May 24, 2018
The analysis of demographics in some countries, often forgotten in many studies, raises the issue of both development and national security. Because without sustainable development, it eventually could constitute a real social time-bomb. Algeria’s challenges facing its population pressure getting more acute every year will have to be addressed and at the earliest.
Whilst the evolution of the world’s population increased per the below chart.
The demographers estimate that the global human population is increasing by 246,000 inhabitants per day, a result equal to the difference between 403,000 births and 157,000 estimated deaths per day on Earth, representing an increase of 90 million people per year. By geographical area on average in 2017, Asia represents 4,504,4280,000 inhabitants or 59.7%, Africa 1,256,268,000 is 16.6%, Europe, the richest zone in the world, 742,741,000 is 9.8%, Latin America and the Caribbean 645,593,000 or 8.6%, USA and Canada 361,208,000 or 4.8%, Oceania, 40,691,000 or 0.5% and Antarctica 1,500 or 0.0% for a total of 7,550,262,000 inhabitants.
The growth of the African population is going to be more important during this period. According to the INED of France https://www.ined.fr/ , the population of Africa is going to double between 2017 and 2050, it will rise from 1.25 billion inhabitants to 2.574 billion. On the other hand, the population World should Tend towards 10 billion human beings (9.846 billion).
What about the evolution of the Algerian population?
The figures given by the NSO (National statistical Office) on forecasts of the evolution of the Algerian population by 2030 would be 51,26 million. And according to the current rate hypothesis of 2.4 children per woman and by 2050 to reach 65 million inhabitants, data that must be correlated with life expectancy.
While it is 77.1 years for men and 78.2 for women, it will at birth be 81 years for men and 83 years for women in 13 years. The figures of the INED confirm the trends of the NSO, showing that the Algerian population is young, constituted at 29% of under 15 years, the over 65 years representing about 6%. According to the INED, the forecast on the strong growth of the Algerian population over the next 33 years is due to several annual births of 1,103,000 and a relatively high fertility index (number of children per woman) of 3.1 whereas countries of the Mediterranean basin such as Morocco with 2.4, Tunisia, 2.4, France, 1.9 and Libya, 2.4 have much lower rates. Egypt has however a higher one with an index of 3.3 but Niger occupies the first place in the world ranking with the highest index of 7.3.
What is the spatial distribution of the population?
According to data for 2016, the 12 provinces with a density of less than 20 inhabitants per km² account for 89% of the country’s area with just 13% of the population. The 36 other provinces, all located in the north, have a higher density of more than 120 inhabitants per km², representing 11% of the area, approximately 240,000 km2 and includes 87% of the population.
Among these 36 provinces of the north, the highest densities are found around the large agglomerations of Algiers, Oran, Constantine and Annaba, then come the more rural coastal provinces, then the inner land provinces and finally the wilayas close to the Sahara.
More precisely and in descending order we have: Algiers, Oran, Boumerdes, Constantine, Annaba, Mostaganem, Tizi-Ouzou, Bejaia, Tipaza, Jijel, Sétif, Mila, Skikda, Chlef, Bouira, Ain Defla, Ain-Temouchent, Bordj Bou Arredj, Relizane, Mascara, El Tarf, Guelma, Tlemcen, Souk Ahras, Tissemsilt, Médéa, Batna, Oum El Bouaghi, Sidi Bel Abbes, Sila, Saida, Tiara, Khenchela Biskra, Laghouat and Djelfa.
The other provinces like El Oued, Naama, Ghardaia, El Bayath, Ouargla, Bechar, Adrar, Tamanrasset and Illizi come from far behind.
Good governance and social purpose
Satisfying the needs of a given population must obligatorily whilst considering the new transformation of the world, link economic and social dynamics to achieve some reliability.
The set of previous data shows that in the event of non-development, the demographic pressure would constitute a real social timebomb. As demographic pressure involves increasing needs such as more food consumption and durable consumer goods, more infrastructure, more schools, more training centres and hospitals. Hence the importance for any government to have a forward-looking vision
It is also a matter of thinking already of the diversification of the national economy to create more jobs to meet the needs of an increasingly demanding population. For that, with the scarcity of financial resources, which is likely to impact development projects, the urgency of a new governance re-foundation would be required.
