Prof. Mebtoul: « Any destabilization of Algeria would have geostrategic repercussions on all the Mediterranean and African space »

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Professor Abderrahmane Mebtoul. DR.

Mohsen Abdelmoumen: We are following your work for a long time. For the economist you are, does Algeria respect international commitments?

Prof. Abderrahmane Mebtoul: You are referring to the Association Agreement signed in full sovereignty on September 1, 2015. For Algeria, speaking through the Director-general of economic relations and international cooperation at the Ministry of Foreign Affairs, it is not question of calling into question the general architecture, Europe having acceded to the Algerian demand and agreed to a partial revision of some articles allowing a win/win partnership while underlining for the European part, that the structural reforms for a diversified economy depend first of the Algerian government, in order to benefit from this agreement. There is again talk of a possible membership of Algeria to the World Trade Organization (WTO) which constitutes 97 % of the world trade and 85 % of the world population. End of July 2016, the organization had 164 member countries and 20 observer countries, including Algeria. To date, Algeria led 12 rounds of multilateral negotiations, during which it treated 1,900 issues related primarily to its economic system. For my part, I am favorable to this membership and for the respect of the international agreements, Algeria having always respected them. The recent law passed of the return of the import licenses is part of the respect for the international commitments of Algeria. Freedom of trade and industry is the basis of the economic and trade policy of the Algerian government, enshrined in all the measures of the Algerian legislation. In this context, this legislation following the example of what is planned by the legislations of several countries with economy opened in Europe and elsewhere, offers the possibility of using, in specific and predefined cases, a transitional period in order to upgrade the productive apparatus, to the neutral import or export licenses in their application and administered in a fair and equitable way to manage exceptions to this freedom of trade, in accordance with the rules of the WTO. In general, Algeria’s accession to the WTO will require it to open borders and the increased specialization aroused by globalization. Indeed, both agreements with the European Union than with the WTO are planning to develop trade by putting in place the conditions for the gradual liberalization of trade in goods, services and capitals. Recently, newspapers have poured into the guesswork by taking out the content of its context. There has never been any question, either on the part of the European Union or the USA, of freezing economic cooperation with Algeria. The wish, faced with the fall in the price of long-term hydrocarbons, is a change in the Government policy which will have to accelerate reforms in order to avoid the destabilization of Algeria and, thereby, the region, what the international community does not want. This was confirmed to me during my conference at the invitation of the European Parliament and recently by officials of the European Union. The fight against terrorism of the ANP (Algerian army) and the Algeria security forces is strongly welcomed by the international community; there are dialectical links between security/development that must over time pooling the spending by a regional agreement. In the event of an economic recession in Algeria and in the whole of Maghreb, the integration to which I am deeply attached for decades, with the strong demographic pressure, It is all the Maghreb which risks the destabilization and by extension Africa and Europe, especially after the announcement of Daesh’s penetration in the region, by the US intelligence services. This stability depends on the deepening of the internal comprehensive reform which will depend greatly on the relations of political forces between the reformers and the conservatives seated on the annuity. To conclude with your question, indeed there have been international disputes in cascade for certain Algerian companies including Sonatrach with their foreign partners, but there is an awareness that a law must conform to international standards in order to encourage both domestic and international private investment. This also raises the issue of the 49/51% rule generalizable that the Algerian Government has not introduced in the new investment code whose I have advocated the easing to the Government since 2010, both to the segments hydrocarbons for the marginal deposits and other non-strategic segments in order to boost non-hydrocarbons exports. The exports « non-hydrocarbons » which remain always marginal with only 5, 46% of the global volumes of the exports, that is to say equivalent to US$ 2.06 billion in 2015, have experienced a 20.1% reduction with regard to the year 2014. The groups of products exported except hydrocarbons are essentially constituted by half-finished products which represent a part of 4, 48% of the global volume of the exports, that is to say equivalent to US$ 1.69 billion, food products with a part of 0, 62%, that is to say equivalent to 234 million US Dollars, raw products with a part of 0, 28%, that is to say in absolute value equivalent to US$ 106 million, And finally industrial capital goods and non food consumer goods with the respective parts of 0,05% and 0,03%.

Will the American election and the future French election have repercussions on Algeria?

The United States of America, France and Algeria maintain relations of friendships for a long time. For the USA, it must be recognized that with the oil/shale gas revolution, they became competitors of Sonatrach, and this has had an impact on the value of the trade balance, which increased from $ 12 billion to the years 2008 to $ 5 billion by 2015. But major US non-hydrocarbon investments are underway. We may recognize that the main customers and suppliers are the Europeans with a breakthrough for China in terms of imports. Despite some seasonal turmoil, like an old couple, economic relations with France are excellent. Spain remains a key partner of Algeria with France. In short, the situation is different from the impacts of the 1986 crisis: foreign exchange reserves, although declining, are substantial by more than $ 112/116 billion at the end of 2016, external debt is low. Algeria has all the potential to emerge from the crisis and has become aware of the urgency of boosting non-hydrocarbon production in the context of an open economy. Any destabilization of Algeria would have geostrategic repercussions on all the Mediterranean and African space, hence the importance of development based on a win/win partnership.

How is it going with the partnership with the United States and Great Britain?

Feelings do not exist in this world, but only interests that must analyze with lucidity the economic weight of each nation, the objective in the face of the new global geostrategic changes, and the establishment of America as the first world economic power, energy competitor of Algeria with oil/shale gas. As customer, in 2015, the United States represents $ 1,977 billion that is to say a decrease of 59, 04% compared with 2014 and, as supplier, 2,710 billion dollars, that is to say a decrease of 5, 48% compared with 2014. While in 2012, Algerian exports to the US (source Algerian Customs) were estimated at $ 10.778 billion and imports of $ 1.651 billion. At current prices, the US GDP for a population of 324 million inhabitants in 2015 was $ 17 698 billion, the United Kingdom of $ 3 371. The European Union, including Great Britain, with a GDP of $ 180 812 billion for a population of 510 million inhabitants, remains the world’s largest economic power. The USA and Europe for less than a billion inhabitants add up more than 40% of the world GDP considered at 73 400 billions in 2015 and 75 700 billions in 2016. Commercial prospects exist between the USA and Algeria outside hydrocarbons, Algeria being primarily interested in the transfer of technical and managerial know-how with the presence of major American companies having to boost cooperation, especially in the fields of new technologies, industry, services, agriculture and BTPH (buildings, public works and hydraulics), not forgetting training. Recently, except hydrocarbons where the USA are present, the last contract in date is the one signed in 2013 between the group Sonelgaz and the American group General Electric (GE) for a partnership in an industrial complex manufacturing gas turbines in Algeria, for an investment of $ 200 million. This company, which will be held in 51% by Sonelgaz and 49% by GE, will produce as from 2017 between six and ten gas turbines a year, that is to say a capacity of 2.000 MW, a part of which could be exported. GE also won a market of supply of gas and steam turbines with a capacity of 8,400 MW for a total of $ 2.2 billion, intended to equip the six power stations that Algeria plans to build by 2017. But relations go beyond the economic framework.

The US recognizes that Algeria is the dominant military and economic power in the Maghreb region. It represents a key partner of the United States in the fight against terrorism, according to a document compound of 6 chapters of the Security Research Service of the American Congress which essentially deals with the question of government and politics in Algeria. Approaching the relations between Algeria and the United States, the report notes that Algeria is an increasingly important country in the US efforts to fight international terrorism and represents a key partner in the fight against terrorism-related groups. But never let us forget that the USA have a global strategy which does not differ fundamentally from that of Europe (except for certain tactical discrepancies) based on economic interests and insist on the Maghreb integration under segment of the continent Africa, whose economic control through the rivalries of China in particular will be a major issue of the 21st century.

Britain with 64 million inhabitants has a GDP (2014) of € 2231.5 billion. It is the 5th world economy with an export of € 407.4 billion and an import of € 493.8 billion. In 2015, for the Algerian-British trade, we have $ 903 millions in the import representing 1, 75% and $ 2,883 million in exports, or $ 3.8 billion, compared to $ 2.5 billion in 2012. So, let us recognize that the Algerian-British cooperation knew a real development since lord Risby’s appointment, Special Envoy of the British Prime Minister for Economic Partnership with Algeria, who has explored a number of business opportunities in Algeria. The United Kingdom is present in the traditional hydrocarbon sector, notably through BP, Shell and BG, but also in other fields such as education (Linguaphone), Infrastructure (Biwater), Pharmaceutical Industries (GSK), Consumer Products (Unilever), Financial Services (HSBC), and Transportation (BA). Not forgetting the recent contracts signed with Hospital Group for the construction of a 500 beds hospital in Tlemcen. Petrofac obtained a $970 million-contract, in an association between Algerian Sonatrach (40%), Spanish Repsol (29,25%), German RWE (19,5%) and Italian Edison (11,25%), for the construction of a gas processing plant in the South.

