It is bound to reforms of diversifying its economy and modernising its business environment.
A visit of Johannes Hahn, Commissioner for European Neighbourhood Policy and Enlargement Negotiations in Alger, Algeria today and tomorrow is notably to reiterate the EU support to the country in differentiating its economy. This is in a way to acknowledge that Algeria to fully play a major role in the region, it is bound to reform.
So as per the European Commission, ahead of the mission, Commissioner Hahn said: “The European Union will continue to support Algeria in its efforts to diversify its economy and modernise its business environment. The EU-Algeria Partnership Priorities adopted earlier this year put a strong emphasis on economic matters. It is now time to translate these priorities into concrete actions and reforms“.
Taking up the ideas made at my Conference at the European Parliament on “the Maghreb facing geostrategic challenges” and after some concern about Algeria breaking off the agreement with the European Union, Algerian officials were clear. These have reiterated that there is no question of that happening but it is rather negotiating for a win-win partnership.
Cooperation for shared prosperity
At different visits both in Algiers and in Brussels, the Algerian and European parties reaffirmed the common determination to enhance relations proclaimed ambitions. The will would be to “densify” this cooperation, according to the Algerian Minister of Foreign Affairs, for whom “assessment called for by the Algeria does not call into question the agreement, but try to fully use it in a more positive interpretation sense of its provisions allowing a re-balancing of the cooperation links.
As per the European Union side’s ‘constructive’ discussions, I received an official invitation from the EU’s Ambassador of the European Union to Algiers to join in as an independent international expert for a working dinner on the occasion of the 3 day visit (July 19 through 21, 2017) of the European Commissioner in charge of the European neighbourhood policy and the enlargement negotiations, Johannes HAHN.
Thankful but sadly unable to honour this invitation for personal reasons, I nonetheless received from friends in Brussels a copy of the EU proposals to the Algerian Government. The terms of the Association Agreement stipulate that “the will to intensify political dialogue of high level, in a context of revitalisation of relations of cooperation, through the joint assessment of the implementation of the association agreement and the definition of the priorities of the partnership, adopted during last March 13 Association Council on the revised European neighbourhood policy.”
My view has as always been that Algeria and the EU have for objective to consider ways and means of implementing all conclusions of the joint assessment of the agreement including diversification of the Algerian economy and promotion of exports of nonhydrocarbon and productive investments.
According to the EU side, promising bilateral relationship in the field of energy, in business and trade activity, has an unexplored, even if potentially encumbered by red tape and persistent political decisions. However, the situation in the country remains dependent on the evolution of the oil markets and oil exports related revenues, recalling that energy cooperation, based on a specific Protocol, would be at the center of the cooperation with the EU.
It is as such, that the Council of Ministers as of October 6, 2015 considered necessary to reassess both economic and commercial aspects of the Association Agreement with the EU that have not achieved the expected objectives of the European investment in Algeria.
While article 54 of the Agreement for the promotion and protection of investments stipulates that cooperation is the creation of a favourable climate to investment flows and is realized through the establishment of harmonized and simplified procedures of the mechanisms of co-investment (especially between small and medium-sized enterprises) as well as devices for identification and information on investment opportunities favourable to investment flows and establishing a legal framework promoting investment, its protection, avoid double taxation and promote technical assistance actions of promotion and guarantee of domestic and foreign investment.
Algéria with Europe Trade
The official 2016 exports balance sheet show a decline to $28.88 billion in 2016 against $34,66 billion in 2015, or a fall of 16.7 percent. Non-oil, marginal exports fell to $2.063 billion in 2016 against $2.582 billion in 2015 (-20,1%); over 50% of these being made up of derivatives of hydrocarbons.
As far as imports are concerned, these also declined but at a lower rate to $46.72 billion in 2016 against $51.7 billion in 2015, down 9.62% giving a trade balance deficit of about $18 billion before adding all services and legal transfers of capital.
Trade recorded during the first quarter of 2017, $15.42 billion in total imports and $11.92 billion in exports, an increase of 36.94% compared to the same period in 2016.
From geographical distribution point of view, the members of the EU are the major trading partners of Algeria that imports for 49.21% of its products and exports 68.28% mainly hydrocarbons.
In 2016, according to the Algerian Customs, China in 2016 was the leading trading partner of Algeria, with a market share of close to 18%. France came second with a share of 10.15%, followed by Italy with 9.93%. Spain and Germany were respectively in the 4th and 5th position in this ranking.
For 2016, Algeria’s customers were Italy with a market share of 16.55% of the exports and Spain coming second followed by the United States and France.
During the first four months of 2017, Italy was the main customer with a share of 18.01% followed by the 12.02% of Spain and France’s 10.89%.
China, which is the main supplier, has shipped 20.47 percent of imports, followed by France with 8.49% and Italy with 7.02%. If China is the big beneficiary of Algerian imports, the deficit in trade between the two countries is huge between 2007 and 2016 while official reviews were always headed towards Europe.
Deepen the reforms
In order for Algeria to negotiate, it implies some change in the prevailing bureaucratic tendencies of the Algerian State that are incongruous today in the 21st century. It is no more the State’s role to invest but rather to play a role of regulator like reconciling economic efficiency with a deep social justice; the economic operators being driven by the logic of profit.
The concerns being certainly legitimate because tariff cuts produced a drop in the short-term depending on sources of between $1.5 and 2 billion a year as a result of the EU’s tariff relief.
The situation of Algeria as mono exporter does not help, so are the majority of the OPEC countries; these are members of the WTO. The great challenge for Algeria would definitely be to accelerate the overall reform so as to allow it pull some comparative advantages of its insertion in the internationally institutionalised division of labour.
