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

Interview: Réda Hamiani

How has local manufacturing performed in recent years? What factors have affected this?

REDA HAMIANI: Unfortunately, Algerian production is under-performing. This situation is the result of a large-scale divestment, caused by significant losses of market shares following the liberalisation of national trade decided by public authorities. Yet it was also due to the fact that risk-taking in the field of investment has been made difficult by a challenging business environment. This has resulted in disappointing economic growth. While growth is mainly driven by foreign groups, there is a lack of endogenous development. On the other hand, there is very low wealth creation with little knock-on effects on the overall economy. Thus, Algeria remains a heavy importer and domestic production is limited.

What do you see as the key challenges to enhancing local manufacturing?

HAMIANI: Local production will need to meet the requirements of a Western model of consumption that considers the customer first and chooses the best products. Another challenge consists in regulating the informal market which introduces highly unfair competition and penalises local producers. The state has initiated a strong campaign encouraging local firms to upgrade their competencies and improve organisation. Additionally, a training policy was initiated to introduce and update management and good governance practices. Nevertheless, the biggest challenge faced by entrepreneurs in Algeria remains the business environment where bureaucracy discourages investment in favour of trade. Furthermore there are other difficulties such as access to funding and land.

Going forward, what efforts are needed to adequately tackle inflationary pressures?

HAMIANI: It is necessary to maintain the current level of salaries as long as possible to offset the reckless increases of recent years unrelated to proven productivity gains. The corrections to be made in the medium term require a strict monetary policy led by the Bank of Algeria to adequately increase money supply by a policy of credits unrelated to productive counterparts. The same goes for the authorities, who must get back to better governance when it comes to granting management. They must also avoid giving unconditional support to firms experiencing financial difficulties.

What are the partnership opportunities in the chemical, petrochemical or plastic industries?

HAMIANI: Algerian firms with a foothold in the market expect real technical assistance from their foreign partners, targeting primarily an upgrade of their organisation and management systems. Foreign companies will benefit from additional growth which is quite positive given the current international downturn, especially in Europe. This complementarity will bring about a win-win scenario. Algerian authorities share this approach at the moment, and generally encourage national public enterprises to move it that direction.

How can public-private partnerships be revitalised?

HAMIANI: Public-private partnerships (PPPs) could be greatly facilitated by opening up public companies’ capital either directly or through the stock exchange. It is also possible to consider technical or commercial partnerships. The obstacles to be overcome are related to different management methods and the grip of administrative procedures as drawn up by public authorities.

How can the import bill be reduced while avoiding a restrictive protectionist policy?

HAMIANI: It would be beneficial to increase local production to replace imports which might be limited only to inputs. This can be achieved by mobilising investments while implementing a proactive upgrading programme. Foreign direct investments bringing substantial technology and knowledge should be facilitated to boost local production so that it meets the requirements of consumers in terms of safety, quality and reliability.