As for Algeria, nominal Gross Domestic Product (GDP) is expected to reach US $166 billion in 2016 against US$ 172.3 billion in 2015, according to IMF forecasts, for a population exceeding 40 million. Concerning the trade balance between Algeria and the rest of the world, in 2015, hydrocarbons represented the main part of our exports abroad with a part of 94, 54% of the overall volume of the exports, and a 40,76% decrease with regard to 2014. The exports « non-hydrocarbons », which remain always marginal, with only 5, 46% of the overall volume of the exports, that is to say equivalent to US$ 2.06 billion, experienced a 20, 1% decrease with regard to 2014. The groups of products exported outside the hydrocarbons consist essentially of semi-finished products which represent a part of 4, 48% of the overall volume of the exports, equivalent to US$ 1.69 billion, the food items with a part of 0,62%, that is US$ 234 millions, crude products with a part of 0,28%, that is in absolute value US$ 106 millions, and finally industrial capital goods and non food consumer goods with the respective parts of 0, 05% and 0, 03%. Concerning 2015, according to statistics, Spain was the main customer of Algeria, with US$ 6.56 billion, followed by Italy (US$ 6.16 billion), France (US$ 4.92 billion), Great Britain (US$ 2.88 billion), the Netherlands (US$ 2.28 billion) and Turkey (US$ 2.07 billion). Among the main suppliers of Algeria, China ranks first for the third consecutive year, with (US$ 8.22 billion), followed by France (US$ 5.42 billion), Italy (US$4.82 billion), Spain (US$ 3.93 billion), Germany (US$ 3.38 billion ) and the United States (US$ 2.71 billion). According to the official statistics, these figures also reveal that 63, 49% of the imports of Algeria come from the OECD countries which are also the destination of the 82, 64% of the Algerian exports. The members of the European Union are the main business partners of Algeria which imports over there 49, 21% of its products and exports over there 68, 28% of the goods that it produces, dominated by hydrocarbons. The trade with the Maghreb countries (UMA) remain very marginal, having known a 40% decline in 2015, moving out US$ 2,28 billions into US$ 3,8 billions in 2014, and the trade with Arab countries lowered of 2, 68%, with US$ 2,54 billions against US$ 2,61 billions. As for trade with Africa, it is marginal. Trade was relatively modest, reaching $ 2 billion in 2010, Including 1,260 billion Algerian exports and $ 771 million of imports, but they increased strongly between 2012/2014.

In terms of the economic model, according to our sources, the authorities did not listen to you when you sounded the alarm right from the start. Are you listened today? We had echo that you had undergone pressures about the work you do and the analysis you developed, isn’t it too late to rectify the current economic situation?

No, it is not too late, Algeria having significant potentialities to emerge from the crisis subject to renewed governance and the primacy of the economy, of knowledge, far from the rentier vision which can only lead the country to collective suicide. Besides, I would like to underline that I have never undergone of pressures, being independent expert. A technical model has no significance if it is not carried by economic social forces and policies responsible for its implementation. Let’s get away from the doom and gloom, everything that has been achieved between 2000/2016 is not totally negative. Many achievements were made after the bloody decade of 1989/1999, but also many errors that must be corrected imperatively. At the end of 2013, still as an independent expert, I had directed for the government, with more than 20 experts, an important file followed by many recommendations, between 2014/2016, by insisting on the urgency to review the current social-economic policy. If we had had good governance, more rigor in management, better allocation of resources favoring the economy and knowledge, pillars of development, far from the outdated material vision of the 1970s, taking into account the non-maturation of projects with various reassessments and the additional costs that were sometimes between 25-30% for certain projects (spend lavishly), according to the World Bank report, Algeria could have saved more than 130 billion dollars between 2000/2016, an amount that exceeds current foreign exchange reserves, while creating growth dynamic. When the Government invokes tourism, industry, agriculture, services such as sector dynamic between 2016/2020 to achieve a growth rate of 7%, we need to have a precise vision project by project and to figure within the framework of internationalized sectors according to the standards cost-quality in touch with the new world transformations and not to speak about sector on the whole. Like the free trade agreements with Europe since September 01, 2005 must be taken into account with a gradual tariff reduction of zero by 2020, not to mention the constraints of the WTO in the case of accession. Will we have competitive companies in this short time? The import substitution policy to lighten the import invoice must be based on careful analysis of the import, product by product, starting from large masses. Algeria, if it wants to become an emerging country, and it has the capabilities, does not need a non-industrial strategy, a vision of the years 1970/1980, but of a corporate strategy within the framework of internationalized channels. A growth rate in real terms of 9/10% between 2016/2020 is necessary to boost non-hydrocarbon exports and reduce social tensions. All the more Algeria should face fiscal tensions by 2016/2020 with the decline in hydrocarbon prices being utopian to predict a course upper to $ 75/90 between 2017/2020, OPEC representative 33% of world production marketed with a declining impact. To govern means to make plans, it will be necessary, according to the quantified and dated results, to put in place strategies of adaptation, in economic, social and political, assuming a broad national front, taking into account different sensitivities, local and international changes, being at the dawn of the fourth world economic revolution with profound geostrategic upheavals. I am convinced that Algeria suffers from a crisis of governance and not from a financial crisis, the situation being different from that of 1990. But in the absence of reforms, this governance crisis risks turning into a financial crisis, because Algeria will depend for a long time on the hydrocarbons annuity. It should be reminded that, according to the official data produced by the Council of Ministers in 2015 following the report by the Minister of Energy, Algeria’s gas reserves are 2,700 billion cubic meters and 10 billion barrels of oil, going to, in view of the exports and of the current consumption, in the exhaustion on the horizon 2030. We are currently focusing on the oil price by forgetting the price of gas, representing 33% of Sonatrach’s revenues, whose the long-term contracts expire to 2018/2019 with a very strong competition, before attending a revision of prices downward. It is a strategic error to reason on a linear consumption model focused on traditional fossil energies. The world is preparing for an energy transition between 2020/2030, as has happened from coal to hydrocarbons, hence the urgency of a new economic policy 2016/2025. Faced with a situation both geostrategic and socio-economic worrying for the future of Algeria, beyond the State, all the players in society must be mobilized if Algeria wants to return to sustainable growth outside hydrocarbons within the framework of international values.

How can we not remind that countries that have successfully perform reforms, in particular emerging countries, leaned on a mobilization of the opinion. The need to reform is imperative in Algeria. Despite unprecedented monetary spending, economic outcomes are mixed and can lead to political social crises if we continue to spend lavishly, urging the inevitability of the structural changes to be made. Strong growth can return in Algeria. But it presupposes the combination of different factors: a dynamic active population, a knowledge, the sense of adventure and technological innovations constantly updated, the fight against all forms of harmful monopoly, an effective competition, a renewed financial system capable of attracting capital and a foreign opening. These reforms fundamentally pass through a living democracy, a stability of legal rules and equity, and policies will speak of social justice. The general conduct of these reforms cannot be delegated to any particular minister or placed in the hands of any particular administration. It can only be carried out if, at the highest level of the State, a strong political will (which only the President of the Republic and the Prime Minister carry) leads it and convinces the Algerians of its importance, hence, with the era of internet, a permanent transparent active communication. Then, each minister will have to receive a personal « roadmap » supplementing his mission letter and taking up all the decisions that are within his competence. Given the importance of the measures to be launched and the urgency of the situation, the government will have to choose the mode of implementation best suited to each decision: the acceleration of existing projects and initiatives, the passing of a law accompanied, as soon as it is presented to Parliament, by the implementing decrees necessary for its implementation, and for urgent matters, only decisions by order can be used.

Coordinated actions synchronized over time will require the courage to reform quickly and massively, not of cyclical measures, but profound structural reforms at all levels with a strategic vision for the medium and long term, to rehabilitate strategic planning and management. Algeria can do so within a reasonable time. It has the means. For this, it must relearn to consider its future with confidence, securing to protect, preferring risk to annuity, unleashing initiative, competition and innovation, because the main challenge of the 21st century for Algeria will be the mastery of time. The world does not await us, and every nation that does not advance, necessarily moves back. Delaying reforms can only lead to slow disintegration, impoverishment, loss of confidence in the future because with the exhaustion of the hydrocarbons’ annuity, Algeria will no longer ways to prepare these reforms and will live in the grip of fear, seeing everywhere threats where others see opportunities. This growth requires the commitment of all, not just the State, by organizing solidarity to reconcile economic efficiency and equity through citizen participation and ongoing productive dialogue. The Algerian power has long lived on the illusion of eternal annuity. The majority of Algerians whose income is based on more than 70 %of the hydrocarbon annuity must know that the future of employment and their purchasing power is no longer in the public service and that of companies is no longer in recurring subsidies. The majority of the action is in the hands of the Algerians, who will have to want change and share a desire for the future, learn more, adapt, work more and better, create, share, and dare. The character of power must also change, assuming a progressive overhaul of the State through genuine decentralization around major regional economic poles, implying that it passes from the administering State to the regulating State, reconciling the social costs and the private costs, being the heart of the collective consciousness, by a healthier management of its different structures.

