Employment Policy in 2017 – 2020 for Algeria

Aug 14, 2017

Or else Facing Unemployment Increase?

The National Office of Statistics (ONS) has this month announced unemployment that is worrying but predictable is on the increase. Moreover, despite all investment and employment agencies opting for a maximum of projects with financial and tax benefits, it should however be asked if these projects were fit for purpose as per a global vision of the country’s development. And, whether these are promising segments of sustainable growth or just some cosmetic operations for the redistribution of the rentier annuity to calm the social front? This contribution would want to look at Employment policy in 2017 – 2020 for Algeria and here it is as compiled from various write-ups of mine as leader of a multidisciplinary team of economists, sociologists and demographers between 2007 and 2008 on an audit (1) for the Algerian Government on employment and wages (eight volumes 980 pages).

Algeria according to international observers, as reiterated on November 2, 2016 in Algiers by an independent expert with the delegation of the European Parliament in Algiers chaired by Mr. Antonio Panzeri, Chairman of the Delegation for Relations with the Maghreb countries, has a full potential, subject to far-reaching reforms, to establish a diversified economy responsible for the creation of sustainable jobs and therefore the stability of the Mediterranean region and Africa

Structure of employment and unemployment between 2013 / 2017

The Algerian population has grown to 41.30 million on January 1^st, 2017 and in April 2017, according to the ONS, the workforce reached a total of 12.27 million people with 2.52 million (20.60%) of women, against 12.12 million in September 2016, and a positive balance of 160,000 people, or an increase of 1.3%..

By the end of 2015, the active population was 11.93 million and unemployment for the same period, according to the ONS, was 11.2% with a 29.9% of youth unemployment.

According to the ONS, quoted by the Algerian Press Service (APS), the active population, was in April 2017 estimated at 10.769 million against 10.845 in September 2016, registering a negative balance of 76,000 people as compared to September 2016 where six out of ten people are on average long-term unemployed, which means 62.2% are looking for a job for 1 or over a year.

The unemployed population reached thereby 1.50 million, or 12.3% nationally, an increase of 1.8 point compared to September 2016. Youth unemployment rate for the 16-24 years was 29.7% and the distribution according to education, it was found that 787,000 unemployed had no degree , or more than half of all the unemployed population (52.2%). Thus, unemployment without qualification rose from 7.7% in September 2016 to 10.1% in April 2017, whereas that of graduates of vocational training increased from 13% to 14.8% between the same periods.

On the other hand, unemployment amongst university graduates declined slightly from 17.7% in September 2016 to 17.6% in April 2017. Still according to the ONS, the decline in the volume of employment between September 2016 and April 2017 has affected the sector of the construction industry with a negative balance of 91,000 people, and that of trade, services, and public administration a negative balance of 84,000 whereas, a positive balance was recorded for the sector of agriculture (63,000) and industry (36,000) compared with September 2016.

The preliminary report of the International monetary Fund (IMF) on the global economic outlook for Algeria shows that if in 2016, the growth of real GDP was 4.2%, the situation is expected to significantly deteriorate in 2017 and 2018. Indeed, the IMF expects growth of 1.4% of GDP in Algeria in 2017 and 2018; the Algerian economy should know stagnation, with a growth rate of GDP of only 0.6%. A direct result of the economic slowdown, the unemployment rate should substantially increase over the same period up to an estimated 13.2% in 2018 with an inflationary trend always according to the IMF that we are trying to compensate by creating jobs to very low value added.

An April 2016 investigation of the ONS confirmed that services sector were the trend of the economy with its correlation in employment. But these services sector are basically small trade and services representing 83% of the economic area with very low productivity and not comparable to those of the developed countries where the services sector notably through the information and communication technologies create opportunities for economic growth and generate productive employment.

Indeed, in April 2016, the structure of employment by sector of activity highlights market and non-market services to absorb 61.6% of the total work force, followed by construction (16.8%), industry (13%) and agriculture (8.7%). In a more precise way, on administration, according to the public service, the number of staff on January 1, 2015 is of 2,020,172 officials including 1,608,964 full time (79,64%) and 411,208 (20.30%) contractual agents.

State central administration is represented by 313,171 agents or 15.50% and 813,725 of decentralised national authorities officers or 41.57%, 312,009 local authorities administration agents or 15.4%, public administrative bodies 449,268 agents, or 22.24%, and all public scientific and technology 105,999 agents, or 5.25%. the young represent 274,074 agents, the 30 to 40 year old 735,756 agents, the 41/50 year old 668,725, the 50 to 59 years 92,580, and the more than 60 years only 20,944.

