How to improve the Climate of Business in Algeria

This brief analysis is a synthesis of the Doing Business Report 2017 data compiled upto and as of June 1, 2016. The indicators are used within the context of Algeria to analyze economic outcomes of countries of the same calibre and identify the regulatory reforms of all legislation that are required so as the economies where they have been adopted and the reasons for which they have been implemented have born fruits. The question that such report brings to mind would therefore be about how to improve the Climate of Business in Algeria and how to go about it.  

In the meantime, the above mentioned report findings were that :

Starting a business
Algeria made starting a business easier by eliminating the minimum capital requirement for business incorporation.

Dealing with construction permits
Algeria made dealing with construction permits faster by reducing the time to obtain a construction permit.

Getting electricity
Algeria made getting electricity more transparent by publishing electricity tariffs on the websites of the utility and the energy regulator.

Paying taxes
Algeria made paying taxes less costly by decreasing the tax on professional activities rate. The introduction of advanced accounting systems also made paying taxes easier.

This brief analysis is a synthesis of the Doing Business Report 2017 data compiled upto and as of June 1, 2016. The indicators are used within the context of Algeria to analyze economic outcomes of countries of the same calibre as first reviewed back in October 2016 and identify the regulatory reforms of all legislation that are required so as the economies where they have been adopted and the reasons for which they have been implemented have born fruits. The question that such report brings to mind would therefore be about how to improve the Climate of Business in Algeria and how to go about it.  
In the meantime, the above mentioned report findings are excerpted below:
  • Starting a business
Algeria made starting a business easier by eliminating the minimum capital requirement for business incorporation.
  • Dealing with construction permits
Algeria made dealing with construction permits faster by reducing the time to obtain a construction permit.
  • Getting electricity
Algeria made getting electricity more transparent by publishing electricity tariffs on the websites of the utility and the energy regulator.
  • Paying taxes
Algeria made paying taxes less costly by decreasing the tax on professional activities rate. The introduction of advanced accounting systems also made paying taxes easier.

 The authors state at the outset that there are some important areas not covered by the Doing Business report and that it does not evaluate all of the factors such as policies and institutions that affect the quality of the framework of the economic activity of an economy or its competitiveness. It does not for example,  consider the macroeconomic stability, the development of the financial system, the size of the market, the frequency of bribery and corruption, nor the quality of the workforce, deadlines and costs as related to the logistics of the import and export of goods, indicators on the cross-border trade, or the cost of international transport as well as the effect of roads, rail, ports and inadequate communication systems that can have on operating a business and their consequences in terms of competitiveness.

However, if this report does not evaluate and/or is not intended to assess the benefits of all social and economic programs funded by tax revenues, assessing the quality and efficiency of the business regulation is something to take into account in the debate on the burden on enterprises regulatory objectives, which may vary from one economy to another.

The score awarded to each country on entrepreneurship is based on the following criteria.

– Procedures, deadlines, costs and supply minimum capital required to create a limited liability company.

– Obtaining a building permit:-procedures, time and costs related to execution of all required formalities and controls of quality and security in the system of obtaining a building permit.

– Connection to electricity: procedures, time and costs of connection to the electric network, electricity supply reliability and transparency of prices.

– Transfer of property: procedures, delays and costs of ownership transfer, and quality of the land administration system.

– Getting credit: laws on the pledging of movable property and credit information system.

– Protection of minority investors: rights of minority shareholders in transactions between related parties and corporate governance.

– Taxes and payments: payments, delays and total pay for a business applying all tax legislation as well as procedures subsequent to its declaration.

– Cross-border trade: delays and costs associated with the export of a product with a comparative advantage.

– Performance of contracts: delays and costs of settlement of a trade dispute and quality of court proceedings.

– Insolvency regulation: delays, costs, results and recovery rates in insolvency cases and solidity of the legislation in this area.

– Regulation of the labour market: labour regulation flexibility and aspect of the quality of employment.

 

The three main conclusions of this report are:

  • Europe and Central Asia have improved significantly more commercial regulatory over time than any other region.
  • It is in the area of entrepreneurship that economies have improved their regulatory processes the most.
  • The economies in which it is easy to create a business tend to have lower levels of inequality in income on average.

