Algeria plans aid to debt-swamped state-owned firms

2009-10-23

The Algerian government is taking steps to cut the debts and restore the competitiveness of struggling state-owned companies.

By Walid Ramzi for Magharebia in Algiers – 23/10/09

[Walid Ramzi] Industry Minister Abdelhamid Temmar has announced a sweeping aid package to erase the debts of Algeria’s state-owned industries.

Algeria is developing a programme to help debt-stricken state-owned firms become profitable and competitive, in part through more strategic partnerships with foreign companies.

The Ministry of Industry has "drawn up a project to re-structure the state sector by establishing major industrial complexes with the participation of foreign strategic partners", the ministry's head, Abdelhamid Temmar, told MPs in an October 8th meeting.

"The goals of this programme are to make the activities of state-owned firms conform to the government's economic goals and to revive the nation's economic capabilities by 'cleaning up' the viable public enterprises," he said.

The Finance Ministry issued a report earlier this month that estimated that state-owned companies' debts totalled over 300 billion dinars.

"There are 150 unsuccessful enterprises that require urgent intervention from the government to decide their future," says the report, which adds that the aim is to "put an end to the continuous financial drain resulting from the public treasury's ongoing injection of large sums of money to guarantee the survival of these firms."

Five state-owned entities have already been targeted by the programme: The National Company for Pharmaceutical Industries (SAIDAL), National Algerian Airlines, National Industrial Auto Company (NIAC), National Establishment for Electronic Industries, and the Building Materials Production Company.

A report presented to the Council of State Contributions next November will decide which other companies should receive state assistance with cutting their debts and improving their performance.

"The programme will help the nation's struggling state-owned firms by "increasing their capitalisation or buying their debts," said Finance Minister Karim Djoudi, adding that "the enterprises to be included in the process already have major capabilities and weight in the local market."

The programme will provide different levels of aid to each of the selected state-owned firms.

With an eye to re-establishing the company's place in the aviation industry both nationally and regionally, the government will provide 100 billion dinars to revive the Algerian flag carrier. Funds have also been earmarked for the purchase of 15 planes, four of which have already been received. Government assistance is expected to continue until 2014.

Other companies are undertaking more complex negotiations. NIAC is in talks with the finance ministry in an attempt to deal with its ballooning debt of 60 billion dinars. The state-owned car company has also accumulated an additional 42 billion dinars in debt from overdrawing its bank accounts, which has led to the banks' refusal to provide it with loans or capital.

NIAC's general manager, Moukhtar Shayhoub, said the government will invest an estimated 3 billion dinars in the short run to address the firm's indebtedness.

"This will be complemented by an investment plan that extends over a 10-year period, with a total cost of 10 billion dinars," he added. He believes this spike in government aid will enable the company to increase production from 4,500 vehicles a year to 10,000, and will bring about an estimated 40 billion dinars a year in revenue.

But Algerian economist Abdelhak Lamiri is among the critics of the government's programme.

"[I]njecting public money to rescue state-owned firms has proved to be a failure in the past," he said, adding that from 1990 to 2007, Algerian governments injected around 1.4 trillion dinars into such firms' balance sheets, yet failed to rescue them.