Moving forward: The state continues to implement its plan to upgrade infrastructure

Under the previous and current five-year plans of 2005-09 and 2010-14, a major government objective has been the modernisation and expansion of Algeria’s transport networks. With some €229bn having been allocated to the development of railways, airports, public transport, roadways and ports, major public works projects are under way to facilitate mobility, reduce congestion and encourage the use of more environmentally friendly transport. This large number of projects will offer key opportunities for the participation of foreign enterprises, as well as the potential for the acquisition of technical knowledge by local players.

ROAD: Launched in March 2007, the East-West Highway, one of the largest public works projects in the country, will stretch across 1216 km from the eastern city of Annaba to Tlemcen in the west. Passing through 24 provinces, this €8.7bn, six-lane highway will connect Algiers, Oran, Constantine, Annaba, Setif and Tlemcen, significantly improving national transport and facilitating access to previously isolated parts of the country. Indeed, a recent study conducted by the Ministry of Public Works concluded the East-West Highway is expected to absorb up to 85% of national traffic.

Bids for construction tenders came from more than 60 international companies, with major contracts awarded to Japan’s COJAAL and a Chinese consortium consisting of the China Rail Construction Corporation and the China International Trust and Investment Corporation. The project is to ultimately link with the TransMaghreb Highway, a 7000-km roadway expected to stretch from Libya to Mauritania.

In addition to the East-West Highway, the state has invested in the construction of other major road works to boost national connectivity. Notable projects include the 1020-km Hauts Plateaux Highway, which will run parallel to the East-West Highway and improve access to one of Algeria’s most populous regions and a key trade corridor. Studies were concluded in May 2012 for most details of this roadway by a select group of Korean engineering companies, and construction on the $11bn roadway is expected to begin in 2013. Additionally, work began in Blida in April 2012 for the 1013-km North-South Highway, which will facilitate transport to the country’s southern provinces.

MORE OPPORTUNITIES: The construction of these highways is only the beginning of a long-term programme – the 2005-25 Strategic Plan for Road and Highway Development – that seeks to rehabilitate existing roadways and construct new roads over an estimated 112,696 km. Benefitting from an AD60bn (€610m) outlay in the 2010-14 five-year plan, Algeria aims to create an extensive network of national highways and provincial roads by 2025.

According to the Ministry of Public Works, work on eight new highways will commence in 2013, linking the East-West Highway to the ports at Djen Djen, Skikda and Bejaïa, with plans for another roadway connecting the East-West Highway to the ports of Oran, Tipaza and Ténès. Furthermore, construction of other roads that will connect many of the main highways with airports and cities is in the works. Indeed, initiatives for the next three years envision construction of over 2500 km of new roads and upgrades on 8000 km of existing roads as part of the larger programme.

A PLETHORA OF BENEFITS: The benefits of state investment in the development of road infrastructure are many and varied. For one, public works projects have become a key source of employment opportunities, with construction of the East-West Highway generating more than 100,000 jobs. Moreover, increased connectivity has proven a crucial advantage of new roads like the East-West Highway. “To arrive at a meeting at 10.00am, I used to allot seven hours on the road to travel from Algiers to Oran, and I would still arrive late. Now it takes four hours,” M’hamed Boudouma, the CEO of the Laboratory of Maritime Studies (Laboratoire d’É- tudes Maritimes, LEM), a public entity conducting engineering studies for state maritime projects, told OBG.

Increased access to previously remote areas has not only stimulated mobility in the movement of people, it has also boosted national and regional trade as well. Activities as varied as manufacturing, tourism, agriculture and energy exports will benefit from less congestion and easier transport from many new locations nationwide, while budding industries stimulate new employment opportunities and economic growth. “Road infrastructure encourages people to delocalise their activities and create factories or businesses in previously secluded areas of the country, thereby promoting mobility and development,” Safia Belazoug, a branch manager at Sabel Team Logistics, an integrated equipment and services supplier based in Europe, told OBG. New roads also enhance the potential of rapid delivery services, intermodal freight transport services and an under-developed transport logistics industry.

