France’s presidential elections impacting Algeria

by | May 9, 2017

And the prospects of mutual cooperation . . .

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

  1. -«Wahl in Algerien Der Graben ist tief – wer stimmt ab?» – www.tagesschau.de –ARD-  04/05/2017
  2. -« 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)
  3.  – American Herald Tribune 28/12/2016 «  Prof. Abderrahmane Mebtoul: Any Destabilization of Algeria would have Geo-strategic Repercussions on all the Mediterranean and African Space
  4.  -Interviews with the weekly Point Afrique (Paris-24/03/2016) and the Express (07/04/2016, Paris) on the prospects for co-operation Algeria-France.
  5.  -This theme was developed by Prof. Abderrahmane Mebtoul, on 7 April 2016 in Marseille at the Mediterranean Villa

 

Where is the Market’s Invisible Hand gone?

An article in French by Ramdane Mohand Achour and published on March 25th, 2017 by LibreAlgerie is proposed. It is about Algeria in the course of the persistently decline of its hydrocarbon exports related revenues is currently undergoing soul searching questioning of what is best for making its economy work. Many are wondering where is the market’s invisible hand gone? Like many countries, Algeria that is struggling with falling revenue from lower oil prices is presently looking for ways to upgrade its energy systems to fully support current and future requirements of its economic growth.

Where is the Market’s Invisible Hand gone?

Proponents of liberalism argue that the market naturally produced a self-regulating mechanism that corrects imbalances born out of the multitude of society shaping special interests. This mechanism, called “the invisible hand of the market”, would satisfy the public interest. The law of supply and demand would naturally harmonize economic situation marked by the selfish will of each individual. In this scheme, the State doesn’t have to intervene if it is to guarantee the exercise of free and undistorted competition intended to benefit at all.

The current state of the oil international market turns wrong this angelic vision of a self-regulated inclusive market. Left to itself, the market has experienced a bullish cycle during ten years (1999 – 2008). The price of the barrel thus reached 140 dollars in June 2008 before tumbling within the 2008 crisis, but he soon to rise in 2009 again to be slightly above 120 dollars in April 2011. In 2014, it exceeded even the 110 dollars.

Such a situation was undoubtedly beneficial to the producing countries and companies in the sector as well as those rich countries whose States taxed petroleum products so as to keep their economy afloat. It was not the same for the non-producers, and all poor and middle-income countries who were struggling to feed themselves because of their limited financial resources. The market did not benefit to all, far from it.

The second disadvantage of this situation of relatively expensive oil lay in the fact that it boosted search for more hydrocarbon and production and allowed shale oils to make a big splash, in a full sense of the word, on the world market. With a production of 11 million barrels a day, the United States will see their rate of dependence on foreign oil drop to 30% in 2016 down from 60 percent in 2005.

Such a dynamic did fail to cause a state of overproduction; the purpose of the market is not, contrary to the image that its promoters sell us, to satisfy human needs, but rather to garner, first and above all for not only, profits, but for maximum profits.

Proponents of the “the invisible hand of the market” were right about one thing: in an economy obedient to the laws of the market, the engine of the “economic agents” is selfishness, the individual profit, at the expense of the lives of the producers (workers), consumer and research of nature which we see what mess it is today.

Overproduction intervening in a situation of de facto global stagnation, in the first place, the downturn in the economy of emerging countries (China, Brazil…) dropped slowly but inexorably the price of the barrel. Out of $110, it fell to $35 in February 2016. Decided to reduce the share of the North American Shale oil producers, Saudi Arabia will trigger a price war which played a vital role in this descent into hell.

If the drop in prices could theoretically help poor and middle-income countries producers, it on the other hand hit with full force the producing countries, primarily those of OPEC. For the first time in its history, the rich Saudi Arabia could no more balance its budget and had to resort to austerity. Its involvement in Yemen who turned into a quagmire for Riyadh, financial support of ‘takfirist’ groups in Syria and Iraq and a fierce will to challenge Iran contributed to accentuate its financial crisis. In this sequence of fall in the price of oil, as in the previous bullish sequence, no sign of self-regulation by the market. The invisible hand had other things to look after.

Last November and to everybody’s surprise, the 14 member countries of OPEC, under the impetus of Algeria but due to the will of Saudi Arabia, decided to reduce their production to the tune of 1.2 million barrels a day. Eleven countries non-members of the cartel, including Russia, committed as well to reduce their 560000 barrels per day. In the month of December, stocks of the OECD countries dropped to 1.2 MBD.