Would it suffice to say that a reorientation of the current socio-economic policy to have necessarily a growth rate higher than the population growth rate otherwise the rate of unemployment will increase (rate of Growth greater than 7/8% over several years to create 350,000 / 400,000 new workstations per year)?
Does not this mean also the imperative to abandon the old patterns of the 1970s especially in the field of industrial policy, to adapt to the Fourth World Economic Revolution which promises to be irreversible and on us by 2020 through 2030, based on networks, more social dialogue and more decentralization, not to be confused with deconcentration.
Ademmebtoul@gmail.com
May 11, 2018
10 (ten) Strategic management questions.
“This is not an Algerian production, because more than 90% of the assembled kits are imported for the cars assembly plants… An integration rate of at least 40% is required in order to be able to speak truly of domestic production“: Ahmed Ouyahia, Prime Minister at the inauguration of the 2018 International Fair of Algiers. There is a real cacophony after the Prime Minister announced in April 2018 a production for 2020 of 250,000 units and being contradicted a week later by the Department of Industry going for 500,000 units. Hence the problematic of the profitability of car assembly plants in Algeria is posed and cannot be swept away that easily.
The purpose of this contribution is not to enter polemics but to objectively raise the issue of the future profitability of car-assembly plants in Algeria, which must be part of a real economic strategy.
The World’s Cars market is structured as an oligopolistic market and it is in perpetual change.
What is the future when according to some analysts, the size of the Chinese car market, not to mention India, if one remains in the current consumption model, will be multiplied by ten by 2030 horizon. Experts from the International Monetary Fund (IMF) anticipated that in 2050, a 2.9 billion global park of passenger cars; this vision starting from the assumption of an increase in household income especially in emerging countries such as Russia, India or China representing markets with a high potential for the automotive industry. Thus, about 77,830,000 of cars should have been sold in 2017, compared to 74,380,000 in 2016 according to international estimates. Future technology prospects will be considering the new ecological challenge, with hybrid and electric cars. Therefore, a new model of energy consumption that is slowly taking place, the years ahead foreshadowing major geo-strategic and economic upheavals, China being on the way to becoming the world leader of all categories clean cars thus taking advantage of the “green” stimulus plans of the United States, Europe and Japan. In the short term, we are moving towards optimising the operation of petrol and diesel engines, with a reduction of 20 to 30% of their consumption, because of electric cars, the lithium resources for the famous lithium-ion batteries are limited and that electric motors require magnets that are also manufactured with rare metals, a market of 70/80 million vehicles per year that cannot absorb large volumes of electric cars and that for another ten years, the conventional engines should remain the majority. To avoid this constraint, nanotechnology can revolutionize the storage of energy with in parallel exploring the Flex Fuel and hydrogen.
In the near future, with the loss of competitiveness of some countries to the benefit of emerging countries, we should be witnessing the reorganization of world production of vehicles in relation to the levels of training in the factories and research carried out by the motor companies. Obviously, factories that will maintain themselves in each country will be the most competitive; the priorities for the leaders of car manufacturers will be:
- · Technology and Innovation, (Robotization,) especially in Japan whose labor cost is about ten times higher than that of China,
- · Ethics and corporate governance,
- · Collaborative approach,
- · Better strategies for success,
- · Environment and globalization.
Algeria, witnessing some real confusion as to which coherent economic policy must be opted for in order to avoid in the long run any failures of manufacturers.
Then 10 (ten) questions come to mind and these are as follows:
· First, what will it be with the inevitable depletion of all oil revenues in terms of economic profitability on the Algerians’ purchasing power?
· Second: The Customs statistics as at end of 2017 show that imports of all entrants for cars assembly plants approached the $2 billion mark for about five manufacturers whose majority did not surpass 20,000 units/year or a total of about 100,000 units. If it is hypothesized that the rate of integration varies between 15/20% between 2018 and 2020 and different manufacturers produce 500,000 units/year as announced by the Ministry of industry, the money outflow could be expected to reach $10 billion / year if not more with a significant impact on foreign reserves while all import restraint measures according to the former Minister of Commerce could save only $1.5 billion.