By sectors, the Interior represent 29,22%, education 29,34% with 592,831 of which 297,394 female agents, public health 13.19% with 138,581 out of a total 266,525 agents, higher education with women’s 8.50% of a workforce of 95,118 out of 171,761 total agents, finance with 4.15% vocational training with 2.80%, justice with 2.16% and other sectors 10.64%.

Investment between 2000 and 2017 allocation

Knowing that the industrial sector represents less than 5% of the gross domestic product (GDP), and on these 95% are SMIs/SMEs making up the Algerian productive fabric today going through difficulties because of bureaucratic, sclerotic financial system, socio-educational system not adapted, land disorganisation, in addition to competition from an informal sphere that controls 40 to 50% of the money in circulation. It must be asked if the young developers approved by programs such as the National Agency of Investment Development (ANDI), “Agence Nationale de Soutien a l’emploi des Jeunes” (ANSEJ) and other agencies responsible for the promotion of employment, have the qualification and above all the experience necessary to manager projects, like what is happening everywhere in the world, running a business in a competitive environment in order to have competitive prices.

Is there not a risk of wastage of oil revenues related financial resources and the use of Treasury towards the reorganization of public enterprises? As this is currently the case for El Hajar real financial chasms despite its public euphoric promises of the resolution of all problems between 2014 and 2015.

Because the current political  industrial, without coherence is based on the material age (iron-cement) of the 1970s believing it to be the silver bullet.

Was it not a reasonable path meanwhile a real revival of non-hydrocarbon segments, to invest in the acquisition of knowledge by additional training and internships so as to prepare seriously for insertion in active life permanently?

How can we not forget that, according to official data in terms of the distribution of projects by sectors is transport that has attracted the most investment, closely followed by the building, public works, followed by far less than 15 to 20% of the industry and agriculture sectors with a low foreign direct investment FDI.

Large firms choose to settle in the neighbouring countries and trade with us mainly because of the 2009 Finance Act with its widespread share ownership rule of 49 / 51% is considered too protectionist by all foreign investors hence slowing the momentum of the IDEs towards the SMIs/SMEs. In General, the results of employment of the ANDI, the ANSEJ and the CNAC agencies with reference to projects and not in intention are mixed despite many benefits.

As according to some sources, more than 50% of the projects are abandoned after receiving benefits and the many disputes with banks about non refunds attest to this.

However, before any costly operation without analyzing its profitability in terms of dynamics in the light of the new technological changes and global managerial systems, a serene balance would mean to answer the following questions and this in a way specific and quantified:

• What is the assessment of the ANDI, “Caisse Nationale d’Assurance Chomage” (CNAC) and the ANSEJ since their existence in the effective realisation of these projects and not those filed in and their legal status;
• What is the time limit for projects carried out between the time of the deposit and the actual realization knowing that time management is of the essence;
• For those realised projects how many got bankrupt according to the rules of the commercial code;
• What is the share of hard currency vs. Dinars of these projects;
• What is the level of bank debt of projects with the amount of bad debts;
• What is the breakdown of bank credit per projects;
• What is the exact amount of tax benefits for both the realised projects and those not carried out;
• What is the breakdown of the jobs with the level of qualification per projects and those created insofar as the development of the 21st century is based on the development of knowledge;
• What is the contribution to the country’s real added value of these projects;
• Are these projects notably those realised up to international values insofar as with globalization, that despite the crisis, we have an open economy due to the fact to Algeria’s international commitments.

Also, to get an idea of the necessary balance and in order to go beyond the current entropy, it is necessary to assess the impact of public spending thus:

• On the rate of growth, the unemployment rate and the purchasing power of citizens
• Conducting surveys so as to highlight the distribution of income and consumption by strata model and determine the concentration index in real and not fictitious terms, and according to a dynamic medium and long term vision
• The share of markets granted to national (public and private), distinguishing also self-financing and borrowing from banks and especially their production capacities,
• Clearly distinguish within the investment part of hard currencies and part in Dinars;
• The share of contracts awarded to foreigners;
• Have these contributed to the accumulation of the organizational and technological know-how or was it turnkey contracts ;
• What is their equity contribution and the share covered by Algerian banks;
• What has been the amount of the flow of foreign direct investment and transfers of capital to Algeria;
• What is the amount of currency outflow (goods – services often ignored of 10 to $12 billion dollars per year between 2010 and 2016) and legal capital transfers and finally analyze the impact of the implementation of the import licenses that must be part of a strategic goal of boosting without complacency the national productive fabric, being transitional and granted in total transparency to avoid pension situation and respecting international agreements.