 

Number of non-conventional oil producers will be forced to close their wells that became no more profitable below a price floor of around $50 a barrel. The agreement of the producing countries, OPEC and non-OPEC, which was not an action of “the invisible hand of the market”, but of the conscious and active action of 25 States, will result in stopping the fall in prices on the world market and could even allow the beginnings of a rebound in prices which will pass from between 45-50 dollars to 50-55 dollars.

Number of non-conventional oil producers will be forced to close their wells that were most profitable below a price floor of turning around 50 dollars per barrel. The agreement of the producing countries, OPEC and non-OPEC, which was not the action of “the invisible hand of the market”, but the conscious and active in 25 States, will result will stop the fall in prices on the world market and will allow even the beginnings of a rebound in prices which will pass a fork understood between 45-50 dollars to 50-55 dollars.

There is however, that this new ‘virtuous cycle’ for producing countries is not shared by the importing poor and middle-income countries. It also translates into a revival of the production of Shales. In the United States, the number of wells increased each week. Mid-March 2017, it stood at 617 and the U.S. production has reached the historical peak of 9.1 MBD that recalls the production rate of the 1970s. Stocks of oil and oil products are at the highest historical level at 2 billion barrels. The commercial reserves of the country reached 528,4 million barrels with an increase of 8.2 million barrels, the largest weekly increase since 19821.

This new overproduction mechanically caused a new fall in the price of oil, which threatens the stability of many countries. We think first of countries such as the Venezuela struck by an economic and social crisis. But it does not spare the rich monarchies of the Gulf as well. Thus, below a certain price, producers of Shale disappear from the market while exporters suffer a severe income crisis whereas if prices were back on the rise, Shale producers will return to the market. But in the absence of a significant global economic recovery, they contribute quickly to only flooding the market.

The bullish and bearish cycles seem to alternate way more and faster, impeding the process of renewal of the facilities and the discovery of new deposits that require significant investment that the big oil companies do not realize by altruism, but through their search for profits.

One could therefore ascertain that the market does not regulate anything and that without the intervention of the State that plays a major role but not always effective, the market being not self-regulated, would verge onto anarchy causing economic, social, and humanitarian crises as the deterioration of the environment.

The reality of the international oil market confirms that the role of “the invisible hand of the market” is just a myth. The Liberals, who are constantly putting their realism and their pragmatism forward but who do not have enough teeth against their opponents, in ideology, swim themselves in full ideology. Behind a friendly speech sold according to the lastest in marketing theories, formidable doctrinaires could be hiding.

Source : Libre-Algérie

 

Algeria’s accession to the World Trade Organisation

by | Jan 18, 2017 |

Algeria’s accession to the World Trade Organisation

Algeria’s accession to the World Trade Organisation (WTO) in the face of domestic and international constraints

Per the official Algerian Customs statistics, in 2016, China is the leading provider of Algeria, with a market share of close to 18% and US$8.396 billion.  France comes second with $4.744 billion and a share of 10%, followed by Italy with $4.642 billion and 9.93%. Spain and Germany are respectively in the 4thand 5th position in this ranking, with $3.595 and $3.009 billion.  In the top 10, there are also Turkey (7th), Brazil (9th) and South Korea (10th).

If China is the big beneficiary of the explosion of the Algerian import bill, the deficit in trade between the two countries is huge between 2007 and 2016 all while official reviews were still focusing on Europe. Indeed, customers of Algeria are Italy with $4.779 billion and a market share of 16.55% of exports of the country. Spain comes second with $3.562 billion, followed by the United States ($3.227 billion) and France ($3.192 billion). Tunisia is 12th with $610 million, Morocco 13th with $589, Singapore 14th with $542 million and India 15th with $511 million closes this ranking.  For the 2016 official figures, exports declined to $28.88 against $34,66 billion in 2015, or a drop of 16.7%, non-oil exports fell to $2.063 billion in 2016 against $2.582 billion in 2015 (-20,1%).

Imports 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, amount to which services and legal capital transfers are to be added; the balance of payments is the unique reference with between 2014 and 2016 as key partners of Algeria the countries of the European Union.  Also, as pointed out in my contributions and notably in my conference at the invitation of the European Parliament, and after some concern of the international community over the possible abandonment of the Agreement, Algerian officials were clear.  There is no question of breaking the Association Agreement which binds it to Europe.  Europe however, should consider Algeria not only from the point of view of a market.

