OBG talks to Réda Hamiani, Former President, Algerian Business Leaders’ Forum

Interview: Réda Hamiani

Has Algeria been able to make steps towards building up a local production base?

REDA HAMIANI: We know that petroleum production is going to dwindle in a decade or two, meaning the Algeria of tomorrow will no longer be able to subsist on oil wealth. We need to evolve and move on to new economic foundations. There is a clear need to develop a local industrial base; however, action remains superficial at best. Both the public and private sectors see eye to eye and agree on the need to develop economic sectors such as industry or services, but there has been little progress in advancing initiatives. After all these declarations, our country is still having difficulty in getting out of its old methods and mindsets, and heading towards change. We have the same leaders in power, overseeing a “free market” system when, 30 years ago, they oversaw a socialist state-led economy. We told ourselves we are going to make our reforms progressively, yet after 30 years, we have neither the benefits of a liberal economy nor the benefits and the coherence of a system that was centralised. We are between the two. It is the private sector that accounts for 80% of wealth creation outside of the petroleum and steel-making sectors. The private sector is responsible for 99% of commerce, 90% of food production and 90% of services. Thus we deserve a more prominent role at the negotiating table. In Algeria, the private sector’s economic power causes fear in the eyes of the authorities. They believe that, with greater economic power, the private sector will be a larger political force and threaten the status quo. Despite calls from the authorities to compete in the free market, it has been an empty slogan that has held back the local production base.

What are the obstacles that remain before public private partnerships (PPPs) can gain momentum?

HAMIANI: PPPs are built on principles that appear obvious at first; however, when we move towards execution, the problems present themselves. It is easy to say we share the market, we share the technology, we produce together, but companies with public capital are supervised at all times by the ministry and a court of auditors that follow up the proper accountability. The bureaucracy adds time to decision-making and the decisions are not always based on the principles of a market economy. To overcome these challenges, work is needed to unify the management and the control mechanisms of these partnerships. A reform was started in 1988, which aimed to transform state companies and permit them to act according to the market. Yet we still see that our political system does not want to grant freedom of action to public sector executives. We are under the impression that the economic public sector is just an extension of the administration of a ministry and, therefore, we cannot see how joint management of a PPP could effectively function.

How can the private sector become more competitive before the implementation of the free trade agreement (FTA) with the EU in 2020?

HAMIANI: Algeria has suffered a case of Dutch disease as businessmen found it easier and more lucrative to import products from China rather than importing raw material and investing in personnel and production. This has killed our local production base. Now we have been surprised by the authorities’ willingness to implement the FTA so quickly. The private sector had expected authorities to open up the economy, but with more time to prepare Algerian business for the competitive environment of European imports. More worrying than Europe is the competition from Asia, Turkey and Egypt. European imports are accountable, traceable and based on contracts guaranteeing transparency and quality. Yet, with Chinese imports, Algeria has imported everything without declaring the value or testing the quality of the products, creating a bazaar economy. The capitalism of yesteryear is finished. If we want the Algerian economy to be able to compete with the French and Spanish, we need the new generation of entrepreneurs to be capable of innovation, management and persistence.