 

Doing Business 2017 in its 14th Edition gives the following classification:

The first ten are :

1

2

3

4

5

6

7

8

9

10

New Zealand with a note of

Singapore

Denmark

Hong Kong

South Korea

Norway

UK

USA

Sweden

Mecedoine

87.01

85.05

84.07

84.21

84.07

8282

82.45

82.13

81.74

80.87

 

Classification of the major countries. 

17.

22.

25.

28.

29.

32.

34.

40.

42.

50.

Germany

Canada

Portugal

Netherlands

France

Spain

Japan

Russian Federation

Belgium

Italy

79.87

78.57

77.40

76.38

76.27

75.73

75.53

73.00

73.19

72.25

 

Ranking of middle  of the pack countries

63

66

68

69

74

77

78

83

94

102

116

120

122

123

130

Bahrain

Oman

Morocco

Turkey

South Africa

Tunisia

China

Qatar

Saudi Arabia

Kuwait

Argentina

Iran

Egypt

Brazil

India

68.44

67.73

67.50

67.19

65.50

64.89

64.28

63.66

61.11

59.55

57.45

57.45

56.64

56.53

55.27

Ranking of countries at lower grades than 50 requiring deep reforms

149

150

155

156

159

160

164

165

169

173

Bolivia

Niger

Bénin

Algéria

Ethiopia

Mauritania

Gabon

Iraq

Nigeria

Syria

49.85

49.57

48.52

47.76

47.25

47.26

45.88

45.61

44.63

41.43

 

Ranking of countries with less than 40 points

180

184

186

187

188

189

190

Tchad

Républic of Congo

South Sudan

Venezuela

Libya

Erythrea

Somalia (last)

39.07

39.28

33.48

33.37

33.19

28.05

20.29

 

In summary, the deplorable ranking at the 159th of Algeria that belies the euphoric statements of the former Minister of Industry having induced on the line the country’s authorities, and which I had been cautioning against on several occasions the Government, does not reflect the country’s significant potential.  There is no more a justifying speech that in anyway no-one believes in, therefore the only way is to go towards the necessary reforms to improve the business climate that primarily depend on Algerians themselves.

This ranking together for that matter many others would explain the collapse of the productive fabric and the importance of all hard currency services outflow and legal capital transfer that annually amounted between 2010 and 2016 to $14 / $15 billion to which the value of imports of goods need to be added for the calculation of currency.  These were $60 billion in 2013 and were brought back to $45 / $47 billion in 2016 and are currently extrapolated to be around $45 / $46 for 2017 giving approximately a total of $60 billion still less than what could paralyze the entire economic machine whose integration rate does not anyway exceed 15%.

Let us remember that the reserves of $114 billion as per the official data of both the IMF and the Bank of Algeria as at December 31, 2016. The Governor before the National Assembly on April 12, 2017 gave the amount of $109 billion as at end of March 2017 and as recorded by the official press agency APS.

With the deficit of the balance of payment as shown, during the first five months of 2017 customs statistics and those of the Office of National Statistics, reflecting an outflow of currency between April, May and June 25, 2017, the amount should be less than $109 billion on July 1, 2017.

According to this report, which gives a central place to the analysis of the informal sphere, an effective regulation would facilitate access of companies to the market, creation of jobs, productivity and the improvement of the levels of economic development in general; each new reform of the regulation is associated with a substantial increase in economic growth and thus improvement of the standard of life of the citizens. This report points out to what Haidar & Hoshi (2015) made 31 recommendations to achieve this goal for reform, classified into six different categories, depending on whether the reform is administrative or legal, and according to the level of potential resistance at the political level. 

By Dr Abdulrahmane Mebtoul, Mobile +213 0661552928- fax +213 041415837- +213 041446148

General Elections in the United Kingdom and the GCC

This article of Jameel Ahmad, Vice President of Corporate Development and Market Research at FXTM and BA (Hons) degree in Business Studies with Accountancy and Finance from the University of the West of England published on AMEinfo of May 31st, 2017 is pertinently about the General Elections in the United Kingdom and the GCC. It was the UK Prime Minister who called for these elections for next Thursday, in fact three years earlier than scheduled.
The reasons were to obviously strengthen the hands of the eventual winner who will be deemed to negotiate the Brexit with the European Union.