To benefit from the positive effects of the agreement with Europe towards a possible WTO membership, there is need to first tidy up the Algerian economy but for that, there are obstacles to a fully comprehensive reform of all its segments.
Any operational analysis should connect the progress or the refusal to the reforms by analyzing strategies of the social presence of each tendency; the Government’s policy forces happen to be lying fluttered between two conflicting social forces. On the one hand, partisans of the logic of rentier as supported by proponents of import and on the other, those of the informal sphere that is unfortunately dominant and with a minority entrepreneurial logic.
This might explain how Algeria finds itself in this interminable transition, neither in competitive social market economy nor in an administered economy; progress of reforms being inversely pro portional to the oil price and the value of the Dollar and reforms being tentatively made with inconsistency when the oil price drops. This explains also that despite successive devaluation of the Dinar, to meet the reality of deficit budget and boosting inflation imported, 5 dinars in 1974 a Dollar to 120 Dinars a Dollar in 2017, it has been impossible to boost non-oil exports showing that blocking is systemic.
GDP growth rate is directly and indirectly at 80% through the building and infrastructure development sectors and so is the employment rate, all as pulled by public expenditure through the oil and gas exports revenues which gives wealth creation companies of public or private wealth (often in debt with respect to public banks) a negligible part. Infrastructure being only a means towards an end, the recent experience of Spain that bet on this segment must be carefully meditated by the Algerian authorities. So, in order to attract any investment, the Algerian Government should implement regulatory mechanisms to attract promising investors and avoid for as much as possible any changes in the legal frameworks and any bureaucratic administrative actions that are not only not transparent but source of demobilization and potentially scaring investors whether they are local or international.
Without chauvinism, Algeria has potential options for moving on and unlike some pessimistic forecasts predicting a worst-case scenario for year 2020, it, subject to good governance and a reorientation of its economic policy, has the ambition of its choice.
It can become a player in determining the stability of the Mediterranean region and Africa, conditioned by its economic and social development within regional spaces, analysis supported in my international interviews including Radio France International (RFI) of 27/02/2016 and by the American Herald Tribune of December 28, 2016 and Radio International Mediterranean Midi1 of January 14, 2017.
Successful structural reforms allowing Algerian recovery is possible, but for this, a reform of all structures must be intended to encourage value-added creation investment from the overhaul of all land and property estates, finance, customs, tax, administration and a renewed social welfare regulation systems. There is urgency to specific objectives and a new institutional organization in order to give greater coherence to the management.
In summary, Algeria for the United States of America and for Europe is politically a major player in the region’s stability whereas economically although it holds significant potential, it realistically has little export options outside its hydrocarbon resources to both Europe and Africa in the light of the embryonic state of the productive sector?
Let’s avoid rushing to conclusions by giving a total of $7 billion accumulated losses over several years and thus mislead the public opinion. Customs duties shortfalls as a result of the Association agreement with the EU (with the Dinar being devalued by 20% in 2017) were accounted to be $1.27 billion in 2015 and 1.09 billion in 2016.
Contradictory debates in association with all components of society, tolerating the different sensitivities and the need for social cohesion seem to be the only way to overcome the present multidimensional crisis, because the social adjustments could eventually be painful. The macroeconomic framework seeming to be relatively stabilized in Algeria could be fleeting without deep structural reforms, the decline in the price of hydrocarbons and the risk after the exhaustion of the Reserves Fund that of foreign exchange reserves between 2019 and 2020.
The two countries confronted to their specific challenges ought to have a common vision in order to contribute to a prosperous future as based on genuine co-development and not on obscuring the memory of a shared past for long lasting relationships. The recent France’s presidential elections impacting Algeria, are looked at here as positively as they could be in so many years.
The 187 odd years of very close relationship between the two countries will certainly be in the agendas of each as the renewed French leadership confronted to challenges from all around is settling down shortly for business anew.
It is about preparing the future through mutual respect; a point that I always made during my various meetings with political and economic personalities, and maintained that Algeria should not be considered as a market only. It is in this context that a co-partnership between Algeria and France, far from prejudice and spirit of domination must be inscribed.
We must be aware that the new international relations are no more based on relationships between heads of State, but on custom networks and on decentralized organizations through the involvement of notably business and civil society cooperation, dialogue of cultures, tolerance and the symbiosis of the contributions of the East and the West.
Because it might be unproductive to be and remain locked in distant positions as the latest events should rather make us think of to how avoid antagonising each other beliefs be it religious. After all Islam, Christianity or Judaism did contribute to the development of civilization.
Future relations between Algeria and France must also concern the Maghreb-Europe space and more generally the Mediterranean-Europe area. Our two countries can be dynamic agents, because southern Europe and the Maghreb cannot escape adaptation to the current global changes (the present crisis already causing upheaval in both socio-economic and geo-strategic) and more generally throughout the Mediterranean region.
Because it is necessary to go beyond narrow chauvinist nationalism insofar as real nationalism will be defined in the future as the ability to together expand the standard of living of our people by our contribution to the global value.
Today’s world is characterized by interdependence. This does not mean the end of the role of the State but a separation of politics and economics which cannot be the vagaries of the economic climate, the State dedicated to its natural role as regulator of macroeconomic and macro-social life. I firmly believe and after analysis that the intensification of the cooperation between Algeria and France not forgetting all other cooperation between Algeria and the USA, all emerging countries such as China, Japan, India, the Brazil, Turkey, South Korea and Russia etc…
And in a more comprehensive way between the Maghreb and Europe as based on a genuine co-development, partnership, the introduction of direct investment would upset the bureaucratic behaviour conservative annuitants and enrol them in a dynamic perspective that is beneficial to the peoples of the region thus helping to turn the Mediterranean into a lake of peace and prosperity. The Mediterranean can be that place of rational networking to communicate with distant cultures, encouraging the symbiosis of contributions of the East and the West.
