Oct 15, 2018
Two 2018 reports dealing with Human Development that do not give the same results (certainly using different methods of calculation) were published. It is that of the UNDP and recently on 11 October 2018 that of the World Bank. These two reports show the urgency of adapting to the new global geo-strategic mutations, the world being at the dawn of the Fourth World Economic Revolution, which will be dominated by the primacy of knowledge and good governance in the world as the two pillars in the foundation of the development of the 21st century.
The latest report of the United Nations Development Programme (UNDP), examines the positive and negative linkages between work and human development in a rapidly evolving world, where rapid globalisation, demographic transitions, environmental challenges and many other factors create new opportunities, but also pose risks, that generates winners and losers.
In its recent publication of the Human Development Index (HDI) report 2018, the UNDP confirms the weak positioning of Africa. The ten least well-ranked countries out of a total of 179 assessed by the report are African. The UNDP reveals that, beyond the overall improvement in the living conditions of peoples, many challenges remain. Men may live longer, but that does not change much in their quality of life. Hundreds of thousands of young people are completing school and yet they have no guarantee of finding decent work. According to the UNDP for the year 2017, (edition of 2018), average HDI levels have risen significantly since 1990 – by 22% worldwide and by 51% in the least developed countries. A further examination of the elements constituting the HDI provides data on the unequal distribution of results in education, life expectancy and income within countries. The inequality-adjusted human development index makes it possible to compare the levels of international inequality: the higher this level, the lower the HDI of a country. Considerable variations in the quality of education, healthcare and many essential aspects of life are observed from one country to another. A primary school class has an average of 39 students for one teacher in sub-Saharan Africa and 35 in South Asia, but 16 to 18 in OECD countries, East Asia and the Pacific, as well as in Europe and Central Asia.
On the other hand, while 28 and 27 doctors respectively care for 10 000 people in OECD and European countries, and in the countries of East Asia and the Pacific, these figures are reduced to only eight in South Asia and fewer than two in sub-Saharan Africa. Norway, Switzerland, Australia, Ireland and Germany dominate the ranking of the 189 countries and territories of the most recent HDI released today by the United Nations Development Programme, while Niger, Central African Republic, southern Sudan, Chad and Burundi are at the bottom of the table of national health, education and income outcomes. The transition from a large number of countries to the higher category of the HDI reflects a global trend towards continuous improvement in human development: of the 189 countries for which the HDI is calculated, 59 now belong to the category “Very high human Development” and 38 only at the category “Low Human development”, compared to 46 and 49 respectively eight years ago (2010). The HDI was developed in 1990 by the Pakistani economist Mahbub Ul Haq and the Indian economist, Nobel Prize in Economics Amartya Sen. The HDI is a composite index, ranging from 0 (appalling) to 1 (excellent), calculated by the average of three indices. The first aspect (A) quantifies health/longevity (measured by life expectancy at birth), which provides an indirect measure of the satisfaction of essential material needs such as access to healthy eating, drinking water, housing, good hygiene and medical care adopted by the United Nations Development Programme (UNDP) in 1990. It is more reliable than the previously indicator used, per capita GDP, that does not provide information on individual or collective well-being but quantifies economic output. The second aspect (B) is the knowledge or level of education measured by the adult literacy rate (percentage of 15 years and older who are able to quickly write and understand a short and straightforward text dealing with daily life) and the gross enrolment rate ( Combined rate measurement for primary, secondary and higher levels). It reflects the satisfaction of intangible needs such as the ability to participate in decision making in the workplace or society. The third aspect (C) is the standard of living (logarithm of the gross domestic product per capita in purchasing power parity), to encompass the elements of quality of life that are not described by the first two indices such as mobility or access to Culture thus giving HDI = ADE divided by three.
Unveiled at the annual meetings of the World Bank and the IMF in October 2018, the Human Capital Index is one of the issues addressed in the 2019 edition of the World Development Report entitled “The Changing Nature of Work”, which deals with the importance of investing in human capital to prepare for tomorrow’s work.
For 126 of the 157 countries covered by the index, the data broken down by gender, the new Human capital Index shows that 56% of children born today in the world will be deprived of more than half of their potential income in adulthood because states do not make the necessary investments to produce an educated, resilient and well-off population, ready for the world of work of tomorrow. The human capital index measures the level of human capital that a child born today is likely to achieve by the age of 18, given the health and education services in his country. It measures the distance between a country and the excellent situation of schooling and health.
According to this report, “Human capital is often the only capital of the poorest people”. It is one of the key factors in sustainable and inclusive economic growth. Investments in health and education have not received the attention they deserve. This index establishes a direct link between improved health and population education, productivity and economic growth. Hoping that it will encourage countries to take urgent action and invest more and better in their population. All countries, regardless of their income levels, must develop their human capital to be able to compete in the economy of the future.
Thus, this measure incorporates three factors:
- Survival: a child born today will he reach an age to go to school?
- Schooling: what will be the duration of his or her education and what will he have acquired?
- Health: will this child leave the school system in good health, ready to continue his education or enter the labour market
Also, it is within this framework that special global attention should be given to the human development indexes of UNDP and the Bank which are a significant breakthrough in the use of more credible indicators than the gross domestic product (GDP). According to many international experts, these indicators include essential shortcomings, mainly: the selection and weighting of the selected indicators; i.e. the quality and reliability of the data used to calculate them which are highly variable from one country to another; the use of averages, without considering both socio-professional and spatial inequalities. The level of both schooling and health varies considerably between countries, and finally, some social indicators are difficult to quantify distorting comparisons from one country to another. Also, the qualitative analysis must necessarily supplement the quantitative deficiency. It is also desirable for both the UNDP and the World Bank reports supplementing their indices with new indicators that would consider, participation, gender, enjoyment of human rights, civil liberties, social integration, environmental sustainability and for third world countries, the weight of their ‘informal’ sphere. All of this will assume a statistical apparatus that is efficient and adapted to social situations including standards of good governance and indices of corruption and transparency.
