Chronology of the Algerian economy and investment between the past and the present ~ Investment,finance for businesses

Wednesday, September 8, 2021

Chronology of the Algerian economy and investment between the past and the present

 The economic and financial situation in algeria

The economic and financial situation between what was expected and what is now true

This is a work published by Dr. Ahmed Benbitour 15 years ago. What was expected yesterday is a reality today, and the diagnosis of defects and shortcomings in the Algerian economy!

Exporter of wealth and importer of poverty, such is the sad state of the Algerian economy, as we will demonstrate by analyzing the Balance of Payments based on official figures published by the competent authorities.

The analysis of the state of the economy from the Balance of Payments is done at four levels: the Trade Balance, the Services Balance, the Capital Balance and the Change in Reserves.

1. In the Trade Balance, exports and imports of goods are recorded:

In 2005, Algeria exported 46,380 million US $ including 45,590 million in hydrocarbons (98.3%) and 790 million in other exports (1.7%). It imported for 19 570 Million US $ releasing a Trade Balance surplus of 26 810 Million US $. In other words, the exports carried out exceed the double of the imports. On first reading, this could bring great satisfaction. But when we analyze the nature of exports and imports we understand how Algeria exports wealth and imports poverty.

Hydrocarbons being a non-renewable resource, it must be considered that each quantity of oil and gas exported is, at the outset, an impoverishment of the Nation for the benefit of the rest of the world (buyers abroad). The use that is made of export revenues and petroleum taxation should subsequently be an investment in the future and not a squandering of a non-renewable resource and therefore a mortgage on future generations.

Our duty to oil is dictated to us by future generations. We must extract only what we need to organize our development and leave all the rest of the oil in our basement. It belongs to future generations. "

However, if we consider the two years 2004-2005, Algeria was, a priori, impoverished by 78,600 million US $. It is the use that is made of these recipes that will confirm or deny, a posteriori, this impoverishment.

Export receipts were used, at the Trade Balance level, to finance US $ 19,570 million in imports of goods consisting of food products, drugs, semi-finished products and equipment.

Therefore, Algeria exports a non-renewable resource used as a source of energy for buyers (a wealth for them and an impoverishment for the country) and imports the labor products of the exporter's workforce to the detriment of that of the importer. In other words, we import the work of others at a time when there is significant youth unemployment among us.

It should be noted that our non-hydrocarbon exports barely cover 4% of our merchandise imports. So if there is a large trade surplus, there is a serious trade deficit which is the result of our labor force!

Hence the relevance of the question: what was the oil money used for? We have just seen what it is about the first level which is the Trade Balance. What about other positions?

2. The Balance of Services records trade in non-factor services:

economie algerien et le petrole
The Balance of Services records trade in non-factor services (transport, insurance, technical assistance, major works, etc.) and factor services such as labor and capital (repatriation of income from emigrants, outflow of income from foreign workers. in Algeria, interest paid on the debt and interest received on the deposit of reserves ...).

The balance of trade surplus was used to finance the deficit in non-factor services for a sum of US $ 2 160 million. This is an abnormal deficit for a country which has the tourism potential of Algeria. In addition, we have become an importer of housing by carrying out constructions by foreign companies here. We are the only country on the southern shore of the Mediterranean which records a deficit at this level.

The surplus was also used to finance the deficit in factor services for US $ 4 920 million. There too, this is an abnormal deficit for a country with a very large migrant population and which has a level of foreign exchange reserves which exceeded, at the end of 2005, more than three times the stock of debt. A new fact is the importance of the profits returned by foreign companies operating in Algeria. These profits reached US $ 4,740 million in 2005 and have increased almost five times since 2001 (464.7%).

During 2005, Algeria recorded the inflow of US $ 1,020 million in foreign direct investment and the outflow of US $ 4,740 million in repatriated profits from foreign companies operating in this country. According to the estimates of a competent International Financial Institution, these repatriated profits will exceed 10,000 million US $ by 2007.

In other words, the country will transfer outward in repatriated profits more than it paid in debt services (interest and principal), at the most difficult times of pre-rescheduling debt.

