The role of private sector expands in construction and management of Algeria's transport infrastructure

Algeria is among the top-five African states in terms of investment via public-private partnerships (PPPs) over the last 15 years, according to figures from the UN Conference on Trade and Development, with the public and private sectors increasing cooperation on transport infrastructure development in particular.

Initiatives along these lines include public-private joint ventures (JVs) to build and operate major facilities, such as the main ports and urban public transport networks, as well as the use of mixed public-private firms to assemble equipment and lay transport infrastructure, especially in the rail and light rail segment.

Overall, with private firms taking part in the construction and management of the country’s new deep-water port mega-project, PPPs and similar models look set to play a major role in the development of the transport sector in the years to come.

Ppp Models

While the sector is witnessing widespread use of the PPP model, the country to date has not witnessed the creation of build-operate-transfer (BOT) projects or the private finance initiatives (PFIs) developed by the Australian and UK governments – that is, the development of projects which are financed from scratch by private firms in return for operating concessions – and does not currently have a clear regulatory framework for PPPs.

Rather, most major infrastructure projects are still financed by the government, and sometimes – as in the case of the Cherchell deepwater port project – backed by a foreign loan, though private partners are in certain cases expected to invest in the development of facilities under their management as part of concession agreements, as in the case of Algiers port.

However, the government has said that it is open to considering PPPs to finance transport infrastructure development, something Boudjema Talai, minister of transport and public works, reiterated in October 2016, citing BOT models in particular. Such models are likely to become increasingly attractive to the government, as it seeks to reduce expenditure in order to absorb the fall in international oil prices. Recent moves to develop roadtoll systems underscore the potential for such models to be used, particularly in the road segment, with Talai citing the currently suspended Hauts Plateaux Highway as an example of a project that could be built as a BOT project.

Management Concessions

Several major pieces of Algerian transport infrastructure are managed by foreign companies or JVs between Algerian state-backed firms and foreign enterprises, often involving commitments by private partners for further investment in the facility. For example, SETRAM, a JV firm, is part-owned by two Algerian state-backed companies – the Etablissement Public de Transport Urbain et Suburbain d’Alger, which has a 36% stake and the Entreprise Metro d’Alger, with a 15% share. The the remaining 49% is held by the state-owned public transport operator from France, Régie Autonome des Transports Parisiens (RATP). SETRAM operates the Algiers, Oran and Constantine tram networks and is responsible for their maintenance under 10-year-long concession agreements. The company will also operate a number of new tram systems currently under development in other cities. RATP, via local subsidiary RATP El Djazaïr, also operates the Algiers metro under an eight-year concession agreement.

Similar models are also becoming increasingly prevalent in the port sector. The first instance of a private firm taking over the operation of a local port occurred in 2005, when Singapore’s Portek was awarded a concession for the management of the container terminal at Béjaïa, called Béjaia Mediterranean Terminal, via a JV with the management company of the Port of Béjaïa, Entreprise Portuaire De Béjaia. In addition, Dubai-based port operator DP World has been responsible for the management of the container terminal at Algiers port since 2009 via a JV with Entreprise Portuaire d’Alger. Under a 30-year-long concession agreement, the company committed to upgrading equipment as well as redeveloping the port’s container terminal. The company will also be responsible for managing the new terminal currently under construction at Djen Djen port through a JV with state-owned company Entreprise publique algérienne portuaire de Djen Djen. In November 2016 the port signed another JV agreement with domestic companies Logitrans Group and Group Gema for the establishment of a logistics zone at the base.

Meanwhile, construction is scheduled to get under way on Algeria’s new deepwater port at El Hamdania, near Cherchell in Tipaza Province, in early 2017. Although details of the project have yet to be finalised, in mid-December 2016 Talai told OBG that construction of the port will be divided between Algerian and Chinese companies, and that once completed the port will be managed through a JV between Algerian and Chinese companies. Work on the project is expected to take between four and seven years to complete.

Equipment & Manufacturing

Another significant emerging arena for public-private cooperation in the transport sector has been in the field of equipment assembly, manufacturing and maintenance, in particular in the rail and light rail segments. Prominent recent developments in this field include the establishment in 2010 of Cital, a JV between Algerian companies Ferrovial and Entreprise du Métro d’ Alger and France-based rail equipment manufacturer Alstom, which was established in order to assemble kits for Citadis model trams supplied by Alstom for the country’s expanding network of urban tram systems.

Further local rail assembly JVs have followed on the heels of Cital. In 2015 the ministries of transport and industry signed a memorandum of understanding (MoU) with a Chinese firm for the creation of a JV to assemble metro, tram and train carriages. Then, in February 2016 the National Company of Railway Construction (Entreprise Nationale de Réalisation d’Infrastructures Ferroviaires, Infrafer) signed an agreement with China Railway Construction Corporation to establish a JV to manufacture and lay railway tracks, with a particular focus being placed on highspeed tracks, an area in which Infrafer is less experienced. The company will also build a plant to produce signalling, electrification and telecommunications infrastructure to be used on railway lines.

In November the same year Infrafer also signed a MoU with Spanish firm DF-Rail to establish a JV to produce track switches and rail expansion mechanisms – DF-Rail’s area of expertise. Around 2000 such items will be needed by 2025, as part of the country’s rail expansion plans. Currently Algeria is entirely reliant on importing such products. State railway operator National Rail Transport Company (Société Nationale des Transports Ferroviaires, SNTF) also operates a maintenance facility in Constantine in cooperation with General Electric, which has supplied 25 locomotives to the Algerian company to date.

Such models also exist in other sectors; for example, a new facility to build and repair maritime vessels being set up at Arzew is to be operated by a JV between state-backed firm Entreprise Nationale de Réparation Navale and Portuguese firm Martifer. Air Algérie is also in the process of seeking a foreign partner for a JV to modernise its maintenance facilities.

Private Development

The authorities are also working to develop and improve urban bus services by encouraging private sector operators to expand and improve their services.

As part of this, the government has created new bus companies in each of the country’s provincial capitals to run on a limited number of routes in order to serve as a model in terms of standards of service for private operators, which are being encouraged to develop services of their own. The authorities say the initiative has already led to a notable improvement in service by private operators in some towns.