· Third: What will the cashflow balance of the assembly plants projected? Especially since many of the inputs will be all imported, including costs of transportation, training adapted to new technologies and wages, not to mention the lack of state fiscal revenues and bank earnings due to exemptions that currently have not allowed the price drop.
· Fourth: International standards, for capacity threshold to the world is a range between 200,000 and 300,000/year for individual cars, about 100,000 and more units/year for trucks/buses and scalable with large concentrations since 2009. Analytical accounting distinguishes differing costs pinpointing to a break-even point for a competitive cost compared to international standards and the new mutations in this sector.
· Fifth: What is the situation of subcontracting in Algeria to achieve an acceptable rate of integration that can reduce costs? By comparison with the neighbouring countries where the rate of integration is higher, experts stressed that in Tunisia, the number of subcontracting companies represents 20% of industrial enterprises (1,000 subcontracting companies among 5,000 industrial enterprises), while in Morocco the rate is 28% (2,000 outsourcing companies on 7,000 industrial companies). And that this sector of the industry currently accounts for only 6% of GDP, while the requirements for industrial equipment and other industrial components and spare parts are globally $25 billion. The number of sub-contractors listed in Algeria is currently insignificant and dominated by small enterprises (SMEs) with less than 10 employees and at about 9000, or 1%, activate for the industrial sector, the remainder operating in the commercial sector, distribution, services, building and infrastructure works.
· Sixth: For a coherent industrial policy vision, considering the strong international competition levels and the new technological changes, should not we have started by the selection of two or three manufacturers with foreign partnership, a clear definition of the required specifications and allow them, depending on their capacity, some tax and financial advantages. So, for an integration rate varying from 0 to 10%, the benefits must be limited to the maximum and having to fix them a production threshold in order to avoid that during this period, certain operators are tempted by an rentier’s annuity logic and reach to more than 30,000/50,000 units/year without integration, increasing the imports invoice of all required components.
· Seventh: Are we currently going for cars production for the local market when any strategic management objective would not but be regional and / or global to guarantee the financial profitability? How, do therefore, these micro-units often oriented towards the internal market, achieve the expected integration rate of 40/50% after about five years risking closure for failure to face international competition after having seen all the benefits from subsidies supported by the treasury, hence the importance of strict regulation?
· Eighth: An industrial policy without knowledge control is inevitably doomed to failure with a waste of financial resources. Also, the industry automobile having capitalized through digital programming towers eliminating intermediate jobs; what is the number of direct and indirect jobs created, referring to the necessity of qualification whilst considering the latest technologies as applied today to the automotive industry? And what will be the cost and the distribution network strategy to adapt to these technological changes?
· Ninth: These cars, will they be gasoline, diesel, GPLC, Bupro, hybrid or solar driven, referring to the policy of generalized fuel subsidies that distorts the optimal allocation of resources? Between 2015 and 2016, the distribution of fuels was gasoline representing 65% and diesel 34%, whilst the use of GPLC being marginal. In an audit under my direction “For a new fuel policy in a competitive system” commissioned by the Ministry of Energy in 2007/2008 and assisted by senior executives of SONATRACH’s experts and Ernst Young, where one volume was devoted to subsidies and the other to the promotion of the GPLC and Bupro as linked at the time to a new transport policy. I had made a presentation on this subject with a broad debate before the members of the Economic Committee of the National People’s Assembly in 2007.
· Tenth: How to penetrate the world market in the future with the rule of 49/51%; no reputable foreign firm would accept this rigid rule in the context of global exports and thus with the risk that Algeria will bear all the extra costs leading to debts especially since Algeria risks to know budget tensions between 2018 and 2020
In conclusion, all car assembly plants in Algeria must register within the internationalised sector to avoid tensions on foreign reserves at 2019/2020 horizon. And to test the true profitability of the car assembly units, in addition to all other products, subsidies of all kinds granted must be withdrawn, in order to prevent this from being a transfer of Indirect currencies at the expense. It is not a question of being against or for setting up a mechanical industry, but the latter must be carried out with coherence, pragmatism and realism.
ademmebtoul@gmail.com
May 1, 2018
Several television shows and some dailies, between 2016 and 2017, have got me worried. These involved some so-called experts who affirmed, without restraint and without numerical analysis, that from the exports of phosphate, and / or iron ore in their crude or semi-crude condition, or cement, the country might earn sufficient revenues. Could Algeria currently facing low oil prices, rely on the myth of raw materials as a miracle for development be a real palliative for its incomplete run for its economy diversification.