To be part of global growth, Algeria must first establish a true knowledge economy, developing the knowledge of all, from computer science to teamwork, Arabic, French, Chinese, English, from primary to higher education, from nursery to research. It must then facilitate competition, the creation and growth of enterprises, by introducing modern means of financing, reducing the cost of labor and simplifying the rules of employment. It must encourage the development of new areas, including: digital, health, biotechnology, environmental industries, services to the person with the aging of the population. At the same time, it is necessary to create the conditions for a social, geographical and competitive mobility and to allow everyone to work better and more, to change jobs more safely. In order to carry out these reforms, the State and local authorities must be reformed to a very large extent. It will be necessary to reduce their share in the common wealth, to concentrate their resources on the social groups that really need it, to give way to differentiation and experimentation, to systematically evaluate all decisions, a priori and a posteriori. Algeria has to adapt to the fourth economic revolution with important geostrategic implications that are expected between 2020/2030/2040, far from the material era of the 1970s. New information and communication technologies (NICTs), a set of technologies used to process, modify and exchange information, more specifically digitized data that combine innovations in storage and rapid processing of information as well as its transport through digital technology and new means of telecommunication, have implications for political governance, the management of companies and administrations, and an impact also on our new way of life referring to the knowledge and the permanent innovation. Policies, entrepreneurs, citizens, we are all living today in an electronic, pluralistic and immediate communication society that forces us to make decisions in real time. Time control being the main challenge of this 21stcentury, engaging national security, and any maladjustment to these changes would further isolate the country. Every nation can not distribute more than what it produces annually, if it wishes to avoid social drift. The main obstacle to development in Algeria stems from the entropy that must be surpassed imperatively, referring not only to economic factors but also social and political factors, including the profound moralization of leaders and society.

Where goes Algeria, in your opinion? Is not Algeria in danger of depleting its foreign exchange reserves by 2019/2020 and what are the proposals you have put forward to the Algerian government?

Algeria has a respite of only three years to change course and avoid strong social tensions in 2018/2020. So what to do to keep at an acceptable level the foreign exchange reserves that hold the value of the dinar, because to 10/20 billion exchange reserves, would the official valuation of the dinar be more than 200 dinars for a dollar?

The first solution is a new central and local governance, a moralization of political, social and economic life, the fight against corruption and tax evasion for a shared sacrifice, and genuine decentralization around regional centers energizing the enterprise and the knowledge economy.

The second solution is the rehabilitation of labor, the source of the wealth of any nation, avoiding this income distribution without productive counterparts, avoiding these fictitious jobs for an ephemeral social peace that veils the official unemployment rate.

The third solution is the improvement of the business climate, the bureaucratization of society, the reform of the financial system, socio-educational, and the thorny problem of landed property.

The fourth solution is that any project must be thought of in terms of cost/quality/competition, so according to international standards by a fight against the extra costs which have taken exorbitant proportions, sometimes 20/30%, and thus to have a strategic vision within internationalized sectors.

The fifth solution is the development for structuring projects, in particular in the infrastructure of the Build, Operate and Transfer (B.O.T), which would alleviate short-term tensions in the State’s currencies budget, but be aware that in the long term, there will be transfers of profits. Remind that the B.O.T. technique relies mainly on the « Project financing/Project finance » model, which is essentially a financing technique where lenders agree to finance a project based solely on its profitability and its own value. In practice, repayment of the loan mainly depends on the cash flow generated by the project itself, so that the project’s ability to generate income that will be used to repay the loan is the cornerstone of the Project financing.

The sixth solution is the relaxing of the 49/51% rule (mixed assessment to date) for non-strategic segments, which need to define precisely what is strategic and what is not, where Algeria bears all the extra costs without the foreign partner often sharing the risks, replaced by a blocking minority.

The seventh solution is a higher export of hydrocarbons, the price of which depends on factors entirely outside Algeria and there, pay attention to false calculations, such as those carried out by Venezuela which is on the brink of bankruptcy. Sonatrach’s revenues at a price of $ 60 per barrel, the majority of gas contracts whose price is indexed to it in the long term expiring between 2018/2019 are valued at $ 34 billion, deducting expenses of 20%, resulting in a net profit of $ 27 billion in addition to current foreign exchange reserves. At $ 50, the net profit is $ 21 billion, and at $ 40, the profit is $ 15/16 billion. Between 2016/2020, it is utopian to count on non-hydrocarbon exports (the maturation and the profitability of any project implemented in 2016 putting at least in Algeria 4/5 years in view of the bureaucratic constraints).

The eighth solution is a necessary arbitrage between satisfaction of the internal market and exports posing the problem of widespread subsidies, a source of waste and social injustice, whereas they must be targeted. Algeria is likely to be a net importer of oil to horizon 2025/2030 that needs to invest on gas and especially its transformation, in a win/win partnership. This is because the majority of medium-term contracts expire between 2018/2069, needing to align with the free market, known as market spot, being impossible to compete with Russia (famous Siberian-China gas pipeline) and Iran on the Asian market, no longer having to rely on exports to the USA which themselves export to Europe, the natural market of Algeria being the European market, hence the urgency of the energy transition and a new consumption model based on an energy mix, including renewable energies, taking into account strong international competition.

The ninth solution, which I have advocated to the government for two years, is long-term targeted external debt, but only for segments with competitive advantages of 30/50 billion dollars between 2017/2020, in order to maintain the level of reserves. The World Bank’s forecast of $ 60 billion, according to my information in Washington, from the 2014/2016 data of the Bank of Algeria to the horizon 2018, are realistic.

The tenth solution, the safest, is to have a strategic vision, the tactics to paraphrase military experts to fit into a strategic objective function, which is sorely lacking at present, as the President of the Republic has instructed, is to move towards deep structural reforms without which a diversified economy can not emerge.

In many of your writings since 2009, you have alerted the government to the impacts of lower hydrocarbon prices. You have not been listened to. Can you remind us of your proposals for an energy transition?

We must move from speech to action. There should no longer be any illusion about a barrel’s price higher than 70/80 dollars between 2017/2020. Indeed, taking into account the evolution of rising costs, new global energy changes and competition from new producers, exports and strong domestic consumption induced by new investments in doubling the capacity of power plants that will operate from gas turbines, favored by low prices, Algeria will import oil in 10 years and conventional gas in 15 years. Hence the importance, from now on, of foreseeing the energy transition that I will summarize in seven guiding axes:

The first is to improve energy efficiency because how can be programmed two (02) million dwellings according to the old building standards requiring high energy consumption, while modern techniques save 40 to 50% of consumption?

The second axis is to rethink the policy of subsidies that must be targeted for energy products, File that I directed with the American consultancy Ernest Young and with the managers of Ministry of Energy and Sonatrach of that I personally presented to the Economic Committee of the NPA (National People’s Assembly) in 2008, referring to a new price policy (price of gas sale on the domestic market about one tenth of the international price causing a waste of resources that are temporarily frozen for social reasons). With this in mind, the Algerian government must consider the creation of a National Compensation Chamber, that any subsidy must be endorsed by Parliament for greater transparency, Chamber intended to realize an equalization system, segmenting the activities in order to encourage sectors structuring and taking into account the income by social strata, implying a new wage policy.

The fourth axis, Algeria has decided to invest upstream for new discoveries. But for the profitability of these deposits, everything will depend on the price vector at the international level and the cost, discovering thousands of unprofitable deposits, posing the problem of the profitability of the $ 100 billion announced by the Department.

The fifth axis is the development of renewable energies combining the thermal and the photovoltaic, whose global cost of production has decreased by more than 50% and will be more in the future. With more than 3,000 hours of sunshine a year, Algeria has everything to develop the use of solar energy, or almost. The sun alone is not enough. We need technology and equipment to turn this heaven’s gift into electrical energy. Large-scale production would substantially reduce costs while at the same time promoting a multitude of SME-SMEs, strengthening the industrial fabric from clean energy (ecological industries). The promotion of renewable energies requires substantial financial resources for investment and research-development. The Renewable Energy Technology Fund decided by the Council of Ministers from 0.5% to 1% of the hydrocarbon annuity should be increased to a minimum of 3% in order to allow support between the guaranteed rate allowing the profitability of the investment. Through to the hydrocarbon revenues feeding this Fund, Algeria can avoid making to bear these investments on the low-income consumer, in the same way as Germany where the difference between the guaranteed price and the market price is transferred to the consumers’ invoices via surtax, following its decision to leave nuclear power by 2022. Algeria has received in mid-July 2011 the hybrid power plant in Hassi R’mel, with an overall capacity of 150 MW, including 30 MW from the combination of gas and solar. This experience is interesting. The combination of 20% conventional gas and 80% solar seems to me to be an essential focus for reducing costs and mastering the technology. To this end, the CREG (the regulatory agency) announced the publication of decrees intended to accompany the implementation of the Algerian program for the development of renewable energies. Incentives measures are provided by a proactive policy through the granting of subsidies to cover the additional costs incurred on the national electricity system and the setting up of a National Energy Control Fund (FNME) to ensure the financing of such projects and the granting of unpaid loans and guarantees for borrowing from banks and financial institutions. The Algerian program consists of installing a power of renewable origin of nearly 22 000 MW of which 12 000 MW will be dedicated to cover the electricity national demand and 10 000 MW for export. By 2030, Algeria’s objective would be to produce 30 to 40% of its electricity needs from renewable energy sources. The amount of public investment devoted by Algeria to the implementation of its program of development of renewable energies, by the 2030 deadline, is contradictory: announced once to $ 100 billion according to the Ministry of Energy, and another time to $ 60 billion. Indeed, the Algerian government had announced $ 100 billion in Council of ministers in 2009 and $ 60 billion by the end of 2015. In September 2016, he announced that, due to the financial crisis, the program would become a national and international public private partnership without announcing the exact amount. The call for tenders for the construction of a capacity of 4 000 megawatts of renewable energy from public-private partnerships will be launched at the beginning of 2017, announced recently by the Algerian Energy Minister Nouredine Boutarfa at the opening of the energy conference in the framework of the African Investment and Business Forum held in Algiers. The problem is this: will Algeria have absorption capacity, technological control to avoid the additional costs, control of the world market, and will it not be preferable to carry out these projects in the framework of a national, international partnership, and why not in the framework of the integration of North Africa, bridge between Europe and Africa, natural market of the Maghreb and Europe, a continent with multiple challenges that, by 2030/2040, will drive the growth of the world economy?