This article of Jameel Ahmad, Vice President of Corporate Development and Market Research at FXTM and BA (Hons) degree in Business Studies with Accountancy and Finance from the University of the West of England published on AMEinfo of May 31st, 2017  is pertinently about the General Elections in the United Kingdom and the GCC.  It was the UK Prime Minister who called for these elections for next Thursday, in fact three years earlier than scheduled.
The reasons were to obviously strengthen the hands of the eventual winner who will be deemed to negotiate the Brexit with the European Union.
These elections might however affect all countries, starting of course with those of the EU but also those of the GCC; object of this article of Jameel Ahmad. 
GD93WH London, UK. 13th July, 2016. Theresa May addressing the worlds press on her first day as prime minister in Downing Street. Credit: Eye Ubiquitous/Alamy Live News

Could the upcoming UK election represent a risk to GCC markets?

With the OPEC meeting now in the past, investor attention has shifted towards the United Kingdom and the upcoming General Election scheduled for 8 June. Although the market currently appears calm ahead of the event, this event it does represent a risk for emerging assets and this will include those markets in the UAE and GCC region.

With investors currently positioning in favour of Theresa May being declared victorious next week, there is a risk that investors are heavily under-pricing any other potential outcomes at present. The largest risks to emerging market assets are generally when potential outcomes are heavily underpriced, and recent history from the EU Referendum last June is a kind reminder of what can happen when investors are caught on the wrong side of the trade. If recent history does indeed repeat itself then investors are more likely than not going to divert into “risk-off” mode, where riskier assets like the stock markets and emerging assets suffer from low attraction and safe-haven assets like Gold and the Japanese Yen surge from buying demand.

Politics to continue influencing the Pound’s direction

After suffering its heaviest week of losses so far in 2017, the British Pound is attempting to consolidate around 1.28 against the US Dollar. I personally think that politics will continue to influence the direction of the British Pound and I believe that there is further momentum for the currency to fall with the UK General Election being a little over a week away. In general, the markets do not like uncertainty and this is the recurring theme for the UK at present with another election around the corner and ongoing Brexit uncertainty continuing to dominate news headlines.

My view is that even following the dip lower from the 2017 highs above 1.30 is that the financial markets are still underpricing the risk of an unexpected outcome to the election next week. Investors in general stacked their cards heavily in favour of Theresa May being declared the winner following the unexpected calling of a snap election, but opinion polls are currently showing that the race to win the election is going to be close. I can’t help but think that recent history could be repeating itself with the markets currently underpricing the risk of an outcome that could differ to what the markets expect, which is a Conservative victory on 8 June.

USD JPY – a game of politics vs economics

The British Pound is not alone in being underpinned to political risk, with politics vs. economics being the name of the game when it comes to trading the USDJPY. I believe that politics will continue to dictate the direction of this pair as we head into the second half of 2017, and I am actually favouring towards the Japanese Yen covering further ground against its counterparts on the back of safe-haven buying.

A lack of optimism around the likelihood that President Trump will be able to push forward with his legislative reforms will put the spotlight firmly on Washington, and I think that this will result in further pressure on the USD. Any further market uncertainty in the United States will eventually lead to investors being lured back into the safe-haven appeal of the Yen.

EUR USD – facing near-term selling pressure

The likelihood that the ECB will repeat its dovish rhetoric during its Central Bank meeting in June is encouraging traders to enter selling positions on the Eurodollar after the pair reached new 2017 milestone highs above 1.12 last week. Despite economic data around Europe continuing to improve confidence that the economy has turned a corner, the market is swaying towards the belief that the ECB will repeat in June that the economy still requires ECB stimulus and this could result in the Eurodollar slipping further towards 1.10.

