Bouteflika's Program of Reform: The Social Costs of Saving an Economy
Yes, Algeria must reform its inefficient economic planning, but in the meantime, it must stay away from inspiring a new wave of political and social dissatisfaction that may be the result of untimely reform policy. Most third world countries have associated success in their economic growth to open markets and privatization. Algeria is no exception. But Algeria should be an exception, since it is still unable to completely control the public rejection of the government's political and economic ideologies. By overlooking the uniqueness of the Algerian case, the government could find itself facing a new unnecessary challenge.
In a recent February interview with Algeria's President Abdelaziz Bouteflika, aired by the Lebanese Broadcasting Corp (LBC), Bouteflika said, "When I took over (in April), there was no state to run." He lamented, "Not a single penny has been spent on productive sectors. Everything was poured into consumption and more imports." The devastation experienced by the North African country's infrastructure in the last 8 years due to the civil war is something that must be taken into account. It may appear rational to justify Algeria's economic misfortune based on such an event. However, Algeria's near complete reliance on oil and gas exports, government corruption and the lack of a clear economic vision shaped Algeria's economy, many years before the violence erupted. In fact, the popularity gained by the Islamic parties during the early 90s was due in part to the government's failure to create new jobs, to increase salaries, and to spark economic growth.
The concerns above were sited by Bouteflika himself in the LBC interview, when he admitted that the task is daunting to deal with a heavy legacy of rising unemployment, a chronic housing shortage and an economy that he stated suffers from wide-scale corruption.
It is healthy for any county to attempt to safely exit any burdensome period of its history to try to heal the wounds and fix the problem, which have brought about its hardship in the first place. Yet while walking toward the gate of economic salvation, the government is carrying the burden of over $ 31 billion of debt, 30 percent unemployment and a largely paralyzed economic infrastructure. While Bouteflika is trying to find answers to some of his country's problems, he finds himself overwhelmed with even more questions. One of them is; how can a country develop a quick recipe to redeem the faults of the past if half of the country's energy-dominated earnings go to pay back ever-accumulating foreign debts? In the recent crash in oil prices, Algeria, like other oil producers, doubted that the summer cloud would last for long. To recover from the temporary setback, government borrowing increased dramatically, in hopes that the return of the old oil prices would quickly pay off some of the debt. The re-boost of the oil prices was untimely and even then, Algeria was swallowed again in its political and economic misfortune.
Like others, Algeria was advised to remove the government's domination over the economy, to privatize and open the door to foreigners. And like others, Algeria listened to the advice and has launched its own reform program, hoping to pull the country out of crisis. But it seems that Algeria is a special case, and that uniqueness might not only jeopardize the success of its programs, but also the relative stability which it achieved on the political level, since Bouteflika's conditional amnesty. Prime Minister Ahmed Benbitour, known for his reform-minded approach, is expected to introduce a program shortly to be approved by the upper house of parliament. The program reads, "A market economy and openness to (foreign) partnership is an option that has been frankly declared. It will lead to achieving strong, sustained and qualitative growth."
Business experts say that such a notion sounds positive, but the real challenge lies within the implementation. An Algerian-based western economist told Reuters that the proposal, though it may sound all right, doesn't specify exactly how it will be carried out. Moreover, the plan has indeed failed to speak of the mechanism proposed to minimize social instability, should such a thing occur, and that is indeed the main challenge. Other Western diplomats argue that despite the relative calmness which Algeria has experienced in the last few months, the security situation is still very worrisome, since the same news of massacres are still heard of weekly and sometimes daily. They doubt that many foreigners will become inspired to empty their resources into a country engulfed by a tragic past and a mysterious future, no matter how attractive the tax breaks offered by the Algerian government may be.
The Algerian government's economic planning in the 1960s and 70s worsened the county's performance further since most public firms were proven unproductive and incapable to face competition. Like others who attempted to implement such a system and failed, the government blames their failure on the economic theory of centralization itself rather than its own corruption. In any case, regardless of what economic approach may fit Algeria's needs, caution must be used while implementing it. The fragile Algerian social stability must be carefully dealt with, since the Algerian people have no interest in experiencing another agonizing era, this time in the name of privatization and long term economic liberalization.
Topics: Algeria, Economy, Finance