Are we moving out of the problem of transfers on external debt to that of repatriated profits? This is an issue that deserves full attention.

All the more so, since in 2004, SONATRACH began to see its share in oil production fall below that of its partners (48% for SONATR

ACH and 52% for associates), with a downward trend among the national producer and a very strong increase among associates.

3. The surplus export earnings were also used to finance the deficit of the Balance of Capital :

The surplus export earnings were also used to finance the deficit of the Balance of Capital for US $ 4,780 million, which is normal in a situation of net deleveraging.

However, it must be borne in mind that the advance payment of the external debt can only obey, in the current circumstances of Algeria, a very marginal cost / benefit calculation. This is certainly not a strategy that is part of a policy of seeking independence or reducing vulnerability. It is a lesser evil, nothing more. Indeed, the advance payment concerns the debt and the interest due over the period 2006-2011, date on which the date would be fully paid, according to the initial planning of 1994. Therefore pay for a value of US $ 8 billion this debt in 2006 or leaving it spread over the remaining five years cannot present a major issue, because this sum represents less than 5% of the level of foreign exchange reserves anticipated in 2011 or a variation in income over one year corresponding to a price increase of 10 dollars. .

4. Use the proceeds to finance the increase in foreign exchange reserves :

 The remainder of the proceeds was used to finance the increase in foreign exchange reserves to US $ 16 310 million. This sum went to swell already very important reserves, which by 2003 exceeded more than two years of imports.

This significant increase in foreign exchange reserves greatly exceeds the needs for controlled management of external balances. Under such conditions, the Algerian economy enriches the rest of the world by becoming poorer. In fact, the Algerian economy supplies the rest of the world with non-renewable energy raw materials and deposits with it a significant portion of export earnings in the form of accumulation of unnecessary reserves for the country. Said, in more direct language, the Algerian economy specializes in transforming a non-renewable reserve into a volatile reserve!

Use the proceeds to finance
The analysis of the figures shows that, in the current state of the Algerian economy, the only uses necessary are those which went to the imports of goods (42.48%) and to the repayment of the external debt (10, 48%) of which 4.25% in early repayment. Although the country needs a new economic policy to review the structure of imports.

In other words, 46.6% of export earnings financed abnormal deficits and the needless increase in reserves.

But in addition to being a source of foreign exchange through export revenues, hydrocarbons are also a source of budgetary revenue through oil taxation.

In 2005, the budgetary receipts amounted to 3,081 billion DA including 2,352 billion DA of oil taxation, that is to say 76.33%. This rate was 47% on average over the period 1969-1978; In other words, the economy is sinking into dependence on hydrocarbons!

An important part of the receipts was directed towards the Regulatory Fund, that is to say 1,368 billion DA or 44.4% of the total receipts or 58% of the petroleum taxation. Insofar as the Regulatory Fund was set up to deal with the repayment of the external debt, it is useful to note that of these 1,368 billion DA, only 115 billion DA (8.40%) were used for this purpose in 2005.

If we consider the period 2001-2005, we find ourselves with the enormous figure of 2,591 billion DA (36 Billion US $) spent by this Fund, not entered in the Budget, therefore, available to be used in a discretionary manner, i.e. that is, outside parliamentary control.

In addition, the Algerian economy recorded in 2005, a national savings rate of 51.7%. This is a very high number.

In fact, this indicator has two readings that are difficult to reconcile.

As saving is by definition a renunciation of consumption, such a high savings rate means significant austerity imposed on the Nation. At a time when the "introduced" display an outrageous conspicuous consumption rate, with the risk of social explosion.

But a high savings rate is at the same time an investment opportunity to fight unemployment, eradicate poverty and secure a better future for future generations.

In 2005, the national savings rate was 51.7% and the investment rate, including changes in inventories, was 30%. This 30% breaks down into 22% for the capital increase and 8% for the increase in stocks. Put more simply, it was only a small portion of the savings that went for investment, the rest was used for inventory building and hoarding. 21.7% of the GDP was hoarded in 2005, more than a fifth of the wealth generated in 2005 was used for nothing. They were neither consumed nor invested. This represents 1,630 Milliar in DA (22 Billion US $). And the situation has been going on for five years.