This network should facilitate communication links, freedom insofar as the excesses of the collective voluntarism inhibit any spirit of creativity. It is that the Maghreb and Europe are two geographic areas with an opening on the Latinity millennial experience and the Arab world with natural links and overall culture and Anglo-Saxon influences…
It is essential that Europe developed all actions that can be implemented to achieve a desirable balance within this set. In fact the formation of weak regional economic areas is a step of structural adjustment within the globalized economy with for a goal to promote political democracy, – a humanized, competitive market economy – promotion of ideas through social and cultural debates so as to combat extremism and racism – the implementation of common business whilst never forgetting that these are driven by the logic of profit and not emotions.
Thus, it is necessary to pay special attention to the educational action because human thinking and creation should in the future be the beneficiary and the leading actor in the development process. That’s why I would advocate the creation of a Euro-Maghrebine University as a cultural center as well as a central Euro Mediterranean bank as a facilitator for all Exchange.
It is in this context that a realistic approach must be apprehended so as to the co-partnership between Algeria and France taking into account all potentialities. At the global level, we are witnessing the evolution of a built-up passed based on a purely material vision, characterized by hierarchical rigid organizations, to a new mode of accumulation based on the mastery of knowledge, of new technologies and flexible organizations as networking around the world, with globally segmented supply chains of production where investment in comparative advantages takes place in sub-segments of these channels.
As rightly noted by Jean-Louis Guigou, President of IPEMED (Institute of Prospective Economic of the Mediterranean world, in Paris), it should be that, in the interest of both of the Algerians and of the French, and more generally of the Maghreb and the Europeans as well as all South-Mediterranean populations, the boundaries of the common market of the future, the borders of Schengen in the future, the borders of social protection in the future the borders of the environmental requirements of tomorrow, must be South of the Morocco, the Tunisia and Algeria, South and East of the Lebanon, Syria, of the Jordan and the Turkey, through a lasting peace in the Middle East, Arab and Jewish populations with a thousand-year history of peaceful coexistence.
Specifically, Algeria and France have economically other strengths and potential for the promotion of diverse activities and this experience can be an example of this global partnership becoming the privileged axis of the re-balancing of the South of Europe by amplification and the tightening of links and exchanges in different forms. Per the official foreign trade balance of Algeria in 2016, the countries of the European Union are still its main partners, with the respective proportions of 47.47% and 57.95% of exports and imports. Italy is the main customer and France the main supplier.
Between France and Algeria, trade can be intensified in all areas, i.e.: agriculture, industry, services, tourism, education, not to mention cooperation in the military field, where Algeria can be an active player, as shown by its efforts to bring stability to the region.
Also, let’s not forget the diaspora with residents of Algerian origin in France that would exceed 4 million, including more than 2 million bi-nationals. This regardless of the numbers is an essential element of reconciliation between Algeria and France, because it holds significant intellectual, economic and financial potential. The promotion of the relations between Algeria and its emigrant community should be mobilized in various stages of intervention initiatives of all the parties concerned, namely the Government, diplomatic missions, universities, entrepreneurs and civil society.
Hence, any intensification of this cooperation won’t possible – whilst not forgetting the duty of memory – if Algeria and France have a realistic approach to the co-partnership for a win-win partnership away from any mercantilism and spirit of domination. The two countries must have a common vision of their future.
Algeria can overcome its current difficulties but the success of national and international industrial partnerships is not feasible without a total renovation of all central and local governance systems with a coherent vision based on both political, social, economic structural reforms including financial market, land and property market, labour and especially reform of the socio-educational system, at the dawn of the fourth technological revolution.
The objective for Algeria is to commit for structural reform, whilst assuming a broad internal mobilization of the social front, tolerating the different sensitivities, in the face of the many challenges in order to allow Algeria to emerge, in the medium and long term. For this, the dominance of the bureaucratic approach must give way to economic operational approach, with positive social and economic impacts. Also, in the face of the new global changes, Algeria undergoing this transition towards a productive economy closely tied to its energy transition, needs an accumulation of technological and management expertise with assistance from its foreign partners.
In short, Algeria and France are key actors for the stability of the region, and that any destabilization of Algeria would have negative geo-strategic repercussions throughout the Mediterranean and African region, as I pointed out in my interview on December 28, 2016, the American Herald Tribune (3).
And of course, subject to Algeria furthering into the rule of law, democratization of society and that it’s reorienting its economic policy in order to achieve sustainable development. The current tensions between Algeria and France are only temporary, as per information gathered with friends of mine in France.
It is only in this context that cooperation must return for a win-win partnership far from all prejudice and in mutual respect.
Notes : See recent contributions and international interviews of Professor Abderrahmane Mebtoul
-«Wahl in Algerien Der Graben ist tief – wer stimmt ab?» – www.tagesschau.de–ARD- 04/05/2017
-« Après Glavany et Macron… « Dépassionner les relations entre l’Algérie et la France » quotidien financier français la Tribune .Fr 19 février 2017 – (“After Glavany and Macron…» “Take the heat out the relationship between Algeria and France” by French financial daily la Tribune.fr 19 February 2017)
Europe – North Africa Cooperation in High Education comes in as education in the MENA generally and more specifically in its western half of North Africa has been for some time prioritised with various efforts being made to improve it through notably innovation with a view to creating job opportunities for the youth.