The sixth axis, Algeria plans to build its first nuclear power plant in 2025 for peaceful purposes to meet a demand for galloping electricity where, according to the Minister of Energy and Mines, on May 19, 2013, the recently created Institute of Nuclear Engineering, must train the engineers and the technicians in partnership who will be responsible for operating the plant. Algeria’s proven uranium reserves are close to 29,000 tons, enough to operate two nuclear power plants with a capacity of 1,000 megawatts each for a period of 60 years, according to data from the Ministry of Energy. The human resource being the key, as the production of all forms of energy and to avoid the massive brain drain that Algeria is experiencing, the services item with the exit of currencies having increased from 2 billion dollars in 2002 to 10/12 billion between 2010/2015, a large part of which destined for the hydrocarbon sector, Sonatrach emptied of its substance, it is necessary to resolve the recurring problem of nuclear researchers (this applies to all researchers) who for years have been asking for clarification of their status, the revaluation of their remuneration and above all an environment conducive to the removal of the bureaucratic obstacles that hamper research.

The seventh axis, the option of oil/shale gas (3rd world reservoir according to international studies) introduced in the new hydrocarbon law of 2013, which I have the honor to lead on behalf of the government and delivered in January 2015. In Algeria, while avoiding clear positions for or against, a broad national debate is necessary, as the risks of groundwater pollution in the South can not be minimized. Algeria being a semi-arid country, the problem of water is a strategic stake at the Mediterranean and African level and arbitration for the consumption of fresh water must be carried out (since new water-saving technologies have not yet been developed despite recycling, what will be the cost, depending on the purchase, the know-how), one billion cubic meters of gas requiring 1 million cubic meters of fresh water to be taken into account in costs (in addition to the purchase of patents), and several hundred average wells have to be drilled for one billion cubic meters of gas, not to mention the short life span of these deposits and the necessary agreement with riparian countries sharing these aquifers. The sixth axis, which falls within the framework of the resolutions of COPE21 and COP22, is the climate action that can not be conceived within the framework of a nation, will involve a broad consultation with, in particular, the countries of the Maghreb and Africa. In general, for the Maghreb, including Algeria, water resources are vulnerable to climatic variations. Water and its management are problems conditioning its future, the maximum volume of water mobilizable being deficit by 2020 according to Femise (Euro-Mediterranean network on the MENA region). In the Maghreb region, the negative effects will affect the production of vegetables whose yields decrease by 10 to 30% and a drop in wheat to nearly 40. Thus, climate change could lead to a real migratory crisis. The Blue Gold will be the challenge of the 21st century which, unresolved, could cause planetary wars.

In summary, the transition can be defined as the passage from a human civilization built on an essentially fossil, polluting, abundant and inexpensive energy, towards a civilization where the energy is renewable, rare, expensive and less polluting, with the objective of eventually replacing stock energies (oil, coal, gas, uranium) with flux energies (wind, solar). The energy transition refers to other technical subjects, posing the societal problem.

It is not enough to make a law because the determinant is the social base. This poses the problem of a new growth model. All economic sectors, all households, are concerned: transport, BTPH (construction and public works, hydraulics), industries, and agriculture. Today’s technical choices engage the society in the long term. Therefore, the energy transition requires a social consensus because the fundamental question is the following: this energy transition, how much does it cost, how much it brings and who will benefit? For a coherent energy transition to strengthen network interconnections and optimize their management (smart grids) in order to contribute to energy efficiency and industrial development, moving towards a new growth model in order to promote the emergence of an energy industry in the service of economic integration, the benefits granted by the State should be based on that rate. In this context, a national and international public private partnership is desirable in order to promote competition, the monopoly involving necessarily additional cost. For this segment, the 49/51% rule based on an outdated ideological vision is inappropriate; other mechanisms are needed to protect domestic production (other criteria, positive technological and financial balances). For this, a new price policy is necessary because the determination of tariff policy is inseparable from the mechanisms of distribution of national income. It would be better to target these subsidies that are borne by the treasury without distinction of income. There is a real paradox in Algeria: residential consumption (riches and poors pay the same price; idem for fuels and water) represents 60% compared to 30% in Europe, and industrial consumption 10% compared with 45 %in Europe showing the decline of the industrial fabric, less than 5 % of the gross domestic product. Decisions in the field of energy commit the long-term and the security of the country with regard to the priorities defined at the political level (national independence, reducing costs, and reducing carbon emissions, creating jobs). Each major decision will have to be analyzed beforehand by the National Energy Council, chaired by the President of the Republic, after a broad national debate, as I advocated it two years ago in Brussels at the invitation of the European Parliament. Co-development and co-partnership with foreign partners can be the field of implementation of all innovative ideas, the future being within the Euro-Mediterranean and African spaces. Africa with 25 % of the world’s population by 2040, considerable resources both material and human, subject to homogeneous sub-regionalization and better governance, will be the driving force of the global economy on the horizon 2030/2040.

Does Algeria not risk social implosion without structural reforms?

No, there will be no social implosion in the short term, but it is a scenario not to be discarded between 2019/2020 if Algeria does not begin rapidly deep structural reforms painful involving a deep social cohesion and morality of the leaders. Also, I identify four reasons for the period 2017-2019:

First, Algeria is not in the situation of 1986 where the foreign exchange reserves were almost non-existent with a debt that began to become heavy. With 118 billion dollars of reserves of the bank of Algeria at the end of 2016, 112 billion dollars according to the IMF, and an external debt of less than $ 4/5 billion, these foreign exchange reserves, if they are properly used, can serve as a social buffer at the same time.

Secondly, in view of the housing crisis, the regrouping of the family unit concerns a large part of the population and the expenses are paid through total family income. But we must be careful: solving the housing crisis without re-launching the economic machine will eventually prepare the social explosion.

Third, through their work but also the state subsidies, Algerian families have accumulated savings in various forms. However, just visit the official places selling jewelry to see that there is a liquidation of the « hoarding » and that this saving is unfortunately being spent in the face of the deterioration of their purchasing power. This may take another two to three years. At the end of this period everything can happen.

Fourthly, in spite of increasing fiscal tensions and the provisions of the 2017 Finance Law, the State continues to subsidize the mains basic products: there is no question of affecting two essential products for the poorest, namely bread and milk. On the other hand, in the long term, it will be a question of targeting subsidies which, generalized, are unsustainable for the budget.

Algeria has a respite of only three years to change course and avoid high social tensions 2018/2020. Certainly, in the short term, this situation can be manageable, subject to greater budgetary rigor and a fight against extra costs, waste and corruption. With Sonatrach’s revenue decline of 45%, it is essential to increase ordinary taxation: this is a difficult exercise without penalizing productive activities and the most disadvantaged classes. But in the medium term, in the event of weak domestic production, an accelerated slippage in the value of the dinar correlated with falling foreign exchange reserves, we should witness an accelerated inflationary process. Indeed, we must also be aware that without structural reforms, avoiding false remedies and populist discourses, social implosion is inevitable by 2018/2020. Inflation still plays a role in redistributing incomes in favor of variable incomes and it is up to the State to reconcile economic efficiency with profound social justice, which is not antinomic with efficiency. All State apparatus must set an example. I had advocated, at a conference before the Prime Minister in November 2014 that the leaders at the highest level (Presidency, Government, senior Government officials, deputies, senators, etc.) set an example by reducing their wages and avoiding unnecessary receptions. Of course, such an attitude will not have a significant impact on the State budget but it will be a strong sign of mobilization in favor of a justly shared austerity, because all responsible must think about the future of Algeria to horizon 2025/2030. This issue is relevant and geostrategic. The Algerian population was 40 million on January 1, 2016 and will be about 50 million in 2030 with an additional demand for employment that would range between 300,000 to 400,000 people per year, which is also underestimated since the ONS calculation uses a much lower rate for participation rates for the female population, representing half of the active population and whose schooling is rising sharply, which will be added to the stock of unemployment. Thus, there are two scenarios for Algeria: succeed the reforms or go to the IMF on the horizon 2019/2020.