Unconsciousness or demagoguery? Why then mislead both public opinion and policymakers?
To avoid the myth of raw materials as a miracle solution for development as I have had to demonstrate on several occasions, particularly in my latest Algeria and Its Illusory Raw Material Annuity, for phosphate mining exploitation, all depends on marketing within all environmental constraints, the country’s internal strategic management, etc. The ore’s content, hence key factor determining the cost of exploitation. The growth of the global economy, being by far the greatest influencing factor is expected to experience a significant change in its structure with the advent of the fourth economic and social revolution between 2020 and 2040. The purpose of this contribution is to analyze the case of iron mining.
The case of iron mining in Algeria
For iron, global reserves are valued by international agencies at 85 billion tons (MT). Algeria not quoted in international statistics has, according to Algerian data, reserves (exploitable deposits) that vary between 1500 and 2000 MT, a minister having given the figure of 2500 MT on December 5th, 2015.
World iron production amounts to 3.32 billion MT, and by far, China is the first producer, followed by Australia and Brazil. China however on its on concentrates about 50% of the steel market, both in terms of supply and demand. The price of iron ore fluctuates and in February 2018, the price of iron was $77 per ton. If we stick to the statistics of the European Union in terms of imports, and reported last April 2018, the prices have evolved as follows: $100 per MT in January 2009, $140 in January 2012, $102 in January 2013, $116 in January 2014, $70 in January 2015, $58 in January 2016.
SCOTIA, a Canadian Bank, which specializes in the evolution of commodity prices, provides, in a business note dated July 6, 2016, an international price between $48 and $50 /MT for 2018, depending on the revival of China’s economy, whose steel mills absorbed 70% of the world’s iron ore demand between 2014 and 2017.
With iron ore going at $60 /MT, exports of 3 million of MT/year, giving a turnover of $180 million to which must be subtracted 40% of charges, would leave $108 million to share following the 49/51% rule, between all partners, leaving less than $55 million for Algeria.
With exports of 30 million MT/year, the net profit for Algeria would not exceed $600 million/year. It is that the exploitation of the iron of Gara Djebilet will require large investments estimated by the government in 2013 to about $15 billion in power plants, transport networks, rational use of water, resolution of the remoteness issue of supply sources, environmental protection measures and, above all, all human resources required training.
Only processing into products can therefore provide a higher value added to exports. If we take a few products, with a high added-value, controlled by a few multinational firms, from both the technological and commercial point of view, we have the following prices fluctuations.
- In February 2018, copper was established at $7,007 per ton, down 0.8% over a month and up 17.9% over a year. At the end of April 2018, the price of copper per kilo was $7.01.
- In February 2018, the price of stainless steel that depends on various alloys including carbon, chromium and nickel can fluctuate between $2,000 and $2,500 per ton.
- The price of aluminum was $2,182 per ton, down 1.3% over one month and up 17.3% over one year.
- In February 2018, the price of lead was $2,581 per ton, down 0.1% over one month and up 11.7% over one year.
- In February 2018, the price of zinc was $3,533 per ton, up 2.7% over one month and up 24.2% over one year.
In March 2018, the price of all metal ground scrap (type E40) averaged €285 per ton, up 6% over a month and down 33% on a Year. For the Price of steel is very fluctuating and was $620 per tonne on July 22, 2016 compared to $580 per tonne on July 19, 2016. In April 2018, the price of steel in average, is established to $857 per ton. The prices of the different categories of steel, are for the MM20 steel at $816 / ton, the MM50 at $750 / ton and the MM100 at about $635 / ton.
In the meantime, steel imports costed Algeria in 2016, around $10 billion a year due to mainly its growing domestic demand from a drive to modernize infrastructures coupled with engaging into developments of subsidized housing schemes. In fact, Algeria imports most of the goods it needs due to insufficient domestic production caused by a lack of investment in its non-energy industries, including of course mining of all those abundant and near the surface resources.
