World Bank Document

RERTEJST1I TED FILE C y E t IN0. E.A. 5 ONE IVEE Public Disclosure Authorized This document was prepared for internal use in the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized THE ECONOMY OF ALGERIA Public Disclosure Authorized August 15, 1955 Public Disclosure Authorized Department of Operation Europe, Africa and Australasia CURRENCY EQUIVALENTS PAR VALUES 1 Algerian franc = 1 French franc Frs. 1 = .2857 U.S. cents Frs. 1 million = U.S. $2,857 Frs. 1 billion = U.S. $2.857 million U.S. $1 Frs. 350.0 CONTENTS Page Charts Basic Data Summary and Conclusions..................*.oe...***** i Introduction ......................... 1 Agriculture.............. ... .. .... ..... 3 cereals. ... .. .*.. .. ..................... *** & Wine... .... .. Fruit and Vegetables...................... 6 Other Agricultural Products............... 6 Livestock............... 7 The Paysannat........................ 7 Minerals.......e...........************************* 9 Industry....... oooo...... ooo.o..******** **** **** 11 Commercial and Financial Relations with France........ 14 External Trade............*..*..... 0........ 15 Investment and the Public Finances....,.....,........ 16 Map Tables l. Ordinary Budget - Receipts 2. Ordinary Budget - Expenditures 3. Public Investment Program - Expenditures 4. Public Investment Program - Financing 5, Agricultural Production 6. Grain Production Since 1901 7. Production and Export of Wine 8. Industrial Production 9. Volume of External Trade ALGERIA POPULATION GROWTH (MILLIONS OF PERSONS) 10 10 8 8 G 6 TOTAL 4 S 4 2 2 EUROPEANS O I 1 1 1 1 0 1856 '66 '76 '86 '96 1906 'll '21 '26 '31 '36 '48 '54 ORDINARY BUDGET* (BILLIONS OF FRANCS) 100 100 FISCAL YEARS 80 80 60 60 40 -O40 MATERIALS 1--- 20PERSONNE - -- 20 1949/'50 1950/51 i951/'5? 1952/'53 1953/'54 1954/'55 1955/'56 *Net of transfers to capital budget FINANCING PUBLIC INVESTMENT (PERCENTAGES) FISCAL YEARS 100 100 ALGERIA --- 0 600 S GRANTS I 40 -40 FRANCE 20, OAN 2 20 20 1949/'50 1950/'51 1951/'52 1952/'53 1953/'54 1954/'55 1955/'56 8/2/55 1053 IBRD- Economic Staff ALGERIA PRODUCTION OF CEREALS (THOUSANDS OF METRIC TONS) 2,500 TOTAL NALL OTHER 2,500 2,000 2,000 1500 500 N500 3.500 3,000 / 3,000 2,500 1 /2,500 2,000 2,000 1,500 -1,500 1,0001,000 500 OSPHTES500 0 0 400 400 300 ,' 300 /-. / 200 200 COALL 100 LA l100 Z INC S -- - /... 0O -- O 1916 '20 '25 '30 '35 '40 '45 '50 '55 8/2/55 1054 IBRD- Economic Stoff BASIC DATA ALGERIA Area: 2,190,000 sq. kms. of which Sahara 1,866,000 sq. kms. Population: end 1954 Total 9.4 million European 1.0 million Major Products - 1954 Wines 19.3 million hectolitres Iron ore 2,923,000 tons Cereals 2.5 million tons Phosphates 758,000 tons Fruit and vegetables 1.5 million tons Coal 303,000 tons Trade - 1954 (billion francs2 Total expoorts 140 Total imports 218 of which of which Wines 56 Fuel 13 Fruits and Raw materials and vegetables 18 semi-finished 43 Iron ore 11 Equipment 34 Grains and flour 8 Consumer goods 127 Trade vwith Prance - 1954 Exports 103 Imports 160 Retail prices - 1949 = 100 March 1955 131 Currency unit - Algerian Franc 1 Algerian franc = 1 French franc - i - Summary and Conclusions 1. Algeria is a poor country with no natural communications and a population of diverse elements. It owes its political and economic unity to France. The three Departments are treated as part of France, Algerians are French citizens, elect representatives to the French Parliament and can move freely in and out of France. Goods and funds can also move freely, for Algeria is within the French customs and exchange control area and, since the Algerian franc is freely convert- ible with the French franc, Algeria virtually belongs to the monetary area of metropolitan France. Three-quarters of Algeriats trade is with France. A Govern- ment-General and an Algerian Assembly in Algiers provide for a measure of local autonomy. There is an Algerian budget which covers routine civil expenditures in Algeria. But the French Government remains responsible for Algerian affairs and policy and provides a growing proportion of the finance for current and capital expenditures. Algeria is most simply to be viewed as an economic region of France. The concept of Algerian creditworthiness distinct from that of France does not apply. 2. There are about 9.5 million people in Algeria. The main elements are 1 million Europeans, of whom four-fifths were born there, about 1 million Berbers, who live mainly in the mountain areas of Kabylie and the Aures, and about 7 million of mixed Arab and Berber stock. Arabs and Berbers alike are Muslims but the Berbers retain strong traditions of local independence. The European population is mainly urban, the Muslim mainly rural. The Muslim population has been increasing by about 225,000 a year. It is consequently a very young population and there are as many of school age as in the labor force. 