Now with regards to the WTO, and according to the Algerian Press Service (APS), the Uruguayan Gustavo Miguel Vanerio Balbela has been appointed as of January 14, 2017, new Chairman of the Working Group for the accession of Algeria to the WTO in replacement of Alberto D’Alotto of Argentina, as per the last WTO newsletter.  Mr. Balbela was immediately invited from the Algerian Trade Minister, to visit Algiers and discuss the next steps of the Working Group, which had not met since March 2014.

We must remember that for more than 15 years, dozens of meetings took place and commissions created for Algeria’s accession to the WTO. All of the Algerian major economic players such as workers’ unions, employers’ federations, government representatives, and many experts were conveyed but so far in vain.

Algeria has since 1987 an observant status within the WTO organization and has been negotiating for more than 20 years thus achieving a world record. Looking at developing countries, such as heavyweight of Africa, Nigeria and South Africa, or small countries like Chad, Niger, Togo, Angola, Benin, Gabon, Ivory Coast, Ghana, countries of the Maghreb, Morocco and Tunisia, the majority of the Arab oil countries of which the latest being Saudi Arabia not to mention the majority of the countries of South America including Brazil, Venezuela, Chile, Bolivia, Peru, Mexico, Cuba, in Asia with India, Indonesia, Malaysia, Viet Nam, South Korea, and China, the latter having joined the WTO in 2001, without forgetting Turkey and Russia which joined the WTO in December 15, 2011.

With the WTO agreements, which are part of a global space concern only the economic component, are broadly outlined by the agreement linking Algeria since September 1, 2005 to Europe, as anchored in the Barcelona process, which is part of a regional space but do include political and cultural components.  These agreements have strategic implications for both economy and society: prohibition of the use of the “duality of prices” for natural resources; general elimination of quantitative restrictions on import and export trade; quality and health standards; environmental protection in the use of oil energy, environmental agreements conceived, outside the WTO but lately incorporated to the WTO when felt to be hampering the development of trade; measures concerning the freedom of movement of capital.  Intellectual property protection is an essential condition in order to fight against piracy and therefore the integration of the dominant informal sphere in Algeria which controls 40% of the money supply and more than 65% of the basic necessities.  In General, Algeria’s accession to the WTO would require opening of its borders and the increased specialization as prompted by globalization.  Indeed, both association to the European Union and that of accession to the WTO are based on the development of trade by putting in place the conditions for the gradual liberalisation of trade in goods, services and capital.  It then will be followed by Algeria proceeding with the dismantling of customs duties and taxes for industrial and manufactured products over a period of transition.

All State monopolies must be progressively adjusted in a way that there is no discrimination regarding the conditions of supply and marketing goods between nationals of the Member States. These agreements should turn the Algerian industries from the status of protected industries to industries completely open to international competition with the total removal of tariff and non-tariff obstacles. If Algeria’s WTO entry may have little impact on the oil market, already inserted in a global or regional logic (gas), it is different for all oil products that will be subject to international competition.

Thus, the duality of prices – measure by which a Government could keep domestic prices at levels lower than those determined by the international market forces and the export restrictions – can no longer be valid in a context of trade liberalization. One of the stumbling blocks in the negotiations, in addition to the importance of the informal sphere, is the duality of the gas price for units for export, which would distort international competition. In case of accession, oil products, mainly fuels, will no longer benefit from crude prices lower than the international price upstream. The Agreement emphasizes the opening to competition of the market for energy services as far as it concerns all activities, from exploration to the provision of the product to the consumer through the production and transport.

The environment is a prime area of cooperation, the aim being the preservation of the ecological balance, requiring to implement more and more stringent quality standards; Algeria would be committing to gradually implement the various recommendations of the charters on energy and the environment.  Being in a situation of mono-exporter does not warrant any acceptance; the main OPEC already being WTO member countries. So much more than Doha agreements, a transition period to avoid the wild tariff dismantling that could adversely affect the Algerian infant Industries would be necessary. Indeed, it has made clear that the main resolutions of the fourth Ministerial Conference, held in Doha in November 2001, examined the problems facing developing countries to implement the current WTO agreements, i.e. the agreements of the Uruguay Round of negotiations. The decision on implementation has focused on the following: exception in respect of the balance of payments and clarification of the less stringent conditions set out in the GATT.

This is applicable to developing countries if they restrict their imports to protect their balance of payments. Then a commitment in terms of access to markets, longer periods are granted to developing countries to enable them to adapt to new SPS in other countries. Then technical assistance to those countries least developed and review of technical assistance, including the transfer of technology to least developed countries would be provided. The terms of a special provision concerning developing countries, which recognizes that developed countries must take specifically into account the situation of developing countries when considering to apply anti-dumping measures; the extension of the deadline for developing countries to implement the agreement; development of a method to determine which developing countries fulfil the criterion according to which their GNP per capita must be less than $1.000 so they can grant subsidies contingent upon export.

