Algeria is a leading supplier of energy to the European market. Spain
imports 75 percent of its natural gas via pipeline from Algeria and
Portugal receives 100 percent. Italy imports 51 percent of its gas
requirements and recently signed a memorandum of understanding with
Algeria on a proposed $2 billion gas pipeline to transport Algerian
gas from Skikda via Sardinia and Corsica.
Although the oil and gas sectors which account for 97 percent of the
country's foreign export earnings are booming, the world economic
downturn and declining global oil prices seem set to impact on
government revenues. The domestic economy is not in a healthy state
and social tensions exacerbated by economic hardship have alerted the
government to the need to step up job creation and investment in
infrastructure projects.
An Economic Recovery Plan has been passed proposing extra spending of
$7.1 billion over the next four years which was cautiously welcomed by
the IMF. The plan seeks to stimulate demand, offer increased support
for agriculture and small to medium-sized enterprises (SME), invest in
public works, especially housing. The government put its house
building programme out to international tender towards the end of the
year. In total it intends to construct some 35 thousand housing units
across the country.
Elsewhere, a major investment to modernise and develop the port of
Algiers is due to begin soon with the aim of improving services and
expanding capacity and plans for the building of a second container
terminal.
Oil Revenues
In 2000, rising oil prices and increases in crude production saw a
massive increase in export revenues to around $19.5 billion, from
$12.3 billion in 1999, leading to a $7.3 billion current account
surplus in 2000. This increased income from oil sales offered the
opportunity for the country to raise living standards, reduce
unemployment and boost growth.
The International Monetary Fund has broadly supported Algeria's
economic plans, but suggested further measures of privatisation, legal
reforms and speeding up modernisation of banking. The IMF has also
urged Algeria to reconsider the use of high tariffs to protect local
industries.
Recent sell-offs
The pace of privatisation appears to have been stepped up. Strategic
stakes in three cement plants are under preparation for privatisation
with the international bank, HSBC brought in to supervise. A 51
percent sale by a process of open tender is expected early in 2002.
Government plans to step up construction projects should help ensure
the attractiveness of the cement sector to investors.
Stakes in some state owned steel assets were sold in October to a UK
based firm, LN Mittal Group, which took over 70 percent of steel
making plant Alfasid and stakes in iron ore mines. The government
offered a generous deal to the company to offload the loss making
firm.
In a 2001 report the IMF expressed optimism at the expanding
contribution of Algeria's private sector to the wider economy,
highlighting the recent strong performances of sectors such as food
processing, textiles and pharmaceuticals.
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