At a time, when and contrary to the speeches of most Algerian officials, we also witnessed two declarations by two principal partners of Algeria, who translated the concerns of both domestic and foreign investors. The Ambassador of the United States of America, Mr John Desrocher, for whom Algeria, in order to “attract other investments, will require more transparency, predictability and better market access”, the other of Jean Louis Leven, senior French official in charge of technological and industrial cooperation between France and Algeria, who deplores the “moving economic regulations of Algeria and for which the Algerians do not sell their country well enough to foreign investors and tourists”. According to the UNDP index, between 1990 and 2017, the Algerian HDI rose from 0.577 to 0.754, an increase of 30.6 per cent, according to the UNDP report. The index shows an upward curve from 0.644 in 2000 to 0.749 in 2015 and then to 0.754 in 2017 in the category of countries with a high level of human development. Algeria came in 2017 to the 85th place of this ranking of the countries; an increase compared to 0.752 obtained in 2016 but which had, then, placed Algeria in the 83rd place of this chart which evaluates the efforts of 189 countries and territories in this field. Algeria has significantly improved its ranking at the African level and thus points to second place, just after Seychelles nearly having figured fifth in the edition of 2016. In the Maghreb, Algeria is ahead of Morocco (123rd place), Tunisia (95th place), Libya (108th place), Mauritania (159th place) and the HDI of Algeria in 2017 remains above the average of 0.699 obtained by the Arab countries, according to the explanatory note which was consecrated to him. Life expectancy at birth in Algeria recorded a slight progression of 76.1 years in 2016 to 76.3 years in 2017, but with a slight difference of 77.6 years for women and 75.1 years for men. Following the same trend, the expected duration of schooling increased from 14.3 years to 14.4 years, while the average duration remained the same for the two years to 8 years. Enrolment is a little higher among women than men whom last year was 14.6 years old compared with 14.1 years. The gender gap is widening as shown by the GNP per capita index, where men earn $23,181, compared to only $4,232 for women. The global index for GNP per capita was $13,802 last year compared to $13,809 in 2016. According to the World Bank index of 2018, the 28 “Pioneer” countries are Saudi Arabia, Armenia, Bhutan, Costa Rica, Egypt, the United Arab Emirates, Ethiopia, Georgia, Indonesia, Iraq, Jordan, Kenya, Kuwait, Lesotho, Lebanon, Malawi, Morocco, Uzbekistan, Pakistan, Papua New Guinea, Peru, the Philippines, Poland, Rwanda, Senegal, Sierra Leone, Tunisia and Ukraine. However, Africa is at the bottom of the scale. In this table of 157 countries, Seychelles 43rd World achieves a national index of 0.68 points, which means for the bank, that the “Economic potential” and the future of the population (and the country as a whole) is amputated by 32%. It also implies heavy economic losses and an annual reduction in GDP growth in the years to come. Seychelles is followed by Mauritius (world 52nd with 0.63), Algeria (World 93rd with 0.52), Kenya (World 94th with 0.52), Tunisia (World 96th with 0.51) and Morocco (98th worldwide with 0.50). As for other greats on the mainland, they have no better clues and are lost at the bottom of the leader-board. This is, for instance, Egypt (World 104th with 0.49), South Africa (World 126th with 0.41) and Nigeria (152nd worldwide with 0.34).
Meanwhile, it must be recognised that in Algeria, a lot of effort in education in investments was made. However, the alarming drop in the educational levels could be explained by mainly relying on the quantity factor rather on the quality, of both school and universities ending up by obvious inadequacy of the vocational training to the new mutations, a significant loss from primary to secondary, then from secondary to universities, except for about 20% (part of which is expatriated through brain drain) . From 1974 to 2018, the improvement of the purchasing power of Algerians goes through a reorientation of the current socio-economic policy in order to necessarily have a growth rate higher than the population growth rate otherwise the unemployment rate will go up (growth rate higher than 7/8% over several years to create 350.000/400,000 new workstations per year). This growth rate depends on the new governance and the improvement of human capital eternal resource much more important than all the ephemeral mining resources by a fight against mismanagement, over costs, corruption, and targeting projects creator of value added within the framework of universal values. What helps alleviate social tensions is paradoxically the social subsidies/transfers, the housing crisis and the ‘informal’ sphere that allow for combined income (sharing the same charges). Generalised subsidies without targeting and the resolution of the housing crisis without an economic stimulus. Its recognition of an important state effort for subsidies and social but generalised transfers are a source of social injustice and wastefulness. Social transfers budgeted for 2019 will amount to 1,772,500,000,000 Algerian Dinars (DZD), representing 8.2% of GDP and up DZD12.5 billion (+ 0.7%) compared to 2018 and about 21% of the total state budget which is close to DZD8.56 trillion. Social transfers have reached DZD1,625 billion in 2017 versus DZD1,239 billion in 2010. This amount was increased to DZD1.76 trillion in the fiscal year 2018, up by almost 8% compared to 2017. The rate of social transfers had reached 22.8% of the state’s general budget over the period 2000-2004, then 24.5% over the period 2005-2009, then 25% of the state budget in 2010-2015 and 23% between 2016 and 2017.