In summary, far from being or sounding utopian, it was in 2017 and certainly is still for 2018, the case of all hard currency inflows come, whether directly or indirectly and for 97/98% from only hydrocarbons and their derivatives. Non-hydrocarbon exports would be conditioned by profound structural reforms that far from the Keri vision, would certainly not be a matter of administrative decisions, but rather of the adopting of all necessary policies that would enable the setting up and running of competitive productive companies in terms of, amongst many things, optimal cost/quality ratios, etc. Within this context, it must be mentioned that from inception, negotiations, maturation, and finally realization and up to its gaining some cruising speed, a project would require in Algeria a minimum of five years.
That is definitely too long, even if in this day and age, heavy mining cum industrial undertakings are still onerous and weighty to come along. Due to their oligopolistic structure, for the mining industry, the only solution is a win/win partnership with reputable firms that could find it difficult to accept the restrictive rule of 49/51% with its unnecessarily bureaucratic burdens; flexibility and real-time decisions being the rule in international trade rather the exception. Ademmebtoul@gmail.com
Apr 28, 2018
The Minister of Energy whilst proceeding with the installation of an inter-sectorial Steering Committee of the mega-partnership project for phosphate exploitation and the development of petrochemical industries, said in a communiqué that this will enable Algeria to “become a global exporter of phosphate fertilizers and its derivatives”. This contribution is about Algeria and its illusory raw material annuity potentialities with a particular look at the case of phosphate mining and exploiting.
This strategic mega-project’s objective is to achieve a production of phosphates of nearly 11 million Tons/year compared to 1 to 1.5 million of Tons/year currently.
Unlike euphoria such as stated by the former Minister of Industry in 2014 – 2015 that thanks to the exports of phosphate, iron and cement, Algeria would not be negatively impacted by the recent oil prices drop. However, for both phosphate and iron (crude or semi-crude) and cement, marketing depends so much on the constraints of the international strategic environment management, the content of these ores that determines the cost of exploitation, and above all the growth of the world economy whose future structure with the fourth industrial revolution that gradually sets in by 2018 through 2030.
In these internationalized segments, some multinational firms control the techniques and distribution channels. We should avoid the mistakes of the past that have been estimated at billions of Dollars’ worth of losses and approach these for some mutual understanding.
Phosphate is a key element in the composition of fertilizers which are of crucial importance for world food security, but paradoxically the prices between 2015 to 2018 have been oriented downward.
For phosphate reserves, by order we have Morocco 50000 MT, China 3700, Algeria 2200, Syria 1800, South Africa 1500, Russia 1300, Jordan 1300, Egypt 1250, Australia 1030, The USA 1100 and Saudi Arabia 950. As far as production is concerned, we have for 2015, 223 million metric tons (MT) including China 100 MT, Morocco 30 MT, USA 27.6 MT, Egypt 5.5 MT, Tunisia 4 MT, Saudi Arabia 3.3 MT, Israel 3.3 MT, Australia 2.6 MT, Vietnam 2.6 MT, Jordan 2.5 MT and Algeria 2.6 MT. The price of crude phosphate has been divided by three since its peak in the year 2008; Having fallen by 43.2% since the year 2011. The world price of raw phosphate remained stable at around US $115 per MT, on a monthly average of 2015. According to a forecast of the World Bank, the general and medium-term trend of prices of phosphate products would remain down; crude phosphate would negotiate in 2020 at about of $80 – 85 per MT, that of DAP around $377.5 /MT and the TSP to nearly $300 /MT. In a new analysis, the world rating agency estimates that the prices of phosphate ore will remain on average at 100 per tonne (toll-free), in 2018 and the prices of the ton of phosphate ore (no charge on board) would reach $105 in 2019 and possibly $110 in the long-term.
Crude phosphate price is this month approximately $86 per ton compared to $84 for the same period in 2017. So, if Algeria exports 3 (three) million ton of raw phosphate annually at an average price of $100 between 2018 through 2020, we could have a turnover of about $300 million and for ten million tons a billion Dollars.
