming years. “The outlook is favourable and likely to remain unaffected by the issues at the ports. Particular growth is expected for construction materials such as cement” said Adnan Hani, the managing director of shipping company Evergreen Line, adding that volumes of all import products are expected to increase, as are certain exports, such as wine, dates, scrap and aluminium.

PORT EXPANSIONS: The port of Algiers handles the majority of container traffic into the country, but its location in the centre of the capital has made it hard to implement improvements. Since 2009, when Dubai Ports World (DP World) entered into a concession agreement, the infrastructure has been jointly managed by the port operator and the state-owned Entreprise Portuaire d’Alger. The average annual traffic in the Algiers port is 350,000 twenty-foot equivalent units, according to Belabdelouahab.

Market operators have been calling for an upgrade to the port infrastructure. Most ships coming into Algiers need to use their own cranes to discharge, making unloading inefficient. “In Algiers, because of the conditions of the port, you have to bring in several smaller boats, as opposed to bigger boats that would allow for economies of scale,” said Laurent Vandewinckel, general manager at Maersk. The government is considering the construction of a new port in the centre of the Algerian coastline before 2029. The coastal areas to the east or west of the capital have been suggested as a possible site, although no decision has been made so far. Most port upgrades are happening to the east of the capital.

The port of Djen Djen, 350 km from Algiers, is the country’s deepest seaport. This has attracted increasing traffic, which rose by 25% over 2012 The Entreprise Portuaire de Djen Djen (EPJ) manages the port with DP World, which won a concession for part of the infrastructure in conjunction with that for the Algiers port. Investments are taking place to upgrade the facility and its trans-shipment potential. The Djen Djen port typically handles heavy loads such as machinery and vehicles, construction materials, cereals and mineral production. In 2012, the main product groups included agricultural products, which made up 38% of traffic, and minerals and building materials, which together accounted for about 28%.

Bad weather, such as strong winds, has sometimes made operations difficult, and this prevented the port from being used to full capacity for a total of 56 days in 2012. To help prevent this, the EPJ is extending the existing breakwater to better protect operations. South Korean company Daewoo E&C is expanding the north and east breakwaters by 400 metres and 250 metres respectively, as well as building a new breakwater and wave-absorbing beach to reduce the operational impact of challenging conditions.

Work is also being done in the Béjaïa port, east of the capital. After Skikda and Arzew, Béjaïa boasts the country’s third-largest hydrocarbons export channel. Despite an annual shipping capacity of 16m tonnes, only half of this can be used at the current site, as supertankers are unable to dock due to the shallow draught of the existing port. In order to expand the port’s capacity, and reduce the impact that any potential accident would have, the port’s hydrocarbons terminal is being relocated to a site further outside the city. The new terminal is set to start operations in Sidi Ali Lebhar by 2015.

With a number of new facilities and port upgrades in the works, improving other aspects of the maritime transportation system will become more important. Ali Al Qaiwani, general manager of DP World, told OBG, “Cumbersome Customs clearance procedures are a primary cause of bottlenecks at the Algiers port and, as efficiency levels increase, this is set to become a more pressing issue.”

COMPETITION: Improving efficiency will be especially relevant for port operators due to the gradual transformation of Algeria’s relationship with neighbouring Morocco. Calls to open the border between the two countries, closed since 1994, have been increasing in tone. Both governments have mentioned their willingness to negotiate a potential opening of the land crossing in the near future. This would allow the western side of the country easy access to Morocco’s modern Tanger-Med Port, and might prompt some port users to opt to cover the road distance and avoid Algerian ports all together.

Despite the potential competition posed by the Moroccan port, there is also the opportunity for new traffic to flow through Algeria. Sabri Bencherif, general manager of Global Freight Transit, told OBG, “It is clear that the effectiveness of the management of the national port system is a determinant of its insertion into the global economy. Algeria has the potential to become a regional hub, as well as the entry door to sub-Saharan Africa.”

Much can also be gained through the government’s plan to build new cargo areas to support port operations, with the Algiers and Béjaïa ports set to get new logistics zones in 2014 (see analysis).