Note that these are resource allocation figures. We do not work on corruption or prebend, which is difficult to assess without careful investigation anyway.

Despite significant resource endowments in quantity and quality, Algeria was, in 2003, in the ranking of countries in relation to the Human Development Index in 108th place behind Tunisia 92nd, Jordan 90th, the Jamahiriya Arab Libyan 58th and Cuba 52nd.

 In 2003, Algeria was ranked by Transparency International in 88th place, in the ranking of countries in relation to their anti-corruption programs, far behind Tunisia 39th place or Egypt and Morocco in 70th place.

For press freedom, Algeria was ranked in 2005, according to Reporters Without Borders, in 129th place, behind Sub-Saharan African countries such as Mali (37th place) or Niger (57th place)!

For the degree of economic openness, Algeria occupies the 120th place, that is to say in the rear pack. The same goes for the business climate.

Even in Football, Algeria is in 2005, in 81st place in the ranking of the International Federation of Football Association (FIFA) far behind Egypt (26th), Tunisia (32nd), Morocco (35th).

In fact, Algeria is in a situation of excessive economic and social vulnerability as these figures prove. Likewise a political vulnerability marked by subversive violence, lasting more than a decade, which has created a huge gap between the rulers and the ruled.

A generation of Algerians have been lost during this devastating time, expressing their discontent with the riots and the destruction of symbols of the state.

Hence, the urgency to go beyond the political and economic status quo in the face of the social turmoil which is motivated by the obvious appearance of corruption, incompetence; lack of accountability for transparency and integrity; as well as inefficiency, waste and insensitivity to the demands of populations.

We must ban the practice of making decisions without any coordination, causing damage contrary to expectations.

We must be seriously concerned about the risk of seeing the creation of two antagonistic societies in Algeria: that of the nouveau riche through rent, financial ease, waste and corruption; and that of those left behind among regions and within regions.

In such a case, the country would settle into a growing social protest, without the latter being able to lead to a revolution and the changes that accompany it. It would then be “the permanent misery trap”. Poverty calls for riots, which in turn increase poverty due to the resulting political and economic instability.

At a time when the country has very strong potential to emerge from it, it becomes unacceptable, for those who have the capacity, to be silent on the possibility of engaging Algeria on the path out of the crisis.

This is why we are addressing all those who are keen to get their country out of the state of crisis to tell them to carefully analyze this lucid and responsible observation, which we present without any fear-mongering.

There are times in the history of Nations when opportunities for change present themselves as rendezvous with destiny:

 to seize them is to open the way to progress and prosperity; to miss them is to open the way to chaos.

Algeria is currently living and for the next few years, a rendezvous with its destiny.

Financial ease, the absence of organized political opposition, which in other circumstances would hamper the executive in making economic choices, the quality of potentials, technological progress in the world, the international environment, offer a favorable ground , for the country's commitment to a New Development Policy paving the way for strong and sustainable economic growth, the successful integration of the Algerian economy into the world economy, the enhancement and protection of heritage and especially peace in progress.

That we miss this meeting, by doing nothing to change the economic policies and by leaving the institutions as they are and it will be the inevitable fall into "the trap of permanent misery", as is already the case. for a large number of Third World countries.

 

Conclusion:

The current economic policies seriously jeopardize the future of future generations, as the economic and social realities which have just been presented prove.

Especially since the officials concerned announce that "Algeria plans to produce 2 million barrels per day at by 2010 and plans to increase its exports of natural gas and LNG to 85 billion m3 in 2015 ".

Especially since the endowments of human, natural and cultural heritage are very vulnerable and strongly threatened by the development of the country in terms of demography, economic choices, land use planning, natural disasters and weakness. management chronicle.

What resources are we leaving for future generations?

 

By Dr Ahmed BENBITOUR ( Economist and former prime minister)


Share:

About