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mercoledì 16 dicembre 2015

Challenges in 2015/2020 Algeria: five lessons, in front of the fall in oil prices

hydrocarbures.jpgThis paper is a brief summary of a long relationship of fruit under my leadership, the participation of 26 international experts, submitted to the government, (10 volumes 1000 pages in January 2013), where we emphasized the importance of the potential of 'Algeria, in order to avoid the vision alarmist, being all the more realistic for a speech of truth.
The last international relations (2014/2015) show that the business climate must be improved, Algeria despite its potential, often being dismantled. Do not have a vision of pessimism. Many successes shortcomings, but it is absolutely correct. I am convinced, to avoid the dramatic experience of the impact of the crisis of 2006, the battle of the future economic recovery of Algeria and its place in the global competition to win through good governance and its ability to innovate.
First lesson: the socio-economic policy after political independence under the program of Tripoli was conducted exclusively by the state with different variations. Paradoxically, the macroeconomic parameters Algeria appear as positive but ephemeral without structural reforms. From 1965-1979 with an exclusive orientation toward productive investment. This took place throughout the state ubiquitous entire cycle: planning, financing, the implementation of investment and production. From 1980-1990 mainly oriented infrastructure BTPH and businesses. In 1991-2000 due to the particular situation faced by Algeria, with the advent of terrorism and suspension of payments can not be, strictly speaking, development policy but with the cessation of payment of macroeconomic adjustments and extremely painful macro social due to the requirements of the IMF. From 2000-2015, because the social demand has been compressed and mass destruction between 1990-2000, mainly oriented infrastructure policy. Main trends aggregates reveal macroeconomy under control as far as the function of the risks of hydrocarbons annuity represent 97/98% of total exports, 4/5% excluding hydrocarbons according to customs statistics for 2015 as products manufactured and means for the mostly derived from hydrocarbons. Foreign debt remains low at this time because of prepayment, less than $ 4 billion, with goddesses reserves expire between 140/145 billion until the end of 2015, but still to hydrocarbons. The budget begins to know the budgetary pressures due to the fall of 2014 the price of hydrocarbons. In addition, the yield on the debt threatens the country by 2020 in case of a price less than $ 70 and maintain the current level of public spending that is based on a price of 115/125 dollars. While the trade balance has benefited greatly from the increase in hydrocarbon prices in 2007/2012, as of 2010, however, imports following an upward trend, the important Algeria 70% of the needs of families and businesses are public or private, whose integration rate not exceeding 15%, with a decline of the industrial fabric of less than 5% of gross domestic product. Inflation, which was a record high in 2012 (8.9% according to official statistics) is relatively controlled since the end of 2013, but it artificially compressed by generalized subsidies and social transfers, non-target ($ 60 billion in 2004 and 27/28% of GDP). But inflationary tendencies start to appear since the second half of 2014, to meet a sharp increase in 2016 due to the postponement of the dinar against the dollar, as well as the euro, from 75/77 to 106 dinars a dollar / 107 dinars a dollar and 85 dinars for 1 € 116/117 dinars. For an objective assessment, applicable to burst the index of the NSO, and analyze the links between income distribution and social strata model of consumption, earn 20,000 dinars per month net having not even perceived inflation as perceiver 200,000 dinars. Including public banks which concentrate over 85% of loans are confined to small investors wickets administrative accompanying partly reflecting the low efficiency of the banking system, which does not include lethargy of the stock system. Public banks are sick of their clients including public enterprises (consolidation of more than 60 billion Euros in 1971/2014) 70% is returned to the starting projection that breaks the block is systemic and that it is not just a matter of capital Monetary but strategic management linked to socio-economic policy generally. Public industry is largely obsolete and concentrates overall losses, despite repeated renovations that require renovation and modernization. The clearance of debts held by five banks on public enterprises, in the past, which could be repeated if populist measures, has led to significant disbursements Treasury. Thus, the resources of the country are based on rents that contribute to anesthetize change of intent. Paradox on the price of oil is low longer feels the need to reform, and slows down when the current is high ...