New rules allowing developing countries to provide grants under programs that aim “legitimate development objectives”, but without giving rise to a countervailing action; and finally, the review of the provisions on investigations countervailing.

Not wanting to unnecessarily dwell on the notion of license according to the rules of the WTO to avoid sterile debates, I would in this context, like to request an answer as to what came about that decision of the Council of Ministers dated December 30, 2014 and thereafter the law passed for the return import licenses in Algeria?

The answer will be that these licenses should fit in the context of respect for all international commitments of Algeria.  The information I gathered however from the Algerian Government, provide the following details :

The freedom of trade and industry is the foundation of economic and trade policy of the Government of Algeria, consecrated by all the provisions of Algerian law.

In this context, this legislation as provided by several countries with open economy in Europe and elsewhere, the possibility of using in specific and predefined cases, a certain transition period, in order to upgrade their productive apparatuses, to import or export licenses neutral in application and administered in a fair and equitable way, so as to handle exceptions to this freedom to trade and this in accordance with the rules of the WTO.

It is in this context that the law that was passed, should first reaffirm the freedom of import and export of products, without prejudice to the rules relating to public morality, security and public order, the protection of the health of the people, as well as to the preservation of the environment and the historical and cultural heritage.

The reasons for implementation of licenses of import or export of which, those with the only objective to limit the trade of certain exhaustible natural resources, the guarantee for the national availability of locally produced raw material processing industry, the supply of the market in products on which would be felt a shortage, as well as backup outside the country financial equilibria.

It is in this framework that the Government introduced a 03-04 amendment of July 19, 2003 to the general rules applicable to operations of import and export of goods, the amendments aimed to upgrade the legislation in accordance with the rules of an open economy. In contrast to the restrictive licensing regime previously applied to imports, these licenses are defined as administrative procedures in the rules of the WTO and are aimed to ensure better quality and product safety as well as secure human, animal and plant health.

Reference to the WTO rules, texts of which clearly state that import licences are administrative procedures requiring, as a condition to the importation of goods, the presentation to the administrative body of a request that is separate from the documents required for customs purposes; the Government states that this kind of license does not mean restriction or distortion of imports.

Control undertaken by the administration is concerned only by those aspects of quality and compliance and not by the commercial aspects, to ensure fairness in commercial transactions, including between the community of traders themselves or between the retailer and the consumer whereas the former regime had for purpose the distribution in the amount of foreign currency to importers.

Also, it has never been said that Algeria would not adhere to the WTO as adopted by the successive governments since 1995, but that accession cannot be at the expense of the interests of Algeria’s which would be seeking to benefit from the Doha agreements that provide for a transitional period for countries such as Algeria.

Also, Algeria, per our sources, whilst safeguarding its interests as any country, intends to comply with international agreements, notably that agreement of association with Europe, the negotiations with the WTO, which it is not to call into question, is no issue to discredit the image of Algeria at the international level, unlike certain tendentious statements.

From my point of view the debate is elsewhere and is about how, with the fall in the prices of hydrocarbons, to deepen all structural reforms for a strategy leading out of the rentier type economy and how can we put aside any tensions between Europe and Algeria relating to the association agreement.

Agreement signed in full sovereignty by the Government and with fundamental implications. Certainly, the concerns being legitimate because tariff cuts are a shortfall ranging between $1.5 and $2 billion annually for Algeria.

Invoking the situation of a mono-exporter would not help, for there will not be any specificity for Algeria alone and per our information from the EU, no renegotiations of the basic clauses with Europe from 2020 onwards.  An extension of time limits for certain products per the terms of the agreement.  Similarly, there will not be any specificity also for accession to the WTO.

Membership or not to the WTO would greatly depend on internal political forces rapport and especially a real desire for clarification of the future path of the controlled liberalisation of the Algerian economy not only for its efficiency that should be coupled with a deep social justice through a better and equitable spread of the national income and therefore put up an effective fight against corruption.

This is not a question about legislation but rather of social practice referring to the urgency of a renewed governance model. All these constraints imposed by both the association and accession to WTO agreements, could not they secure the Algerian economy into the world economy and act as an important pull factor in economic development and social progress?

