ReportNo. 6607-AL Algeria The 1985-1989Development Plan and the
Public Disclosure Authorized Medium-and Long-TermProspects
September30,1987 CountryOperations Department II Europe,Middle East and North Africa Region FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Documentof the WorldBank
Thisdocument has a restricteddistribution and may be usedby recipients onlyin the performanceof theirofficial duties. Its contentsmay not otherwise bedisclQsed without World Bank authorization. CURRENCY EQUIVALENTS
Currency Unit: Algerian Dinar (DA)
ExchangeRate (AnnualAverage)
DA/USt
1980 = 3.8375
1981 2 4.3158
1982 2 4.5922 1983 = 4.7888 1984 - 4.9834 1985 5.0278 1986 - 4.7023
FISCAL YEAR
January1 - December31 FOROMCIL USEONLY
This report was drawn up after a mission which stayed in Algeria from 14 June 1986 to 27 June 1986. The mission was headed by Mr. Ivan CHRISTIN (senioreconomist), assisted by Mr. Hasso MOLINEUS (seniorloan officer). The report was drafted by the various members of the mission: the First Part was drafted by Mr. CHRISTIN; the Second Part was drafted by Mr. BALLESTEROS (Agriculture), J. L. REIFFERS (Industry), A. ODY (Fertilizer and Petrochemicals), assisted by Messrs. MAKONI and DELON, B. DECAUX (Hydrocarbons),Mrs. Z. LADHIBI and D. CR&IG (Electricity),R. KNIGHTON and PELLETEY (Transportation),B. LAPORTE on information collected by Mr. MERTAUGH, J. M. VERDIER, 0. DE MESSIERES,Mrs. VAUGRANTEand Mr. GERMANACOS (Educationand Training),A. EL TOGBY and Mr. CHRETIEN (Housing and Urban Development). An additioial chapter devoted to the water treatment and conveyancesector and constitutinga follow up to the many missions by the Bank relativeto the sector was drafted by M. A. BROOMHEAD. Mrs. SEMSARZADEH (research assistant) collated the general statistics and drew up the StatisticalAnnex for the Third Part.
This documenthas a restricteI distributionand may be used by recipientsonly in the performance of their officialduties. Its contentsmay not otherwisebe disclosedwithout World Bank authotization. x\ ALGERIA THE 1985-1989 DEVELOME PLAN AND THE MEDIUM-AND LONG-TERM PROSPECTS
Table of Contents
SUMARY i
PART I - MACROECONOMICPLANNING
CHAPTER I - ALGERIANPLANNING: A RETROSPECTIVE A. PreliminaryConsiderations regarding the Algerian EconomicSystem and PlanningProcedures I B. The 1980-84Plan: Performances, Strengths and Weaknesses 7 1. The InitialPlan 7 2. The InvestmentProgram 8 3. AlgerianPublic Finances between 1980 and 1984 10 4. Money,Credit and Pricesduring the FirstFive-Year Plan 16 5. Balanceof Paymentsand ExternalDebt 19 6. Evolutionof Employmentand Income duringthe FirstFive-Year Plan 24
CHAPTER E - THE SECOND FIVE-YEAR DEVELODPMENTPLAN (1985-89) 29 A. Descriptionof the InitialProgram 29 1. StartingTargets 29 2. InvestmentProgram of the SecondPlan 30 3. ExpectedMacroeconomic Developments 32 4. FinancialEquilibria of the Economy 33 B. The SecondPlan and its Adjustmentto AdverseCircumstances 35 1. Collapseof the Oil Market 35 2. The InvestmentProgram: A NecessaryReconsideration 36 3. The New MacroeconomicTrends 41 4. The OtherEquilibria 42 5. Medium-TermProspects for the InvestmentPlan 47
CHAPTER m - LONG-TERM PROSPECTSFOR THE ALGERIAN ECONOMY 49 A. Analysisof the DynamicForces in Algeria'sEconomy 49 B. Organizationaland InstitutionalComponents 50 C. CriticalConditions for Long-TermGrowth 54 1. The Problemof PopulationGrowth 54 2. The Problemof ForeignTrade 55 3. Productivity,Economic Efficiency and the PriceSystem 57 D. OutlinePlan for RestoringEconomic Growth 59
ANNEX I 68 PART r - SECTORALPLANS AND PROGRAMSREALIZATIONS AND PROSPECTS
CHAPTER IV - THE AGRICULTURAL SECTOR 70
A. Introduction 70 B. Major Developmentsin the 1967-87Period 72 C. The 1980-84Plan 74 1. Restructuringof the SocialistSector Farms 74 2. PrivateSector Support 76 3. Reorganizationof the ServiceAgencies 77 4. AgriculturalPrices 78 5. Public Investment 80 D. The 1985-89Development Plan 81 1. Principlesand Objectives 81 2. Implementationduring 1985 82 3. Outlookfor 1986-89 86
CHAPTER V - THE INDUSTRIAL SECTOR 89
A. GeneralPanorama 89 1. The EconomicFunctioning of the Light IndustrySubsector 91 2. The EconomicFunctioning of Heavy Industry 95 B. Chief Thrustsof EconomicPolicy Regarding the Sector 99 C. Prospectsand Recommendations 100
CHAPTER VI - FERTILIZER AND PETROCHEMICALSECTOR 103
A. Background 103 B. PresentSituation 104 1, FertilizerSubsector 104 2. PetrochemicalSubsector 108 3. ASMIDALand ENIP 109 C. Future Projects 109 1. FertilizerProjects 110 2. PetrochemicalProjects 111
CHAPTER VI[- ENERGY: THE HYDROCARBON SECTOR 113
A. HydrocarbonResources 113 1. The Discoveryand Dispositionof Crude Oil Resources 113 2. The Statusof Known Crude Oil Resources 114 3. The UltimatelyRecoverable Petroleum Resources 115 4. The Statusof NaturalGas Reserves 115 5. FutureExploration, Development and Recoveryof HydrocarbonResources 117 B. Productionof Hydrocarbons 119 C. Oil Refining 121 D. Storageand Distribution 122 A E. Domestic Demand , 122 F. HydrocarbonExports 124 1. LiquefiedNatural Gas (LNG) Exports 1.25 2. Piped NaturalGas Exports 126 G. Investmentsin the HydrocarbonSector 127 H. Summaryof Issues 136 CHAPTER Vm - THE ELECTRICITYSUBSECTOR 138
A. Introduction 138 1. The Sector 138 2. Recent Developments 140 B. Energy Pricing and Demand Management 142 1. Economic Supply Costs 142 2. Comparison with Tariffs 143 3. Demand Management 145 C. Investment 146 1. Rural Electrification Targets 146 2. Deferment of Major Projects 146 3. Other Investment Savings 147 4. Local vs. Foreign Costs 148 5. Project Financing 148
CHAPTER IX - THE TRANSPORT SECTOR 150
A. An Overview 150 B. Main Characteristics of the Sector 150 1. Road Infrastructure 150 2. Road Transport 151 3. Railways 152 4. Ports and Maritime Transport 152 5. Civil Aviation 153 C. Recent Trends 154 D. Investment Program 1985-89 156 1. General 156 2. Road Infrastructure 156 3. Road Transport 158 4. Railways 158 5. Ports 158 6. Airports 158 7. Air and Maritime Transport 159
CHAPTER X - EDUCATION AND TRAINING 160
A. The Socio-Economic Context 160 1. Introduction 160 2. The Demographic Factor 161 3. The Economic and Manpower Factor 161 B. The Educational Policy Framework 163 1. Reorganization and Restructuring 164 2. Reform of Curricula 165 3. Teacher Education 166 C. The Specifics of the Second Five-Year Plan, 1985-89 167 1. The Directives 167 2. Present Status and Proposed Targets 168 3. The Planned Investments 170 D. Conclusions and Recommendations 173 CHAPTER XI- THE URBANAND HOUSUDGSECTOR 176 A. RegionalDistribution of the Population 176 B. Urbanization 176 C. Objectivesof the Five-YearPlans 177 D. PhysicalPerformance 178 E. FinancialPerformsace 179 F. InstitutionalAspects 181 G. ConstructionEnterprises 184
CHAPTER XII - WATERSUPPLY AND SEWERAGE 186 A. WaterResources 186 B. RecentSector Organization and Developments 187 C. CurrentService Levels 188 1. Water 188 2. Sewerage 189 D. PublicInvestment Program 189 E. Conclusionsand Recommendationsfor the Future 193 1. InstitutionalStrengthening 193 2. CostRecovery and NationalTariffs 193 3. Sewerageand PollutionControl 194 4. IntegratedWatershed Management 194
ANNEX E 195
MAP
7 2509/p 1 Z- IS MAINA3RDVEAtINeS AMD ACRDMI
AGEP : AgenceNationale de l'EauPotable et ?ndustrielleet de l'Assainissmnt (NationalAgency of Drinkingand IndustrialWater and of Sewerage) APC : Assembl4ePopulaire Coimwnale (Peoples CouMnal Assembly) APW : Assemblde Populaire de la WiIaya (Peoples Assembly of Wilaya) ASHIDAL : Entreprise Nationale des Engrais et des Produits Phytosanitaires (NationalCompany of Fertilizersand PlantProtection Chemicals) BAD : BanqueAlgerienne de Developpement(Algerian Development Bank) BADR : Banquede l'Agricultureet du DeveloppomentRural (Bankof Agricultureand RuralDevelopment) BDL : Banquede DeveloppementLocal (RegionalOevelopment Sank) CNEP : CaisseNationale d'Epargne et de Prevoyance (NationalSavings Bank) CACG : CooperativesAgricoles de Comptabiliteet de Gestion (AgriculturalCooperatives for Accountingand Management) CAE : ComitdAlg6rien de l'Energie(Algerian Energy Commission) CAPCS : CooperativesAgricoles Polyvalentes Comunales de Services (Multi-ServiceAgricultural Communal Cooperatives) CASSAP : CooperativesAgricoles Specialisdes en Approvisionnements (AgriculturalCooperatives Specialized in InputDistribution) CNAN : CompagnieNationale Algerienne de Navigation (NationalCompany of Navigationof Algerta) CNPA : CentreNational de PddagogieAgricole (Centerfor AgriculturalEducation) COFEL : Cooperativesdes Fruitsat des Legumes (MarkettngCooperatives of Fruitsand Vegetables) COPCID : CoopErativesSpicialisdes dans la Construction.l'Irrigation et le Drainage (SpecializedCooperatives for Construction,Irrigation and Drainage) CPA : (CrEditPopulaire d'Algdrie) (Peoples Credit Bank of Algeria) DAD DElEgationAgricole de DaYra (DistrictAgricultural Service) DAS : DomainesAgricoles Socialistes (Socialist Farms) ENAFOR : EntrepriseNationale de Forage(State Enterprise for Drilling) ENIP : EntrepriseNat ionale de la Pdtrochimie (StateEnterprise for Petrochemicals) ENTP : EntrepriseNationale des TravauxPetroliers (StateEnterprise for Oil Development) ENS : EcolesNormales Superieures (Teachers' College) ENSEP : EcolesNormales Superieures de tlEnseignementPolytechnique (Teachers'College for VocationalTraining) EPLF : EntreprisesPubliques du Logementfamilial (PublicEnterprises for FamilyHc'Jsing) HYPROC : SociEtENationale de TransportsMaritimes des Hydrocarbureset ProduitsChimiques (NationalCompany of MaritimeTransportation of Hydrocarbons and Chemical Products) IDGC : Institut de Diveloppement des Grandes Cultures (Development Institute for Large-Scale Farming) IPH : Institut Pidagogique National (National Pedagogical Institute) MAP : Ministirede l'Agritulture et de la Peche (Ministry of Agriculture and Fisheries)
1EICP : Minist6re de lPEnergie et des Industries Chimiques et Pdtrochimiques Ministryof Energy and Chemical and Petrochemical Industries) KNEF : Minist6re de l'Hydraulique. de l Environnement et des Forets (Ministry of Hydraulics, Environment and rorestry)
HILD Mtnistere de llIndustrie Lourde (Ministry of Heavy Industries)
MLi : Hinisteredes Industriee Lsgeres (Ministryof Light Industries)
"OE : Ministire de l t Education Nationale (Ministryof Education)
NONE : Hinist6re de tlEnseignement Supenieur (Ministryof Higher Education)
MOVT : Ministsre de la Formation Professionnelle et du Travail (Ministry of Vocational Training and Labor)
HP : Hinistere de la Planification (Ministryof Planning)
MT : Ministsre des Transports (Ministry of Transport)
NAFTAL : Entreprise Nationale de Raffinage et de Distribution de Produits Chimiques (National Companyof Refining and Distribution of Chemical Products)
OAIC Office Algerien Interprofessionnel des Cereales (Cereals Marketing Board)
OAMV : Offices d'Amnagemont et de Mise en Valeur (Agency for Land Use and Oevelopment)
OFLA : Office des Fruits et des Legumes (Marketing Agency for Fruits and Vegetables)
UNAB : Office National des Aliments du Betail (NationalAgency for Animal Feed)
ONANA : Office Nationav du Materiel Agricole (Nationalmarketing Agency for Distribution of Agricultural Equipment)
ONAPSA : Office National des Approvisionnements et Services Agricoles (NationalMarketing Agency for Input Distribution)
ONLF : Office National du Logement Familial (National Agency for Family Housing)
OPaI : Office de Promotion et de Gestion Inmobili6re (Agency for Housing Development and Real Estate)
OPI : Offices des Perimetres Irrigues (Irrigation ManagementAgencies)
PIP : Progrmnmed'Investissement Public (Public Investment Program)
SOA : Secteur de Oeveloppement Agr1cole (Agricultural Development Sector)
SECAL : Soci6t6 des Eaux de l'Agglomeration d'Alger (Grand Algiers Water Supply Company)
SNTF : Soci1te Nationale des Transports Ferrovia1res (National Companyof Railroad Transportation)
SONATRACH: Soclitd Nationale pour la Recherche, la Production. le Transport. la Transformation et la Comnercialisation des Hydrocarbures (National Companyfor Exploration, Production. Transportation, Processing and Marketing of Hydrocarbons)
SONELGAZ: Socilt Nationale de l'Electricit6 et du Gaz (National Companyfor Electricity and Gas)
SUCH : Service de l'Urbanisme. de la Construction et do lHabitat (Bureau of Urbanism, Construction and Housing)
ZUNN : Zones Urbaines d'Habitation Nouvelle (Urban Zones of New Housing)
72SOB/p17 1? AGERIA-. COUNTRYDAT
NOh (1,000km2): 2,381.7 PPULATilON IN 122M: 22.6 million/A b DENSIUI:9.5/kSA (ResidentPopulation)
POPULATIONCHARACTERISTICS (1986) EDUCATION(1986) Crude BirthRate (per 1,000) 41.0 PrimarySchool Enrollment Ratio 94.0 Crude OeathRate (per 1,000) 10.0 SecondarySchool Enrollment Ratio /J 47.0 PopulationGrowth Rate 3.2 Urban Population(% of total) 48.0 HOUSINGAND CONSUPI (1986) Age Structure(%) 0 to 14 years 47.0 Accessto SateWater (% of population) 85.0 15 to 64 years 49.0 Accessto Electricity(% of all dwellings) 34.0 65 years and over 3.0 PassengerCars (per 1,000pop.) 1S.0 HEALTHAND NUTRITION(1986) Populationper Physician(1.000) 2.8 Populationper HospitalBed (1,000) 0.4 Per CapitaSupply of Calories 2,'99 Per CapitaProtein Supply (grams/day) 72.0
GNPPER CAPITA IN 1905 Id. US12f600 NATIONALACCOUNS US dollarmillions - 1974 prices and exchanalrates AnnualGrowth Rates 1M1 As % of I1s2 1984 lo8J GOP-198S If3m 1im GrossOomestic Product 21,612 23.868 24.704 100.0 4.0 4.5 3.5 Gains from germsof Trade -2,799 -2.807 -3,234 13.1 - - - Gross DomesticIncome 24,412 26.675 27,938 113.1 2.2 4.5 4.7 Imports 7,228 7.299 6,875 27.8 1.0 1.8 -5.7 Exports 4,907 5,219 5,342 21.6 -0.2 3.1 2.3 Resource Gap 2,321 2,080 1,534 6.2 - - - ConsumptionExpenditures 15.235 16,611 17.037 69.0 2.6 6.9 2.6 Investment(incl. stocks) 8.697 9.337 9,200 37.2 6.3 -0.6 -1.5 DomesticSavings 6.376 7.256 7,265 29.4 7.3 -0.S 1.0 NationalSavings 5,992 7.093 6,796 27.5 6.9 2.9 4.1 OUTPUT.EMPLOYMENT AMD PRODUCTIVITYIN 1l5 Value Added Emoloynent V.A. gar warker (at 1974prices) IUS$MI 11JI L J2IL00L S USt lXL AgricultureIg 1.884 9.2 1,000 22.0 1,884 2.0 Industry 13,194 65.0 523 1l.S 2s.228 27.4 - Hydrocarbons 4.766 23.5 92* 2.0 51,804 56.3 - Others 8.428 41.5 868 19.1 9.710 10.5 Services 5.218 2$.7 1.518 33.4 3.437 3.7 Unemployed -f 666 14. - - TOTAL 20.297 100.0 4,539 100.0 92.063 100.0 fOVERNMENTFINANCE CentralGovernment M1illonsof Dinars % of GOP 1982 ISML 19844211 1985 1Q21 12M 1211 CurrentRevenue 77.6 87.0 102.9 106.7 37.4 37.2 39.6 36.9 - Petroleum 41.S 37.7 43.8 47.8 20.0 16.1 16.9 16.5 - Other 36.1 49.3 59.1 S9.0 17.4 21.0 22.7 20.4 CurrentExpenditure 41.5 45.0 52.3 60.8 20.0 19.3 20.1 21.0 CurrentSurplus 36.0 42.0 50.6 45.8 17.3 18.0 19.5 15.8 CapitalExpenditure 61.0 76.4 78.0 72.4 29.4 32.6 30.0 25.0 - CentralGovernment Investment 33.7 43.0 44.6 44.9 16.2 18.4 17.2 1S.S - CapitalTransfer to Public EnterprisesIS 27.3 33.4 33.4 27.5 13.2 14.3 12.9 9.S External Borrowing (net) -111 39 -18 52 - - - Ij Hid-yearestimate based on 1977 populationcensus results. Datum is for 1980 /b Includes999.000 Algerians living abroad. - nil or negligible /& 12-18years of age. . not applicable /4 The per capitaGNP estimateis that of the World Bank Atlas (preliminary). /I Includespart-time workers. /I Includesonly non-agriculturalunemployed. /g Includesinvestment loar disbursement,allocations for the workingcapital of enterprise, and enterprises'debt reschc0uling. 7250B/pI9 ALGERIA COUNTRYDATA
MONEY. CREDIT AND PRUCE 191 1282 .. i3 .. 1.R4 1985 ------(millionsof dinars;end of period) -
Money and Quasi Money 109,1S4 137.890 165,927 194.717 223,860 Claimson Government(net) 25,147 36,1S3 52,692 67,741 76,633 Claims on the Economy 88,540 112,817 132,968 156,031 174.614 (Percentageor indexnumbers)
Money and Quasi Money as % of GOP 57.0 66.4 71.0 74.9 77.4 GeneralPrice Index /a (0974-100) 220.3 229.7 244.9 260.4 280.0 Retail Price Index /l (1974=1O0) 204.8 218.6 233.2 249.8 276.5 AnnualPercentage Change in: GeneralPrice Index 12.2 4.3 6.6 6.3 7.5 Retail Price Index /h 14.6 6.7 6.7 7.1 10.7 Clatms an Government(net) 76.2 43.8 45.8 28.6 13.1 Claimson the Economy 29.2 27.4 17.9 17.3 11.9 BALANCEOF PAYMENTS 1981. 1982 _1983 1984 i9as (Millionsof US dollars)
Exportsof Goods,NFS 14.674 14,145 13,510 13.448 13.669 Importsof Goods,NFS 13,s90 13.277 12.548 12.189 11,614 ResourceGap (deficit; -) 1.084 868 962 1.259 2,055 InterestPayments (net) -1,287 -1,288 1.231 *1.343 -1,450 Workers'Remittances (net) 274 300 171 1SO 132 Other FactorPayments (net) -6 -26 7 6 4 Net Transfers 25 -37 7 3 199 Balanceon CurrentAccount 91 -182 -84 75 939 DirectForeign Investment -1.4 -68 -12 -14 -2 Net MLT Borrowing -75 -123 -580 -296 42 Disbursements 2,479 2,812 2.697 2.949 3.299 Amortization 2,554 2.935 3.276 3.246 3,258 Other Capital(net) -183 -282 -276 -132 -84
OverallBalance -43 -818 -694 -540 1,28S Total ReservesMinus Gold (end of year) 3,695 2,422 1.880 1.464 2.819 MERCHANDISEEXPORTS 1983 1984 _ 1985 USS mi Z} US$ mi IX US$ mil 41 Crude Oil and Condensate 5,344 47.9 5,622 47.4 4,810 47.4 Refined Oil Products and LPG 3.084 27.6 2.534 21.4 2.920 28.8 Gas 2,535 22.7 3.412 28.8 2.167 21.4 Agricultural Products 37 0.3 48 0.4 56 0.6 Others 162 1.5 245 2.0 196 * .9 Total Merchandise Exports 11,162 100.0 11,861 100.0 10.149 %0.O
IBRD Lendine. September 30. 19R7 fUSS mil EXTERNALDEBT. December31. 1986 /c (USSmill
Disbursed 937.8 Total Outstanding and Undisbursed 20.884 Undisburscd 954.3 Total Outstanding and Disbursed 14,777 Total Amount of Loans 2.345.0 DEBTSERVICE RATIO li9S li9B l9fl 1986 In X of Exports of Goods 32.8 33.7 33.1 63.9 In X of Exports of Coods and Workers' Remittance 30.1 33.3 32.8 62.3 In X of Government Revenues 24.8 22.1 21.5 26.7
/I GOPdeflator. /b Grand Algiers Area Consumer Price Index. /g Preliminary.
7 250B/p2l November 5 1987 SUMMARY
1. Macroeconomic Planing
1. The Algerian economy is guided and directed by a central planning bystem (currentlyon a five year basis), which itself has been broken down into yearly less comprehensiveplans. At present,it is situatedin the upper range of medium income countrieswith a per capita GNP of US$ 2,410 (1984). The country'sefforts have chieflybeen aimed at settingup a large industrial sector (53 percent of gross domestic product in 1984 as compared with 34 percent in 1965) with particularemphasis placed on manufacturingindustries which on average progressed from 17.8 percent annually during the decade 1973-1984:however, this rapid progress has started off from a very modest level. Such active industrializationhas been done to the detriment of agriculturewhose share in the GDP declined from 15 percent (1965) to 6 percent (1984), giving rise to serious food supply problems and critical dependenceon food product imports. With the population increasing at an annual averagerate of 3.2 percent,one of the major concernsof the Algerian authoritieswill be to overcomesuch a dependence.
2. The resourcesfor such a strategy have largely been supplied, since 1974, through exploitationand exportationof hydrocarbons(crude oil, and particularlygas with the countryhaving 4 percentof proven world reservesof the latter, ranking fifth in the world, and with only 17 percent of the reserveshaving been exploited). Algeriatherefore has dependedfor up to 98% of its hydrocarbonexports to assure its foreign currencyresources allowing it to achieve its final objectives for national integrationthrough the transitory resource (or deemed such) of purchasing abroad equipment, intermediateproducts, which local industry is still not capable of producing. The authoritieshave, however, implementeda clever policy in diversifyingthe production and export of hydrocarbons (besides crude: condensates, refined products, and gas), which has partly reduced its subjectionto risks inherentto one productdependency.
3. The first Five Year Plan (1980-1984)aimed at ambitious objectives: growth of gross domestic productionat 7.1 percent per year, an investment rate of 48.6 percentof the GDP. Such objectiveswere only partiallyachieved since the GDP grew only by 4.3 per annum in real terms and the investmentrate settled at 38 percent. Most of these reduced performances (although not entirely negligible in absolute terms) were the result of two series of combinedfactors: (a) a downturnin the hydrocarbonmarket trend which made it necessary,once the danger of a perilousslippage in foreign indebtedness (16 billion US dollars in 1981) was noted, to constrain imports that were essentialfor maintaininga high growth rate for the industrialsector; (b) continuedweaknesses in productivityin the productionapparatus. At the same time, Algerian authoritieshave become aware of the restrictingnature of certainconditions necessary to the good functioningof the economy and have started to take steps to remedy the situation (e.g. restructuringof industrial enterprisesand farming units, reorganizationof distribution channels for agricultural products). Also, during this period and particularlyafter 1981 (the only year duringwhich the Treasuryhad actually reduced its debt towards the CentralBank), the overall Treasurydeficit has - ii - not really been contained (11.8% of GDP for the last three years of the Plan). This situationresulted in an excessiveissue of currencyin relation to evolution of GDP as well as in the persistenceof a visible annual inflation rate of about 7%. The clear-sightedstrategy of the Algerian authoritiesin the area of external debt must be emphasized:moving against the currentof an appallingworldwide trend, they have carefullyreduced to a minimum their foreign liabilities, thus priserving their financial independenceas well a valuablereputation of solvency.
4. As far as employment,labor productivityand wages are concerned,the targetsof the first Five Year Plan aimed at: (i) reactingto an anticipated 4.8% p.a. growth of the to.al labor force by an increase of 8.7% p.a. of non-agriculturalemployment; (ii) stopping the drift from the land and attemptingto rejuvenatethe agriculturallabor force;and (iii) improvingthe incentive value of wages by an increased linkage of wages with labor productivity. While the total labor force has increasedsomewhat less than anticipated,Algerian authoritieshave been able to increasenon-agricultural employment by 6.1% p.a., a 2.1% p.a. increase in total unemployment notwithstanding.The civil service has absorbed two thirds of new jobs and some other sectors (e.g. constructionand transport) remained below the plannedobjectives. The overall rate of implementationof the first Five Year Plan for industrialemployment amounts to 88%. For the agriculturalsector it does not appear that the targetshave been successfullyreached. In most of the sectorsthe increasein per capita wages remained close to increases in labor productivity, except for administrations. For the latter, the apparentlynegative trend in labor productivityhas been matched by a positive increasein the purchasingpower of wages.
5. The seconi Fiva.Year Plan (1985-89)has been preparedin the contextof atnincreasingly unccrtain overall economic situation. The Plan's objectives have therefore been set at a level which reflects the cautious attitude adoptedby the authorities:the annualgrowth rate of GDP has been set at 6.5% and the investmentrate at 40% of GDP. From a qualitativeviewpoint, the authorities also intended to give more relative significance to the agriculturalsector (includingirrigation) in order to progressivelyreduce food dependency,refocus the activitiesof the State towards the development of infrastructure,achieve a higher economicyield of the productiveapparatus with a view to reducingthe level of financialintervention on behalf of the State in the agriculturalsector. Over the five-yearperiod of the Plan, an overallbudgetary equilibrium (achieved through substantialsurpluses at the end of the Plan) should have allowed an easing of inflationarypressures. With the plummetingof hydrocarbonprices at the turningpoint of the 1985-89 period,the projectedperspectives had to be drasticallymodified: unit prices droppedby at least 40% on internationalmarkets and triggeredchain reactions affecting the overall structure of macroeconomicequilibrium in Algeria, resulting in a drastic compression of imports, a downward revision of investmentopportunities and, in the last analysis,a substantialweakening of economic growth. Early in the summer of 1986, the Algerian Government undertook the necessarymeasures to rebalancethe economy,without, however, reviewingthe secondFive Year Plan itself. - iii -
6. Under these new conditions,potential economic developmentdoes not look very promising: il the short term, the growth of GDP in real terms (at constant prices of 1984) practicallycame to a standstill in 1986 while investmentswere reducedby 25% and importsby 27.6%. The budget equilibrium, seriouslycompromised, could not be achievedwithout resortingto substantial advancesfrom the CentralBank (23.5 billion DA in 1986 compared to 1 billion DA in 1985). This exacerbatedinflationary pressures, the inflation rate exceeding lOb p.a.. The pressures affecting external equilibria were temporarilycontained as a result of good agriculturalperformance in 1986, stocks previouslyrealized and the practiceof direct quotas. In the medium term, however, the central piloting instrumentof the Plan (the investment program) should, according to World Bank estimates, undergo major ups and downs: in constant 1984 dinars, total Plan investmentsshould not exceed 330 billion (of an expected total of 550 billion), followinga downturn in effectiveinvestments which could be 65 billion in 1989 (the final year of the Plan),or, for that year, some 22 percentof GDP.
1. In the long term, the objectiveof puttingthe economyback on the path of high level stable expansioncalls for a basic rethinkingof the conditions of Algerian growth. Hence, this report emphasizes that endogenous growth forceshave demonstrateda clear downwardtrend since 1974, a regressivetrend which has been largelyhidden by the financial facilitiesallowed by turning petroleumearnings to profit. Many indexes facilitateestimations that the industrialprocess still suffers from deficiencieson the technologicallevel (possibilitiesof diversification,load breakdowns,maintenance), the economic level (knowledgeand control of costs), and the financial level (size of operationaldeficits). Moreover, the sector lacks adequate incentives to increaseefficiency. Significantprogress has yet to be made in agriculture to mobilize people, increase farming areas and ease water constraints. Planningitself has still not given up bureaucraticpractices for the central tasks of economiccomputation.
8. Any substantial long term growth, moreover, depends on overcoming criticalfactors: first, Algeria'sdemographic expansion (+3.2 percent per year on average) is a handicapwhich imposes an excessiveminimum economic rate of expansion;second, lack of export diversificationwhich subjects the economy to standingeconomic risk and gives rise to behaviorsthat are overly focusedon maximizationof mineral earningsand hence inadequatelyadaptable; third, the price system (prices of goods and services, price of capital, relative prices of currencies)does not appear to perform its role of allocatingscarce resources. There are indicationsof awarenessabout t'-ese three points but will there be the time to convert such awareness into decisionsaimed at resolvingurgent problems?
9. The report adopts this point of view in order to establish two long term growth scenariosfor Algeria'seconomy. Both scenariosassume that the prices of hydrocarbonswill remain in the range of 17-18 US$ per barrel, at least until the beginning of the 1990's. A first scenario is based on the hypothesis that the authorities will implement, in the near future, an assortment of adjustment measures aimed at reestablishingmacroeconomic balances (continuedreduction in imports, reorientationand overhaul of the investmentprogram). Without other parallel provisions, the economy can - iv - hardlyregain a rate of growthwhich is compatiblewith demographicconstraints before 1994 and (towards1995) would revertto a path of moderateexpansion of approximately4 percent per year. A second scenario then explores the hypothesisof, in addition to the precedingadjustment measures, a provision which would catalyze rational economic behaviors (positive interest rates, price reflecting production costs and indicativeof relative scarcities, adjusted exchange rate), and improve sectoral performances. Under these terms, the dynamism of the economy would go beyond that of the previous scenariostarting from 1990, after a necessaryperiod of adaptation,and would place the economy on a sustainedgrowth trajectoryof 5 or 6 percentper year around 1995.
2. Sectora Plans and Programs
10. Analysisof the agriculturalsector is based on the observationof food dependencyrepresenting (in 1980) two-thirdsof total consumption. The first Five Year Plan undertook, with a view towards increasing production, a reorganizationof the socialistsector, reformof the mechanismfor aid to the private sector,an overhaul of service organizationrethods of intervention, research, etc... The establishment of the DAS (Socialist Agricultural Domains), outfitted with improved staffing, acquitted of their debts, constitutedcertain progress; the private sector which now has 60 percent of farmland had easier access to factors of production. Overall, price differentialbetween input and output was expanded, opening up prospects of enhancedprofitability, although investment remained greatly below the planned objective. The second Five Year Plan then concentratedefforts on the extensionof farmland,the easing of water constraintsand the search for solutions assuring economicaland technicalviability of enterprisesin the sector. It is difficultto distinguishbetween what is due to plannedefforts in the results recordedin 1985 and 1986. Nevertheless,it appears that the mechanismset up, coupled with an ambitious program for eliminatingfallow field farming and an assortment of irrigation development projects, implementedwith perseverance,could contributeover time towards resolving one part of the acute food problem (with another element of the solution obviouslybeing a reductionin the populationgrowth rate).
11. Unquestionably,the industrial sector has been the "spearhead" of Algeria's development. It has reached a stage of technicalmaturity which shows itself in an assortmentof significantindicators (improvedrates of utilization of production capacities (T.U.C.P.), reduction in rates of dependence,etc.). Production units have been reduced to more manageable sizes under the terms of the industrialrestructuring program undertaken as of 1982. Nevertheless,economic performancesthat have been recorded still appear far from satisfactorylevels since on the whole, after subsidies,bank exposuresof enterprisesunder the oversightof the two Ministersof Industry, in 1984 approachedsome 20 billion dinars. Behind this overallobservation, however, lurk significantdisparities (disparities in the TUCP of the light industrysectors are activitiessuch as cement plants, carpentry,canning of vegetablesare in a periloussituation) or structuralfragilities (sensitivity of some heavy industriesto technicalincidents, sizable reject rates). This sector should thereforeregulate specific problems (textiles,cement plants) develop a spirit of competitionin certain branches, and more generally promotenew productivitygains. - v -
12. Also uneven are performancesin the fertilizer and petrochemicals production sector: while certain units (Arzew I, Arzew II, Annaba) are subject to major malfunctions,others operate in a most satisfactoryfashion. The establishmentof the ASMIDAL or the' ENIP are without question an absolutelyessential organizationalsolution but inadequateto resolve the problems of the sector. The latter are expressed in technologicalterms (choice of techniques), management (planning, supervision, accounting). Hence, despite the breadthof investmentsmade (some 2 billion US dollars in cumulativeterms), levelsof productionand use of productivecapacities, too often remainbelow internationalstandards.
13. At the heart of Algeria's economic development is the hydrocarbons sectorwhich has borne the full brunt of the crisis. Productionof crude oil stabilizedat 34.3 million tons in 1985 (far from the record level of 1978: 54.2 MT [milliontons]), as a result of many factors (conservationstrategy, internationaldemand, OPEC quotas);production of condensates(not subject to OPEC quotas) grew quite heavily (from 4.3 to 14 MT between 1980 and 1984); productionof LPG [liquefiedpetroleum gas] tripled (0.968 MT to 3.2 MT between 1980 and 1985) and was to grow even more. Gross productionof natural gas more than doubled (from 43.4 billion cubic meters to 90.7 billion cubic meters, from 1980 to 1985), causingnet productionto increasefrom 15 to 35 billion cubic mpters; productionof LNG [liquefiednatural gas] practically doubled (attaining 17.6 10' cubic meters in 1985); and lastly, volume of refined products rose from 10.4 (1980) to 21.9 million tons (1985). In addition to traditional uses of such products for export, there was progressivelyadded internaldemand which grew heavily: for total resources of approximately80 million TOE [tons of oil equivalent] (all sources combined),internal use at present representsone-fourth and export uses the remaining 75 percent Exports themselves were better divided among the various products, a diversificationwhich helps to reduce risks. Europe remains the best potential outlet for Algerian gas notwithstandingkeen competitionfrom Norway and the USSR. Forty nine billion DA were invested during the first Five Year Plan and 39.8 billion DA are provided for the second Plan. Nevertheless,because of the price fall recorded in 1986, the principalinvestor in the sector (SONATRACH)is undoubtedlygoing to be forced to revise downward its investment program (31 billion DA provided for 1985-1989), especially for new projects (exploration, development and transportation)which could seriouslycompromise the sector'sfuture.
14. With respect to domesticgas and electricitysupply, the report notes the objectivesassigned to the sector: wideningof availability,increasing replacementof gas, increasinguse of gas, energy savings. The means for this policy essentially are through a gradual policy of relative price adjustments. Beyond technicalproblems (distributionof consumptionamong forms of power, distributionof natural gas consumptionamong users, types of productionof electricity,transport and distribution),the report emphasizes that the problem of rate establishmenthas made considerableprogress since it was decided to instituterate settingat marginal cost, and that organization of sectors improved following the restructuringdecided upon in 1982. Nevertheless,realization of the SONELGAZ restructuring,in financial terms (scheduledfor 1987), remains subject to strict profitabilityrequirements. In particular,a reevaluationof the structureand level of the rates should - vi - allow the enterprise to avail itself of the investmentfunds required to technologicallyrespond to heavily growing demand, especiallyin rural areas which had been planned for electrificationduring the second Five Year Plan. Partial investment reports (Marsat, Skikda, West Algiers) could be contemplatedalong with other investmentsavings on new transportlines or new posts.
15. In the transportationsector, after the earlier expansionaryphase, emphasis should now be placed on improving productivity,and strengthening effectivenessto reduce the need for new larger infrastructureinvestments. From this point of view, maintenanceand rehabilitationwill take priority over the installationof completelynew equipment,and transportenterprises will be analyzedfrom the point of view of their financialperformances. Of the 39 billion DA set aside for the period 1980-1984for investments,the sectorhas realizedan effectivetotal of 31 billion,largely concentratedon roadway infrastructures(54 percent of the total) and railway resources (20 percent). The 1985-1989Plan providedfor increasinginterventions up to 54 billion DA, but it is hardly probable in view of the current financial situationthat the sector can invest much more than 42 billionDA, a priority program in which the road infrastructurewould representslightly more than 40 percentof the total and railwaysapproximately 25 percent. The emphasis, in this priority program, would be on restoring the current infrastructure, especiallyfor railways,and on port modernization. Cuts that might be made in the program would occur primarily in the setting up of a new railway infraatructureincluding the Algiersmetro, in constructionof local roads and in renewingtrucking capacity. The constructionof new railwaylines would be limitedto ongoing projects,the implementationof which would be slower than scheduled. Likewise,the schedule for work on constructingthe new port of Djen Djen, in the east of the country,which began in 1985, would probablybe revised, taking into considerationa probablereduction in port traffic over the upcomingfive years.
16. In the education and training sector, :he report notes that the Algerianauthorities have buttressedtheir actionwith the convictionthat any significanteconomic developmentcan only be acquired with an effective education and training system. For this reason, they have agreed to exceptionalfinancial efforts (approximately7 percent of the GDP) to assure the future of the nation through education. Such efforts have been al' the more essentialinsofar as it was necessaryto respond to intense demographic pressure and a no less intense requirement for qualified labor. This combinationof factorshas led Algeria to reorganizethe education structure (establishmentof nine years of basic education,and creationof "%ocational schools"), to revise the structure for programs favoring scientific or technologicaldisciDlines, and improving the training of educators. The 1985-1989Plan thereforehas been found to be capableof being formulatedin a renewed context and of being capable of aiming for rational technicaland professional training objectives, with reduced administrativecosts. It providesa total of 45 billionDA in authorizedinvestments which will require an appreciable increase in personnel in order to become an effective investment. Nearly 50 percent of the investmentsare concentratedon the Ministryof Education,22 percenton the Ministryof Higher Education and 28 percenton the Ministryof ProfessionalTraining. However,it is likelythat the programshould be rescheduled. - vii -
17. The chapter devoted to the housing and urban development sector emphasizesthat it is one of those in which pressureby social demand is particularlykeen and where such demand (based on extremely intense needs revealing rates of occupation for lodging that are extremely high and critical) is poorly met by the supply notwithstandingthe efforts of the authorities. The principalproblems in the sector are analyzed in terms of urban planning (whichentails difficult decisions in regard to allocationof propertiesamong farm users and building sites), in terms of allocating buildingsites among the differenttypes of promoters on the basis of the economiceffectiveness of the constructionfirms, as well, perhapsas in terms of financing. In other words, besides easing of physical constraints (availabilityof properties, allocation of properties, availability of constructionmaterials) there are economic handicaps (cost of construction, organizationof the sector)which should absolutelybe overcome. Hence it is hardly likely that the sector can reach the 86.5 billion DA investmentlevel stipulatedin the secondPlan.
18. The supply of drinkingwater and drainage systems of waste water are the subject of the last chapter of the report. This chapter evaluates the annual resources (16.8 billion cubic meters), notes their operational difficulties(water quality, infiltrations)and embarks on an estimationof annual requirements (approximately3.4 billion cubic meters in 1981). Rigorous planning in the sector is called for in order to economize resources. Such planning which is carried out under the auspices of the Ministryof Water Works, Environmentand Forests (MHEF),is made operational through the existenceand activity of autonomousregional enterpriseswhose purposeis to supply the populationwith drinkingwater. The World Bank has actively contributedsupport to such an organizationof the sector. The currentlevel of service in drinkingwater in urban centers has unfortunately regressednotwithstanding enormous efforts, since the populationhas grown more quickly than the level of service itself. The treatment network also requires sizable efforts to be authorized in order to avoid greater pollution. Total investment effort on behalf of the sector which has considerablyaccelerated (41 billion for the 1985-1989plan as comparedwith 23 billionfor the 1980-1989plan) is focusedon the urban zones of Algiers, Oran and Constantine. In view of the top priorityof this program,it should not undergocuts as a result of current financialconstraints. However, it remains weak in its "treatment"aspect which is neverthelesscrucial for the population'shealth status.
3. Recommendations
19. The analyses made in the report lead to two broad series of recommendations:
19.1 In the macroeconomicorder, the reportrecommends particularly:
a) mitigating the administrative burdens on macroeconomic planning and managing proceduresand replacingthem with proceduresthat give greaterplace to economiccomputation and financialincentives.
b) perseveringly pursue the program for economic reequilibrium undertakenunder the urgencyof the 1986 financialsituation. - viii -
c) blend into this program (a necessarybut not sufficientcondition for returningto a path of satisfactorygrowth) a reconsideration of a price system. From this point of view:
(i) prices of goods and services should faithfully reflect production conditionsas well as tensions between supply and demand. The "truth in pricing" policy that has already begun should be based on more thorough analysis and lead to a continuedreduction in the subsidysystem.
(ii) interestrates also should better representalternative use costs of capital and be set at positive real levels. It is thereforeappropriate to eliminatethe the misgiving idea that domesticmonetary and financialgoods are to a wide extent "free" since,like any other good, they are scarceresources.
(iii) a radical rethinkingof the relativeprice of the Algerian currency vis-a-vis other foreign currencies (exchange rates) also seems to be called for, both to take into account the new world situationas well as to restore economic calculationson more wholesome rationalbases (note here the weight played by importsin the Algerianeconomic process).
This reconsiderationof the price system, is in the spirit of the report, the key to a substantialimprovement in economicefficiency which the countryso greatlyrequires.
19.2 Moreover, these recommendationshave their extensionsand equivalents in the sectoraland even microeconomicorder.
a) In all the production sectors (industry, agriculture, petrochemicals,construction, transportation,domestic energy) making companiesresponsible, eliminating subsidies and/or nonpaid exposures,and the requirementto free up net autofinancingmargins in a decentralizedfashion, militate in favor of settingup a price system appropriatefor assuring rationalallocation of resources. To establishsuch prices, the institutionand developmentof proper analyticalaccountings are prerequisiteswithout which a knowledge of costs will remainapproximate.
b) In the same sectors,the report recommendsthat before undertaking new expansion investments,the existing serious difficultiesbe first identifiedand then resolved. Whether such difficultiesare of a technologicalnature (ammonia production units, phosphate plants, cement plants), economic (textiles,lumber) or financial (assortmentof firms showingexcessive bank exposures or incapable of paying back their debts), it is necessary to have a restored base before accumulating new equipment, otherwise national integrationcould well show local gaps that could jeopardizethe operationof the whole. - ix -
c) In the industrial sector. decisions connected with economic organizationof the sector (opening to PNI [small and medium industries] on certain segINats of light industry, upstreamdownstreamimprovement of the electronicsconnection) or technicalorganization (load plans, availabilityof spare parts, maintenancein heavy industry)should be adopted.
d) Analysis of the training and education sector leads to an estimationthat it is desirablenot to slow down:
(i) the program for trainingprofessional education instructors; (ii) the professional training centers program; (iii) the secondary teachers trainingprogram (iv) strengtheningthe IPN and Ministry of Education regional personnel and upper managementtraining centers.
e) Lastly, for hydrocarbons,a sector which remains crucial for the future,the reportemphasizes:
- the need to maintaina higherrate of exploration - the requirementfor optimizinggas production - the importanceof restoringthe old pipelines network - the analysis to be made of performancesof companieswhich provide technologicalservices or engineeringservices in the sector.
728s@p3-11 44
Iz. -Ilz l 4tll -31. PART I
MACROECONOMICPLANNING ., \
I CHAPTER I - ALGERIANPLANNING: A RETROSPECTIVE
A. Preliminay Considerationsregard ratheen EconomicSystem and Plannin5 Procedures
1.01 The Algerian economic system is not easily understood without systematically referring to its national and ideological sources. These are frequently mentioned in the basic texts defining the fundamental choices of society in Algeria'I, and in particular in the "National Charter," the most recent version of which dates from January 1986. This charter establishes an unambiguous ideological (and historical) link between the adoption of the values of Islam, the selection of Socialism as a "system for achieving development in order to ensure an equitable distribution of wealth" and the choice of planning as "an instrument for directing and democratizing the economy and as a means for equitable distribution of the fruits and costs of development."
1.02 While the Algerian economic system declares itself to be socialist, this is understood as being a national (or even nationalist) reality which is not derived from any "materialist metaphysics" nor based on "any concept foreign to the intellectual, social and spiritual history of the Algerian people." Algerian socialism seeks to achieve three fundamental objectives which shape both the structural profile of the Algerian economy and the style of current economic behavior. These three objectives are:
(a) Consolidation of national independence. Beyond the creation of a "sovereign State" and the delimitation of "a territory freed from all foreign occupation," this objective aims at the elimination or at least minimization of any foreign economic interests likely to revive behaviors of a "colonialist" type. However, the scope of this objective is very wide-ranging within the structures of the economic system, since it also extends to:
(i) financial independence, from which are derived the principles of: limitation of the contributions of external technologies to projects or sub-projects for which national technologies are defective, maximum incorporation of available national production techniques in preference to competing and/or competitive foreign technologies, maximization of transfers of foreign technology and import substitution. Financial independence also implies the absolute control of external indebtedness.
1/ These texts are: The Proclamation of November 1, the Charter of the Soummam, the Tripoli Program, the Charter of Algiers, the Proclamation of June 19, 1965, the National Charter of 1976, the Constitution of 1976 and the National Charter of 1986. - 2 -
(ii) State monopolyof foreigntrade, which has resulted in the grant of a monopoly of foreign procurement to certain public enterprises,the setting up of a system of General Import Authorizations (GIAs), the instituting of a General Import Program (GIP), and the assignment of essential decisions regarding hydro-carbonexports to a central sectoral authority (the Ministryof Energy).
It should be noted here that the dividing line between "national independence"and self-sufficiencyis a vague one and that Algerian economicpolicy decisionsfrequently cross it without being aware of the consequences.
(b) Socialization of the means of production."' This results essentially in the formation of a public sector of the economy covering agricultural,mining, industrial,banking and trust, and transportationactivities. The public sector accounts for some 70% of the total grossvalue added of the productivesectors.
(c) "Promotionof man and the realizationof the full potentialof his personal development.' These philosophical objectives are neverthelessgiven a concrete and economicallyintelligible content inasmuchas labor is consideredas the "fundamentalproduction and accumulationfactor" while the principlesof equality of the sexes and of remunerationfor labor, taking into account the talents and merits of individuals,are affirmed. The aim is to provide citizens with a level of consumptionthat is "consistentwith a high standard of living",even for thosewho are not in a positionto work.