All related costs in this sector being relatively high, of notably depreciation and wages at a minimum of 40%, the resulting net profit would be, for 10 (ten) million tons about $600 million. In the event of an association with a foreign partner using the unavoidable 49/51% rule, the net profit of Algeria would be slightly more than $300 million. We are therefore, far from the profits generated from the oil fields.
To increase net profit, it is therefore necessary to embark on highly intensive processing units with heavy and profitable investments in the medium term with an export of as diverse products as possible. Thus, in a market as competitive as that of the European Union, all fertilizer / Urea products were sold at more than $423 per ton in 2014 and was quoted on an annual average in 2017 at $327 per ton and on April 24th, 2018 to €247 per ton.
The price of Ammonia is a function of the price of gas on the international market. For instance, when the price of gas is $4 / MBTU, the cost of Ammonia is about the current rate of $140 / ton. When the gas price is $7 per MBTU, the cost price is $242.
In the world market, prices fluctuated between $338 / ton in August 2017 and $404 as quoted at the beginning of February 2018. But for large exportable quantities, this requiring heavy investments in the medium term would bring any profit not before 2020 – 2022 if the project was in operation as of 2018. And for large exportable quantities, this would require going through some partnership notably because of the world market being controlled by some firms. Moreover, for Algeria, it will be necessary to solve the problem of the price of the transfer of gas which cannot be aligned with that of the market and avoid the numerous disputes. In this context, I recommend, following many experts, that petrochemicals be attached to the Ministry of Energy / SONATRACH for greater coherence and efficiency, even if it is to establish a State Secretariat for Petrochemical Industries.
Focusing only on the country’s higher interests, it must be recognised that there is a lack of strategic vision. I would like to think that, as a word of warning against all visions of utopias of the past, should be left behind.
All this raises the problem of the limits of all public expenditure via the annuity and refers, for Algeria, to the mastery of strategic management to at least avoid all mismanagement, ignoring the new global mutations and / or initiation of non-mature projects that may go bankrupt in between time. A pertinent example is this drift towards all those automotive assembly plants where we ended up with more than thirty manufacturers, thing unknown anywhere in the world. Hence the importance of understanding the new mutations of these internationalised channels in perpetual technological change.
Algeria needs a Vision within which all industrial policies should be coordinated (institutions, financial system, fiscal, customs, federal, socio-educational systems, labor market, land use, etc.), in order to adapt to the new world in perpetual evolution driven by innovation. Without this necessary adaptation to the new world in perpetual change, referring to a clear political will to accelerate the reforms, thus to a cultural revival generalized to the society as a whole, Algeria having all the required potentialities to go beyond the current status quo, it is futile to penetrate any world market. Algeria still dependent for long years on hydrocarbons, all other raw materials would only help make it possible to realize just an average profit,
In short, a win-win partnership with companies that control international circuits is the only way to value phosphate and to bring more value-added because exporting the raw material per say would not be as vitally important especially in a heavily devalued currency.
Let us avoid the illusion of an eternal annuity via some raw materials related exports revenues, as I recall in my previous contributions, no country in the world that has focused solely on raw materials has achieved sustainable development. As we must avoid this myth of the power of capital-money as a means. If we take the oil exporting countries of the MENA region that have had hundreds of billions of Dollars in the last three decades, none have achieved at least an emerging country status.
Since the world is world, and this proves truer with the forthcoming fourth world economic revolution, the prosperity of different civilizations has always been based on good governance.
Ademmebtoul@gmail.com
Apr 23, 2018
During various visits to both Algiers and Brussels, wishes for a fruitful dialogue promoting a win-win partnership of Algeria and the EU as well as a common determination to enhance relations to the heights of the existing Agreement’s proclaimed ambitions were reaffirmed.
The picture above (Copyright The Financial Times Limited 2018. All rights reserved.) is of Algeria: A giant afraid of its shadow, depicting the country as a regional powerhouse, having been reluctant to flex its muscle despite the turmoil surrounding it in an article of the FT by Borzou Daragahi posted on APRIL 3, 2013.
Algeria is an actor of stability in the Mediterranean and North African region and as a strategic player for Europe’s energy supply through notably the Medgaz and Transmed pipelines.