Illiteracy however remained and is still rampant although varying from country to country and from cities to rural areas within each country.
Historically, education systems of the Maghreb countries having within the last 50 years undergone since independence, reform processes whose main objectives was to prepare for the nationalization take over through European inspired education curriculums while stressing the need to respond as closely as possible to the aspirations of the indigenous cultures by providing teachers in re replacement of the predominantly European body of educators.
The situation nowadays is best described by an article on University World News Issue No. 456 of April 21, 2017 by Wagdy Sawahel who elaborated on Europe and North African higher education cooperation plans for the future.
It is well known to all around the Mediterranean basin that education and innovation are mechanisms of progress in the 21st century, whilst all ideas related to that goal resonate as being somewhat impossible to attain in most capital cities across North Africa without as it were, a hand from Europe.
In efforts to promote cooperation in science, technology, innovation and higher education, five countries of the Arab Maghreb Union and five European countries have approved a two-year cooperation plan aimed at stimulating economic growth, job creation and social cohesion in the Western Mediterranean region.
The 10 countries are known as member states of the “5+5 Dialogue initiative: A sub-regional forum for dialogue”.
The five Maghreb countries involved are Algeria, Libya, Mauritania, Morocco and Tunisia. The five European countries include Western Mediterranean nations, namely, France, Italy, Malta, Portugal and Spain.
The new two year plan (2017-18) was announced at the third conference of the ministers of research, innovation and higher education of the member countries of the forum for the dialogue in the Western Mediterranean, held under the theme “Promotion of Higher Education, Research and Innovation to Achieve Social Stability and Economic Development”, in Tunis, Tunisia from 30-31 March.
According to a dedicated website for the 5+5 Dialogue initiative launched in Tunis, the plan encompasses several initiatives and projects, including the setting up of a network of higher education institutions, the formation of teams of researchers and engineers around joint projects, the development of a rectors’ network, along with the promotion of exchanges of best practices in quality assurance and governance.
The network of higher education institutions within the Dialogue 5+5 will focus on encouraging cooperation between higher education institutions in the Western Mediterranean Basin.
Based in Tunisia, the regional network will focus on strengthening existing university linkages and developing newer partnerships around novel cooperative projects.
The network will participate in the construction of ‘Mediterranean spaces’ dedicated to research, innovation and higher education approved and outlined in the 2013 Rabat Declaration and endorsed at the first conference of ministers of research and higher education of the 5+5 Dialogue states, held in Morocco.
Mediterranean spaces will be based on the principle of free movement of researchers between the two western shores of the Mediterranean and on a connection to regional and global scientific networks to facilitate the exchange of scientific data and development of skills.
It will also focus on intellectual property, patenting and exchange of students, academics and research between countries.
The network will also support initiatives that promote institutional partnerships, including scientific networks, the mobility of students, faculty and administrators, multi-diploma or thesis co-supervision, and the development of online training and research
Collaboration with researchers in the region will be enhanced under the Horizon 2020 programme known as PRIMA – Partnership for Research and Innovation in the Mediterranean Area – that will help bridge the gap and regulate the brain drain through the creation of poles of excellence in member countries.
The proposed Dialogue 5+5 rectors’ network will focus on specific initiatives including organising regular encounters between rectors and presidents from all Dialogue 5+5 countries, with visits to universities and polytechnic institutes as well as international meetings of students and researchers, and the holding of conferences and seminars on mobility and academic interchanges.
Besides sharing quality assurance practices, the plan will enhance exchanges on governance with a focus on the organisation of teaching, research and innovation in order to improve the management, efficiency and financial autonomy of institutions.
At the opening of the conference, Tunisian Prime Minister Youssef Chahed said that a national conference on higher education reform will take place in Tunis in the period from 30 June-1 July to present a higher education reform plan that will focus on five major axes, including university training, employment, human resources, governance and innovation, according to a local press report.
Looking for some good weekend reads, we could not let the following article We need a New Narrative for Globalization of Klaus Schwab, Founder and Executive Chairman, World Economic Forum go unnoticed. As a Regular Author, Klaus Schwab produced many noteworthy contributions in various media on this very subject, and we could not let it pass without hopefully helping its spread throughout the MENA region. Globalisation is as a matter of fact impacting the MENA Region which with its diverse countries socio-economic and political arrangements does contribute to the ever increasing expansion globalisation but in its own discrete ways, resulting in as diverse appreciation and / or revulsion as elsewhere by its populations.
The only sure thing about this phenomenon is that it (globalisation) is here to stay and that it has only one way to go: expand further. As put by this author: ‘We have to manage our future based on the fact that we are simultaneously local, national and global citizens with overlapping responsibilities and identities.’ And that: ‘The promise of a better future lies in acting together as stakeholders of a technology-driven global transformation process, with the objective of building a more modern, inclusive and human world.’
The world is at a historic crossroads. Market extremism, often labelled neoliberalism, which has shaped our national and global policies for the past three decades, has become a toxic fuel for the stuttering engine for global growth. It has also generated polluting side effects that are no longer tolerated by large portions of society.
Yet market-driven globalization has lifted over a billion people out of poverty and has been an overall driver of improved standards of living. In its present form, however, it is no longer fit for purpose in our current – nor particularly our future – context.
What are the reasons?