AIRPORTS: Algeria’s airports have witnessed sustained growth in passenger travel over the past few years, with the number of passengers jumping from 7.25m to 8.85m in 2009-11. This increase has encouraged the entrance of new airlines like Spainair and Iberia. Thomas J Bommer, CEO of Swissport, a ground handling agent, told OBG, “Algeria's air transport sector needs to be integrated into the broader international environment, with open skies agreements, but to do this a gradual liberalisation process would be beneficial.”

The arrival of new airlines has boosted competition and benefitted customers. “Because of the growth in the number of international airlines flying to Algeria, visitors have a large choice when selecting flights and can take into consideration a variety of factors, such as price, service, frequent flier programmes, airline hubs and timing that they prefer,” Radya Diffelah, commercial manager of British Airways in Algeria, told OBG.

Algeria’s airports are managed by three separate entities under the banner of Airport Management Services Establishment of Algeria (Les Établissements de Gestion de Services Aéroportuaires, EGSA): EGSA/Alger, EGSA/Oran and EGSA/Constantine. EGSA/Alger oversees the management of 18 airports across the centre and south of Algeria, including facilities in Hassi Messaoud, Bejaïa, Tamanrasset and In Salah. EGSA/Oran is responsible for 11 airports across western Algeria, including the airport at Oran, Algeria’s second-largest city. EGSA/Constantine manages seven airports, including Annaba, Constantine and Jijel, all in the north-east.

The modernisation and expansion of national and international airports has been a priority. According to plans, 14 new airports will be constructed in 2014, bringing the total number to around 70. Improvements at existing facilities have already been under way for the last several years, notably at Houari Boumediene in Algiers, which opened a new international terminal in July 2006. In early 2012 the government launched a tender to carry out a feasibility study for another new terminal at this airport. This facility, which would boost capacity from 6m to 12m passengers and cost about AD33bn (€316.8m), should be completed by 2018.

Work is ongoing at other facilities across the country. For example, the Danish construction firm Cosider has been awarded the contract for building a €130m terminal at Oran’s Ahmed Ben Bella International Airport, formerly known as the Oran Airport-Es Sénia. Meanwhile, under direction of EGSA/Constantine, new terminals are being constructed at the Annaba and Constantine airports, raising capacity from 500,000 to 700,000 passengers and 700,000 to 1.2m per year, respectively. The Jijel and Biskra airports are also being expanded, which will boost annual capacity by 100,000 and 200,000 passengers, respectively, accommodating an estimated 1.2m travellers between the two airports.

The realisation of these projects would not only encourage passengers to travel both within the country and to foreign destinations, it is also likely to provide tangible benefits in terms of freight traffic. This effect can already be seen at airports managed by EGSA/Alger, in part due to renovations and expansion at Houari Boumediene in recent years. For the combined EGSA/Alger airports between 2009 and 2010, national cargo traffic increased from 588 to 610 tonnes, international trade rose from 2357 to 2567 tonnes and global traffic went from 2947 to 3177 tonnes.

This growth is a good sign, but additional investments and bureaucratic reforms will likely be needed to realise the full potential of Algeria’s airports. Specifically, the movement of goods from the country’s airports is slowed by the relative underdevelopment of many roadways, and by administrative and Customs delays, resulting in an average clearing time for incoming cargo of 27 days at Algerian airports. However, government investment in new roads that link airports to ports and major cities should help in this respect.

RAIL: The development of Algeria’s rail system constitutes another critical state priority. The national rail network is being developed by the National Agency for Railway Project Studies and Investments (Agence Nationale d’Études et de Suivi de la Réalisation des Investissements Ferroviaires, ANESRIF), a public institution established in 2005 that is responsible for managing the budget for railway development, overseeing the implementation of projects and ensuring their timely completion. Under ANESRIF’s watch, Algeria’s railways expanded from 1700 km in 2008 to 4000 km in 2011, including completion of several key projects, notably a 574-km West Algerian Railway that transports passengers from Tabia to Sidi Bel Abbès through Béchar.