Oct 1, 2018
A trade war between the USA and China: could it be a return to protectionism and a prelude to yet a new global economic crisis horizon 2020/2022?
Return to Protectionism and a new Global Economic Crisis ?
The Chinese president, Xi Jinping, at the World Economic Forum, on January 17, 2017, said addressing the new U.S. President Donald Trump: “There is no point in blaming the globalisation. Any attempt to stop the exchange of capital, technologies and products between countries is impossible and backward in history. We must remain committed to the development of free trade and investment [transnational], and say no to protectionism. We need to rebalance globalisation, and make it stronger, more inclusive, more sustainable”. In a statement dated September 29, 2018, reported by the Chinese official agency (Xinhua), Xi Jinping has clearly stated that “China would not close its doors to the world but would rather widen their openness”. Citing as an example the openness of China in the service sector: The World Trade Organization (WTO) has put in place more than 160 sub-sectors that need to be opened. All developed countries have opened an average of 108, while China on its own has opened 100, far exceeding the average of 54 of the developing countries. In this context, it is useful to recall the fundamentals of the crisis of 1929 and that of 2008 to draw lessons for the future of the global economy.
The crash of 1929 is a consequence of a speculative bubble, the genesis of which dates back to 1927. The bubble was amplified by the new stock-credit purchasing system, with investors able to buy securities with only 10% coverage. The rate of borrowing depends on the short-term interest rate. The continuity of this system depends therefore on the difference between the rate of appreciation of the shares and the rate of borrowing.
The foundations of the crisis of October 2008
There are many similarities between the crisis of October 1929 and that of October 2008. The economic boom was preceding the crisis, increasing indebtedness and divorce between the real and financial spheres, impact on the real sphere with the fall of technological values. However, unlike in 1929, there was a more critical interconnection of economies with a stronger global regulation.
Moreover, the economies of the developed countries are in deflation (low inflation, unemployment and negative growth) and not in stagflation (inflation and unemployment decreasing). As evidenced by the socialisation of the losses of some banks, the speed of the interventions of the central banks such as the American FED, the European Central Bank, the Bank of England and their Japanese, Russian, Chinese and even their Indian counterparts coordinated to break the vicious circle of lack of trust. They did unblock all interbank lending that constitutes the vital element of operation of the global economy. With repeated bankruptcies, the interbank credit source of the expansion of the world economy has tended to dry up especially at the level of the business banks that have experienced an unparalleled expansion during the contemporary period. Unlike a universal bank, a business bank does not have the opportunity, in the event of challenging market conditions, to rely on individual deposits to raise funds for the short term, although they continue to issue debts In the short term to finance their business. However, increasingly the financial institutions with which the banks of business refinance refused in a period of crisis to lend because of lack of confidence in the repayment capacity of these banks. The essence of the crisis of both 1929 and 2008 is a denaturation of the foundation of capitalism as described by the founders of the political economy based on enterprising creators of wealth, Karl Marx had not written Socialism but Capital. This crisis is therefore related to the increased financialisation in disconnection with the real sphere and the non-symbiosis of economic dynamics and social dynamics forgetting that work is undoubtedly a price but creator of value and growth vector. In fact, with this growing financialisation, we have two types of stock ownership. Direct detention (those who hold them in their own right) and lengthy detention (those who hold them through an intermediary: management bodies, life insurance companies, pension funds, etc.). The new fact is the rapid and significant change in the type of actions held by households. The direct holding of shares becomes a minority, while the lengthy detention has highly developed. Pension funds control Wall Street, managing more than a third of the US market capitalisation. These dysfunctions have been concretised through the mortgage crisis (Subprime) In August 2007, a crisis that has spread to all the world’s stock exchanges with losses estimated at several hundred billion Dollars that I summarise in five steps.
a- Banks have made real estate loans to poor or low-collateral households at high-interest rates.
b- Distribution of bad debts in the market: to evacuate risks, banks “sent their receivables, that is, they cut their debt into financial products to sell on the market. Globalisation has done the rest, by disseminating these risk securities in the portfolios of investors of the whole planet. Hedge funds (Hedge Funds) were of Wholesale buyers of Subprime, often on credit to boost their Yields (up to 30% per annum), and to play the leverage effect, the Hedge Funds Borrowing up to 90% of the sums required.
c- Reversal of the U.S. real estate market: Towards the end of 2005, U.S. interest rates began to rise as the financial market sputtering. Thousands of households were unable to honour their repayments resulting in losses for banks and investors who bought the bonds have seen their value collapse.
d- Crisis of confidence: the banks have found themselves in a situation or as in a poker game, they know what they have in their balance sheet, but not what is in that of others because these bad mortgages were bought all over the world, and the distribution of the risk was not known. This situation has caused the stock markets to fall and paralyse the market Inter-bank, banks no longer or very little afraid that their counterparts would be in a red line.
e- Intervention by central banks: in the face of market paralysis, the banks massively intervened in early August 2007 by injecting several hundred billion dollars and euros of liquidity.
Lessons to meditate
As noted in the Echos.fr in its edition of March 5, 2018, “As in the 1930s, populism and protectionism were gaining ground, today’s Americans are sinking into protectionism and the Europeans voting for the closing of doors.
These events give off as an already-seen impression. So, they have already taken place in the years 1930, followed by other disasters, even more deadly. However, the political crisis is taking place this time in slow motion. Europe in a meeting in Brussels on September 16, 2018, created a commission to circumvent the embargo on Iran and payment in Dollars, putting in wanting to place barter mechanisms.
