Algeria - COUNTRY PROFILE
Geography
The second largest country in Africa after Sudan and 10th largest in the world, Algeria is bordered by Western Sahara and Morocco to the west, Tunisia and Libya to the east and Mauritania, Mali and Niger to the south. However, despite its giant size, with almost 85% of its land mass covered by the Sahara desert, its smaller Mediterranean coastal strip is the home of almost the whole 32.8m population.
Along this 1200km of coast, a narrow plain is periodically broken by the Tell Atlas mountain range, while inland, the deserts of the Great Western and Great Eastern Erg give out onto the central, Tademait Plateau. The desert is also the source of the famous sirocco wind, which blows hot and dusty across the southern Mediterranean during the summer months.
Farming is naturally concentrated on the coastal strip, with around 13% of the country's total land area used for grazing and pasture, 3% for arable and 2% for forestry.
Yet the desert is far from being a complete wasteland. Located within it are scattered oases and often sizeable towns, such as Tamanrasset in the far south and Tindouf in the southwest, while beneath its surface lie huge hydrocarbon reserves.
The climate also changes between desert and coastal plain, with the former dry and hot while the later enjoys a Mediterranean climate that sees mild, wet winters and hot, humid summers.
Recent History
Revolt against over a century of French colonial rule took the form of a series of uprisings in 1954-55, followed by a full-scale war. The Algerian nationalists were led by the Front de la liberation nationale (National Liberation Front - FLN), which battled both the French army and colonial settlers known as the pied noir. The war proved a particularly bitter conflict, in which more than a million are thought to have died. Finally, peace negotiations began in 1962 and on July 5 of that year, Algeria was proclaimed independent.
In October 1963, Ahmed Ben Bella - a hero of the independence movement - was elected president, and began a socialist programme that included the nationalisation of foreign holdings. Opposition to him resulted in a military coup on June 19, 1965, led by Colonel Houari Boumedine. He overthrew Ben Bella, suspended the constitution and implemented military rule.
This dictatorship continued in one form or another until December 1991, when the first full parliamentary elections ever held in Algeria took place. However, much to the dismay of the government and the military, the apparent winners were the fundamentalist Front Islamique du Salut (Islamic Salvation Front - FIS). Unwilling to accept this, the army cancelled the general election and restored military rule. The country plunged into another bloody, albeit undeclared, civil war.
An estimated 150,000 people have been killed since this began in January 1992, and damage is estimated at $30bn. Conflict further escalated in 1997-98, with the targets for the killings shifting from politicians to intellectuals and journalists, then finally defenceless villagers. The FIS itself ceased armed activity in 1997, yet was superseded by more radical organisations, the Armed Islamic Group (GIA) and the Salafist Group for Preaching and Combat (GSPC). There was also widespread suspicion - both international and domestic - of the government's handling of the conflict, and accusations that the army was being deliberately ineffectual in dealing with the often unattributed massacres.
In April 1999, Abdelaziz Bouteflika became president after an election in which he was the only candidate, after the last-minute withdrawal of all opposition candidates on account of alleged election rigging. However, Bouteflika did initiate a process of change, securing a truce with the FIS and an amnesty for those of its members not convicted of murder or rape. He also embarked on a policy of opening Algeria up to the outside world, with particular initiatives towards France and Morocco alongside efforts at economic liberalisation under the government of Prime Ministers Ahmed Benbitour, until August 2000, and Ali Benflis thereafter. Bouteflika was re-elected by a landslide in April 2004 on the promise of achieving national reconciliation and prosperity and restoring Algeria's international standing.
However, the jury is still out on the government's dealing with the country's political problems. In 2001, there were a number of powerful protests in the Berber-speaking region of Kabylia calling for more recognition of the Berber minority. These resulted in concessions from the government, including official recognition of the Berber language, yet protests - and violence - still continue. On his re-election, Bouteflika promised to take some new initiatives regarding the Berber issue, though many Berbers had boycotted the ballot. He seemed to be keeping his word in 2005 when the government, after reaching an agreement with Kabylian tribal representatives, announced that new local elections would be held in the region.