The Dead Sea might come alive with the WEF

In our article World Economic Forum 2015 at the Dead Sea, Jordan  we have tried to bring to our friends’ attention that the Dead Sea might come alive with the WEF as the international gathering of world heads of states, academia, businesses and / or communities.  It did make life a little easier by bringing friends as well as antagonists together so as to debate and / or share in the debates of ideas.
We come back again this time for yet another summit next week of the WEF Middle East & North Africa 2017.  It starts on May 19 and finishes on May 21st, 2017 as previously to be held in Dead Sea, Jordan. It is understood that it will have a platform where a lot of important topics are going to be discussed in a variety of domain such as business, economics, entrepreneurship, governance, politics, demography, public and private sectors and of course growth.
1000+ participants are expected making it the most outstanding event on contemporary economics and finance topics at a time where we are witnessing a historic turning point in the process of dissemination of economic ideas and adjustments in the world of economics are dramatically accelerating.
In Davos last January, Middle East business leaders have joined forces with the WEF to launch a strategy to boost private-sector investment and accelerate the pace of economic reform in the region.  Would we expect some sort of account rendering on this plan.
This plan aimed to reduce the high levels of unemployment among Arab youth that is amongst many things perceived as a major driver of continued instability of the MENA countries.
In any case here is the WEF’s statement published on May 16, 2017 on this forthcoming event. It is written by Malik Faraoun, Lead, Middle East and North Africa, World Economic Forum

The Middle East and North Africa: a region on the brink of historic change

This article is part of the World Economic Forum on the Middle East and North Africa 2017

In a couple of days, Jordan will host the 2017 World Economic Forum on the Middle East and North Africa at the Dead Sea. It will bring together over 1,000 global leaders – from government, business and civil society. The aim: to unlock a set of opportunities for a profound transformation of the region and to pave the way for a new narrative of shared peace and prosperity. Its theme of “generational transformation” heralds the emergence of a framework that supports social cohesion and responds to everyone’s aspirations for today and tomorrow.

The region is split by two narratives: on one side, a positive view, which paints a picture of a blossoming digital and technology scene, accompanied by a renewed drive for reforms (aptly exemplified by the Saudi Arabia Vision 2030). On the other side, the region remains plagued by the largest humanitarian crisis of our times, in particular the war in Syria.

There are also three concurrent trends shaping the region, and which will form the focus of the meeting. These are:

  1. To seize the innovation and entrepreneurship opportunities that are powered by the digital revolution. More technological change is expected over the next decade than in the past 50 years,according to Klaus Schwab, Founder of the World Economic Forum. It means the region could leapfrog 20th-century technologies and move straight to the advanced technologies of the 21st century. This year, for the first time, the World Economic Forum and the International Finance Corporation have joined forces to highlight the foremost 100 Arab-world start-ups. At the meeting in Jordan, these companies will be applying their innovative worldviews to artificial intelligence, advanced robotics, augmented reality and the internet of things.
  2. To work with government and business leaders to create actionable solutions to accelerate economic reforms and build inclusive economies. In the coming decade, 75 million jobs need to be created in the Middle East and North Africa. As IMF Managing Director Christine Lagarde has stated, growth is too slow and benefiting too few of the global economy. This is even more relevant for the Middle East and North Africa. Thus policy-makers need to design economic frameworks that at the same time create value and are accessible to all. Once economies are transforming in an inclusive manner, we shall create jobs for the millions Arab youth entering the labour market every year. A profound economic transformation calls for a massive leap in human-capital development, new strategies for entrepreneurship and industry diversification, and creative ways for to bridge the infrastructure gap.Responding to the imperative of building inclusive economies, the meeting will advance theNew Vision for Arab Employment initiative, which aims at investing in the continuous learning, re-skilling, up-skilling and job readiness of one million of the region’s youth. It will also accelerate delivery of economic policy reforms and host the launch the region’s hub of the Sustainable Development Investment Partnership for infrastructure to address market failures in infrastructure.
  3. Last (and just as crucial) is to support humanitarian efforts and diplomatic dialogue towards de-escalating conflicts and achieving a vision for shared stability. The prosperity of the Middle East and North Africa is inarguably related to success in limiting the conflict spill-over, rebuilding post-conflict and fragile states, and enhancing humanitarian action. Building on its impartiality and convening power, the World Economic Forum will continue to provide a platform for diplomatic dialogue to further breakthroughs for the future of the region. In this regard, the programme of the meeting will include high-level dialogues on the future of Syria and Iraq with key international and regional stakeholders. On the humanitarian front, the meeting will call for innovative models to enhance the delivery of emergency aid bringing together more synergies between the private sector, host governments, the refugee population and humanitarian players.