1.03 Planning,finally, is consistentwith the logicof socialism. It is, first of all, viewed less as a "forecastingand programmingtechnique" and more as an instrumentfor achievingthe goals of socialism. This means that it is primarily political in nature (it is "the expression of the implementationof a policy (by the DirectionPolitique]"). In this context, it neverthelessseeks to achieve,by specificmeans, accumulationand growth objectives;it organizes,in principle,the optimum utilizationof available resources,requires an efficientmanagement of the national economy and must impose positiveor negativesanctions. It can only be mandatoryin natureand must logically be applicable to all the processes of national economic activity, thus requiring a significant level of social and collective discipline. It should be noted at this juncture that Algeria's leaders are not far from obtaining this disciplirefrom their fellowcitizens; the fact is that the differentwatchwords ("self-reliance," the call for "austerity"and the forgoing of present consumptionto preserve the country's future and national independence) generally produce a response that enables the authoritiesto solve difficultproblems of macro-economicadjustment without causingan excessivesocial or politicalcrisis.
1/ Also envisaged as a means for "doing away with the exploitation of man by man." - 3 -
1.04 Even when placed in an ideologicalframework, planning is still no less an instrumentfor managing the economy. In this respect,the Charter of 1986 emphasizes that: (i) "planning also entails the use of scientific approachesand techniques,in accordancewith the developmentof planning techniques and management systems in the world"; (ii) planning must continuallyensure the "observanceby economicenterprises of the imperatives of economic growth, cost reduction,quality improvementand adjustmentof productionto needs"; and (iii)planning shouldnot be limited to the listing of projects and the cataloguingof investments,but should also seek to develop appropriateinstruments for selecting new projects and following up projectimplementation.
1.05 First of all, Algerian planning has a theoretical background consistingof a theoryof economicdevelopment based on a twofoldfoundation:
(a) The "Feldman-Mahalanobis"model- which, on the basis of very high investment rates in the sectors producing capital goods (heavy industry, for simplification),is presumed to generate an initial phase of slow growth with considerable sacrifices as regards consumption; the foundationsof industryhaving been laid, a second phase of faster growth will lead to a quantitativeand qualitative improvement in the supply of consumer goods thanks to the establishmentof light industry which, from then on, will absorb a growingproportion of investment;
(b) the theory of "industrializingindustries" according to which the industries in which investment should be concentrated at the beginningof the developmentprocess are those which will generate the maximum backward and forward linkage ef'ects in the industrial structure- specificallydescribed by an inpu.Jsitputmatrix. Thus a developingeconomy, characterizedinitially by a relativelyempty input-outputmatrix, will fill it out at a faster pace by making a careful and appropriate selection of industries for investment. These two initialconsiderations also explain the initialvoluntarist nature of Algerian planning combined with the persistenceof a high accumulationrate. They also explain the care taken by Algerian planners to construct an input-outputmatrix which subsequently becomesa centraltechnical tool of the Plan.
1/ This is in fact an implicit synthesis of two contributions: that of the Russian economist Feldman,which is a modernizedversion of the Marxist model for the expanded reproductionof capital; it makes a central distinctionbetween productionof capital goods and that of consumer goods, from which results the institutionalseparation of heavy and light industry activities. The second contributionis that of the Indian economistMahalanobis who, using similarbases, deduces differentpaths of long-termeconomic expansion depending on sector investmentrates. 2/ The theoreticalanalysis of these effectshave been made by A.0. Hirschman who has based the process of unbalancedgrowth on the structure of an input/outputmatrix. - 4 -
1.06 From a technical point of view, macroeconomicplanning is in fact based on a nationalaccounts model constructedon an input/outputmatrix.
(a) More ?recisely, Algerian macroeconomic planning is based on a static- open Leontiefmodel.&/
(b) The evaluationof the economic future then consistsessentially in a projection of supply (the production capacity of the production apparatus)over a five-yearhorizon, taking into account:
(i) potential production capacities introduced by the new investmentsmade in the productivesectors; (ii) the inputs (of all types) requiredthat will have to be (can be) importedunder the PGI (GeneralImport Program).
In such an analyticalcontext, it must be clear that final consumer demand is not met unless there is something left with which to satisfy it after industryhas been providedwith currentand capital inputs,and furthermorethat no exporting(other than of hydrocarbons) is done unless an exportablesurplus remains after all (intermediate or final) domesticdemands have been satisfied. This approachwhich may be labelled as "residual"partially enlightens the fact that non-hydrocarbonexports have not been adequatelypromoted in the past.
1.07 At the same time, two sets of plans are developedin parallelwith the overallapproach over a five-yearhorizon:
(a) On the one hand, enterprise plans comprising the setting of production targets connected with investment projects. Normally, these plans must: (i) observe the constraints laid down by the supervisoryministry; (ii) be formulatedin the enterprisefollowing a 'pre-ranking"of investmentprojects; (iii) be referredback to the supervisoryministry which, after discussion,will make the necessary adjustments;(iv) then be submittedto the Ministry of Planning to verify that the sector plans are consistentwith the macroeconomic plan and in order to prepare the technicalworking documents to be transmittedto the interministerialgroups responsiblefor making the final adjustments;the final decisionsby the politicalauthorities will not be taken until all of these phases have been completed. This (rather complex) procedure worked relatively well until the reorganizationof enterprises. Since then, with the multiplication of enterprises,the enterpriseplans are no longer being submittedto the Ministry of Planning.3 A/ serious coordinationproblem has thereforearisen from the point of view of macroeconomicmanagement.
1/ This precisionis quite importantfrom an operationalstandpoint. 2/ It should be borne in mind that in this context there is a one/one "branch/product"correspondence. 3/ The qualitativevalue of these plans can moreover be questioned,knowing the generallack of cost accountingsystems within the enterprises. - 5 -
(b) On the other hand, an Annual Plan1 ' which up till now has focused on determiningthe amount and/or desirabilityof capital projectsas a functionprimarily of the oil market. The core of the Annual Plan can easily be located in the Budget, but the Annual Plan as a whole extendsconsiderably beyond the limits of the budget process. The operationaland mandatorynature of the Annual Plan will undoubtedly acquire further significancein the years ahead since: (i) the second Five-YearPlan (1985-89)intends to make it a "real instrument for evaluationof the performanceof the economicand social system" and to give it "a definite operationaland binding character;and (ii) as of 1987, the Annual Plan will include the introductionof an "annual financialplan" componentdesigned to introducethe finoncial constraints2'into the programmingof investments.
1.08 Once the macroeconomicplan has been drawn up and the projects enumerated, coordinatedand rendered compatible,both among themselvesand with the relevantpolitical criteria, and after the consistencyof the General Report on the Plan with the resolutionsof the FLN party has been verifiedand the NationalPeople's Assembly has debated and adopted the macroeconomicplan, it then takes the form of a law and is promulgatedas such. Clearly, this procedure,designed to ensure the political soundness of the plan, is too inflexible since it causes the Plan to become a rigid and irreversible document.
1.09 It must be borne in mind that the AlgerianPlan is a key instrument in the macroeconomicstrategy and management of the country, and in the formulationof its policy. It is accordingly necessary to evaluate its effectivenessas an instrument. As a set of forecastingtechniques, the Algerianplan has certain weaknesses;it appears ill suited to the controlof the economyand remainsscientifically perfectible.3'
(a) Its major weakness (and also sourceof its unsuitability)lies in the fact that it is based on a static model that is incapable of explaining how the growth path of the economy is achieved, and of explainingat the same time both how the targetsset can be achieved and how (throughappropriate economic policies) it will be possible to get back to a growth path that will minimize the divergencefrom the course initiallyset.
(b) Its need for scientific improvement derives from an essential considerationto which certainminor commentscan be attached. This is primarily the unsophisticatedand segmented nature of the forecastingmodel used. The sector projectionsare distilledinto a synthesis "by discussion"and not by means of reconciliationand analysisof their consistencyin the contextof an appropriateformal
1/ First institutedduring the 1970-73Five-Year Plan. 2/ Constraintsthat have been totallylacking up till now. On the contrary, the banks have been under the obligation to finance any decision incorporatedinto the Plan. 3/ It is significantthat both the Charter of 1986 and the GeneralReport on the Second Five-YearPlan focus on the need for a scientificapproach in the elaborationof the Plan. - 6 -
model. A subsidiarypoint is that for years the Algerian planners concentrated on "filling up" the input-output matrix without consideraion of the cost-effectivenessof the operation, thereby ultimately obscuring a crucial aspect of economic analysis: the determiningof opportunitycosts so as to avoid the waste of scarce resources,particularly labor expended in constructionand in the daily implementationof new equipment. Finally, there is also the fact that there is no true calculation of the inter-temporal allocation of resources: on the one hand, it appears that the politicaloption in favor of a high investmentrate (40% of GDP) will not be reconsideredby political authoritiesbefore 1988, on the other hand, investmentcalculations never systematicallyincorporate discount rates - the real interest rates being moreover negative - and are almost always viewed in terms of rent for money and very rarelyas an instrumentof inter-temporaleconomic calculation.
1.10 As far as the actual impact of the Plan on economic outcome is concerned,it seems that it varies in intensityaccording to the observer's viewpoint. In order of decreasingapparent impact, it can be noted that:
- Ceteris paribus, (and specifically, in a situation of balanced externalaccounts)the Plan has a decisive impacton the distribution of domestic resources between consumptionand investment. As has already been mentioned,this is primarilya political choice, which is all the more easily made that, in principle,the planner State possesses the principalmeans of decision-making,i.e. it finances the investments. But there are also physical and financial constraintswhich, when not sufficientlytaken into consideration, create a gap between the target set and actual achievement. Therefore, the actual investment rate observed during the first Five-Lear Plan, although quite high (38.3%) according to the qualitativeoption that had initiallybeen made, has remained well below the targetedobjective (48.6%).
- The impact of the Plan on external trade has been somewhat less strong. Concerningexports, it is the internationalequilibrium between supply and demand for hydrocarbonswhich operates the feed-back controls; as for imports, these feed-backs are not completely controlled by planning devices: they are closely subjectedto the incompressiblerequirements in imported inputs, on the one hand, and to the exportssituation, on the other.
- Finally, the Plan's role in efficientlyregulating production is questionable(on a short-termbasis): as will often be mentionedin the following chapters of this report,1' the Plan seems to be relativelyunable to make up for the delays which occur in growth (in normal conditions); these are mainly attributableto the actual performanceof the productiveapparatus. In turn, the latter,although subjectedto bureaucraticconstraints, is not, at this point of time, controlledby an operationalsystem of incentives/penalizationswhich would enable to correctthe gaps in growthpath of totalvalue-added.
1/ See also Tables I.1 and II.3. - 7 -
B. The 1980-84 Plan: Performances, Strengths and Weaknesses 1. The Initial Plan
1.11 The 1980-84 Plan continued the majority of the general policy requirementsof the socialistdevelopment of the economy,while also placing emphasis on pursuit of the strengtheningof intersectoralrelations in parallel with national economic integration,elimination of the sources of imbalanceand of the disequilibriathat had occured earlier (overdevelopment of sectors having special relations with foreign activities,formation Lf economic "enclaves," bureaucratizationof the economy, development of inflationand shortages,constitution of pure economic rents), establishment of a correctly balanced and unified education system, mobilization of productioncapacities and achievementof high levelsof economicefficiency.
1.12 The global performancesexpected of the economy were set quite high (Table I.1, column 8). A target GDP growth rate of 7.1% p.a. (in constant 1979 values)was definedwith final consumptiongrowing slightlyfaster (+8.9b p.a.) than GFCF (+7.3% p.a.). This differentialin growthrates was viewed as necessaryon account of the high averageannual rate of population increase, and the need to ease social tensionsarising from the p)pulation'sgrowing impatienceto share in the benefits of Algeria's oil and gas earnings. The Plan also provided for modest but positive expansion of exports (+4.92 in constant1979 DA) combinedwith a restructuringof hydrocarbonexports (higher gas and refined product exports, less crude oil), while non-hydrocarbon exports were not felt to need closerattention. Importswere to grow faster than exports (+6% p.a.) in view of the need to satisfya final consumerdemand (especiallyfor food products) that could not be met by domestic production and particularlyin light of the necessityof providingindustry with current inputs and capital goods required for the productionactivities featured in the Plan. It will be noted here that the programmedimbalance between the respectivegrowth rates of exports and importsapplied to a base year (1979) that was itself out of balance (DA 6.3 billion foreigntrade deficit);as a result,the deficit (in constant 1979 DA) programmedfor 1984 necessarilyhad to grow at a high annual rate (12.2b p.a.) and engender sizable external financing needs. The opposite hypothesis adopted in the Plan ("moderate recourse to capital market") then presumed that gas prices would rise considerablyand that this rise would be sustained. This assumptionproved to be only half justified. Achievementof a high level of productionwas also dependenton the sectoralperformances of the economy: a large proportionof the growth was to be derived from high-poweredperformance on the part of industry(+12.52 p.a. on average),an expansionof services (+L0.5%p.a.) and sustained developmentof the activitiesof the constructionand public works sector (+10.5b p.a.); while the real growth of the agriculture and hydrocarbonssectors would remain well below the average growth rate of GDP (4S and 0.4% respectively)."'
1/ The very low growth rate expected for the value added of the hydrocarbonssector is the result of the last revision of the Plan aimed at intensifyingconservation of a nonrenewableresource. - 8 -
1.13 Viewed overall, the actual figures remained quite far from the forecasts: in global terms, GDP grew by no more than 4.302 p.a. on average (Table 1.1, column 7) with a progressiveacceleration of growth between the start of the Plan and its conclusion. The growth trajectoryof GDP is the complexoutcome of that of consumption,which was continuallycurbed after two years of reordering(1980 and 1981) and that of productiveinvestment (GFCF), which had to be speededup appreciably(from -2.552 in 1980 to +3.83%) in the closing years of the Plan. Insteadof an expectedexpansion of exports,there was a decline,and as a result of which, imports had to be compressedwell below the target levelsafter the two years of expansion(1981 and 1982). It should be noted here that in 1980-81,the differencein growth rates between exports and imports was such (about 16 percentage points) that it was inevitablethat Algeriawould have to cover the deficitby fresh recourse to externalcapital; disbursed borrowings in fact amountedto nearlyUS$16 billion in 1981. In sectoral terms, the processing industries posted a growth shortfall of 4 points per year on average as of the end of the Plan; the growthof serviceswas also disappointingand somewhaterratic, at 4.50% p.a. on averageas of the end of the period,which was far from the expected10.5X. Notwithstandingthe modest forecasts,hydrocarbon production dropped in real value by 2.36X p.a. The dynamicsectors were the publicworks (+8.45Zp.a. on average for the period as a whole, with a distinctacceleration in the final years of the Plan) and agriculturewhich managed to maintainits growthfairly well despitetwo mediocreyears in 1982 and 1983.
2.The investment prograu(Table I.2)
1.14 As alreadynoted, the investmentrate of the first five-yearPlan was very ambitious: 48.61 of GDP. Moreover, the high volume of expenditure authorizations(DA 400.6 billion)would appear to indicate that an even higher investmentrate (56.71) could be achieved. Primarily because the actual durationof implementationof the projectsin questioncould not coincidewith the five calendaryears of the Plan, the first Five-YearPlan inheritedan appreciablevolume of projectsstill outstandingfrom previousperiods (nearly DA 200 billion) and bequeathedto the next Plan an amount of substantial investmentsyet to be ca.ried out (some DA 160 billion). In hindsight,the absorptioncapacity of the sectors seems to have been overestimated,and the program appears to have been distinctlyoverdimensioned. From the sectoral viewpoint,the distributionof the projects(in expenditureauthorizations) is seen to be 581 for the direct production sectors (industry,agriculture, transport,construction), 251 for the social sectors of housing (151) and training (101), 9.5% for economic infrastructureand about 7.51 for social infrastructureand community facilities. This distributionmirrors fairly preciselythe policychoices of the Plan,which stressedmoreover the need for "fullutilization of the existingpotential."
1.15 The Plan's achievements lagged markedly behind the program: the averageinvestment rate (GFCF/GDP)was 38.3%,rising from 371 in 1980 to 39.61 in 1983 then droppingback to 381 in 1984. Actual investmentexpenditures in the period were 345 billion current DA,-' hence well below the real or even the nominal targets. The 1980-84 Plan therefore left an unimplemented carryoverof about 56 billion current DA, to be added to the 160 billion of
1/ DA 270 billionat 1979 prices. Table I.1:
FIRST FIVE YEAR PLAN (1980-84), MACROECOOI)#C PRWJECTONtSANO PERFORWANCE
(Billions of Algerian dinars and percentages)
Pie., Estimates Actual Real Average Annual Growth Rates Planned Lead o+)Or Aggregates for Aggregates for from 1979 to indicated Year f% D.a.j Average Growth Lag t-) base Year: 1979 base Year 1979 1980 1981 1982 1983 1984 Rate (%I 1 2 3 4 S 6 7 8 9
uwoss Domestic Production 111.6 112.9 1.93 3.48 3.61 4.15 4.30 7.1 -2.80 Government Services n.a. 15.3 13.32 9#:16 7.58 6.80 5.92 n.a. n.a. Gross Domest4c Product n.a. 128.2 3.79 4.17 4.10 4.47 4.50 n.a. n.a. Final Consumption (1) 61.0 75.9 (60.5) 11.96 (11.1) 12.88 (13.2) 9.53 (9.3) 7.43 (7.1) 7.34 (7.2) 8.9 -1.56 (-1.7) o.FCF 55.5 50.4 -2.55 1.37 4.09 4.66 3.83 7.3 -3.47 Changes in Stocks 1.4 4.1 39.88 11.20 -3.29 3.71 1.70 n.e. n.e. Exports 38.0 39.9 -12.83 -9.S6 -6.53 -4.20 -2.78 4.9 -7.68 Imports 44.3 42.1 3.48 7.34 5.18 3.65 3.27 6.0 -2.73
II. Value Added by Sector
Agriculture 7.5 10.8 6.96 12.34 5.00 2.31 3.59 4.0 -0.41 Nydrocarbons 36.0 33.5 -8.20 -8.10 -5.60 -2.84 -2.36 0.4 -2.76 Processing Industries 14.0 12.2 4.20 7.23 7.33 7.75 8.33 12.3 -3.97 Other Industries 1.8 1.4 30.36 19.00 18.00 13.88 12.50 12.9 -0.40 Construction/Public works and Oil Works 15.2 18.1 4.75 6.20 8.58 7.76 8.45 9.3 -0.85 Services 27.5 28.3 4.48 3.93 4.66 3.99 4.50 10.5 -6.00 Iotal Value Added 102.0 104.3 1.41.l 2.4 3.10 Li -4.S0 Import Duties and Taxes 9.5 8.6 13.S1 20.90 11.99 13.60 12.10 8.1 +4.00
Gross Domestic Production 111.6 112.9 112 293.4 -2.80
(Exponential) growth rates calculated as annual averages by reference to the base year of the 1979 Plan. using the formula: 9t - [(XT / Xo)IhT - I in which ST = average annual growth rate up to year t XT = value (in constant 1979 OA) for year t Xo = 1979 value n a not available (these aggregates are not calculated in the context of Algeria's national accounts) el not established (I) figures between brackets are consistent with the concept of final consumption in the Algerian system of national accounts (SCEA)
Auutc : Data provided by the Algerian authorities (Ministry of Planning), in June 1986 and May 1987. *i,bS/pi (5,3) - 10 -
1979 DA already scheduled for implementationafter 1984. Altogether,the 1980-84 Plan left its successor a portfolio of some DA 220 billion of unimplementedprojects."' The reasons for this are in fact quite simple: firstly, in constant 1979 dinars, exports have fallen rather than risen, entailing a downward revision in terms of growth of the amount of imports, resulting in an appreciablecutting back of capital goods imports with a consequentimpact on project implementation;secondly, the absorptioncapacity of the sectorswas very probably too low. When plant and equipmentalready installed is at times underused or misused, the addition of new projects further complicates the situation. The already existing shortages of qualifiedpersonnel for bringing the installationsin place on stream could only be worsened by the completionof new capacity, so that the managers cannotadequately supervise the relatedprojects.
1.16 The actual achievementsby sector as of the end of the Plan reflecta rebalancingof the initialpriorities: the share of investmentsin production activities becomes some 52.52 (down 5.5 percentage points; primarily the non-hydrocarbonindustries and, to a lesser extent, transportation);the !'social"sectors are down about 1 percentage point (24.5b with some very marked shifts within the category,the proportion accounted for by housing being up by nearly 1 point whereas that of educationand trainingshrinks by 1-1/2 points);the effort put into economic infrastructureis proportionally greater (11.5%,i.e. up 2 points)while that devoted to social infrastructure and community facilities is down by about 3 points. Altogether, the difference between plans and actual accomplishmentsis still sizable: calculatedin constant terms (at 1979 prices), tie DA 345 billion in actual investments(86% of the expenditureauthorizat4 as in current terms) amounts to DA 270 billion in 1979 prices, which me .a that in actual fact the investment program was only two thirds implemented. An appreciable restructuringof the program still leaves the impressionthat the decisions made have not always directlyaddressed the real questions: the new emphasis placed on economic infrastructuredemonstrates that this infrastructureis apparentlyviewed as a pre-requisitefor other investments. The continuation of a high rate of investment in housing underscores the existence of an unavoidableproblem linked to demographicexpansion and urbanizationwhich is beyond the direct control of central planners-. The reduction of the relativeweight of accumulationin the non-hydrocarbonindustrial sector also reflects the existenceof structuralconstraints that place a limit on the abilityof centralplanning to achieveambitious targets.
3. Algerian Public Finances' between 1980 and 1984 (Table 1.3)
1.17 The Algerian Public Finances are both the vector of essential economicpolicy decisions(it forms the "heart" of the annual Plan) and the
1/ In 1979 DA this amounts to over DA 290 billion, i.e. half of the value of the programscovered by the Plan. 2/ Urgency and social pressure rather than the planners' economic analysis explain the increase in the relative weight of these expenditures. Reference should also be made to the part of this report devoted to housing. 3/ With this terminologywe refer to the set of Treasury operations which cover not only the budget stricto sensu but also lending and borrowing activitieswhich exceed the budgetaryframework. Table I 2:
GENERALINVESTMENT PROGRAM 1980-84 AND ITS EXECUTION
(Btilions of constant 1979 Algerian dinars)
PROGRAMS Billions of DA Unexecuted iExpenditure Actual As X of As X of targets Brought forward As X of carried ..Autharization Expenditures total (of 1980-84 from 1980-84 Total to be total over from New 1980-84 expenditures authorizations) Plan carried forward Programs Drevious Plan Pronrans Total 1,98-84 Beyond Constant DA (X) Col.6fCol.4 Col.4-6 CnLL±. CL2.9 Col.10QC01.3 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) INDUSTRY 22.5& 132.2 211.7 JiS45 ALI 97L214 35.96, 6L2. 57286 114.486 IL4 of which: Hydrocarbons 28.4 49.3 77.7 63.0 14.7 (43.206) 16.00 68.6 19.794 AGRICULTURE i. 41. 59 47.1 12.3 29247 10.82 62.6 17.853 3QI51 50. Forestry 0.7 3.3 4.0 3.2 0.8 2.673 1.00 81.3 S27 * Farming 6.0 17.9 23.9 20.0 3.9 8.762 3.23 43.8 11.238 * Water Resources 10.9 19.1 30.0 23.0 7.0 17.628 6.52 76.6 5.372 * Fishing 0.2 1.3 1.5 0.9 0.6 184 0.07 20.4 716 TRANSPORTATION LA 13.4 Ila 13 0 6.357 23 i2 6643 9 43
INFRASTRUCTURE i. 3i6. 51 7 1 1 11 30 8 5 7f382 2S.S82 i5. - * Nonrail Comuinicatns 6.8 12.S 19.3 12.5 6.8 15.546 5.75 124.4 -3.046 Railway Infrastructure 1.8 7.1 8.9 5.0 3.9 3.131 1.15 62.6 1.869 Telecommunications 1.8 6.2 8.0 6.0 2.0 3.510 1.30 58.5 2.490 Storage/Distribution 8.8 9.0 17.8 13.0 4.8 7.855 2.90 60.4 5.145 * Industrial Zones 0.7 1.4 2.1 1.4 0.7 476 0.20 34.0 924 HQUUdNG iA0 2ZI5 MA "A 42i39Sii6i L ZL2 l7i60S SosL1S lii EQUCATIODMTRAINING I26l LA ILl iLZ ZL.i iLili L.Z4 ILi l8l566 42.066 64
INASTRUCTU"DK 43 10 1^347?348 7, 2745189S92 13.6S2 6* of which: Health 3.6 6.2 9.8 7.0 2.8 4.020 1.49 57.4 2.980 COMMUNITYFACILITIES 2.1 l0.9 31il Li L 7 4Z274 1Ifl i4L S.326 9L02l CONSTRUCTIO ENTERPRISES LA 21. 2i5 20I la 11.356 4.20 KA. 8644 136 MA MISCELLANEOUS 19.930 6.65 n.a. n.a.
T 0 T A L . ii ML6 AD"l 2ZP &L8 IM U_L
61368 p 2 (5.3) - 12 -
reflectionof the stressesin the current economicsituation. In other words, they are intended to form the financial core of the Plan, and therefore reflectsthe conflictsbetween the policy goals and the resourceconstraints.
1.18 CurrentOperations
(a) Up to 1979, the resources derived from oil and gas taxation were practicallyequivalent to those obtainedfrom other taxes, and their growth (at least since 1975) stayed relatively symmetrical. Followingthe raisingof oil prices in 1979, oil and gas tax revenues soared to account for 60X of current budget revenues. During the period coveredby the first Plan this situationlasted for two years (1980and 1981),after which hydrocarbonrevenues began to falter and decline: the combined effect of the reduction in world demand for oil productsand the successiveprice cuts in a context of surplus supplycaused the relevanttax revenuesto drop to PA 37.7 billion in 1983. The subsequent upward movement in condensates and the differentforms of gas then brought about an upturn in tax revenues but not, however,a return to the record level of 1981 (aroundDA 51 billion).
(b) Receipts from ordinaryand other taxes returnedto first place as a source of budget receiptsafter 1982, when oil and gas tax revenues hit a low. During the first Plan, the formerhad grown at some 23.5% p.a. as a result of a sustainedeffort by the Governmentto improve the efficiencyof collection.
(c) The very marked rise in currentexpenditures (17.4X p.a. between 1980 and 1984 with pronounced fluctuationsduring the period) was the outcome of governmentdecisions regarding the meeting of essential social needs (health and education) and social justice. The applicationof the Workers' Charter (StatutGen6ral du Travailleur) has also brought about a significant increase in the wages and salariespaid out by publicauthorities.
(d) The currentbudget balance has accordinglyreflected the effects of all the precedingprocesses. It peaked at a DA 50.6-billionsurplus in 1981, droppedback to DA 36 billion in 1982 and did not return to its previousrecord level till 1984.
1.19 Capitaloperations
(a) These grew by 12.1% p.a. between 1980 and 1984 in nominal terms, which correspondsto about 5.9% p.a. in real terms (after deflation by the GFCF deflator)and is 1.4 points below the global growth estimatedfor GFCF. Within this generalfigure, considerable changes have taken place in the structureof the State's interventions:from 1980 to 1984 direct investments(economic, social and administrative infrastructure)were increased by a factor of 2.5 while indirect interventions(in the form of loans by the Treasury to financial intermediariesspecializing in particularsectors: CNEP for housing, - 13 -
BAD for industry,BADR for agriculture,PTT for telecommunications) remainedstatic around an average of DA 27 billion per year. At the same time, the State never ceased puttingmoney into the productive sector to clear the accounts of units, that were in debt and incapableof repayingtheir borrowings: DA 8.4 billion was injected in this way between 1980 and 1982; as of 1983, moreover,the program for the general restructuringof enterprises,which included a considerabledebt settlementcomponent for public production units, entailedthe injectionof a furtherDA 13 billion. These resultsare evidenceof deficienciesin the financingprocess of productionunits that borrowed from the State through the specialized financial intermediaries.Thus, if only loans granted between 1972 and 1977 that would normally have fallen due around 19801' are taken into consideration,and assuming an average term of 15 years2, while ignoringinterest (very low), the State would have recoveredthrough repayments,as of 1980, some DA 3.5 billion a year on average. Not only were these sums not recovered(repayments averaged around DA 700 millionper year between 1980 and 1983), but the State even had to reinject balancing subsidiesamounting to DA 2.8 billion per year. The logic of "loans" can legitimatelybe questionedif no repayment follows. The Chapter on the industrial sector also underscores the permanentnature of this question and che urgency of resolvingit. It is noted that the questionof publicenterprise deficits cannot be isolatedfrom that of the price policy for inputs and outputs of these enterprises.
(b) As the financingresources have not been replenished,and since there are no other sources of funds, the capital budget deficit has risen by 112 per year, mounting from -DA 48.4 billion in 1980 to -DA 74 billionin 1984.
1.20 The FinancialEquilibrium of the Treasury
(a) With the exception of 1981 when a record level of oil and gas tax revenues made it possible to limit the shortfall between budget savings and budget investmentsto DA 2.6 billion, Algerian public finances have been characterizedby a marked negative imbalance between savings and investment. In cumulative figures, the total deficit from 1980 to 1984 amounted to almost DA 100 billion, entailingthe mobilizationof resources that ought normally to have been availablefor use outsideof the Treasury.
(b) Half of these needs (a cumulativeDA 50 billion over five years) was met by resources of the nature of savings (issuanceof development bonds, recovery of financial surpluses of public institutions). About DA 20 billion was obtained from Treasury resources proper. DA 30 billion, finally,was financedby means of monetary resources, chiefly through recourse to advances from the Central Bank. The modalitiesof money creationfollowing Treasury deficits have varied,
1/ These loans are generally granted with grace periods of four years on average. 2/ The termsof the 'Loansare in fact between five and twentyyears. - 14 -
Tableau I.3:
SUMMARY TABLE OF ALGERIAN PUBLIC FINANCES DURING THE FIRST FIVE YEAR PLAN
(Millions of current Algerian dinars)
1980 1981 1982 1983 1984
I. CURRENT OPERATIONS A. Current Revenues 62,116 82,814 77.572 87.026 102.899 a) Ordinary Taxation 22,030 28,176 31.316 40,799 46.968 b) Oil Taxation 37.658 50,954 41,458 37,711 43.841 c) Other Revenues 2,428 3.684 4.798 8,516 12.090 B. Current Expenditures 27.592 32.150 41,560 45,026 S2.338 a) Ordinary Expenditure 27,592 32,150 41.085 45,026 52.338
C. Current Account Balance 34,524 50.664 36,012 42,000 50.561
II. CAPITAL OPERATIONS A. InvestmentExpenditure 49,339 54.119 61,050 76.388 78.033
B. Investrient-linkedResources * 922 810 485 573 3.953
C. Capital Account Balance -48,417 -53,309 -60,565 -75,815 -74,080
III. BUDGET BALANCE (I. II) -13,893 -2,645 -24,553 -33,815 -23.519
IV. FINANCING 13,893 2,645 24.553 33.815 23,519 A. Net External Loans -206 -108 -111 39 -18
B. Domestic Savings Mobilization 6,629 9.208 13,725 13,665 7.350 a) DevelopmentBonds 5,257 5.167 6.076 6.800 8.324 b) Deposits of Public Institutions 1,372 4,041 7,649 6,865 -974 (incl. Local Authorities)
C. Mobilizationof Sight Resources 1.849 3.083 5,123 4.604 4,488
D. Recourse to Banking System 5,621 -9.538 5.816 15.507 11.699
* Loan Repayments.
Sources: Cf. Annex, Table 5.1
61368/p3 (7,10) - 15 -
however: the inflow of funds in 1981 enabledthe Treasuryto pay off almost DA 10 billion owed to the Central Bank, i.e. nearly half of the Bank of Algeria'sclaims on the Treasury. This was howeveronly a passingphase. Starting in 1982, the Treasury resumed calling on monetaryfinancing at an average of DA 10 billionper year up to the end of the Plan, thereby Ieinitiating an inflationaryprocess. The Treasurydeficit, which stood at some 11.8% of GDP on averagefor the last threeyears of the Plan (11.8% in 1982, 14.5% in 1983 and 9% in 1984) engenderedextensive recourse to monetary issue constituting about 4.2% of GDP as a yearly average (2.4% in 1983, 6% in 1983 and 4% in 1984). This was largely responsiblefor prices rising at an averageannual rate of 6.8% between1982 and 1984.
1.21 Budgetand Plan from 1980 to 1984
(a) The aim of the Plan1' was to spread the efforts required to reach internalfinancial equilibria over two phases. The first phase (1980 and 1981) was to be a period of curbingby the Budget of current and financialdeficits accumulatedby the productivesectors. Once its financial situation has been put in order, the producti;e sector would generate sufficientresources for self-financingto ei.surethe reconstructionof its capitaland a correspondingeasing of the drain on the publicfinances in the secondphase (1982 to 1984).
(b) Being heavily concentratedon the industrialsector, the Government's effortsto eliminatethe deficitsand place the enterprises'finances on a sound footing could not be contpietedin accordancewith the timetableset, nor were the relevanttargets met as of the end of the first Five-Year Plan. By the end of the Plan the industrial productionapparatus as a whole posted a cumulativenegative cash position of some DA 26 billion (DA 8.7 billion for heavy industry plus DA 17.3 billion for light industry)2/. Its ability to finance its own investmentsappeared to be rather limited,just as before. Based on net cash flows reported, light industry financed no more than DA 579 million, i.e. 11.5% of amortizationand provisions,and heavy industry only about DA 190 million or less than 7% of amortizationand provisions.
(c) It is essentialto draw a partial conclusionfrom this experience: the objective of financial restructuring,while praiseworthy in itself,could only be attainedquickly if the conditionsunder which the microeconomiccalculations were made, and particularly the methods and proceduresfor price setting,were modifiedat the same time. If no far-reachingchanges are introducedon this point, the managers of public enterpriseshave freedomof action in name only, being hemmed in all around by rules on input supplies,distribution and employmentand lackingany "objectivelydetermined evaluation" of their cost-effectiveness.
1/ See the AlgerianGeneral Report on the 1980-84Five-Year Plan, pages 57-62. 2/ See the chapteron the industrialsector. - 16 -
4. Money. Credit, and Prices during the Fist Five-Year Plan
1.22 With improved internal cost-effectiveness,the production units should have had less need to call on credit from the monetaryand financial sector during the period covered by the Plan. This sector must be examined with the greatest prudence,knowing that the majority of Algerian financial intermediariesare (besidestheir functionin financingthe operatingfunds of public enterprises)simple "caisses" that carry out transactionsfor the Treasury'saccount, in particular the transferringto production units of funds for investment,as is shownmoreover by Table I.4.
(a) The phase of accumulationof net external assets came to an end in 1981 with the downturn in oil and gas prices. Consequently, long-termexternal commitments by financialintermediaries other than the Treasury,which had been held stable at a constant figure of around DA 13.5 billion up to 1981, then had to make up for the shortfall in foreign exchange accumulation(down by 21% per year between .1981 and 1984), with the result that such commitments increasedat a rate of nearly 16% per year over the same period.
(b) Normally,credit to the economy would be expected to increase at a rate largely matching that of the public funds earmarked for the purpose-' and which form the chief financing resource of the system. Viewed overall, the process that ensued was an unbalanced one. Whereas the earmarkedpublic funds increasedin amount by an annual average of about 16.5% - 21.5% on averageduring the first two years of the plan - then graduallybut definitelycut back over the following three years until in 1984 the rate of increase in these funds was less than 11%), credit for the economy expanded at an average annual rate of 18.5%, hence leaving an annual gap of 2 percentage points (with an intertemporalpattern marked by an expansion of 21.5% on average during the first three years of the Plan followedby a more modest expansionof about 15% per year in the last two years, 1983 and 1984). The fact that the shortfallwidened appreciably(3.3 percentagepoints) toward the end of the Plan is symptomaticof the difficultiesencountered by the productionsectors in seeking to avoid recourseto credit throughbetter managementand generationof an adequatecash flow.
(c) The behavior of the State is equally symptomatic: the pace ef its endowmentin "loanablefunds" to the system (at an average annual rate of 16.5%,but with a distinctslowing down from 22.5% in 1980 to 10.9% in 1984) lagged systematicallybehind its drawings from the system (22.4% per year on average). Altogether,borrowing by the State which made up 29.8% of its loanablefunds in 1979 rose to 38% in 1984. The State therefore recycled to its advantagea growing proportionof the resourcesgenerated by the financial system. In what form?
1/ These are loans includedin the CentralGovernment Capital Budget. Table 1.4:
SIMPLIFtED STATEFENTOF MONETARYAND FINANCIAL SITUATION
Outstanding at End of Year ANNUAL FL"U6 (in millions of DA) (in millioas of DA and in X chdae in amount outstandina) 1979 1980 1981 1982 1983 1984 1980 1981 1982 1983 1984
%et Foreign Assets 12,358 16,500 18,818 13,959 11.432 9,311 4,142 2.318 -4.859 -2.527 -2,1
(33.52) (14.0S) (-25.82) (-18.10) (-18.55) .'>
laims on Government /a 34.,30 44.892 40,376 54,628 78,079 95.474 10.162 -4.516 14.252 23.451 17.39S (29.26) (-10.06) (35.30) (42.93) (22.28) Credit to the Economy /g 17S,634 211,548 259,541 315.026 3S9.379 410.355 3S,914 47,993 55.485 44.353 50,976 (20.45) (22.69) (21.38) (14.08) (14.18) ASSETS LIABILITIES 222.722 272.940 318.735 383.613 448.890 515.140 50.218 45.795 64.878 65.277 66.250 (22.55) ('6.78) (20.35) (17.02) (14.76) . Money 72.208 84,434 97,922 125.300 152,756 180.433 12,226 13,488 27.378 27.456 27.677 (16.93) (15.97) (27.96) (21.91) (18.12)
Quabi-toney /& 15.553 20.967 25.379 31.598 36,12S 41,249 S.414 4.412 6.219 4.527 5.124 (34.81) (21.40) (24.50) (14.33) (14.18)
Long-term External Conmitments /d 13,483 13,649 13,265 14.386 15.209 20.471 166 -384 1.121 823 5.262 (1.23) (-2.81) (8.45) (5.72) (34.60)
Earmarked Public Funds /g 116.410 142,651 172,426 200,563 229,061 253.969 26,241 29.775 28,137 28,498 24,908 (22.54) (20.87) (16.32) (14.21) (10.87)
Net Miscellaneous Liabilities 5.068 11,239 9.743 11,766 15,739 19.018 6.171 -1.496 2.023 3.973 3,279 (121.76) (-13.31) (20.76) (33.77) (20.38)
/a Ineluding BAD and CUEP claims. , Including BAD and CNEP loans. .ILsicluding savings deposits with CNEP. d Including those of QAD. This heading does not include all medium- and long-term commitments but only those involving financial intermediaries other tti. t the Treasury. 10iJding the funds allocated to BAD and CNEP.
Data furnished by the Algerian authorities. -.. (5.3) - 18 -
(d) There is every evidencethat money creationplayed a significantpart in this resourcegeneration: the growth rate of the money supply (Ml) was very high (20.1 p.a. on average, i.e. quite considerably more than that of the nominal GDP, which grew at 15.3% p.a. during the first Plan). Even if the savingsmade availableto the financial systemwere quite considerable(average annual growth of 21.5%), they were however very heavily concentratedin the initial years of the Plan (growthrate of 34.8% in 1980,21.4% in 1981 and 24.5% in 1982), after which there was a very marked slowingdown in 1983 (14.32)and 1984 (14.22). Accordingly,by the end of the Plan it was money creationthat ended up supplyingthe financingsystem.
1.23 The fact that the majorityof the trends displayedby the financial sector exceed those posted at the level of the real economy points to the existenceof deep seated internalstresses not entirelyresolved by the Plan. The excess money creation in relation to nominal value added (about 5 percentagepoints on average for the FourthPlan) must moreoverbe viewed in the context of Algeria's controlled price system. As a result, the inflationarytendency, contained by this controlledprice system, is only partly reflected by price movements-'. This necessarily means that the economic calculationsare flawed to the full extent that prices are in fact also instrumentsof economic calculation. As a result the consumer price index must be treatedwith caution:
Table I.5t CONSUMERPRICE INDEX
1980 1981 1982 1983 1984
Generalindex (1969=100) 239.9 274.9 293.3 313.0 337.1 Annual growth rate, . 9.5 14.6 6.7 6.7 7.7
Source: Data providedby Algerianauthorities.
Similarcomments have to be made regardinginterest rates: Algerian interest rates are set at low levels, and in any event at levels well below posted inflation rates (see the tables of interestrates in the annex); they are viewed as the money rate and cannotplay their role of instrumentsof economic calculation,especially in matters of resourceallocation where they ought to serve to dissuadeeconomic units from runningdeficits too easily settled by recourseto credit,and spurringthem insteadto generateoperating surpluses.
1/ I. must also be added that the price indexes publishedin Algeria are quite far from constitutingreliable statisticaldata; consumer price indexesare only availablefor the Algiersurban community. Moreover,the base figureof 100 = 1969 is outdated,at least as regards price movements during the first Plan. - 19 -
5. Balance of Payments and External Debt
1.24 Algeria'sbalance of paymentsis characterizedby one dominantfactor: oil and gas exports,which statisticallymake up some 98% of all the country's exports(Table I.6). The 1980-85Plan was constructedon the presumptionthat this preponderancewould be maintained ("the share of other products will remain marginal"L'). This was an option heavy with consequences. To the extent that it is considered necessary - or alternatively,proves to be essential - penetration by any country (hence also Algeria) into export markets other than for hydrocarbonsis a very long-termundertaking (at least ten years), the foundationsfor which should thereforebe laid at least two five-yearperiods in advance. The fact that the first Plan was silentin this respect accordinglyhas an impact on the profile of the next Plan. Although it has not opted for total diversificationof exports, the Algerian Plan has neverthelessset itself the goal of diversifyingits hydrocarbonexports in the framework of a strategy for conservingthese nonrenewableresources-2' For the most part, this second option of the Algerianstrategy has proven to be judicious and profitable: the uncertaintyregarding future prices for Algerian crude has been, to some extent, offset by developmentof sales of other hydrocarbons. Thus taking a base of 1980 = 100, exportvolumes of crude and condensates(the expansion of the latter significantlycompensating for the marked reduction in crude exports) stood at an index of 71 in 1984. On the same basis, exports of refined products reached an index of 210, while those of gas (of all sorts) were increasedthreefold. In total, the impetus given to exports of refined products and gas (and to a lesser extent condensates)served to offset the greater part of the fall in unit pricesand enabledAlgeria to safeguard,by the end of the Plan, the essentialcore of
1/ GeneralReport on Plan, op. cit., page 54. 2/ The Algerian strategy concerning exploration for and production of hydrocarbons has two main aims: resource conservation and product diversification. In view of the absence of any significant new discoveriescoupled with the declining ratio of reserves to production, the Algerianauthorities decided toward the end of the 1970s to shut down certainwells and to cut back production. This decision was made easier by the sharp rise in oil prices at that time. As a result, crude oil productionfell from 47 million tons in 1980 to 34 million tons in 1985. In addition,major efforts were made to conservethe deposits: the volume of gas flared was reduced from 10 billion m3 in 1980 to 6 billion m3 in 1985 and sizable investmentswere made in gas recycling. To this conservation policy was added the goal of product diversification. Production of refined products rose from 11 million tons in 1980 to 22 million tons in 1985, while the quantitiesof condensatesextracted from natural gas for export increased from 4 million tons in 1980 to 14 milliontons in 1985. In the same way, the productionof LPG (propane and butane) from gas rose from 0.8 million tons in 1980 to 2.7 million tons in 1985. Finally, the (net) natural gas produced in Algeria more than doubled, from 15 billion m3 in 1980 to 35 billion m3 in 1985. The stepped-upproduction of these new productsresulted in an increasein the global volume of hydrocarbonexports from 52 million toe (tons of oil equivalent)in 1980 to 63 million tons in 1985, notwithstandinga drop in crude oil. exports (39 million tons in 1980 down to 14 million tons in 1985). Tablg 1.6:
FOREIGNTRADE IN GOODS (In millions of Algerian dinars and in percentages)
1980 (1) 1981 (1) 1982 (i) 1983 (1) 1984 (1)
1. EXPORT
1.1 NYdrocarbons 59,021 (98.5) 56,223 (98.0) 51,612 (98.0) 52,561 (98.3) 57.646 (97.5) t composition (100) (100) (100) (100) Natural Gas (100) (6.9) (7.8) (14.0) (23.1) (21.9) * Crude Oil (68.5) (53.0) (23.0) (23.1) (25.3) * Condensates (10.1) (19.8) (23.9) (25.7) * Refined Products (23.3) (14.5) (19.4) (39.1) (28.1) (29.5) 1.2 Food Products 461.7 (0.8) 532.2 (0.9) 328.8 (0.6) 181.1 (0.3) 239.4 (0.4) 1.3 Other Products 470.1 (0.7) 629.3 (1.1) 758.7 (1.4) 715.0 (1.4) 1,221.1 (2.1) TOTAL EXPORTS 59,952.8 57,383.S 52,699.5 53.457.0 GOODSBALANCE 59,106.5 19,433.9 8,746.9 3,387.9 3,675.4 7,849.3 TOTAL IMPORTS 40,518.9 48,636.6 7 49,311.6 49,781.6 51,257.2 0 2. IMPORTS
2.1 Food Products 7,641.1 (18.9) 9,101.1 (118.7) 9,829.5 (18.8) 9,703.2 (19.5) 8,815.0 (17.2) 2.2 Other Consumer Goods 6,851.3 (16.91 7,266.6 (14.9) 9,102.1 (18.5) 8,056.4 (16.2) 7,241.9 (14.1) 2.3 IntermediateGoods 13,342.3 (32.9) 16,369.5 (34.7) 13,974.5 (29.4) 16,290.4 (32.7) 19,562.9 (38.2) 2.4 Cauital oonds 12,679.2 (31.3) 15,890.4 (32.2) 16,405.5 (33.3) 15,371.6 (31.6) 15,637.4 (30.5)
(1) As % of total exports (= 100) or imports (= 100). Sourc : Data furnished by the Algerian authorities.
61366/pS (5.15) - 21 -
its exportearnings. Crude prices (not countingthe peak reached in 1981) in fact dropped by 182 while the prices for refined products fell 10Z; gas prices, buoyed by Algeria's oligopolisticpolicy on the European market, managed to post an increaseof 22% in 1982 with respect to 1980, but by 1984 they had returnedto a level closer to that of the first year of the Plan. In this way, the level of total export earnings (DA 60 billion) posted in 1980 was virtuallymaintained at the end of the five-yearperiod (DA 59 billion).