Meanwhile, attacks blamed on radical Islamists are becoming less and less frequent, in spite of occasional flare-ups, particularly in the western provinces of the country - Tipaza, Chlef, Ain Defla, Tiaret, Sidi Belabbes, Mascara and Saida. There have also been terrorist attacks in Medea and Blida, south of Algiers, as well as in Boumerdes, less than 50 km east of Algiers. Berber guerrillas also occasionally launch attacks on military patrols on the edge of Kabylia and in some other eastern parts of the country. Death threats against political figures and foreigners are also still prevalent, with, unsurprisingly, few of the later having visited this remarkable land during this long decade of sorrow. However, in early 2005 most attacks and ambushes appeared to be directed against security forces, offering civilians a sorely needed sense of security.
While the GIA is considered to be virtually wiped out, following the capture of its leader Nurredine Boudiafi and the killing of Younes Chaabane, who had replaced him at its head, it seems that the GSPC is reeling from the death of leader Nabil Sahraoui and the arrest of deputy leader Amar Saifi during 2004. Algerian authorities' pressure against the GSPC has most likely had the effect of pushing its activity into Mali and Niger.
Government and Politics
Major Political Players:
Abdelaziz Bouteflika: Elected president in April 1999 on a national reconciliation ticket after all the other candidates withdrew, he was once foreign minister, hails from western Algeria and is now the most important civilian political leader in the country. In the April 2004 elections, he was re-elected with 83.49% of the vote. Still tied closely to the military - he is also minister of defence - his push for an end to the war is tempered by fears of a return to widespread violence, while his efforts to open up the country economically are edged by fears that the country's decreasing unemployment levels might go up again as markets liberalise.
Ahmed Ouyahia: A former premier, Ouyahia was brought back to replace Ali Benflis as prime minister in May 2003. This came after Benflis had fallen out with President Bouteflika over the pace of political and economic reform. As a result, Ouyahia is widely seen as applying the breaks to change and following an approach much closer to the president's.
Chakib Khelil: As energy minister, charged with the most controversial of these reforms - that of the oil and gas sector - Khelil has been in the spotlight recently, being both praised and condemned for his push to liberalise the market.
Abassi Madani: Head of the FIS since its foundation in 1989. Since banning, the party is not what it was, but he is still known as its "historic chief". He was released from jail in July 2003, although remains banned from political activity.
Sheikh Abdallah Jaballah: Leader of the Mouvement de la Réforme Nationale, or Islah (Renewal), which is now the strongest Islamic party. Seen as a man of principle, he was the original founder of Ennahda, an Islamist party that joined the government coalition, leading to Jaballah's departure.
The current political system is bicameral, with a lower house, the Assemblée Populaire Nationale, with 380 members, and an upper house, the Conseil de la Nation, which has 144 seats. Two-thirds of the Conseil's members are elected through municipal polls and the remainder appointed by the president. The executive arm is the Council of Ministers, headed by the prime minister, who is appointed by the president.
From 1962 through to 1991, only one party in Algeria had legal status - the FLN. However, pressure for reform in 1990 led to the legalisation of a number of other parties, including the FIS. In 1997, the Rassemblement National Démocratique (National Democratic Rally - RND) was formed as an establishment party, as was the more moderate Islamist Mouvement de la Société pour la Paix (Movement of Society for Peace - MSP). Other parties now include the Front des Forces Socialistes (Socialist Forces Front - FFS) and the Rassemblement pour la Culture et la Démocratie (Rally for Culture and Democracy - RCD), both of which are strong in the Berber region of Kabylie and boycotted the last general elections, held in May 2002.
The Islamist movement split three ways, with the MSP and Ennahda supporting the government, while the Mouvement de la Réforme Nationale, or Islah, remains outside. Together with Lousia Hanoune's small but pugnacious Trotskyist Workers Party, Islah forms the main opposition in the National Assembly.
The May 2002 ballot confirmed a trend that had been ongoing for over a year - the return of the FLN as the main establishment political force in Algeria. The vote gave them 199 seats in the 389-seat national assembly. However, the turn out was the lowest since 1962, at 47.49%, while almost no one voted in the Berber regions, where the Berber nationalist FFS and RCD had urged a boycott.