Since March 8, 2018, the US president has decided to introduce 25% tariffs on US imports of steel and 10% on aluminium, further threatening to impose customs duties on some 50 billion from 22 May, Chinese goods exported to the United States. On 06 July 2018 the United States planned to implement taxes on 34 billion of products imported from China, the first tranche of the 50 billion blocks, China has decided to retaliate with similar taxes, which will hit notably soybean and cars from the United States. According to the Figaro.fr in its edition of September 26, 2018, the USA would have threatened in order to counter the trade imbalance vis-à-vis China of $375 billion in 2017 (source US Treasury) and in the case of Chinese retaliation, to go even further in this way : taxes could increase from 10% to 25%, and 267 billion of additional Dollars could be affected, almost all Chinese imports. According to the agency (Xinhua) as of September 29, 2018, in 2017, every American farmer exported on average more than 10,000 Dollars of agricultural products to China, the company General Motors sells 4 million vehicles each year in China, surpassing its sales in the United States during the same period and in 2016, U.S. companies made sales of over $600 billion in the Chinese market. While not forgetting the important assets in US Treasury bonds that are part of the quotation of the Dollar. In April and March 2018, China was a net seller of U.S. state bonds that was a concern for the financing of the United States. The stock of U.S. state borrowings in the foreign exchange reserves of the PBoC approximately $1.2 trillion, or nearly one-third of the foreign exchange reserves from the middle, or about 20% of the total sums held by foreign entities in the US. It was within this framework of economic warfare between the two largest global economies that 1140 economists, together with former councillors and budget director of past Republican presidents Harvey Rosen and Wendy Gramm in a letter to the US President on May 3, 2018. They “exhorted him not to repeat the mistakes of the past and renounce all protectionist measures so as not to repeat the same mistakes that could lead to a crisis equivalent to that of 1930”. For these economists, Trumpian protectionism will hardly reduce this deficit, for some obvious reason: it generally concerns products that the United States no longer manufactures and that it would be too complex and too costly to develop again under the aegis of “Made In USA ». Taxes would, therefore, have the sole consequence, deleterious, or raise prices for American consumers. Even sound of Bell on 02 July 2018, where the International Monetary Fund “while saluting the performance of the American economy, urged Washington to renounce its protectionist measures that threaten the economic health of the United States and the rest of the world. It is that from 2008 to 2018 a new paradigm: one went from the banking crisis to a crisis of indebtedness of States hence the importance of acting on six interdependent levers because, in September 2018, the world economy is still characterised by turbulence which may repeat the scenario of the years 1929/1930 and the crisis of 2008.
- First, it is a question of identifying a typical response to the financial crisis, all measures projectionists that must be temporary and targeted, but durable and generalised slow the growth of the world economy.
- Second, open the door to an in-depth reform of the international financial system.
- Third, take new initiatives to counter possible bank bankruptcies and impose new accounting standards on banks.
- Fourth, introduce stricter rules on rating agencies, securitisation and golden parachutes.
- Fifth, public expenditure must be achieved through coordinated budget deficits of energy savings for Building & Infrastructure and clean technologies for the automotive sector,
- Sixth, rethinking the current global economic system that promotes North/south Bipolarization, poverty detrimental to the future of humankind, accelerated by the most debatable governances of most southern leaders.
Aug 28, 2018
The forum of leading global policymakers of the developed and emerging countries in recent years has addressed several strategic themes that challenge Algeria today. These included and were not limited to issues such as the 4th Industrial Revolution, Climate, Migration, Energy and the impacts of terrorism. In Strategies for Adapting to the New World, Prof. Klaus Schwab, president and founder of the World Economic Forum, said: “The 4th Industrial Revolution refers to the fusion of technologies, especially in the digital world, which has significant effects on the political, economic and social systems, it will be a matter to establish a system of common understanding of this industrial revolution”. We shall see such varied themes as to how our lives are to be changed by this Revolution, how business structures will be modified by the new technologies and how rapid technological change will revolutionise work such as what is the future of financial services, how to restart the global economy. Debates about the possible impact of intelligence on defence systems and the future of fuel energy on climate change will take a different meaning. Facing the New World Revolution in 2020 through 2040, including the development of Artificial Intelligence and digital transformation, Algeria has so much to do in the political, security, social, cultural and economic fields of adaptation strategies, if it wants to avoid its marginalisation.
For François-Xavier Sambron, Government institutions and businesses spend a lot of time and energy managing tasks daily, whether it is prioritising, planning over time or overseeing routine workloads. Although familiar, this exercise is nonetheless complicated and ineffective, while efficiency implies breaking down its tasks. In this context, according to this author, we have six digital impacts that revolutionise the function of a political and economic manager, see “My Business-Digital” – February 2018.
First, in traditional management, the manager’s power resided primarily in his ability to distribute or maintain information. This situation is reminded to us by the famous adage that “information is power”. Today, it derives its legitimacy from its ability to link and interconnect collaborators and services among themselves, and its ability to synthesise and sort through the profusion of information received to extract the essentials. This method is exceeded because the “New Generation” manager gives priority to sharing and transparency, looking for above all to empower its employees by opening doors and guiding them in the right direction. By greatly facilitating the flow of information within the company, digitalising is both the primary trigger and contributor to the so-called collaborative management.
Secondly, the manager has to be-first a developer of collective intelligence, a leader, a facilitator, thanks to the information is now widely shared, like not the one who knows but the one who pulls his team. He is the host of a team that seeks to fulfil its objectives by taking maximum advantage of the resources of the company, Putting Interacting with different skills to create value.