The first scenario would be the status quo, living from the illusion of a return to an oil price above 80 dollars and speeches of self-satisfaction, source of collective neurosis, disconnected from both local and global realities. It would be a political error of extreme gravity, a headlong rush (“when we are gone let happen what may”), to wait the 2017 parliamentary elections as a solution to the crisis, by engaging in activism in the meantime without making any real changes, because in economics, time never catches up. Meanwhile, the financial crisis is likely to increase with a growing social demand, the increased demands of youth, including hundreds of thousands of graduates that will demand employment and housing. Those who are currently working will be over 60 in 2030 and will be retired. As a result, it is to be expected that without hydrocarbons, and this is a high probability, there will necessarily be suppression of the Ministry of Hydrocarbons and that of the National Solidarity with the risk of implosion of the pension fund, and without currency, no attraction of investment. This will lead to increasing unemployment, social tensions and political instability, as are the poorest countries in sub-Saharan Africa, and the risk of intervention by foreign powers.

As for the second scenario, and I am optimistic about the future of Algeria, it is based on the favorable conditions for development in Algeria where the after-oil has been prepared. Socio-economic policy will be deeply revised by focusing on knowledge segments, avoiding legal instability, lack of coherence and visibility. Corruption that becomes dramatically generalized to all sectors, generating a general demobilization, would then be countered by genuine democratic counterweights and not by technical organs obedient and little effective, in fact and not in texts. Consequently, the informal sphere intimately linked to the rentier logic produced by the bureaucracy and the dysfunctions of the State apparatus that favors this corruption would be progressively integrated within the real sphere. Development would then be based on the pillars of the development of the twenty-first century, such as the revaluation of knowledge, the rule of law, a new governance by rehabilitating the strategic management of the company and the institutions, and by controlled liberalization through the central role of the regulating State. Political, economic and social dialogue avoiding the excessive concentration of national income in favor of speculative annuities destructive of wealth would have replaced the authoritarian decisions. We would have put an end to the wastage of the hydrocarbon annuity, of these monetary expenses, without worrying about the impacts for a fictitious social peace. We would have prepared a new model of energy consumption based on a Mix, including renewable energies. We would have rehabilitated the public and private enterprise, far from any monopoly, the only source of permanent wealth creation. And we would have bet on the intangible investment which today cruelly lacks in Algeria, favoring quality rather than quantity, avoiding universities to manufacture the unemployed, not attributable solely to higher education, which inherits the functioning of the primary school through secondary education and vocational training.

How does a country that has so many assets to succeed find itself lagging behind and what is the future trajectory that you have often proposed in your various contributions?

Let’s avoid the legal illusion, bureaucratic mentality without imagination, a text-law is only a text of law that can be contradicted daily by social practices. For its effectiveness, the legal text, whatever its form, must tackle the functioning of society, favor the social forces acquired to the reforms and project itself on the future taking into account the future global geostrategic map. For, we can not fail to recognize the discrepancy between the potentialities of Algeria, and they are enormous, and the level of development, far from the expectations that the country has achieved after several decades of independence. As mentioned above, it is necessary to make a realistic diagnosis in order to correct the errors. About 95% of foreign exchange earnings come from Sonatrach, with the industrial sector accounting for less than 5% of GDP, and of these 5%, more than 95% come from non-competitive family-dominated SMIs, small trade and services for 83% of the economic area, the informal sphere draining more than 40% of the money supply in circulation that will have to be integrated into the real sphere, and over 5% of non-hydrocarbon exports, more than 60% of foreign exchange earnings are hydrocarbon derivatives and ferrous and semi-ferrous waste. It will be to prepare the post-hydrocarbon in the context of the globalization, passing imperatively by a systemic mutation. So, it’s necessary to avoid the euphoria of some, because by perpetuating the status quo and without profound change, the real risk is the acceleration of the social tensions deferred by the distribution of the hydrocarbons’ annuity without productive counterparts leading ultimately the country to the collective suicide.

Hence the eight following propositions, to repeat myself:

1. Algeria must undertake genuine structural reforms, notably the reforms of the political system, nerve center of resistance to change and to openness by clearly choosing between a parliamentary or presidential system in order to empower political actors.

2. Achieving justice reform through the application and adaptation of law through the fight against corruption that becomes socialized and constitutes a danger to national security, to synchronize the popular, parliamentary and technical control.

3. Reforms in the education system, center of the elaboration and dissemination of the culture and ideology of resistance to the change and modernization of the country, counting on the number at the expense of quality and giving an unsuitable socio-educational system.

4. Proceeding to the reforms in the hydrocarbons sector, source of annuity and the object of all covetousness, and in agriculture through a new land policy and a policy of water management.

5. As a factor of social cohesion, it will be necessary to have a new management of social strategies, to review the management of pension funds and Social Security.

6. Tackling the reform of the financial system which is a prerequisite for the revival of domestic and foreign investment, the public and private banks being at the heart of important stakes of power between the supporters of the opening and those of the preservation of the annuity’s interests, being rightly regarded as the most evident indication of the political will of the Algerian State to open or not the national economy to free enterprise.

7. Integrate the informal sphere controlling 40% of the circulating money supply and 65% of the basic commodity segments.

8. Finally, adapting Algeria to new global changes by analyzing the impact of the association agreement with Europe applicable since 1 September 2005 and its possible accession to the World Trade Organization (WTO), in the Maghreb, a bridge between Europe and Africa, its natural social space.

Precisely, is not the Algerian financial system, the pillar of reforms, obsolete?

It is obvious that the Algerian financial system needs to be reformed, since there are no banks that accompany real investors and no real stock exchange. It’s an economic heresy that the dominant State-owned enterprises often in the red buy State enterprises in deficit. Neither Sonatrach nor Sonelgaz nor any major private company such as Cevital is publicly traded. From that point, we have to talk about a re-foundation of the financial system. The hydrocarbon society did not create wealth or at least very little. It transforms a physical stock into a monetary stock (field of the company) or contributes to have foreign exchange reserves which, because of the low absorptive capacity, are placed abroad. Wealth can only appear in the context of the transformation of the stock of money into a stock of capital, and that is the whole problem of development, since this transformation is no longer within the scope of the enterprise but moves into the institutional field (problem of distribution). In this relationship, is the financial system passive or, conversely, active? A system, by definition, is never neutral, it always carries within it one or more stakes. The Algerian financial system carries with it the substance of the stake because it perfectly fits the economic policy developed up to now and its corollary the sources and modalities of its financing; the fact that an economy of a public nature must be made in the sense where the whole of the activities whatever their nature are nourished by budgetary flows, i.e. that the very essence of the financing is linked to the real or supposed capacity of the Treasury. The analysis of the Finance Laws of the year and complementary Finance Laws, and the distribution of the State budget over the period 2000-2017 with the budget deficit, with the risk of inflationary pressures in the future that are artificially compressed by transitional subsidies, prove it. Irrigation pipes, commercial and investment banks can be considered to operate not from picking up savings from the market, possibly from work, but by the recurring advances (circulation: rediscount) with the Bank of Algeria for public enterprises which are then refinanced by the public Treasury in the form of sanitation (repurchase of EPE’s [Economic public enterprises] financial commitments to the Bank of Algeria, several tens of billions dollars between 1991/2016 while more than 70% of these companies returned to the starting point). As for the majority of private companies, over 80% of which have a family organization that is not open to strategic management, there are some, but these are exceptions. Without wanting to stigmatize them, a rapid analysis of their capital structure and financing structure clearly shows that they are in debt positions vis-à-vis the financial system. Whether for their investment or their day-to-day operations, they are entirely dependent on « hydrocarbon money ». It is an economic system built on a set of networks carried by individual short-term financial interests, developing then long-term strategies of rooting. The theory of rooting teaches us that elites create situations and processes in such a way that they consider themselves rightly indispensable. This rooting is only possible in reality because of the lack of definition of economic strategy. The daily management mistakes are covered by the financial transfer that passes through the financial system and irrigates the economic system. It’s the distribution of the annuity through the channels of the financial system. If we construct a graph with ordinates a date scale (1980-2016) and on the abscissa the price of a barrel of oil (0-130 dollars), at constant prices, a curve is drawn, we notice perfectly the moments of stagnation and regression and moments of advances. There is a close correlation between: the lower the price of oil, the greater the potential for development of material resources and human resources. On the other hand, the higher the price of oil the more the development potential decelerates, stagnates and ultimately tends to regress if the price of a barrel of oil continues to rise.

What is your impression of the 2017 finance law, in particular the taxes borne by the most disadvantaged classes?