First, the global economic system has moved from focusing on meeting the needs and aspirations of crucial segments of society who feel they are living in a precarious situation, to focusing on the optimization of the system itself. As such, individuals want to regain control of their livelihoods and seek out more than material satisfaction. People are searching for meaning and purpose in their lives – lives that are not solely defined by economics and business, but which also encompass social and cultural affinities. Many people feel spiritually isolated in a globalized world and long for a socio-economic context in which greater emphasis is placed again on shared values and less on impersonal rules.
In addition, the legitimacy of a purely market-driven global economy was undermined by a growing number of systemic challenges, such as:
The transition from a unipolar to a multipolar world, and consequently, to a world with competing societal concepts which challenge “Western” thinking;
Market power, corrupt practices and speculative financial practices distorting the fairness of markets and the process of real long-term value creation;
Transformation of production processes, emphasizing automation, capital and innovation over manual, and soon intellectual, labour;
The serious threat to the preservation and regeneration of our environment, caused by the excessive use and erosion of our natural resources.
Since the 1980s, I have drawn attention repeatedly to the deficiencies of neoliberal globalization. For example, in an editorial for the International Herald Tribune (now the New York Times) more than 20 years ago, I wrote:
“Economic globalization has entered a critical phase. A mounting backlash against its effects, especially in the industrial democracies, is threatening a very disruptive impact on economic activity and social stability in many countries … This can easily turn into revolt …”
Even though the World Economic Forum emphasized the importance of social responsibility in its programmes in Davos and around the world, these warnings were not taken seriously enough.
Today, we face a backlash against that system and the elites who are considered to be its unilateral beneficiaries. The danger of this backlash is that it overlooks the fact that the search for innovation and competitiveness is still the main driver of economic development, and ultimately social progress. It is not the market-based system itself that is the issue, but rather its implementation. It is the lack of adequate and trustworthy principles to maintain a social contract inside it, which is indispensable to a fair, prosperous and healthy society.
Moreover, the tendency to resurrect national borders and other obstacles to global interconnectivity overlooks the fact that the world has become a community of shared responsibility. Global cooperation cannot be undone without causing major damage to all involved. We depend on each other when confronting the challenges of pollution, migration, space exploration, terrorism and crime – to name but a few.
It is also true that some of the elites were at the origin of aberrations in the system, just as others triggered a popular outcry over excessive abuses of this power. But any society that wants to remain dynamic needs people who assume responsibility for political and economic successes and failures alike. In a fast-changing world, where our very notion of identity is being challenged, the ideological choice is no longer between left and right, but rather between open and closed – with one of the consequences being that people are increasingly opposing “cosmopolitan” elites.
Thus, the ideological battle currently raging should not be between defending the “old” system against the current forces offering simple answers to very complex sets of challenges. Instead, this impasse must urgently be overcome – to not only be responsive to the grievances and anger of large portions of society, but also to move forward. Failure to do so will only result in a further shift towards more polarized societies and a breakdown of the norms that are fundamental to social cohesion.
The future challenge: the Fourth Industrial Revolution
There is no new replacement or ready-made ideology that can be conveniently taken “off the shelf”. Our priority should instead be to redesign our economic and social systems, taking into consideration that humankind, thanks to global interconnectivity and the growing impact of the Fourth Industrial Revolution, is becoming more sophisticated, and the individual more emancipated.
The Fourth Industrial Revolution will completely alter how we produce, how we consume, how we communicate and how we live. It will redefine the relationship between citizens and the state. It will provide us with great opportunities for enhancing the lives of individuals and societies. It will allow, if we get it right, a much more human-centred approach, fostering not only material satisfaction, but also genuine individual and societal well-being for all.
The present focus of our economic and political discussions seems to completely miss the mark. We have now a historic window of opportunity to shape technological breakthroughs, such as artificial intelligence and gene editing, in the service and for the benefit of humankind. We have two options. We can either fully use the opportunities of the Fourth Industrial Revolution to help lift humanity to new heights, or we can allow ourselves to be controlled by the forces of technology and end up in a dystopian world in which citizens will have lost their autonomy.
Mastering the Fourth Industrial Revolution is a global challenge. The tension between globalism and nationalism is artificial. We have to manage our future based on the fact that we are simultaneously local, national and global citizens with overlapping responsibilities and identities. The best way to develop a sustainable future is through the stakeholder concept, which I developed more than 40 years ago, and which forms the base of the Forum’s philosophy.
The basic principle for the success of the stakeholder concept is to find long-term solutions based on dialogue, and endorsed by the commitment and willingness to achieve the best outcome in the shared long-term interest of all stakeholders. As the international organization for public-private cooperation, the World Economic Forum is committed to serving this purpose as a catalyst and convener.
The promise of a better future lies in acting together as stakeholders of a technology-driven global transformation process, with the objective of building a more modern, inclusive and human world.
The transition energy guarantor of global security . . .
The one day 15th World Forum on Sustainable Development in Paris ended on March 13th, 2017 in the presence of many personalities from the world’s governments, politics, business, academic experts in energy.
I want to first thank the President of the World Forum of Sustainable Development for his kind invitation and for allowing me to put my view forward in an intervention, as an independent expert. It followed on that of the Algerian Minister of Energy who has objectively presented his vision of Algeria’s. Utopia aside, fossil fuels such as gas, still have time to go as the main source of energy at least until 2030. But governing is anticipating, it is up to Governments to deal with the new and irreversible global energy changes notably those enshrined in the agreements of the COP21 in Paris and signed off a year later at the COP22 of Marrakesh in order to prepare the necessary energy transition.
It is a strategic mistake to reason as in the past on a linear energy model of consumption.