Legal instability and the lack of visibility in the socio-economic policy, the dominance of the informal sphere and a financial system that is totally disconnected from the international financial system tend to worsen the growing pessimism about a political opening in fact real economic and political reforms which explains the successive downgrades between 2007/2014 of many international organizations.

Is it that the new Algerian economic policy must better articulate the market forces and the action of the State as a regulator in its role of macroeconomic management and macro social within a space balanced and solidarity, the challenge being the massive arrival on the job market of millions of young people within the next two decades.

The question that arises then is the possibility of change in growth to achieve a double objective, today apparently contradictory: on the one hand, create the necessary jobs, on the other hand, improve international competitiveness while distributing more revenue, including through the productivity of factors.

The current productive structure makes growth volatile and subject to external shocks, the financial resources, the importance of foreign reserves is not synonymous with development. The external position of Algeria remains dominated by the weakness inherent to its specialization in hydrocarbons, (weak production and non-hydrocarbon exports less than 4% of the total so marginal and within these 4% semi-finished ferrous and semi-ferrous representing more than 60%), having no control over its own external accounts, which depend only on the price oil/gas and the exchange rate of the Dollar, GDP per capita moving chaotically.

Having a natural wealth that is ephemeral, Algeria must at the same time preserve this resource for future generations and gradually find different revenue sources. It follows that the levels of growth necessary to result in a significant improvement in the situation, estimated at 8 / 9% per year until 2017/2020/2025, seem difficult to achieve in the short term.  In the meantime, its association agreement of free trade with the European Union (EU), Algeria incurred a shortfall in customs duties that was valued for year 2016, at $1.27 billion and in 2015 at $1.09 billion.

To benefit from the positive effects of the agreement with Europe to a possible WTO membership, would require us to undertake first some cleaning in the Algerian economy and that they are obstacles to the comprehensive reform of the result of displacement of the segments to be able to which explains the dieback of the productive fabric that any operational analysis will have to connect the advanced or the brake reforms by analysing the different social forces, public policy strategies located fluttered between two conflicting social forces, rentier logic supported by proponents of importation (of the monopolists and not shopkeepers, actually only 100 controlling more than 80% of the total) and unfortunately dominant informal sphere, and minority entrepreneurial logic.

This explains, Algeria is in this interminable transition since 1986, not a market economy, nor an economy administered, explaining the difficulties of regulations, the progress of reforms being inversely proportional over the oil and the value of the Dollar, the reforms since 1986 being blocked or timidly with inconsistency when the price rises.

In summary, Algeria’s accession to the World Trade Organization is irreversible if it wants to avoid its marginalization, benefitting from both the Doha agreements and from the success stories of Russia and Saudi Arabia whose economies mainly dependent on hydrocarbons.  The security aspect having been improved, Algeria must create favourable conditions for the development by raising the environmental constraints to enhance the vitality of local and international enterprise as sole source of permanent wealth creation, and its foundation on promoting knowledge and the adaptation of its economic strategy to the fourth economic revolution that is looming between 2020 and 2030.

Read more on the WTO website.

Morality of Leaders as factor of stability

 

For a Happy New Year 2017 in the Maghreb and North Africa,

by

I often had in the past, to stress on numerous occasions in my counselling activities for the Maghreb and African Governments about how the lack of integration did in fact result in the loss of several points from the region’s growth.  This was principally tied with and / or consequent to the prevailing lack of morality in the region’s leadership.  And how Morality of Leaders as factor of stability has become a factor of progress or a sine-qua-non condition for a sustainable development.

Any sustainability in development would have to take into account the current ecological challenge amongst many other things, that in this 21st century, should essentially be made through good governance and effectively be knowledge based.  For the development of whether the Maghreb or North Africa to be competitive in these globalization times and the fourth economic revolution that is looming upon us between 2020/2030, we ought to first remove all productive sectors out of the rentier economy model and incorporate them in the global arena of fair trade.

The Maghreb and Africa hold significant potential, especially in human skills, wealth that is more important than all the reserves of hydrocarbons for Algeria or Phosphate for Morocco and Tunisia.  To overcome the current situation both locally and abroad, in addition to deep sense of morality of the people responsible for running the city, the fight against corruption and illegal transfers of capital, with democratic control mechanisms should be the urgency of the hour.

One cannot ignore the effects of globalization that in the main is positive but could at the same time be perverse if unregulated.  We should for instance inscribe all future projects as part of the integration of the Maghreb, bridge between Europe, the Middle East and Africa, for the stability and prosperity of the whole region.  The Maghreb and Africa being at the crossroads, we must avoid any complacency, and contrary to the daily lives of the vast majority of the population, we should refuse letting it become a source of collective neurosis.  Whilst avoiding gloom, everything achieved in all countries of the Maghreb and Africa is after all not entirely negative, but there are many deficiencies that require to be absolutely addressed.