1.25 The Plan envisaged import levels that were dependent upon the performancesof the productionapparatus, both in the sphere of satisfaction of et.dneeds (importsof foodstuffsand other consumergoods) and in that of supply of current inputs and capital to the economicsystem. The growth rate of 6% p.a. for imports was respected without apparent difficulty, since Algeria practises a system of direct quantitativerationing laid down in a General Import Program ("PGI") implementedthrough General Import Permits ("AGI"). The structureof importschanged very littleduring the periodunder consideration:on average35% for final consumption(of which 191 foodstuffs) and 65% for use by industry (of which 34Z capitalgoods). There is no room for maneuveras regardsfood imports,at least in the short term and outside of times when weather conditions are exceptionallygood. In the period 1980-84and as a consequenceof choices made earlier"',Algerian agriculture was still unable to ensure the equilibriumfood self-sufficiencypossible with the country'spotential2'. The importsof other consumer goods are a safety valve designed to reduce the social tensionsthat might be engenderedby the shortagesdue to national industry'sshortcomings. As to industrialimports proper, they are the outcome of three not necessarily convergent considerations:the import substitutionstrategy, the technicaland economic efficiency-'of national industry,and the medium and long-termconstraints of absolute scarcityP'. The success of the import program with respect to the first two can be assessedby the ratio of inputs (currentand/or capital) to the-value added of the non-hydrocarbonsectors. The results of the calculationpoint to two phases: the first one, from 1980 to 1982, in which the global ratio stabilizedat around 74%, i.e. a relativelyhigh level on account of quite extensive availabilityof foreign exchange;and a second, from 1983 to 1984, during which the global ratio fell to around 53.31. The sharp fall in this ratio is partly explainedby the necessityof cuttingback importsin light of the uncertaintiesof the oil and gas market, coupledwith better import substitution.However, here too, the fact that importingunits hastenedto stockpileimports right from the start of the Plan in order to be a jump ahead of any subsequentrationing very probablyalso played a part.
1/ The Algerian industrializationmodel, the principles of which are discussedin the Introduction,is to some considerableextent at variance with one of the oldest precepts of political economy: "Primum vivere, deindephilosophari." 2/ I.e., in comparisonwith a price system that promotes optimum use of productionfactors. 3/ I.e., the aptitudeof national industryto produceat lower cost products that are customarilyimported. 4/ For example, since Algeria has very little wood in relation to its requirements,it is doubtful whether an effective substitute for this productcan be found in the medium term so it will have to continue to be importedfor some considerabletime to come. - 22 -
Table I.7 IMPORTSAND VALUE ADDED
1980 1981 1982 1983 1984
Value added of non-hydrocarbon industrialsectors = VAi 36,171 41,543 48,993 57,492 68,212 (millionsof Algeriandinars)
Intermediateimports ratio VAi 36.4 39.4 33.6 28.3 28.7
Capitalimports ratio VAi 34.9 38.3 39.5 26.7 22.9
Globalratio 71.3 77.7 73.1 55.0 51.6
Sources: Based on Tables I.1 and I.6.
1.26 Algeria's trade balance accordingly posted a surplus for goods equivalentto US$18.5billion (TableI.8), duringthe periodof the first Plan. This surplus was more than absorbed by the deficit on services (a total of US$19.7billion), 40Z of which was accountedfor by the interestpayable on an externaldebt that had risen to US$16.3billion by 1980 (borrowingsactually disbursed)and 60X by other services (especiallytransportation services, which for the greaterpart were no longerrequired by the end of the Plan once Algeria'sLNG tankerfleet was in operation). The very marked contractionin the balanceof privateunrequited transfers toward the end of the period, due to the decline in remittancesby Algerianworkers abroad, reduced the global currentaccount balance for the Plan periodto almostnothing (US$138million). The capital movements balance, which was still positive in 1980-81 (US$1.3 billion)remained negative (-US$1.7billion) throughoutthe last three years of the Plan in accordancewith the Government'saim of greatly cutting back recourseto externalborrowing, an aim which meant that debt repaymentshad to exceed the amount of new loans raised. As a result, and in total, the first Five-YearPlan concludedwith a marked deteriorationin the overall balance of payments,which moved ,rom a surplus of US$1.6 billion to a US$1.9 billion deficit,hence leavinga balanceof -US$300million.
1.27 Algeriatherefore managed to bring its disbursedmedium and long-term debt down from US$16.3 billion in 1980 to US$12.1 bi'llionin 1984 in the context of a shrinking trade balance and, more generally, a contracting current account balance. As a consequenceof falling export earnings and rising payments,the debt service ratio,which stood at 22.62 in 1980&', was up to 32.4X in 1984. This appreciabletrimming of the debt also entailed drawings on the country's reserves, which fell from US$3.9 billion to US$1.5billion, i.e. two months'simports.
1/ It was in point of fact around 222 at the start of the first 5-YearPlan. - 23 -
Table 1.8:
BALANCE OF PAYMENTS (SIMPLIFIED)
EXTERNAL DEBT. FOREIGN EXCHANGE RESERVES
(In millions of US dollars)
1980 1981 1982 1983 1984
I. BALANCE OF PAYMENTS
1. Current Account 1.1 Goods (net) 4.056 4,028 3.621 3,226 3,557 1.2 Services (net) -4,151 -4,297 -4.171 -3,483 -3,625 (of which interest on debt) (-1,551) (-1,765) (-1.641) (-1,410) (-1,516) 1.3 Balance, Goods/Services -9S -269 -550 -257 -68 1.4 Net Transfers 337 358 367 173 142 1.5 Current Account Balance 242 89 -183 -84 74
2. Capital ';count 2.1 Net Direct Investment 320 -1 -65 -13 -14 2.2 Net Official Capital 614 138 -637 -613 -323 2.3 Net Monetary Flows -14 11S 54 246 128 2.4 Net Miscellaneous 219 -100 -270 S -232 2.5 Capital Account Balance 1,139 152 -918 -375 -441
3. General Balance (1.5 + 2.5) 1,381 241 -1.101 -459 -367
II. EXTERNAL DEBT
1. Total External Comnitments 28,266 24.913 23.060 20,816 19,260 1.1 Short-term 2,32S 2.307 2.751 1,957 1,759 1.2 Medium- and Long term ' ' "'z5,941 22,606 20,309 18,859 17.501
2. OutstandingDisbursed Debt 18,623 17,612 16.704 14,942 13,811 2.1 Short-term 2,325 2,307 2,751 1,957 1.759 2.2 Medium- and Long-term 16,298 15.305 13.953 12,985 12,052
III. FOREIGN EXCHANGE RESERVES (excl. gold)
2.1 Gross Amount (end of year) 3,850 3,744 2,424 1,920 1,531 2.2 Change in Reserves 1,222 -106 -1,320 504 -389 2.3 As # of Months' Imports 4.8 4.4 2.9 2.4 2.0
Note: To simplify the table, the adjustment items that enable the various flows to be reconciled statisticallyare not reproduced.
Sgurce: Data furnished by the Algerian authorities,converted to USS at the exchange rates published in "InternationalFinancial Statistics" (IMF).
6136B/p6 (7,7) - 24 -
6. Evolution of Employment and Income during the First Five-Year Plan
1.28 According to the Plan's backgroundpaper, the labor force was to increaseby about 4.8% p.a.; this figure takes into account: (i) the increased participationof women in the labor force (startingoff from a low level); (ii) the reinsertionof Algerian workers who were expected to return from abroad; and (iii) some complex effects involving the young population(the extensionof schoolingdelays their entry in the labor market, while at the same time the implementationof trainingpolicies may speed it up). As far as non-agriculturalemployment is concerned,the plannershave found the initial employmentrate to be satisfactory,although they have encounteredseveral inter- and intra-sectorialimbalances regarding qualifications. They have also stressed that labor productivitywas quite low and that substantial rationalizationmeasures shouldbe taken in view to correct this. According to Algerian forecasts,non-agricultural employment was to have increasedby about 8.71 p.a. on average to reach a total of 3.5 million workers in 1984. Within this global evolution, the average annual growth rate in the constructionsector was expectedto be of 11.82 (with 300,000new jobs to be createdmainly in small and medium enterprises),of 7% p.a. in the industrial sector (with, at the same time, substantialincreases in productivity)and 105,000 new jobs were expected to be created in the transportationsector (i.e. at an averageannual growthrate of 12.22). The Plan's objectivewas to restore the trade and servicessector to its proper level of importance,so as to enable it to absorb about 305,000new jobs (an averageannual growthof 81); as for public services,208,000 new jobs were expected to be created,mainly to fulfillthe needs in the subsectorof educationand training,as well as those arising from the developmentof regionalgovernments (an average annual increase of 7.71 which also depends on increases in productivity). The employmentsituation in the agriculturalsector and its future prospectswere described more cautiously. Indeed, the planners were confronted with a twofoldnecessity: (i) curbinga rural exoduswhich createssources of tension on urban development,and (ii) more importantly,recruiting younger people into the agriculturallabor force. The planners have not establishedany precisequantitative objective for the agriculturalsector.
1.29 The followingtable (Table1.9) allows to measure to which extent the Algerianauthorities have been able to implementan employmentpolicy in line with the Plan's objectives. With a slower than expected increase of the overall labor force (about 11 below objective),probably linked to the fact that the youngergeneration has delayed leavingthe education/trainingsystem to join the labor force, the Algerian authorities have increased the non-agriculturalemployment by 706,000 jobs, i.e. an average growth rate of 6.1% p.a.; this growth has, however,remained 2.6 percentagepoints below the plannedtarget, in such a way that non-agriculturalunemployment has increased by 2.1% p.a. The near stabilizationof the agriculturallabor force (-0.2% p.a.) has partly contributedto the fact that the number of workers in other sectorshas increasedto a much lesserextent than anticipated. - 25 -
Table 1.9: LABOR FORCE AND EMPLOYMENT
AverageAnnual GrowthRate of Variation the Labor Force 1979 1984 1984/79 Actual Plan Margin -- ('000)------…(2) ------
Total Labor Force 3,612 4,374 +762 +3.9 4.8 0.9 AgriculturalLabor Force 969 960 -9 -0.2 n.d. n.d. Non-agriculturalLabor Force 2,643 3,414 +771 +5.3 n.d. n.d. - Non-agriculturalEmployment 2,049 2,755 +706 +6.1 8.7 2.6 * Industry 401 495 +94 +4.3 7.0 2.7 * Construction 437 654 +217 +8.4 11.8 3.4 * Transportation 126 166 +40 +5.7 12.2 6.5 * Trade and Services 470 595 +125 +4.8 8.0 3.2 * Administrations 615 845 +230 +6.6 7.7 1.1 - Unemploymentin SectorsOther 594 659 +65 +2.1 n.d. n.d. than Agriculture
Sources: RapportG6n4ral du Plan Quinquennal1980-84 and Data providedby the Algerianauthorities.
Employmentin non-agriculturalsectors has risen by 6.1X p.a., with, at the same time, substantialsectorial disequilibria. On average, civil servant jobs and comparablejobs have been those which have remained the closest to the targeted growth rates (the gap is about 11), which seems to suggest that employmentis only effectivelycontrolled in those sectors closely monitored by the Government. On the other hand, th.,trade and servicessector (with a high density of small and medium enterprises)have far from reached the ambitious targets set by the authorities. The industryand transportation sectorshave only contributedmodestly (a total of 133,000 jobs) to reducing underemployment.According to availablestatistical data, it appearsthat the doubledilemma of the labor force structurein the agriculturalsector has not been resolvedduring the first Five Year Plan: (i) there are no signs of any lastingreversal of the ageing trend of the working population,and (ii) the rural exodus continues,even if at a ratherslow pace.
1.30 In light of these developments,it does not seem that the indicesof apparent productivity of labor have evolved in systematicallyfavorable directions (Table 1.10). In spite of sizeable positive (+122 in 1980) or negativefluctuations (-7T in 1982) in the agriculturalvalue-added which make the interpretationof results less clear, it appears however that the value-addedper capita has increasedby 1.3% p.a. during the first Five-Year Plan. This would tend to prove that, in line with the price liberalization policyapplied since 1980 in the sector,Algerian farmers are willing to work more as long as they are better paid, through, among other things, - 26 -
Table I.10
EVOLUTION INDICES OF VALUE ADDED PER CAPITA IN REAL TERMS '& (a) base 100 = 1979; (b) base 100 = previousyear
Average annualincrease rate of value added 1979 1980 1981 1982 1983 1984 per capita
Agriculture/b (a) 100 118.9 127.0 116.4 110.6 102.6 1.34 (b) 100 118.9 106.8 91.7 95.0 96.7
Industry * Globalsector (a) 100 90.2 83.5 84.4 88.7 88.6 -2.4 excl. construction (b) 100 90.2 92.5 101.1 105.1 99.9
* Excluding hydro- 'c (a) 100 96.8 100.0 108.3 108.4 116.8 3.15 carbons,incl. (b) 100 96.8 103.2 108.3 100.1 107.7 construction
* Construction'^ (a) 100 97.6 97.8 101.3 95.5 99.8 0.00 (b) 100 97.6 100.2 103.6 94.2 104.5
Transportationand (a) 100 100.1 97.9 97.4 95.9 94.0 -1.2 Services (b) 100 100.1 97.8 99.5 98.5 98.1
Administrations (a) 100 105.6 104.0 101.8 100.4 96.6 -0.7 (b) 100 105.6 99.1 97.3 98.6 96.2
/a According to data provided in Table 1.2 (labor force), II.1 and II.3 (national accounts), et II.5 (deflators) of the Annex. Basic data communicatedby the Algerianauthorities. /b Due to the decisive impact of weather conditions on the generationof agriculturalvalue-added, results here have been interpretedwith caution. /c Calculationson this line have been made by using as deflators the price indices for industrial production, published provisionally in "Statistiques",No. 9, Algiers,ONS, December1985, pp. 85 through87. 41 Deflatorsused here are those used in the annex to this report. - 27 -
agriculturalproducer prices. Globally, in the industrialsector, apparent productivityper worker has tended to decline, but it should be noted that this situation is mainly due to the unfavorableevolution of the actual value-addedof the hydrocarbonssector (which accounts for about 38h of the total industrialvalue-added). As for non-hydrocarbonssectors (includingthe constructionsector) the real apparent productivityof labor in industryhas been estimatedat about 3.22 p.a., with substantialdisequilibria within the sector. Particularly,in the constructionsector, actual value-addedper capita showed a zero average growth rate, In tertiary sectors such as transportationand other services, the growth rate of value-addedper capita has been on the wholenegative, and one can deduce that, in those sectors, the labor employed is in excess of levels necessary to generate an acceptable level of value-added. Finally,the value-addedper capita for public services has also decreased by almost 1% p.a.; the increasesin productivitythat plannershad expectedin this sectorfailed to materialize.
1.31 Normally, the evolution of real wages should not deviate substantiallyand for a long period of time from the increases in real productivity. Table 1.11 shows, in this respect,contrasting tendencies. In the agriculturalsector, wage-earners (some 63% of the labor force within the sector)h:ve seen real wages deteriorateby about 1.5X p.a., while independent farmers (about 301 of the labor force within the sector)have seen their real income increase by nearly 5.7% p.a. in real terms. Thus, on average, agriculturalincome should have increasedby 0.7% p.a. in real terms,which is a very low figure if one has in mind to attract future generations,unless the objective is to attract young independent farmers. In that case, the evolutionpatterns of value-addedand income representa favorable incentive which should not be underestimated.In non-agriculturalsectors, total real income (wagesand non-wages)have increasedby about 5.91 on average. With an employmentgrowth rate of about 5% (excludingpublic service), this means that income per capita has increasedby at least one percentagepoint in terms of purchasing power, which seems to suggest, at least globally (excluding hydrocarbons),that a certainsymmetry exists with increasesin the apparent productivityof labor. On the other hand, civil servants have gained, per capita, about 0.6% of additional purchasing power, while their actual productivitydecreased (-0.71). This is a worrisomefactor which calls for subsequentcorrective measures.
7 25 1B Tablea1.1:
EVOLUTIONOF INCOMES
(In billions of Algerian dinars and in percentages)
Planned Actual Real Growth Growth Growth Rate Rate Deflator Rate 1979 /a 1979 /b 1980 1981 1982 1983 1984 (X) (X) (1979=100) (x)
Waaes and Salaries 40.5 46.1 57. 76.1All L. 9 15.1 154 5.6 Agriculture 2.5 5.1 5.3 6.4 6.6 6.8 7.3 3.7 7.4 154 -1.5 Non-Agriculture 25.0 28.0 35.1 39.7 46.0 53.4 57.6 10.9 15.5 154 6.0 Administration 13.0 13.0 16.7 19.7 23.5 26.6 28.4 9.0 16.9 154 7.2 00 Non-waneIneomns ZJ I l. 122 11.9 154 L Agriculture 5.5 6.1 7.6 9.8 9.9 10.9 12.4 4.9 1S.2 154 5.7 Non-Agriculture 12.5 15.4 17.4 19.9 22.6 23.2 25.4 8.0 10.5 154 1.4
Dmestic Transfers la J1.0fI 12.3 1I3. 14.I 164A IL& 15.7 154 §La
Gross Households Income 67.3 ZA.5 2L.1 107.8 122S 13S.2 147.5 9. 14.3 154 4L. Compulsory Charges n.a. 10.8 12.1 14.2 16.9 19.0 20.7 n.d. 13.9 154
Disnosable Incom n.a. 4.7. iLl9 IS, 1l6.2 12fi.8 n.d. 14.4 154
Ia Initial values from the Plan document. /1 Actual recorded value.
Souae: Ministere du Plan.
61368p7 (5,20) - 29 -
CHAPTER lI - THE SECOND FIVE-YEAR DEVELOPMENTPLAN (1985-89) A. Description of the Initial PrEEfam 1. Starting Targets
2.01 The Second Five-Year Plan was drawn up in a general climate of great economic uncertainty and its general economic structure was severely disrupted by the sudden and extremely sharp fall in hydrocarbon prices during the first half of 1986. However, the basic hypotheses of the Plan had remained fairly prudent, as had its goals, which called for growth levels lagging slightly behind those of the First Plan. The Plan assumed "a difficult international environment" and unpredictable hydrocarbon sales receipts "subject to strong fluctuationsdue to the uncertainty concerning the trends of, first, world gas and oil prices and demand, and second, the dollar exchange rate." For the planners, an immediate and inevitable consequence of this situation was that it was now impossible for the Government to "bear the responsibility for the quasi-total financing of development". The chief goals of the Plan then became:
(a) to hold the external debt to an acceptable level and keep debt service low;
(b) to achieve an across-the-board reduction in the costs deriving from investment and the functioning of the productive apparatus;
(c) to achieve a more balanced distribution of "development costs between the Government and the other economic agents (enterprises and households)";
(d) to effect a redefinition of action-programpriorities:
(i) to grant absolute priority to the development of agriculture (too long neglected) and of water resources (vital for raising Algeria's agricultural productivity);
(ii) to undertake a retrenchment by the Government in its mission of developing economic and social infrastructures by restoring balance between transportation modes, strengthening storage and distribution capacities, and raising the cultural and leisure-activity levels of young people,1' continuing the housing effort, and mounting an education and training effort;
(iii) to refocus industrial projects toward medium-scale activities:
- technologically,by giving preference to industrial processing activities with the object of expanding intersectoral trade flows and pursuing import substitution;
1/ It has to be borne in mind that 252 of the total population is aged 10-19 years, 402 5-19 years and 432 under 20 years. - 30 -
- functionally,by promoting decentralization,regionalization and subcontractingso as to steer investmenttoward better exploitationof productionpotential, stimulate self-financing and exploitprivate enterprise potential more efficiently.
2. Investment Program of the Second Plan
2.02 The conversion from the First to the Second Five-Year Plan can be analyzed fairly well by re-evaluating the carry-overs between the two plans (Table 1I.1, columns 1-3). The implicitor explicit priorities of the new Plan are clearlyevident. The plannersdid a courageousjob of pruning: they reducedthe "balance to be executed"of the First Plan for industry -- the sector that sufferedthe deepest cuts -- by 68% (-DA 111.6 billion in 1984), made deep cuts also in constructionenterprises (-48%) and transportation (-53%), and -- a priori more surprising -- rationalized education and training expenditure(45%) -- while, however, recognizingthe need to redimension expensive projects in order to reduce recurrent expenditures. Less severe cuts were made in the outstandingproject portfolios of agriculture(only -21%) and housing (-15%). Finally,in line with the prioritiesannounced, the programs were expanded of economic infrastructure (+3.5%), social infrastructure(+4%) and communityfacilities (+152%).
2.03 The shift in total resourceallocation in the 1980-84 Plan to the varioussectors is, generallyspeaking, reinforced in the 1985-89Plan. Thus, there is a very substantialcutback in the program for the industrialsector: 32% of total plannedexpenditure under the Second Plan, against 39% (planned) and 36% (actual)under the First Plan. Lower shares are assignedalso to the constructionenterprises (3.5% of total expenditureunder the Second Plan, against5% (planned)and 4.2% (actual)under the First Plan); to transportation (2.7%,down 0.5%),and to educa#5_nand training(8.2%, against 10.5% (planned) and 8.5% (actual) under the First Plan). In contrast, higher shares are allocated to agriculture (14.3%, against 11.8% (scheduled) and 10.8% (executed),and housing (up 0.7 of a point to 15.7%). Finally,improvements are noted in the positionsof economic infrastructure(11.2% of Second Plan projects,against 9.5%) and above all of communityfacilities (DA 51.7 billion, i.e. 9.4%, against2.4% under the First Plan).
2.04 It thus appears that the quantitativerankings identifiedaccurately reflectthe Government'spriorities, in terms both of revisionof outstanding projectportfolios to effect the transitionfrom one Plan to the next and of total financing levels allocated for the current Plan. In particular,the line has been more sharplydrawn betweenactivities that have to have priority in directgovernment action (economicinfrastructure, community facilities) or that are assignedstrategic priority (agriculture) and activitiesin which the economic entities (enterprises,households) are urged to assume direct responsibilityfor their own capital formation. In the latter case the Government, alongside a diminishing but still considerable financial involvement,must create the conditions for this increased measure of autonomousresponsibility. TAble II.1: INVESTMENTPROGRAM OF SECONDFIVE YEAR PLAN 198S-9 (Billions of 1984 Algerian dinars)
Follow-up from first Five Year Plan 1980-84 Expen- Original Revised Probable Planned diture expen- expOn- expendit- Theoretical in Total unspent portion Brought forward from New Investment to be Total Expen- ditures ditures ures made cost of ditures planned planned 1986**** 198O+1986 carried forward previous Plan: pro- expen- Plan grams diture after proPosed 1985** for 86"** for 86"* (1984 from Secgnd Diffe- DA) Total Annual Nominal Actual rence (1984 1985-89 1989 programs (1984 (current (current (1984 (812)1 (113)2 (14)am 1984 DA * 1984-0A ta)-i1l DAI (1984 DA) 1984-DA (S)+(6) DA) DA) DA) (11) (14) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
30~3 2.1 15.5 xi. 143.3 4t. INDUSTRY 164.5 52.9 -111.6 198.7 174.20 77.40 251.6 1S.4 of which Hydrocarbons (15.0) (26.5) 39.80 1.70 (41.5) IlS. 62Ll 1 4. 34.34 _- 81.08 79. 36.42 115.42 LI II I. Li AGRICULTURE 1.0 Forestry 1.10 8.50 7.0 0.8 1.2 * 5.05 4.3 Agriculture 9.00 35.0 30.0 2.6 6.25 4.6 Water Resources 24.00 36.72 41.0 4.1 * 0.1 0.1 0.1 * Fishing 0.24 0.86 1.0 1.A la L. 1,3 1 TRANSPORTATION 6 .41A -7.2LZ 15.41 LL2 21.52 EC01N10IC .A Ai ILI IL1 I6 IllRASTRUTURE 3 . 38.14 1.3 45.60 6 .31. 0 23.20 9 12.9 1 * Non-Rail 4.9 3.9 Coamunications 8.78 17.0 t8.5 8.50 4.7 * Railway w 6.84 8.8 17.8 6.80 1.8 3.0 2.2 Infrastructure 1.4 1.2 - Teleconumnications 7.35 6.7 8.0 6.00 1.1 2.0 2.8 Storage-Distribution 13.65 11.3 15.85 9.16 3.2 0.1 0.4 0.3 Industrial Zones 1.62 1.8 1.50 1.00 Il L L IL ss ALA R HeUIs 72. 61.42 10.6 63.50 8iSi.45 3847! 1l9 ILl 100 Z4 7. 143 0. 1. TQCAION/TAIG 60.4 3330 -27.1 31.50 4S.00 19.80 64.eo 6.9
SOCIAL L i63 11.7 INFRASTRUCTURE 21.33 hl 135.2a111 liso 3L61 4 I ZA 0 I 32 of which: Health (13.27) (21.50)(10.00) (24.77) (34.77) (1.5) (3.3) L. COM4UNITY FACILITI£5 1.0 32.67 +19.7 25.67 S16 1§.46 6711 1S.3
EXECUTION ENIKEERIILS ILl1141 -1.z 4A 2SI0 19L00 ILl2 33R2Q la 4.1 MISCELLANEUS 18.06 +18.1
11B.3 L.1 "_.32 A1 I T 0 T A L 13kL1 ALL."2.J 1.11 LILIA
of cal. 1 above. Cf Tableau 1.2, Col. 10. The figures from that table were converted to 1984 DA to obtain the figures * to 78.5 billion 1985 OA. ^* Data provided by the Algerian authorities (drawings on credit). The 71.3 billion 1984 OA are equivalent Forecasts by the Algerian authorities (Lo1 de Finances for 1986). by the Algerian authorities in may 1987, World Bank forecasts. **** According to data provided 61368/pB (5,2) Source: Data provided by the Algerian authorities. - 32-
3. E?,eted macroeconomicdevelopments 2.05 The exogenous conditions of functioningof the Algerian economy, togetherwith the endogenousconditions defined by the investment program, thus determine the trends of the major macroeconomic magnitudes that constitutethe core of the Plan. Under these conditionsthe Algerian planners have anticipatedglobal GDP growth of 6.6S a year (correspondingto annual growth of non-hydrocarbonGDP of 7.51). This projecteddevelopment is based, apart from additions to existing plant, on the expectationof "increased mobilizationof production capacities,"the effects of the public-sector restructuringand rehabilitating programs, and greater mobilization of manpoweraround the developmentobjectives. The overall dynamism is moreover the complex result of a set of sectoral trends, themselvesgenerated by specificstimuli:
(a) Agriculturalvalue added should grow by to 4.51 a year, representing sustained growth in comparison with the sector's historical performance. This would be achieved through increased effort to relieve the major constraint,which is availabilityof water, and thereforeof land that can be cultivatedefficiently, together with changes in the organizationof the sector designed to improve the utilizationof manpowerand plant.
(b) Growth of the hydrocarbonsector would be limited to some 41 by the weaknessof the world market. Growth of these two sectors would lag behind the general average rate; thus, even though they together account for 401 of total value added, the other sectors would all post fastergrowth rates.
(c) The overall annual growth rate for the other sectors that produce physical tangible value added would be 8.81, with the following individualrates:
(i) processing industries: 91 (assuming 85 utilization of installed production capacity), enlargement of production capacitieswhere these are inadequate,substantial productivity gains,and bettermatching of supplyto demand;
(ii) water and energy: 102, stimulatedby the developmentof demand and assumingmajor efforts in water supply and electrification of the country;and
(iii)construction and publicworks: 8.7%, stimulatedby the package of infrastructureand facilitiesprograms.
(d) The services(23.61 of total GDP and 261 of total value added) would post annual growth of 7.22 in responseto the pressureof final and intermediatedemand. - 33 -
2.06 With a continuedvery high investmentrate (402 of GDP), the tempo of accumulation(GFCF + inventoryformation) would be sustained(7.32 a year) and would in any case exceed GDP growth. The sluggish growth of exports (+5.3%a year) and the necessary slowdown of imports (+6% a year at most) together produce reduced residual consumptiongrowth of 5.92. Again, the private sector and the administrationswould post different overall consumption trends. Growthof publicconsumption should spurt (+7.52a year, as a result of expectedimprovement in the efficiencyof the services furnished),while private consumptiongrowth should slow (to about 5.71). In view of the continuedhigh populationgrowth rate (3.21), this still leaves appreciable room for growth of consumption(and thereforeof per capita level of living), in line with one of the major goals of the Plan.
4.Financial equflibria of the economy
2.07 In the absence of precise statisticalanalysis and data,s' the financialequilibria assceiated with the Second Plan can only be describedin qualitativeterms.
(a) Domesticfinances: TIe currentbudget is expected to grow by 6.5% a year. This would raise current expendituresto some DA 71.7 billion (constant 1984 dinars) by 1989. The projected stabilizationof hydrocarbon-basedtax receipts could be translatedas equivalentto some DA 48 billion (conistantdinars) in 1989. Recognizingthe need to raise the ordinary taxation burden,1' the planners estimated ordinary tax receiptsat the end of the Plan at some DA 88 billion. Assuming normal developmentof current resources,-3we arrive at total currentreceipts of about DA 155 billion (constantDA) for 1989 (table II.2). In total, the current budget surplus would be nearly DA 83 billion (constant DA) by 1989. Taking the appropriate components of the investment program and converting them into investmentbudget terms, we arrive at a total of about DA 70 billion (constantDA). The overall budget balance would rise to a positive amount of nearly DA 13 billion (constant)at the end of the Plan. Interpolatingthese projectiontrends on the 1984 startingsituation, which has an overallbudget deficitof DA 20 billion,would resultin an overall equilibriumrather than a surplus for the 1985-89Plan as a whole (table II.2). Consequently,for the 1985-89 period, it is very unlikelythat the Public Finance system will produce something differentfrom an overallequilibrium (Table II.2).
(b) The other domestic financingoperations, particularly those relating to production-unitinvestments, would have necessitated that the enterprises"increase their economic and financialefficiency and progressivelygenerate a cash flow at least equal to their
1/ Such as a table of financial operations or a consolidatedfinancial accountfor the economy. 2/ This tax burden,estimated at 251 of non-hydrocarbonGDP in 1984 (it was in fact already close to 281 for accidentalreasons at that time) would have to rise to 271 by the end of the Plan. 3/ World Bank hypotheses,not containedin the Plan. - 34 -
amortization fund so as to finance a large part of their investments"." The hypothesisadopted for households,that they would invest some DA 25 billion in construction,leaving a savings surplusof DA 30 billion availableto be mobilizedby the financial intermediaries,particularly the Treasury, to finance investment loans,was aimed essentiallyat reducingthe inflationarypressures generatedby the actual differentialsupply-demand discrepancies.2'
Table II.2: SUMMARYOF THE PUBLICFINANCES PLAN 3 (in billionsof 1984 DA)
1985 1986 1987 1988 1989
Currentreceipts 115 123 131 143 155 Currentexpenditure 56 59 63 67 72 Currentbalance 59 64 68 76 83 Capitalexpenditure 70 75 80 80 80 Capitalreceipts 0 5 10 10 10 Capitalbalance -70 -70 -70 -70 -70 Budgetbalance -11 -6 -2 6 13
(c) The external financing operationsare presented even more tersely. Externalreceipts were projectedfor the first few years of the Plan on the basis of stabilizationof the nominal unit price of the referencehydrocarbons (at around US$28-30/barrel),then at the end of the Plan by inflationadjustment of this nominal price. Value of imports is indexed to import prices rising by 4-5% a year. This would produce a surplusof DA 22 billion (constantDA) on goods and servicesaccount, strengthened by an additionalDA 11 billion surplus for the other balance sheet headings,giving a total current balance of DA 33 billion (constantDA). It is impossible to deduce any further useful informationabout the capitalaccount componentsfrom reading the Plan. The issue of balance of payments equilibrium thereforeremains problematical.
1/ Ibid.,p. 138. 2/ It must not be forgotten, however, that inflation has other causes, including in particular those resulting from lack of cost control or monetaryfinancing of the budget deficits. 3/ This table, which nowhere appears in the Plan Report, is an attempt to assemblethe indicationsscattered through the Plan coherently. - 35 -
B. The Second Plan (1985-89) and Its Adjustment to Adverse Circumstances 1. Collapee of the Oil Market
2.08 In October 1985 Saudi Arabia, the world's leading oil producer, decided,with the object of regainingits market share to adopt the principle of "netback"as the critericnfor determiningthe price of oil."' In final marketscharacterized by strongcompetition and a large supply surplus,prices fell sharply and rapidly. From a current average level of US$28/barrelin 1985 the unit price was to fall to some US$13/barrel(in netback values; the spot price can sometimesbe much lower: US$10/barrelor even less). At the end of 1985, after a great deal of controversywithin the oil producers organization,most (if not all) of them aligned themselveson the netback criterion. After February1986 Algeria aligned itself on this criterionfor 1 its condensatesales ' then progressivelyfor its crude oil sales.3 The principleinevitably spread to the pricesof the other hydrocarbons,linked in one way (indexing)or another (competition)to crude prices. Algeria,which at the end of 1985 was sellingits hydrocarbonsat an average price equivalent to US$28/barrelof oil, was reduced by the end of the first half of 1986 to tradingthem at an average oil price equivalentof US$16-17/barrel,4'a fall of about 40% in six months.s' A movement of this magnitude inevitably disruptedthe entire structureof the Second Five-YearPlan since hydrocarbon sales provide987 of Algeria'sforeign exchange receipts and 40% of its total budget receipts. This necessitatedrevision, if not of the Second Five-Year Plan,G'at least oi the modalitiesof its implementation.In June 1986 the Algerian Government,via a CorrectiveFinance Law,7', enacted a package of adjustmentmeasures designed to restore equilibrium. Lateral measures were
1/ Accordingto this principle,the price of oil is establishedby netting the market price (sale to final consumer)of the final productsback to the crude oil producer,a processthat takes accountof all cost elements. 2/ Cf. PetroleumEconomist, March 1986,vol. L III, no. 3, p. 109. 3/ Ibid.,October 1986, vol. L III, no. 10, p. 393. 4/ The price of Algerian LNG fell from about US$3.81/MBTUnatural gas equivalentin 1985 to US$2.32at the end of the first half of 1986, a drop of 33% in six months. 5/ The fall in hydrocarbonexport receiptsaffects both oil productsand gas becauseSONATRACH has decided to lower the gas prices initiallyprovided for in the long-term contracts signed with France, Spain, Italy and Belgium. This reductionwas imposed by the fall in crude and fuel oil prices,the slackeningof gas consumptionin Europeand the competitionby Sovietgas. The fall in export receipts affects not only SONATRACHbut also the other foreign-exchangeconsuming sectors of the economy. The fall in prices has cut into SONATRACH'sfinancial resources. With a drop of at least 502 in its gross profits,a continuedtax rate of 852 and a sharply diminishingcash flow, SONATRACH is finding it more and more difficultto meet its always high financingneeds. 6/ According to the Algerian authoritiesthis revision is excluded at the presenttime. 71 Details of the measures relating to this supplementalFinance Law are given in the Annex. - 36 -
also taken to supplementthe provisionsof the CorrectiveFinance Law. The developmentof Algeria's planned economy since 1985 has henceforth to be analyzedin this new light.-`
2. The lIvestment Pror: A Necessary Reeonsideration
2.09 As we shall see, the years 1985 and 1986 constitutean excellent experimentalsetting to evaluatethe respectiveweights of the three impulses which govern investmentpatterns in Algeria. These three impulses are the following: (i) voluntarism(which expresses itself mainly in the Five Year Plan),(ii) relativism(which expresses itself in the annual plan, necessarily subjected to constraints),and (iii) empiricism which reflects (through statisticaldata) what has actually been realized. Furtherniore,from a technicalviewpoint, the progress of the investmentprogram can be measured either in terms of levels or in terms of rates, both processes of investigationproviding complementary information. The analysis in terms of levelshas beea carried out by calculatingthe average value of investments during the median year of the Plan (550 billionDA/5 centeredon 1987 = 110 billion DA) and by distributingthese median values over 1985 and 1986 by using the conLtant annual growth rate of investments(7.5%) assumed in the Plan. The values that have been calculatedas such, which have been called "theoreticalAnnual Plan" for the purpose in hand, can thereforebe used to evaluate(i) the variationof the investmentprogram due to the actual Annual Plan, and (ii) the degree of realizationof effective annual investments relative to the planned theoreticalpath. In light of these two factors (Table II.1 bis) it can be observedthat the programfor 1985 had appropriated 88 billionDA (in constant1984 DA); in nominal terms, the 1985 Annual Plan amounted to 96.7 billionDA, which represents6% less in real terms than the level of the theoreticalAnnual Plan. In addition,only 81% (in real terms) of the budgeted funds have been spent. Indeed, the first year of the Five Year Plan which has met 81% of the targetsset for the actual Annual Plan, has only achievedthe three quartersof the "theoreticalAnnual Plan",accompanied by substantialand heterogeneoussectorial gaps. Performancesmay be divided into two categories:the first groups together the investmentsectors very directly controlled by the Central Government (Economic infrastructures, Housing, Educationand Training,Social infrastructures,Utilities) where the achievementrate of the Plan is close to or higher than 75%; the second category groups together all other sectors whose achievement rate is substantiallylower than 60%, the industrialsector, among others, showing obviousdifficulties of absorption. The analysisin terms of rates (part B of Table IIJ1 bis) allows for a finer analysis and shows three categories of performances:the first groups togetherthe sectorswhere the Plan achievement rate is close to or higher than 90% (Economicinfrastructures, Education and Training,Social infrastructures,Utilities); except for the Housing sector which is facing some difficulties,these are the same leading sectors in the first group previously mentioned, which confirms that these sectors are critical to the success of one of the Government'skey policy levers, investment policy. The second group consists of housing and agriculture, strategicsectors with an achievementrate of more than 80%; the industry
1/ The foliowingshould be precised: in December 1986, OPEP members agreed on the principlesof productionceilings and of a return to the posted pricessystem. Tab]e 11.1 bIS:
PLANNED INVESTMENTSIN 1985 AD 1986
Annual Plan Actual Rate of Annual Plan Actual Rate of 1985 Real Real. of 1986 Real Real. of 1984 /A Realis. Annual Initial Rtvised Theoret. Realis. Re1ised Effect. Theor. 198S Plan Effect. Effect. /e 1986 nnual Plan /b /a (a) In If Is/ (X)
A. LEVELS OF REALMIXON (1984 constant Industry billion DA) 19.1 25.1 29.9 15.4 61.0 25.0 22.4 32.1 15.S 69.0 Agriculture 7.75 9.1 13.6 7.6 83.0 10.4 8.3 14.6 8.3 94.0 Transportation 2.2 2.4 2.6 1.4 58.0 2.4 2.1 2.8 1.3 62.0 Economic Infrastructure 10.3 12.0 10.6 9.7 31.0 10.7 8.6 11.3 8.3 96.0 Hos1ins 12.2 10.0 14.8 10.7 107.0 9.1 7.9 16.0 S.9 7S.0 Education Training 7.6 8.0 7.7 6.9 B6.0 8.3 6.2 8.3 7.4 119.0 Social tnfrastructure 2.8 3.3 3.1 2.4 72.0 4.4 3.3 3.3 3.9 118.0 Community facilities (inc. PCD/PMU) 14.95 1S.5 8.9 1S.3 99.0 1S.6 11.6 9.6 13.5 116.0 Construction Enterprises 2.9 2.6 3.3 1.9 73.0 2.S 2.1 3.5 1.4 67.0 TOtAL 79.8 88.0 94.5 71.2 81.0 88.3 2.5 101.5 65.5 90.0
Rate of Rate of w 8S Tranche 1985 198S Real 6 Tranche 1986 1986 Real of 85-89 Nominal Real Realis. of Plan UZtnnal Real Realis. MX)/A Plan Realis. Realis. ;d 1985 8S-89 Realis. Realis. End 1986 lb hb (X) lb (1)
R. RATES AND XtUOES OF GR9ITH Industry 8.6 100 108.6 88.5 80.6 74.2 117.9 97.9 81.2 68.9 Agriculture 22.3 100 122.3 108.3 98.1 80.2 149.6 130.3 107.1 71.5 Transportation 6.0 100 106.0 68.2 63.6 60.0 112.4 77.3 S9.1 52.6 Economic Infrastructure 2.3 100 102.3 103.9 94.2 92.1 104.7 98.1 80.6 77.0 Housing 7.9 100 107.9 96.8 87.7 81.3 116.4 59.0 48.4 41.6 Education Training 1.5 100 101.5 100.0 90.8 89.5 102.7 118.4 97.4 94.8 Social Infrastructure -3.7 100 96.3 87.0 85.7 89.0 92.7 171.4 139.3 150.3 Coinmity Facilities (inc. PCDfPMU) -13.6 100 86.4 108.0 102.3 118.4 74.6 109.7 90.3 121.0 Construction Enterprises 8.0 100 108.0 71.3 65.S 60.6 116.6 62.1 48.3 41.4
TOTAL 7.5 100 107.5 98.2 89.3 83.1 115.6 100.0 82.1 56.7
/A Data provided by Algerian Authorities (credits utilization for the levels of 1984). /b Data provided by Algerian Authorities (current values have been converted in constant values of 1984). /L World Bank calculations after data of General Report of 2nd Five-Year Plan, p. 135. /d Data provided by Algerian Authorities, converted in 1984 constant DA (investoent credits utilization). /& Source : 1986 Loi de Finances. Official Journal of Algerian Republic. December 28. 1985. pp. 1343 SgMa. (recalculated values in 1984 constant DA). £f After data provided Algerian Authorities for the Loi de Finances rectificative (recalculated in 1984 constant DA). Ia After data provided by Algerian Authorities in May 1987. World Bank estimates in 1984 constant DA. /h Cmpared with the 1984 investments converted to the norm 100. 6136B/p9 (S.4) - 38 -
sector (where three quarters of the theoreticalPlan has been realized), transportationand construction(602) constitutethe third group. For this latter,the gap recordedas early as the first year of the Plan is such that it is very unlikely that it will be filled during the remainingduration of the Plan. The conclusionsto be drawn from this first year of the Plan are that the effective control of investmentsexist mainly in those activities which are directly controlledby the Central Government;on the other hand, the other activitiesare subject to actualconstraints which are too strong so as to permit investmentsto be made with the desired intensity. One of the objectivesof the 1986 Annual Plan was to acceleratethe rate of investments by increasingby 10.5% (in constant1985 prices) the amount of the investment budget (106.9billion DA), that is, a level relativelyclose to the theoretical 110 billion. In terms of growth rates, the global growth index should have reached 115.6. The events of 1986 have neverthelesscalled for a substantial review of the investmentprogram. It is then very unlikely that effective realizationswould be higher than 65.5 billion DA (in 1984 values),i.e. 352 below the targetlevel and more than 40% below the targetrate.
2.10 The principleson which the investmentprogram was revised stem from threemajor considerations:
(a) A considerationof fact: the ongoingprograms must be completed;the programsstill unstartedwill be deferred.
(b) A budgetaryconsideration: the sharp fail in budget resourcescalls for deep and urgent cuts in expenditure, including capital expenditure. Capital expenditures proper (those for which the administrations were directly responsible, for example for infrastructure)are reducedby DA 16 billion (currentDA), from the initial budget allocation of DA 61 billion to DA 45 billion (1986 DA). Converted to 1984 DA, this represents approximatelyDA 40 billion for direct investment. Planned investment financing authorizations for the public-sector enterprises (comprising budgetary loans plus non-budgetizedloans plus self-financing)are down from DA 52.5 billion to DA 47.5 billion (1986 DA). In 1984 DA terms, the latter figure representsfinancing authorizations1' of DA 41.5 billion. Taking into accountother constraints,which still persist (on credit utilization,physical availability of plant, foreign-exchange availability, etc.), mobilization of these appropriationsshould not exceedabout DA 34 billion (in 1984 DA).
(c) A political consideration: at no time was there any question of revising the priority ranking as defined in the Second Five-Year Plan.2/ However, the Algerian authoritiesput the emphasis on the followingconsiderations:
- Agricultureremains an investment priority sector on which the macroeconomicconstraints must have only a limitedimpact;
1/ That is, a ceilingon actual investment. 2/ See paragraph2.01. - 39 -
- In industry,preference is to be given to all investmentactivities that make it possible:
(a) to obtainan increasedreturn very rapidly; (b) to relievethe variousconstraints; (c) to save on foreignexchange.
- In the hydrocarbonssector, adjustment measures have been necessary:
(a) a hydrocarbons law has been enacted with the object of attractingforeign companies back to Algeria; (b) investmentin hydrocarbons,classified as a priority sector, have been kept at the level originallyset in the 1985-89Plan; (c) the Governmenthas assignedpriority to hydrocarbonsproduction in order to sustain export receipts, vital to meeting the economy's short- and medium-termforeign exchange needs; at the same time, the need is recognizedto diversifyexports to reduce Algeria's dependence on oil, and this action is encouraged,although the effects will really be felt only in the long term.l'
1/ (i) In August 1986 the Governmentenacted a law to encourageresearch and explorationby foreigncompanies. The latterproduced only 300,000t of crude oil in Algeria in 1985 (out of a total of 34.3 million t), against 10 million in 1980 (out of a total of 47 million). Their reactions need to be determined both to the new tax incentives (royaltiesof 12.5-16.25%instead of the usual 20% for investmentsin still unexploredareas, and profitstax of 65-752 insteadof 85%) and to the geographicareas where they are encouragedto operate. Above all, the question will arise of the best means of restoring appropriateconditions for the returnof the foreigncompanies.
ii) The Government has decided to sustain investmentat DA 8 billion (about US$1.7 billion) in 1987, even though in other sectors investmenthas alreadybeen cut by 40% or more. The asthoritiesare aware that, to maintain Algeria'svital export receipts,investment must be preserved if not expanded. The problem is how to finance it. The sharp fall in SONTRACH's receipts has led it to seek externalsources of financing.
(iii) The Government is maintainingits hydrocarbonproduction goals in order both to sustain Algeria's export receipts and to meet the rapidly growingdomestic demand. In view of the tightenedfinancial constraintsand the large numberof types of hydrocarbonsthat can be produced in Algeria, an optimizationmodel needs to be worked out. It is necessary to identify the most profitable activities economicallythat allow maximumproduction at lowestcost. Table 1II.3: SECONDFIVE YEARPLAN 1985-89: MACROECONMCPRO3ECTIONS AN9 PERFORMANCESTATUS AT ENDOF 1986
(In billions of constant Algerian dinars and in percentages)
Actual Values at End-of-year Lead (.) aggregates constant 1984 Planned average annual or Las (-) for base arices growth rate growth rate in relation to vear 19a4 (ml MS* 19B6* 1115f9 lJ 1986* is) Plan opal 1 2 3 4 5 6
I. Anarantes Gross Domestic Production 225.3 237.2 237.0 6.6 2.6 -4.0 Government Services 34.5 36.2 35.0 n.a. 0.7 n.a. Gross DomesticProduct 259.8 273.4 272.0 n.a. 2.3 n.a. FinalConsuption 159.1 168.5 171.2 5.9 3.7 -2.2 GFCF 87.3 89.4 70.0 7.3 -14.0 -21.3 Changes in Stocks 7.3 4.2 Exports 67.7 69.3 72.8 5.3 3.7 -1.6 I*orts 61.6 58.0 42.0 6.1 -17.4 -23.5
It. Value Added h_ Sector Agriculture 19.5 24.7 26.0 4.5 15.5 11.0 Hydrocarbons 62.0 64.0 60.0 4.0 -1.6 -5.6 Processing Industries 26.6 28.7 ) 9.0 ) inVes and Quarries 0.7 0.8 ) 32.0 6.6 ) 8.84 3.3 -S.5 WAter anO Energy 2.7 2.5 ) 10.0 ) Construction/Public Works and OiI works 38.4 40.2 40.0 8.7 2.0 -6.7 Services S2.1 52.3 55.0 7.2 2.8 -4.4
Total Value Added 2Q2L0 21 ZJ.J2 LI 2l 39 Iwort Duties and Taxes 23.3 24.0 24.0 6.9 1.5 -5.4 fiross Dmistic Production 225.3 27L.2 2UL&0 Li 2A A
(a) Actual figures. These may differ appreciably from the statistical data on which the Plan was based, which at the time were only estimates. < Provisional estimates. n.a. - not available (these aggregates are not calculated in the context of Algeria's national accounts).