As far as energy engaging the security of Nations is concerned, the strategy of renewable energy must form part of a clear and dated definition of a new model of energy consumption based on an Energy Mix by evaluating resources to achieve all objectives that have to prepare the industries of the future. These will be based on the new technologies related environmental industries, object of the new economic revolution that is anticipated to be in 2020/2040
Strategy for the Energy of the Future
Photovoltaic solar energy refers to the energy recovered and converted directly into electricity from the sunlight by photovoltaic panels. It results from the direct conversion into a semiconductor of a photon to electron. In addition to the benefits associated with the low cost of maintenance of the Photovoltaic systems, this energy fits perfectly for isolated sites and whose connection to the electric grid is too expensive.
Solar Thermal energy is the conversion of solar radiation into heat energy. This transformation can be used directly to heat a building, for example or indirectly (such as the production of steam for turbo-alternators and thus get electrical energy). Using this transferred heat through radiation rather than the radiation itself, these modes of transformation of energy differ from other forms of solar energy as solar cells such as Photovoltaic cells..
By definition, wind energy is the energy produced as a result of the action of wind on specially designed turbines to generate electrical power.
Average solar irradiation in African countries, according to IRENA (International Renewable Energy Agency) is between 1,750 kWh/m²/year and 2,500 kWh/m², nearly double that of the Germany (1150 kWh/m²) which has an installed photovoltaic farm of 40 GW (a photovoltaic capacity 20 times greater than that of Africa).
The load factor of any photovoltaic systems would be much higher in Africa than in European countries. And by end of 2015, Africa had 2,100 MW of installed solar photovoltaic plant, 65% of this capacity is concentrated in South Africa and 13% in Algeria and 9% the Reunion.
In the past two years, the continent has more than quadrupled its capacity in photovoltaic farming but this would remain still modest in the light of the great African potential because some 600 million Africans do not have access to electricity.
According to the Agency, this energy would be competitive today with currently used fossil fuels, whether in the case of important plants or isolated micro-grids (as well as home systems). According to IRENA, the investment of large photovoltaic power plants in Africa costs decreased by 61% since 2012 and possible a decrease of 59% of these costs over the coming decade.
These currently are nearly $1.3 million by installed MW (the world average for photovoltaic is around $1.8 million per MW/h according to IRENA). IRENA highlights the fact that photovoltaic energy presents for Africa a decentralized and “modular” solution (with facilities of a few to several tens of MW) for rapid electrification of areas not connected to power grids.
According to experts, it is true that the energy needs of Africans are limited to a few KW/h per capita per year, for mainly electric lighting. Electrical power networks are rare in Africa; therefore there could be no possibility of economy of scale. Africans pay 2 times more expensive power than Europeans do. It’s always more interesting to have cheap electricity.
But industrial development requires great levels of power and heat specially. Photovoltaic source of energy is certainly more suited to small off-grid installations and for some African countries but industrial production would require this to be combined with heat production.
Renewable energy expansion would be part of the professed Energy Transition.
The transition may be defined as the passage of a civilization built on energy essentially fossil, polluting but abundant and cheap, to a civilization where energy is renewable, rare, expensive but less polluting and aimed at the eventual replacement of energy (oil, coal, gas, uranium) stock by energies of flow (wind, solar).
Energy transition refers to subjects other than techniques, such as those related to societal problems. It is a move towards an Energy Mix as justified by the scarcity of resources, thus the urgency of a new model of consumption on a global scale which poses the problem of energy efficiency, and a social consensus, today’s technical choices engaging society in the long term: how much is this transition, how much is it worth and who will be the beneficiaries?
It was necessary to first make few remarks on the current approach to development of renewable energy. We must target priority projects which contribute the most to the achievement of the objectives. Without any decision between the Photovoltaic and Thermal, we would discuss solar heat that seems suitable in the regional program of the South. Algeria that has significant potential in this area can become between 2020 and 2030 an exporter. The lack of knowledge of the field could not explain the selected program.
Indeed, wanting to test all technologies before opting does not seem to be the right approach. This would hide all studies that have been used including the studies in question had been carried out in collaboration with key research centres in the USA, as the ENREL, as regulators of solar technology: the DLR (Germany) and CIEMAT (Spain). The Kramer Junction plant works in the USA since 1980 with a capacity of 300 MW on the same technology that was used in Hassi R’Mel, Algeria.
Solar towers in Spain have been proven for many years. This is to identify the parameters of different technology assessment. With GTZ (Germany) the decomposition of the value chain by component and by cost helped to set a realistic integration of 70% for the solar heat rate. Manufacturers of solar thermal converge with this rate, while also according with the level to export electricity to Europe. Indeed Europe will need to import 15% of its needs by 2030 that is the electrical equivalent of 24 GW or the equivalent of 50 billion M3 of gas per year.
The study has also defined the conditions:- a stable political framework, a sustainable local market the size of 250 MW/year and a market that is open between the countries of the Maghreb. Technologies must correspond to the most important value potential allowing a rate of integration, the greatest creation of jobs, offering the best match with the electricity market and finally, the most important technologies with the greatest potential for cost reduction up to competitiveness with fossil fuels.
The technology partnership and integration generally appeal to private companies. The risk is too great for an investor to agree to be put under the control of a public company.
Transition based on Realism
It is therefore to identify the real actors and have a strategic vision based not on utopia but on realism as it is generally believed that laws and changes in organizations would not solve the foundations of problems, the political actors are therefore essential, referring to the political and social base. As far Algeria is concerned, I warned the Government and particularly SONATRACH of a suicidal adventure that could involve the security of the country, if these were to engage in massive investments in conventional hydrocarbons whereas the world at this time would undergo between 2020 and 2030 a major shift in energy consumption.
