Algeria to review investment policy

30/07/2008

President Bouteflika sharply criticized privatisation and foreign investors last weekend, accusing them of failing to contribute to the development of the Algerian economy. Economists say bureaucracy and corruption are to blame.

By Said Jameh for Magharebia in Algiers – 30/07/08

[Getty Images] President Bouteflika accused foreign investors last weekend of failing to contribute to the development of Algeria's economy.

The Algerian government said it would organize three workshops to draw up new investment policies by September. The announcement follows a speech Saturday (July 26th) by President Abdelaziz Bouteflika in which he sharply criticised foreign investors and the privatization process.

In an interview with the Algerian press on Tuesday, Minister of Communication and official government spokesperson Abderachid Boukrezaza announced that to draft the new policy proposals, the government will organise workshops on investors' transfer of capital overseas and promoting foreign and Arab investments.

Speaking at a gathering of more than 1,500 municipal leaders, President Bouteflika lashed out at foreign investors and managers of the privatisation process. He described past policies as a road that failed to lead to "paradise", vowing to radically review privatisation and investment rules.

The speech was the first of its kind for Bouteflika, who said that his investment policies had not achieved the economic growth he expected.

The president accused certain investors of making gains at the expense of the Algerian people, incurring meagre costs on projects in Algeria, then transferring huge amounts of money overseas.

Bouteflika's diagnosis has come too late, Algerian economic expert Abdelmalek Serrai told Magharebia. The special advisor to former President Elyamine Zeroual said that experts in the Algerian economy had warned four years ago that such problems would occur and that the industrial strategy and privatisation dossier needed to be reconsidered.

Serrai identified bureaucracy, bribery and a general lack of transparency as some of the major factors that have prevented projects from being implemented and caused many investors to leave the Algerian market.

Serrai said that several other domestic factors also contributed to the failure of foreign investment to build the Algerian economy. Only a small portion of a plan to privatise 1,200 public enterprises has been completed, despite the project's announcement more than four years ago. In addition, the expert said, Algerian banks have played a negative role because they have not provided sufficient loans to Algerian and foreign investors seeking to take part in the privatisation process.

"Investors seek to make profits in return for certain services," Serrai said. "Therefore, the Algerian side is to blame. If the applicable law in this regard doesn't suit the national policy, then the mistake is that of the people who enacted the law, not the investors."

Serai added that President Bouteflika's criticism of the officials managing foreign investment may "have a certain political smell" linked to the presidential elections slated for next year. Referring to the international investment sector, the economic expert added, "President Bouteflika has to choose efficient men who can manage this huge file."

Many citizens feel that investments in the country have not brought economic benefits to the population.

Public bank employee Yekhlef agreed with the president's criticism, describing foreign investors as having taken advantage of the nascent local market and the fragility of Algeria's laws. Foreign investors look only at the short and perhaps medium-term, he said, in order to realize just one goal: speedy profits.

"They didn't care about participating in building a strong economy in Algeria," he concluded.