Soruce: Data provided by the Algerian authorities and World Sank estimates (e). For further details. see Annex.
61368/plO (5,25) - 41 -
3. The New Macroeconomic Trends
2.11 Growth rates will turn sharplydownward as a result of the lossesof receipts (Table II.3):
(a) The year 1985 had already produced uneven results. Excellent performanceswere posted by agriculture which, helped by very favorableclimatic conditions,generated a notable growth of value added (+272),and by the processingindustries (+8% growth of value added). In contrast,the hydrocarbonssector (which accounts for a large share of total value added) grew by only 3X, water and energy lost ground,construction and publicworks (17% of GDP) advancedonly 4.7X, and services (25b of GDP) also did no better than 0.4%. Overall, GDProductionposted average annual real growth of 5.32, which is an average performance in historical terms but 1.3 percentagepoints behind the average annual target. The relative trends of final demand aggregates also reflect tensions: while consumption(5.9X) grew appreciablyfaster than GDProduction(5.3%), the reasonsare to be found in an abundanceof food productsand, to a less degree, livelygovernment consumption. In contrast,the weak growth of investment(-l1) reflectsmore complex processes:serious reductionsin inventories(-57X) and a reduced increase in GFCF (+2.4Z)mostly supportedby capital formationby the Administrations, since the productivesectors with the highest shares were unable to absorb the plannedinvestments.
(b) The events of 1986 will acceleratethe trends. The sharp fall in hydrocarbonprices will boost export volume growth only slightly but lower receiptswill call for very sharp cuts in the import program. Correlatively,the lower availabilityof resources will inevitably also generatea very sharp reductionin fixed capitaland inventory accumulationthrough the revisionof the annual investmentprogram under the supplementalFinance Law. The austeritybudget applied to current expenditures,together with the economic austerity very probably imposed on the population,will sharply reduce the rate of growthof final consumption.In sum (see Table II.3, col. 3):
(i) Over the year 1986 alone, GDP should remain stagnant; final consumptionwould grow by only 1.6b in real 1984 terms;1' investment (GFCF + inventory formation) should fall back by nearly 25Z and importsby about 27.62 (all percentagesexpressed as changesat constant1984 prices).
(ii) Over the first two years of the Plan (Table II.3, col. 5), the economic growth trends will lag appreciablybehind the Plan goals (table II.3, col. 6): GDP growth will fall short by 4 points, consumption will lose 2 points and per capita consumptionwill begin to decline; investmentwill shrink by nearly 20S of its starting value and import growth will lose 24 percentagepoints as a result of the operations to restore macroeconomicequilibrium.
1/ This means that real per capitaconsumption will also decline. - 42 -
4. The OtherEauibra
2.12 As we have seen, public finances equilibriumis to be thoroughly overhauledand restructuredover at least two years. The related projections are shown in Table II.4:
(a) For 1986, the recorded-'drop of nearly DA 26 billion (currentDA) in oil taxationreceipts has been offsetonly in part by an increased effort of collection of other taxes. The provisions of the supplewentalFinance Law point to an additionalDA 5.7 billion or so in ordinary receipts and DA 3 billion in other receipts. The uncontrolledincrease is current expenditures (+18.5% in nominal value) has underminedthe efforts to reduce the negative balance in Special Accounts. The current surplus of the budget has then been reducedby 502 (comparedto 1985) leavingan insufficientamount of funds available to finance the initiallyplanned investmentprogram. Direct public-sectorinvestment expenditure have fallen to about DA 41.3 billion (DA 3.7 billion below the Finance Law ceiling), i.e. less than in 1985. Treasury-financedinvestment credits have been reducedto DA 25.4 billion. Overall,the capitalbudget balancedoff at DA 59 billion, i.e. nearly DA 10 billion less than in 1985. The total budget deficit (of DA 35.3 billion) has been up by DA 11.6 billionin a much more difficulteconomic climate than that of 1985. Since one of the Algerian Government'sgoals was, moreover, to stabilizedisbursed outstanding public debt at its current level (US$13.6 billion),"' no external resources can be provided to finance the deficit. Domestic savings, already in sharp demand in 1985, could only cover DA 9.3 billion (in particul.r because reductionswill also occur in the surpluses of the other public institutions). Sight deposit funds (amountingto DA 2.4 billion) have been mobilizedentirely in the form of postal checkingaccounts since the other Treasury resources cannot be imperilled. Consequently,the deficitwas largely financedby monetary financing, 93% of it in the form of Central Bank advances (DA 23.5 billion). Thus, in 1986 the budget deficit has representedabout .0%, and monetary financingby the Central Bank by itself about 82, of GDP. In an economy in which creeping inflationis entrenchedthis has not helped to relieve inflationarypressure; on the contrary,whereas in most of the countrieswith which Algeria trades the inflationrate is declining(to about 2% a year), in Algeriait is on the rise and this is becoming a source of serious worry: Algeria's competitive disadvantagein terms of prices will tend to worsen, creating new obstacles to the diversificationof non-hydrocarbonexports and, failing global monetary adjustment,helping to distort the terms of economiccalculations a littlemore.
1/ As of the end of 1986, according to data provided by the Algerian authoritiesin May 1987. 2/ See paragraph2.14. - 43 -
Table II.4:
SUMMARY TABLE OF ALGERIAN PUBLIC FINANCES
DURING THE SECONDFIVE-YEAR PLAN
(In millions of current Algerian dinars)
1985 1986* 1987**
I. CURRENT OPERATIONS A. CurrentRevenues 106,668 90,629 96,000 a) Ordinary Taxation 47,753 53,425 58,000 b) Oil Taxation 46,787 21,439 22,000 c) Other Revenues 12,128 15,765 16,000 d) Credit Balances Special Accounts
B. Current Expenditure 60,832 67,056 63,000 a) Ordinary Expenditure 53,748 63,690 63,000 b) Debit Balances Special Accounts 7,084 3,366
C. Current Account Balance (A - B) 45,836 23,573 33,000
II. CAPITALOPERATIONS A. InvestmentExpenditure 72,328 66,732 75,000
B. Investment-linkedResources * 2,725 7,770 10,000
C. Capital Account Balance 69,603 58,962 65,000
ItI. BUDGET BALANCE (I, II) -23,767 -35,389 -32,000
IV. FINANCING 23,767 35,389 32,000 A. Net ExternalLoans 52 93
B. Domestic Savings Mobilization 14,935 9,308 10,000
C. Mobilizationof Sight Resources 4,978 2,392 2,000
D. Recourse to Banking System 3,802 23,596 20,000
* According to data provided by the Algerian authoritiesin May 1987. ** Forecasts.
Sources:Data provided by the Algerian authorities (Ministryof Finance). For further details see Annex, Table 5.1 bis.
6136S/pil (3/9,S8) - 44 -
(b) A sharp reversal of this movement is scarcely to be expected in 1987. A fresh effort in the area of ordinarytaxation will raise the fiscal burden too close to an intolerablelevel. Meanwhile, other resourceswill increaseonly nominally. Assumingnominal growth also of current expenditure,the current account surplus would reach DA 33 billion, an improvementof 4% over 1986 in constant 1985 values, at best. The nost recent availabledata (first semesterof 1987) show that the capitalaccount balancefor 1987 should be close to DA 65 billion. This would be due to two factors: (i) a cut in Treasuryloans down to DA 30 billion (whilethe AppropriationLaw has alreadyforecasted an amountof DA 44 billion),and (ii) an increased effort to collect debts linked to investments;investment grants (45 billion)will probablybe exhaustedin full. The overallbalance of the Public Finances is then expected to totalizea deficit of DA 32 billion. To finance the gap, it will be necessary to resort even more to monetary financing through the banking system (DA 20 billion). In 1987, Algerian Public Finances are still expectedto have a determiningdriving effect on inflation.
2.13 Overall monetaryand financialequilibrium (Table II.5) at the start of the Plan exhibits contrastingtendencies: replenishmentof net foreign assets to nearly DA 15 billion is indisputably one of the positive signs'' and providesthe economywith at least a temporarysafety valve. The growth of debt claimson the Government,while still substantial(+14.9%), is slowed considerably,while the growth of credit to the economy has reverted to a reasonablerate of just over 11%, more or less the same as the growth of resourcesallocated by the Treasury. Thus, monetary expansion in the strict sense (Ml) appears to slow appreciably(+12.1%), most of the new contributions to the financingsystem again taking the form of time and savingsdeposits (a quite remarkablegrowth of 30%). Moreover,the financialsystem has been able to procurenearly DA 10 billionin incrementalexternal resources.
2.14 This progressivelyimproving situation has undergonesome changes in 1986; it could be furtherimproved in 1987 providedthat substantialadjustment measuresare taken. The externalpayments disequilibria recorded in 1986 has already led to a substantialcut in foreign exchange reserves in order to avoid swellingAlgeria's external debt, in line with the Government'starget. Net foreignassets have thus been reducedby 46.3%. The domesticdebt of the CentralGovernment has continuedto grow rapidly (+32.2%)and has implied,in order to maintainthe balance of macroeconomicaggregates, a continuedgrowth of foreignlong-term liabilities of the banking system (howeverat a reduced rate of 18%, versus 45% in 1985). Although this externalflow had not been accountedfor initially,it has enabled to limit the growth of MI at about 11%. However,even at this "reducedrate", the creationof money has remained excessive (and more preciselywhen it is related to a zero growth of GDP). This situationhas also been exacerbatedby the fact that savershave adopted a particularlycautious behaviour and have saved only marginally compared to 1985 (+2.4% in outstandingfigures). Since the Central Governmenthas also substantiallyreduced its inflowsof funds (+20 billionDA), the expansionof credit has been growingat a rate of 5.1% only (comparedto 11.3% in 1985).
1/ It should be borne in mind that these net foreign assets deteriorated substantiallyduring the last three years of the 1980-84Plan. Table II.S:
SIMPLIFIED MONETARYSURVEY (In millions of Algerian dinars)
1984 196S 1986* 1987* 1985 1986* 1987*
AMOUNT OUTSTANDINGAT END OF YEAR ANUPALFLOWS (AND % CHAnGE IN AMOUNTOUTSTANDING)
Net Foreign Assets 9,311 14.885 8,000 7.000 5,574 -6.,85 -1,000 (59.9) (-46.3) (-12.5) Claims on Government /a 95,474 109,666 145,000 160.000 14,192 35.334 1S,000 (14.9) (+32.2) (+10.3)
Credit to the Economy lh 410,355 456,640 480,000 500,000 46.285 23.360 20,000 (l1.3) (+S.1) (+4.2)
ASSETS LIUBILIMES 5I1.140 581.191 633000 ML000 66.QSl S1.809. 34.000L1 (12.3) (.8.9) *S.4)&
Money 180,433 202,230 224,000 232,000 21,797 21,770 8,000 (12.1) (.10.8) (3.6) Quasi-money /1 41,249 53,718 5S,O0O 60.000 12.469 1,282 S,OOO (30.2) (+2.4) (+9.1) LT External caMitments /4 20,471 29,6S5 3S,000 40,000 9,184 5.34S S000 (44.9) (+18.0) (14.3)
Larmarkod public funds /g 253,969 283,982 304.000 320,000 30,113 20,018 16,000 11.8) (.7.05) (5.3)
Net iseotlaneous Liabilities 19.018 S,606 1S.000 15.000
AL Including BAD ant CUEP claims. /k Including MAD and CHIP loans. /s Ineluding savings deposits with CNEP. /4 Including those of BAD. This heading does not include all mediu- and ong-term comuitments but only those involving financial intermediaries other than the Treasury. /i Including the funds allocated to BAD and CNEP.
* Forecasts by the World Bank.
Source: Based on data provided by the Algerian authorities.
61364Jpl2 (5.20) - 46 -
Within thin overall framework,the additionalfinancing requirements (if any) of the final units have necessarilybeen satisfiedwith their own resources. In 1986, Treasuryoperations have obviouslycleared the financialnetwork by crowdingout those units for which the financingdemand exceededthe existing potential. This effect will have been salutary if and only if those units have drawn the right conclusions:focus on improving their profitability. 1987 could then become a test year: if the Central Government is able to limit to 10% the growth of its domestic liabilities,and if externalpayment requirementscan be limitedto an additionaldecrease of about 12.5% in net foreign assets and to a slowed down increase (by 14%) of long term foreign liabilities,the monetaryexpansion could be reducedto a 3.6% growth. This growth rate for MI would be in the same line as the growthof GDP, thus easing inflationarypressures. Only the facts will show if the Government has actuallytaken this path and if its policywill prove to be successful.
2.15 Perhapsparadoxically, it is Algeria'sexternal equilibrium that will pose the least problems. The transitionfrom an oil price equivalentto about US$28/barrelin 1985 to about US$17 in 1986 cuts unit export receiptsby 40% (for constantsales volume). However, imports can be reduced commensurately because:
(a) the excellentresults of the 1985 and 1986 crop years will make it possible to reduce food imports accordinglyand even to build up certainstocks;
(b) until 1985 the importingunits also stocked many capital goods and large quantitiesof intermediategoods (sometimesup to a year's requirements)so demandfor furtherimports can be reduced;
(c) the importsubstitution policy will be continued;and
(d) in particular,Algeria operates a policy of direct import quotas (through the PGI and the AGIs) which avoids it having (at least initially) to use the exchange rate as its adjustment instrument. The reduction in imports decided on in 1986 (a cut of about 27%) should suffice to hold the balance of payments current account deficit to about DA 7 billion (about US$1.5 billion). Financingof this deficit - constrainedby the Government'sgeneral decision to maintain outstanding disbursed external debt at a constantlevel of about US$13.6billion (see the StatisticalAnnex) - could be accomplishedby drawing down the exchange reserves, which will slide back to US$1.5 billion in 1986, i.e. only two months' imports,a ratiothat is desirableto be maintainedthereafter. Debt amortization (including interest), which represents about US$5 billion a year (of which interestalone accountsfor US$1.2 billion) will have to be financed througha package of operationscombining: the mobilizationof certainundisbursed portions of the existingdebt commitments(the differencebetween total and disbursedcommitments is abouL U6$6 billion),calls on fresh capital to replacecommitments - 47 -
reaching maturity (Algeria appears to have had no difficulty in raisingloans on the market in 1986, particularlywith syndicatesled by Japanesebanks), " and marginalrecourse to short-termcredit.
5. Mediun-Term Prospects for the Investment Plan
2.16 Consideringthe crucial role of investmentsin the overalleconomic process of Algeria it is important to assess the potential"robustness" of the investmentprogram; this means that one should analyze to which extent the initially desired programr&'is likely to become the program which will actually be implemented, taking into account the new conditions and constraintsaffecting the economy. The following table (II.6) provides the prospectivesynthesis which can be applied to the program,resulting from a complex task which takes into consideration: the data and information gatheredby the mission during its discussionsin June 1986 and May 1987, the changes already observed for 1986, the sectoral analysis included in the second part of this report (which indicate both the constraintsand the choices made concerning the sectors), as well as the overall resource constraint.
Table II.6: PROSPECTIVEFUTURE OF THE INVESTMENTPROGRAM 1985-86 Based on drawingson opened credits (in billionconstant dinars of 1984)
Total % of 1985"6 1986"a 1 98 7 'k 1988'k 1 98 9 'k of 2nd realization Plan of Plan
Industry 15.4 15.5 16.0 16.0 17.0 79.9 45.9 Agriculture 7.6 8.3 9.0 9.0 9.0 42.9 54.3 Transportation 1.4 1.3 1.5 1.5 1.5 7.2 48.0 Econ. Infrastructure 9.7 8.3 8.5 8.5 8.5 43.5 70.5 Housing 10.7 5.9 7.0 8.0 9.0 40.6 47.0 Education& Training 6.9 7.4 7.0 7.0 7.0 35.3 78.4 SocialInfrastructure 2.4 3.9 4.0 3.5 3.0 16.8 93.3 Utilities 15.3 13.5 9.0 8.5 8.0 54.3 105.1 BuildingCompanies 1.9 1.4 2.1 2.0 2.0 9.4 49.5
TOTAL 71.3 65.5 64.1 64.0 65.0 329.9 60.0
/a Cf. Table II.1 bis. /b See explanationsprovided in text, para. 2.15.
1/ It appears moreover that Algeria has reached the point where it can henceforthaccept terms that are slightly less favorable than in the past but open up new financing "windows" which can give it the room for maneuverit is going to need. 2/ The programshown in Table II.1. - 48 -
2.17 This table calls for the following comments : in the industrial sector,the share attributedto the hydrocarbonssubsector should be close to the third of the total, taking into account the vital nature of these activities. The refocusingof Governmentactivities in priorityareas such as the productionof essential infrastructuresshould contributeto relatively favor the subsectors of economic infrastructure,education and training, utilities (where the social pressure is very strong and cannot be contained withoutany risks),and of social infrastructure(in the absenceof which the urgent demographicand health problems cannot be resolved). The progress already made in the field of social infrastructureand utilities should be maintained even if, in the case of the latter, the absolute level of investmentswill be substantiallyreduced. However, it is feared that two negativeaspects will persist,due to structuralconstraints : investmentsin both the housingand buildingsectors where it will be difficult to make up for initialdelays.
2.18 To conclude, it should be noted that the prospectiveinvestment peformancesthat have been exposed remain very satisfactory(compared with those of developingcountries with similarGNP levels)and would representfor the Algerian economy a successful achievement in an unfavorableeconomic situation: the second Five-YearPlan would accumulate(in constantdinars of 1984) approximatively330 billion dinars in new investments,which represents nearly60% of the initiallytargeted objective, i.e. a satisfactoryperformance as comparedwith the first Plan, given the accompanyingcircumstances.
72S28 - 49 -
CHAPTERIII - LONG-TERMPROSPECTS FOR THE ALGERIANECONOMY
3.01 Just as it took several years to restore basic equilibrium to the economies of the industrialized countries in the aftermath of the various "oil shocks," Algeria's economy will have to contend, at least for the remainder of the Second Plan, with a number of factors making for instability. The central question needing a response, even if not immediately, tVerefore becomes: can Algeria resume stable, balanced growth that will enable it to attain reasonable objectives? To answer it, the preceding "clinical" analysis, though necessary, is not enough; it must be complemented by some more structural analysis designed to reveal the factors that may be decisive in bringing about this outcome. A very important place must also be accorded to organizational and institutional factors, in which considerations of "economic doctrine" may be relevant, so profoundly is Algeria's economy marked by these social choices. By looking from these two angles we may hope to get a clearer picture of the deep and sometimes contradictory forces shaping Algeria's economy.
A. Analysis of the Dynamic Forces in Algeria's Economy
3.02 The fact that Algeria's economic system is centrally planned makes it possible to divide analyticallyi/ the forces responsible for the dynamics of its development over the last ten years into two groups, namelyl':
(a) The forces built into the structure of the Algerian production and trade apparatus which generate an "autonomous" motion of the Domestic Product.
(b) The forces resulting from the control apparatus of the economy. They operate mainly via the following variables1 /: public consumption and direct investment of the Central Government. They produce what is usually called a "forced" motion of the Domestic Product.
Thus, globally, the evolution of GDP should result from the (additive, by assumption) combination of these two forces.
3.03 When applied to the 1974-85 decade, this analytical apparatus allows to derive a number of interesting features, inter alia:
(a) a noticeable downward trend of the dynamic performances related to the forces producing the "autonomous" motion: whereas these forces (ceteris paribus) had been driving forward the economy at an average annual rate of 6.42 during the first half of the decade (1975-80), during the following period (1980-85) they were only generating, on average, an annual growth rate of 42. Keeping in mind that the population growth rate is 3.2% p.a., this leaves very little room to manoeuvre for improving living standards per capita.
1/ This analysis is that of the World Bank, and does not necessarily represent the approach of the Algerian authorities. 2/ In a formalized framework which is, ipso facto, a necessary simplification. 3/ Other control variables could have been selected. - 50 -
(b) This trend,however, has been offsetby the intensityof the impulses resulting from the control variables. During the decade, the capacity of public consumption to stimulate production through increaseddemand has noticeablyimproved. Direct investmentsmade by the CentralGovernment have also played a positiverole in prompting an induced production which has supported the overall economic momentum.
3.04 The present circumstances(as well as the necessity to preserve satisfactoryfuture prospects)require an attempt to rebalance the relative intensitiesof these two sets of forces. On the one hand, given the current financingconstraints, the Central Governmentis no longer in a position to intervenewith the same intensityin the overall economic process. On the other hand, the new policy towardsa more decentralizedeconomy will require an increaseddependency on the production and trade apparatus to promote economicgrowth. Algerianauthorities seem to be aware of these requirements; they have reachedsimilar conclusions through different analytical devices and are apparently determined to carry out the "actual decentralizationof investments(...) so as to directly involve the banks and enterprisesas far as the efficiencyof investmentsis concerned".
B. Organizational and Institutional Components
3.05 Under the Second Five-Year Plan, Algeria has embarked on major organizationalchanges. Before examining them let us note that in terms of macroeconomicpolicy, Algeria has given an impressivedemonstration of its ability to respond in the short term to the challenge of the fall in oil prices. The decisions taken in June/July1986 constitutea coherentset of adjustmentmeasures: the objectiveof stabilizingthe external debt at its current level and the imperativeneed to restore the trade balance have led the authoritiesto make major reductionsin import authorizations. The loss of oil-relatedrevenues has led to a series of austeritymeasures affecting both the State'scurrent expenditure and the capital expenditureit controls, together with measures to offset the loss of receipts (domestic taxes on fuels,stamp duties,elimination of tax exemptions... ). Even if part of the adjustmentis based on the two-foldassumption (i) that the fall in oil prices is temporary,and (ii) that a significantportion of the adjustment can, without great risks-l9 be transferred to the financial system, the determinationof the authorities to undertake further public expenditure reductions in 1987 is a sign of their desire to maintain the pIincipal macroeconomicequilibria, even at a lower level of activity. In particular, the decision to stabilize the external debt shows that the Algerian authoritiesare not hesitatingto tackle the difficultiesconfronting them, ratherthan passingthem on to futuregenerations.
3.06 With the State reverting to its traditional and top-priority strategic task of providing quality infrastructure,it is the sectors producing significantamounts of value added that must be regarded as the sourcesof a revivalof economicactivity, above all the industrialsector.
1/ This assumption is, however, crucial: any mistake will lead to acceleratinginflation. Accordingto the most recent data (Spring 1987), inflationin Algeriashould have been around122 in 1986. - 51 -
It should be possible to make progress in industrialorganization through small-scaleinvestments, pertaining to: (i) the allocationof functionsamong enterprises;and (ii) the natare of regulatoryaction and control.
3.07 The industrialrestructuring undertaken in 1982, in splittingup the very large enterprisesinto new units specializedby product line and by function,was an advance in that it createdsmaller, more specializedunits. It was, nevertheless,more appropriatefor the industries producing basic goods than for the manufacturingindustries. As regards the latter, it is worth lookingagain at:
- the separationof distribution-production-developmentin the various enterprises;
- the excessive specializationthat rules out enterprise strategies based on a certainlevel of diversification.
In that part of the heavy industry sector that produces intermediategoods many tasks are not performedas a resultof raw material supply difficulties and very sharp fluctuationsin orders. Since the latter emanate very largely from the public enterprises,the circulationof flows of intermediategoods should be better organized. This entailsdeveloping planning skills in order to strengthenthe various logisticalchains concerned,within enterprisesand the sector. Finally, the sector as a whole lacks industrial maintenance servicescapable of ensuringrepairs to equipment;furthermore, the output of these enterprisescontains a significantproportion of rejects and poses quality control problems, which should be a spur to develop "operational efficiencydepartments" in the units.
3.08 Among the regulatoryand control measures to which the enterprises are subjectare some that cause major difficulties.
(a) From this standpoint, the AGI allocation machinery should be reorganized. One must, as a matter of principle, query the net benefit of a procedurewhich provides some foreign exchange savings at the cost of substantialand often very sharp reductions in capacityutilization. A generalreview of importprocedures could be undertaken to give a progressivelymore important place to the exchangerate as a resourceallocation criterion.
(b) Price-fixingmethods could also be reviewed for activities not involvingbasic consumer products. Although it may be possible to defend the idea that market pricingcannot be systematicallyapplied to basic goods, and thereforethat some efficient enterprises,via transfersand subsidies,may have to financethe deficitsof certain less efficient priority sector enterprises,the system has more perverse effects when it involves manufacturing enterprises. Althoughany assessmentof the current method of relating prices to productioncosts remains problematic,it would nonethelessseem that prices reflectproduction conditions fairly closely only in the most efficiententerprises, with the resultthat: - 52 -
- the self-financingcapacity of these enterprisesis limited;
- structuraloperating losses become a permanentfeature of the less efficiententerprises;
- an ex-post transferoperates in such a way as to penalize the more efficiententerprises.
The best course of action to follow here would be to apply market pricing as widely and as quickly as possible,bearing in mind the cash flow requiredto raise levelsof self-financing.In view of the particularproblem of priority goods, several pricing systems could be envisaged.
(c) The almost exclusiveemphasis on productionobJectives and capacity utilization rates should be broadened through the addition of criteria more directly based on the income statements. This will only be possible if the above-mentionedconditions are met, if the enterpriseis in a position to operate a more autonomouspersonnel policy(including the possibilityof releasingsurplus personnel)and if bankingconstraints are exercisedunder normal conditions.
Excessive polarization around production objectives also has consequencesfor work organization.By leadingto taylorizationand a very advancedtechnical division of work, it may end up by harming productivity. One indication of the room for progress within enterprisesfrom a work organizationstandpoint is the level of interestdisplayed by workersin their tasks.
Along the lines of the recommendationsin the Plan, one effective method of gradually restoring the responsibilityof the enterprise for its performance would be to increase the pressure on its financial results, which requires that the enterprise be less constrained as regards inputs, prices, development policy and personnelmanagement.
3.09 To restoreeconomic momentum it is essentialto developsignificantly the private sector. On this sensitive issue, Algerian authorities (and particularlythose in charge of the industrialsector) indicate that the countrylacks "entrepreneurs"in the schumpeteriansense; they stress the fact tht "private entrepreneurs"who request a licence to operate from the Governmentare mainly driven by speculationmotives (as experienced,for instance,in the spare parts sector). From this viewpoint,an analysisof the regulationsgoverning the private sector leads to the conclusionthat these regulationsare the very obstacle to the effective operations of private entrepreneurs(in the schumpeteri.ansense). In particular,several drawbacks derive from the fact that these entrepreneursare consideredto be strictly complementaryto the public sector. Firstly, this situation constrains the financialsupport from the private sector to arbitrary levels, most of the time below the critical threshold of funds required to implement modern technologies.Secondly, the privatesector does not find itself in a position where it can benefit from economiesof scale, in which case it would have to - 53 -
operatemore rigourously(quality control, after-sales service ... ). Finally, from a performanceviewpoint, the efficientcommand of a complex industrial system cannot rely on absolute physical norms (such as productionlevels, rates of capacity utilization... ) but on relative norms. Optimizingthe performanceson a given market segment implies the comparisonof performances achieved by several various units operating in this segment. Since the restructuringof enterprisesin Algeria has virtually excluded competition between public enterprises,the presence of private enterprisesis the only alternative. If properlyorganized (offering equal opportunitiesto different institutionalunits), this shouldimprove the managementof complex industrial systems, by progressivelyreducing opportunitycosts and thus alleviating averagecosts to be borne by the communityas a whole.
3.10 One may also hope for much better performancein the agriculture sector,more specificallyin threeareas:
(a) the human factor, which is decisive in the agriculturesector, as most worldwideexperience has shown. The strengtheningof technical assistanceand the trainingof farmers is working to this end, as is the placing on an equal footing of "public"and private farmers as regards the allocationof inputs. This will restore the confidence of private farmers,an essential factor in an activity subject to climaticuncertainties and risks.
(b) land: if the objectiveof introlucingmore modern crop practiceson land currentlyleft fallow is achieved, this would bring back about one third of the current cultivablearea into the economiccircuit. This is not merely a question of permanentlyreactivating land left idle for a certain lengthof time; it also involvesusing this step to improvesoils, reduce their vulnerabilityto drought and introduce new crop species.
(c) water: here too the current directionsare promising. In Algeria, water is the productionfactor in shortestsupply, and thereforeany easing of the situationcan only be advantageous.
3.11 In more overall terms, the choices made as regardsdecentralization and making economic units more responsible for their operations have inevitable implications for the global regulation of the economy; in particular,the managementand planning process should progressivelyassume a less bureaucraticcharacter, make more room for alternativemacroeconomic calculationsand introduceprocedures for flexiblemanagement of the economy. By outlining the main directions to be followed and determining the macroeconomicresources needed to attain the specifiedobjectives, it would leave enormous room for maneuver to the decentralizedunits, breaking the stifling centralizationreflected in the declining autotnomynoted at the beginningof this Chapter. - 54 -
C. Critical Conditions for Long-Term Growth 1. The Problem of Population Growth
3.12 Algeria's population is increasing at an average annual rate of about 3.2%. This establishes a lower limit for the rate of GDP growth, unless one accepts a continuous decline in per capita income. The climax of this process has not been reached, since the population growth rate will increase further in the years ahead (towards 3.4Z). As a result, the current population of 21 million (in 1984) will reach 26 million in 1990 and 34 million in 2000; the stationary population (a hypothetical figure where the rate of increase is zero and the other demographic parameters unchanging, the birthrate and deathrate being equal) is 81 million, a very worrying figure. The net reproduction rate should only reach 1 in 2025; the population momentum of 1.9 reflects the very strong likelihood that demographic growth will continue beyond the period in which replacement-levelfertility is achieved.
3.13 The gross birth rate in 1984 was 42 per thousand (a very high figure) and the gross death rate 11 per thousand; while the former is 16.62 lower than 20 years ago, the latter has fallen by 43%. Tne total fertility rate shows that on average a woman would during her child-bearing years give birth to 6.4 children (again an excessively high figure). Less than 72 of married women of child-bearing age use contraceptive measures. All the relevant parameters therefore combine to produce ever more numerous new generations. In qualitative terms the population is not well off, inasmuch as life expectancy at birth is only 59 for men and 62 for women, rates similar to those for Morocco or Tunisia, which are much less wealthy countries. The infant death rate is 82 per thousand, and while this represents a very significant decline from 20 years ago (when the figure was 155 per thousand) it is still higher than the corresponding figure for Tunisia.
3.14 Although they have greatly improved in the last 15 years, the health conditions of the population are far from being satisfactory: with one doctor per 1432 inhabitants and one medical assistant per 382 inhabitants, Algeria does not have the medical personnel commensura.ewith its level of development. A wide-spread mentality, focusing on the improvement of health and sanitary conditions remains to be achieved. Bearing this in mind, public authorities intend to develop three strategical orientations: the first focuses on family planning; a condition of success will be the overcoming of prejudices deeply rooted in people's minds (public authorities try hard to, and seem to succeed in, reaching the representativesof the islamic cult to have them participate in an awareness campaign) as well as the implementation of an efficient production and distribution system for contraceptives, jointly with an information campaign concerning their use (in this area, the widespread circulation of slogans valorizing four-member families, recommending an ideal interval of four years between each birth, encouraging prolonged breast-feeding etc... are means that should also be supported by other even more effective measures); the second focuses on the illnesses themselves: control of diarrhoeal diseases seems to be well under way through the creation of a production unit of rehydration salts; immuniza ions should allow to reduce considerably the cases of measles (15% of intant mortality), tuberculosis,
1/ Data are from World Development Report 1986, The World Bank, Washington DC. - 55 -
whoopingcough, diphteriaand poliomyelitis;the objectivebeing to reach an infantmortality rate lower than 5% by 1990; the t'hirdorientation is of an ocologicalnature: it is well known that cholera and bilharziosis are water-transmitteddiseases which need, above all, for their eliminationthe availabilityof modernwater supplyand seweragesystems. The whitewashingor treatmentof about 150,000wells which supply water to 502 of the population is a task which seems well under way. For the other half of the population, the extensionof a modern water distributionsystem, under the aegis of the Water Supply Ministry (and with the assistanceof the World Bank) should contribute in partially solving the problem. The problem of used water disposalremains to be dealt with; it is currentlyon hold but should be reviewedurgently not to underminethe other effortswhich have been made in the area1".
3.15 Demographic pressure not merely provides a lower limit to the admissiblegrowth rate of GDP; it has powerfulstructural implications. The growth rate of the urban population rose from 2.5% a year for the period 1965-73 to 5.4% a year for the period 1,73-84, an increase that makes it easier to understandthe prioritygiven by the authoritiesto infrastructure and communityfacilities. One of the problemsis that it has been necessary to concentratethese efforts on the coastal strip. The program envisaged, involvingthe creationof nuclei to divertmigration flows in the directionof the High Plateau,will doubtlessnot be implementedin the immediate future, given its cost and the contractionin resources. However, one bottleneck couldbe eased if the constructionsector were put in a position to respond to a high level of demand, since there seems to be a large volume of savings ready to be invested in housing-'. The sector seems to be held back by limitedsupplies of constructionmaterials. This whole process could become one of the keys to a revival of economic dynamism-'. Restoring the competitivenessof the constructionsector is necessaryboth to stimulatean otherwiselethargic public sector and to create opportunitiesfor productive investmentthat generateemployment.
2. The Problem of Foreign Trade
3.16 This is essentially an industrial problem. Traditionally, imports have been seen as a "temporary"answer to the unavailabilityof local inputs, the ultimate aim being import substitutionand exporting as a residual activity,subsidiary to the priorityof satisfyingdomestic demand. However, there are numerous indicationsof changing attitudes in Algeria and of an awarenessof new imperatives4/.Algeria's industrialstrategy can no longer
1/ Re.: the general area of water supply and sewerage,see Chapter 12 of the presentreport. 2/ Savingsdeposits at the CNEP at the end of 1984 were DA 27 billion and were increasingsteadily at the rate of DA 4 billiona year. 3/ See the later chapteron the urban sectorand housing. 4/ For example, the insLitutionalreorganization involving the merger of ONAFEX and the National Foreign Trade Center into a National Office for Fairs and Exports. Likewisethe reorganizationof the Ministry of Trade, particularlyas regardsthe inclusionof a directorateto support export prices. - 56 -
be so exclusivelybased on importsubstitution. The previoussuccess of this policywas linkedto abundantforeign exchange resources and the disproportion between Algeria's industrialapparatus and the demand for intermediateand final goods. Henceforward,these foreign exchange resourcescan only level off, while the industrialapparatus has achieved a degree of maturity such that the necessary reductions in imports will become progressivelymore difficult. Further progress in import substitutionwill therefore entail growingcosts, with the risk that resourceswill be spent that would be better employed in correctingsome of Algeria's industrialweaknesses. It should also be noted that the lags caused by these difficultiesare leading, via operatingsubsidies, to transfersof resourcesbetween subsectorsthat are in contradictionwith the generaldevelopment strategy.
3.17 It is, however,above all the export side that will benefit from the policy review. Once again this will be a long process; the problems can easily be set out, but the necessary solutionswill take time to have their effect, while their introductionis a delicate matter. The structure of Algeria'sexports is in fact thoroughlyunbalanced at present: hydrocarbons accountfor 982 of receipts. This situationrepresents both a major economic risk (the lack of diversificationentails a general economic crisis should prices fall, and an illusionof wealth should they rise) and a distorting factor in global macroeconomic calculations (the economy is largely conditionedby the aim of maximizing mining rent rather than by any considerationof optimal resourceallocation among sectors). In any event, the progressto be made regardingindustrial exports must not be limited to activities where there is chronic over-capacity (principallytextiles). Industry is going to have to develop a pervasive export mentality, also extending to activities where production is not meeting total domestic demand. Algeria'sindustrial base is now sufficientlylarge to be exposed to internationalcompetition on certainmarkets. From this standpointit will become increasinglyvital to open certainsegments of the productiveapparatus to the outside, involvingboth imports and exports, since the former are frequentlya preconditionfor the developmentof the latter. There are certainother prerequisitesin this area, which can be outlinedas follows:
- the organizationof an institutionalmechanism to provideinformation on foreign markets and the international links guaranteeing integrationinto the relevantnetworks;
- a range of appropriate financial instruments. The Algerian authoritiesare currently putting together an export credit and insurancesystem;
- reflectionon the most suitableexchange rate systemfor ensuringthe successof the exportpolicy.
The main dangerto be avoidedwill be the temptationto enter into generalized barteragreements which will in no way benefit industrialproductivity. - 57 -
3. Productivity, EconomicEfficiency and the Price System
3.18 The "price system" is here understoodto includenot only the prices of goods and servicesbut also the cost of financialcapital (interestrate) and of Algeria'scurrency in relationto foreigncurrencies. There is in fact a general problem in Algeria as regards the price system. Normally in an economythe price systemmust serve severalmutually consistent purposes, and in particularmust help bring about a rationalallocation of scarce resources. Apart from some high-level theoretical contributions1', it must be recognizedthat for planned economies there is no solid analytical support that can serve as an operationalguide for establishinga price system.
3.19 The general system in Algeria is one of administeredpric(.. Except for certainsectors where market forcesoperate (fruitsand fresh vegetables), the prices of goods and services are either fixed administratively("fixed" prices)if the productsin questionare regardedas strategicor staple items, or controlled("monitored" prices), involvinga procedurewhereby prices are lodgedwith the authorities,who ensure that they do not move beyond upper and lower limits. Most of the time the necessary link between prices and productioncosts is not clear'. In practice,deviations develop which are made up by compensationtechniques (there is a prices compensationfund for this purpose, which normally is self-financing) and/or by budgetary subsidies. Whatever its nature, a subsidy-'creates the illusion that the cost of capitalis zero.
3.20 Furthermore,as the subsidies cannot in practice cover all needs, many enterpriseswhich are not in a positionto generatean adequatecash flow borrowfunds, but again at real interestrates (the only meaningfulones) that are negativemost of the time and far from reflectingthe opportunitycost of capital4'. When even the loans are not reimbursed, the system lacks rationalityat any level of analysisand the end result is that capitalcomes to be regardedas free.
3.21 At the same time, the prices of a number of goods are establishedby referenceto the prices of identicalimported goods (cement,for example). In this situationit is obvious that there is some advantage in overvaluingthe Algerian dinar, so as to implicitlydevalue the competing imported good. Another illusion is thereby created, namely the unimportanceof relative currency values, another source of waste, which the Algerian authorities
1/ For examplethe contributionof L. Kantorovitch. 2/ It should be noted that the "restructured" enterprises have no satisfactorycost accountingsystem. 3/ Balancing subsidy, capital subsidy, grants for the "restructuring"of enterprises,and even State funds assignedwhen the grants are not repaid and have to be subsequentlycovered by new budget grants. 4/ The interestrates charged by the Treasuryto financialintermediaries in Algeria for purposes of allocatingState funds to enterprisescurrently vary between0.5% (CNEP)and 2% (BAD or BDL), to which the intermediaries concernedmay add a commissionof 0.51. At the same time the inflation rate is close to 101. - 58 -
tackle by rationing imports through the AGI. The series of distortionsand illusionsthus created results in relativeprice distortionsthat leads to an overuseof "cheapresources" when in fact these resourcesare scarce.
3.22 Another key to revitalizedlong-term growth !n Algeria is indeed restoredand even very substantiallyimproved efficiency. One indication1 / of the low efficiencyof Algeria'seconomic system is the high figurefor the incrementalcapital/output ratio (7.5 for the years 1982 to 1985) which, reciprocally,indicates the low level of the marginalefficiency of investment (0.133,in other words each Algeriandinar investedonly produceson average an additionalDA 0.13 of value added). The depressiveeffects of the present situation will further accentuate these trends: the incremental capital-outputratio may be about 12.75 on averagefrom 1986 to 1990, givinga marginalinvestment efficiency coefficient of 0.08, i.e. each Algerian dinar investedwill only yield DA 0.08 in additionalvalue added.
3.23 The Algerianauthorities are aware of the undesirableconsequences of the adoptionof economic parametersof inadequatequality. They therefore propose:
(a) to move toward a more rationalpricing system over a period of four years, the object being to make the prices of goods and services reflect the economic costs of domestic production. This is a courageous policy because it will be difficult to introduce, upsetting many traditions, and requiring the introduction of objective reference standards, independent of the planner, and systematicallyreflecting the state of market forces.
(b) within the framework of the recentlyapproved banking law and the implementingdecrees that will follow, to promote a structure and levelsof interestrates reflectingthe real costs of using domestic capital2'and designed to steer the latter toward key development sectors. This will require better remunerationof savings deposits (borrowingrates of the financial intermediaries)which, among its favorableconsequences, should have the effect of increasingthe real returns on deposits in Algeria, thereby encouragingtransfers from Algerian workers overseas (which have tended to decline in recent years). In such circumstancesit would no longer be necessary to retain the present discriminatoryexchange rate, with its 40% differentialin favor of non-residents.
(c) to considerexchange rate alterations,which will become all the more necessaryto the extent that the decline in the US dollar introduces unanticipateddistortions in the relativeweights of the 14 currencies making up the basket used to establish the exchange rate for the dinar. Given the psychologicaland political impact on domestic
1/ Only an indication,but a revealingone. 2/ Hitherto many economic calculationshave been made as if the Algerian dinar was an abundant good. On this point see the chapter on the chemicalindustries. - 59 -
prices of any measure affectingthe relativevalue of the currency, the decisions to be taken in this regard will be the more difficult the longerthey are postponed.
3.24 In brief, policies are at least being weighed on each of these matters (population,foreign trade, price sy,-temand conditions for the efficiencyof the productivesystem) which, if they become realities,should enable a satisfactoryrate of growth to be resumed, bearing in mind the economic and ethical objectives Algeria has establishedfor itself. But action is urgentlyneeded.
D. Outline Plan for Restori g Economic Growth
3.25 Strong forces are at work in Algeria'sdecision-making machinery to counteract the trend toward stagnation resulting from both the loss of internal momentum and external disruptions. The determination to act pragmaticallyin devisingsolutions to restoreequilibrium to the economy, if applied across the board, particularlyin the form of a less rigid attitude towardthe Five-YearPlan, and of a more flexibleand more operationalannual plan, will produce an economic frameworkconducive to more efficienteconomic activity. The awarenessof the importanceof the demographicfactor, and the appropriatepolicies in this area that will result, can only have long-term effects, given the very considerable inertia in population changes. A reversal,through a new agriculturepolicy, of the trend towardfood dependency is among the factors that can help maintain an appropriatelevel of overall value added and an acceptablereduction in imports. The partialreorganization of the industrialapparatus to help it face foreigncompetition with a view to renewingAlgeria's export potential,will also take time to produce results, but withina much shortertime frame a more dynamic attitudeamong enterprises can be instilled.
3.26 In this situationthe range of options is not very wide. Once again the starting point must be the excessive predominanceof the hydrocarbons sector and its earnings in Algeria's economy, which, as already noted on sev;araloccasions, has given rise to illusions and errors in economic calculations. The apparent abundanceof foreign exchange led to the belief that the economy could obtain, at almost any price (domesticand foreign), equipment, spare pirts, know-how, food products, etc1'. The reality, however, is very different: any acquisitionof inputs (currentor capital) should be the result of a rationalallocation calculation; it cannot simply involvedrawing down a stock of financialresources that are the result of a process combining the exploitation of a natural resource (hydrocarbons resources)which is depletable and the position attained by a cartel of producerswithin the context of a favorablemarket situation. In rational allocationcalculations, opportunity costs play a central economic role, and prices are an acceptable ex-post statistical reflection of this; their functionin the calculationmust be-carefullypreserved. Otherwise,when the flow of financial resourcesfrom sales of hydrocarbonsis reduced,as is now happening,not only does the economy become unbalanced,but it is sharply
1/ Including foreign capital obtained on rather favorable conditions in view of the foreign exchange resources potentiallyrecoverable by the hydrocarbonsproducers. - 60 -
apparent that it is unable to adapt rapidly in the desirabledirection, and that other imbalancesmust be endured (for example,the now clearly inadequate real productivityof the industrialapparatus has to be made up by credit systemswhich in their turn expandthe money supply in a manner prejudicialto pricesand incomespolicies; the economyslides into a processof inflation).
3.27 Consequently,the correctivemeasures to be introducedcannot be precisely phased over time; action must be taken, not in stages or in sequence,but on severalfronts simultaneously:
(a) make the downward adjustments required by the sharp fall in hydrocarbons prices (reduce public expenditure and the imports program,revise investmentprograms, etc.) and aboveall:
(b) reestablishthe conditionsfor rationalresource allocation. As will have become clear, it is the price system (in the specific sense of paragrraphs3.17 to 3.20) which will (or will not) play the decisive catalyticrole in economic recovery,in the light of the decisions taken thereon. If the policy of moving toward true prices for goods and services,which must be accelerated"',helps to bring them more into line with market forcesA',the tendency to waste resources in Algeria'seconomy (currentlysharply criticized)will be reduced; if at the same time this policy makes selling prices more closely reflectproduction costs, production units will be able to break away from subsidies and other artificialsupports for the financingof investments. It is certain that initiallythis will have an impact on the price index, but since the budget deficit and the consequent financingrequirement will simultaneouslydecline, there will be an offsettingeffect in the form of a smaller expansionof the money supply. To this initial major source of increased economic efficiencymust be added the probablyeven more importanteffects of interest rate revision. This will probably reduce the volume of investment expenditure,but as this will be concentratedon the projectsgenerating more value added, the two effects combined will ,)i-%ote an increased marginal efficiencyof capital, which will be reflected in a sharp decline in the incremental capital-output ratio. Finally, if the Algerian authoritiesshould reconsiderthe exchangerate, the revaluationof importswill entail more judicious use of the relevantgoods and services. Togetherwith the ruptureof the quasi-mechanicallinkage between domestic prices and prices of importedgoods, will appear the necessityof producingdomestic goods more efficiently and at lower effective cost. The subsequent reallocationof resourceswill also help to emphasizethe importance of local products incorporatingsignificant value added, the last (but not the least)element in restoringdynamism to the economy-".
