Algeria will move to free private sector

Oil drop hits economy

ALGIERS, Oct 29, (RTRS): Algeria will take steps to free up its private sector in response to the plunge in its energy earnings, but change will be slow because of entrenched government bureaucracy, former presidential adviser Abdelmalek Serrai said.

“The economic model will change in the short run because of the crisis, but things will move slowly,” said Serrai, an economist and consultant who has taken part in discussions with officials on how to manage an era of low oil and gas prices.

“Reforms will come at a slow pace due to bureaucracy,” Serrai added in an interview for the Reuters Middle East Investment Summit.

For decades, Algeria has used its energy revenues, which account for about 60 percent of the state budget, to pay for imports and cope with social problems, by raising the salaries of state employees and subsidising fuel and food.

But state finances have been deteriorating since mid-2014, when global oil prices started tumbling. The government has announced a 9 percent cut in spending for 2016 and is trying to rein in imports of goods and services.

The country posted a trade deficit of $10.33 billion in the first nine months this year, swinging from a $4.09 billion surplus a year earlier. Algeria imports almost everything for its 40 million people, from food to medicine and industrial equipment, because of weak domestic production that is partly due to lack of investment.

To stabilise the trade balance, the government is restricting import licences and plans to impose customs duties on some imported products, while encouraging increases in local production.

But officials realise that if local industries are to grow rapidly, the private sector needs to get involved — which means it will have to be liberated from the oppressive regulation and red tape of a state-dominated economy.

“I regularly meet with ministers. There is a political will to improve things,” said Serrai. “There have been good indications. The government this year allowed the private sector to set up and run industrial estates for the first time. This was a taboo.