Would, in 2017, the present rulers of the Maghreb and Africa, toast it by chosing those resolutions that in these moments of great geo-strategic upheavals, help them to both take stock of the situation objectively, avoid running forward and possibly become aware of the gravity of the situation.  They should notably make their cultural mu, with a focus not on their personal interests but rather on the superior interests of their populations.

To meet all challenges of the future, the Maghreb and Africa rulers, need a return to CONFIDENCE through a language of truth in order to secure their respective future.  They should rehabilitate work and intelligence, and gather all political, economic, and social forces whilst avoiding any division on subtopics.  Most importantly, they should learn to respect our different sensitivities, and therefore opinions of others, by spreading a culture of tolerance.

Unanimism is generally source of decadence and confrontation of ideas very often a productive source of mutual enrichment.  The challenge of all nations in the 21st century world that is in perpetual motion would be the mastery of time.  Any country that does not move forward goes necessarily backward.  According to the majority of all international reviews, the stability of the Maghreb and Africa could be a factor of stability of the entire Mediterranean and African continent and any destabilisation would have geo-strategic implications whereby the importance of its development as a dialectic link between security and development.

Hence the importance of a broad inter-Maghreb, African and international cooperation so as to deal with above all else terrorism that is a global threat.  The Maghreb and Africa would continue to have a future with strong potential, presuming sub regional integrations, can achieve sustainable development reconciling economic efficiency, a deep social justice and consolidate unity to which I am deeply attached.

In this New Year 2017, I would like to wish that our region, North Africa and the continent of Africa, all the security and development and face the coming fiscal pressures as a shared equitable sacrifice.  I am entirely convinced that the Maghreb and Africa have all the potentialities to surpass the multidimensional crisis they are presently facing. This would involve new modes of local political, economic and social regulations, based on the Rule of Law, the development of freedoms in the broader sense our world knowing a moral crisis that will be overcome only by a profound change in international relations for a fairer world, as based on better global governance.

 

HAPPY NEW YEAR to ALL

from

Dr Abderrahmane MEBTOUL, University Professor on 26/12/2016 ademmebtoul@gmail.com

White Christmas in the Saharan Algeria

 

Climate change: For the first time in 37 years, snow in the Sahara as expressed in Indian Express of December 23, 2016.  It could be interpreted as White Christmas in the Saharan Algeria.

Climate change: For the first time in 37 years, snow in the Sahara

On December 19, a freak snow shower coated the dusty red dunes of Aïn Séfra, Algeria’s ‘Gateway to the Desert’.

In 1984, charitable supergroup Band Aid sang, ‘And there won’t be snow in Africa this Christmas time’.

Had it been this year, they’d have got it wrong — on December 19, a freak snow shower coated the dusty red dunes of Aïn Séfra, Algeria’s ‘Gateway to the Desert’.

Also Read | Parts of Saudi Arabia covered in snow, temperatures plunge

The snow — the result of a combination of atmospheric factors — stayed for about a day before melting.

 

The Enhanced Thematic Mapper Plus (ETM+) on the USGS/NASA Landsat 7 satellite acquired a natural-colour image of snow in an area near the Morocco-Algeria border, south of Bouarfa and southwest of Aïn Séfra. The rare snowfall generated excitement after local photographer Karim Bouchetata posted several stunning pictures of rolling dunes covered in white on his Facebook page. “Everyone was stunned to see snow falling in the desert, it is such a rare occurrence,” Bouchetata told The Independent. “It looked amazing as the snow settled on the sand.”

WHY

The Washington Post reported that a weather map analysis from the day of the snowfall shows that temperatures in the area, at the foothills of the Atlas Mountains, were about 10 to 15 degrees colder than normal when the event occurred. Also, a very strong patch of low pressure had been created at a high altitude, which rapidly sucked up air and cooled it, creating conditions for the extremely rare snowfall.

Ain Sefra –  Algeria

EARLIER

Aïn Séfra, which is situated between the Atlas Mountains and the northern fringes of the Sahara, saw a half-hour snowstorm earlier in February 1979. This region receives only a few centimetres of precipitation every year. In July 2011, the world’s driest desert, the Atacama in Chile, received 80 cm of snow. This week’s event could be another sign of climate change.