According to ANESRIF, some 2000 km of projects are currently under way, while studies are being conducted regarding an additional 5000 km of potential railway. Key projects include the modernisation of the 1200-km Northern Railway, which will enhance connectivity between the north and the eastern and western frontiers, and the construction of the Hauts Plateaux Railway, which will facilitate access to the isolated cities of that region. Work on the latter, which extends over 1160 km from the eastern city of Tébessa to Moulay Slissen in the west, has been partially completed, with 748 km remaining. Other important projects include the mining line connecting the port of Annaba to the mines of Djebel Onk. The completion of these railways is expected to generate efficiency gains in regions traditionally reliant on road transport by facilitating faster transport of goods, particularly hydrocarbons, to key ports, airports and cities around the country. Finally, existing rail networks are seeing an electrification process that will ultimately extend over 10,000 km with the completion of additional rail lines, while advanced signalling systems have been installed on key lines like the Arzew-Senia route.

The rail sector continues to offer ample opportunities for participation by foreign companies. Several international firms have already played a key role in the construction of the Hauts Plateaux Railway, with the Spanish consortium FCC Construcción and the Algerian firm ETRHB Haddad having carried out the 412 km of work completed so far. Foreign firms were also instrumental in the provision of advanced railway technologies, as exemplified by a commitment by Siemens to install signalling and telecommunication systems for a new line from Mecheria to El Bayadh.

URBAN NETWORKS: While Algeria’s urban areas have long struggled with traffic congestion, the modernisation and expansion of urban public transport is well under way, with plans to develop metro, tramway and cable car systems in cities across the country. These efforts are expected to ameliorate popular grievances with transport services, as evidenced by a 2004 Ministry of Transport survey that revealed 80% of the population of Algiers was dissatisfied with urban transport due to average urban commutes of 80 minutes daily.

Conceived nearly 30 years ago, the country’s first metro service – in the capital city of Algiers – was inaugurated on November 1, 2011. Complicated by an economic crisis in the 1980s and political instability in the 1990s, plans to construct the metro were repeatedly delayed until 2003, when work was finally launched. Only the second metro system to be built on the African continent, it has transported roughly 9m passengers since its launch. The metro at present stretches across 9.5 km and 10 stations, but there are three extensions in the works (see analysis). An essential ingredient to the overall success of this project has been the involvement of numerous foreign enterprises, including the Spanish-owned corporation Construcciones y Auxillar de Ferrocarriles, the French firm Vinci Construction, and the German-owned Siemens, with management of the metro handled by RATP El Djazaïr, a subsidiary of France’s Régie Autonome des Transports Parisiens (RATP).

Other metro projects are currently under consideration in large cities such as Oran. In addition, tramways and cable car systems are planned for 14 cities across the country, which would facilitate transport in the western, eastern and central provinces. Similar to the metro projects, these initiatives were inspired by success in Algiers, which is home to a tramway that has served more than 10m passengers since its opening in May 2011. With 16.3 km of line and 28 stations running between the eastern neighbourhood of Bordj El Kiffan and Les Fusillés in downtown Algiers, the tramway will ultimately cover 23 km and 38 stations after two extensions are completed. Foreign enterprises that were key to the construction of the Algiers tramway included the Italian construction firm Todini, the French conglomerate Alstom Group and ETRHB Haddad, while the management of the system was awarded to RATP Development, which is another RATP subsidiary as well.

Other forms of public transport include cable cars, which are used in Constantine and Algiers. In Constantine, this service has carried 12m-plus passengers since its inauguration in June 2008, encouraging the development of similar systems and extensions elsewhere.