For a new political job and wages policy

There is a universal law; the employment rate is a function of the rate of growth and of the structures of the productivity rates of competitive value-added enterprise. Jobs are not created through decrees or State voluntarism; the solution of ease is creating jobs in the administration.

The official unemployment rate of 12.3% for April 2017 is heavily biased including overstaffing in both Governments as in public companies, the fictitious temporary jobs and jobs in the informal sphere.

Paradoxically, because of the sectoral allocation of investment through public spending, strongly biased emphasis on jobs with very low qualifications such as the construction industry, graduates are more likely to be unemployed. This sector will create between 300,000 / 400 000 jobs a year between 2017 and 2020, which are in addition to the current unemployment rate underestimated due to demographic pressure, the entry on the labour market of women underestimated in the statistics, in order to solve the nagging problem of unemployment.

What will become of the 2 million students out of universities between 2018 and 2020? In general, foreign exchange reserves are only a monetary sign to stabilise the currency against the Dollar and the Euro and no sign of development.

Inflation and unemployment that we might artificially be compressing through the rentier revenues of hydrocarbons are the consequences of the disease of the social body, i.e. of the inconsistencies of the socio-economic policies. Without widespread subsidies, non-targeted, combined with the slippage of the Dinar, in the case of non-increasing production and real productivity, of the decline in foreign exchange reserves that sustain the Dinar value by up to 70%, the inflation rate could, in the coming years, reach double-digit with inevitable social tensions.

With the decline in receipts from hydrocarbons, this situation of widespread subsidies, tax benefits and subsidized interest granted in many areas without impact analysis, is untenable.  Without the unproductive jobs and more in case the reduction of public expenditure, the growth rate being pulled to 70 and 80% directly and indirectly by public expenditure through hydrocarbons related revenues, including the construction industry, with the risk of a property bubble, with the decline in purchasing power, the unemployment rate beyond the official rate.

While not having a mainly negative view, there were lots of achievements, perhaps with many deficiencies but there is urgent need for a strategic vision to move beyond the current situation in this world in perpetual motion and a discourse of truth would be required. The fact is that Algeria still in 2017 in transition, is neither a State-controlled economy still very far from a true market economy that is characterised by a productive and competitive economy.

During this difficult period of transition from a State to a competitive market economy and the rule of law is that the reforms are timidly initiated despite speeches that contradict daily social practices, and always restrained especially as the price of oil increases. Banks or rather rentier pension distributers continue to operate as administrative shops, and often by doing so delay reforms issues through attacking the technical more than the organizational aspects, whilst they are the driving reforms; with privatization and partnership as a means of investment and value-added trampling due to lack of consistency and transparency; food bill is high despite the famous agricultural program (NADP) which should take stock of the fact of several billions of dollars in spending and bureaucracy and corruption continue to plague.

As consequence of the inconsistency and lack of visibility of the socio-economic policy and practice for many decades not only for the current period, the currency, we are witnessing the dizzying fall of the Dinar in the official market and on the parallel market with the return to inflation that is compressed by widespread unfair subsidies via the rentier pension whereas the targeting is necessary, in the speculative activities, the discouragement of knowledge and the enterprising creator of wealth, to the extension of the informal sphere, to social tensions through the various local governorates that reflected the difficulties of the economic system to generate growth away from hydrocarbon, only condition to deal with this social unrest.

Summary

Facing inevitable budget tensions between 2017 and 2020 and the price of oil being down for a long time, it will be as based on the results quantified and dated a matter to implement both economic and social strategies on adaptation and solidarity policy, assuming a broad national front, taking into account the different sensitivities of all local and international, the mutations at the dawn of the fourth world economic revolution with geostrategic upheaval (1).

A broad social front is necessary to accelerate all structural reforms. Algeria needs to avoid the lethargy and sterility that all of its children in their diversity join forces in a same economic and social development objective. Because, a multidimensional crisis in today’s Algerian society is fundamentally systemic, beyond the strictly economic scope, referring to political aspects involving renewed governance and therefore the reestablishment of the State would be the wisest. Moreover per all international observers, Algeria having all the required potential, it is only a matter of far-reaching reforms, that are aimed at establishing a diversified economy that will in the end be the guarantor of stability not only in the country but also in the Mediterranean region and the African continent.  ademmebtoul@gmail.com