For these reasons, the 2017 World Economic From on Middle East and North Africa is expected to be a key milestone for the future of the region and an opportunity to “enable a generational transformation”. It aims to be forward-looking, ambitious and truly inclusive.

The WEF recommends further reading :

France’s presidential elections impacting Algeria

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. [ . . . ]

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

 

 

“The Middle East: A region divided” 2017 Report

The MENA region consist as we all know of countries of predominately Arab at 70%, Iranian and Turkic at approximately 14% each, populations.  A study of these ‘Arab World’ populations’ youth titled “The Middle East: A region divided” 2017 Report based on surveys undertaken by ASDA’A Burson-Marsteller, a Public Relation firm established in Dubai, UAE and lead by Sunil John, founder shareholder and Chief Executive Officer
We took the initiative with compliments to this gentleman, to borrow few excerpts so as to hopefully launch a debate on this report.  This started with the premise that :

“The 22 Arab nations spread across two continents, Asia and Africa, have to pull together in a historic movement to declare a shared manifesto that focuses on a unified destiny.

And that:

The solution for the region’s problems, as the Arab Youth Survey sees it, must come from within this region, and not from the US, Russia, Europe or even the United Nations.“

Elaborating, ASDA’A BursonMarsteller stated that its 9th Annual Arab Youth Survey 2017 was conducted by international polling firm PSB Research to explore attitudes among Arab youth in 16 countries in the Middle East and North Africa. PSB conducted 3,500 face-to-face interviews from February 7 to March 7, 2017 with Arab men and women aged 18 to 24.  The interviews were conducted in Arabic and English.

The aim of this annual survey is to present evidence-based insights into the attitudes of Arab youth, providing public and private sector organisations with data and analysis.  It is the largest of its kind of the region’s ‘largest demographic’, and covers the six Gulf Cooperation Council states (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE), North Africa (Algeria, Egypt, Libya, Morocco, and Tunisia) the Levant (Iraq, Jordan, Lebanon and Palestinian Territories) and Yemen. The survey did not include Syria due to the civil unrest in the country.

The key theme running through this Youth Survey 2017 is a sobering one: we live in a region where young people straddle a fault line between hope and despair.  A vast, important demographic that is united by religion, language and culture is increasingly separated by access to opportunity.  Even today, given the conflicts, security issues and unemployment which sadly mark much of the region, the overall finding looks surprisingly positive: just over half of young Arabs as a whole still believe their nation is on the right track.

Looking at the Survey on a region-by-region, or country-by-country level, however, we see a stark divide between youth in the Gulf states, who are brimming with optimism, and those in the Levant – Lebanon, Jordan, Palestinian Territories, Iraq – and Yemen, who are anxious and disillusioned about the future.  The real tragedy of this year’s key findings is that young Arabs are becoming more pessimistic.

“Our best days are behind us” is not a phrase any government should hear from anyone, least of all the very demographic that will be living with the legacy of their rule.

It would be easy to dismiss this divide as the result of the widening income gap between the ‘haves’ and the ‘have nots’ – those that have oil, and the prosperity that should come with it and those that don’t.

Young Arabs realise that while their elders played the victim game and sought intervention and protection from foreign allies, that strategy no longer cuts ice.  The world is becoming increasingly inward-looking and globalisation is being challenged:

According to this year’s Survey, young Arabs do not see the US, Russia or other international powers as their biggest allies, but Saudi Arabia and the UAE.  And they increasingly see the UAE as a model country – one that they would not only choose to live in over any other, but also want their own countries to emulate.

This suggests a solution: that good governance could be the UAE’s newest export.  The soft power of the UAE is one of the Middle East’s greatest assets – and one that doesn’t just enrich the UAE but the whole region, through the promotion of stability and prosperity.

National and international complexities mean that a one-size-fits-all model would be unrealistic. But some aspects of the UAE model are universal: empowering youth, and focusing on enabling positivity, happiness and tolerance – increasingly in short supply across the region – would be  a strong start.