PORTS: Handling approximately 90% of Algeria’s mercantile trade, Algeria’s ports have continued to grow in importance over the last several years. Though maritime traffic declined slightly in 2008 largely due to a 6% reduction in hydrocarbons traffic, trade quickly resumed, with national traffic increasing slightly in 2011 to 118.1m tonnes from 117.9m tonnes in 2010. Algerian port traffic reflects the economic activities of the country; though hydrocarbons comprise a key component of Algeria’s exports, with the ports of Arzew, Bejaia, Skikda and Bethioua specialising in the processing of these materials, Algeria’s 14 merchant ports are responsible for the importation of a significant portion of consumer goods, food and agricultural products, and minerals and construction materials, to name a few examples. While ports like Arzew are highly dependent on the export of oil and gas, other major ports such as Algiers, Bejaia and Oran depend on the importation of consumer goods. Due to increases in purchasing power and a generally high demand for imported goods, trade has diversified away from hydrocarbons exports in certain major ports, with the Port of Bejaia witnessing a rise in non-hydrocarbons traffic from only 30% of trade before 2005 to 69% in 2011. In particular, increases in the import of construction materials can be understood in light of Algeria’s multi billion-euro infrastructural projects, notably the East-West Highway.

A NEW APPROACH: Growth in maritime trade has also been the product of government efforts to improve facilities at Algerian ports (see analysis). By 2025, investments in the renovation and expansion of current ports and the construction of new harbours will total AD660bn (€6.3bn). Projects are under way in major ports to boost harbour capacities and reduce wait times for cargo deliveries. Improvements have already been made at Bejaïa, where the completion of a new wharf helped to reduce the average ship rotation time from 6.94 days in 2010 to 5.93 days in 2011.

Another key initiative under the current five-year plan is the transformation of the port of Djen Djen into a deepwater harbour, the first of its kind in Algeria, with the capacity to handle large ships that have previously been unable to enter the country’s ports. This project includes the extension of the jetties and the construction of a new 80-ha terminal with a transshipment annual capacity of 2m twenty-foot equivalent units. The potential for Djen Djen is enormous, Boudouma from LEM told OBG. “This project will help enable large ships to enter the port and discharge their cargo, facilitating the import and export of goods from land-locked African countries,” he told OBG.

Improvements in port productivity also stem from a recent government initiative to reorganise the handling of particular types of commodities. For example, imports of cars, food and cement were diverted from the Port of Algiers to neighbouring ports, reducing traffic at this major harbour. Furthermore, some ports have benefitted from the introduction of private management companies. Currently, the Port of Algiers and the Djen Djen port are managed by a joint venture between Dubai Port World (DP World) and the public port authorities of Algiers and Djen Djen, while the Singaporean private firm Portek signed an agreement with the Bejaïa Port Authority. According to Ali Jassem Alqaiwani, the general manager of DP World, Algeria has the potential to become a significant trans-shipment centre. “The country is particularly well-positioned and close to deep-sea routes, which could allow it to serve as a gateway to the Sahara and Sahel,” he told OBG.

Coupled with the impact of renovations and the reorganisation of freight movements, management improvements have facilitated substantial increases in port traffic. According to Boudouma, port traffic at Djen Djen has already risen 25% with the aid of managerial adjustments and renovations, and it will continue to rise as facilities development creates efficiency gains. At the Port of Algiers, total traffic increased by 3.81% between first-quarter 2011 and first-quarter 2012, despite a slow beginning for its new port management. While total traffic declined by 20% at Bejaïa’s port between 2009 and 2010, the reduction was largely due to a significant drop in hydrocarbons traffic, while non-hydrocarbons trade rose by 29% over this period, the largest increase of the last decade. Maritime traffic is expected to receive a further boost from the connection of major ports to new roadways like the East-West Highway, facilitating more fluid transport of materials.

OUTLOOK: With the realisation of a multitude of projects across a number of segments of transport – including rail, roads, airports and urban systems – the sector is set to enjoy sustained growth and investment during 2012 and the years to come. As these projects take shape, international firms will play a key role in the development and management of transport systems.