Thirdly, the vertical authority based on the hierarchical organisation of the company and the status of the collaborators gradually gives way to a horizontal authority based on the knowledge, competence and reputation of each. The company is now governed by two Forms of authority that act in parallel, one falling within the processes and priorities defined by the management, the other translating the competence of each collaborator. In this context, the manager must rebuild his power horizontally both to communicate and to identify skills, to value them and to organise them and contrary to the past, his leadership is no longer expressed vertically but Horizontally.
Fourth, thanks to the digital revolution, the manager now has a wide variety of tools that allow him to send the right message at the right time to the right collaborator. Whether it is via messaging (instant or not), social networks, collaborative platforms, sending SMS, etc. Besides, the multimedia capabilities of these different means of communication (audio, video, animation) Facilitate the dialogue and encourage the feedback of the collaborators.
Fifth, for the effectiveness of an organisation, new tools such as collaborative applications, project management solutions, business or administrative workflows, etc., make it possible to set and share priorities and objectives, and to ensure the detailed planning of the tasks to be performed as well as the progress of the latter. At the level of the activity monitoring, the digital usually provides many elements of measurement used in its evaluation as to the identification of its malfunctions. The introduction of quantifiable indicators (productivity, costs, quality, deadlines) enables monitoring of the activity over the water and the rapid initiation of corrective actions in case of discrepancies. Thanks to this continuous supervision, the manager is now in a capacity to steer his team finely as each of its members and to follow up the fixed course.
Sixth, technologically, the digital transformation of a company takes place primarily regarding the human resource, pillar of management, making it necessary to accompany all the collaborators in a transition of which they will be the main actors. In this context, the manager occupies the first role to engage his team in this significant project and encourage each employee to take their place in front of Explain the merits of these changes, reassure the collaborators about their future and value the role of each in this mutation.
In conclusion
Political, entrepreneurs, researchers, ordinary citizens, we all live today in a society of electronic communication, plural and immediate that compels us to make decisions in real time. The control of time being the primary challenge of this century, any inadequacy of these mutations would further isolate the country. It, therefore, needs an adaptation strategy in the face of new global and energy changes with the advent of the Fourth Economic Revolution that will be based on digital, technological news, green industries with an energy mix between 2020 through 2040. As the world advances, artificial intelligence and digital revolutionising both international relations, the management of States, institutions, businesses and relationships that are personal, many leaders could need a Cultural Revolution (an upgrade) to adapt to the arcane of the new economy. The majority of organisations must move away from the utopian patterns of the past of the years 1970 through 1990 and be ready at the dawn of a veritable planetary revolution. Emerging countries have no future if they do not promote good governance and the knowledge economy, which must adapt to these new mutations, the two fundamental pillars of the development of the 21st century. For Algeria, the 2016 – 2018 World Economic Forum report is far from the country’s vast potential has a lesson nevertheless to be learned; that is the balance sheet is very mixed despite the importance of public spending. Furthermore, and according to an OECD report, Algeria would spend twice as much to have twice as many results as compared to similar countries in the MENA region.
Algeria suffers from a closed business environment that is believed to be resolved by legislation when it comes to tackling functioning of a business company: a bureaucratic financial system and an inadequate socio-educational system together land transactions, for instance, tend to be causing high costs. There is still much work to be done, referring to political, social, cultural and economic factors to liberate creative energies, to attract the real creators of local and international private wealth confronted with the bureaucratic burden and the lack of visibility and coherence of socio-economic policy. This implies a specific strategic objective, adapting to the new World at least ten years and another governmental, institutional organisation around essential ministries and large regional eco-poles. Some would still choose the wrong way in their economic policy, which could lead the country to a stalemate and considerable financial losses, by ignoring the new global mutations. It is thus, necessary to go for a new model of consumption, because of the significant strategic error of reasoning at the global level in a linear consumption model, and not continue to live from the illusion of the material age. This would urgently require some cultural change of all business leaders. I would draw the Government’s attention to the non-coherent current policy that may lead the country to accelerate its foreign exchange reserves’ depletion, without however sorting out the real problems of the country’s development. It is all about the technological and managerial accumulation within the framework of the values of financial capital as only one way to avoid monetary illusion.
ademmebtoul@gmail.com
Aug 8, 2018
The U.S. president twitted a new warning on August 7, 2018, to all still trading countries with Iran, after the reinstatement of sanctions against Tehran, threatening that these will not be able to do so with the United States.
The purpose of this contribution is to analyse the situation of the Iranian economy facing American sanctions starting with its socio-economic Situation. Iran holds the fourth largest world oil reserves with more than 160 billion barrels; its OPEC quota is close to 2.7 million barrels a day and produced before the US sanctions up to 5 million. It also has the second largest gas reservoir after Russia and before Qatar, with more than 34 billion cubic meters or more than 16% of the world’s reserves. Iran essential resources being on the planet’s belt of copper reserves benefit from considerable reserves of other minerals, such as iron, aluminium, lead and zinc.
- Agriculture contributes to 9.3% of GDP, employing 17.9% of the working population in 2016.
- The secondary sector accounts for 33.8% of the labour force and contributes to 38.2% of GDP.
- The tertiary sector contributes to 52.4% of GDP and employs 48.3% of assets.
- The mainly imported goods are machinery, iron and steel, electrical and electronic equipment and cereals.
- The Iranian economy remains mostly dominated by the public sector that controls the bulk of the economy with a fragile banking sector.
- The agricultural sector whose main crops are pistachio (the world’s largest producer), wheat, rice, oranges, tea and cotton contribute to 9.3% of GDP and employs 17.9% of the labour force.
- The textile industry is the second most important sector after oil.