The Finance Law 2017 which has just been adopted by the NPC (National People’s Congress) is only an accounting document relating to public finance, recounting expenditure and revenue, Algeria needing above all a strategic vision that makes cruelly lacking. The finance Bill makes a projection over the next three years on the basis of a benchmark price of $ 50 per barrel in 2017, 55 in 2018 and $ 60 per barrel in 2019 with a national currency price of 108 dinars for one dollar and an average inflation of 4%. The growth rate would be 3.9% in 2017, 3.6% in 2018 and 4.3% in 2019. However, according to the World Economic Outlook presented by the International Monetary Fund (IMF) on 4 October 2016, Algeria’s GDP is expected to increase from 3.6 in 2016 to 2.9 by 2017. But the most worrying is that traditional gas accounting for one third of Sonatrach’s revenues with a 50% revision in 2020, according to the IMF, has reached its lowest level in twelve years not only because of the fall in oil prices, but also because of the strength of Russia’s natural gas supply and the weakening of Asian demand. The Finance Law is established on the basis of the forecasts of the IMF which provides for 2017 to 50/51 dollars. The draft budget foresees an amount of 5,635.5 billion dinars (billion DA) of receipts, being an increase of nearly 13% compared to those of the 2016 fiscal year with ordinary taxes amounting to 2,845.4 billion and for the petroleum taxation forecast at 2,200 billion AD. In expenditure, the draft budget provides for an amount of 6,883.2 billion AD allocated between 4,591.8 billion AD for the operation part and 2,291.4 billion AD for payment appropriations for the equipment part. Thus, the total balance of the Treasury shows a deficit of 8%, against a deficit of 15% in 2016, because the floor price is no longer 37 dollars but 50 dollars. Despite the financial constraints for 2017, DA 1,630.8 billion will be allocated to social transfers (23.7% of the budget for 2017) distributed as follows: DA 413.5 billion for support to families, mainly through the subsidy of commodity prices (cereals, milk, sugar and edible oils), DA 330.2 billion for health support and DA 305 billion for national housing.

What are the different taxes contained in the 2017 Finance Law?

The Minister of Finance reminded that the government is counting on an increase in non-hydrocarbon revenues of 11% due to the increase of the tax base and the improvement of the recovery, adding that public spending will be capped around 6800 billion over the next three years. The Government is also called upon to tackle the reform of local taxation and finance to accompany the new tasks assigned to local authorities in the promotion of investment and support for economic activity.

The different taxes are as follows:

a. The text proposes, in particular, an increase in value added tax (VAT) from 17% to 19% for the standard rate and from 7% to 9% for the reduced rate, an increase that should allow the Treasury, according to the Government, to garner a capital gain of 110 billion dinars.

b. The Finance Law 2017 provides for an increase in the current rates of the Petroleum Products Tax (TPP) from 1 to 3 DA/liter, respectively for gas oil and the three types of gasoline. The increase of the TPP should enable the Treasury to receive a capital gain of 42.49 billion AD, including 30.36 billion AD for the TPP and 12.13 billion AD for the VAT, because any increase in prices automatically leads to an increase in VAT revenues. Thus, the TPP for super and unleaded gasoline will be 9 DA/L instead of 6 DA currently (a 50% increase), and that of normal gasoline will increase to 8 DA/L instead of currently 5 DA (+60%), while the TPP on gasoil will increase to 2 D/L instead of 1 DA currently (+50%). Thus, the retail price of normal gasoline will be 32.47 DA/liter (+14.11% compared to the current price), that of the super to 35.49 DA/liter (+12.94%), that of unleaded gasoline to 35.08 DA/liter (+13.08%) and gasoline to 20.23 DA/liter (+7.85%), according to the budget Bill.

c. The Bill introduces an Energy Efficiency Tax (EET) for imported or locally products produced by electricity, gas and petroleum products. Its rate will vary between 30 and 60% according to the classification. This tax will benefit 90% to the State budget. The remaining 10% will be donated to the national fund for energy management and for renewable energy and cogeneration. This will enable the Treasury to collect approximately 10.7 billion AD (9.2 billion AD in TEE and 1.5 billion AD in VAT).

d. It is planned to introduce a further increase in the tax on phone refills from 5 to 7%.

e. The domestic consumption tax (TIC in French) will be extended and raised for certain products, TIC concerning in particular on luxury goods, tobacco, exotic fruits, salmon and caviar. The TIC thus passes for the fixed part from 1,260 DA/kg to 1,760 DA/kg for blond tobacco and to 2,470 DA/kg for cigars, whereas the proportional rate of that tax remains unchanged at 10% for each cigarettes’ package. The TIC also increases to 30% for other luxury goods such as off-road vehicles and cylinder capacity above 2,000 cm3 and less than 3,000 cm3.

f. There is provision for taxation of margins on the sales and delivery of second hand personal properties. This will apply in particular to the market for used vehicles. The goal is to organize this segment by reducing the particular market while providing new revenue for the State.

g. The renting of individual dwellings will be subject to a new 10% tax on total income (IRG in French). At the same time, capital gains on the sale of immovable properties will be taxed at the rate of 5% (IRG) tax-free. This levy may nevertheless be subject to reductions (up to 100%) depending on the property’s shelf life.

i. With regard to stamp duties, there is an « accelerated procedure » for issuing the biometric passport within a maximum period of eight days from the filing date of the application with the payment of a stamp of 25.000 DA for the booklet of 28 pages and 60.000 DA (45.000 dinars in the Bill) for the 48 pages, in the framework of an amendment adopted by the deputies.

j. Tax benefits are granted to the production companies of industrial vehicles, the importation of parts, accessories and components which form part of the collections intended for the assembly industries or those referred to as CKD, benefit that would be extended to all production companies active in the field of assembly approved by the Ministry of Industry and Mines. In the same vein, the temporary advantage currently applicable from 1 January 2015 for a period of three years should be replaced by a permanent advantage for those involved in the sector.

Let us not forget that the slippage of the dinar, not to say devaluation against the dollar, inflates the oil taxation (sale in dollars) and against the euro the ordinary taxation, customs taxes applying to a devalued dinar. With a price of 75 dinars a dollar and 85 dinars an euro, the treasury deficit would exceed $ 20 billion. As the revenue regulation fund is exhausted in 2017, any increase in expenditure over planned revenue will increase the budget deficit with an inflationary impact. In the future, if the price remains between 45-55 dollars, the generalization of subsidies, unfair by definition, will be financially untenable, involving targeting for the most deprived and the sectors that the government wants to encourage on a temporary basis.

Faced with fiscal tensions, in order to bring citizens closer to their concerns, can you remind us of your proposals for a central and territorial reorganization of Algeria?

It will be a matter of synchronizing central governance and local governance. The often forgotten demographic pressure will be the main challenge in the years to come, with the increasing social needs posing the problem of the links between development and security. The crisis linked to the fall in the price of hydrocarbons and the consequences on the State budget imply a revision of the policies pursued, because the era of transfers from State budgets to palliate management deficits is over. These synchronized actions must aim to bring the State closer to the citizen in order to satisfy the growing social demand. This means that there is a local solution to local problems and that this is necessarily better than a generalized national solution. In addition to recasting the status of the central and local administration, needless to say that the new prerogatives that will ensue for the local authority can only be exercised if they are accompanied by a reform of local finances, to imagine a system of equalization between rich APCs (APC=Town Council) and the poorest APCs. At the same time, the State must safeguard its fundamental missions as guarantor of all that constitutes the interests of the national community (cohesion and social justice, safeguarding public heritage, equal opportunities for the development of all citizens…). Indeed, the autonomy of local management can be exercised only in compliance with the policies and strategies implemented by the State, both to regulate and direct the economic and social development of the country, and to help and organize the equitable development and good management of all the components of the national space. Let us draw the lessons of all these social tensions which are manifested through the majority of wilayas (departments), see the latest alarming 2016 reports from the national gendarmerie and the DGNS (Algerian Police). There is a dialectical link between security and development, understood multidimensional development, not to limit only to the economic, material bureaucratic vision of the past, which would be a serious political error.

In this context, I propose the following central and territorial reorganization which I propose to the authorities of the country, renewing my proposals already formulated in 2004.

1. Algeria having opted, according to the Constitution, for a semi-presidential regime, I advocate the creation of large departments at the level of the Presidency of the Republic responsible for elaborating the socio-economic strategy in symbiosis with the governmental organization.

2. Large ministries with technical State secretariats responsible for monitoring the strategy, Parliament and the Senate being responsible for appropriate laws and democratic control.

3. In order to ease bureaucracy both the society and the economy at the regional level, the creation of five major regional clusters (East – Central – West – South-East and South-West), with a governor charged not to manage but to represent the central State assisted by walis managers (Prefects), in avoiding to always draw from the national school of administration. The aim is to manage, not to bureaucratize. Do you know the name of the prefect of Paris, Bordeaux and New York? Obviously not, but everyone knows the president of the regional council and the mayor of Paris or Bordeaux and the mayor or the governor of New York. The objective is a genuine decentralization, which will foster a more participatory and civic society.