3. In face of population pressure, Algeria can offer little new land, for there is generally too little rain. Mineral resources remain limited and industry is still of small proportions. Heavy emigration to France leaves unsolved serious unemployment and underemployment and migration to the towns only aggravates the need for housing. France has provided Algeria with a much higher standard of basic services than she could afford herself. The policy of assimilation implies higher standards of education and welfare, the costs of which are being contin- ually inflated by the rising numbers for which they have to be provided. 4. Since November 1954, there has been a series of terrorist outbreaks centered in the backward, often inaccessible and thinly administered regions of the Grande Kabylie and the Aures Mountains. The disorders themselves have remained local- ized but they are tying down disproportionately large numbers of security forces and police action is likely to be needed for a considerable time. But it is recognized that a remedy has also to be sought for the economic and social malaise which underlies the disorders, even if it does not directly cause them. A program has yet to be elaborated in direction and amount but it is already clear that the level of both social and economic investment is to be raised still further and probably by a substantial amount. 5, The disorders have focused attention on the fact that Algerian production has been too low and growing too slowly. The prospects for rapid growth in the future remain limited. Four-fifths of the population is occupied in agriculture. One-third of the farm land is owned by about 25,000 European farmers but the rest is cultivated by huslim peasants mostly using traditional methods. Cereals, vines and livestock each contribute about a quarter to the value of agricultural output. - ii - Cereals cover three-quarters of all Muslim land but though the area has increased slightly over the last 50 years production has stagnated at about 2 million tons a year; vines took over the best land and erosion and exhaustion have offset improvements in methods. Good harvests in recent years may however in part reflect a reversal of the trend. Vines, almost wholly European, give at least the same return as cereals frum a tenth of the area. Heavy surpluses in Algeria and France pose serious market problems but under present conditions growers in Algeria are unlikely to reduce production on their own initiative. Fruit and vegetables, mainly European, contribute about a fifth of the agricultural product. Industrial crops are of minor importance. 6. The evolution of Muslim farming is hampered by conservatism, the frequent lack of land titles as a bpsis for conventional credit and a shortage of suitable instructors. But progress under the guidance of the Government's Paysannat program, thcug so fer 2mal3 in scale, suggest- that i.n time thera are cnsiderable gains to oe made. Vines howevei have reached tne limit of their expansion and the area available for other crops is strictly limited. Livestock probably offers the largest opportunities for improvement. 7. Minerals are accounted for very largely by some 3 million tons of iron ore and 700,000-800,000 tons of phosphates. %ith some lead and zinc they make up only 10% of Algerian exports. There is unlikely to be any great increase in proeuction in the north of the country and it remains to be seen whether the Sahara will produce minerals in commercial quantities. Over $30 million equiva- lent a year is being spent in the search for oil in the Sahara, but distance again poses a costly problem. A large strike would have major consequences for the franc area: it would not, at least initially, solve Algerian problems directly, as some high hopes have it, but would certainly help to pay for solu- tions. 8. Industry occupies only 10-15% of the labor force. Its growth has been based on processing agricultural produce, supplying agriculture and meeting the needs of a construction and public works program, Wartime separation from France created new needs for the consumer goods and equipment that France had supplied bat some of the plants then built ran into difficulties under stable peacetime conditions. The disorders have not checked the industrial recovery and expansion which, as in France, began early in 1954. Building and the building materials industry will be directly stimulated by the forced draft of an increased inflow of public funds for current and capital expenditure that is the consequence of the disorders. The disorders themselves have had little effect on mining and agriculture and private confidence has not been so seriously affected that important investment decisions have been put off.

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