The Government that was misled in the past into believing that $90/100 per barrel would be the market price of oil, must at all costs avoid to reason about a model of linear consumption. It is that large firms in the U.S., in the European and Asian International spheres are reportedly investing massively, preparing the future in other alternative energy segments. Also, future profitability must register for the deposits between a fork of $40/55 and for marginal deposits between $60/70 before despite the recent report of the IEA on a possible barrel at above $80/90
What are the axes for the energy transition of the 2017/2025/2030 Algeria?
The first axis, would be to improve energy efficiency with new technology; energy consumption whether at the household level and / or the economic sectors referring to the policy of the currently widespread subsidies source of wastage that should be targeted for energy products. The Algerian Government would be bound to reflect on the creation of a National Chamber of Compensation that would be charged to coordinate all inter socio-professional and inter-regional equalization.
The second axis would be for Algeria to decide on investing upstream for new discoveries. But for the profitability of these deposits, it will depend on price at the international level and the costs,.
The third axis, Algeria planning to build its first nuclear plant by 2025 for peaceful purposes, in order to meet its soaring electricity demand.
The fourth axis, would be the option of Shale Oil/Gas (3rd global reserves according to international reports) introduced in the new law of hydrocarbons from 2013, folder that I have the honour to lead on behalf of the Government and handed over in January 2015. In Algeria, in order to avoid positions decided for or against, a broad national discussion, because we cannot minimize the risk of pollution of aquifers in the South of the country where as a semi-arid country, the problem of water is a strategic issue in the Mediterranean and African level.
The fifth axis would be the development of renewable energy by combining Thermal and Photovoltaic whose global costs of production decreased by more than 50%. Algeria has decided to apply the resolutions of the COP21 and 22, about global warming. But effective action cannot be designed by a Nation on its own. It will involve wide consultation with especially between the countries of the South Mediterranean and the Maghreb because for the Maghreb including Algeria, water resources are vulnerable to changes in climate. Water and its management problems would definitely affect the future of all these countries.
With more than 3000 hours of sunshine a year, Algeria has what it takes to develop the use of solar energy in a win-win partnership. For this purpose, the CREG (regulatory agency) issued decrees to accompany the implementation of the program of Algerian of development of renewable energy in the context of the implementation of a national fund for energy efficiency (FNME) to ensure the funding of these projects and grant loans at subsidized interest rates and guarantees for loans made from the banks and financial institutions.
By 2020, it is expected that the installation of a total power of about 2,600 MW for the national market and a possibility of export of the magnitude of 2,000 MW and by 2030, it is expected the installation of a power of nearly 12,000 MW for the national market as well as a possibility to export up to 10,000 MW. According to the CREG, Algeria plans to launch a tender for investors for a mega project of 4,050 MW Photovoltaic solar power plants, soon split into three lots of 1,350 MW each and backed by the construction of one or more factories of manufacturing equipment and components of solar power plants.
Development of electric interconnection between the North and the Sahara (Adrar), will enable the installation of large renewable energy plants in the regions of In Salah, Adrar, Timimoun and Béchar, and their integration into the national energy grid system. If these achievements were effective, apart from the problem of funding with budgetary tensions, the country would have by 2030, 37% of the installed capacity of electricity for domestic consumption from renewable sources.
In conclusion, economic dynamics alter the balance of power throughout the world also affect the political compositions within States as well as at regional and nationwide areas. Energy, in particular, is at the heart of the sovereignty of States and their security policies.
As I had to sustain it in various international conferences of mine and recently in a long interview by the American Herald Tribune of January 28th, 2016), co-development, and collocations, which cannot be limited to economics, including cultural diversity, can be the field of implementation of all the ideas at the level of the Mediterranean basin as to hopefully turn it into a shared Lake of peace and prosperity.
In the interest of both the Europeans and all of the southern Mediterranean populations, borders of the common market, of Schengen, of social protection, would be the borders of the environmental requirements of tomorrow. These must be along a line south of the MENA region for a lasting peace, where Arab, Jewish and all other ethnic populations have a thousand-year history of peaceful coexistence.
In these moments of great geo-strategic upheavals, the African continent with very strong potential, would have to face up to significant challenges in the 21st century, such as rivalries between the major powers, USA/China/Europe for its control, whilst by 2040, it will have a quarter of the world’s population and perhaps drawing the growth of the world economy. This is subject to good governance and of the primacy of the economy of knowledge and the struggle to lower global warming which hits it hard by the preservation of its environment. In this context, the development of renewable energy is the guarantor of the coverage of needs and energy security of humanity. –
Written in Paris on March 14th, 2017 by Professor, Expert Dr Abderrahmane Mebtoul, Director of Studies Department of Energy 1974/2008 – firstname.lastname@example.org
At the 15th Forum of Sustainable Development “The Mediterranean and regional borders” on Monday, March 13th, 2017 at 9, Avenue Franklin Roosevelt, Paris 75008, FRANCE.
See also recent contributions of Pr Abderrahmane Mebtoul on MENA-Forum.com
Avoiding rushing to the conclusion that a total accumulated loss of $7 billion, was consequent to Algeria’s association with the European Union (EU), we must look long and hard at the amounts of each year loss. According to the Algerian Customs statistics, the shortfall in duties, as a result of the EU and Algeria Association Agreement was worth $1.27 billion in 2015 and $1.09 billion in 2016. A 11th EU and Algeria Association Council Session will be held in Brussels on Monday March 13, 2017.
I have recently been recipient of the latest version of the partial revision proposed by the European Union following the Algerian revisions that comforts some Algerian proposals considered being not questioning nor amending the agreement framework.