1/ Because the four-year time frame initially posited for this policy now appearstoo long. 2/ Market forces must thereforebe allowed to exist on both the demand and supplyside. 3/ See paragraphs3.16 to 3.18. - 61 -
3.28 The "modus operandi" and the combined effects of the simultaneous actions mentionedabove cannot be describedwithout first recalling to mind some structuraland guidingfeatures of Algeria'seconomy that are essential to an understandingof its normal behavior. As a centrally-plannedeconomy, where market forces have hitherto played only an auxiliary role, Algeria's economy is greatly "over-directed": the number of control variables is substantiallylarger- than the number of significantobjectives set out in the Plan and the number of relationsinvolved. Nonetheless,it is possibleto identifycertain major vectors of both the functioningand the process of directing the economy;among these forces, investmentis at the head of the list. Investment,however, should be regarded as having two components: first, State investment (by the central government), which involves expenditureon economic,educational, and social infrastructure,etc.; and second, investment in the productive public sector (capital inputs in agriculture,industry, services, etc.)2/. The first component is under the full and direct control (includingits financing)of the State, within the double framework of the Plan and the budget; the second component is the result of a more complexdecision-making procedure, involving intervention by those responsible for production units (initiative in projects), the supervisoryministries (who rule on the desirabilityand the priorityranking, etc., of projects),the Ministry of Planning (which determinesintersectoral and intertemporalpriorities), and the Ministryof Finance (whichdecides the creditallocations to be transferredto thefinancialintermediaries managing the funds for financing). Only the first componentis a control variable in the strict sense of the term, and it is in practice treated as such in the planning process-. The second component, embodied in administrative procedureswhich it is now intendedto eliminate4',is more of an empirical endogenoussystem of capital accumulationby trial and error, under the control of industrialmanagers who are unfortunatelystill inexperienced (becauseof the recent nature of Algeria's industrialsystem) and who above all have not been confront-edby the challengeof doing things differentlyor matching achievementselsewhere, and who cannot be removed (or only with difficulty)from the productionprocess by reason of poor performance,as would normally happen in a risrketeconomy. This explains the serious deficiencies noted- as regards the productivity of capital in the
1/ In particularbecause of the doublingof the economic control variables by administrativeregulations. 2/ Private investmentis small and is moreover tightly controlled by the authorities. 3/ See, For example, in paragraph 2;09 how the Algerian authoritieshave since 1985 intensifiedthe execution of economic infrastructureworks in order to sustaineconomic activity. 4/ With a view to removing the "obstacles hampering the tasks of the enterprises, (...), the responsibilitiesof the authorities and the enterprisesshall increasinglybe governed by clear regulationswhich shall specifythe obligationsof both parties." 5/ See the report on the industrialsector, which stresses the urgency of increasingthe efficiencyof the public enterprises,from the investment planningstage throughoperations. - 62 -
production apparatus, reflected in some very significant rates of under-utilizationof production capacity and especially in the fact that despitea very high investmentratio (402 of GDP on average),the coefficient of the overall marginal efficiency of investment is still rather low (about0.13). A major featureof Algeria'seconomy is thereforethe dwindling efficiencyof investment,which is rootedin the productionprocess and cannot be overcomeby State expenditure- quite the contrary. It is this decline in productionthat must be reversed.
3.29 Taking up again the working hypotheses set out in the preceding paragraphs,it becomes possible to constructdifferent scenariosrepresenting alternativepaths for Algeria'seconomy. For the sake of convenienceonly two scenarioswill be discussed here; these will be designated "scenarioA" and "scenario B`'L'. From a technical standpoint, each scenario has been simulatedwith two different(but complementary)models. The first model is a dynamic control system model (which was mentionedat the beginning of this chapteras as instrumentfor analyzingthe historicaldynamics of the Algrian economy); under appropriateassumptions it works with (i) the structural parameterswhich describethe productionand trade apparatusof Algeria, and (ii) the control variableswhich have been identifiedas such in this report (PublicConsumption and Direct investmentof the Central Government). The working hypotheseshave been translatedin terms of modulatednon-stationary values for the parameters(ICORs, coefficients of marginalcapital efficiency, investmentratios, savings ratios, import ratios,export ratios)and modulated valuesfor the controlvariables. The secondmodel is the usual "RMSM" of the World Bank which translates the consequencesof the selected hypothesisin terms of consistent national accounts. As both models have produced quasi-identicalgrowth paths, the followingparagraphs will describeonly the projectedvalues which give a complementarypicture for the evolutionof the economy. Schematically,scenario A reflectsthe time patternresulting from a policywhich fulfillsonly the necessary(but not sufficient)conditions for a return to high level growth rates: it is limited to the adjustment of macroeconomicaggregate3 without tacklingthe fundamentalcauses of the crisis. Thus trend values for the growth rates remain low for a long period of time. In contrast,scenario B combinesa policy of macroeconomicadjustment with a policy aimed at improvingthe conditionsfor an increasedefficiency. Trend valuesfor the growth rates are then raised at higher levels. In both cases, however, one should remember that the intensity of the exGgenous shock experiencedin 1986 is such that over the next four or five years the Algerian economy will display the basic featuresof an unstable system. Parametric assumptionsfor the simulationsare presentedin the Table II.1.
3.30 In scenarioA (Table III.1 A), the share of imports in GDP, which in the years before 1986 was about 30% on average,is cut back to 20% for 1986, is held slightlybelow this level until 1990. The share of exports in real GDP (22% on averagebefore 1986) falls slightlyin 1986 (21%),then returns to its traditionallevel in 1987 as a result of a more pragmatic external marketingpolicy for hydrocarbons;world market forcesrule out any expectation of largergains in such a way that exports are constrainedto 24.3% of GDP. Downward financial adjustment (reduction of budgetary allocations) of productiveinvestment produces a double, cumulativeeffect: in the light of
1/ All reasoningsare in real terms (exceptotherwise specified). - 63 -
the considerableshare of investmentin GDP, any reductionin the volume of investmenthas an adverseeffect on the generationof value added. Moreover, it is assumed that the conditionsgoverning the proper allocationof, and the returnsfrom, investmentsare not restored (or, at best, only in a hesitant, inadequate manner). In all, the efficiency of investment coefficient deterioratesdramatically from 12b in 1985 to 7% in 1990/91. The overall financialresource constraint absolutely prevents the State from contemplating any recoverythrough the instrumentof public consumption:Central Government consumption remains close to its minimum compression thresholdL' until around 1989-1990. Direct investment (mainly in infrastructures)by the Central Government,also reduced in real terms from 1986 onwards, can make only very marginal progress through 1989. From then through about 1990 private consumption will keep growth rising slowly, its share in GDP increasing steadily from 551 before 1986 to 60% in 1989-1990, private consumptionbeing the only variablenot directlyconstrained for reasons both politicaland technical-'. In all, real GDP growth remains weak until 1990 as a resultof the austeritypolicy, and this effectcontinues in 1991 through the inertiaeffect. The cure by austeritytherefore has a gestationperiod of around five years. Subsequently,the combinationof a better oil and gas situation and the return to efficiency levels for productive investments identicalto those of the years 1980-1985(higher than 102 with a ceiling of 17X) somewhatmodifies the terms on which the economy functions: the import ratio can be slightlyincreased (toward 251), althoughprudence requires that it permanentlyremain slightlybelow the export ratio. The constraintson public demand can be progressivelyrelaxed, allowing public consumptionto move from an average annual growth rate of 12 in 1989 to 5.5% in 1994-95. Initiallythe relativelydepressive effects of this relaxationare more than offset by the expansionaryeffects of the policy for government capital expenditure,the relativebalance of forces being reachedin 1994. However, as the absoluteintensity of centralgovernment investments is higher than the absolute intensityof their consumption,by assumption,the absoluteoverall effect of the control variables remains positive. Thereafter, in global terms,growth linked to the productiveand trade apparatusis once again quite significantfrom 1992 onwards,propelled by an economic policy which for the first time in 5 years enables the overall growth rate to exceed 2% a year. Nonetheless,it will be 1994 before this growth rate exceeds the probable populationgrowth rate (3.2%),and hence before per capita living standards begin to rise again. Under this scenario,however, the growth rate does not approach4% until around 1996. In conclusion,it should be noted that this real scenariocould be accompaniedby a dangerousnominal development,which at the extreme could undermine its entire basis. To stem the dramatic consequences of the loss of external financial resources, the public authoritiesin Algeriamight be temptedto relax in variousways (maintaining zero or negativereal interestrates, a large overallbudget deficit financed by printing money, establishingweak constraintsfor the financing of productiveinvestments) the domestic financingconstraint. This possibility cannot be ignored, since a'll the indications are that a significant inflationaryprocess was alreadyat work in 1986. It is hardly necessary to
1/ The base consists of the wages and salariesof civil servants,who will protecttheir "acquiredrights" to the maximumpossible extent. 2/ In other words, as a resultof the algebraicstructure of the model. - 64 -
say that in such circumstancesthe adjustment effort would quickly be undermined and that the small scope for productivity gains would be progressivelyeliminated.
3.31 Under scenarioB (TableIII.1 B) the adjustmentprocedure designed to alleviate the loss of external receipts is essentiallythe same. It is, however,accompanied by a coordinatedset of measures designed to restore a rationalstructure of productivityand economiccalculation. As will be seen, this in due course gives rise to an essential difference;however, in the short term, in other words over the next three years, the economy will make hardly any better progress, the effort being entirely concentratedon a reorientationthat will bring about the conditions for a more efficient, stableand dynamicequilibrium.
(a) The first measuresto be introduced,from 1987 onwards,and certainly the least difficult, concern raising the borrowing and lending interestrates to positivelevels in real terms. Assuming that the reorganized apparatus of financial intermediation!"plays an effectiverole in attractingidle depositsand operatesas a rational filter in the allocationof loanablefunds (selectingon a priority basis those projectsthat generatethe maximum amounts of net value added, so that enterprisesare enabled not merely to repay their loans but also to rebuild their resourcesfor self-financing),the revision of Lhe interest rate structure will help to reorient economiccalculations.
(b) It it obvious that, in parallel, enterprise managers must also progressivelyrecover a margin of autonomy for fixing their prices, otherwise the concept of producing genuine value-added lacks any substance. Those enterprisemanagers whose projectsare eliminated during the processof financialselection of investmentswill then be led to reconsidertheir productionconditions, reduce their costs, exert pressure on suppliers of inputs, and adjust their selling prices, in order to present acceptable financing plans. To avoid unacceptable price increases public enterprises should be progressivelymade to face the challengeof alternativeproduction processes,which entails that from 1987 onwards market segments be defined in which private operatorsmay intervenemore extensively, and that a programfor openingup the marketbe rapidlyset in motion.
(c) These two groups of measures should,after an adjustmentphase that would end in 1989/90,slow the trend towardslow levelsof equilibrium for the efficiency coefficients of productive investments. Subsequently(after 1989), the changes in investmentparameters will be favorable (increasesin all investmentefficiency coefficients) and very rapid in relation to developments under scenario A. Specifically,the incrementalcapital-output ratio may be close to 3.7 in 1996 (against6.0 in scenarioA).
1/ The referencehere is to the BankingLaw voted in August 1986. - 65 -
(d) There remeins the exchange rate. Its current level entails major drawbackswhich should be remedied: it is in no way a deterrent to imports(it is the administrativecontrol of imports through the AGI which performsthis function);it hardly encourageseffective import substitution(as long as people have dinars to buy importedproducts at good prices, in foreign exchange terms, they will make every effort to do so; on the other hand, once foreign exchange is more expensive in dinars, the comparison between buying overseas or producing the same article in Algeria will recover its proper significance;then a real effort will be made to save dinars, a scarce resource);in conjunctionwith low real interest rates, the current exchange rate is not exactly an incentive to transfer resources to AlgeriaL', and in practice the parallel currency markets have already witnessed a devaluationof the dinar. Thus there are many arguments in favor of altering the current exchange rate, and it is very clear that such a change would not only help to reduce the level of importsbut, combinedwith positivereal interest rates,would stimulatethe returnof capitalwhich Algeriavery badly needs. This capital could either be directly invested in projects with high returns, thereby helping to increase the marginal efficiencyof capital;or it could be depositedand then recycledas investment financing by the Algerian financial intermediaries, thereby acting as a source of loanable funds that could help to loosen the overall financialconstraints (but not the microeconomic financingconstraints, which should remain, thus limiting financing to profitableprojects).
3.32 In all, scenario B, incorporating these various hypotheses, representsa more favorableevolution than that associatedwith scenario A. However,one must not expect any miracle;during the adjustmentphase and the introductionof new price conditionsgrowth will remain weak. It will only recoverproperly from 1990-91onwards (one year is gained over scenarioA) and will not again exceed the populationgrowth rate until mid-1992 (2 years are gainedover scenarioA). However,from 1990 onwards,the internaldynamism of the economy increases,the process acceleratingfrom 1993 onwards,enough to leave sufficientroom to maneuver for economic policy instruments. It goes without saying that very strict financing rules must also underpin this scenario, in order to avoid any substantial inflationary slippage. Specifically,these rules must establish:
- for productiveenterprises, a minimum rate of self-financingfor the investmentsand the progressiveelimination of Governmentsubsidies;
- for the Central Government, a current budget surplus that is sufficientto financeeconomic and socialinfrastructure investments, and a rule limiting recourseto central bank financing to a given proportionof the regular fiscal receiptsof the preceding year. Lastly, with the emphasis placed on effective mobilization of
1/ It is worth recallingthat non-AlgerianMaghreb workers in good times or bad remit close to US$2 billion, while the Algerians,although far more numerous,barely repatriate US$350 million. Table IItI.:
SUMMARYOF THE MAJOR FORECASTINGASSUMPTIONS. RESULTING GOPGROWTH RATES
Years before 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
A. ASSUMPTIONS FOR SCENARIO A I. Main Economic Parameters: (a) Import Ratio (X of GDP) 30.0 18.6 19.4 19.6 (b) Export Ratio 19.8 21.6 22.9 23.6 24.4 25.3 (% of GOP) 22.0 22.3 23.0 23.4 (c) Overall Average Consumption 24.0 24.2 24.3 24.3 24.3 24.3 Ratio (% of GOP) 71.0 64.9 65.1 65.8 (d) Overall Investment Ratio 66.5 69.6 75.9 75.0 73.2 73.1 (% of GOP) 38.9 31.3 31.3 30.3 (e) ICOR for Productive 29.3 27.8 22.8 24.4 27.0 28.0 Investment 8.4 18.8 17.2 15.0 14.8 (f) Average Coefficient of Capital 15.0 9.8 6.1 6.1 6.0 Efficiency for Productive Inv. 12.0% 5.0% 6.0% (g) % of Hydrcarbons in GDP 7.0% 7.0% 7.0% 10.0% 16.0% 16.0% 20.0 19.4 19.7 19.8 17.0% 19.9 19.6 19.0 18.5 17.9 17.2 II. Expected GOP Growth Rates 4.6% 1.7% 1.6% 1.7% 1.6% 1.$% 2.5% 3.0% 3.2% 3.6% ch B. ASSUMPTIONS FOR SCENARIO B I. Main Economic Parameters: (a) Import Ratio (% of GDP) 30.0 18.6 19.4 19.7 (b) Export Ratio 20.0 21.7 22.7 23.2 23.9 24.5 (% of GDP) 22.0 22.3 23.0 23.4 (c) Overall Average Consumption 24.0 24.0 24.0 23.8 23.6 23.2 ratio (% of GOP) 71.0 66.1 67.5 71.2 72.6 (d) Overall Investment Ratio 75.2 74.0 71.5 70.2 70.0 (% of GOP) 38.9 30.1 28.9 25.0 (e) ICOR for Productive 23.3 22.4 24.5 27.8 29.8 31.0 Investment 8.4 18.8 17.2 14.9 (f) Average Coefficient of Capital 12.1 9.2 6.3 4.4 4.6 3.7 Efficiency for Productive Imv. 12.0% 5.0% 6.0% (g) % of Hydrcarbons 7.0% 8.0% 11.0% 16.0% 23.0% 22.0% in GOP 20.0 19.4 19.7 19.8 27.0% 19.9 19.4 18.9 18.1 17.4 16.4 II. Expected GDP Growth Rates 4.6% 1.7% 1.6% 1.7% 1.8% 2.2% 2.8% 4.0% 4.3% 5.4%
6136B/p13 (525) - 67 -
domestic resources,net foreign borrowing should be governed by the rate of growth of GDP, since the level of indebtednessreached in 1986 shouldbe regardedas sufficientfor a countrysuch as Algeria.
3.33 To be more precise,external debt problemsshould not be excessively acute in either scenario. The Algerian authoritieshave set targets for externaldebt: the major target consists in keeping constant the level of external debt reached at the end of 1985. At that time, the level of outstandingand disburseddebt (D.O.D) was US$13.6billion"'. Then the main issue to be raised here is to assess the probabilityof success (or failure) of the Algerian strategywithin our scenarios. Further debt increasesdepend upon two major functions. The first one has, as a major argument, the externaltrade gap (exportsminus imports);the second function is built in the mechanism of the debt itself since the external debt must be repaid (principalplus interests),a processwhich also requiresthe availabilityof foreign currencies. As far as the first function is concerned, the two scenariosassume that the major sources of possible externaldebt increases have been suppressedthrough drastic reductionsof the importratio which will be kept below (or close to) the export ratio. In fact, the trade gap should even be slightlypositive (a surplus). But, due to the structureof Algeria's externaldebt (especiallythe maturity structure)over the next five years, the country should repay an annual average amount of US$5.25billion as debt service'. If no "new money" is required for external trade purposes, and without noticeable surplus in the same external trade, "new money" will howeverbe necessaryfor debt servicing;consequently, the external disbursed debt will not be reduced; the small trade surplus will be used to finance around 802 of the interests owed, leaving an average annual financing requirement of US$4.2billion. Of course with these repayments, the correspondingdebt alleviationwill be offsetby the new commitmentsin such a way that the DOD will remain stabilizedaround US$15 billion until 1990-92. There is then a very high probabilityof success for the stabilizingstrategy set by the AlgerianGovernment. Algeriawill probablybe able to raise these funds although the terms may harden. It must be emphasized that Algeria should take the opportunityof these "refinancing"operations to modify the maturitystructure of their medium and long-termdebt towards a longer term basis in order to avoid the recurrenceof such high debt serviceratios in the future. Finallyit must be noted that the "refinancing"policy of Algeria is more likely to succeed if the country is able to follow a program leading to economicrecovery, not only through the adjustmentpolicy suggestedin this report,but also throughmajor structuralchanges which we have also suggested as sine qua non conditionsto restorea sustainedeconomic growth.
1/ World Bank figure,excluding short term debt (whichis evaluatedat around US$1.9billion). 2/ Of which 242 as interestpaymerts and 76% as principalrepayments.
58463 - 68 -
ANNEXI Page 1 of 2
SPECIFIC MEASURES INCLUDED IN
THE ADDITIONAL APPROPRIATION LAW FOR 1986
1. Tax Measures
The principles underlying these measures are as follows:
- to adjust some taxes, fees and duties, - to be related to activities spaced out over time, as far as stamp fees are concerned, - to avoid affecting the low income households in such a way that the staple goods are still exempted, - to require a higher contribution from upper income recipients by an additional taxation of some luxury goods (yachts, etc...), - to integrate as taxable operations, advertising activities, - to introduce a new distribution of resources between the Central Government and the local authorities.
1.1 RegistrationFees and Stamp Fees
- Introductionof a fixed fee payable at the time of the approval of liaisingoffices of foreigncompanies, - introductionof a fee on advertisingsigns such as posters and neon signs, - introductionand/or increaseof stamp fees on ordinarypassports, on the forms of the Algerian parimutuel,on the bills of lading for sea transportation,on the pleasureboats, and on the registrationforms of the vehicles.
1.2 SalesTax
- Introductionof a fixed tax rate on tobacco, - increaseof the rate of TUGP on beer from 77% to 80%. 1.3 IndirectTaxes
- Increaseof the domesticconsumption taxes on fuels, - cancellationof exemptionson gasolinefor agriculturaluses, - cancellationof exemptionson domesticconsumption of fuel oil.
1.4 CustomsDuties
- Cancellationof exemptionson big-enginedcars imported in case of changeof residence, - increase in the fees related to the utilization of road infrastructureby commercialvehicles registeredin foreigncountries and travellingin Algeria, - 69 -
ANNEX I Page 2 of 2
introductionof a lf fee, payable in foreign currencies,on the purchase price of the vehicles bought at non-registereddealers within the AIV regulations, time adjustmentand adaptationsof the custom tariff, cancellationof the "cashwith order"procedure of purchase.
2. Measuresrelated to State AdministeredProoerty
- Integration in the Central Government Budget of the revenues resultingfrom the sales of equipmentabandoned by local authorities, public administrations and from the sales of downgraded administrationvehicles.
3. Budgetary Measures
- Unification of the support to price for staple goods with a 502 reductionof budgetsubsidization, - reduction in recurrent expenditures of DA 7.5 billion (from DA 67 billionto DA 59.5 billion), - reduction in capital expenditures of DA 16 billion (from DA 61 billionto DA 45 billion), - reductionby about DA 5 billion in the amount of authorizedfinancing for planned investmentsby public enterprises(from DA 52.5 billion to DA 47.5 billion).
$75125pl2-i . I\ IC""N?6 PART II
SECTORAL PLANS AND PROGRAMS
REALIZATIONSAND PROSPECTS / - 70 -
CHAPTER IV - THE AGRICULTURALSECTOR
A. Introduction
4.01 The combinationof high populationgrowth (3.2% per annum)end rising per capita income (4.5b - 5% annual growth rate) originated substantial increasesin the demand for food that resultedin food consumptionir.'reasing at an annual rate of 6% from the mid-1960'sto the late 1970's. The Algerian agriculturalsector was unable to supply the additionalfood requirementsand imports grew rapidly to fill the gap. By 1980, imports provided about two-thirdsof total food consumptionand accountedfor one-fifthof aggregate imports,more than twice the ratiosof a decadeearlier.
4.02 This growing dependence on imports for the satisfaction of ever-growingfood requirementselicited renewed attentionon the part of the Governmentto the performanceand constraintsof the agriculturalsector on the occasionof the First Five-YearDevelopment Plan, 1980-1984. An analysis and diagnosisof the situationmade by the Governmentindicates that the basic factor explaining the sluggishnessof agriculturalperformance was probably Insufficientattention to the managerialand technicalhuman capital during the interveningyears."' Agriculturalphysical investmenthad indeed been accorded a relativelyminor and declining share in successive development plans and there were deficienciesin deliveriesand on occasionin the quality of key farm inputssuch as fertilizers. The crucialfactor, however, was that the level of technicalproficiency at the farm productionlevel was inadequate to make full use of availableresources, let alone move agricultureon the path of innovationand increased productivity,in spite of the incentives providedby consistentlyfavorable nominal movements in the agriculturalterms of trade (paras.4.29-4.31).
4.03 As the 1980s dawned, farming in Algeria was carried out by three distinctsectors: the self-managedsocialist sector, the cooperativesector and the private sector. The self-managedsector consisted of some 2,080 farms comprisingthe 2.3 millionha of arable land that had been operatedby 20,000 European owners before 1962. The cooperativeor Agrarian revolutionsector encompassedabout 6,000 cooperativescovering 1.2 million ha of arable land. The cooperativeswere establishedduring the early 1970's,grouping formerly landlesspeasants to farm state and communalland and land expropriatedfrom absentee landownersand large private farmers. The privatesector consisted of about 700,000 farmers cultivating4.4 million ha in generallyfragmented properties,with less favorablesoil, using traditionalfarming practices.
4.04 The self-managedsector was particularlyvulnerable to management weaknesses. It comprisedthe most fertilesoils in the countryin the rainfed as well as the in irrigated areas. The management problem was greatly magnifiedby the ten-foldincrease in average farm size and the inclusionin individual farms of separate non contiguous lots with dissimilar
1/ See, for example, MPAT, "L'6volutionde l'Agriculturede 1967 a 1982", in ONS Statistiques,No. 2-I-1984,pp. 46-61. - 71 -
characteristics. Nevertheless,the vacuum left by the departure of the Europeanowner-operators was not adequatelyfiled when operation was turned over to previous farm workers due to the lack of Algerian agronomist engineers. It has been pointed out that no agriculturalschool graduates worked at the self-managed farms until 1977.1' As for the workers themselves,a considerableexodus appears to have taken place, particularly among the young and the skilled,to take advantageof the better working and livingconditions to be found in cities and towns. Nor did the cooperative experimentwork out as expected. The lack of farming experienceon the part of the members and the dearth of extensionand demonstrationservices were among the major reasons for the meager success of this initiativeand for the decisionto phase it out.
4.05 Knowledgeabout the private sector is somewhat fragmentary. There are three major types of enterprises: (a) subsistencefamily farms, very small in size, where traditionalmethods are employed and the bulk of productionis consumedon the farm; (b) medium size enterprises,that have a limitedstock of capitaland that targetpart of their productionfor sale in the market; and (c) typically commercialenterprises, that employ modern farmingtechniques and make the necessaryinvestments and that producemainly for the market.
4.06 Next to the human capital constraints,marketing and pricingpolicies appear to have seriouslyweakened the incentivesfor growth in agricultural output and productivity.Marketing agencies (Offices)had been establishedto purchase the entire output of socialistfarms at Governmentdecreed prices. Output prices were increasedsteadily from the mid-1960'sto the late 1970's while physical input prices were maintained largely unchanged, but non agriculturalprices were increasingsubstantially during that period, enough to warrantan increasein the non agriculturalminimum wage from 12 DA/day in 1968 to 33.68 in 1978, and in the agriculturalminimum wage from 8 DA/day to 28 duringthe same period. Undoubtedly,the terms of trade moved considerably againstagriculture.
4.07 The pricing and marketing system contributedto mounting operating deficitsof the self-managedfarms and, at least in the case of cereals, to the indifferentperformance of productionand productivity.2/ Privatefarms could sell on the open market. In thosecases where consumerprices were free and consequently intermediariescould offer producers higher prices that reflectedstrong consumerdemand, farm prices did rise and with them private sector production. This was particularlythe case in vegetablesand livestock products,practically the only commoditiesthat experiencedsizeable increases in production in the 1967-1980 period. However, the performanceof the private sector during this period was seriouslyhandicapped by its limited access to credit and to outside inputs (machineryand equipment,fertilizers, herbicidesand pesticidesand improvedseeds), as the correspondingGovernment agenciesalmost totallyignored private farms in their operations.
1/ MPAT, op. cit. page 56. 2/ Cf. MPAT, 2p. cit., p. 60. - 72 -
4.08 The sections that follow present a concise expositionof (a) major developmentsin tl. 1967-1982period; (b) goals and accomplishmentsof the 1980-1984Plan; and (c) objectives,progress to date and outlook for the 1985-1989plan.
B. Major Developments in the 1967-82 Period
4.09 Agricultural production increasedduring this period at an annual rate of approximately 2.81. Given the much higher growth in other sectors of the economy, the share of agriculturein aggregatevalue added declined from about 13% to less than 72 (see Annex II, Table IV.1). Farm productiongrowth was also insufficientto accommodatethe much higher rate of growth in demand, fueled by rapidly increasingpopulation and per capita incomes. The share of importsin total domesticfood consumptiongrew between 1967 and 1982 from 28% to 651 in the case of cereals,from 12% to 85b in the case of grain legumes (lentils,chick peas, dry beans),and from 4% to 751 in the case of eggs.
4.10 Output performance varied greatly among different subsectors. Considerableincreases were achievedin the productionof vegetables,pit and stone fruit (apple,pear, apricot, plum and peach) and in livestock. Cereal productionremained stationary during most of the period,while grain legumes increasedrapidly until the mid-1970'sand fell back thereafter,although it stayed at levelsover 251 higher than during the initialperiod. Citrusfruit and wine grapes, the traditionalagricultural export crops before independence, fared least well of all. Citrus productionincreased slightly through the mid-1970's but decreased after that to levels below the initial ones. Production of grapes and wine declined by over 50% during the period. These developmentsmay be better portrayed in the summary table shown on the followingpage.
4.11 It is worth noting the generallydeclining trend in yields. Although the final years of the periodanalyzed (1979-83) were characterizedby somewhat below average precipitation,the rather uniform and steady deteriorationin yields points to a deteriorationof the technical standards in Algeria's agriculture during this period. The observed trends permit the characterizationof 1967-1983developments as follows: (a) a stagnation,and even a regressionin some cases, in the productionof the hiaincrops, with an increasein productionlimited to vegetables,and largely due to an increase in area; (b) a growing disaffectiontoward crops with high labor requirements for the harvestand with meagerprofit margins, such as grain legumesand some tree crops;and (c) universallylow yields that are due to a lack of mastery of cultivationtechniques and to the absence of a research and extension policy seekingvarietal improvementsand the productionof plantsand seeds at the nationallevel."'
1/ MPAT, op. cit., p. 5. - 73 -
Table IV.l: TRENDS IN PRODUCTIONOF SELECTEDCROPS, 1967-69TO 1979-83
Average Average Average Average 1967-69 1970-73 1974-77 1979-83
Risins Production Vegetables Output 654 742 1,046 1,250 Yield 8.7 8.4 8.6 8.0 Imports 18 51 98 150
Pit & Stone Fruit Output 58 61 96 120
LivestockProducts Milk: Output 482 550 700 742 Imports 213 302 677 946
Redmeat:Output 76 100 118 140 lmports 0.5 - 14.5 58
Chicken:Output 24 27 70 116
Eggs : Output 10.5 12.0 15.0 32.0 Imports 0.7 0.8 17.5 45.0 StationaryProduction Cereals Output 1,860 1,930 1,890 1,960 Yield 0.65 0.60 0.62 0.60 Imports 620 780 1,730 2,600
Grain Legumes Output 40 42 67 50 Yield 5 5 7 4.4 Imports 4 9 47 80
DecliningProduction CitrusFruit Output 441 514 510 400 Yield 98 112 113 80 Exports 157 136 79 15
Wine Grapes Output 837 740 387 250 Yield 28 28 19 14 Exports 784 861 454 350
Source: MPAT, op.cit., passim. Note: Output and import/exportfigures are 1,000 t, exceptmilk and wine which are million1. Yieldsare t/ha. - 74 -
C. The 1980-1984 Plan 1 '
4.12 Unlike previous developmentplans (the 1967-69 three-yearplan and the 1970-73and 1974-77four-year development plans), the first Five-YearPlan 1980-84 was formulated following a thorough and objective analysis and assessmentof the performanceof the economy during the precedingdecade on the basis of which the Ministryof Planningdrafted, in May 1980, an economic and socialbalance sheet of the country. Concerningthe agriculturalsector, it was acknowledgedthat the ultimate longer term objective of increasing production implied a wide-rangingreorganization of the sector aimed at removing the existing developmentconstraints. The reorganizationwas to encompass (a) a restructuringof the socialist sector enterprises;(b) an improvementin the supportsystem for the private farms; (c) a reorganization of the service agenciesand a redefinitionof the function of the research institutes.
1. Restrueturing of the Socialist Sector Farms
4.13 The socialistfarm sector consistedof the self-managedfarms and of the agrarianrevolution cooperative farms. As of 1979-80,this sector covered about 452 of the cultivablearea of the country. The self-managedfarms consistedof 2,100 establishmentscovering 2.3 million ha, for an average area of 1,100 ha/farm. About 70% of the farms hnd more than 500 ha. In addition to the operatingcomplexity emanating from their large size, fragmentationof the total area of individual units into separate plots with dissimilar ecologiesand suitabilitiesmade operationof the self-managedsector complex and demanding. Proper operation, however, was crucial to Algeria's agriculturaldevelopment since it was estimated that the sector, given the superiorityof its soils and climate,contained about 70% of the agricultural potentialof the country. Althoughcovering only 3G% of the cultivablearea, 441 of the irrigated land was in the sector. Overall, about 402 of the cereals,70% of the industrialcrops, 86% of the vineyards,84% of the citrus, 54% of other fruit crops, 49% of the grain legumesand 421 of the vegetable producedin Algeria,were producedin the sector. Managementwas, in theory, decentralized.The Governmentappointed a director,but the decision-making power was to rest on the workers and their elected officials,including the president. This was known as the self-managementsystem. In practice, however, the Governmentplayed a major role in the conduct of the farms' operationsparticularly through the centralizedsetting of productionplans to be carriedout.
4.14 The Agrarian Revolution cooperatives consisted ot about 6,000 collectivefarms, whose memebers jointly operated the land and means of productionallocated to them for the purpose of improvingtheir incomes and working condition. As pointed out earlier (para. 4.04) lack of adequate technicalsupport services constituted a decisiveobstacle to proper operation of the cooperativefarms.
1/ Basic referencedocument for this section is Evaluationdu Premier Plan Quinguennal1980-84, Direction Generale des Etudeset de la Planification, Ministerede l'Agricultureet de la Peche (MAP),Octobre 1985. - 75 -
4.15 Performanceand problemsof the socialistfarm sectorwere thoroughly evaluated by the Government during the late 1970's. This evaluation identifiedthe major constraintsas follows: (a) the fragmentationof farms and dispersionof individuallots; (b) the relativelymodest productivity; (c) the considerablefinancial debts; (d) the lack of clear responsibilities; (e) the lack of productionincentives; (f) the excessive centralizationof planningand productionprocesses; and (g) the lack of technicalcadres. In consequence,a reorganizationof the socialistsector was decided in 1980, to be put into effect by the MAP, with the overallobjective of establishingfarm enterpriseseconomically viable and technicallyefficient. In the process of the reorganizationduring 1980-84, the cooperative sector practically disappeared,being partly merged into the self-managedsector and partly convertedto privateoperation. The resultswere as follows:
Table IV.2: CHANGESIN THE STRUCTUREOF THE SOCIALISTFARM SECTOR,1980-84
Type ef BeforeReorganization After Reorganization Enterprise Number Area ('000ha) Number Area ('000ha)
Self-managedfarms 2,099 2.331 3,415 2,830 Cooperatives 5,288 1,253 38 6 Individualallocations 40,634 157 103,168 705 Remainingland to be allocated 157
Sourc,: MAP, 2p. cit., p. 7.
4.16 The subdivisionand consolidationof self-managedfarms and the incorporation to this system of about 500,000 ha previously under cooperatives,resulted in an increaseof 62X in the number of enterprisesand a reductionof 27% in the average farm size to about 820 ha/farm. This type of enterprisewas also renameddomaine agricole socialiste (DAS). Allocations to individualfarmers of land from the Agrarian Revolution Fund reached 705,164ha (an additional40,000 ha were subsequentlydistributed) benefitting 103,168farmers, for an average size of holdingof 6.8 ha, considerablylarger than the 3.9 ha/farmallocated under earlierprograms.
4.17 The technical and managerial staffing constraint affecting DAS performancewas tackledat the enterpriselevel and at the provinciallevel. At the enterpriselevel, the numberof high-level(engineer or equivalent)and mid-level (technicien)technical staff increasedfrom 52 and 60 in 1979 to 1697 and 436 in 1984 respectively.Although the substantialincrease in staff numbersdid no. quite reach the perceiveddesirable level, it provideda sound foundationfor the more recently launched intensificationand technification programs. - 76 -
4.18 To reinforcethe technicaland managerialexpertise put into place at the enterpriselevel, 116 "agriculturaldevelopment centers" (secteurs de developpementagricole - SDAs) were establishedat the provinciallevel. Each SDA was staffedwith about 16 technicianson the averageand providedsupport to approximately30 DAS. They are attachedto the provincialDirectorates of Agricultureand their closenessto the individualfarms allow them to provide practicalsolutions to their operationalproblems and to assist them in the identificationand preparationof developmentplans.
4.19 Financial rehabilitationof socialist farms was another major objectiveof 1980-84 Plan initiatives. As an initial step, the Government assumedthe operationaldebts of self-managedfarms befor proceedingto their reorganization.The decisionwas then made to decentralizethe record-keeping and accountingto the enterpriselevel and to this effect, 3872 accounting expertswere trainedand placed in to individualDAS. In a parallelmove to the establishment of the agricultural development centers, acounting cooperatives(Cooperatives Agricoles de Comptabiliteet de Gestion - CACG) were set up at the provincial level to assist and monitor progress in individualfarms. Centers and cooperativesare in principle financed by charges on socialist farms levied at the rate of 1.6% of their annual productionplan estimatedexpenditures.
2. Private Sector Support
4.20 The total farm area under private sector operation expanded by 704,000 ha to a total of 5.1 million ha from 1979 to 1984 by virtue of the allocationsfrom the Agrarian RevolutionFund. This brought the area under privatefarms to about 60% of the total (see Annex II, Table IV.2), increasing the incidenceof productionfrom this sector in overall sector performance. In recent years, for example, about 60% of total cereal and vegetable productionoriginated in private farms (see Annex II, Table IV.3),and 95% of cattleand sheep stocksresided in them (see Annex II, Table IV.4).
4.21 Prior to 1980, private farms were almost totally overlookedby the servicesof the Ministryof Agricultureand had likewiseminimal access to the Officesand Cooperativesin charge of input distribution. This undoubtedly contributedto the overall lower yields obtainedin these farms, particularly in cereals,a situationthat still persists (see Annex II, Table IV.5). To piovide technical support to private farms, the 1980-84 Plan envisaged the establishmentof County AgriculturalAgencies (D6l6gationd'Agriculture du Daira - DAD), staffedby one agriculturalengineer, one or two techniciansand one veterinary.DADs are assignedthe role of identifyingthe extensionneeds of private farmers in their area and of carryingout the necessaryprograms and actions. A beginninghas been made in this initiative,but progress is slow given the scarcityof qualifiedstaff in relationto requirements.
4.22 Access to farm inputs,notably machineryand equipmentand chemical inputs, and to agriculturalcredit have expanded considerablyduring the 1980's. For example, while the statisticalyearbook reported only 10,000 tractors and 53 combines in private farms in 1978, deliveries of 27,000 tractorsand 4,000 combinesare reported for the 1980-83 four-year period. - 77 -
Althoughthere is undoubtedlya margin of approximationin those figures, it is clear that private farms currentlyenjoy greater access to modern inputs and receptivityto assistancefrom the various Governmentagencies concerned with agriculturalcredit and inputdistribution.
3. Reorganization of the Service Agencies
4.23 The reorganization of the service agencies envisaged three broad types of actions: (a) the restructuring of the input and output marketing offices to render their operationsless centralizedand more responsiveto producers'requirements; (b) the establishmentof specializedcooperatives at the provincial levels to act as link between producers and offices; and (c) the redefinitionof the functionsof research institutesto render them better suited to activities such as experimentationwith new varieties, management of nurseries, promotion of new crops, and diffusion of new techniquesin crop and livestockproduction. Progressin all three areas has been relativelymodest thus far, reflecting to a considerate extent the scarcityof trainedand experiencedstaff in the face of mountingdemands on their services.
4.24 Government interventionin output marketing until 1980 concerned principallycereals, grain legumes, wine and tobacco. All output of these commodities,from socialist as well as private farms, had to be marketed throughstatutory cooperatives and offices. Other commoditieswere marketed either throughservice cooperativesin the case of socialist farm output or throughthe free market in the case of privatefarm production. The existence of a "parallel market" in cereals and grain legumes which handled a substantialproportion of private farm productionhas been acknowledgedand allowedto persist,given the strongpreference of small farmersand villagers for directstorage and marketingof those food staples.
4.25 In the intervened sectors, little change took place during the 1980-84period. A major transformation,on the other hand, took place in the marketing of fresh fruit and vegetables. Until 1980, socialist farms sold their output to local cooperatives (Coop6rativesAgricoles Polyvalentes Communalesde Services - CAPCS) at pre-established maximum prices, and this productionwas then turned over to provincialcooperatives (Cooperatives des Fruits et des Legumes - COFEL) and the nationalboard (Officedes Fruits et des Legumes- OFLA) which arrangedwholesale and retail distribution. Market demand,however, increasingly overtook supply leadingto grow;ngshortfalls of maximum prices paid by cooperativesfrom market priceb. Furthermore, socialistfarms met a growing scarcityof seasonallabor to handle the harvest of the fruitand vegetablecrops. The Governmentdecided to abolish the local cooperativesand in fact to allow socialist farms to gain access to the private marketingchannels that were open to private farms. Currently, the bulk of socialistfarm productionis sold on a standingcrop basis to private contractorswho arrange for the harvestand transportationto market of the produce. - 78 -
4.26 The reorganizationof the marketing system of farm inputs has basicallyconsisted in the establishmentof provincialand countrybranches of the national agencies in charge of the distributionof chemicalsand seeds (Office National des Approvisionnementset Services Agricoles - ONAPSA), equipmentand implements(Office National du MaterielAgricole - ONAMA), and livestockfeed (OfficeNational des Alimentsdu Betail - ONAB). Closer links with farmers are providedby specializedcooperatives (Cooperatives Agricoles Specialis6esen Approvisionnements- CASSAP) establishedto take over this function from the former CAPCS. These cooperativesplay also an important role in the distributionof plants and improved seeds, acting under the supervisionof the correspondingresearch institutes and offices.
4.2/ The agricultural credit system received major impetus with the establishmentin 1982 of the AgriculturalCredit Bank (Banquede l'Agriculture et du D6veloppementRural - BADR) which took over functions previously assignedto the NationalBank of Algeria. With the establishmentof the BADR, a number of reformswere introducedto redresssome of the problemsof credit access, use and recovery. The objectivesof these reforms were: (a) to mobilize increasedamounts of resourcesto be channeled to the agricultural sector;(b) to providegreater access to credit,particularly for the private sector; and (c) to develop a system for assessing financial risks and to improvefollow-up and credit recovery.
4.28 Total lendingfor agricultuTeincreased from DA 7.7 billion in 1982 to DA 8.5 billion in 1984 and DA 10.7 billion in 1985. A mt'-r effort is underway to increase lending to private sector farms, with . number of privatecredit recipientsincreasing from 9,200 in 1982 to over ,OO in 1985 (whichis however a low figurewhen comparedto some 700,000potential credit recipients).Medium and long term credit has increasedfrom 15% of the total in 1982 to 202 in 1985, and the participationof private farms in this type of creditincreased from 122 in 1982 to over 17% in 1985.
4. AgriculturalPrices
Farm Inputs
4.29 The primary objective of Government's agriculturalpricing policy was to limit the increasein consumerfood prices as much as possible. To this end the prices of inputs were maintained basically unchangedfrom 1974 to 1983. As a consequence,the real prices (nominalprices correctedby the GDP deflator) of fertilizers, plant protection chemicals and equipment had declinedby 50% by 1980. Even the agriculturalminimum wage had lost by then 20% of its purchasingpower (see Annex II, Table IV.6). Only the prices of seeds and nurseryplants were increasedsteadily during this period to reflect the higherprices paid for importsand for domesticseed production.
4.30 Since production costs of farm chemicals and equipment rose considerablyduring this period, the Government incurred sizeable subsidy costs paid initially to the manufacturersand later to the marketing agencies. In the case of farm machineryand equipment,it was also observed that the low price policyencouraged acquisition of new material rather than maintenanceand repair of existing one (spare parts prices being increased - 79 -
annually in step with productioncosts) as well as diversionof machinesto non agricultural uses (construction,notably) for which no comparable subsidieswere provided. These considerationsled the Governmentto adopt in 1983 a new approach to input pricing aimed at bringing sale prices closer to production costs. From 1983 to 1985 prices of fertilizersand equipment roughlydoubled and plant protectionchemicals were increasedbetween twelve and twenty-fivefold. With these increases,the relative input to output prices in 1985 remained generallybelow 1974 levels, and the output prices have not yet "eachedthe desiredincentive level.
Farnn utputs
4.31 Prices of the major crops were adjustedupward annually,maintaining them ahead of GDP deflatormovements (see Annex II, Tables IV.7 and IV.8). Between 1974 and 1980, the price increasesfor the major crop categories (cereals,grain legumesand fresh fruit and vegetables)were of similarorders of magnitude. From 1980 onward,however, the freer play allowed to supplyand demand forces in the marketing of fruit and vegetables resulted in substantiallyhigher increases in the prices of those crops relative to cerealsand grain legumes,as shown in the followingtable:
?'RODUCERPRICES, 1980 AND1984
Percentage 1980 1984 Increase
Cereals(DA/ql) Hard wheat 125 160 28 Bread wheat 115 150 30 Barley 80 100 25
Grain Legumes(DA/ql) Lentils 300 330 10 Chickpeas 300 330 10 Beans (broad) 170 200 18
Vegetables(DA/kg) Potatoes(season) 1.10 1.90 73 Tomatoes 0.80 5.20 550 Artichokes 1.30 6.00 361 Carrots 1.10 2.70 45 Peppers 1.50 6.75 350 Onions 1.04 2.60 150
Fruits (DA/kg) Oranges(Thompson) 1.45 3.15 117 Tangerines 0.75 1.70 127 Dates 4.50 6.50 44 Table olives 1.21 2.75 127
Source: MAP, ap. cit. p.64. - 80 -
As indicated earlier, the steep increases in input prices in 1984 (and in 1985, see para. below) failed to overtake the increases in output prices during the entire 197p-85period.
5. Public Investment
4.32 Investment in agriculture is carried out by four separate units: (a) the Ministry of Agriculture; (b) the development institutes;(c) the provincialgovernments; and (d) the marketingoffices. Investmentsby the MAP and the institutes are financed entirely by budgetary appropriations. Investments at the provincial level, which largely encompass on-farm investmentsand investmentsby service cooperativesare financed partly by budgetaryappropriations and partly by creditallocations. Office investments are entirelyfinanced through credit allocations.
4.33 The 1980-84 Plan's final allocation for agriculturalinvestment at all levels was DA 21.6 billion, slightly over 5t of aggregate investment programmed for the quinquennium. Actual implementatonof the agricultural investmentprogram reached only DA 13.2 billion,or 617 of the plannedtotal. Detailsare at Table IV.9 in Annex II. Implementationrates ranged from 46% for the developmentinstitutes to 68% for the credit programsat the provincial levels. The latter,largely representingproductive on-farm investments,were considerablyboosted by the high rate of implementationof the programs of machineryand equipmentacquisition (DA 2.6 billion or 89% of target) and small-scaleirrigation development (DA 459 millionor 722 or target). On-farm investment implementationrate was considerably higher in crop related programs excluding mechanization(DA 1.7 billion or 70% of target) than in livestockrelated programs (DA 633 millionor 522 of target). The development institutesconcerned with crop productionalso achieveda higher implementation rate than those dealing with livestockdevelopment. The implementationrate of Office investmentprograms was highest in the case of storage facilities (DA 2.5 billionor 69% of target).
4.34 The relativelymodest rate of implementation,particularly at the central level, is explained to a large extent by the continuingconcern and activitiesdealing with structuralreorganizatior and financialrehabilitation of the entire farm system detailedabove. Other contributingfactors listed in MAP's evaluationare (a) the insufficiencyof cadres and training;(b) the relatively low attention by technical support agencies (structures de l'encadrement)to reinforcing production activities; (c) the lack of implementationcapacity; (d) the complexityand delays in processingcredit requestsfrom decentralizedagencies and farms; and (e) an overall inadequacy of planningand programmingactions and the lack of consistencybetween medium term plans and successiveannual plans and between annual plans and actual activities. - 81 -
D. The 1985-1989Development Plan 1. Principles and Objectives
4.35 The 1985-1989Plan pointedout that the satisfactionof the country's food requirementsover the lorg term and the need to rehabilitatethe agriculturalsector and to refurbish the rural environment required the deploymentof major efforts followinga coherentand integratedapproach to rural developmentand a strategycommensurate with the scope and seriousness of the food problem. Singledout as measuresto be taken were:
(a) the expansion of the productive potential, particularly through (i) reductionof lands left fallow; (ii) cultivationof new lands; (iii) rehabilitationof grazing lands in the steppe; (iv) development of small and medium scale irrigation,and (v) the deployment of integratedactions in mountainand desertareas;
(b) the rationalizationof the utilizationof soils and water as well as other productionfactors that should allow a more pronouncedregional specializationover the longerterm; and
(c) the implementationof measures leading to insure the economic and technicalviability of farm sectorenterprises.