Lesson, Algeria seeks his difficult transition from a public to a more liberal economy with a social purpose. It 's' is open to a market economy, but not mastered, the crisis of 1986, the effects of lower fuel prices. However, the Algerian economy remains an economy essentially public, the whole economy is driven by public spending through hydrocarbons annuity. The socialist heritage is strongly present in the philosophy and practices of social and economic life and the sustainability of the public company. Population pressure makes Algeria increasingly dependent on imports, which has laid the foundation of a productive apparatus capable of facing international competition. Currently, short-term political considerations outweigh the long-term prospects. While the majority of the electorate will draw its income from employment in the public service can benefit from social services to low-cost, basic reforms will have little chance of progressing from the opposition as the general public the techno should implement these changes. Foreign direct investment in non-oil and manufacturing sectors are very low, foreigners are attracted contracts from BTPH. .in The same time as the framed under the rule of the 49/51% set by the 2009 law finance, generalized for banks in 2010, most foreign countries have announced that for SMI / SME, this rule does not work, first distinguishing strategic segments where this rule would be applicable, and the right of first refusal, it decided only by the Cabinet and not framed by a law that limits the government's action, where non-core segments and blocking minority would be sufficient. Agriculture is an important reservoir of labor and can be used in the event of a decrease in the price of hydrocarbons as a social buffer reducing the food bill, ensuring food autonomy. In general, private companies operate mainly in the service sector, with a predominance of retail, small business BTPH and traditional production. Except oil, some segments of telecommunications, some mixed companies, productive foreign sector is marginal. Paradoxically, Algeria relies heavily on technology, the after is increased from 2 billion in 2002 to EUR 12.11 billion in 2010/2014. .Therefore, The results of the current policy are now clearly visible on various strategic aspects of the Algerian economy. The current behavior is a "semi-rentier", and does not look for profound reform of the economy. Oil revenues generates several negative effects of the economy to their advantage, which further strengthens the country's energy monoculture and the informal sphere with the continued depreciation of the Algerian dinar reflection of low productivity and local production, or a discrepancy of 2014 about 60% of the price on the official market and the parallel market. The sector suffers from low profitability and significant additional costs to have the economies of command; Charging systems are often disconnected from economic conditions; supply of systems or contracts negotiations born of the public procurement code are slow and expensive; corporate social vocation is relieved but strongly influenced attitudes; cooptation of personal systems involve redundancies and lax management; big industry has sufficiently contributed to the development of the industrial fabric and is sometimes used his public status to grow regardless of the regulation; most large complexes have been trying to integrate everything, not only the industrial classic outsourcing, but also functions easily available in the market (cleaning, security, catering ...). And 'only under economic pressure late outsourced these activities; low regard for the environment can cause serious problems attracting international groups who know the evolution of international jurisprudence; the one-sided interpretation of the rules generated litigation as evidenced by the many disputes, including those of Sonatrach abroad
Lesson three: the current management of foreign trade, inherited from the past system impairs the functioning of the sector, including for export. The historical weight of bureaucracy characterizes all agencies involved in the life cycle of the company is a constant obstacle to the efficient operation of the same. Their disappearance will be only gradual. This is probably exacerbated by a slow judicial system, not transparent and not suitable for a modern economy. The goal of infant industry protection has created a bureaucratic management of procedures for import authorization which has become a breeding ground for many practices do not comply. The accession of Algeria to the WTO would be a strong signal to simplify this system obsolete habits but catches have generated lucrative and powerful monopolies that are slow to disappear or round. The formalities of exchange controls remain largely interpreted by the staff of the bank that maintains the nostalgia of the power of his master role. As for foreign investment, corporations generally seek comparative advantage to produce competitively for a solvent local market but also to a regional market, and / or worldwide, integrating their trade and productive capacities, hence the importance of 'bridge' Maghreb integration between Europe and Africa, where Algeria could find comparative advantages. The model was dominated by the rate of vertical integration goes up against the new global changes. Bureaucracy (time of negotiation and implementation) and legal uncertainty (tariffs, taxes, regulations) have further reinforced the image of a tough market and closed, Algeria isolating the new global changes. The main problem to be solved is the introduction of targeted subsidies budgétarisées by parliament to avoid artificial transfers of profits from the transfer prices for tax optimization places reliable and low-tax, distortion of competition, the monopoly source of additional costs and, finally, the improvement of the information system (which limits access to national data to foreign companies) and distortions in access to information technology has now become urgent. For the highlight in the twenty-first century is the internationalization of economies makes obsolete systems autarkic, opposite the State policy is often a dose or an oscillation between excessive liberalism and interventionnismes, explaining that in the face of new constraints In most countries , the state has largely changed his action. The choice of value chain development must be consistent with international trends, because the inevitable trend for the internationalization of economies tend to overshadow the policies and national controls for the benefit of regional or global economic spaces. Prime contractor, the state evolves into a regulatory role through a series of levers that remain master (credit rate, exchange rate, budget deficit, fiscal and public services ...) and regulatory (trade, taxes, telecommunications, transport, labor law ...). Economic globalization has been driven by multinational corporations and by the Member; now it becomes a political and economic phenomenon copied by states themselves to the main strategic areas. These are sovereign states who sign agreements establishing a framework conducive to trade (EEC, ASEAN, Mercosur). Supranational organizations often ensure the application of the rules between the partners. Thus, the WTO, which wants to unite Algeria is an institution responsible for enforcing the law and arbitrate conflicts between the United States through the ORG (Dispute Settlement Body). This does not mean the end of the role of the state, but a strategic role in the regulation. The issue of globalization concerns the policy of openness of Algeria to address problems from a different angle. The inclusion in the international organization of industry and services, is an emergency situation in Algeria in order to adapt the support measures needed, including: increased competition on domestic markets; market access; the growing importance of research and development and technology in business strategies; participation of international procurement systems; development of SMEs / SME for export; business climate improvement measures (combating bureaucracy); participation in new global networks: logistics, Internet, financial, distribution. The important thing is not the specialization in the branches away from the mechanical (view obsolete) leads to excessive debt without solving the problems of development, but in the dynamics of the products of technological innovation and management.