- The other major industries are the refining of sugar, the industrial preparation of food, petrochemicals, cement and construction.
- Traditional crafts, such as carpet weaving, ceramics, silk and jewellery, are also vital to the economy.
Structurally, the economy is dependent on oil revenues that account for almost half of the state’s revenue. The Iranian population, with an efficient educational system, has risen from 21 million inhabitants in 1960 to 80.6 million inhabitants in 2017 with an extrapolation of 84 in 2020. The urban population represents about 73%, a life expectancy of 71.15 years. GDP estimated at $412.2 billion in 2016, second in the MENA region, after Saudi Arabia has a rate of growth was 4.6% in 2015, 4.5% in 2016, with a pre-penalty forecast of 4.8% in 2018 and potentially 4.5% in 2019. Recently, in its 2018 report, the World Bank for 2017, Iran’s GDP was estimated at $439.5 billion with a GDP per capita of $6974. So, for the first half of 2017 (from April to September, depending on the Iranian calendar), GDP growth at factor cost was 4.5% (annual slip). After the lifting of the sanctions, the non-oil sector mostly boosted overall growth over this period, contributing to the growth of the economy to the tune of 3.2 %. With the announced sanctions, this will have an impact on the rate of Unemployment that was 12.20% in 2012, 10.60% in 2014, 11.67% in 2015, 11.3% in 2016 , 11.4% in 2017 and 12.1% in March 2018, according to the official, indeed undervalued, mainly affecting young people (under 25 years of age represent 32% of the population) and in particular young women graduates. For 2016/2017, The male unemployment rate is 10.1% and 19.1% among women, a sign of the deepening gender inequalities in the labour market, each year, 800 000 people entering the labour market. This is due in large part to the increase in the population’s activity rate, to 40.4% compared to 35.4% in 2014. Let us recall that Iran has embarked on a series of reforms spread over 20 years covering the period 2016-2021, including the recasting of non-targeted generalised subsidies. Thus, the complicated subsidy scheme, which estimated at 27% of GDP in 2007/2008 (approximately $77.2 billion), was replaced by a programme of direct monetary transfers to Iranian households. The second component of subsidy reform, launched in the spring of 2014, provides for a more gradual adjustment of oil prices than previously envisaged and a broader targeting of transfers to low-income households. The removal of nearly 3 million of high-income households from the beneficiaries’ lists would have led to a reduction in the targeted subsidy organisation (TSO) spending of 4.2% of GDP in 2014 to 3.3% in 2017.
The financial situation
According to an Iranian Ministry of Economy announcement dated February 19, 2017, the public debt figure of government and public institutions for the current Iranian fiscal year ending March 20, 2017, reached 700 trillion of Tomans, or $200 billion. However, the external debt is now estimated to approximately $7.116 billion as at December 31, 2016, according to CIA World Factbook. With respect to trade balance in 2016 and compared to the evolution of 2015, we have 37,383,000,000 of export Dollars (plus 29.34%) and 36,041,000,000 of import Dollars (less 5.37%) with as the main supplier being China (24.44%), the United Emirates (15.04%), South Korea (8.14%), Turkey (6.80%) and Germany (5.72%). France, which has many large companies engaged in the country, has just withdrawn from Iran because these carry out their transactions in Dollars, that according to the French Treasury, “due to the reinforced sanctions imposed on Tehran from 2011 onwards, our trade with Iran has been reduced from a peak of €4.3 billion in 2006 to €515 in 2014”. Started timidly on the rise in 2015 (+22% at €628 million) even before the lifting of the reinforced sanctions, they departed in 2016 (+239% to €2.1 billion) to reach €3.8 billion at the end of the financial year 2017, which was a new level since 2008. However, the budget tensions persist. According to the IMF, the budget deficit has grown to 2.4% of GDP in 2017, due to a rate of growth in public spending higher than the increase in revenue. According to the World Bank, in the first nine months of the year 2017, tax revenues grew by only 4.4%, while operating expenditure increased by 16.8% and investment expenditure amounted to 91% after two years of contraction through the lifting of sanctions. Thus, the surplus of the current balance of transactions rose to 4.1% of GDP in 2017, a slight improvement over the 3.9% of 2016, due to the increase in oil prices, while the export volumes remained stable, around 2.4 million barrels per day, production remaining in line with the limitations agreed upon in the OPEC framework. The current balance in 2014 was 3.8% compared to the gross domestic product (GDP), 0.4% in 2015, and less -0.6% in 2016 with a forecast of zero (0%) in 2017, while public debt/GDP was 15.6% in 2014, 17.1% in 2015, 17.5% in 2016 with a forecast of 17.7% in 2017. Following the popular protest movement in Iran from the end of December 2017 to the beginning of January 2018, the exchange rate has deteriorated considerably, volatility has increased, and the gap between the official and the parallel market has between the beginning of December 2017 and the beginning of March 2018, the Iranian Riyal (IRR) depreciated as compared to the Dollar. Thus, the IRR was quoted at 14,777 for a Euro in 2011, 15,643 a Euro in 2012, 24,456 a Euro in 2013, 34,653 a Euro in 2014, 32,188 a Euro in 2015 and 36,335 2017 a Euro. On August 7, 2018, at the reinstatement of sanctions the IRR was at IRR42,105 an official Dollar and IRR50,965 a Euro, thus a very high depreciation of the Iranian currency which influences the rate of inflation. On the black market, according to the Financial Information Market, a reference on currency market fluctuations, the Dollar had exceeded the 50,000 Riyals in April 2018, and since July 2018, more than 65,000 with the risk of going to 90.000/100.000 despite the threats of the authorities to ban possession of more than €10,000 and against all those who practice other rates of “Lawsuits” comparable to those reserved for “Drug traffickers”. According to the IMF, the inflation rate was over 35% between 2012/2013, and due to greater budgetary rigour reduced to 15.6% in 2014, 12.0% in 2015, 8.9% in 2016, 8.0% in 2017 but was back at 13.7% in June 2018 with food inflation reaching more than 20%. Moreover, the raising of the bank interest rate, which is 18% in July 2018, which will only hinder investment. In fact, this rate is much higher per Steve H. Hanke, professor of Applied Economics and co-director of the Institute for Applied Economics and the Study of Business Enterprise at Johns-Hopkins University, considering that the informal sphere aligns typically aligns typically with the free market price.
