New Algerian economic model by 2020

Conditions of implementation of the new Algerian economic model by 2020 . . .

Prime Minister A. Sellal, indicated at the Algiers’ 17^th International Tourism and Travel Show (SITEV) of May 14 to 18^th, 2016, that the situation created by the almost 2 year old oil price collapse prompted the government to revise its Algerian economic model upto 2020, before adding that the country has the potential to overcome the crisis.

In my humble opinion and unlike those discoursing on Algeria being on the brink to some catastrophe, the country is not bankrupt. Its situation, admittedly difficult in a world that is going through both an economic and a moral crisis, as well as with the struggle against corruption and tax evasion that are becoming a global security emergency.  A situation that will be the focus of several international meetings at the highest levels between 2016 and 2017 is however in Algeria different from that of the 1986 crisis.  The country has relatively high level of foreign exchange reserves, although going down and a historically low level of external debt.  We must however be realistic; Algeria that is a mono exporter of hydrocarbons oil and derivatives would not be able to overcome the “shocks” if it were not to follow these ten (10) conditions.  These are the subject of the present contribution.

1. A new governance ready to invest in democratic institutions that take into account our cultural anthropology to realize the symbiotic state-citizens, based on greater morality of the leadership as well as that of society generally so as to restore CONFIDENCE without which no development is possible. This requires a vision far from any populist and a language of truth.  It also requires the emergence of leadership with the primacy to the Economy of Knowledge.
2. With the geo-strategic tensions that are coming close to not only Algeria’s borders but also to the African and Euro-Mediterranean region, a mobilization of the whole nation would be required because the 2016 to 2020 economic and social adjustments with deep structural reforms needing minimal social consensus could be painful.  Hence the importance of decentralized networks both international and local are required through economic and social policies credible inter-mediation.
3. A reorientation of all socio-economic policies for a transition from the semi-annuity type of market through de-monopolization for a healthy competitive market and de-bureaucratisation of society to the economy of the fourth industrial revolution. The illusion of monetary policies as remedies should be avoided like in the past the myth of the mechanical era requiring adaptation strategies.  All this should take into account both the new world changes and the internal social changes with notably demographic pressure generating increasing needs, to reconcile economic efficiency and deep social justice, not egalitarianism.  This latter is in no way the antinomy of efficiency.
4. Related to the previous sections, settle down a realistic development policy, freeing all creative energies, national / international and public / private companies without any distinction in order to create wealth whilst ending the environmental constraints through the long awaited business climate sanitation.  The myth of Law making being the solution is to be avoided for the sake of stabilisation of the ever-changing organizational and legal frameworks.  It is a question of addressing the functioning of society generally, taking into account global comparative parameters. The sectors to be promoted are those of agriculture, new technologies, certain industrial segments within internationalized sectors and tourism all through the promotion of win / win partnerships under international competition to attract the FDI’s.   Moreover, the informal market sphere should not be integrated in the real economy through feelings, nor by monetary measures, but through the establishment of transparent regulatory mechanisms.

5. Ease of the generalised 49/51% ownership share regulation (whilst taking stock of it since 2009) in all sectors. This was based on the rentier ideology of a semi-annuity economy that is inoperative because requiring support with Algeria bearing all extra costs.  Defining what strategic, historically dated notion and what is not, by introducing preventative against for instance wild re-locations.  Finally repeated remediation of certain public enterprises are not advised because unsustainable.
6. Try and foresee a new model of energy consumption based on a new energy mix, the $80+ a barrel of fossil oil is over; the world moving towards a certain energy transition with a new global energy resource distribution whilst avoiding the reasoning on the linear energy model development of the past.
7. A new policy of social transfers and targeted subsidies to go to the most disadvantaged and to create value added sectors in stages until the market price reflects the true value based on the production and productivity within international values.
8. So as to avoid the depletion of foreign exchange reserves that warrant the Algerian Dinar, employment and the level of public spending via the hydrocarbons sales revenues of over 70%, the preference would be targeted debt only for the creators of value added segments that can pay back principal and interest.
9. The solution would primarily lie with the Algerians themselves, to refrain from seeing the enemy from without to be the cause of all ills for the purpose to hide internal difficulties. With clear strategic objectives, the returns to confidence, the morality of those in charge are the minimal specification requirements in order to mobilize the public.  Avoiding any lavish spending and going instead for deep structural, microeconomic and institutional reforms would certainly be difficult but necessary since it involves moving large segments off the hydrocarbons cash-cow.
10. The overall reform is about all institutions (bureaucracy to move towards its real decentralization and not its de volution), the financial system, socio-educational system and the thorny issue of land distribution involving visibility and consistency of socio-economic policies whilst avoiding all contradictory discourses and unnecessary telescoping of the different ministries.

In short, a national revival is needed if we are to avoid the exhaustion of the Revenue Regulatory Fund late 2016, early 2017, and the Exchange Reserves during 2018 and 2019.  To be avoided as well are the inflationary process, the deterioration of the purchasing power and an accelerated unemployment rate.  All these could well lead to a potential destabilization of the country with possible regional implications.

Algeria can go through this difficult phase with the means it has in its possession but pessimism together with complacency disconnected from reality, that is definitely source of collective neurosis are to be kept away.

NB :     Dr Abderrahmane Mebtoul, International Expert, Associate Professor of universities,

• Former migrant to France, having done his elementary school and part of his university education in Lille in France,
• Member of scientific boards of several international organizations, doctor in Economics (with honours – 1974)
• Accountant of the Institut Supérieur de Management of Lille
• Author of 20 books and more than 500 national and international contributions
• Has conducted several audits on behalf of Governments
  • Successive audit of SONATRACH 1974/1976
  • Balance of industrialization in 1977/1979
  • Record of the private sector on behalf of the central Committee of the FLN 1979/1980
  • Record of habitat on behalf of the Presidency of the Republic (1981/1982),
  • Record of employment and wages on behalf of the Presidency of the Republic (2008/2009)
  • Recently on behalf of the Prime Ministry, the economy recovery folder…
  • Record of economic recovery 2014/2020 assisted by 23 experts (in 10 volumes)
  • Record of the oil / shale gas assisted by 21 international experts ( in 8 volumes), February 2015.