The Plan underscoredthat the magnitude of the objectives assigned to the sector implied that inter-sectorialsolidarity was absolutelynecessary, to which effect the non-farm product requirementsfor rural developmentefforts should be incorporatedas priority tasks in the plans and programs of the correspondingsectors.
4.36 To further lift the constraints that had till then blocked the developmentof the agricultural sector, the Plan proposed the following actions: (a) implementationof integrated programs; (b) close working relationswetween the supportagencies and the farmers,and imprrvementof the performanceof the agencies; (c) adaptationof the financing system to the actual circumstancesof the farms, with higher attentionto small farmersand enterprises;(d) improvementof farmers incomesin the frameworkof a policy of nationalincome distributionthat promotedproductive activities; and (e) implementationof a price policy that encouragedthe productionof food crops and discouragedproduction of crops of a speculativenature.
4.37 The Plan containeda detailedenumeration of land use and production objectivesto be attainedon the basis of a desirablefood intake per person per year of 170 kg of cereals,9 kg of grain legumes,120 kg of vegetablesand 50 kg of fruit. To achieve self sufficiencyin grain legumes,vegetables and fruit and a 50% coverage of cereal needs, land under cultivationshould be redeployedas follows: - 82 -
Table IV.3: LAND USE AND PRODUCTIONOBJECTIVES OF THE 1985-89PLAN
1984 1989 1,000 ha 1,000 ha X
Cereals 3,334.2 45.8 3,448.3 44.6 Grain legumes 211.1 2.9 305.4 4.0 Foragecrops 706.1 9.7 883.3 11.4 Industrialcrops 7.3 0.1 48.3 0.6 Vegetables 274.5 3.4 294.4 3.9 Fruitand vineyards 669.9 9.2 788.9 10.2 Grazingland 43.7 0.6 68.8 0.8 Fallow 2,060.2 28.3 1,890.4 24.5
Total 7,280.0 100.0 7,520.0 100.0
Source: 1985-89Plan.
£4 the basis of projectedyields (in parentheses),expected production would be: cereals(8.7 ql/ha)about 3 milliont in a favorableyear; grain legumes (8.5 ql/ha) 0.26 million t; vegetables(95 ql/he.)3 million t; and fruit (44.3ql/ha) 1.3 milliont.
4.38 Concerninglivestock products, the per capita consumptionper year was projectedat 13 kg of red meat, 9 kg of poultry,100 kg of milk and derivativesand 5 kg of eggs, and the productionobjectives were set at 228,000t of red meat, 242,000t of poultry,132,000 t of eggs and 910,000t of milk and dlerivatives.These levels would insure self-sufficiencyin poultryand eggs, 70 coverageof red meat and 36% of milk and derivatives.
4.39 Action programs to be undertakenat the different levels were enumeratedin the Plan, and their overall cost was estimatedat DA 30 billion. The first year (1985) allocationwas set at DA 4.84 billion, consistingof DA 1.15 billionof budgetaryappropriations and DA 3.69 billion of credit allocations. Following the readjustmentof expenditureplans arisingfrom fiscalconstraints, the finalbudgetary appropriation was reduced to DA 1.01 billion,while the creditenvelope was left unchanged. Given the priority assigned by the Government to agricultural development and increased food production, it appears likely that agricultural sector investments will not experience substantial reductions in the remainder of the Plan period.
2. 1&entg dim
InveI mnt
4.40 A wide-rangingseries of program and actionswere undertakenduring the 1984/85campaign in pursuanceof the objectives set in the Development Plan. The overallrate of implementationof planned investmentswas 71% (a noticeableprogress compared to the previousperiod), broken down as follows: - 83 -
Table IV.4: AGRICULTURALSECTOR INVESTMENTS,1984/85
Planned Actual Implementation (DA million) ---- (S)
BudgetApprropriations MAP 164 144 88 Institutes 99 42 42 Provinces 748 665 89 Sub-total 1,011 857 84 CreditAllocations Provincesand APF 2,106 1,560 74 Offices 1,585 931 59 Sub-total 3,691 2,491 67.
Grand Total 4,702 3,372 71
Source: MAP, Directionde la Planification,Rapport G6n6ral de l'Ex6cutiondu Plan Annuel 1985, p. 64.
PriniDalProran
4.41 It must be rememberedthat these programsare organizedaccording to three major directions: (i) expansionof cultivableland and improvementof water availability,(ii) intensification of production(cereals, others), (iii)regional development (steppes, Sabarian areas, mountain areas). Actions wereinitiated toward improvement of agriculturein the steppeand the desert. Concerningthe steppe,the principalmeasures taken were (a) establishmentof technicalassistance nuclei and cooperativesat selectedlocations; (b) plant regenerationon over 225,000ha; and (c) relocationof sheepherds as a step in turningthe steppeinto a breedingarea for animalsto be fattenedin the north. Concerningthe desert zones, drainageworks were carriedout in selectedareas and over 75,000ha were allocatedto some 19,000farmers in accordancewith the provisions of the law on accessionto rural land (loi a l'accessiona la proprit6 fonci6re).A beginningwas also made toward developmentof mountainarea agriculturewith the selectionof two pilot provincesfor futureaction.
4.42 Productionintensification programs received major impetus and their impact, given the improvementin the structureof productionunits implemented during the preceding years and the generally favorable weather, was spectacular. Agriculturalproduction in 1985 reached record levels (see Annex II, Table IV.10). Results in major commodity group are summarized below, with 1980 (relstivelyfavorable weather) and 1984 added for purposesof comparison. - 84 -
Table IV.5: AGRICULTURALPRODUCTION
1980 1984 1985 1985/80 1985/84 …('000 tons) -- -- (% change)--
Crops Cereals 2,328 1,406 3,005 29 114 Grain Legumes 39 37 46 17 23 Vegetables 1,092 1,538 1,957 79 27 Forage crops 665 677 849 28 25 Industrialcrops 120 149 186 55 25 Tree crops 618 711 645 4 (9) Vineyards 484 298 275 (43) (8)
Livestock Red meat 135 160 160 18 0 Poultry 96 144 163 69 13 Milk 699 708 713 2 1 Eggs 15 49 84 443 70
Source: MAP, 2p? cit. p. 11.
4.43 The 1984/85 crop intensificationprograms centered on cereals and vegetables(potatoes particularly) and they were both extremelysuccessful, as shownat Table IV.l1 (Annex II). At the centralGovernment level, the cereal intensificationprogram was designedby the Directorateof plant productionof MAP in cooperationwith representativesof Institutes,Centers and Offices concerned, particularly the Cereals Development Institute (Institut de Developpementdes GrandesCultures-IDGC), the CerealsMarketing Board (Office Alg6rien Interprofessionneldes Cer6ales-OAIC),the Center for Agricultural Education (Centre National de Pedagogie Agricole-CNPA);ONAPSA and ONAMA (para. 4.31). The group drew up cereal developmentplans, defined specific objectives, established actions required for the supply of inputs and equipmentand decided the requiredtraining and experimentalwork. The group was to monitorplan implementationand to evaluateresults. At the provincial level units were formed including also representativesof the cereals cooperativesand of CASSAP (para. 4.26); they were responsible for the implementationof the agreed program, selection of the cereal zones, identificationof suitable DAS and private farms within those zones, monitoringof DAS activities,and deploymentof extension staff to assist private farmers. The units were to supervise the implementationof the programand to evaluateresults.
4.44 For the training of the techniciansrequired, several short courses were planned,and these were run by IDGC and CNPA. An extensionprogram was drawn up covering improved seed production,plant protection,fertilization, the use of agriculturalmachinery and the improvementof harvestingoperations. - 85 -
The actionsproposed aimed at trainingstaff who would be able to advise farmers,and at the productionof technicalnorms based on experienceat pilot farms; the farmswould serveas modelsand be used for demonstrations.IDGC was askedto concentrateon work on crop improvementand on culturalpractices, and to work on irrigatedcereals. At ten pilot farms in cooperationwith localstaff, IDGC would establish demonstration plots covering seed production, cultural practices,chemical weed control,mechanization of grain legume production,the introductionof foragepeas, and adaptabilitytrials on type and varietyof cereal.
4.45 The 1984/85program reached about 750,000ha, wherean averageyield of 1.2 t/M was obtained,compared with 0.9 t/ha in areasoutside the program. Althoughnatural conditionswere probablymore favorablein generalin the areas selectedfor the program,this 302 yield differentialunquestionably reflectsto a considerableextent the successof the actionsundertaken. In the case of breadwheat, for example,the differencein yieldsbetween areas included and areas outside the progran was a striking77X, as the figures belowindicate:
TableXV.6: CEREALCULTIVATION, 1984/85
UnderIntensification Program OutsideProram Area Production Yield Area Production Yield ('000ha) ('000t) (tha) ('000ha) ('000t) tKaM
Durumwheat 347.2 387.8 1.12 714.3 645.7 0.90 Breadwheat 203.1 265.3 1.31 376.0 277.1 0.74 Barley 171.9 234.2 1.36 1,021.5 1,081.2 1.06 Oats 35.7 37.5 1.05 97.5 74.1 0.76 Source: MAP.
Overallyields in 1984/85were 974 kg/ha for durum,936 kg/ha for bread wheat and 1,102kg/ha for barley,considerably higher than the 600,671and 639 kg/ha averagesrespectively during 1978-82. By way of reference,average yields in neighboringTunisia during 1978-82 were 845 kg/hafor durum,1,410 for bread wheatand 561 for barley.
4.46 The 1984/85potato intensificationcampaign was devoted to main season potatoes (February/March planting) and covered 17,000 ha at DAS farms and 27,000 at private farms. The same approachwas adopted: technical instructionsreaching farmers in time and in detail,availability of inpattson time in the requiredamounts, and as mwch follow up as possible. Yields ranged between 5 and 17 tons per hectare,mainly dependingon amount of rainfall,irrigation and drainageconditions, severity of mildewattacks and of insectpests. Yieldsat privatefarms were higherthan those at DAS farms partlydue to theirspecialization and the care of the crop on their smaller areas. The 1985 output of about 2 million t of potatoes reached the self-sufficiency level, However,with the rapid growth in populationand risingper capitaconsumption, further increases in area and yields will be requiredin the yearsahead for the country to remain self-sufficient. - 86 -
AgriculturalPrices
4.47 Input prices were further increased in 1985 following the policy adopted by the Governmentin the previous year to eliminategradually the difference between production cost and prices charged to farmers. The steepest increase affected plant protectionchemicals, where the cost/price differentialwas completelyeliminated. Fertilizerprices were increasedby about 452 and machinery (tractors)by about 25%, with further increases planned to bring about full cost pricing by 1987. Output prices were also increased for regulated commodities,mainly cereals and grain legumes, the increasesranging from 252 (bread wheat) to 40b (barley). Market prices of deregulatedcommodities also experiencedsubstantial increases of the order of 301.
4.48 The prices of inputswere raised in 1984 and 1985 considerablymore than output prices. Takinga longerperspecti-3, however relative input/output pricesin 1985 were still generallylower than they were in 1974 (see Annex II, Table IV.12). The notable exceptionwas plant protectionchemicals, where the price increasesof 1984 and 1985 far exceededthe increasesin output prices during the entire decade. This may partlyexplain the apparentdecline in the use of these inputs in recent years (see Annex II, Table IV.13),which is in marked contrast with the observed increase in the use of fertilizer (Oee Annex II, Table IV.14).
3. Oudlookfor 1986-89
4.49 The overall allocationfor investmentin 1986. which had initially been set at DA 5.5 billion, was subsequentlyreduced to DA 4.1 billion, roughlyto the level of actual 1985 expenditures.Given the continuingfiscal stringency,it does not seem likelythat allocationswill be greatlyincreased in the near futurenor, given the sector'spriority and success of development effortsto date, that they will be appreciativelyreduced.
4.50 Programs for agriculturaldevelopment in the desert, in the steppe and in the mountainousareas are continuingalong the lines started in 1985. A strong element of technicalsupport and trainingis being providedthrough the local agriculturaldirectorates. Although progress will necessarilybe slow initially, these programs are expected to improve considerablythe incomesand living conditionsof importantsectors of the populationas well as to enhance the productivecapital base of the areas involved thrcugh preventionof further desertificarionand erosion in arid and mountainous zones respectively.
4.51 Production intensificationprograms are also being pursued for cerealsand vegetablesand expandedto cover their productssuch as industrial crops (tomatoesfor processingand tobacco)citrus and table and wine grapes. As in the 1984j85program, plans are being made to involve all the agencies concernedwith the preparationof plantingmaterial, distribution of inputs, technical investigationand information,training of extension agents and demonstrationsat pilot farms in the differentproduction zones. Attentionis also to be given to strengtheningthe organizationof harvest, collection, transportand processingof the crops,particularly in the case of fruit and vegetables. - 87 -
4.52 Significant improvements in productivity and growth of the agricultural sector may be expected in the years ahead from the area developmentand productionintensification programs described above. Even more lasting improvementsmay be achievablethrough two additionalsets of programsthat are being now activelyconsidered or initiated: replacementof the fallowand irrigationdevelopment.
Fallow Reduction
4.53 Algeria, in common ,.tith several Mediterranean countries, has been consideringhow to replace the fallow (land left withoutplanting between the harvest of one crop and the sowing of another,usually about fifteenmonths later). From 2 to 3 million ha out of the total 7.5 million ha of cultivated land are left fallow every year. The advantagesof the fallow in providing grazing, helping retain some moisture, contributingnitrogen, weed control, and in preventingbuild-up of diseases,are now widely questioned.
4.54 The Ministryof Agriculturerecognizes that it will not be easy to convinceprivate farmers,or even DAS managers to abandon the tradition of fallowing, and that the change may be more acceptable in areas of good potential. A program will be initiatedin autumn of 1986 aiming eventually at: (a) eliminationof the fallow in land of good potential(0.75 millionha) where fallow r.owoccupies 11%; (b) reduction of fallow in land of medium potential (2.3 million ha) from 30T to about 10% and replacingit with grain legumes,forage crops, industrial crops and vegetables;(c) reductionfrom 36% to 25X in land of low potential (about 2 million ha) and replacingit with forage crops, improved pastures, grain legumes, industrial crops and vegetables;and (d) retaining the fallow in the one million hectares of agro-pastoralland withina two year rotation(502).
4.55 DAS farms in areas with land of good potentialwill be advised to start eliminatingthe fallow from their proposed cropping patterns in the autumnof 1986. In the medium and low potentialzones, the Ministry proposes that studies be startedby the DevelopmentInstitutes to define the soil and climatic conditionsof the areas where fallow is practised: descriptionof productionsystems, review of possiblefood crops, fodder,and forage crops, the technicalfeasibility of replacingthe fallowand the costs. The studies will be accompaniedby testinghigher crop intensitieswithin pilot farms in each of the zones and determiningsuitable crop and animalproduction systems.
4.56 Tremendousbenefits could be expected from these initiatives,not only by the reductionin the area annually left idle, but also by the soil improvementand diminishedvulnerability to droughts that would follow from the introductionof forage legumes/cerealsrotations. Experimentsalready made by IDGC show that annual Medicago speciescan be successfullyintroduced and managed in rotationwith cereals. Widespreadadoption of these farmers systems would permit the expansion of livestock raising activities in associationwith crop growingand would significantlyenhance the possibility of success of the ongoing efforts to develop the steppe areas as breeding groundsfor sheep herds to be fattenedin the northern'arms. - 88 -
Irrigation Development
4.57 Programs are underwayto expand the availabilityof irrigationwater and to improve the efficiencyof its use. The efforts are three-pronged: (a) increase and rehabilitation of large-scale irrigation perimeters; (b) expansion of small and medium-scale irrigation development; and (c) establishmentof extension services to assist farmers in proper water use techniques,including care and maintenanceof worksand facilities.
4.58 Existing large-scaleirrigation perimeters have long suffered from indifferentmaintenance and inadequatedrainage. As a first step towards correctingthese problems, decentralizedmanagement agencies (Offices des P6rim6tresIrrigues) are now being establishedin the individualareas. In addition,a special agency has been set up under the joint auspices of the Ministriesof Agricultureand Water Resources(Office d'Amenagement et de Mise en Valeur - OAMV) to design and assist farmers in the implementationof integrateddevelopment projects.
4.59 Concerningsmall and medium-scaleirrigation development, technical assistanceservices will be channelled through newly focussed cooperatives (Cooperativesspecialisees dans les Constructions,l' Irrigation et le Drainage - COPCID). Work is also advanced in the preparationof a wide-ranging investmentprogram to pursue this type of irrigationdevelopment in socialist and privatefarms.
4.60 There is also awareness of the considerablepotential to increase water use efficiencythrough the introductionof water-savingtechniques such as drip irrigatioii.d minisprinkleruse. Acknowledgedly,these techniques require attitudesand skills on the part of the users that do not generally exist at present. Sustainedefforts would thereforebe called for to train and interestfarmers in them. This could appropriatelybe undertakenin the context of ongoing rehabilitationefforts and, particularly,of the new irrigationdeveloppement projects soon to be implemented. - 89 -
CHAPTER V - THE 1NDUSTRIALSECTOR
A. General Panomma
5.01 Over the past twentyyears, industry'scontribution to the nominal grossdomestic product has rangedbetween 141 and 101. Light industry'sshare has posteda virtuallycontinuous decline, whereas that of heavy industryhas increased.These nominalresults should not be allowedto concealthe fact that the industrialsector expanded considerably over the period,the drop in its contributionto the nominalGDP beingdue mainlyto the exceptionalgrowth of the hydrocarbonssector. In real terms, the manufacturingindustries' activitygrew from 8.5 in 1969 to 15.4Sin 1985. TableV.1: CONTRIBUTIONOF THE INDUSTRIALSECTOR TO GROSSDOMESTIC PRODUCT (In percentages)
1969 1973 1980 1984 /a 1985 /a M1 (ii) M1 (ii) Mi (ii) Mi (i) Mi (ii)
HeavyIndustry 2.9 n.a. 3.4 n.a. 3.1 n.a. 6.75 n.a. 6.52 n.a.
Light Industry 10.3 n.a. 10.4 n.a. 7.1 n.a. 5.37 n.a. 5.21 n.a.
Total Industry:(i) 13.2 13.8 10.2 12.12 12.73 (ii) 8.5 9.9 12.9 14.9 15.4
/a Provisionalfigures. (i) In nominalterms; (ii) In real terms. Source: Ministryof Planning.
5.02 Duringthe period1980-85, the industrialsector posted an increase in employmentof around80,000 persons, which was accompaniedby a pronounced rise in labor productivity,an improvementin the rates of utilizationof productioncapacity estimated at between802 and 90% in heavy industryand between 701 and 802 in light industry,t'an appreciablereduction in
U/ It must be noted that it is quitedifficult to make a preciseevaluation of the efficiencyfor the industrialapparatus. Two major indicatursare available:the rateof capacityutilization and the rate of realizationof productionobjectives. The firstdepends on the measurementunits retained for availablecapacities. For this purposeone makes the distinction between the theoretical(contractual) capacities (as defined by the installmentcontract) and real (effective)capacities (as reflectingthe productionpotential of a given unit duringa period,with given technical and humanresources). The seconddepends on the assignedproduction target with due regardfor the contextof management.This methodleaves room for subjectivitysince measurement of real capacityand targetdesign is subjective.It frequentlyhappens that evaluationsof real capacitiesare revisedaccording to the achievements,thus creatingdiscontinuities in statistics.The selectedfigures mentioned above are estimatedaccording to the Algerianpractice. - 90 -
dependencyrates (the imported componentin manufacturesgoing down from 36% in 1980 to 282 by the end of the first Five-YearPlan), and a reductionin the proportionof public investmentaccounted for by the sector (industryabsorbed 32% of non-hydrocarbonpublic investmentin 1984 as opposed to 80b in 1974). Taken together,these data indicatethat the industrialsector is now capable of satisfyinga large part of the country'srequirements with an acceptable degree of technicalefficiency, which is evidenceof a certainmaturity. It exportsvery littleof its production,however (less than 32 of total exports), notwithstandingthe existence of sizable productivesurpluses in certain branches.
5.03 The restructuringof industrycarried out in 1982 resultedin a large number of enterprisesspecialized by product line, hence smaller in size and possessinggreater autonomy. The principleson which this reorganizationwas based also led to a separationof functions,which in most brancheshas given rise to the establishmentof separateproduction, distribution and development enterprises. The reorganizationhad positiveresults in that it made possible the formationof smaller, often regionalized,enterprises. Its impact was less so, however, on the branches located in contact with the end demand (capitalgoods, textiles,leather, woodworking, canneries) in that it limits the possibilitiesfor product diversificationby the enterprisesconcerned and makes it harder to take the requirementsof the demand into account (particularlyin view of the now very markedseparation between production and distribution).
5.04 At the close of 1984 the sector'sfinancial position showed it owing the banks some DA 20 billion after subsidies. Even if the financial restructuringfollowing the reorganizationof industrysucceeds in correcting this situation, it will nevertheless not resolve the Algerian public enterprises'problems in obtainingbalanced net results. These difficulties derive first from the excessivelyhigh personneland financing costs the enterpriseshave to bear, in relation to the price levels acceptable to the authorities,and secondly from the other costs caused by delayed startups, breakdownsand interruptionsin supplies,especially in heavy industry. They also result, finally, from the form of taxation,which impacts both the enterprisesrunning deficits and those operatingat a profit. It should be noted that this situation is further aggravated by the fact that the enterprisesthemselves only finance a very small part of their gross fixed capitalformation.
5.05 The reductionof the possibilitiesof recourse to state financing raisesa number of questionscommon to the industrialsector as a whole. The first relates to the applicationof measures that would make it possible to increasethe efficiencyof the public enterprises,from the programmingphase through operation proper. In this connection problems arise regarding adaptationof the methods of macroeconomicregulation (price setting, import permits,employment maintenance obligations), autonomy of financialmanagement and, more generally,the degree of responsibilityof the managers of public enterprises. The second question is that of the developmentof the private sector as a complementof the public sector in certainbranches and as a new dynamismfactor, while the third concernsthe possibilityof developingexports of non-oilproducts and the changesthat this developmentwill entail for the import-substitutionstrategy and the parityof the dinar. - 91 -
1. The Economic Functioning of the Light Industry Subsector
5.06 The light industry subsectoris made up of the industriesproducing items to meet the population's basic needs [construction materials, agricultural and food industries (AFIs)], intermediate products and manufacturedgoods intended for the end consumers, especially textile and leathergoods. The first Five-YearPlan period concludedwith an appreciable increase in the share of the AFIs, woodworkingand glass. A significant dispersion is apparent in the increase in labor productivityamong the remainingbranches, with the exception of textiles, leather and cellulose, this increasebeing higher than the increasein per capitawages. In several branches,the rise in labor productivityis unrelatedto the capital invested per worker, which tends to prove that significantproductivity gains are possiblewith small investments,provided that productionis alignedbetter on demand.
Table V.2: SELECTEDINDEXES FOR THE LIGHT INDUSTRYSUBSECTOR
% of Sector Indexes 1980 - 100 - Current Values value added Personnel Output Wages per Value added in 1984 (84) sold (84) capita (84) per capita (84)
Construction 15.15 111 154 114 121 Materials
Wood 10.03 127 228 113 178
Glass 3.34 231 360 140 221
Cellulose 2.60 105 160 148 142
AFIs & Tobacco 45.18 100oa 186 'a 125 A 170 "a
Textiles& Leather23.70 154 234 130 97
/a ExcludingERIADs (semolinaand flour). Source: Ministryof Light Industry(MLI).
5.07 Utilizationof production capacity (Table V.3) posted a distinct improvementon average over the first Five-YearPlan. Nevertheless,certain branches-Iare in a situationof quite high under-utilization;these are, in 1984 figures: cement (552), sanitary ware (391), general woodworking(21%), hollow ware (571), canneries (81), carbonatedbeverages (461), and fabrics (29% for wool, 72% for cotton fabrics). With the exception of the cement works, technicaldeficiencies (frequently related to defects in design) are
1/ Out of 31 activitiesanalyzed, 7 are under-utilizingtheir production capacitiesand 24 displayan acceptablerate of utilization. 92 -
INSTALLEDAND PLANNEDPUBLIC PRODUCTIONCAPACITIES PRODUCTBALANCE - LIGHT INDUSTRY
Rate ot Capacity satisfaction Growth indexes Installed Utilization of demand by New of Installed Capacity Rate noutut Canacty Capacity Plan tX) 1984 (X) (%- 19)5-t Plan
Cement (103 T) 10,000 48 55 70 84 3,000 130 Bricks.etc. (103 T) 1.990 76 83 54 53 1,100 155 Ceramictiles (103 42) 2.650 76 76 54 45 2,500 194 Sanitaryware (103 T) 29 49 39 69 69 - - Generalwoodworking (103 #42) 4.448 35 21 4 5 - Prefabricated wooden CoM onents (103 M2) 19 32 108 4 6 - - Flat glass(103 T) is 19 85 33 27 20 233 Hollow ware (103 T) 16 54X 57 46 31 60 179 Crockery(T) 18.100 55 57 27 65 - - Printingpaper (103 T) 55 S4 78 76 62 - Packingboard (103 T) 89 72 78 46 40 - - Semolinaj103 T) 1,219 94% 99 65 69) Flour (10 T) 1.105 86X 93 71 101 ) 775 133 Edible oil (103 T) 285 97 97 100 91 - - Soap(10' T) 82 94% 94 100 87 - - Margarineand Fats (103 T) 27 57 57 100 68 1 margarineplant - Cannedvegetables (103 T) 27 12 8 nd nd - - Tomato concentrate(103 t) 15 45 72 15 36 - - Mineralwater (10t H2) 1,610 66 70 66 42 ) Carbonatedbeverages (103 H2) 2,8S4 39 46 27 26 ) 3,900 187 Cigarettes(106 packets) 10.030 75 77 96 101 600 158 Cottonyarn (T) 34,020 72% 80 nd nd - - Wool yarn (T) 8.371 63X 66 nd nd 2,000 124 Finishedcotton fabrics (103 L") 120,399 72 72 nd nd - - Finishedwool fabrics(103 LM) 34,024 26 29 nd nd - - Finishedsilk fabrics (103 LI) 12.544 69 73 nd nd - - Blankets (103) 1.459 103 94 34 36 2,500 277 Shirts (1O3) 3,379 62 79 30 28 Made-upGoods Progr. - Footwearother than shoes (103 pairs) 4,106 70 76 19 12 - - Shoes (103 pairs) 18.783 92 97 30 35 4,500 209 Fancy leather goods (103 pieces) 2,125 124 144 36 37 2,000 197
Soure, Ministry of Light Industry 61368 p.14 (7,2) - 93 -
not the primaryreason for this capacity under-utilization.A bigger factor is the failureto match productionto demand,which is evidentfor woodworking and textiles,branches where there is significantcapacity under-utilization coupledwith a domesticdemand that is in excess of a nationalproduction. On the other hand, when the "marketeffect" manifests itself in a positivefashion (case of glass, cellulose, leather and fancy leather goods), significant productivitygains can be achievedjust by increasingthe capacity-utilization rates. Finally,the general import authorization("AGI") mechanism determines capacity-utilizationrates to the extent that it restrictsrecourse to imported inputs; this effect has been appreciablein textiles,hides and skins, and canning,for which no nationalsubstitutes are available.
5.08 At the end of the first Five-YearPlan the public enterprisesin the light industry subsector were in the financial situation set forth in Table V.4. Even with quite substantialstate support (DA 10 billion in 1Q84), this group as a whole is still in debt to the banks to the tune of some DA 7 billion. Moreover, its net operatingresults are negative and there has been little in the way of improvementover recent years, which means that repayment of the debts is out of the question. What is more, certain enterpriseswith considerableunder-used capacity are in a financialposition that is hardly tenable in the short term. These are general woodworking, cellulose, canning and textiles (semifinishedgoods), for which the "cash balance/turnover"ratio has high negative values (-39% for textiles (after subsidy),-1862 for woodworking,-4002 for cellulose). It should be noted, finally, that on the basis of the net cash flow for 1984, the sector's self-financingcapacity appears extremely small. In 1984, out of 36 public productionenterprises, only six concludedthe year with their net results in balance. The two componentsweighing excessivelyon the operating costs of most of theseenterprises are personneland financingcosts. The requirements for these enterprisesto be placed on a sound footing includeprivatization and reorganizationof the activitiesmost seriouslyaffected (cement works, canning, woodworking, semifinished textile goods), application wherever possible of cost pricing (hard to envisage in certain enterprisesproducing staples - cereal processingenterprises in particular- in which personnel costs alone accountedfor 94% of value added in 1984) and the possibilityfor them to let excesspersonnel go.
5.09 Privateenterprise will be requiredto play an increasingrole in the lightindustry subsector. Since the applicationof the law of August 21, 1982 liberalizingthe conditionsfor approval of private investments,a thousand new dossiershave been lodged each year, averagingDA 9 million in 1985 (as against DA 800,000 in 1980). In light of the 8,000 enterpriseslisted, this figure gives an idea of the growth potentialof the private sector. Private enterprisesare small and operate primarilyin hides and skins, leatherwork and textileswhere they account for about 602 of branch turnover,and to a lesserextent in the AFIs and woodworking(25% and 202, respectively).
5.10 The external position of the light industry subsector improved (exceptfor constructionmaterials) during the first Five-YearPlan thanks to the import-substitutionpolicy (see Table V.5). On the other hand, the total - 94 -
lale V.Y4: FINANCIALSITUATION OF SELECTEDPUILIC ENTERPRISES FOR 1984 (In millionsof Algeriandinars)
Operating Cumulative Amortizations Income Cash Govt. Final Cash & Reserves for FY84 Net Cash Flow Position Subsidies Balance (1) (2) (3) - (1)+(2) (4) (5) (6) = (4)+(5)
Constructionmaterials 695 -S00 +195 -431 1,559 1,128 Wood 190 -2 +188 -3,534 - -3.534 Glass 90 -64 +36 +285 56 341
Cellulose 24 -457 -433 -3,725 - -3,725 AFls - Tobacco 743 -1,021 -278 -1,406 2.458 1,0o2 Textiles 824 -835 -11 -8,095 6.036 -2.059
Leather ._I_46 U -348 232 -11.
TOTAL 2,611 -2,832 -221 -17,254 10,341 -6,913
Source,: IL
Table V.S: DEPENDENCYOF LIGHT 1NOUSTRYSMSECTO
1. FinalDependency (1) is a8 2. OperatingDependency (2) lsI= Jim
Cement 17% 39X Constructionmaterials enterprises 10% 12% Ceramictiles 0.4% 27% Wood enterprises 13% 9% Glass enterprises 42% 9% Flat glass 77% 43% Paper enterprises 4% S% ERIADs - Semolina. flour - 2%
Kraft packing paper 43% 61% Juices and canned foods enterprises 17% 7% Mineral water enterprises 5% S%
Semolina 38% 39% Tobacco products, matches 3% 6% Textile enterprises 29% 16%
Flour 26% 2% Hides and skins enterprises 21% 16%
(1) Final imports in percentagesof distribution volume. (2) OperatingGeneral Import Authorizations in percentages of output sold (in value). Sgurce: Ministeredes IndustriesLegeres. 61368 p.15 (7.2) - 95 -
amount of the light,heavy and food industries'exports (DA 802 million for semimanufacturesand consumergoods -- i.e. 2.4% of all exports)shows that thereis still scope for developingexports.
2. The Economic Fbnctiow,,, of Heavy Industry
5.11 Heavy industry's contribution to the nominal GDP is definitely growing (6.51 in 1985 as against 3.11 in 1980) even though the subsectoris receivinga smaller proportionof public investment(441 of non-hydrocarbon public investmentin 1974, 43% in 1980 and 171 in 1984). Personnelemployed by the publicenterprises rose from 108,637in 1980 to 144,000 in 1985, which means that 40,000 industrialjobs were created in the first Five-Year Plan period. Aside from some subcontractingactivity, the private sector plays very little part in heavy industry. The restructuringexercise was carried out according to the same principlesas for light industry, in particular decentralizationby productline and regionalization.
5.12 Over the period 1980-84as a whole, the averageannual growth rate of productionsold was 17.20% in current DA and of the order of 151 in constant values. At the close of the first Five-YearPlan, and during 1985, there was a slowingdown in the rate of growth (11% in 1984 and 7.61 in 1985) which was mostly due to SNVI's productionfall (SNVI has an importantrelative weight in the total). Moreover,in 1984 and 1985 implicitproduction prices rose by 5% and 0.42 respectively,hence at a faster rate than during the first Five-Year Plan. Viewed branch by branch, a noteworthy increase in apparent labor productivityis evidentin all cases exceptmining and mechanicalengineering. One may notice that: (i) for mining it is very likely a structuralphenomenon related to the conditionsof productionand marketing,and to the saturation of a few activities;(ii) that the performancesof mechanical industries should be related to the sudden decline of SNVI's production in 1985, an accidentaldifficulty which has since been resolved.
Table V.6 SELECTEDINDEXES FOR HEAVY INDUSTRYSUBSECTOR Base 100 = 1979
Metal- Mech- Elec- Total Mining Steel working anical trical
MarketedProduction CurrentDA 106 246 159 213 319 243 307
Labor Force 150 95 163 153 167 164
Value Added per Worker 232 197 283 280 170 259
Source: MILD. - 96 -
5.13 Evaluated in terms of capacity utilization and achievement of productiontargets, the subsectorcan be viewed as having reached a certain maturityinasmuch as these differentindicators are on averagerelatively high (in comparisonwith the light iniustrysubsector in particular)and there is a distinct slowing down in their rate of growth at the end of the period. Expressedin financialterms, the availableand usable real capacityreserves amount to DA 5.4 billion and represent an 83% utilizationrate for the subsectoras a whole. A physical assessmentof the main productsyields an average utilizationrate of 842 in 1985 as comparedwith 76.4% in 1979. The average rate of target achievementis of the order of 84b in financial terms and 90X in physicalterms.
5.14 The heavy industrysubsector poses primarilya problemof organization of production,stricto sensu, since there is little in the way of productivity reserves to be mobilizedby better alignment on the market. In view of the size of the units concerned,technical incidents can have significantimpacts on results. This was the case in 1985 in steel and mechanicalengineering (industrialvehicles) in particular. More generally, the factors identified by the supervisoryministry are mechanicaland electricalbreakdowns, supply problemswith materialsand parts, high rejectionrates and quality problems, inadequateordering programs as a resultof delays in certainpublic equipment programs (railway rolling stock, telephone equipment,etc.) and inadequate qualificationlevels of techniciansand junior management. It is therefore maintenanceand the operationof industriallogistics both within and outside of the enterprises(supplies, stocks management, transportation, distribution, after-salesservice) which are essentiallydeficient. Taken individually,it would appear that these shortcomingscould be remediedwithout difficulty; however,the range of them and their build-up form a complex accumulationof interlockingproblems requiring detailed attention.
5.15 Viewed as a whole, heavy industryposts negativenet annual results and is incurringmounting bank debts. It should be underscored,however, that the operating results proper are positive (DA 1.1 billion in 1984, DA 1.3 billion in 1985) and that the net deficits derive from non-operatingcosts. It should further be noted that the net cash flow of the sector as a whole representsa financing capacity close to 402 of the credit for capital investmentpurposes in 1985, a datum that is not structuralsince the 1984 figure was 6X. More detailed examination of the financial operating conditionsand their recentdevelopment reveals the followingphenomena:
(a) an excessiveincrease in personnelcosts in all branches;
(b) a particularlyhigh level of financing charges in certainbranches, where they can amount to as much as 15% of turnover (mining, mechanicalengineering);
(c) an almost across-the-boardincrease in non-operatingcosts and an altogetherdisproportionate level of these costs in certain branches (especiallyin mechanicalengineering, where they accounted for 21% of turnoverin 1985); - 97 -
Table V.7: PERFORMANCE INDICATORSOF HEAVY INDUSTRY
Capacity- Target- Utilization Achievement Actual Output Rate /a Rate 1979 1984 1985 1979 1985 1984 1985
Iron Ore (103 T) 2,864 3,664 3,376 62 73 88 97 Zinc (103 T) 8.8 35 36 SS 118 95 102 Phosphates (103T) 1,082 1,000 1.221 94 69 80 102 Salt (103 T) 146 182 163 100 75 91 79 Pig Iron (103 T) 496 1,176 1,462 103 87 9S 92 Steel (103 T) 432 1,143 1,390 68 63 94 92 Rolled Products (103 T) 263 53S 683 66 43 76 88 ReinforcingRods (103T) 216 282 387 79 80 102 110 Structural Steel, 8oilerwork (103T) 22.8 29.8 34.9 64 72 72 83 Mechanical Packaging (103T) 67.S 114.9 126.6 96 91 97 92 Freight Cars (Units) 334 895 838 100 100 108 102 Trucks (U) 6,082 6,619 5.722 - 85 100 85 Concrete Mixers (U) 1,141 4,152 4,441 72 108 101 106 Compressors (U) - - 16 - - - - Diesel Engines (U) 6,220 10,976 12,038 100 100 88 91 Agricultural Tractors (U) 4,886 5,927 6,2S0 122 100 88 89 Combine Harvesters (U) 371 890 700 100 93 78 88 Buses (U) S24 731 636 75 84 104 8S Motorcycles (U) 27,012 47,000 47,434 98 lOU 102 99 Bicycles (U) 17,325 43,097 47,213 100 100 100 93 Pumps (U) 3,800 14,678 17,529 88 82 89 119 Valves and Joints (U) 98.000 50,849 41,416 148 62 113 86 Taps and Fittings (T) 183 1,27S 1,336 11 78 96 92 Mill Work (U) - 92 97 - 68 - 69 Lathes (U) - 606 614 - - 96 Electric Meters (U) - 183,787 240,158 - 10o - 100 WaterMeters (U) - 136,000 143,900 - 111 - 111 Gas Meters (U) - 20,280 27.000 - 90 - 45 Power Cables (1O3 T) 14.8 17.2 19.6 64 81 82 90 Telephone Cables (103 T) 4.1 2.9 2.3 132 92 102 102 Radios (U) 53,000 140,609 166,404 22 71 82 71 Black and White TVs (U) 54,400 210,026 271,818 84 79 99 85 Color TVs (U) 7,000 82,098 87,163 27 97 82 96 Telephone Exchanges (lines) 10,800 43,000 43,013 14 63 97 74 Telephone Sets (U) 20,000 104,520 81,625 14 58 90 61 Refrigerators(U) 37,400 100,024 102,016 104 76 80 79 Cookers (U) 11,808 73,766 79,232 63 88 92 86 Water Heaters (U) 18,900 29,426 12,236 - - 96 98
/a Related to the real production capacities defined as those feasible according to the technical and human possibilities.
Source: MILD. Rapport d'execution du plan annuel 1985. Plan de Production definitif 1987.
6136B p.16 (7,8) - 98 -
(d) the existence of significant differences in operating conditions between, on the one hand, the branches where the enterprises have clearly reached an advanced stage in terms of experience (mining, steel, metalworking) and those that have to turn out new products (mechanical engineering, electrical and electronics industries) and therefore have to go through the start-up phase of new complexes; and
(e) the progressive appearance of a special "capital goods" problem, since the machinery and equipment industry is posting technical and financial performances distinctly below those of the other branches. It may be possible that this issue has been only the consequence of an accident in 1985.
Table V.8: 1985 FINANCIALINDICATORS FOR HEAVYINDUSTRY
Metal- Mech- Elec- Total Mining Steel working anical trical Misc.
Net Profit (loss) for Year, DA 106 -1,787 -164 -572 -215 -768 -103 +16
Net Cash Flow, DA106 /a +1,400 +30 +526 245 +116 +246 +237
Cumulative Cash Position, DA 106 -10,513 -1,044 3,922 -372 -3,447 -1,422 -306
/a According to the 1986 Plan documents, which give the net deficit of the fiscal year. Cf. Tables 5.7 to 5.13 of the Annex for more details. Source: MILD.
5.16 By its very nature, the heavy industry subsector is highly dependent on its outside suppliers. The entire logic of its development was based on the idea of creating an industrial base capable of producing intermediate and capital goods that could progressively take the place of imports. The subsector became considerably less dependent over the period: imported intermediate inputs represent 12% of production (against 271 in 1980). However, it is still highly dependent as regards intermediate inputs for metallurgy, metalworking and electrical and electronic goods, and on capital goods imports for mechanical engineering. With the present level of development of the production apparatus no appreciable reduction of imported inputs (AGIs for operating purposes) would appear to be possible without a significant reduction in the subsector's production of intermediate and finished goods, an outcome that would have the twofold consequence of creating - 99 -
bottlenecksin the supply of intermediategoods to the other sectorsand also rendering additional imports of finished products essential (especially capitalgoods).
B. Chief Thrusts of Economic Policy Regarding the Sector
5.17 The second Five-Year Plan places special emphasis on light industrys which is made the fourth national priority. For both subsectors,the main objectivesare first to satisfythe priorityneeds and producegoods considered to be strategic,then to reduce the degree of dependency,hence to pursue the import-substitutionpolicy, and finally, to improve the management of the industrial units and raise productive efficiency. The initial program authorizationsenvisaged for this purpose were DA 40.75 billion for light industryand DA 61 billionfor heavy industry.
5.18 In light industry, the initial program called for expansion of cement, brick and ceramic tile production capacities, a large-scale grain-millingprogram aimed at attaining full self-sufficiencyas of 1989, a bottlingprogram and various other steps in the agricultureand food areas. The intentionwas also to structurethe textileindustry, upstream by means of the installationof syntheticfiber productioncapability (designed to lessen reliance on imported inputs) and downstream by garment manufacture. The strategy adopted was thereforea mixed one, combining developmentof the constructionmaterials subsectors and priority AFIs with encouragementof productionof consumergoods with subsequentexport potential. The adjustment carried out in 1986 to adapt the plan to Algeria's reduced export earnings caused the sector to delay 20% of the investmentappropriations on averageand 32X of the new programs. From the viewpoint of the differentbranches, the strategy selected consists of satisfying the production requirementsby focusing on the priority products (constructionmaterials, AFI staples) and productsfor end uses such as textiles,garments, leather goods, woodworking products and paper. The projects for capacity expansion and upgrading of priority products are not affected. However, the reduced number of import authorizationsfor finishedproducts (cement,semolina and flour) means that there has to be a significantincrease in production-capacityutilization and that the new capacitieswill have to be quickly operational. On the other hand, numerousdownstream projects in textiles,leather, woodworking products and paper will be deferred and the private sector will be expected to take over what the public cannot handle. The public enterprises in these subsectors(and in textilesin particular)will probablyhave capacity- utilizationrates even lower than at present owing to the reductionin import authorizationsfor the primary productsnecessary for their operation. It has even been decided to limit their storage capacity by only granting import permits against evidence of a procurementplan. To sum up, it must be stressedthat the 1985-89Five-Year Plan for light industry:
(a) has been devised in order to pursue Algeria'sstanding strategy based on meeting priorityneeds, substitutingimports and using the public enterprisesas instrumentsfor this purpose; - 100 -
(b) must, if it is to achieve its productiontargets in the context of the present financial crisis, improve the productiveefficiency of the basic industriesand turn the downstreammanufacturing industries over to the privatesector on advantageousterms; and
(c) could, if the financial crisis persists, end up with a public manufacturingsector with extensiveunused capacity,a situationthat would inevitablyhave an impact over the long term on the volume of public industrialemployment.
5.19 In the heavy industrysubsector, the prioritiesadopted are, in order of importance: (i) completionof the programsunder way, i.e. essentiallythe mining and steel programs; (ii) satisfaction of priority irrigation infrastructureneeds for agriculture,and (iii) strengtheningof intra-industry integration in order to complete the structuring of certain branches (essentiallyelectrical engineering and electronics) and further import substitution. Being faced with a 16% reduction in budget appropriationsin 1986, and also in light of the sizable differencebetween actual investment expendituresand programauthorizations (60X), the ministrygave priority to completionof existing programs. If the adjustmenteffected in 1986 were to be extendedover the periodof the plan the total actualamount of the sector's investmentexpenditures would be close to the programresidue to be executedas of December31, 1985. Taking into account the program reappraisalsconducted when the residue to be executedis considerable,it is not altogetherunlikely (in view of the sector's priorities)that completionof old programs will absorb the bulk of the appropriationsfor the second Five-YearPlan. The outcome could then be that the emphases on irrigation infrastructurefor agricultureand, especially,household consumer durables might be scaled down to allow completionof old programsthat continuethe preferentialtreatment for heavy industry. This would be prejudicialin that the demandfor capital goods would outstrip supply by too large a margin; withoutan adequatevolume of downstreamactivities heavy industrycould itselfultimately be obliged to functionat a lower proportionof capacity. Without wishing to prejudge the outcome, which could be different if the prioritiesare adapted to the circumstances,it would appear that achievementof the plan's targets in this sector will in any event entail a greater degree of self-financing,and recourseto the privatesector could be conceivablehere.
C. Prospects and Recommendations
5.20 Algeria's industrial strategy can no longer be based so exclusively on import substitution. This policy'spast successderived from the abundant availabilityof foreign exchangeand the limited dimensionsof the national productionapparatus in relationto the demand for intermediateand finished products. From now on, external resourceavailability will level off, while the industrialbase has reacheda level of maturity that renders the present import requirementlargely incompressible.Progress in import substitution will thereforegive rise to increasingcosts. There is a risk that resources may be diverted for this purpose that would be better employedon eliminating some of industry'sblack spots. It should moreoverbe noted that the delays - 101 -
in dealing with these difficultieslead, through operating subsidies, to interbranchtransfers that are contrary to the general developmentstrategy. It thereforeappears importantthat the remainingperiod covered by the second Five-YearPlan sbouldbe used to:
(a) devise permanent solutions for the most critical situations, in particular the problem of the textile (semifinishedproducts), woodworkingand canning branches,and the chronic under-utilization of capacityin the cementworks;
(b) ensure that developmentof the mechanicaland electricalengineering and electronicsbranches is on a competitivebasis;
(c) generate further productivity increases through upgrading of technical and especially management skills, while renewing the factorsmaking for dynamismin the yublic enterprisesand encouraging developmentof the privatesector; and
(d) create the conditions for less specialized participation in internationaltrade.
5.21 The measurestaken in 1986 to adapt industryto the payments crisis could have effects that are not entirelypositive. In light industry,private enterpriseis supposedto take over from the public sector in the downstream branches. In quantitativeterms, this seems possible. The drawback of the strategy selectedis that private small and medium industrywould be limited to a close complementaritywith the public sector, which would deprive both the publicand the privateenterprises of the dynamizingeffect of a degree of competition,while owing to the lack of a flexibleand motivationalregulatory environment, private small and medium industry will have considerable difficulty in benefiting from economies of scale and ensuring acceptable productquality and monitoring.
5.22 In heavy industry, there is a risk that the operations already included regarding steelmaking,metallurgy and metalworkingwill receive specialattention, to the detrimentof mechanicaland electricalengineering and electronics. In terms of productuse, this means that the necessitiesof the situationcould result in furtheremphasis being placed on productionof heavy intermediategoods while the satisfyingof capital goods needs and, especially,of demand for domesticappliances, which is rising rapidly, will continue to be deferred. In this connection,it might be consideredadvisable to continuerationalization of the mechanicalengineering branch and implement the Sidi Bel Abbes project, which seems to be an innovativeattempt at downstream-upstreamrestructuring of the electronicsbranch (these projects are officiallyconsidered as priorityprojects).