Iran facing American sanctions
The first wave of American sanctions came into effect on August 7, 2018, at 4:01 GMT. It includes blockages on financial transactions and imports of raw materials, as well as penalising measures on purchases in the automotive and commercial aviation sectors. It will be followed in November by measures affecting the oil and gas sector as well as the central bank (Interview with Professor Abderrahmane Mebtoul In Arabic at the Iranian International agency IRNA on 28 July 2018 “Impact of American sanctions against Iran on the price of oil”. The American president threatens to ban “any country that trades with Iran will not be able to do so with the United States of America”. These American sanctions are likely to have a negative impact, the resumption of foreign trade and Iranian investment as exports of oil had regained their pre-sanctions levels. For proof, the trade volume between Iran and the EU Member States reached 16.6 billion Euros in the first ten months of 2017, an increase of 61.6% compared to the same period of 2016. What about the end of 2018? We are witnessing a gradual withdrawal of major American and European groups. After the 2015 agreement, Total, the French oil and gas group had partnered with the Chinese NCPC to invest €5 billion in the operation of the South Pars gas deposit in the Persian Gulf. A project of which Total, which could not obtain an American derogation, will probably disengage. The Italian rail industry could suffer from these sanctions. The public group of Railways of Italy has In July 2017 signed an agreement for the construction of a high-speed line between Qom and Arak in northern Iran. Italy had become Iran’s first European trading partner, with exports to the country rising by 12.5% in 2017, reaching 1.7 billion Euros. In tourism, British Airways and German Lufthansa, that had resumed direct flights to Tehran, will have to stop if they want to continue to operate transatlantic flights freely. The French Accor Hotels, which opened two hotels at the Tehran airport in 2015, could be penalised, just as the Emirati Rotana Hotels that said they wanted to establish themselves in Iran. The so-called Blocking Law approved by the EU Ministers of Foreign Affairs on July 16, 2018, annulling the effects in the EU of any foreign court decision based on these sanctions, to protect European companies that decide to take risks by remaining in Iran, exposing themselves is meant to circumvent such American sanctions. Will it be useful in the face of American requirements? To global transactions that are mostly in Dollars, the Euro is still an ancillary currency, demonstrating that both political and economic Europe is not autonomous in major economic decisions. What will the threat of Iran blocking the Strait of Hormuz 40 km wide, between Oman and Iran in the Persian Gulf consequences be? As a vital sea corridor, this a crossing passage for more than 30% of the world’s oil trade. On several occasions, the Iranian supreme leader and the guards of the revolution brandished the threat of a blockade if oil exports were to be blocked by American sanctions. The US president was demanding OPEC to increase production to bring down prices while recalling the links between certain cartel members and the United States. However, does this increase in the production of two major producers such as Saudi Arabia and Russia, not risk question the OPEC Vienna Agreement while not forgetting this political will of the US to increase their market share in Europe via the supply of shale gas? What does this recent speech of the American president hide by wanting to meet the Iranian leaders? In the event of effective sanctions, the other OPEC countries, being competitors of Iran, including Russia, that outside the black market that is likely to develop, would leave China’s big energy consumer free to import oil and gas at a competitive price and invest massively in Iran. Is trade between Iran and China that exceeded $45 billion in 2017, compared with $35 billion in 2016 and forecast as expected to increase to between 15 to 20 per cent each year until the end of the sixth five-year programme of development?
ademmebtoul@gmail.com
Aug 5, 2018
The challenges of 2018, 2020 & 2030 Algeria: reform of the political system and economic transition would be a dialectical link between politics and economics where social forces inevitably carry any project, often with different interests. In a democracy, it is through the ballot box that the political minority submits to the will of the majority. As not to recall that in the past(1), I had the honour of coordinating several multidisciplinary works, of a topicality hot theme, having addressed the political reforms, social and economic issues; the fruit of collective work in the drafting of which contributed colleagues specialists in anthropology, economics and Political Science of the Universities of Oran and Algiers. At that time, I had given several lectures at the Universities of Annaba, Tizi Ouzou, Sidi Bel Abbes and Oran before closing at the National School of Administration of Algiers (ENA). Other conferences between 2007 and 2017 were held to explain our approach that is as always based on democratic alternation while considering our authenticity, and a diversified and non-hydrocarbons economy within the framework of universal values.
This operational work is now the hot topic and the subject of this present contribution, which is part of the already well-established tradition of ‘Transitology’.
It is about dealing with all Third World countries experiences and those of the former socialist bloc with the objective of reviewing policies that various government teams have developed and executed in response to the tremendous internal and global challenges.