The Arab Spring of 2011 is behind us, and last year’s Survey showed us youth were increasingly disillusioned with its legacy.  But revolutions can take a long time for their full effects to become apparent. For better and for worse, the region is very different today than it was six years ago. It’s easy to concentrate on the ‘worse’ – the conflicts in Yemen, Syria and Libya, the refugee crisis and continued instability in Iraq, to name just a few.  For better, though, we see that nations are waking up to the new reality and finally preparing their economies for the future. In Saudi Arabia, the UAE and Qatar we see younger generations taking more prominent roles in government; in Egypt we are seeing the return of a measure of economic and political stability; in Iraq and Syria we see Daesh in retreat; in North Africa, outside of Libya, we see relative stability; and across the region we see young people increasingly rejecting the message of extremism.

Twelve years ago, long before the Arab Spring provided a wake-up call to autocratic regimes, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, sent a clear message to Arab governments: “You must change, or you will be changed.”

So what is the solution?

The 28th Arab League Summit, held in Jordan in March this year, pontificated for the nth time on the same issues, and came out with no solution.  While it may sound utopian, the only real solution that has the chance to offer a candle in the sea of darkness is one led by the spirit of youth and the courage to be positive.

We in MENA-Forum accept all the report’s findings as a true picture of the current situation.  For a start we would join in applauding such initiative to try and cover such a diversely endowed region by nature and millenary culture.  We would nevertheless have to note that misunderstanding is however still prevailing sadly in most of its hot spots where it would certainly be difficult to extricate a happy opening for each and every side to be happy with.

 

Ernst & Young on Fraud and Corruption in 2017

Fraud and Corruption in the MENA . . .

In a report of Ernst & Young on fraud and corruption in 2017 it is said in its Executive summary that “Today’s businesses are operating in an uncertain economic environment. Popular discontent with globalization, political instability and slower growth in emerging markets is placing pressure on companies as they seek alternative ways to meet ambitious revenue targets.”

It is also advocating that “Restoring confidence through enforcement as “Bribery and corruption remains a challenge and business conduct is under greater scrutiny from both regulators and the public than ever before. The majority of our respondents support the strong stance taken by regulators, particularly respondents in emerging markets.”

The report, titled ‘Human instinct or machine logic – which do you trust most in the fight against fraud and corruption?’ is the synthesis of a survey of 4,100 employees of large businesses in 41 countries across EMEIA.

It was already highlighted back in 2015 in similar report of EY that generally “The cost of unethical behaviour has never been higher” than that of that year.

Although sporadic progress were acknowledged to have taken place in the struggle against bribery and corruption in most countries of Europe, the Middle East, India and Africa (EMEIA), almost half of the surveyed by EY of the MENA region reported their concern and still feeling that it is a rampant problem in their own country. In other words good morality is definitely not there in business.

Whistle-blowing when things get eventually out of hand might be a way out but how to do would be crutial as to how.  Hotlines are now considered an important part of a company’s compliance program in the MENA and only few respondents were aware of such a channel in their company, whilst half would not allow themselves as if to salvage their career first and foremost.

In our view and in so far as the North African half of the MENA region is concerned, we would like to think that it is widely acknowledged that the domestic business informal sphere of these countries’ account for no less than 50% of their respective economies.  Can we therefore assume that a sizable portion of that informal sphere being carried out outside any radar coverage is of doubtful nature, meaning possibly tainted with burrs for most close to the ground and lots of well-known politico-economic blunders for the different leaderships.  These were found at 57% of MENA’s respondents not believing that business management do not emphasize enough high ethcal standards.

Hydrocarbons bearing on macro-financiers balance of Algeria

Impact of the decline in the price of Hydrocarbons bearing on macro-financiers balance of Algeria of 2000 to 2016 . . . 

 This contribution is a very brief summary of a lengthy report titled ‘Impact of the Decline in the Price of Hydrocarbons on the macro-financiers and macro-social balances of Algeria (1). Any socio-economic model is carried by political, social and economic forces for its implementation, and because Hydrocarbons bearing on macro-financiers balance of Algeria that much, these must take account of the harsh reality not only facing the country but above all those of the transformation of the world that surrounds it, that with the revolution of new technologies have turned it into a Glass House, foreshadowing major geo-strategic upheavals, especially in the Mediterranean and Africa. This would require adaptation strategies.

What of the evolution of the price of oil ?

Impact on the Trade balance

According to the Algerian Customs Statistics, all imports have evolved as shown below.