AIRPORTS: Development of air traffic between Europe, Africa and the Middle East, coupled with ongoing infrastructure upgrades to the national airport network, has attracted additional airlines into the Algerian market. There are currently 36 airports, including 12 that provide international services, spread throughout various wilayas. The main airport is the Houari Boumediene International Airport in Algiers, which handled 5.4m passengers in 2012, a 13.9% increase compared to 2011.

Husain Alsafi, Algeria country manager for Emirates, told OBG, “The aviation industry is seeing a wave of expansion with new airlines entering the market, linking Algiers to major hubs globally.” Indeed, 2013 marked the introduction of new regular flights to Algiers by Emirates, Spain’s Vueling Airlines, Royal Jordanian and Air Malta, bringing the total number of international airlines servicing the country to 24. Air traffic is also set to receive a boost from plans by Air Algérie, the national airline, to acquire 16 new planes to increase the number of long-haul flights.

BOOSTING NUMBERS: Despite growing interest from an increasing number of international airlines to service the country’s airports, Algerian authorities resisted pressure to enact an open skies agreement due to concerns that it might have an overly negative impact on the state-owned carrier. Implementing an open skies policy would likely have a positive impact on passenger numbers, however, as proven by neighbouring Morocco, where the signing of an open skies agreement with the EU in 2007 led to an increase in the number of tourists flying in on low-cost carriers. Further liberalisation of Algeria’s air sector would most likely boast passengers and increase tourism. Algeria might also see increased passenger numbers through Air Algérie’s expansion strategy. The flagship carrier is looking to raise its profile across Africa, as well as establish direct flights to the Chinese port city of Shanghai and São Paulo in Brazil. Additional air connections should help boost tourism as well.

In early 2013, Air Algérie and the Algerian National Tourism Office signed an agreement with French tour operator Selectour, under which Selectour will promote Algeria as a tourism destination. This type of synergy has the potential to bring real benefits in terms of higher passenger numbers, since France already accounts for close to half of Air Algérie’s Western European destinations. The tourism authority expects the deal to bring more traffic from both foreign tourists and Algerians living abroad.

AIRPORT EXPANSIONS: The capital’s airport is set to undergo some revamping of its infrastructure, including the construction of a new $425m international terminal, designed to increase the airport’s international capacity to 10m passengers a year. Construction is set to begin in 2014 and last until 2018. Also in the plans is the extension of the airport’s second runway from the existing 1500 metres to a more flexible 1800 metres, allowing for an increase in the number of aircraft movement. Airport authorities are also considering reallocating the airport’s domestic terminal for charter flights.

In Oran, work has begun on a new AD14bn (€128m) passenger terminal at the Ahmed Ben Bella International airport, which is set to boost annual capacity from 800,000 to 2.5m passengers. Work, being carried out by Algerian contractor COSIDER, is set to be completed by 2015.

The central position that Algeria’s national carrier holds in the country’s air sector has introduced an additional risk. In 2013, Air Algérie employees represented by the National Union of Aircrew threatened an indefinite strike in order to solve salary and work arrangement issues. Considering the key role that Air Algérie plays in bringing visitors into the country, such a strike could have a heavy impact on attempts to boost arrival numbers.

OUTLOOK: The government is committed to a long-term strategy of transport infrastructure development. Port improvements in particular could have an impact on reducing the cost of the country’s imports, thereby facilitating trade. Operators also expect government plans to increase the availability of logistics zones in close proximity to some of the country’s key ports will have a large impact on reducing transportation costs for businesses. An easing of bureaucracy in terms of Customs regulations, as well security checks for incoming containers, could also positively impact port operations.

New road links will help connect the hinterlands with import/export platforms, as well as improve the transport of people and goods within the country. Within cities, a strong focus on mass transit is set to improve traffic conditions. Substantial investments in transport infrastructure over the coming decade will attract a growing number of global players as well as bring benefits to local contractors.

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The Report: Algeria 2013

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