Development in Algeria involves reform of the political system
For Algeria, a proactive management since independence with internal power issues lead to an economic, social and cultural crisis and, to the increasingly burdensome external constraints resulted in some changes, sometimes hastily carried out, revealing a very bitter reality: the dramatic absence of a genuine national strategy to adapt to this total and inexorable phenomenon of Globalization. The combination of endogenous and exogenous factors and the massive-sometimes direct and insidious-moment intervention of internal and external actors has led to a transition that has been dragging on for decades and not just for the current period. As previously recalled, the economy is fundamentally political as we have been taught by its founders including Adam Smith, David Ricardo, Karl Marx, Joseph Schumpeter and closer to us the Nobel Prize in Economic Science awarded to all those Institutionalists between 2000 and 2017.
The fundamental reforms of the socio-economic transition refer to the ‘Refounding’ of the State which implies to grasp the real tendencies of the Algerian society in the face of both internal and global changes. The demands of a strong statement of its righteousness and its right, if they constitute a vital tool for national cohesion and the destiny of the nation, must not obscure the needs of Local Authorities autonomy which must be restructured according to their anthropological history and not according to electoral or clientelist needs. The cohesion of these spaces and their involvement in the management of their respective interests and territorialities would then trigger a dynamic of positive complementation’s and make the control of the groups easier for the national political centrality. The autonomy of Local Authorities does not mean autonomy of government but an act that strengthens good governance by reinforcing the role of civil society, that only actions of common interests must legitimise and not be State support only.
The ‘refounding’ of the State, not to say its foundation as a public entity, passes necessarily through a profound change in the social function of politics. The end of the cash-cow State and that of the revolutionary legitimacy means above all that the benevolent or charitable power inaugurated as an implicit political contract by the supporters of benevolent socialism to legitimise the exchange of a part of the rentier’s annuity against political dependence and submission. It has removed any spirit of active citizenship; shear power must give way to a just, vigilant and righteous power. It is the Law norms that legitimise the actual status of national citizenship.
The transition from the state of “support” to the State of justice is, from my point of view, a major political gamble because it merely implies a new social contract and a new political contract between the Nation and the State. Algeria cannot get back to itself only if all false privileges are banned, and criteria of competence, loyalty and innovation reinstated as gateways to success and social advancement. Competence is by no means synonymous with positions in the informal hierarchy, nor be positioning in the perception of a rentier annuity, it is enough by itself, and its effectiveness and legitimacy mainly verified in the relevance of the ideas and the symbolically positive that it anchors in the bodies and social actors. Moreover, competence is not a diploma only but a conscience and a substance that nourishes the institutions to build the foundations of knowledge to have a real impact on the global social dynamics to realise the aspirations of an Algeria anchored to modernity while preserving its authenticity.
The ‘refounding’ of the State cannot be confined to a technical reorganisation of authority and powers and governance is a matter of real and non-fictional legitimacy. This implying redevelopment in the organisation of authority poses the strategic problem of the future role of the State primarily influenced by the effects of globalisation on economic and social development, mainly through real decentralisation. A first cell par excellence, the Algerian ‘commune’ has been governed by texts which are no longer topical, in other words, lapses have stricken them. The central objective of the approach is to transform the ordinary “providence” into a “common enterprise”. This implies that all the components of society and the actors of economic, social and cultural life, are involved, without exclusivity, in the decision-making process which commits the configuration of the image of the Algeria of tomorrow which will have to gradually move away from the spectre of exclusion, marginalization and all negative attitudes that undermine social cohesion. The involvement of the citizen in the decision-making process that engages the future of future generations is a way for the State, to mark its will of justice and to rehabilitate its credibility by giving a definite meaning to its role as regulator and arbitrator of social demand. The image of the common-manager based on the need to do more and better with limited resources. There would be more room for waste and the right to error, which necessarily excludes sight-seeing, to the benefit of positive actions by long-term prospects on the one hand, and coherent arbitrations on the other, which implies a certain degree of rigour in the act of Management. It would mean addressing the democratic political-institutional underpinnings, the redesign of the unjust system and civil society.
ademmebtoul@gmail.com
Notes:
(1)- Collective work under the direction of Prof. Abderrahmane Mebtoul “The stakes of Algeria: reforms and democracy” 2 volumes Kasbah Edition Algiers-2005 (520 pages)
-Lecture by Professor Abderrahmane Mebtoul on November 26, 2014 at the Club of Pines, Palais des Nations Algiers – in the presence of the Prime minister, the majority of members of the government and executives of the Nation – following the debate I held at Radio France Internationale RFI Paris on November 12, 2014, with Prof. Antoine Halff Former chief economist of the Government Barak Obama and director of foresight at the IEA, on “Prospects for the fall of the Cous of hydrocarbons and their impact on the Algerian economy ‘
-Interviews by the American Herald Tribune of December 28, 2016 and the French financial newspaper La Tribune.fr March 2017 « Any destabilisation of Algeria would have an impact on the Mediterranean and African area. ‘
-Collective work “The geostrategic stakes of the integration of the greater Maghreb” Edition l’Harmattan Paris/France-2015 under the direction of Abderrahmane Mebtoul and to Camille Sari Two books (1050 pages) The first collective work is entitled “What governance and institutions in the Maghreb in the face of geostrategic issues”. The second book Collective Trafficking Of the Maghreb economic integration, a forced destiny.
-A contribution of Professor Abderrahmane Mebtoul Institute French international Relations – IFRI-“Europe/Maghreb cooperation in the face of Geostrategic issues 55 pages 04 April 2011” and the same author “The problem of the informal sphere in the Maghreb” (IFRI 28 pages December 3, 2013).
-Africa, Maghreb and migratory flows» Site Afrik Press Paris France two parts, June 24/27, 2018
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