Source: NASA Earth Observatory image by Joshua Stevens, using Landsat data from the US Geological Survey. Caption by Mike Carlowicz. Other information: NASA & ENS

 

Merry Xmas and Best Wishes to Each and Everyone.

 

The Reasons for the Slippage of the Algerian Dinar

In the parallel market,

Economic laws being generally immune to any political slogans and bureaucratic measures; how to explain the reasons for the slippage of the Algerian Dinar that for €1 on the parallel market in this month of December 2016 would fetch about DZD186 and DZD168 for a Dollar.

And most significantly why is there a gap with the official market that is DZD118 a Euro and DZD111 a Dollar?

Are we not moving towards the DZD200 a Euro with the inevitable inflationary impact due to the fact that all prices tend to often line up with those of the parallel market?

Will it not remind us of issues related to the level of the general lack of production and / or weak productivity, to the bureaucratic measures without strategic vision, and to either the monetary illusion or its mechanics interpretations that in the end have increased distrust towards this national currency?

To reply to these queries, let us start with :

A Short history of the the Algerian Dinar (DZD).

Set up in 1964, the DZD was on a par with the French Franc until 1973.  Since 1974, the value of the Dinar has been set following the evolution of a basket of 14 currencies.  We have seen depreciation between 1986/1990 of 150% from DZD4.82 to DZD12.191 a US Dollar, followed by a second one, of the order of 22% in 1991.  With the cessation of payment in 1994 and following the rescheduling and conditions imposed by the IMF, there was a new devaluation of more than 40% followed by its commercial convertibility in 1995/1996.

The evolution of the official exchange rate has evolved from 2001 to December 12, 2016 thus:

  • 2001 – DZD77.29 a Dollar
  • 2005 – DZD73.35 a Dollar
  • 2008 – DZD64. 58 a Dollar
  • 2010 – DZD74.39 a Dollar
  • 2015 – DZD100.46 a Dollar

On December 12th, 2016, the rating of the Dinar got close to DZD111 a Dollar and DZD118/119 a Euro at the official rate, a difference of 57% with reference to the parallel market and a slippage of about 60% from the 2010s.

This accentuates the inflationary process, with the risk of two-digit inflation by end of 2016, due to the fact that 70% of the needs of households and of public and private businesses are met by imports which with the falling price of oil are making the State no longer able to subsidize as it did in the past.  The value of the Dinar that is function of the trust and a productive economy, which in the case of Algeria being an economy fundamentally of a rentier type, will contradict the basic laws of economy where any devaluation should in principle boost exports.  Paradoxically, we see that when the price of the Dollar decline and the rise of the Euro, the Bank of Algeria make the Dinar slide (whilst avoiding to talk of devaluation) for political reasons.

Why then this accounting trick ? The answer or main reason could be that by devaluing the Dinar rate to the Dollar, is the artificial increase in oil tax that fluctuates depending on the price of a barrel, between 60 and 70%.  Because oil and gas revenues are converted into Dinars, together with Customs taxes on hard currency imports being calculated in Dinars, would only lead to a definite devaluation.  All this hide the importance of the budget deficit and thus the effectiveness of the State through its public expenditure budget and artificially inflates the Regulatory Revenue Fund as calculated in Algerian Dinars.

Inflation being the result, a certain distrust towards the Algerian Dinar that is officially administered and therefore disconnected with the real world as represented by parallel market.  In General, both foreign and local investors are wary of an administered low currency.  The real value of a currency, which is only a medium of Exchange could be interpreted as a nominal value adjusted for inflation.

Hoarding would not create value.  It is the work through continuous innovation, whilst adapting to this ever more interdependent world, turbulent and in perpetual upheaval that is the source of wealth of a Nation.  The value of a money depends on the confidence in that economy and all related politics of production and productivity, as shown by the Classics.  In fact, the essence of this situation lies in the dysfunctions of the different structures of the State because of its excessive intervention that distorts the market rules forcing households and operators to circumvent them.

So when the authorities immoderately tax and regulate excessively or by declaring illegal the activities of the free market, it skews the normal relations between buyers and sellers.  In response, buyers and sellers naturally seek ways around all Governments imposed obstacles.

What then are the reasons for the devaluation of the Dinar on the black market?