The intention would be to “densify” this cooperation, as per the Algerian Foreign Minister, for whom “the evaluation process requested by the Algerians does not aim at calling into question the Agreement but, on the contrary, to use it fully in the sense of a positive interpretation of its provisions allowing for a rebalancing of the links of cooperation. According to the European side, the bilateral relationship, which is promising both in the field of energy and in business and trade, has unexplored potential, even if encumbered by persistent administrative burdens and unpredictable political decisions. The European side must look at Algeria as a partner and not only like a huge market for receiving all “Made In Europe” products as Algeria must understand that in this 21st Century, network relationships have replaced personalized relations between heads of States or Ministers through credible networks.
Settling the different Algeria/Europe: for shared prosperity
Before the French National Assembly, the European Trade Commissioner, Cecilia Malmström, had stated, on Tuesday, April 10th, that the restrictions on imports introduced by Algeria were “not in conformity with the free trade agreements” contained in the Association Agreement between the Union EUropean (EU) and Algeria and that in case of failure of the dialogue between the two parties on this subject, “The dispute settlement clauses” of this agreement will have to be mentioned. However, according to the Algerian Government on the period 2005-2015, Algeria’s non-hydrocarbon exports to the EU stood at $14 billion, while Algeria imported $220 billion from the EU. In terms of customs revenue, the Algerian government estimated in 2015 the loss of profits as caused on the same period, at more than €6.7 billion (at the rate of 2015). For the Europeans, it is up to Algeria to recognize that it is its total exports to Europe that should and not just non-hydrocarbon products therefore to move towards reforms of the investment legislation, particularly regarding all SME-SMEs in all sectors of activity.
I’ve been recipient thanks to friends in Brussels, at the end of December 2016 of the new mount of the partial revision proposed by the EU following the Algerian proposals of the Association Agreement that comforts some Algerian proposals but is not in any way concerned with amending the main Agreement framework. This confirms the recent declaration of a Ministry of Foreign Affairs official for whom the document containing 21 recommendations would enable the cooperation between Algeria and the EU to be revived in order to put economic relations at the centre of this cooperation, to give this agreement all its importance and To use all its enormous potential in its three Components: Political, economic and human.
As recalled in my contributions and taking up some ideas at my conference at the invitation of the European Parliament, after a real concern of the international community where some Algerian media have speculated on the breakdown of the agreement which links Algeria to the Union EU, the Algerian officials were clear. For Algeria, there is no question of breaking the Association agreement. The situation in the country remains, however, dependent on developments in the oil markets, the sales of which the country derives the bulk of its income. It is in this capacity that the Council of Ministers of 06 October 2015 considered it necessary to re-evaluate the economic and commercial aspects of the Association Agreement with the European Union (EU) which did not achieve the expected objectives for European investment in Algeria. The Agreement’s Article 32 stipulates for any commercial presence that Algeria should reserve to the establishment of any EU’s companies in its territory, a treatment that is no less favourable than that granted to third-party country companies all in accordance with its legislation and that no less favourable treatment with regard to their exploitation than that granted to its own companies or branches or to Algerian subsidiaries or branches of other third-party country companies should be considered.
The general provisions of article 37 stipulate that the parties avoid taking action or engaging in actions that make the conditions for the establishment and operation of their companies more restrictive than they were on the day before the signature of this Agreement.
With regards to article 39, it is the EU and Algeria that shall ensure, from the entry into force of this agreement, the free movement of capital relating to direct investments in Algeria, carried out in companies established under the Legislation in force as well as the liquidation and repatriation of the proceeds of these investments and any profit therefrom.
Lastly, article 54 for the promotion and protection of investments, it is stipulated that cooperation aims to create a climate conducive to investment flows and is carried out in particular through the establishment of harmonised and simplified procedures for mechanisms of co-Investment (especially between small and medium-sized enterprises) as well as identification and information of systems on investment opportunities, conducive to investment flows, the establishment of a legal framework promoting investment, the conclusion between Algeria and the Member States, investment protection agreements and agreements designed to avoid double taxation and technical assistance in promoting and guaranteeing actions domestic and foreign investments.
Ademmebtoul@gmail.com
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