4. In charge of execution, it’s the companies that create wealth and not the administration, and the concrete implementation of projects with added value. The structure that seems to me the most appropriate to create this dynamism is the regional chambers of commerce (several wilayas). How would this operational regional structure be organized?

5. Representatives of the State acting as facilitators, APC presidents, representatives of civil society, private employers organizations (which must go towards unifications by branch of activity, including the FCE which is only one organization among many others), public enterprises, banks, vocational training centers, universities and research centers. The action of the Chambers of commerce, the only interlocutor of the public authorities at national and regional level (election of a national and regional board of directors), a place of consultation and impetus for the realization of projects would be quadruple:

a. First, to boost the basic infrastructure and prepare sites entrusted to public and private real estate promotion agencies.

b. Second, to provide companies with a skilled workforce through an efficient and evolving training system ranging from engineers to managers, specialized technicians, through the university poles and research centers, avoiding this myth of a university by wilaya. Dynamic learning is a human capital for future societies that will settle in the region, an established company paying taxes that will largely cover the advances in advanced training. This training should be adapted to take into account the standard quality standard, the quality label being required for any exporter to Europe, America, Africa or Asia. Thus, we would witness a symbiosis between the university and the companies. Because companies need access to researchers and laboratories for experimental testing and the university needs companies as financial support to improve research. Students thus experience the dialectic between theory and practice.

c. The third action is to promote flexible enterprises based on mobility and individual initiatives. Tests have shown that personal initiative, for certain products, saves some equipment (therefore have less depreciation in the cost structure) and move the process from seven (7) minutes (420 seconds) to 45 seconds, so saving time by more than 90 % improving the productivity of the team’s work. What we call self-directed teams.

d. The fourth action, the chamber of commerce would intensify the flow of exchange through different experiences between the regions of the country and outside and the development of regional forecasting tables by 2016/2020/2030. Providing future investors with all the necessary amenities and services (commercial network, leisure) is fundamental. This symbiosis between these different structures and segments of civil society must result in a dashboard of orientation of the future activities of the region, in order to facilitate the arrival of investors.

It’s imperative to take into account the social and cultural factors that need to carry out an institutional reorganization from the top to the grassroots level, leaning on a regulatory and non-managerial State, based on the trio: strategy/follow-up of strategy/execution. This new organization not to be imposed but to be done gradually and in consultation with the local populations – regional specificities (proposals contained in documents submitted in Arabic-English-French to the Presidency of the Republic when I was invited for the constitutional revision). The full success of this eminently political complex process implies putting the role of the State and its articulation with the market in the future socio-economic strategy, which refers to both local and international governance. All the actions mentioned above imply a strategic vision, hence the importance of a strategic planning body under the authority of the President of the Republic or the Prime Minister and not short-term actions, a territorial and governmental reorganization around major regional hubs and major ministries, including economy/education/scientific research.

As part of the implementation of the provisions of article 202 of the Constitution, President Abdelaziz Bouteflika, by presidential decree dated 14 September 2016, appointed the component of the National Prevention and the fight against corruption. What do you think about it?

I cannot stress enough that effective control must above all be founded on the rule of law, with the involvement of citizens through civil society, a genuine political opposition, a genuine independence of justice, all of this accompanied by coherence and visibility in the socio-economic policy approach, a renewal of governance at the global level to clearly delineate responsibilities. This will involve more morality of leaders at the highest level for a shared sacrifice in order to avoid the State/citizen divorce. In order to combat corruption, in particular against over-invoicing, capital illegal transfers, making control more efficient, there is an urgent need to review the information system which has been totally collapsed for more a decade, posing the problematic of the transparency of accounts, including for a large company like Sonatrach.Having had to conduct a financial audit on this company with a large team of experts and all Sonatrach executives, it was impossible for us to accurately pinpoint the cost structure of Hassi R’mel and Hassi Messaoud, both the oil barrel and the MBTU of the gas arrived at the ports, the consolidation and the transfer accounts of Sonatrach distorting visibility. Without reliable internal information, any external control is difficult and in this case the task of the audit institutions, including that of the Court of Auditors, would be biased. In the administrations, it’s almost impossible because their methods of management are the methods of the early 1960s and ignore the basic principles of rationalization of budgetary choices. Indeed, recently, within the framework of the implementation of the provisions of article 202 of the Constitution, President Abdelaziz Bouteflika proceeded by presidential decree to appoint the component of the National Body for the Prevention and Combating of Corruption. Note that there are other pieces of legislation that also deal with the fight against corruption, such as the law on money and credit relating to the suppression of foreign exchange offenses and capital movements of capital from/to foreign countries. It is imperative to avoid the telescoping of all these bodies, in particular the body responsible for corruption, and the Court of Auditors, two strategic institutions provided for in the Constitution. For the Court of Auditors, whose role is strategic in the majority of developed countries where the rule of law exists, in Algeria, it is under-supervised. It was composed in 2014 of about 100 financial magistrates who could not control about 17,000 entities (administration and public enterprises), noting that the control of Sonatrach alone would require 200 financial magistrates. Having had the opportunity to visit these structures at international level and to lead in Algeria in the past (between 1980-1983, during the presidency of the late Dr. Amir, former Secretary General of the Presidency of the Republic) as magistrate first Counselor and Director General of Economic Studies at the Court of Auditors, three major audits on the effectiveness of housing programs and infrastructure at the time, and demurrage at ports and wilayas development programs, In connection with the Ministry of the Interior and the Ministry of Habitat, assisted by all the walis at that time, I want emphasize its importance by avoiding, as in the past, that it is used for political purposes. As regards responsibilities, it should be borne in mind that Algeria stays in transition since 1986, without a market economy or a planned economy, a dialectical link existing between the rentier bureaucratic logic and the extension of the informal sphere that drains more than 50% of the circulating money supply and which monopolizes as much for the economic area (see my study carried out for the French Institute of International Relations IFRI December 2013 – Weight of the informal sphere in the Maghreb). It’s this interminable transition that explains the difficulties of regulation, posing besides the problematic of the responsibility of the public company manager in case of ministerial interference, therefore of the policy, where the law on the autonomy of public enterprises 1990 has never been applied.

In this case, is the responsibility not collective and does it not refer to the systemic blockade, with managers taking less and less initiatives?

This explains the bureaucratization of society with constraints in the business climate which blocks creative initiatives, particularly those of the private sector, with reference to economic freedoms. Among the factors promoting economic freedom are the size of the government, the legal structure of the country for the protection of property, the value of money, free trade with countries in the rest of the world, and regulation of credits, labor and companies. The report published by the Heritage Foundation and the Wall Street Journal for the year 2015, dated January 25, 2016, ranks the 178 countries studied in 5 broad categories on a scale ranging from 40 points (the least free) to 100 points (the freest): « free » (80-100 points), « rather free » (70-79,9 points) « moderately free » (60-69,9 points), « not very free » (50-59,9 points) and « repressing freedom » (40-49.9 points). Algeria was downgraded from eleven places, the 157th position out of 178 countries. This report places Algeria in the category of countries where economic freedom is « repressed » with an overall score of 48.9 points, 1.9 points less than the year 2014, this overall score remaining below the average as well regional as global. The Canadian think tank Fraser Institute in its 2016 edition ranks Algeria 151st out of 159 countries with a score of 5.15/10. In terms of size of government, Algeria is ranked 157th, for freedom of commerce 154th, the legal system for the right of ownership to the 106th place and for the strength of the currency to the 113th. This explains the lack of entrepreneurial spirit that is based on the risk and loss of productive enterprises. Thus, without transparency in management and a clear political will to fight corruption, there can be no development in Algeria involving profound moralization of society.

SMI-SMEs (SMI-SME: small and medium-sized industry/enterprise) in the majority of countries are the basis for development. Can you remind us the proposals you have put forward for the Algerian government to energize them?

The new law on SMEs will have no impact without comprehensive structural reforms and a strategic vision of adaptation to the new world. So I express ten proposals. These are the proposals on the dynamization of SME-SMEs issued at the meeting of 06 November 2014 at the Palais des Nations before the Prime Minister and members of the government, at the time when I was advocating a crisis committee to counter the decline in hydrocarbon prices.

First, creating a Service Agency for Small Business with fewer than 20 employees. The legal, administrative, fiscal and social environment is particularly complex and unstable for a very small company. As an employer, a TPE (very small company) is connected today to dozens organizations. Why not taking inspiration from the Small Business Service, a single administrative interlocutor for very small companies, created by the British government?

Secondly, for the payment deadline, I propose to impose a law, if necessary, or an executive decree for payment to SMEs within 30 days from the date of delivery. Such a decision will allow SMEs to recover billions of dinars of cash for all deliveries to large companies and for all contracts with public authorities, the long delays accumulated in the payment becoming stifling, assuming to review the public finance procedures.