In May 2002, the FLN thus emerged as the dominant party in the ruling government coalition, which includes the RND and the MSP, both of which did very badly in the poll. Municipal elections in October 2002 continued the process of FLN consolidation, while also demonstrating that the Islamists are far from the electoral numbers they were able to muster in 1990-1. With their vote now divided between the MSP, Islah and Ennahda, it hovers around half the 4m votes the FIS received back then. Islah secured nearly 1m of those votes, twice the performance of Ennahda, which it split from in 1997. Islah also emerged ahead of the pro-establishment MSP, making it the leading Islamist party.
The October ballot also demonstrated fragmentation elsewhere, as 23 different party lists secured at least one seat while 17 different parties won majorities in at least one constituency. The government has recently argued that this is why a 5% electoral barrier is needed, eliminating smaller groups - and also those with only a regional base - from public office.
With the FLN now the dominant grouping, events within the party itself have taken on more significance. The rift many observers had spotted between President Bouteflika and Prime Minister Ali Benflis ahead of the 2004 presidential election suddenly broke out at the 8th FLN congress in March 2003. Ali Benflis and his supporters then took over the party, with a view to using it as a springboard for his presidential bid. However, standing against Bouteflika in the April 2004 elections, Benflis received only 8% of the vote - although he alleged this was the result of massive electoral fraud.
The following FLN congress in February 2005 was actually a repeat of the March 2003 one, the results of which had been nullified by legal proceedings, following protests by opponents to Benflis. The president's allies regained control over the party, thus ending a two-year internal crisis, with Abdelaziz Belkhadem, the minister of foreign affairs, being elected FLN Secretary General, while the congress created a tailor-made FLN President title for Bouteflika and officially endorsed his general amnesty project.
Several political parties, starting with government coalition RND and MSP, also declared they would support a general amnesty, although the actual content of this project has not been disclosed as yet. Meanwhile, victims' families associations and human rights groups are opposing a general amnesty that would put murderers on a par with victims, and demanding compensations. In any case, Bouteflika has made clear he would subject the general amnesty project to a popular referendum.
Population
With a total population estimated at 32.81m for 2003, figures for different ethnic groups within that are widely disputed. With the majority ethnic Arabs, the largest minority are the Berbers, quoted widely as around 5m, though Berber organisations themselves put the figure at around 30% of the total population.
Population growth was around 1.65% in 2003, with almost all Algerians living in the predominantly urban coastal lowlands and adjacent mountain valleys. Population density drops sharply toward the interior, with the vast desert regions uninhabited except for isolated nomadic and sedentary communities. There is also a high urbanisation rate, running at around 5.6% per year throughout the last decade.
Algeria's population is overwhelmingly young, with around 70% under 30 years of age.
Population growth is expected to decrease to an average of 1.35% between 2000 and 2030, with total population forecast to reach 45.4m in 2030.
Economy
Despite the chaotic violence of the past decade, the Algerian economy has put up an impressive performance since it embarked on an IMF and World Bank supported structural adjustment programme in the early 1990s. It now records a balance of trade surplus, a stable currency and a low inflation rate - though unemployment remains high.
Much of this economic success is the result of the country's major hydrocarbon reserves. The gas and oil sector has accounted for an average 30% of the country's GDP over the last few years and about 95% of its export earnings. Algeria is also the largest supplier of natural gas to the European Union (EU).
Agriculture accounts for some 10-12% of the country's GDP in an average year, and 9% of GDP in drought years, with 2003 and 2004 seeing a good amount of rainfall. The sector also employs 15-20% of the labour force.
Restructuring the working of the economy as a whole has been the goal of the Algerian government since the early 1990s, with the primary economic challenges being to foster the development of the private sector and to stimulate investment in the non-oil sector. By doing this, the government hopes to reduce Algeria's dependence to hydrocarbons and to combat poverty and unemployment, which decreased from around 30% in 2000 to 23.7% in 2003 and 17.7% in 2004, according to the National Statistical Office (ONS). However, unemployment is considerably higher in some areas as well as among the numerous youth. Reducing dependence on hydrocarbon exports will also protect the country from the ravages of fluctuating international energy prices.
However, despite these intentions, industrial production continues to stagnate, while structural change has been slow. While the privatisation law offers considerable benefits to private investors, few privatisations have been successful to date.