This confirms the recent statement of an Algerian Department of Foreign Affairs official to whom the document containing 21 recommendations, would no doubt revive cooperation between Algeria and the EU so as to allow both sides to develop economic relations further and place these at the center of this cooperation, to give importance to this agreement and use its huge potential in its three components, e.g.: political, economic and human aspects.
As recalled in several of my contributions and echoing my conference at the European Parliament, after some concern of the international community following some Algerian media speculating on the end of this agreement, Algerian officials were clear in their response that for Algeria, it is not question of breaking the Association Agreement but only negotiating a win-win partnership, By the way and in addition to a good number of obvious questions, the above lowering of the Customs duties has on the other hand eased the import to consumers generally.
It will be to resolve any misunderstanding for a shared prosperity. At different occasions in both Algiers and in Brussels, the Algerian and European parties reaffirmed their common determination to enhance relations to maych their proclaimed ambitions.
The will would be to “densify” cooperation, according to the Algerian Minister of Foreign Affairs, who “claimed by Algeria that its evaluation process is not intended to about questioning the Agreement, but instead, to use it fully in the sense of a positive interpretation of its provisions thus allowing a re-balancing of the cooperation links,
On the European side, the talk was ‘constructive’ and bilateral relationships, in both the areas of energy as well as in the activity of business and trade, have unexplored, even if the potential were encumbered by red tape and persistent political decisions.
However, the situation in the country remains dependent on the evolution of the oil markets with sales that the country gets most of its revenues, recalling that energy cooperation, based on a specific Protocol, is at the center of the cooperation with the EU.
It is as such, that the Council of Ministers on October 6th, 2015 considered necessary to reassess the economic and commercial aspects of the Association Agreement with the EU that has not achieved the expected objectives for European investments in Algeria.
What is the evolution of trade between Algeria and Europe? And what can Algeria export outside its hydrocarbons that make up to more than 60% of its exports to the EU and ditto to Africa in the light of the embryonic state of its productive sector.
Officially, all exports declined to $28.88 in 2016 against $34.66 billion in 2015, or a fall of 16.7% whereas non-oil, of which more than 50% are derivatives of hydrocarbons fell to $2.06 billion in 2016 against $2.58 billion in 2015 (20,1%).
As for imports, these have also declined but at a lower rate to $46.72 billion in 2016 from $51.7 billion in 2015, down 9.62% giving a deficit in the balance of trade of about $18 billion; the amount of which there is need to add services and legal capital transfers. The balance of payments is the unique reference between 2014 and 2016.
It is a matter of deepening the reforms.
For Algeria, negotiating from a balanced position, would involve it changing its bureaucratic mentality. In this 21st century, it is the role of the State to regulate, and to reconcile economic efficiency with a deep social justice, investors and operators alike are driven by the logic of profit.
Concerns being certainly legitimate because tariff cuts are a shortfall in the short-term depending on sources between $1.5 and 2 billion a year as a result of the Tariff Relief, but we ought to think in terms of dynamic comparative advantages in the medium term.
Invoking the mono exporter situation of Algeria is no road holding; the majority of OPEC countries are members of the WTO. The great challenge for Algeria is to accelerate all comprehensive reforms for comparative benefit from inclusion in the international division of labour.
To benefit from the positive effects of the Agreement with Europe as much as from a possible accession to the WTO, a first clean-up of the Algerian economy would be necessary. The brakes to the overall reform are due to the fact of moving authority segments around that could explain the decline of the productive fabric. Any operational analysis should connect the advance or the brake to the reforms by analyzing the strategies of social presence; Government policy forces lying fluttered between two conflicting social forces. These are the rentier logic supported by proponents of import (actually only 100 controlling more than 80% of the total) and the informal sphere that is unfortunately dominant and the minority entrepreneurial logic.
This would explain that Algeria is in an interminable transition, neither a competitive social market economy nor an administered economy. The progress of reforms being inversely proportionate to the oil price and the value of the Dollar; reforms can only tentatively be made with inconsistency when only the price decline.
This explains also that despite successive devaluation of the Dinar, DZD5 in 1974 for a Dollar to DZD110 / Dollar in 2016 at the official rate, it has been impossible to boost non-oil exports showing that all blocking was and still is systemic related.
It is that 80% directly and indirectly from the growth rate of GDP mainly from Building and Infrastructure development and so is employment rate, that are all pulled by public expenditure coming from oil revenues that gives public or private wealth creation enterprise (often in debt to state banks) a negligible part.
Infrastructure being only a means, the unfortunate recent experience of Spain that bet on this segment must be carefully meditated by the Algerian authorities. Also, in order to attract investment, the latter should implement regulatory mechanisms to attract promising investors, avoiding periodic changes in legal frameworks, bureaucratic administrative actions not transparent source of demobilization and potentially scaring investors whether they are local or foreign.
In short, unlike some pessimistic forecasts predicting a worst-case scenario for the year 2020, Algeria, subject to good governance and a reorientation of its economic policy, has the ambition of its choice. For this reform of structures must intend to encourage creative added value investing through the overhaul of the system property, financial, customs, tax administration, and a new social regulation for the benefit of the poorest. There is urgency to specific objectives and a new institutional organization in order to give more coherence and visibility; otherwise we will always see the extension of the informal sphere to ever widening circles.
The macroeconomic framework relatively stabilized in Algeria would be fleeting without deep structural reforms, especially with the drop in the price of hydrocarbons, and the risk of exhaustion of the Regulatory Fund of foreign exchange reserves.
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