Total imports of goods between 2000 and 2016 were of the order of $498.12 billion.

Total entries of currencies between 2000 and 2016 of which more than 97% are directly and indirectly derived from oil were $798.36 billion.

Total exports of hydrocarbons were over the same period of time as follows according to the official Algerian data.

The total gives $770.63 billion for SONATRACH or on average, a 96.49% of total foreign exchange earnings.

Sales of oil brought to Algeria an amount of $27.66 billion in 2016, with an average price of a barrel at $45. That is a decline of more than $5 billion in a year, despite an increase of 10.6% of the volumes exported, according to the central Bank of Algeria. Because of the drop in revenue of SONATRACH, the oil related tax declined to DZD1805 billion (against DZD2273.5 billion in 2015).

Impact on the level of Foreign Exchange Reserves (FER)

The level of external debt remains historically low, that at 2.45% of GDP, or $3.85 billion, and as per the Bank of Algeria all FERs have also evolved in the same way.

Impact on the rating of the Algerian Dinar (DZD)

The value of a currency is function of a certain degree of built-in and / or innate confidence within a productive economy. The Algerian economy being fundamentally a rentier type of economy, it more often than not contradicts the basic laws of economy as for instance devaluation of the national currency, the DZD should in principle have boosted exports. It did not and if tomorrow the exchange reserves tended towards zero, the Government would be forced to introduce a very sharp devaluation of the DZD possibly to DZD200 a Euro and in the parallel market to DZD250 a Euro.  .

All previous data take into account the importation of goods, but also imports of services and legal transfers of capital; the document of reference being the balance of payments. The difference between revenues and imports gives $300.24 billion. From this amount, the $122 billion of FERs should be subtracted leaving us as at 31/12/2016 with $188 billion.

If we take an average annual outflow of legal capital amount of $3.5 billion a year, we will have for 16 years $56 billion or FERs exit for services of about $244 billion between 2000 and 2016 or an annual average $8.11 billion.

The official data of the Bank of Algeria give an average ranging between $10 and $12 billion over the 2010 to 2016 period. More precisely and according to that central financial institution as of April 12th, 2017, non-oil exports although declining still represent a small fraction of the external revenue, that were $1.39 billion in 2016, by counting imports (including goods and services) and the various outflows (repatriation of dividends, etc..) the balance of payments deficit stayed, at a level of $26.03 billion, down slightly from 2015 ($27.54 billion).

In summary, Algeria put up for decades, with a crisis of governance. However the current situation is different from that of 1986, of which the impacts had repercussions between 1989 and 1999 on all economic, social and political spheres. Despite the significant, although declining foreign exchange reserves, and if structural reforms were to be hampered in any way, the current crisis of governance may turn into a financial crisis by years 2018/2020. How can we forget that countries including emerging countries, that have undertaken successful reforms, relied on a mobilization of opinion and above all deep change in policies?

The need for reform in Algeria is more than necessary. Despite its unprecedented money spending, economic outcomes were mixed. These risk leading to social and / or political crises at mid to long term if the present status quo continues unabated and to lavishly spend; requiring us to face up to the urgency on the inevitability of the structural changes to operate more effectively. Strong growth can come back to Algeria but only if a combination of different factors such as a dynamic workforce, knowledge economy, a taste for risk and constantly updated technological innovations, the fight against all forms of harmful monopoly, healthy competition, a renewed financial system capable of attracting capital and an irreversible opening towards overseas investments were brought to bear.

These reforms should fundamentally go through a vibrant democracy, stability of the legal rules and certain equity; with policies leading towards social justice. The conduct of all these reforms can neither be delegated to such or such Minister nor put in the hands of any given administration. These can only be conducted if, as the top level of the State, strong political will resting with only, the president of the Republic and his Prime Minister could lead and try and convince the Algerians of their importance with in this internet age, the use of permanent and transparent communication flows. It is the minimal condition through which “Algeria can become that pivotal country for stability in the Mediterranean region and Africa. It would also have to adapt to the new global changes by analysing the impacts and adjusting to the terms of its association agreement applicable since September 1st, 2005 with the European Union and to the requirements of its eventual membership to the World Organization (WTO), starting with integration within the Maghreb, bridge between Europe and Africa.