Thirdly, it will be necessary to reduce the time limit for VAT refunds to SMEs to a maximum of 15 days, where it will be necessary for the tax administration to reimburse SMEs within 15 days, unless it’s motivated to question for a risk of fraud. In case of overruns, the tax administration should be penalized according to the same rules as those applied to the companies.

Fourthly, SME financing opportunities should be expanded by introducing Leasing, development capital to finance small and medium-sized enterprises at a somewhat advanced stage of their expansion, because the majority of family businesses are reluctant to seek outside capital, and even more to enter in the Stock Exchange of Algiers which is besides in lethargy for years.

Fifthly, compel large public companies, including Sonatrach and Sonelgaz, to sub-contract through a co-partnership. It is not a matter of making administrative decisions, but of calling for changes in mentality among the leaders of large companies. As in other countries, large Algerian companies operating with public funds could rely on powerful networks of SMEs that can provide them with reliable subcontractors, innovations and research centers compatible with their own activities. The German experience which considers SMEs as equal partners, unlike France where the effect of domination exists, is interesting to study.

Sixth, the accounting rules governing SME-SMEs are very cumbersome and not useful to all companies. We can therefore move towards a treasury accounting for companies with less than 10/20 employees. This would reduce administrative burdens. However, this does not apply to SMI/SMEs borrowing or increasing their capital, which will have to respond, as at present, to requests for information from investors and bankers.

Seventhly, it would be desirable to subject small SMI/SMEs to a specific tax and social regime especially for those among whom the turnover does not exceed 10.000.0000 dinars with a tax levy of 10 to 15% equivalent to the income tax, substituting for all direct taxes.

Eighth, lightening the 49/51% procedure, which I have been asking the government since 2010, and what the Prime Minister has just announced to the Walis on 13 November 2016 concerning the partnership with foreign countries for non-strategic activities to be listed, including small and medium-sized enterprises, by introducing the blocking minority of about 30% and the obligation of a technological transfer, managerial, and a positive currency balance for Algeria.

Ninth, do a assess of Crédoc documentary credit which has not allow to limit the import invoice, nor to boost the productive fabric and reintroduce the Remdoc for certain small and medium-sized enterprises and thus adapt the rules to the needs of the Algerian economic fabric on a case-by-case basis, which is provided for in principle in the Finance Law 2017.

Tenth, in the end, improve the business climate by synchronizing central, local governance, and corporate governance. This involves a fight against cancer of the bureaucracy, corruption, deep reform of the financial system. We must avoid the monetary and the mechanical illusions of the 1970s, the socio-educational system having to rely on quality, the labor market combining flexibility and social protection, and reform the land market so as to be able to cope with international competition in terms of cost/quality and therefore to the inexorable challenge of globalization.

There is a controversy currently on the reform of retirement funds in Algeria, what do you think?

The President of the Republic has decided on December 1, 2016 to postpone the retirement to more than 60 years, with a transitional period of 2 years, and anyone with 32 years of activity can retire. Without entering into polemics on a subject so sensitive, having to take into account the productive arguments of each other privileging the higher interests of the country, taking into account both the financial situation of the country and the new global changes, it’s a matter of modifying collective practices and reducing shocks on employment by increasing the flexibility of incomes and working time through ongoing training to enable adaptation to new techniques and organizations, in the context of improved quality, which has deteriorated considerably. A decentralization of education management in an overall manner is desirable in order to bring regional competition and its adaptation to the needs of society, with four (04) great poles of excellence and avoid the myth of a university by wilaya. The other axis of social cohesion is that of a new management of social security. Funding for social protection continues to be based mainly on social contributions and absorbs productivity gains at the expense of employment and direct wages. It must be acknowledged that with the decline in wages due to rising unemployment, this affects the social security account, the deficit being covered by medium-term loans that are borne by future generations. Consequently, the sustainability of the system is likely to be threatened in the medium term and requires major structural reforms. The concept of equity has changed and access to employment must be a priority because current social protection increases unemployment. So it’s not a change in the basis of the levies that will solve the problems but in the control of the expenditure, both the overall expenditure and the expenditure reimbursed, for in this specific sphere, the one who consumes is not necessarily the one who finances, and this is not neutral for the productive activity. Thus, overall social security spending should not grow, in volume terms, faster than growth in the Gross Domestic Product (GDP). This rationalization of expenditure does not mean blind restriction in order to cover the needs of the most deprived, assuming targeted field surveys. As for the tax system, the level of direct taxation in a society measuring the degree of public support, there is an urgent need for a new policy, because the tax system is at the very heart of fairness. But tax can kill tax, because it alters the allocation of resources, including the supply of capital and labor and the demand for goods and services. I regret that no precise survey quantified in time highlights the links between the distribution of national income between social strata, the evolution of the inflationary process and the model of consumption, which is indispensable information. An efficient tax system needs to find ways to raise revenues by minimally disrupting the mechanisms that lead to the economic optimum, implying a change in the welfare State. The Algerian population increased from 12 million Inhabitants in 1965, from 34,591,000 on July 1, 2008 to 37.5 million in 2010, 39.5 million on January 1, 2015, and 40.4 million on January 1, 2016. In a study published by the ONS (National Statistics Office) at the end of 2015, the labor force is 9,493 million in 2005, 10,862 million in 2010, 10,661 million in 2011, 11,964 million in 2013 and 11,932 million in 2015. The unemployed population for the same period, according to the ONS, is 15.3% in 2005, 10% in 2011, 11% in 2012, 9.8% in 2012/2013, 10.6% in 2014 and 11.2% In 2015 with a youth unemployment rate of 29.9%, an unemployment rate of 9.9% in 2015 for males and 16.6% for females (whose participation rate is lower), Including overstaffing, temporary jobs and the informal sphere. According to the ONS 2013 survey, the pattern of employment according to business sector shows a growing tertiary sector (trade and services). This latter absorbs 59.8% of the total labor force, followed by construction (16.6%), industry (13%) and agriculture (10.6%). As for the civil service, according to the Directorate General of the Civil Service, the number of civil servants on 1 January 2015 is 2,020,172, of which 1,608,964 are full-time (79,64%) and 411,208 are contract employees (20,30%). The wage-to-GDP ratio in 2001 was 22.94%, 18.03% in 2005, 25.97% in 2010, 27.11% in 2014 and 29.70% in 2015. By way of comparison, France had 5,416,900 civil servants at the end of 2014, including 2,385,000 to the State civil service, 1,878,700 to the territorial civil service, and 1,152,000 to the civil service hospital. Just behind comes Germany and its 4.9 million public officials. However, the part of French civil servants in the population remains well above the European median. On the other hand, it is far behind certain European countries when one considers the number of public officials per 1000 inhabitants, with 80 officials per 1000 inhabitants, at the same level as Belgium, far behind Denmark with more than 145 agents per 1000 inhabitants, Finland with 129.40 agents and Sweden with 123.60. Morocco had 900,000 civil servants for 35 million inhabitants in 2015 (ratio 25.7), Tunisia 630,000 civil servants for 11 million inhabitants (69.3), while according to the IMF, Tunisia had 44 officials per 1,000 inhabitants in 2013, and Morocco had a ratio of 27 officials for the same number of inhabitants. Algeria, contrary to certain assumptions, has a ratio of 50.5 for 2015, far behind European standards. But a global ratio can undermine efficiency, so we must calculate the optimization of the value of the public service that does not create value, except education and health indirectly, according to the UNDP (United Nations Development Program) report in order to bring the state closer to the citizen.

Interview realized by Mohsen Abdelmoumen

Who is the Professor Abderrahmane Mebtoul?

Professor Mebtoul is an Algerian economist, a professor of universities and an international expert. Son of late a great militant of the Algerian National Liberation War, he is a former emigrant who has completed primary and secondary studies, a part of superior in Lille (France). Doctor of State in Economics (1974), graduate of the Institute of Management of Lille (1973), he is a member of several international organizations, author of more than 20 books, and lecturer for more than 500 conferences National and international levels. During his career, he was administrative officer on the road to African unity (1972/1973), Director of Studies at the Ministry of Energy/Sonatrach (1974/1979, 1990/1995, 2000/2006), former magistrate, first Counselor, Director General of Economic Studies at the Court of Auditors (1980/1983), President of the Algerian Privatization Council at the rank of Minister Delegate (1996/1999), Director of Studies at the Office of National Security-DGSN (1997/1998), Expert Economic and Social Council (1995/2007), Expert at the Presidency of the Republic (2007/2008), independent expert to the Prime Minister (from January 2013 to the present), who led several important cases on behalf of the successive Algerian governments from 1974 to 2016. Professor Mebtoul is an independent expert since 10 November 2016 for economic matters with the Secretary General of the FLN, the President of the FLN being the President of the Algerian Republic.

Published In American Herald Tribune, December 28, 2016:http://ahtribune.com/world/africa/1410-abderrahmane-mebtoul.html

In Oximity:https://www.oximity.com/article/Prof.-Mebtoul-Any-destabilization-of-A-1

In French in Palestine Solidarité:http://www.palestine-solidarite.org/analyses.mohsen_abdelmoumen.291216.htm

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