5.23 The managementconditions of the public enterprisesare presently excessivelyconstraining. To begin with, the operatingaccounts of most of them are too heavily burdened with personnel and financingcharges. Then non-operatingcosts are abnormallyhigh, especiallyin heavy industry. This
1/ The modalities of this development are set forth in the macroeconomicreport. - 102 -
means that breakdownsand startup delays are too common. Moreover,managers are constrainedby rules governingprocurement of importedmaterials, prices and the obligationsto maintainemployment. They tend to be "super- technicians"concerned essentiallywith meeting productiontargets and, as a result, neglect planning and development of the enterprises they are responsiblefor in spite of the existence of enterprises'strategic plans. In addition,the form of taxationwhich bears alike on enterprisesgenerating profits and on those running deficits makes it hard to bring about any improvementin the latters' situation. Finally, there would appear to be a definite deficiencyin managementprocedures, particularly as regards cost accounting,management audit and computerizationof operations. The chief recommendationhere is that conditionsshould be created that will give managers greater autonomy so that they will be actually (and not just nominally)responsible for the developmentof their enterprises. The buildup of external constraintsleads to a dilutionof responsibilitiesbetween the manager and the authoritieswhich holds back developmentof the enterprise. In this connection,it would be desirableto completethe straighteningout of cash positions, to reconsideroperating conditions that create structural deficits so that most of them will have been normalizedby the end of the plan, and to make managers fully responsiblefor their enterprisesincluding any failures. As regards supportingmeasures, developmentof maintenance enterprises(possibly private ones) would appear necessaryin order to reduce the levelof non-operatingcosts.
5.24 Developmentof industrialexports shouldnot be a matter solely for activities with chronic overcapacity. The entire sector must be made export-minded,including the activities whose production is not able to satisfy all domestic demand. Algeria's industrialbase is now sufficiently developed to be able to face internationalcompetition in certain markets. With this in mind, certain segments of the productionapparatus should be opened up to competitionin the course of the period,on both the import and the export side since importsare often necessaryfor developmentof exports. Certain supportmeasures will be essential: an efficient informationsystem on foreignmarkets, internationalconnections, hence human resourcesthat will enable Algeria to function effectively in the networks, participationin fairs, a battery of appropriatefinancial instruments,and developmentof exportknowhow. It must also be added that thi presentexchange rate for the dinar presentsa problem from this viewpoint;the possibleeffects of a change in parity shouldbe studied.
5.25 Personnel trainingis undoubtedlyone of the componentsthat will have the greatest impact for successof the proposedmeasures. To begin with, extensive promotion of project appraisal and monitoring expertise will be needed. In the present state of affairs a very large percentageof spending authorizations(501 for light industry, 60S for heavy industry) is not committedowing to a lack of adequate capabilitiesat either the projector the administrationlevel. If high qualificationsmay be observed for top managers, the same is not true for the intermediatelevel. Next it will be necessaryto strengthenengineering capabilities, chiefly in the "methods and logistics"area. Finally,managers, enterprises,the administrationand the banks must be made constantlyaware of the need for operatingand financial efficiency.
60453 - 103 -
CHAPTER VI - FERTILIZER AND PETROCHEMICALSECTOR
A. Background
6.01 The fertilizerand petrochemicalsector is defined as comprisingthe production of nitrogenous, phosphatic and compound fertilizer, presently undertaken by ASMIDAL (EntrepriseNationale des Engrais et des Produits Phytosanitaires),together with the productiontof methanol,ethylene and their derivatives(resins, low density polyethylene:LDPE and polyvinyl chloride: PVC) by ENIP (EntrepriseNationale de la Petrochimie).The facilities,for the productionof fertilizersand chemicalproducts, in the sector were originally developedby SONATRACHover the period 1966-83,and inheritedby the two newly formedsuccessor companies at the beginningof 1983.
6.02 Although some related activities, such as downstream plastics processing (not consideredhere), are relativelymore labor intensive,the operationsof ASMIDAL and ENIP themselvesare highly capital intensive.While the mission has not valued the capital assets in the sector in detail, it is unlikelythat cumulativeinvestments, at today'sprices, would be significantly less than US$2.0 billion. By contrast, employment is relatively small. ASMIDAL employs about 5,000 people and ENIP some 4,000 (including those workinigin smaller operations such as ASMIDAL's plant protectionchemical formulationunits). The industry is largely based on local raw materials. ASMIDAL's nitrogenous fertilizer units and ENIP's methanol plant consume natural gas, the ENIP plastics complex is based on ethane extracted from natural gas, and the phosphate fertilizerplant uses locallymined phosphate rock. Of major raw materials,only the sulfurused in the phosphateplant and the potashcomponent of compoundfertilizers are imported.
6.03 The record of SONATRACH in implementingchemical projects and operating plants was a mixed one. A number of units have operated well, without known seriousproblems, since their commissioning.At the same time, a significantnumber, i-ncludingsome of the largest units in the fertilizer subsector,have experiencedmajor difficultiesover a number of years. The Arzew I ammonia unit never operated satisfactorilybetween commissioningin 1968 and its shutdownfor rehabilitationin 1977, and has yet to re-open. The attachedurea unit has never been operativebut it could be, in the future, if appropriateconditions were met. The Arzew II nitric acid and ammonium nitrateunits have also experiencedproblems since their startup in 1982. The Annaba ammonia unit started operating in 1987, some three years after plant constructionwas completed. The Annaba phosphateplant, in spite of recent improvements,still only operates at about 50% of capacityin the phosphoric acid line and 60% (in May 1987) in the downstreamfertilizer units. Similar problems could be identifiedduring the early years of the methanoland LDPE units (more recently, largely resolved),and in the chlorine unit of the plastics complex,whose unsatisfactoryoperation still poses a bottleneckto the productionof PVC.
6.04 In many of the above instances,there is no doubt that legitimate explanationscan be found, which at least in part explain the problems,in unsatisfactoryoriginal designs or poor performanceby contractors. At the - 104 -
same time, taking the record as a whole, it is hard to avoid the conclusion that contributory factors include choice of unproven technology or inexperiencedcontractors, weak planningand co-ordination(e.g. betweenmajor units ard utilities),lack of detailed supervision,inadequate maintenance procedures,staffing constraints and operatingerrors.
6.05 Against this background it may be understood that, in spite of extensivepast investmentsin the sector, present levels of productionand capacity utilizationare in some cases still low by internationalstandards. In the mission'sview, the formationof ASMIDAL and ENIP has the potentialto be a highly positive step, by shortening decision-makingprocedures and bringingsenior managers much closer to the problemsof the sector. There are recent indicationsof productionimprovements at several of the plants. It must, however,also be recognizedthat the companiesare still young, have yet to complete establishmentof their staffing or internal procedures,and continue to face problems in some of the establishedunits. Care will be needed to avoid over-taxingtheir capabilities(given the present available resources)WitLi unduly ambitious new investment programs before existing issuesare fully mastered.
B. Present Situation
1. Fertilizer Subsector
6.06 The table below summarizes domestic fertilizer production data for 1983 and 1984 supplied by ASMIDAL. This information is essentially consistent with figures publishedby FAO. Also shown are consumptionstatistics made available to the mission by the Ministry of Agriculture. Estimates of productionand consumptionin earlier years indicate that Algeria has always experienceda deficit in the overallsupply of nitrogenand phosphate(as well as potash,which is entirely imported). In 1984, improvementsin production narrowed the deficit significantly. However, the Ministry of Agriculture projectstotal demand to grow rapidlyto 1.16 million tons by 1989 (comprising 370,816 tons ammoniumnitrate; 403,366 tons TSP; 225,746tons NPK; 89,997 tons PK and 68,384 tons potassiumsulfate). - 105 -
Table VI.1: FERTILIZERPRODUCTION AND CONSUMPTION (tons of product)
1983 1984 Surplus Surplus Production Consumption (Deficit) Production Consumption (Deficit)
Ammonium Nitrate 106,160 132,486 (26,326) 204,000 218,041 (14,041) TSP 69,600 125,743 (56,143) 107,000 148,000 (41,000) NPK 87,500 107,211 (19,711) 147,400 122,329 25,071 PK 30,920 45,250 (14,330) 17,000 9,096 7,904
Total 294,180 410,690 (116,510) 475,400 497,466 (22,066)
Source: ASMIDAL,Ministry of Agriculture.
6.07 NitrogenousFertilizer. Algeria possesses three worldscalenitrogen plants (i.e. complexescentered on 1,000 tons per day ammonia units), among the largest nominal capacity anywhere in the developingworld. The units, with their date of completionof construction,are Arzew I (1968),Arzew II (1981) and Annaba (1983).As shown below, each unit is designed to produce finishedfertilizer plus significantquantities of surplusammonia.
Table VI.2: NITROGENFERTILIZER UNITS - FULT CAPACITYOUTPUT (tonsper day)
Arzew I Arzew II Annaba
AmmoniumNitrate 500 1,000 1,000 Urea 400 - - SurplusAmmonia 548 560 560
Source:ASMIDAL.
Ammonium nitrate is the principal source of straight nitrogen used domestically(and also provides the nitrogen content of NPK). Urea is not used locally,for agronomicreasons. If all units operatedat design capacity for 330 days/year,potential output would be 825,000 tons per year (tpy) of ammonium nitrate (far in excess of current or planned local demand) and 132,000 tpy urea and 550,440 tpy surplus ammonia,both fully available for export. The industrywould thus be in a position to convert abundant local naturalgas into a significantsource of foreignexchange. - 106 -
6.08 In practice,Algeria still imports finishednitrogen fertilizerand exports of ammonia currently run at only about 100,000 tpy. The oldest ammuonia plant (Arnew I) operated between 1968 and 1977, but never satisfactorily:peak capacity utilizationwas 362 and the average barely abov; 10X. It is clear that there were seriousdesign problemswith the.plant. Followinga partialrehabilitation over 1978-86 (apparentlyprefinanced by the contractoragainst subsequent product deliveries),an attempt was made to startup the unit in early 1986, but was interruptedby the explosion of a boiler. It is understoodthat responsibilityfor further rehabilitationhas not yet been agreed between the company and the contractor. Without making any judgmenton the merits of the case, it would clearlybe in the national interest to avoid any unnecessarydelay in putting this unit back into operation. Of the downstreamunits at Arzew I, the nitric acid and ammonium nitrate units apparentlyoperated well (in part on importedammonia) through the early 1980s,when rehabilitationcommenced. The urea unit never operated commercially, and in recent years has suffered from corrosion and cannibalization. A Yugoslav team will shortly commence a survey of its condition, to determine whether rehabilitationwould be feasible. This technicalstudy shouldbe followedby an economicreview.
6.09 The Arzew II ammonia unit is runningwell and is at present the sole source of ammonia. Output reached 233,000 tpy in 1985, or 70% of annual capacity, and has reached over 901 on a daily basis. The downstreamunits (nitricacid, ammoniumnitrate) have, however, experiencedproblems not yet fully resolved (apparentlypartly of design,l' compoundedby maintenance difficulties),and 1985 fertilizeroutput (95,000 tpy ammonium nitrate) was only 401 of capacity. At Annaba, the ammonia plant was unable to commence operationon completionin 1983, due to a lack of synchronization(of which the contractor was responsible) with the appended utility units. Precommissioningwas underway in mid-1986, and the unit is predicted to commence operation in late 1986. The downstreamunits commencedoperation in 1984 (temporarilyusing ammoniashipped from Arzew II), producingan estimated 80,000 tpy ammoniumnitrate (241 of capacity). These apparentlyhave reached their daily capacity,but are constrainedby ammoniasupplies.
6.10 Phosphateand Compound Fertilizer. The sole complex for production of phosphate and compound fertilizeris located at Annaba, and dates from 1972. The complex is based on a phosphoricacid unit, using locally mined phosphate rock, with a nominal capacity of 500 tons per day (as P2sO). Two downstreamlines each have capacityto produceeither Triple Superphosphate (TSP), DiammoniumPhosphate (DAP), NPK or PK. The nominal capacitiesof the downstreamunits are potentiallymisleading, as the supplY of F20s may represent a constraint. The situation was further complicated by the constructionduring 1974-78of an STPP detergentfacility, which also requires P10s. Alternativemeasures of full capacity in the downstreamunits are given below, showing maximum potentialoutput of any single product (if no other fertilizerwere produced),under alternativehypotheses.
11 Essentiallya bad qualityin some componentsof the equipment. - 107 -
Table VI.3: ANNABA PHOSPHATE/COMPOUNDFERTILIZER PLANT: MAXIMUMCAPACITIES (tons per day - tpd)
TSP DAP NPK PK
(1) NominalCapacity 1,760 1,440 2,100 2,100 (2) Effectivecapacity if no STPP produced 1,450 1,086 (2,778) (2,500) (3) Effectivecapacity with 100% STPP production 1,158 868 (2,218) 1,996
Source: ASMIDALand missioncalculations.
Note: Figures show output correspondingto P20s avaiilability.In cases shown in parenthesis,downstream processing capacity would be the binding constraint.
6.11 The present situationof the Annaba plant is highly complicated.As indicatedabove, even at full capacity utilizationin the phosphoricacid unit, the supply of Pz0s could potentiallyconstrain fertilizer output. In practice,the phosphoricacid unit has operated well below capacity (the mission estimatesrates of about 38% in 1983 and 50% in 1984). A combination of possibledesign problemsand staff inexperiencein the early years and more recently maintenance issues and the age of the facilitiesappears to be involved. ASMIDALhas identifieda seriesof relativelyminor investments(in total about US$24 million) to deal with bottlenecksand deteriorationin the phosphoricacid (and upstreamsulfuric acid) units. ASMIDAL is also aware of the serious pollutionproblems which the plant causes, in a denselypopulated location,and its program includes proposals to reduce effluent levels. At present, the downstreamfertilizer units operateat about 40% of capacity in physical terms, though this has been achieved only by concentratingon low P20s products (NPK, PK), eliminatingDAP output and producingTSP only as P2 0s is available. The STPP unit runs at half of its capacity, meeting the needs of the domesticmarket.
6.12 The present problems and future prospects of the complex clearly require detailed analysis,and this an area where the Bank itself (or some other external body) could possibly provide assistance. In the short run, serious considerationshould be given to the possibility of importing phosphoricacid to permit a more satisfactorylevel of capacityutilization in the downstreamfacilities. The technical solutions contemplatedby ASMIDAL should be carefullyreviewed. While some appear well justified,the mission has questionsas to (a) whether the sulfuric acid unit is currently in a conditionto permit expansionas proposed,(b) whether the proposalto improve phosphoricacid concentrationis an optimal solutionor (c) whethera license will be available for improvingSTPP production,for which US$10 million is allocated (STPP product quality does not meet internationalstandards). The mission also considers that further analysisis needed of ASMIDAL'sproposal - 108 -
to changethe NPK process from use of solid ammoniumnitrate to use of nitric acid, as it is not clear whether the existingreactors could toleratethe more severe operatingconditions. Improving the performanceof this complex is a major challenge,which calls for very carefulanalysis and preparation.
2. Petrochemical Subsector
6.13 Earlier plans to create a worldscale petrochemical industry, centered on a 500,000 tpy steam cracker,and with capacityto producestyrene, butadiene and a comprehensive range of ethylene and propylene derivatives, were subsequentlyscaled down substantially. The petrochemicalindustry today consists of a smaller cracker,with ancillary facilitiesto produce PVC and LDPE, and a methanolunit with attachedresins capacity.
6.14 Ethyleneand Derivatives. The plastics complex operated by ENIP at Skikda, constructedover 1972-81, comprises a cracker capable of producing 120,000 tpy ethylene,and downstream units to produce 48,000 tpy LDPE and 35,000 tpy PVC. With all units at full capacity,a surplus of 50,000 tpy ethylene would be availablefor export. The plastics are destined for the domestic market. The mission is not aware of any seriousproblems with the cracker,which operatedat approximately67% of capacity in 1985 (about 80,000 tpy). Earlier serioustechnical problems with the LDPE unit seem to have been largelyresolved, and some 30,000 tpy were producedin 1985 (63% of capacity). Remainingdifficulties center on the unsatisfactoryoperation of the chlorine unit, which representsa bottleneckin the PVC productionchain: PVC output in 1985 was 16,000 tpy, or 46% of capacity. ENIP is currently studying whether to rehabilitatethe existing chlorine unit or replace it using an alternativetechnology. In addition to a project to build a new high density polyethyleneunit (see below), ENIP is contemplatingexpanding the LDPE capacity to 70,000 tpy, which would substantiallyreduce any potential ethylene surplus. It is also studying extraction of small quantities of propylenefrom the cracker.
6.15 Methanoland Resins. ENIP's methanolplant at Arzew was built during 1971-76,and the attachedresins units between 1973 and 1978. The respective capacitiesare given below.
Table VI.4: ARZEW: METHANOLAND RESINS CAPACITIES
MethanolUnit: 100,000tons/year "Formurea"and formalineunit: 20,000tons/year Phenol-formaldehydeliquid resins: 6,000 tons/year Phenol-formaldehydemoulding powder: 2,500 tons/year Urea-formaldehydeliquid resins: 6,000 tons/year Urea-formaldehyde atomized resins: 3,000 tons/year Urea-formaldehydemoulding powder resins: 2,500 tons/year Melamine-formaldehydeliquid resins: 1,000 tons/year
Source: ENIP. - 109 -
Followingdifficulties in the initial years, productionhaa gradually been pushed closer to capacity,and 1985 methanol output reached some 90,000 tpy (90 of capacity). Beyond the relativelyminor requirementsof the downstream plants, the bulk of the methanol is exported. Although the current world price is very depressed,an appropriatecomparison should be not with the 'full cost' of production,including overheads and capital charges, but with the marginal cost of production,which will reflect the low (financialand economic)cost of naturalgas. Plant managementis studying low-costprojects to debottleneckmethanol production and also shows great initiativein seeking to adapt the outputof resins to the requirementsof local purchasers.
3. ASMIDAL and ENIP
6.16 As noted earlier, ASMIDAL and ENIP are both new and not yet fully establishedcompanies. On the technicalside, they are making seriousefforts to address the inherited problems of their plants. An important area for concentrationis the improvementof maintenanceand the managementof spare parts. The mission was not in a positionto undertakea comprehensivereview of the financialsituation of the two companies.However, it appears that as far as operatingcosts are concerned,both companies benefit from relatively low prices of gas supplied by SONATRACH (although the domestic price of phosphate rock to ASMIDAL is above internationallevels). In most cases, domesticproduct prices are above landed import costs. For ENIP, prices are temporarilyfrozen at 10% above 1984 cif import prices, while ASMIDAL'sprices have been set by Government at levels intended to reflect costs at target levels of capacityutilization. A major charge to both companies relates to the servicing of debt inherited from SONATRACH - even though the final divisionof SONATRACHassets is not yet complete. The incidence of these charges is magnifiedby low current levels of capacity utilization. To the extent that the companiesfail to cover their outlays,the deficitappears to be financed by extension of short-termcredit on an ad hoc basis. In the interestsof accuratelyreflecting the opportunitycost of the sector'soutput to domesticconsumers, consideration should be given to moving internalprices closerto border parity, possiblyaccompanied by at least a partial write-off of the accumulatedSONATRACH debt.
6.17 To improve further the potentialto control and manage the use of resources in the sector, the mission also recommends strengthening the companies' current accountingcapacity and introductionof systematiccost accountingand improvedmanagement information systems. If, as seems likely, ASMIDAL is soon in a positionsignificantly to expand its exports of ammonia and nitrogenousfertilizer, it will also need to strengthen its commercial operations.
C. FutureProjects
6.18 In addition to the rehabilitationrequirements discussed above, both ASMIDAL and ENIP have substantialproposed investments in new plants included in the current Five Year Plan. As summarizedbelow, if all the planned new projectsare in fact carriedout, total investmentsare likely to be in excess - 110 -
of US$1.0 billion (plus a further US$340 million in the downstreamfiber componentof the polyesterproject). The mission'sview is that, if a reduced public investmentprogram wiereto be prepared,none of these projectsshould be an automaticcomponent of the program. Given the present situation,each should be re-examined carefully using rigorous economic tests of its viability,and allowing for both local and foreign componentsof the cost of implementation.To the extent that some of the new projectswould be based on importedintermediates (or easily exported liquid oil deriva tives), Algeria will not benefit from the built-ineconomic advantages represented by the low cost gas feedstockused by existing plants. Internationalexperience further suggeststhat, if an uncriticalattempt is made to increasethe local element in chemicalproject capital costs, the capacity of local suppliers can be over-strained,leading to delays in implementation,failure to meet standards and cost over-runs.
Table VI.5: PETROCHEMICAL& FERTILIZERSECTOR: PLANNED PROJECTS
EstimatedCapital Cost (US$ mAillion) A. Fertilizers Triple superphosphate (TebessaProject) 400+
B. Petrochemicals Polyester(excluding fiber component) 300 LinearAlkyl Benzene(LAB) 120 High densitypolyethylene 100 Plasticizers(oxylene, phthalic anh,-dride) 80 Aceticacid (vinylacetate, PVA) N/A Subtotal 600+ TOTAL 1,000+
1. Fertilizer Projects
6.19 Tebessa Phosphate Fertilizer (TSP) Project. There has been discussion for many years of the possibilityof establishinga new unit for the production of triplesuperphosphate (TSP) in Algeria. The favoredlocation is at Tebessa,inland and near the sole operatingphosphate rock mine (Djebel Onk). As presentlyformulated, the projectwould have a capacityof 1,320 tpd of TSP fertilizer(435,600 tpy) and 120 tpd of STPP for detergentuse. In the absence of commercialsources of domesticsulfur (for the sulfuricacid unit), importedsulfur would be brought to the site and the productevacuated via a new railway link (and possiblythrough a new port). It is understoodthat a recent study has concluded that, with careful attention to recycling, the water available at Tebessa could meet the requirements of the plant and other consumers. - ill -
6.20 The mission was quoted a plant battery limits capital cost of DA 1.5 billion (US$320million). However,there would clearlybe a substantial requirementfor complementaryinvestment in transportand water facilities,as well as other infrastructurerequirements (power, housing, gypsum disposal), which could not be quantifiedaccurately. The mission'sallowance of at least US$400 million may thus represent a significantunderstatement of the true figure.
6.21 The attractionof the projectis that it would representa new outlet for local phosphate rock (the mine currentlyoperates well below its nominal capacity,due to exportmarket constraintsand transportbottlenecks), promote regional developmentand contribute to meeting local demand for phosphate fertilizer. Internaluse of TSP is projectedby the Ministry of Agriculture to reach more than 400,000 tpy by 1989, if the developmentof agriculture proceedsas planned. This would be more than double the present consumption, and about four times the level of the early 1980s;it would also substantially exceed the potentialoutput from the currentfacilities at Annaba.
6.22 At the same time, it should be recognizedthat the capital costs of the proposed Tebessa projectwould be very heavy, even if it proved possible to maximizethe local content of the works. The mission recommendscareful scrutiny of alternative means of meeting local phosphate requirements, includingcapacity expansion at Annaba (assumingappropriate measures to lower present pollutionlevels), the possiblenitrophosphate project (see below)and partial continuationof importationof low-cost product from international sources.
6.23 Joint NitrophosphateProject. Although not included in the current plan, discussionshave been held with Tunisia on possiblejoint developmentof a project to produce nitrophosphatefertilizer. The locationof the project is not yet settled. From an economic standpoint,such a project would have the advantageof using nitric acid (derivedfrom Algerian suppliesof natural gas), rather than the sulfuric acid (based on imported sulfur) required by TSP. However, nitrophosphateshave distinct agronomic characteristicsand there is apparentlyno local experiencein their use. A careful program of agronomic research would therefore need to precede any decision to advance this project.
2. Petrochemical Projects
6.24 Polyester. ENIP is working on a project to produce 60,000 tpy of polyester. As indicatedabove, this would be the most capital intensivenew petrochemicalproject in the current plan, with total costs (includingthe - 112 -
spinning component) likely to exceed US$600 million. The processesinvolved are complexand sophisticatedand two alternativeprocess routes exist (either via DMT or TPA), with contrastingadvantages and disadvantagesin terms of yield and likely licenseavailability. The choice of process route does not at this stage appear to be finally settledwithin Algeria,and there are also market issues concerning size of market and final product mix yet to be resolved. In mid-1986 ENIP was planning to issue bid invitationsat the end of 1986, but this may be premature. Algerian authoritieshave undertaken further work on project definition and a subsequent thorough economic evaluation,to assess the priority of proceedingwith the project, whether as initiallyenvisaged or in a stage-by-stagemanner.
6.25 LAB. This project is more advanced and bids were already under evaluationin mid-1986. LAB is an intermediatefor detergentproduction, and the output of 50,000 tpy would be absorbed by three domestic factoriesnow under implementation(36,0U0 tpy) and through export to Tunisia under a contract already concluded (14,000 tpy). The mission considers it possible that, in the early years, the local marketmay not fully absorb the equivalent quantitiesof detergent,and suggeststhat furtherexport outletsmay need to be assessed.
6.26 High Density Polyethylene. This project is also at an advanced stage, with bid evaluation narrowed to three bidders and two processes. Contractsignature was predictedfor end-1986. With or without the proposed expansionof LDPE at Skikda, the existing cracker could not supply the full requirementof 75,000 tpy of ethylenefeedstock implied by the proposedscale of at least 70,000 tpy of HDPE (alternativescale 100,000tpy). Thus the HDPE project will be largely dependenton imported feedstock. While recognizing the economies of scale present in HDPE production,MEICP estimates that, starting from the present level of 60,000 tpy, the internal market is for about 100,000tpy. -I
6.27 Plasticizers. The project to produce plasticizers(and phthalic anhydride)is at a less advanced stage, with neither locationnor scale yet determined (though present thinking is for 20,000-33,000tpy of phthalic anhydride and 45,000-70,000tpy of plasticizers),and with implementation tentativelyenvisaged for 1988-91. Plasticizersare used to make PVC more flexible,while phthalicanhydride is used partly in plasticizersand partly in other uses (alkyd resins,unsaturated polyesters). Project output would be targetedat the local and Tunisianmarkets. However,a market of 45,000 tpy of plasticizerswould appear to imply PVC demand of 170,000-200,000tpy, or a compound growth rate through 1992 of about 15X per annum. The mission recommends that market assumptionsshould be carefully re-examinedbefore proceeding with the project. Finally, a feasibilitystudy was recently commenced for the remaining petrochemical project (acetic acid and derivatives),but at this stage little informationis availableon the project.
59S38 - 113 -
CHAPTER VII- ENERGY: THEHYDROCARBON SECTOR
A. HydrocarbonResources 1. The Discovery and Disposition of CrudeOil Resources
7.01 Early explorationfor commerciallyexploitable oil depositsbegan in the Chelif sedimentarybasin, west of Algiers. The first well was drilledin 1892, and explorationefforts were pursueduntil 1923. However,since none of the wells found commercialquantities of oil, interest in oil exploration virtua:lyceased after that for about 25 years.
7.02 Explorationstarted again after World War II in the Chelif basin. Between 1947 and 1952, some 43 exploratorywells drilleda total footageof 75,000meters with some success. In 1949, the Oued Gueteriniwest field was found in the Hodna basin east of the Chelifbasin. This field representedthe largestdiscovery in Algeria up to that time. However,another 40 wells and 8,200 meters of exploratorydrilling found no commercialoil in the fractured reservoirsof the tightlyfolded sedimentsof the basins of the SaharanAtlas Mountains,until the Djebel Onk field was discoveredin 1960. This field is located in the Constantinearea. It is the largest and the last of five fieldsG-acovered in the intramontanebasins.
7.03 To the south of the SaharanAtlas Mountains,the great unknown area of the Saharabecame accessible as suitablevehicles, which could traversethe rugged terrain,became available. Along with numerous gas fields, including the discoveryof the giant Hassi R'Mel natural gas field which at that time had no prospectsof markets,17 oil fieldswere discoveredin the 1950s. Only two of the fields found were in the northeasternpart of the Sahara (the Ghadamesbasin) includirig'>1.ic-supergiant Hassi Messaoud field found in 1956. To the southeast,the Illizibasin yieldedone giant field (Zarzaitine)out of the 15 discoveries. The giant discoveriesgenerated new interestas numerous French and other foreign companiesbegan explorationcampaigns. In December 1963, the Societe Nationale de Transport et de Commercialisationdes Hydrocarbures(Sonatrach) was created to manage the government'spetroleum affairs. Subsequently,in 1965,Sonatrach became involvedin exploration.
7.04 During the sixties, 38 oil fields were discovered. Three of the fifteenfields found in the Ghadamesbasin were giants; El Agreb (1960),Gassi Touil (1961) and Rhourde El Baguel (1962). Of the 22 fields found in the Illizibasin, only one, the Tin Fouye Tabankortfield is a giant. The Djebel Onk field in the Hodna basin was the only discoveryof the sixties that was not in the two Saharanbasins (Chadamesand Illizi).
7.05 During the seventies,Sonatrach increased its share of concessionsas foreign participationin explorationdeclined. A total of 19 fields were discovered;15 of the fields are locatedin the Ghadames basin and 4 are in the Illizibasin. - 114 -
7.06 During the period 1977-1980, Sonatrach became involved in joint venturesinvolving 13 separateforeign companies. However,by end 1981, only four had in fact carriedout work in the field or were about to do so
7.07 Sonatrachhas drilled 40 wells during 1985 and two oil discoveries were reported in the Hadjira area and near Adrar in the southwest. Elf Aquitaine has decided to suspend exploration in June 1986 following disappointingresults in geology terms. In fact, foreign investorsseemed to have largely lost interest in Algeria until recently. However,the approval by the NationalAssembly in July 1986 of a more liberal legislationmay again attract foreign companiesand revive explorationefforts. Althoughdefinite termswill not be known until new contractsare drawn up, changesmay include lower royalty rates (12.50 or 16.25%depending on locationof fields instead of the standard 20X) and lower gross profit taxes (65 to 752 according to fields locationinstead of the standard85% rate). A full analysisof the new legislationand of its potential impact on foreign investment is needed. Attracting foreign interests is becoming increasingly important since governmentresources are now scarcer due to lower oil prices. Such resources which have to be shared between a number of other social and economic subsectors,may not be sufficientlyimportant to both intensifymuch needed explorationin the five main sedimentarybasins and develop known oil and gas reservesin order to optimizehydrocarbons production.
2. The Status of Known CrudeOil Resources
7.08 It is estimatedthat about 2.4 billion tons of oil recoverableby primary methods and 200 million tons of oil requiring secondary recovery methodstLave been found in Algeria's77 oil fields.
Table VII.1: CRUDE OIL RESOURCES
Discovered Cumulative Apparent Ultimately Production RemainingKnown Percentof the Discoverable Through Recoverable DiscoveredCrude Crude Oil 1 1985 Crude Oil t' Oil Remaining 2.40 0.98 1.42 59.2
7.09 Based on the apparent reservesestimated for each of the 77 fields discoveredin Algeria and field productionhistories, 8 giant oil fieldshave been identified.-' Of these, two are establishedgiants - Hassi Messaoud and Zarzaitine;three are imminent giants4 - El Agreb, Gassi Touil and
1/ Excludes indicated additional secondary recoverable oil, i.e., 0.2 billion tons. 2/ Approximatelyequal to remainingproved reserves. 3/ Oil fieldswhich have producedmore than 70 milliontons of oil. 4/ Oil fields which have sufficientoil in place and a recoveryefficiency such thautthey may ultimatelyyield over 70 milliontons of oil. - 115 -
1 Rhourde El Baguel; and three are conditional giants' - Edjeleh, El Adelblaracheand Tin Fouye Tabankort. Cummulativeproduction through 1985 of the two establishedgiants fields was 677.4 million tons; of the three imminent giants was 140.3 million tons and of the conditionalgiants was 76.3 milliontons-
7.10 Crude oil production declined from 47.2 million tons in 1980 to 34.3 milliontons in 1985, i.e. by 35% partly resultingfrom the Government's decision to "conserve" the reserves. Four of the five establishedand imminentgiants fieldswere discoveredbefore 1982, i.e. are 25 years old or more. In general,the combinationof smallerfield discoveriesand diminishing outputfrom the giant fieldsmakes irreversiblefor Algeria to reestablishthe productionlevel of the seventiesunless developmentis acceleratedand new discoveriesare made.
3. The Ultimately Recoverable Petroleum Resources
7.11 Over two thirds of Algeria's estimatedultimately recoverable crude oil (3.6 billion tons) have been discovered. Out of this, about 30% has already been produced and 33% remains to be found. It should be noted, however, that Algeria has a very large potential for gas condensate discoveries.
7.12 The discoveredrecoverable resources represent approximately 42 years of additional producing life based on 1984/85 productionlevels. However, recent productionhas been significantlybelow the historic peak levels. If the currentproduction were at peak level, the producinglife of Algerianoil would be shorter. These are the consequencesof a decliningdiscovery rate and of the decision taken by the government to adopt a conservativeoil productionrate policy. 4. TheStatus of Natural Gas Reserves
7.13 The estimatedproved natural gas reserves are about 3.200 billion cubic meters. They are the fifth largest in the world and they amount to slightly less than 42 of world reserves. Only about 17% of proven gas resourceshave been depleted.
AssociatedGas
7.14 Most associatedgas found at Hassi Messaoud is processedto maximize recovery of condensatesand LPG. Near Hassi Messaoud, gas is stripped of butane,propane and light naphthaand the remainderis used to lift crude oil. Further northwestof Hassi Messaoud,a treatmentplant has been installed to separate LPG abd condensatesfrom and dry gas. The latter is presently reinjected.
1/ Fieldswhich reportedlyhave sufficientoil in place to become giants but are shut-in, produce insignificantquanities of oil and/or must have a significantimprovement in the recovery efficiencyto achieve the giant field status. 2/ Through1981, data not availablefor 1982-1985. - 116 -
7.15 To maintain constantpressure in the Hassi Messaoudfield, gas has to be reinjected in increasinglylarger volumes. In 1986, associated gas purchased at Hassi Messaoud was about 5.6 billion cubic meters while gas produced from the Gassi Touil field and reinjectedat Hassi Messaoud was 2.9 billion cubic meters. Out of. this total of 8.5 billion cubic meters, 1.4 was gas flared at Hassi Messaoudand 1.3 was fuel gas (mostly from Gassi Touil). The remaininggas (5.8 billion cubic meters)was reinjectedat Hassi Messaoud to keep pressure constant. It is anticipatedthat, to maintain a crude oil output of 19 million tons, reinjectedgas would have to increase from 5.8 billioncubic meters in 1986 to 11 billion in 1989. This means that a growing volume of gas will be "imported"from gas fields located south of Hassi Messaoud (GassiTouil, Alrar, Rhourde Nouss, etc.).
7.16 The Zarzaitineoil field has been in productionsince 1966. Gas from a nearby field at Alrar is used for gas liftingof both oil and water wells. Work was completedin 1984 to both shut in the open gas lift system and to recover associatedgas from oil production. North of Zarzaitineand Alrar, assoe~iatedgas has been recovered since 1983 and is now used in Zarzaitine, thus replacing gas previously brought from Alrar, and helping optimize condensaterecovery from Alrar.
7.17 Due to rapidly increasing production of non-associatedgas (see below), the share of associatedgas in total gas outputdeclined since 1980/81 althoughthe volumeof productionhas remainedabout constant.
Table VII.2: NATURALGAS PRODUCTION (billioncubic meters)
1980 1981 1982 1983 1984 1285
Associatedgas 15.6 11.8 10.1 10.2 11.8 12.5 % of Associatedgas in naturalgas output 36.0 18.0 12.4 11.3 12.6 13.8
Non-Associated Gas
7.18 Most Algerian gas fields, with the exceptionof the In-Salahbasin, are relativelyrich in condensates. Total reserves of condensatesamount to 450 million tons compared to 1.4 billion of remainingrecoverable crude oil reserves.
7.19 Gas re-cycling is used extensively in these wet gas fields to optimize liquid recovery. The Hassi R'Mel field is under partial re-cycling. The Rhourde Adrar and Rhourde Nouss fields will be subjected to gas re-cycling. A number of other gas fields will also be exploitedthrough gas re-cycling schemes. Other fields will be better delineated and may be producingthrough natural depletion. - 117 -
7.20 The Hassi R'Mel field discovered in 1956 is the largest Algerian non-associatedgas field with proven reservesof 2300 billion cubic meters, 400 probableand 200 possiblereserves giving a total of 2900 billion cubic meters. Condensatereserves are estimatedto more than 400 million tons on the basis of 180 grams/cubicmeter. The LPG (50% propane and 50%.butane) content is about 38 grams/cubicmeter and reserves are thus estimated at 87 million tons. Nominal production capacity of the Hassi R'Mel field is about 90 billion cubic meters per annum and effective capacity 80 billion, taking into account stoppagesfor maintenance. In 1985, productionwas about 72 billion/cubicmeters from which have to be subtractedsome 3 billion cubic meters equivalent of condensatesand LPG.1' Dry gas productionwas thus about 69 billion cubic meters of which 30 billionwere dispatchedfrom Hassi R'Mel and 39 were reinjected. The ratio of reinjectedgas (56%) to total dry gas produced is somewhat above the 50% ratio considered "normal" by the experts. However,a 56% ratio ensuresa higher liquid recoveryrate over the total life of the field. But there is also a risk that LPG recovery ratio falls below 38 grams/rm3 after a few years and is reduced,for example, to 10 grams or less. The 50% ratio was calculatedsome years ago for the Hassi R'Mel field alone but existing installationsare also capable to use gas brought from other fields,south of Hassi Messaoud. Dependingon future gas requirements (for exports and for the domestic market) and in order to maintaina 50% reinjectedgas ratio, it may prove necessary in future years for Hassi R'Mel to purchasegas from Alrar, Oued Nourmerand RhourdeNouss.
5. Future Exploration. Development and Recovery of HrdrocarbonResources
7.21 Under the 1980-84 Plan, exploration efforts were limited partly because Sonatrach was being restructured and because separate petroleum service companiesset up in 1981 started practically from scratch and had to be organized. One of the main Plan objectivesfor 1985-89 is to intensify explorationin relativelyunknown areas of the country and in particularin the Adrar area and in the South. Althoughexploration investments were kept at DA 1.5 billion in 1985, and in 1986, they may fall in 1987 and after, due to Sonatrach'sdeclining cash flow resourcesand scarcergovernment financial contributionsas a resultof lower oil prices.
7.22 As regards investmentsrequired to developexisting resources, about one third are for completionof ongoing projects and two thirds for new projects. Half of the oil projectsconsist in developinga network of pipes to collectcrude oil from producingwells and to maximize gas reinjectionin oil wells.
7.23 Ongoing gas projects aim at reducing the flaring of gas and at maximizing liquids (condensate and LPG) recovery. Also numerous reservoir studies have to be completedand furtherdrilling undertaken. One key element
1/ LPG recovery was 72 billion cubic meters x 25 grams/cubic meter, i.e. 1.8 million tons (comparedto 72 x 38 grams/m3 in 1987, i.e. 2.7 million tons after two new LPG recoveryunits were installedin September1986). Condensate recovery was 72 billion cubic meters x 180 grams/cubicmeter, i.e. 1.30 milliontons. - 118 -
of Sonatrach'sstrategy is to develop new gas fields in the south in order to extract LPG and condensatesand reinjectgas sent from the new gas fields in the south to Hassi Messaoudand possiblyHassi R'Mel. Gas fields would thus be exploitedwhile Hassi Messaoudwould become a collectingcenter, where gas from the south would be reinjectedwhile LPG and condensateswould be sent to the north. Sonatrach is soon scheduled to complete a 48 inch, 1,200 km pipeline from Alrar via Tin Fouye and Hassi Messaoud to Hassi R'Mel. The new line will also carry gas from Rhourde Nouss, served by a gas treatment facilitydue to be completedin 1987. As a result of this ongoing project, LPG production is likely to be increased by 1988. As indicated above (para. 7.15), gas is already sent from Gassi Touil to Hassi Messaoud for reinjection. The Rhourde Nouss and Alrar fields are also being developed. Other fieldsmay be exploitedin future years in order to increasethe global supply of gas availablefor reinjection.
7.24 New gas developmentinvestments are envisagedand also aim at improving Sonatrach's knowledge of gas reserves in the south through additional exploratorydrilling and evaluationand optimizationstudies. However,here again investmentsmay be affectedby lack of sufficientfinancial resources.
Table VII.3: EXPLORATIONAND DEVELOPMENTINVESTMENTS, 1985-89 (In billionsof Algeriandinars))
OngoingProjects New Projects Total Exploration - 6.00 6.00 Development Crude Oil 3.00 8.33 l' 11.33 Gas 5.50 1.60 2" 7.10 Sub total 8.50 9.93 18.43
TOTAL 15.9 24.43
7.25 In 1980-84, exploration investmentsamounted to less than DA 4 billion and developmentinvestments to about DA 18 billion, i.e. a total of DA 22 billion. In 1985-89,although the total would be only slightlyhigher, i.e. some 24 billion, explorationwould receive increased attention with DA 6 billion while developmentwould get about 18 billion, reflecting the prioritygiven to improvedmanagement of existingfields and better knowledge of discoveredand potentialreserves. However, the two key issues will be, first, how to mobilizefinancial resources needed to meet the above objectives in view of reduced funds availabilityand second, to examine what is Sonatrach'sleast cost strategyto increaseand developoil and gas reserves.
1/ Excluding social infrastructureof DA 0.46 billion linked to oil development(housing, health, recreation, etc.). 2/ ExcludingDA 0.10 billionfor preliminarysecondary recovery studies. - 119 -
B. Production of Hydrocarbons
7.26 Crude oil production after reaching a peak of 54.2 million tons (excluding condensates)in 1978 declined to 47.2 million tons in 1980. Since then productiondecreased every year until 31.3 million tons in 1983. However, production rose to 33.3 million tons in 1984 and again to 34.3 milliontons in 1985, sufficientto fill OPEC quotas.
7.27 Given the lack of substantialnew crude oil discoveries,a decision was made in 1980 to restrictthe growth of crude oil productionand exports to give priority to domestic consumption (the share of the latter in total production rose from 11% in 1980 to 22% in 1985). Behind this lies the expectationthat by the year 2000, the Algerianeconomy will have "takenoff" and the need for foreign currency earnings from hydrocarbonswill begin to decline.
7.28 After the decisionwas taken to "conserve"crude oil reserves,output remainedclose to OPEC quotas. One exceptionwas in 1983, when it amounted to 31.3 million tons although the quota (set in March 1983) was for 36.3 million tons. It must be emphasized that OPEC quotas do not cover condensates. Algeria has taken advantage of this to increase condensates output substantially,from 4.3 million tons in 1980 to 14 million tons in 1984. The relatively high proportion of condensatesin Algerian natural gas makes it very attractive to increase condensate output, as a partial substitute to declining crude oil output.1 Algeria has been able to live with an OPEC quota of 33 million tons because it boosted sales of condensates,LPG and naturalgas.
7.29 Algerian LPG productioncomes from severalsources: the "Jumbo"LPG plant at Arzew, two LNG plants (one at Skikda and tbe,'otherat Arzew) and the oil refineries. Productionevolved as followsbetween 1980 and 1985:
Table VII.4: LPG PRODUCTION (In thousandsof metric tons)
1980 1985
LPG plant - Arzew (RA2Z) 500 - Jumbo LPG - Arzew - 2,200 LNG Plant - Arzew (GNL2) - 204 LNG Plant - Skikda 320 320 Oil Refineries 138 481
Total 968 3,205
1/ Declining crude output is due to conservation reasons as well as to marketinglimitations including quotas. - 120 -
7.30 Four LPG units with a total nominal capacityof 4 million tons were commissionedat the Arzew Jumbo plant from December 1983 to September1984. The start up of one LPG extractionplant in September1986 at Hassi R'Mel with a total capacity of 1.1 million tons/yearwill allow the 4 million tons fractionatingplant at Arzew to operate at full capacity.1' LPG production at Arzew rose from 2.2 million tons in 1985 to 3 million tons in 1986 and may reach 3.6 in 1987, i.e. 100% of effectivecapacity (90% of nominalcapacity).
7.31 Gross output of natural gas rose from 43.4 billion cubic meters in 1980 to 90.7 billion in 1985. All of increased gas productiolicame from non-associatedgas. ln particularHassi R'Mel contributed76.6% of total gas output in 1985. Due to this substantialincrease, net gas output (i.e. after deductingreinjected and flared gas as well as gas used at the fields) rose from 15.1 billioncubic meters in 1980 to 34.8 billionin 1985.
7.32 This increaseis due to three main reasons: (a) conclusionof export contracts with European gas distributioncompanies; (b) rapid growth of domestic consumption; and (c) increased use of gas for reinjection in petroleum fields to maintain pressure and step up extraction of liquid products.
7.33 Liquefied natural gas (LNG) productionrose from 9.6 billion cubic meters (deliveredto LNG plants) in 1980 to 17.6 billion in 1985.1' There are four LNG plants; one at Skikda (8.4 billion cubic meters capacity)and three at Arzew (two units with 10.5 billion capacity each and one with 1.7 billion capacity). Total capacity is thus 31 billion cubic meters compared to a 12.6 billion productionin 1985, i.e. a low 412 utilization rate.3/
7.34 Based on existing contracts LNG exports are projected to increase from 12.6 billioncubic meters in 1985 to 13.6 billion in 1990 (see paragraph 7.55 below). Such increasewould come mostly from higher gas sales to Enagas of Spain and Distrigazof Belgiumwhile purchasesby Gaz de France (GDF) would remain constant. Efforts to gain LNG new export markets in order to better use existing capital intensive facilities (some of them are experiencing difficultmaintenance problems partly due to low utilization)while adjusting to prevailingworld market price situation now rank high among Sonatrach priorities. In that respect,an analysis should be made of (a) the market situationfor LNG (and for piped natural gas) sales abroad (includingspot sales); (b) the processingcost for LNG includingnatural gas sellingprice to the LNG plants, amortization,rehabilitation and modernizationof existing
1/ There is also an older 1 million ton LPG and condensateplant (RA 2 Z) set up in 1971 at Arzew, which is now stopped pending revamping to exclusivelyproduce LPG. 2/ One cubic meter of LNG is equivalentto 600 cubic meters of gas in its gaseousstate. 3/ Capacity utilizationwas 57% at Skikda but only 34% at Arzew. The latterrate was due to marketing problems (Arzew's largest LNG plants were supposed to produce gas for the US market, but sales to the US have disappeared). - 121 -
units; and (c) the long-runmarginal cost of LNG and piped natural gas to be considered and compared with existing LNG and piped gas prices on internationalmarkets. Such an analysis would also take into account increasinggas domesticdemand and substitutionpossibilities.
C. OilRefining
7.35 There are five oil refineries with a total nominal capacity of 21.3 million tons. The largest refinery at Skikda on the eastern coast has a 15 million tons processingcapacity and producesmainly naphtha, low sulfur fuel oil and diesel oil (85% of the productionis exportedmostly to European countriesand to the United States).