Lesson Four: the EEC is the first partner and especially its main export market, while Russia, Qatar, Iran, and soon in the United States in 2017 (the revolution of the gas / oil shale) are tough competitors including the European market . As part of its accession to the EEC and possibly joining the WTO, Algeria opens its field of multilateral cooperation that should further strengthen exchanges through reciprocal commitments on dismantling its tariff protection (reported in 2020 instead of 2017 ) and the gradual opening of the market including: the reduction of import quotas for agricultural products; the establishment of a maximum tariff on industrial products; an Information Technology Agreement; the liberalization of trade in services and market access services; opening a wide field of both regional and European multilateral partnerships; strengthen structural reforms including privatization and monopolization (new private actors), to equate the private sector and the public sector, which is home to the vibrant manager to give them autonomy of management, to promote a competitive environment; to review its management standards, the Algerian State to spend 2 times more than the average of developing countries for half the economic and social return in Asia. In addition, it comes to fighting against the informal sphere which represents over 50% of the economic area, integrating with new economic mechanisms and bureaucratic authoritarianism that produce the opposite effect. The customs and tax systems, complex must be reformed and adapted to international standards. The lack of distribution networks of raw materials, materials and / or replacement parts makes it impossible responsiveness and logistics required by international subcontracting; Weak services infrastructure and the difficulty of acquiring industrial land pose the problem of material structures to create new activities. It should improve the external environment: institutions, infrastructure, including anti-dumping action to review subsidies -the telecommunications policy, human skills that the education system and provide an accurate database on exports, loans, guarantees and exploration operations.
Lesson Five: Algeria needs to invest in the knowledge economy and the segments in internationalized sectors for comparative advantages. And 'urgent the promotion of research and development - R & D tax breaks: support for research and development of technologies -For - Improved support institutional and university collaboration / public sector / private enterprise. Otherwise it should not expect the creation of a sustainable production system. The free movement of goods generates hyper-competitiveness that requires a rapid redeployment of resources at the regional scale (tomorrow worldwide). Improper maintenance of uncompetitive sectors is equivalent to an indirect subsidy but also preventing the optimization of invested capital, penalizes the future of the most dynamic. The analyzes of international trade, for a long period, show that the industries have a life cycle similar to industrial products, however, more complex. The countries 'convergent' (who took on the living standards of the group of old industrialized countries) are those that have increased their advantages over dynamic products .. We must then consider other parameters that explain TFP production (share growth that is not explained by the growth in the stock of capital and labor, but the immaterial. Use of international trade statistics can reveal the characteristics of industrial fabrics. They provide clear structure of specialization of a country, particularly its ability to insert international . Analyses show that private companies are an area of ​​greater economic dynamism that public companies as they adapt faster to market and make better resource allocation. Their weight in the economy is a factor indicative of substantial adaptation. The choice of routes development they need to stick with the socio-economic and cultural life of the country. The high population has generated a sharp increase of the Algerian population, up to 50 million inhabitants in 2030 (39 million at January 1, 2014). The jobs created in the field of heavy capital intensive cost between 4 and 10 times more than in SMI / SME. For private companies, the performance is still hampered by the limited entrepreneurial know-how, but also by the difficulty of access to modern technology and quality standards obsolete. In addition to the mobilization of domestic savings (low banking penetration) where everything is treated in cash with the importance of the informal sphere which controls 40/50% of the money in circulation, we have to establish networks to better attractiveness of the country to FDI as well as funds Community migrated by creating channels abroad This should be handled by the banking system remains to modernize (eg leases, bills discount, commitment contracts, etc ...).
Conclusion. The return of growth requires the rule of law, a renewed governance based on higher morality of those who run the city. Because of budget pressures are, the oil spill to be sustainable over time, which implies a greater efficiency of public spending .. The development of Algeria, should be based on local initiatives to launch productive activities because each centralized action is intended to fail without local involvement .. I am defeated, in order to avoid the dramatic experience of the impact of the crisis of 2006, the battle of the future economic recovery Algeria and its place in the global competition to win through good governance and its ability to innovate. Algeria has the potential subject of a clear political will to speed up structural reforms, involving the mobilization of all Algerians, taking into account their different sensitivities.
Professor of International Universities expert in strategic management Dr Abderrahmane Mebtoul

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