Since Algeria’s privatization agenda began in 2005, the process has continued to play a lead role in attracting foreign direct investment (FDI), paving the way for further liberalization plans after the country’s economy suffered years of mismanagement under a socialist regime. However, the privatization of Algerian industry has not delivered the expected results. Investment has been hampered by delays in the privatization plans. Critics doubt the ability of the government to privatize the near 100 firms they targeted for sales in 2008. The question of land, in particular, is often among the main obstacles. Asked about the meager results, Algeria’s Minister of Industry and Investment Promotion Abdelhamid Temmar said “the economic problem regarding land will be permanently resolved before the end of 2008”.
Verifiable data is still hard to obtain as Temmar’s ministry does not follow the strictest of transparency standards. Balance sheets are not fully disclosed and parties involved in privatization deals are still kept in waters murky to the public eye. However, property transfers have amounted to $1.9 billion, with capital contributions of $507 million, which have allowed the government to sell companies without their debts.
The former Algerian Minister of Finance, Ghazi Hidouci Hamrouche, commented on the lethargic nature of the privatization process. He said “the lack of pseudo-liberal regulation and form leads to a deadlock. The origin of the crisis stems from the inability of the government to privatize banks and other large national companies, although attempts were made to sell off state assets to foreign companies.”
Hamrouche noted the particularly poor governance used in privatizing banks during the current credit crisis wondering “is this the time to open our system to uncontrolled speculation? Should we do so at a time when some are renationalized or bought cheaply? Be careful not to privatize the profits when things are going well and socialize the losses when everything goes wrong.”
“Banks are not like other businesses,” advised Hamrouche. He warned that “we must address the issue of their ownership in the context of fiscal and monetary policy. They are at the epicenter of the functioning of the economy. We cannot simply ignore these choices.”
Temmar himself recognized the poor policy of upgrading business at such a slow pace, mentioning “there is a quarantine of companies that have really been affected by the upgrade.” The lack of domestic enterprise is a situation that will be threatened as Algeria accedes to the World Trade Organization (WTO) sometime before the end of 2008.
Aware of privatization’s mixed results, Algeria’s government has decided to accelerate the process, mainly through financial incentives, simplifying administrative procedures, adopting a comprehensive strategy to transform the national economy, and promoting privatization, especially as foreign investors continue to attack Algeria for the lack of transparency on the sale of public enterprises.
Temmar has recently toured Europe to promote transparency of Algerian companies eligible for privatization to potential investors. According to him, “we are targeting the regions which will enable us to hold road shows based on the potential of the regions and what they can bring us.” For Algeria, foreign investment via privatization offers industries a chance for revival after much of the domestic industry remained stalled for several years.
With a privatization that could take three to six months with regular, transparent follow-up assessments made thereafter, Algeria could find an influx of foreign capital with a firm-state social contract implemented if the government pushes investors to adjust action plans to add value to the nation’s economy and workforce. One such possibility is strengthening economic links within Algeria’s economy. Large-scale infrastructure development through economic support programs promise to make significant improvements in integrating transport and telecommunications networks, in addition to upgrading payment systems.
For 2008, Algeria Telecom and Crédit Populaire d’Algérie (CPA) are set for privatization. The former has attracted attention from 45 possible buyers seeking a share varying between 35% and 51%. Although CPA’s privatization was stalled in 2007, the sale is likely to go through eventually, marking one of the largest privatizations yet. A slew of other companies also set for privatization, include electric and manufacturing firms as well as Sonatro and EVSM, who specialize in road works, chemical manufacturers Enasel Alphyt, and Aldar. Strategic firms like Sonatrach, Sonelgaz and Air Algeria remain off the privatization agenda.