I count seven and here there are :

First, the gap could be explained by the reduction in the supply due to the fact that the global economy slowdown, combined with the death of many Algerian retirees, has largely paid off savings of the emigration.  This decrease in the supply of currency was offset by fortunes acquired regularly or irregularly by the Algerian community who transfer regularly or irregularly currencies into Algeria. Conversion of money from corruption, playing on the distortion of the official reference exchange rate (you charge me DZD150 a Dollar instead of a commodity bought 100 with the complicity of foreign operators; operations easier and faster in the trade) clearly shows that the parallel currency market is much more important than the savings of the emigration that explain the soaring real estate prices notably in urban areas.

Second, demand comes from traveling ordinary citizens: (tourists, medical tourists abroad and Hajis) because of the weakness of the derisory travel allowance. But it is the travel agencies that failing to benefit from the right to free exchange, they being importers of services also tend to use the black market currencies. They mostly export currencies instead of import as would the tourism logic like in Turkey, Morocco or Tunisia.

Thirdly, the strong demand comes from the informal sphere that controls 40 to 50% of the money supply in circulation  and 65% of the different market segments; fruits &vegetables, red &white meat market, and through imports using small resellers, because it is an informal financial intermediation away from State circuits. This sphere, which is the product of bureaucracy, everything is handled in cash thus promoting dialectical relationships with rentier segments favouring tax evasion and corruption.

Fourth, the gap is explained by the passage of the REMDOC to the CREDOC documentary credit, explaining the easing measures, in 2013 which largely penalized small and medium-sized companies representing more than 90% of the industrial fabric in decline (5% in GDP). There are many SMEs that to avoid supply disruptions use parallel currency market. The Government has in the past increased the allowance upto DZD4 million, but this is not enough, explaining the easing measures in the 2017 budget bill.

Fifth, many foreign businesses including domestic operators use the parallel market for their transfer of currency, since every Algerian is entitled to €7200 per transfer trip, using Algerian employees to increase the amount.

Sixth, the gap can be explained by the weakness of production and productivity; the injection of monies without productive counterparties generating a certain level of inflation and depreciation of the Dinar. According to an OECD report, the productivity of Algeria’s is one of the lowest in the Mediterranean basin. The industrial fabric that some would revitalize without a strategic vision, according to the old mechanical vision, without seeking to take into account new technological changes and global managerial methods is a strategic error that the Algeria might pay dearly in the medium term.

Industry representing less than 5% of GDP and of these 5%, more than 95% are PMI/SMEs  that are uncompetitive, costs indirectly devalue the value of the Dinar. There is no proportionality between public spending and the low impact, the average growth rate not exceeding 3%, is source of inflation and explains the deterioration in the rating of the Dinar (imbalance of supply and demand that is supplemented by a massive importation of goods and services) on the open market against currencies the Bank of Algeria supported artificially thanks to oil revenues.

If foreign exchange reserves tended towards zero, the Euro open market to trade more than DZD300 and the official exchange fluctuate between DZD200/250 a Euro, where the importance of an external targeted debt, only on productive activities, in order to avoid the complete depletion of foreign exchange reserves which take the value of the dinar to over 70%.

Seventh, to guard against inflation, and therefore deterioration of its Dinar, the Algerian citizen does not place only his assets in land, real estate or gold, but would apportion his savings in currencies. Many Algerians benefit from the crisis of real estate, especially in Spain, acquiring apartments and villas in the Iberian Peninsula, in France and some in the USA, Latin America and tax havens. It is a choice of security in a country where the evolution of oil prices is decisive.

Political uncertainty, and a certain psychosis created by financial scandals, is pushing many officials to sell their assets and purchase property abroad. Also many households put in the prospect of a fall in oil, and given the commodities erratic fluctuations revenues, on the decline since year 2O13, buy the currencies on the informal market. (Ref paper by Professor Abderrahmane Mebtoul “Informal Sphere in the Maghreb and how to integrate it into the real sphere” Institut français des relations internationales (IFRI) Paris – Brussels December 2013 – 60 pages)

In summary, distortions between the formal and informal market reflects the weakness of local productive fabric, oil based rentier economy could only give an artificial official rating of the Dinar. An objective an analysis of inflation which has repercussions on the real value of the Dinar, would suppose a serious grasp of the dialectical relationship between development, the distribution of income and consumption by strata models. Subsidies and the distortion of the exchange rate between the official and parallel markets with neighbouring countries are basic explanations of overbilling and the spilling over of a good number of products out the borders. Administrative measures can only be one-off, otherwise an army of controllers would be needed. The solution lies simply in a new type of governance, ideally with new mechanisms of regulation, local production in segments of value-added in internationalised sectors, so of successful companies.

Read more on these 2 previously published here contributions Algeria’s currency rating between 2017 and 2020 and

The Algerian Dinar great slide by