An energy liberalisation law was first floated in 2002, but it was shelved in early 2003 due to widespread opposition from a spectrum of parties, ranging from Berber nationalists to Islamists to trade unionists, who see market liberalisation as a threat to jobs and an inroad for foreign influence. Bouteflika's landslide re-election helped the government put the bill back on track, and it was finally voted through by the National Popular Assembly in March 2005.
The law aims to make Algeria's state oil and gas company Sonatrach more competitive and efficient by stripping away the firm's regulatory role and its control of the tendering process for oil and gas exploration blocks. It also plans to further open up opportunities for foreign oil companies by reducing Sonatrach's minimum stake in production-sharing agreements to 30%, as opposed to the previous 50%, thus significantly increasing the attractiveness of Algeria's energy sector.
Yet there are other strong opportunities for foreign investment in Algeria, thanks to the country's 1993 investment code. Within this, April 1997 saw the establishment of the first free trade zone, in Bellara, while the hydrocarbon, agribusiness, tourism, construction and public works sectors are also earmarked for considerable expansion.
Algeria's per capita GDP at Purchasing Power Parity increased from around $4500 in 2001 to almost $6000 in 2004 (in actual terms, around $2200), while growth has picked up since 2001 after a continuous decline in the late 1990s. Surging oil prices during the period also saw hard currency reserves reach the record level of $43bn for year-end 2004, and a $50bn public spending plan was launched. This includes the building of 1m housing units during Bouteflika's second term.
While the oil price bonanza has considerably boosted exports, which rocketed from $19bn in 2001 to $31bn in 2004, the economic upturn has also triggered a dramatic increase in imports, from under $10bn in 2001 to almost $18bn in 2004. As a result, Algeria appears to have failed to capitalize on the high price of oil to strengthen its external position, with a cover ratio decreasing from 192% to 174% over the period.
Meanwhile, early public debt repayments have helped reduce debt servicing from around 20% of export earnings in 2001 to just 10% in 2004. Inflation has also remained low, hovering around the 4% mark.
Algeria's leading trading partner has long been the EU, which took 57.8% of its exports in 2004 and provided 55.5% of its imports. However, the US is by far Algeria's first client, taking 23% of its exports in 2004.
The country has a well-developed distribution system, mainly in the hands of private businesses, with the privatisation of remaining state distributors underway. The 1993 investment code also allowed foreign companies to use local distributors or establish their own in-country. In 1996, new regulations allowed for the leasing of equipment from foreign companies by Algerian enterprises, which has proved a popular development. Joint ventures (JVs) are also seen as a vital method of upgrading much of the country's outdated plant and machinery and attracting new technology. The government is determined to encourage as many JVs as it can.
Algeria is in the process of ratifying its Association Agreement with the EU, which was signed in April 2002 in Valencia. The agreement is expected to come into force in mid-2005. The most important aspect of this association is the gradual establishment of a free-trade area for industrial goods, on which customs tariffs will be totally removed by 2017.
Moreover, Algeria is also engaged in negotiations in order to become a member of the World Trade Organisation by 2006. Both moves require Algeria to upgrade its productive capacities and improve its business practices in order to significantly bolster its competitiveness.
Aside from the Banque d'Algerie - the central bank - there are six state-owned banks, one public development bank, and a sizeable number of private banks, both local and international. There is also an Islamic Bank jointly owned by a state-bank and the Saudi Al Baraka Group. The banking sector is another area ripe for reform, as in the past it has largely functioned as a depository, lending mainly to the public sector. This has left it with a non-performing debt problem, a blatant lack of efficiency and a need for major reorganisation under the ongoing liberalisation programme.
Foreign banks such as BNP Paribas, Société Générale, Citibank and Arab Banking Corporation have established themselves in Algeria since 2000, but so far they have been unable to conquer even 10% of the market altogether. This is mostly due to the public sector's prominent weight in the overall economy, as well as to its distrust of the private sector, especially in light of the bankruptcy of private Algerian banks such as El Khalifa Bank and BCIA in 2003 and Union Bank in 2004. Algeria's third-largest bank, state-owned Crédit Populaire d'Algérie (CPA) has since late 2002 been earmarked for sale of up to 49% of its shares to a strategic investor, but this might not happen before mid-2006. The long-awaited electronic payment system is also underway, and seems likely to become operational by early 2006.