7.36 Refined products output rose from 10.4 million tons in 1980 to 21.9 milliontons in 1985. Althoughdomestic sales rose from 5.2 million tons to 7.5 million tons, exportsmore than doubled and reached 14.7 million tons in 1985. Such a rapid growth is explainedby Sonatrach'spolicy to minimize crude oil exports and rathermaximize export values through sales of refined productsabroad. A large part of crude oil is now refined in Algeria and this is likelyto continuein comingyears.
7.37 More than half of the output is for middle distillates(diesel, naphtha,kerosene). Fuel oil is also a significantcomponent of output (24% in 1985). Refined products output is unlikely to increasesignificantly in future years. Crude oil productionmay very well decline in future years, leavinglittle room for much increasedcrude deliveriesto refineries(unless crude oil exportswould be drasticallyreduced). Also, due to rising domestic demand, available exports are likely to decline. CAE's oil forecasts'' indicatethat crude and productsexports would fall from 28.7 million tons in 1985 (14 million tons for crude and 14.7 millionfor products)to 24.8 million tons in 1990.
7.38 Consequently,no capacity increasewould seem to be needed in the refinery sector. Nevertheless, the project to raise catalytic reforming capacityat Skikda from 1.1 to 2 million tons to meet increased gasoline demand has been retained;the plant should producesome 30,000bpd in 1988.
7.39 The fall of crude oil prices in the first part of 1986 has been faster than that of refined products thus increasing the margin of oil refineries. In the first quarter of 1986, the Skikda refinery obtained a US$2.50margin per barrel. Combinedwith higher capacity utilization,lower amortizationcost (at least for the older refineries)and lower foreign technicalassistance fees, the refinerysector has been recoupinglosses made in earlieryears.
1/ Cf. paragraph7.53, Table VII.7. - 122 -
D. Storage and Distribution
7.40 Naftal is the company in charge of storage, transportation(product pipelines to depots and LPG pipelines)and distribution. It was established in 1980 after Sonatrachwas restructured.
7.41 Naftal's investmentshave been around DA 1 billion during 1982-85 divided between refining (25S) and storage and distribution(75%). During 1982-85,three large and sixteen small bottling centers have been installed. There were in 1984 about 1,000 service stations and 400 were planned to be installedin 1985-89(300 were alreadybuilt in 1985-86).
7.42 Naftal has been active in pushingLPG consumptionthrough conversion of cars using gasoline. Ten stations in Algiers have already been supplied with LPG pumps and there are plans to increase this to 600 in the next ten years. Some 2,000 cars are now runningon LPG and thereare plans to convert 10,000 gasolinedriven cars to propaneeach year. Another method to develop LPG consumptionhas been throughsubsidized LPG prices to maximize LPG use as part of the fight against desertification(reduced fuelwood consumption)and to help lower income population. There are still today shortages (at the level of marketing)of bottled butane, mainly due to booming demand for domestic use. In order to reduce the financial burden of LPG subsidies, butane pricewas increasedfrom DA 10/bottleof 13 kg in 1984 to DA 16 in 1985 and DA 19 in July 1986.
E. Domestic Demand
7.43 Algeria's relative prosperitywas built upon hydrocarbonexports. In 1985, the sector accounted for 97.5X of export earnings,44% of the central governmenttax revenue and 252 of GDP. But domestic consumptionhas risen rapidly from 3 million tons of oil equivalent(mtoe) in 1965 to about 20 mtoe at present. By the year 2000, consumptionof 63 mtoe would exceed exports projected at 60 mtoe by Algerian planners, although this may well prove difficultto achieve should the economy slow down as a result of lower oil prices and otherconstraints.
7.44 Energy consumptionin the industrialsector has grown faster at over 161 per annum since 1965. In 1965, there were only two high voltage industrial customers for electricity;there were 43 in 1983, consuming over 46 times the quantity of electricity. The energy industry (i.e. oil refineries,LNG and LPG plants,etc.) is the major singleenergy consumer.
7.45 Natural gas consumptionhas risen rapidly. In 1965 there were only ten industrialcustomers for high pressuregas while there were 118 in 1984. Natural gas deliveriesto Sonelgaz (for poweruse and gas distribution)and to ammonia and chemicalplants rose from 4.6 billion cubic meters in 1980 to 7.6 billion in 1985.-' Today there are half a million domestic customers
1/ The share of Sonelgas in this total is about 801 with a large increase in the number of industrial and domestic consumers. - 123 -
for gas and by the year 2000 there are plans to increasethe number to over two million.
7.46 In order to maximize the use of gas, prices of petroleum products have been raised faster than those of natural gas. While naturalgas (high pressure)price rose by 2.6% per annum in 1980-1986,heavy fuel oil price rose by 45X. Similarly heating oil price increased by 252 annually in 1980-86 while naturalgas (low pressure)price rose by 4.5Z only.
7.47 Domesticenergy consumptionhas been projectedby Algerian planners to more than quadruplebetween 1982 and 2000.
Table VII.5: DOMESTICENERGY CONSUMPTION
1965 1975 1982 1990 2000 1975 1982 2000 --- (Millionsof oil equivalent)--- -- (Percentages)---
Petr. products 0.56 2.80 4.60 7.91 13.00 57.1 44.2 28.3 Natural gas/LPG 0.26 0.90 2.55 6.72 11.80 18.4 24.5 25.7 Power (thermal) 0.35 0.85 2.60 8.30 16.50 17.3 25.0 35.9 Power (hydro) - - 0.15 0.20 0.20 - 1.5 0.4 Solid fuels 0.40 0.35 0.50 0.97 4.00 7.2 4.8 8.7 Solar 0.50 1.0
Total 1.57 4.90 10.40 24.10 46.00 100.0 100.0 100.0
7.48 The above forecast clearly shows the rise of natural gas/LPG and thermal power generation. In relative terms the use of solid fuels remains limited and is mostly for cooking coal in the iron and steel industry. Hydroelectricpower accounted for only 1.5% of energy consumed in 1982 and will fall even lower since the potentialfor furtherhydro projectsis limited.
7.49 Solar energywould appear for the first time in the energy balance by the year 2000, then representing1% of total domesticconsumption.
7.50 Given lower economic projections for Algeria (which do seem inevitable given the impact of lower hydrocarbon prices and other constraints),domestic energy demand is likely to slow down in the years ahead. Alternativegrowth scenarios for energy should then be prepared for the medium to long term. At any rate what is emerging is that pstroleum products are likely to show a declining share in energy consumptionwhile natural gas for industry,household and power use should continueto develop at a relativelyrapid rate and further increaseits share in energy demand by substitutingfor oil products. This has serious implicationsfor future energy investmentsprograms to be prepared,under changingcircumstances, for the perioduntil the year 2000. - 124 -
F. HyjdroarbonExport
7.51 Despitethe growthof domestic consumption,hydrocarbons exports rose from 50 million mtoe in 1980 to 58.6 mtoe in 1985. The share of various sourcesof hydrocarbonshas evolvedas follows(in 2):
Table VII.6:
1980 1983 1985
Crude oil 67.3 21.6 24.4 Condensates 8.6 25.8 23.6 Petroleumproducts/LPG 14.2 26.6 25.1 LNG 9.9 22.8 16.6 Naturalgas (piped) - 3.2 10.3
Total 100.0 100.0 100.0
7.52 The share of crude oil in total exports has fallen dramaticallysince 1980 as a result of governmentefforts to diversifyhydrocarbon exports and lessen reliance on crude oil exports. Condensatesand petroleum products (includingLPG extracted from natural gas) now representabout 25h each of exports against 9 and 142 respectivelyin 1980. Natural gas (LNG and piped gas) also amounts to 26% of exports against 101 in 1980. The fastest development has been for natural gas piped to Italy through the Trans-Mediterraneanpipeline. The result of these developmentsis that there are now four groups of exports each amountingto about one fourth of total hydrocarbonexports.
7.53 An IBRD EconomicMemorandum (draft dated February6, 1986) estimated that hydrocarbonexports in 1990 would amount to 83 mtoe in 1990 where the AlgerianMinistry of Energyforecast is 75.1 mtoe as shown below:
Table VII.7:
1985 1990 1990 2000 (actual) (IBRD) (AE7A) (CAE"a)
Crude oil 14.3 15.4 ) 24.8 4.8 Oil products(excl. LPG) 12.6 7.8 ) Condensates 13.9 17.6 18.0 13.8 LPG 2.1 5.8 3.0 4.8 LNG 12.6 19.5 ) Naturalgas (piped) 7.0 17.1 ) 29.2 36.6
Total 62.5 83.0 75.1 60.0
/a Report of the "Comit6 Alg6rien de 1'Energie" prepared under the aegis of MEICP for the 3rd Arab Conferenceon Energy (May 1985). - 125 -
7.54 The two above forecasts for 1990 differ essentially regarding prospects for natural gas. Crude oil output is likely to stagnate or even decline in future years. Furthermore,condensate exports are projected to increase substantiallyfrom 1985 to 1990 but this will depend on the developmentof new gas fields and the managementof existingones to maximize condensatesand LPG extractionfrom natural gas. At any rate, a target of 18 million tons is not out of reach for condensatesproduction since there appear to be good marketing prospects. As regards LPG, with substantial investmentsnearly completed at Hassi R'Mel aa.d Arzew, LPG exports have already reachedabout 2.5 mtoe in 1986 and should amount to some 3 mtoe by 1988-1990. As regards natural gas exports prospects,much will depend on future pricing policies, petroleum supply/demandbalances on international markets, as explained below, and on the importance,from the purchaser's viewpoint,given to considerationsof supplysecurity.
1. Liquefied Natural Gas (LNG) Exports
7.55 LNGexports have evolved as follows since 1980:
Table VII.8: EXPORTSOF LNG BY COUNTRYOF DESTINATION (In thousandsof cubic meters per year)
1980 1983 1985 1990 (forecast) Britain 1,315 - - - France 3,432 13,133 13,054 139000 Spain 2,015 2,665 2,703 3*000 United States 3,835 5,957 970 - Belgium - 4,173 4,215 6,600
Total 10,597 25,928 20,942 22,600
Equivalentnatural gas (millioncubic meters) 6,623 16,205 12,628 13,560
Source: MEICP and missionestimates for 1990.
7.56 The above table shows the drasticdecline of exportsto the US market since 1983 as a result of excess gas deliverabilityon that market combined with increasedsupplies from Canada at lower prices, the gradual deregulation of wellheadprices and market mechanism,and the appearanceof spot gas. As a result, US importers have found it impossible to "roll in" higher cost Algerian LNG in their supplies and maintain their market share, and they denounced their contractswith Algeria. However, Algerian LNG is likely to reappear on the American market followingthe recent signing of a contract between the Americannatural gas company,Panhandle, and SONATRACH,according to which up to 100 billion m would be deliveredduring 20 years, i.e. on average 5 billion m3 p.a.. The price of gas will be indexed to the selling - 126 -
price on the Americangas marketwith a floor allowingSONATRACH to offset the marginalcost rather than total capitalcosts. The contractwill satisfyboth Panhandle'sdesire to sell their gas profitablyand SONATRACH'sdesire to re-enter the American market. In parallel, Algeria may wish to make spot sales to the US where its former customer, Boston's Distrigas, bought Indonesia'srecent spot cargo.
7.57 In contrast to the US, sales to the French Gas Board (GDF) have reached a high level in 1983-85. As regards pricing, falling values for netback crudes have loweredthe third quarter 1986 f.o.b. negotiatedprice of AlgerianLNG to France (and also Belgiumand Spain) to US$2.32 per million BTU comparedto US$3.81before April 1986.
7.58 Distrigaz's (Belgium)main difficultystemmed from falling demand. Exports to Belgium reached 2.5 billion cubic meters (i.e. 4.2 million cubic meters of LNG per year) in 1985 and would amount to 3 billioncubic meters in 1986-87. Although Distrigazhas not been able to sign a new contract with SONATRACH,it will continueto buy Algeriangas to supply its new terminalin Zeebruggeat a provisionalprice, based on the official selling prices of a basket of eight different crude oils (US$1.97 per million BTU during the second quarterof 1987).
7.59 Sales to Spain's Enagas amounted to 1.6 billion cubic meters in 1985 (2.7 million cubic meters of LNG), much below what was contractedunder a 1973 agreement. According to a settlementreached in 1985, Spain will take 1.5 billion cubic meters in the first three years, increasingto 3.8 billion at the end of the contractin 2004. Enagaspays about the same price obtainedby Franceand Belgium (US$2.32per millionBTU in July-September1986).
7.60 Faced with tumbling revenues and idle capacity, Sonatrach is beginningspot sales to Gaz de Franceand German Ruhrgas under recentlysigned contracts that provide considerable discounts below long term prices. Deliveriesstarted in November 1986 and will continue through the winter months. The volumes are small but not negligible,possibly about 250 million cu.bicmeters of liquefiednatural gas for each of the two above companiesover a three month contract period. The spot price, f.o.b. Algeria,is believed low enough to lead to a regasifiedborder price for both customersof under US$2/millionBTU. The fourth quarter1986 contractf.o.b. price for Algerian LNG to France, Belgium and Spain was some US$1.95 per million BTU with transportand regasificationto France and Spain an added 50 cents giving a total US$2.45price.l'
B. PipedNatural Gas Exports
7.61 Piped gas exports began mid-1983 with first flows through the Trans-Mediterranean pipeline to Italy. Italy's SNAM(ENI) contract signed in 1983 called for it to lift 12.4 billion cubic meters. Exports amounted to
1/ Transport and regasification to Belgium amount to more than US$1.00. - 127 -
about 7 billion in 1985 and may well reach 12 billion in 1990 based on recent agreerentsbetween the two countries. Regarding price, Italy, with pipeline gas, had a better deal than Europeancountries buying LNG. Its price f.o.b. Algerianborder was 362 lower than for LNG, or US$3.46 for the third quarter of 1985. This contract allows more flexible conditionsfor deliveriesand includesindexed prices.
7.62 Assuming that Italy (and perhapsYugoslavia) could purchaseabout 12 billion cubic meters in 1990 comparedto about 7 billion in 1985, and that LNG exports would amount to 22.6 million cubic meters (i.e. 13.6 billion cubic meters of natural gas) total gas exports would reach 25.6 billion in 1990. This is somewhat lower than the 29.2 billion cubic meters forecast(paragraph 7.53) but reflects severe marketing problems and the renegotiationof LNG contractsat a much lower level. It is to be noted that initial contracts signed by Algeria amounted to about 40 billion cubic meters per year. This has now been reduced to about 26 billion. In this context, aggressive Sonatrach marketing policies (including those implementedthrough low gas prices) may lead to higher exports through spot sales, including the US market. Spot deals are a rarity in LNG trade, and it is still too early to tell if this market has a new field. But everythingpossible should be done to increasepresent low capacityutilization rate of LNG plants.
7.63 In the longer run, the Western European market is projected to requiresubstantial quantities of gas importsby 2000. The major development within the region is expected to be productionfrom the Troll and possibly Sleipner or Temmeliten fields, offshore Norway. Since some of the existing contractswill graduallyexpire through the 1990s, it is anticipatedthat a part of the projectedshortfall in 2000 will be supplied by Algeria and the USSR. The enormousnatural gas reservesand the existingpipeline capacities to Western Europe would ensure the continued availability of at least 60 billioncubic meters from the USSR. The doublingof the Trans-Mediterranean pipelinecapacity (from 12 to 24 billion cubic meters) and the LNG contracts (from 14 to 28 billion cubic meters) could provide around 54 billion cubic meters/yearof Algerian gas. Subject to the supply security considerations (implyingEurope giving preferenceto more expensiveNorwegian gas), a short haul supplier,such as Algeria,will be suitably positionedto forestallnew projects with flexible pricing policies. Algeria has already shown its ability to change its policy since the heady days of 1980-81. Not only has Algeria shelved the idea of f.o.b. crude oil price indexed, it has also demonstratedrecently a more flexibleattitude toward gas customers.
G. Investments in the Hydrocarbon Sector
7.64 Investmentsin the hydrocarbonsector amountedto about DA 49 billion in 1980-84(at currentprices) out of which DA 44 billion for Sonatrach. Only 75% of planned investmentallocations were actuallyspent mainly due to delays in implementingprojects. Major investmentscompleted or started in 1980-84 included a new gas liquefactionplant (GNL2), the modernizationof an older gas liquefactionunit (GL4)and the "Jumbo"LPG plant at Arzew. - 128 -
7.65 The 1985-89plan shows investmentsof DA 39.8 billion,20S lower than actual investmentsin 1980-84 and even less when allowance is made for inflation. However,this is to be expectedwhen consideringthat considerable basic investments(field development, pipelines, gas liquefactionplants) have already been achieved. However, about one-thirdof projected investmentsin 1985-87 is still for completionof ongoing projects. The latter particularly are importantfor Sonatrach,which still has a backlogof projectswhich could not be completedduring the previousPlan periodbecause of variousdelays and physicalbottlenecks in implementingauthorized projects. Only DA 44 billion were actuallyspent by Sonatrachin 1980-84compared to 64 billion originally plannedfor that period.
Table VII.9: PLANNEDINVESTMENTS IN THE HYDROCARBONSECTOR (1985-89)
Investment Authorized Cost Expenditure
I. New Projects: Sonatrach (exploration, production,pipelines) 20,508 19,083 Naftal (refining,storage & distribution) 6,110 5,192 PetroleumServices (seismic,drilling, etc.) 2,630 2,300 Total 29,248 26,575
II. OngoingProjects: n.a. 13,235
III. Total I & II n.a. 39,810
Source: Ministryof Planning.
7.66 Due to financial constraintsas a result of lower oil and gas pricesand reduced cash flow, Sonatrach may have to slow down investments substantiallyunless alternativefinancial resources can be mobilized. Since priorityis likelyto be given to completionof ongoing projects (35% of total Sonatrach investmentsof DA 30.9 billion planned for 1985-89) resourcesfor new projects may have to be reduced, thus endangeringvital exploration, developmentand transportationprograms. - 129 -
7.67 Sonatrach's ongoing investments for the period 1985-89 include (a) The completionof two LPG extractionunits at Hasi R'Mel (each unit has a 1.1 million ton capacity). LPG is sent to Arsew in the "Jumbo" 4 million ton plant where it is separatedinto butane and propane and exported (only 202 of Arzew output is delivered to the domestic market). These two LPG extraction units were completed in September 1986. (b) The completion of the second Trans-Mediterranean48-inch gas pipeline from Hassi R'Mel to Italy (G02) with a capacity of 8.3 billion cubic meters per annum. Constructionstarted in 1985 and is expected to be completedin 1988. (c) The completionof Rhourde Nouss and Alrar pipelinevia Tin Fouye and Hassi Messaoud to Hassi R'Mel. The new line will also carry gas from Rhourde Nouss, served by a gas treatment facility due to be completed in 1987. As a result of this ongoing project, LPG productionis likely to be increasedby 1988.
7.68 Sonatrach's own planned investmentsamount to DA 19.1 billion for 1985-89,as shown in the table below:
TablaVII.10 SONATRACH'SNEW INVESTMENT PROGRAM (198S-89) (In millions of Algerian dinars)
Authorized /A Project Cost Expenditure
Exploration 6,000 6,000 PetroleumDevelopment a. DevelopmentProjects 9,230 8,320 b. SocialInfrastrucicre Linked to PetroleumDevelopment /1 4A6 460 Subtotal 9,690 8.889 Gas Development a. Gas FieldsDevelopment 1.750 1,600 b. PreliminaryStudies for SecondaryRecovery IllpalD Subtotal 1.860 1.700 Transportation Replacementof HaoudEl Hanra-Skikda 340 Oil Pipeline(northern part) 1.200 1,145 Renewalsand Improvements (pipesand compressionstations) 560 42Q Subtotal 1,760 1,635 Gas Liquefaction Renewalof LiquefactionPlants 380 320 DebottleneckingLiquefaction Plants 510 340 Investmentin GL2Z LiquefactionPlant 48 48 Subtotal 938 708 Other LaboratoryRenewal and Improvement 20 20 New Laboratories 40 30 OrillingEquipment 2QQ lAB Subtotal 260 250
Total 7ncn1 15LA
/A Differencebetween project cost and authorizedexpenditure is to be spent after1989. /b Housing.medical centers, recreation centers. etc. 61366/p19 - 130 -
7.69 Investmentsare concentratedin four main areas: exploration,oil and gas development,pipelines and gas liquefaction. Planned investmentsin explorationamount to DA 6 billion against DA 4 billion achievedin 1980-84. In 1985-86,there were about 27 explorationdrilling rigs in activity,mostly at Adrar and at In-Salah(gas exploration).This equipmentwas utilizedfor a total of 270 months/machine,on the basis of an average 80% capacity utilization in 1985-86. Explorationdrilling averaged only about 80,000 meters in both 1985 and 1986. For 1987 and beyond, drillingprograms may be reduced due to Sonatrach's insufficientfinancial resources,resulting in lower orders placed with the two government-ownedexploration companies, Enafor and Entp. Explorationdrilling is costly because of difficultterrain conditions: a drilling operation is estimated to cost US$15 million in the Erg areas and US$10 million at Adrar.I/ Many zones are still totally unknown,and even in areas which have alreadybeen explored,new reservesmay be identified with up-to-date,modern explorationtechnologies. The main difficultyis the high explorationcost resultingin a major financingproblem for Sonatrach. Despite the fact that the ratio of productionwells to total number of wells drilledis relativelysatisfactory by internationalstandards, these wells are in very remotedesertic areas and often costly. For instance, ENAFOR experts estimatethat the Adrar oil discoverymight be exploited only should the price of oil increase to US$100 per barrel. As explained in paragraph 7.07, recently passed new legislation may induce foreign oil companies to increaseactivities in Algeria since royaltiesand profit taxes have been reducedwhen explorationis undertakenin certain geographicareas of the country. The new petroleumlegislation has still to be made effective since detaileddecrees have not been issuedyet (they shouldbe issued at the end of June 1987). But preliminaryreactions from oil companies should already be sought since an enhanced explorationprogram is vital to at least maintainAlgeria's declining hydrocarbon reserves at their presentlevel.
7.70 Oil and gas developmentexpenditures amount to 55% of total planned new investmentsin 1985-89. The largest part of developmentprograms is devoted to petroleum (DA 8.9 billion or about US$1.9 billion) while gas developmentis allocated DA 1.7 billion or US$0.4 billion. Investmentsin petroleum include two new compressionstations at Hassi Messaoud which will start productionin January 1987. These stationswill be added to the five existing stations and will increase the volume of gas separated from oil2' and reinjectedto maintain field pressure. This has the effect of further reducingflared gas, now alreadyonly 22 of total associatedgas produced.
7.71 Other petroleuminvestments include renewalsand replacementof aging equipment in a number of fields. More than 50% of investments aim at developingoil gatheringnetworks from producingwells and at bringinggas or water to oil wells for reinjection.
7.72 Gas fields developmentaims at keeping the pressure at an optimum level in producing fields, decreasing the proportionof flared gas and at increasingliquid recovery (condensatesand LPG). No major new investmentis
1/ Oil has been discovered by Sonatrach at Adrar in 1985 (130 cubic meters/dayof 43 gravitycrude with the wildcatTouat 1 from 550 meters). 2/ There are 12 gas separationstations at Hassi Messaoud. - 131 -
anticipatedat Hassi R'Mel, where two LPG extractionunits were completedin September 1986 (ongoing projects). Sonatrach'sdevelopment strategy is to further develop non-associatedgas fields south of Hassi Messaoud such as RhourdeNouss, Tin Fouye, In Amenas,Alrar and also Oued Noumer, southeastof Hassi R'Mel. In the longer term, i.e. after 1989,the new In-Salahgas fields may also be developed depending on marketing requirements (including reinjection). Such gas developmentprojects aim at making gas availablefor reinjection in oil fields. For instance, Hassi Messaoud would require 11 billion cubic meters of gas by 1989 (for an oil productionmaintained at the 1985 level of about 19 million tons) as against 6 billions reinjectedin 1986 and this just to keep the pressure needed to reach the required productionof 19 milliontons of oil.
7.73 Ac regards liquid recovery (condensatesand LPG), a significant increase in such liquid productionwould compensatefor a likely decline in crudeproduction in the near future, partly for conservationreasons since no significantdiscovery has been made in recent years. Condensatesand LPG are not covered by OPEC quotas and there is a market for such products, although LPG may prove to be increasinglysubjected to keen international competition.-" At any rate, increased gas production in the new fields south of Hassi Messaoud would result in higher liquid recovery (which is exportableand a source of foreign exchange, compensatingfor falling crude oil foreignexchange resources) and would providegas availablefor reinjection in oil and gas fields where it is needed. A major objectiveof the 1985-89 Plan is to optimizegas productionin the south, taking into account maximum liquid recovery and optimum technical and economic requirements for gas reinjection. New gas developmentinvestments in 1987-89 aim at completing projectsalready undertaken such as at RhourdeNouss and Alrar and economically use Algeria'sample gas resources.
7.74 Sonatrach's planned new investments in pipelines amount to DA 1.6 billionor about US$350million. The most importantproject is by far the replacementof the 38" oil pipeline (northernsection) from Haoud El Hamra to Skikda (whereoil is used in a 15 million ton refinerywhich exports 851 of its production). The original pipeline was installedin the seventiesbut always experiencedtechnical problems and has to be replacedto fill a vital need to supplyoil to the giant Skikda refinery. Other investments,amounting to about DA 0.5 billion, include pipe renewals and rehabilitation of compressionstations and other equipment. It is generally expected that replacementand rehabilitationof machinery and equipment will become a growingfinancial burden since a number of investmentswere undertakenin the sixties (pipelines,-'refineries, production wells, compression stations, drillingequipment, etc.).
1/ Algeria'scapacity is 5 million tons (includingthe 4 MT Jumbo plant and the smaller RA2Z MT at Arzew) while total world internationallytraded productionis only 20 million tons (including8 million tons for Saudi Arabiaand the rest for Kuwaitand Indonesia). 2/ The first 24" gas pipeline was built between Hassi R'Mel and Arzew in 1964; the first 28" oil pipeline from Hassi Messaoud to Arzew (for refiningand export of crude)was built in 1965. The oil pipelinebetween Hassi Messaoudand Bejaiawas built in 1959. - 132 -
7.75 The last large categoryof investmentscovers natural gas liquefaction units. These amount to DA 0.7 billion, divided between modernizationand replacementof machinery at Arzew liquefactionplants,-/ debottleneckingat the same plants and special renewalsand new installations(such as a helium recoveryunit) at the GNL2 plant. Large maintenanceexpenditures (required to keep in shape plants now working at very low utilizationrates) are likely to representan increasinglyheavy financialburden for Sonatrachin the next few years.
7.76 Actual investmentsby Sonatrach amuountedto about DA 5 billion in 1985 and DA 6 billionin 1986. For 1987, 7 billion have been requestedand no cutback in planned investments has been assumed since hydrocarbons are considered a priority sector. To reach Sonatrach's Plan target of DA 31 billion in 1985-89,about DA 7 billion would also have to be invested annuallyin 1988 and 1989. However, the question is whether Sonatrach'scash flow, which has alreadydecreased by some 20b in 1986 comparedto 1984-85and may decrease further in 1987-89, will be sufficient to cover anticipated expenditures. Government fund allocations may also be insufficient to compensate for Sonatrach'sshortfall in resources. Sonatrach's borrowing abilityon internationalmarkets has been reducedsince the drasticfall in oil prices in 1985-86 and fresh money could be obtained only at tougher terms (higher interestrate and shorter maturities,i.e. 6 to 7 years). Given the unfavorableinternational financing perspectives for the energy sector, other alternativefinancial resources may be investigatedby the Algerianauthorities includingmultilateral assistance.
7.77 Total planned investments in refining, storage and distribution amount to DA 6.8 billion,of which DA 5.2 billionare for new investmentsby Naftal, a state-ownedcompany establishedin 1980 when it has been decided that Sonatrach'sactivities would be restrictedto exploration,production and transport. New investmentsinclude DA 1 billion for a new reformingunit at the Skikda refinery and DA 4.2 billion for investments in new storage facilities,LPG and multiproductpipelines, workshops, conditioningcenters and service stations. As indicatedabove (para.7.38), there are still doubts about the need for a refiningunit locatedat Skikda. One objective of this project is to increase aromatics production (benzene, toluene, xylene and paraoxylene)for export. Such productionhas risen from nil in 1982 to 50,000 tons in 1983 and to 140,000 tons in 1985. The existingreforming unit has a 1.1 millionton annual capacitywhich is almost fully utilized to produce both aromatics and gasoline.-/ To increase aromatics exports, it has been
1/ Substantialinvestments already took place in 1980-85 at the old GLN4 plant (the former CAMEL) consistingof an additionalsteam plant, three new turbo generators (18 MW each), interconnectionwith Sonelgaz, new compressors,etc. Storagecapacity will soon be increased. 2/ Gasoline production at Skikda was 858,000 tons in 1985, requiring a processingcapacity equivalent to 830,000 tons. Twenty percent of the productioncame from topping and 80% from reforming,i.e. 690,000 tons. Adding 140,000 tons aromatics production led to total output of 830,000tons or about 930,000 tons processing capacity equivalent, close to the existing1.1 million tons. - 133 -
proposed to set up a new one million ton reformingunit which would also produceabout 600,000 tons gasoline for the domesticmarket. Total gasoline consumptionrose from 584,000 tons in 1975 to 1,830,000tons in 1985. The new unit, which would take about 18 months to complete, would result in a significantincrease in gasoline productionavailability. This has raised a numberof questionswithin Naftal and the Ministry of Energy regardingfuture demand growth for gasoline, substitutionpossibilities by LPG and diesel and also the competitiveadvantage of concentratingnew gasoline capacity in Skikda vis-a-vis Algiers and Arzew refineries. Further studies have been requestedfor this project, which has not yet been approved formally. This representsan interestingtrend for energy projectsin Algeriawhich appear to be increasinglyscrutinized by the Ministryof Energy, the latter insistingon a thorough economic, financial and technical evaluationof project merits before proceedingto implementation.
7.78 As indicatedearlier (see Table VII.9), new investmentsare divided into three main groups: Sonatrach,Naftal and petroleumservice companies. Petroleumservices are providedby several state-ownedcompanies set up in 1981-82 after Sonatrach was restructured. Activities largely previously performed by Sonatrach were transferredto these new companies. They are ENAGEO (geophysics),ENAFOR (drilling),ENTP (drilling),and ENSP (wells servicing). Other companiesare ENEP (petroleumengineering), ENGCB (drilling platforms, infrastructure,buildings), ENGTP (petroleum works) and ENAC (pipeline laying)."'
7.79 Total planned investments for petroleum services amount to DA 3.2 billion, of which DA 2.3 billion are for new investment expenditures.2/ Investments are divided between four companies: ENAGEO (DA 0.2 billion), ENAFOR (DA 0.4 billion); ENTP (DA 1.2 billion) and ENSP (DA 0.5 billion).
7.80 ENAGEO was formed in January 1982 through integratingthe former Algeo Company created in 1966 with TeledyneUS (491) and Sonatrach(51%) with part of Sonatrach'sGeophysical Department. ENAGEO offices have been located at Hassi Messaoud only since September1983 to be closer to operations. Total staff is 2,600, of which 501 is permanent. ENAGEO undertakes seismic activitiesin the field and is responsiblefor interpretationof the results. Eighty percent of ENAGEO's business comes through Sonatrach contracts. The two-year 1985/86 Sonatrach contractamounted to DA 560 million to which were added about DA 60 millionin contractswith foreign companies(Agip, Braspeto, Yugoslavs)in 1986, but the lattercontracts fell to nil in 1986. Until 1982, seismic activitieswere relativelyimportant but have regularly and slowly declined since then. ENAGEO's management claims that existing means in personneland equipment(600 trucks)are sufficientto easily meet Sonatrach's needs, should the latter increaseby 25% or more. ENAGEO cooperatesclosely with Sonatrach'sExploration Department, which supervisesseismic operations and still undertakesgeological activities on its own. In 1982, ENAGEO was
1/ Another company (KANAGHAZ) specializes in secondary smaller pipeline layingfor Sonelgaz. 2/ Plannedexpenditures; total new investmentis estimatedat DA 2.63 billion. - 134 -
not initiallyprofitable since Sonatrachdid not includein its internalcosts those labor costs which were accountedfor somewhereelse in Sonatrach. Since 1983, ENAGEO has become profitableby consolidatingthe beneficial former Algeo activitieswith Sonatrach'sseismic operations. Since 1982, investments have been mainly for replacementof equipment. In 1985-89, investmentswill be half for new maintenance installationsand half for renewals (trucks, laboratories). The main issue for ENAGEO is how to diversify from limited seismic activitiesfinanced by Sonatrach. Already ENAGEO undertakesland and soil surveysas well as water drilling for the Wilayas and private customers. Twenty percent of ENAGEO business comes from such activities. Thereare plans to furtherdiversify through geophysical operations (magnetometry, gravimetry, etc.) for mining companies such as ENREM, which specializes in mining exploration. It thus appears that, after initial difficulties(financial losses, need to merge Algeo and Sonatrach seismic activities,location in Algiers remote from operations in the south), ENAGEO performance has improved. A feeling of growing autonomy from Sonatrachand the need not to rely excessively in erratic seismic operations should lead ENAGEO to successfullypursue its diversificationefforts in Algeria and perhaps in other African countries.
7.81 ENAFOR and ENTP are the two state owned companies responsible, respectively,for explorationand developmentdrilling since 1982. They were set up at the time Sonatrach was restructured,and it was decided to decentralizedrilling operations. ENAFOR was created in August 1982 and took over ALFOR activities. ALFOR was set up in 1966 by Sedco (Dallas)US (49%) and Sonatrach (51%) for a period of 15 years. ALFOR was a very profitable company with 10 drilling machines. In 1982, ENAFOR inherited from this equipmentto which were added 12 machinesprovided by Sonatrach. Today, there are 26 drilling machines,and the staff has increasedfrom 2,600 to 3,000. Staff has been transferred from Algiers to Hassi Messaoud, closer to operations.
7.82 There are two reasons for having two government-owneddrilling companies. First, there were already, i.e. before 1982, two organizations: ALFOR, which became ENAFOR,and Sonatrach'sPetroleum Works Department,which became ENTP (see below) in 1982. The PetroleumWorks Department(DTP) owned 122 drilling machines' and suffered from managementproblems with a staff of 13,000 dealing with geophysicalactivities, drilling, civil engineering, wells maintenanceand workover,etc. It was thus decided in 1981 to divide Sonatrachactivities into various autonomousactivities and co set up ENTP. At any rate, ENTP management staff came from Sonatrach with a view of managementdifferent from those of ENAFOR'sstaff, and it seemed difficultto merge the two. In fact, ENAFOR and ENTP are not really in competitionsince Sonatrach is their only client and divides contracts according to the two companies'technical capabilities (number of machines,staff, etc.).
7.83 ENAFOR undertakesexploration' and developmentdrilling as well as workover and well maintenance. Twenty machines are used for drilling, five for workover and one for drilling water wells as part of exploration
1/ Eighty owned by DTP, 12 given by Sonatrachto ALFOR and 30 left by foreign coutractorsafter 1980. - 135 -
programs. Since 1982, about 100,000 meters have been drilled on average of which 2/3 for developmentand 1/3 for exploration. Drillingis taking place at Alrar, Adrar,1 ' In-Salah,Hassi R'Mel, Hassi Messaoudand Berkaoui (near Ouargla). ENAFOR'splanned expenditures in 1985-89amount to DA 400 million. Its 20 drillingmachines are used about 10 months/yearon averageand on that basis wexe fullyoccupied in 1985 and 1986 (40% exploration,60% development). Activitiesfor 1987 and beyond will depend on Sonatrach'sfinancial resources to renew drillingcontracts. The othermain problemsare maintenanceof large trucks(lack of spares and of qualifiedstaff) and high personnelturnover in the south (at least 202).
7.84 ENTP (EntrepriseNationale de Travaux Petroliers)started operations only in 1983 after difficultdecisions had to be taken in 1981-82 on how to reorganizethe former huge SonatrachPetroleum Works Department(DTP). ENTP headquartersand staff were moved to Hassi Messaoud in 1983-84 and available equipmenthad to be drasticallyreduced. The DTP owned 92 machines in 1982, but 10 had to be discarded in 1984, 12 Romanianmachines had to be put on standby due to technicalproblems while 8 machinesin good conditionwere also set aside since not needed, given the limiteddrilling volume. In 1986, ENTP had 62 machines in working order2' (32 for developmentdrilling, 17 for explorationdrilling, 7 for workover,6 for drillingwater wells). Development activitiesare taking place at Rhourde Adra, Hamra, Gassi Touil, Tin Fouye, Berkaoui, Hassi Messaoud and Ben Noumer. Explorationwork takes place at In-Salah(gas) and Adrar. Workoveris mainly at RhourdeNouss and Zarzaitine.
7.85 ENTP drilled140,000 meters in 1985 and about 130,000meters in 1986. In 1987, drilling activitiesmay remain at the 1986 level. Such drilling programs do not allow ENTP to make profits. Drilling tariffs are set by Sonatrachat U3S$11-13,000per day of drilling. ENTP complainsabout these low rates, particularlysince old equipment (most recent machines are 10 years old) results in productivity10 to 20% below normal (in meters/month/drilling machine).3/ Other reasons for high costs (and resulting losses) are overstaffing(although staff was reduced from 9,500 in 1983 to 8,300 in 1986) compared to ENAFOR (3,000persons), the need to open new drillingbases and to close older ones (such as Rhourde Nouss in 1987, where developmentis being completed). Finally, ENTP has inheritedlosses sufferedby Sonatrach'sDTE before 1983 and since then has incurredcontinuous losses.
7.86 ENTP's productivityis probably not much higher than that of the former DTP. ENTP has inherited rather old DTP drilling equipment and insufficienttransportation means (20 large trucks had to be purchased in 1985) throughbank advances. While ENAFOR is financiallyautonomous, ENTP is in a poor financialsituation and will probablyhave to be restructuredto be given the medns to progressivelyimprove a presentlydifficult situation.
1/ Explorationdrilling. 2/ However, since ttheyare used only 10 months per annum, this in only equivalentto 50 machinesavailable all year round. 3/ This results in high maintenancecosts aggravatedby the diversified origin of ENTP equipment(US, Russian,Romanian, etc.). - 136 -
H. Summary of Issues
7.87 A numberof issueshave been mentionedabove. They can be summarized as follows.
Exploration
7.88 Algeria, in integratingits explorationstrategy, reeds to stress formationof joint ventures. In this context, the National Assembly's new petroleumlegislation is essential,and preliminaryreactions from foreignoil companies regarding chances to speed explorationwould be interesting to analyze. Further,there is a need to intensifyexploration in selectedareas and to upgrade the technologyused. Although important,such efforts have lagged in the past (however,it must be noted that physical conditionsare particularlysevere in Algeria). Finally,not only should planned investments be maintained,they should be increased,despite Sonatrach'ssevere financial constraints.
Gas Development
7.89 The new fields south of Hassi R'Mel have to be developed in such a way that gas production and condensates as well as LPG extraction are optimized and hydrocarbonsconserved, especially through gas reinjection. Such developmentis already under way but has to be pursuedduring the next fsewyears. External assistance could be critical in helping the Algerian authoritiesfinance an integratedgas developmentproject.
Itan poAtion
7.90 There is a growing need to rehabilitateand/or replace pipelines which were built in Sonatrach'searlier years. One is the 38-inchpipe (from Haoud el Hamra near Hassi Messaoud to Skikda) which had structural deficienciesfrom its and needs to be replaced. The main justificationof this pipeline rehabilitationis the need to maintainthe oil productionflow from Hassi Messaoudto supply the Skikdarefinery and for crude exports.
Rehabitationand Maintenane
7.91 Rehabilitationand maintenanceinvestments are becoming increasingly importantat all stages of the oil industry (drillingequipment, workover of wells, pipes, gas liquefactionplants, workshops, etc.). The share of investments in total planned expenditures is growing and will require additionalresources. - 137 -
LNG and Piped Gas Exots
7.92 Sonatrachneeds to continueefforts to adapt LNG and piped gas prices to existingmarket requirementsand explorenew markets. Expanded "spot" gas sales may also representa promisingmarket for additionalgas exports. If the low capacity utilizationin capital intensiveLNG installationsis to be raised in a difficultmarket environment,maximum flexibilityis required to maximizesales. bstitutionai Aspects
7.93 Thirteennew companies,set up after Sonatrach's1981 reorganization, provide Sonatrach with services (drilling, wells servicing, pipelines maintenance and construction, etc.) and engineering. Their numerous difficultieshave caused lags in vital explorationand developmentactivities. Although the situationhas improvedsince 1981, there are still problemswhich deservefurther analysis.
Impactof Lower Oiland Gas Prices
7.94 Due to fallingresources both for petroleumcompanies (Sonatrach, the petroleumdistribution company Naftal, and the petroleumservices corporations) and for the Government,critical energy investmentsare being threatened. Objectivesand investmentsincluded in the Plan were based on much higher petroleumprices than those prevailingtoday, so the impact of lower prices on the Algerian economy must be assessedby comparingprevious forecasts to new ones with new price projections.1' This obviously also applies to the energy sector, which provides 98% of exports and which is directlyaffected through reduced profitabilityat various levels (exploration,production, transport,distribution) and through changing export levels. An assessment, thoughdelicate, must be made of the impacton the sector and its implications for a "nlew"energy policy.
7.95 These issues and other more detailed problems outlined in the attached report will be discussed further during the proposed identification mission and subsequentmissions to be carriedout in the Algerianhydrocarbons sectorduring 1987.
1/ An US$18/barrelcrude oil price has been assumed by Algerian planners for 1987.
576BS - 138 -
CHAPTERVm - THE ELECTRICITYSUBSECTOR
A. Introduction 1. The Sector
8.01 Virtuallyall of Algeria'sfinal consumptionof energy is in the form of locally produced petroleum products, natural gas or electricity. In addition, natural gas is the primary fuel for nearly 902 of electricity generation. Directly or indirectly,natural gas is the dominant source of primaryenergy for all economicsectors other than transport. A government- owned utility, Societe nationale de l'electriciteet du gaz (SONELGAZ), exercisesa monopoly over public electricitysales and natural gas sales to all consumers other than the companies created by the dismembermentof SONATRACH. Several major industriesgenerate all or a part of their own electricityrequirements; others maintain their own standby capacity. The four main entities operating in the domestic energy market are therefore SONELGAZand the industrialautogenerators of electricity(the subjectof this chapter),and SONATRACHand NAFTAL (ChapterVII: Hydrocarbons). Electricity accounts for 70-75S of SONELGAZactivity both in terms of sales revenueand investmentexpenditure. Naturalgas revenue and investmentboth remainedat around 132 of total activityduring the 1980-84 Plan; however investmentin gas is projectedto rise substantially(to 182, Table VIII.20 in Annex II) over the courseof the currentPlan.
8.02 The Ministry of Energy and Chemical and PetrochemicalIndustries (MEICP)is responsiblefor energypolicy and supervisionof public enterprises in the energysector. At the Third Arab EnergyConference (Algiers, May 1985), the main objectivesof the Government'sdomestic energy policy were described as follows: (a) to ensure that electricity,gas and petroleumproducts are reliably available wherever they are needed; (b) to replace domestic consumptionof petroleumproducts with natural gas or LPG wherever possible, in order to maximize the exportablesurplus of petroleum; (c) to encourage direct use of gas by limiting electricityconsumption to non-substitutable uses and off-peakthermal applications that improve the power utility's load curve; and (d) to conservenational petroleumand natural gas resourcesby promotingefficient use of energy. The Governmentintends to promote this pattern of energy consumptionby a combinationof gradual adjustment of relativeenergy prices and direct regulatoryintervention. A new agency has just been created within the Ministry of Energy to promote rational and efficientuse of energy.
8.03 Electricity Consumption. Public electricity consumption (Tables VIII.4 and VIII.5, Annex II) is concentratedin the northern interconnected system (882 of total sales in 1984), and is evenly distributedbetween the threemajor voltage levels. As a result of Algeria'semphasis on development of heavy industry,the proportionof consumptionat high voltage (HV) and medium voltage (MV) is unusually high in relation to other countries at similar income levels. More than 802 of high voltage consumptionoccurs in three economicsectors (TableVIII.6, Annex II) - petroleumoperations, steel and related industries, and construction materials (mainly cement and bricks). In 1984 the six largest customersaccounted for 45% of total HV - 139 -
consumption. Medium voltage consumptionis more evenly spread over a wide range of light industriesand services (TableVIII.7, Annex II). The typical low voltage consumer is a household (using electricity for lighting, a refrigeratorand a television)or a governmentoffice; the latter accounted for about 14% of total LV consumptionin 1984 (TableVIII.9, Annex II). The number of consumers in the "ordinary LV"1 category is growing rapidly as a result of a vigorous rural electrificationprogram (ER: electrification rurale)and a programof new connectionsin existingdistribution areas (RCN: raccordementde la clientelenouvelle).
8.04 Natural Gas Consumption. SONATRACHuses gas directly for oilfield operationsand sells gas to SONELGAZand a number of other publicenterprises -- all ex-membersof the SONATRACHgroup. More than half of SONELGAZ'sgas purchases(562 in 1984, Tables VIII.15 and VIII.16,Annex II) are consumedin thermalpower plants;the balanceis sold at high pressureto large industrial consumers(27%) or sold through SONELGAZdistribution systems (17%),mainly at low pressureto households. Statisticson natural gas consumptionby economic sector are not routinely available. However a listing of SONELGAZ's teu largest(of 126) high pressurecustomers in 1984 indicatesthat the El Hadjar iron and steel complex by itself accounted for 24Z of high pressure sales; nine cementplants then accountedfor a further402. The rate of consumption of low pressure gas is about four times as high in the winter as in the summer. Space heatingand water heatingappear to account for the bulk of low pressureconsumption.
8.05 ElectricityGeneration. The SONELGAZ electricitygeneration system is dominatedby gas-firedplant -- steam turbineson the coast and combustion turbines at inland sites. While their installed capacitiesare presently about the same -- each had 44% of total capacity in 1984 (Table VIII.12, Annex II) -- the baseload steam plant provides a higher proportionof total generation -- 542 in 1984, compared with 382 for combustion turbines (TableVIII.1, Annex II). Hydro energy makes a small contributionto the main interconnectedsystem and diesel plant is used for small loads in isolated locations. A significantproportion of total national generation(10.5% in 1984) is directlygenerated and consumedby industry(Table VIII.3, Annex II). Three economic sectors account for 98% of autogeneratedenergy -- petroleum operations,steel and related mechanical and electrical industries, and chemicals,rubber and plastics. The bulk of the primaryenergy for industrial autogenerationis suppliedby natural gas, either directlyor in combination with productionof processheat. In all sectorsother than steel and related industries,annual utilizationof installedpower generationcapacity is less than 35X. While part of this capacity is not intended to function as baseload,some industrieshave been unable to maintain the full planned output of their capacity. The costs of managing, operating and maintaining autogenerationcapacity appear to have been under-estimatedat the planning stage; now that the real value of SONELGAZ tariffshas been significantly reduced by inflationsince 1982, these industrieshave little incentive to maintaintheir own plant in fully operationalcondition.
8.06 Energy Transmission and Distribution. The SONELGAZ electricity transmissionsystem consistsof (a) a 220/60 kV interconnectednetwork, with four active links (at 90 kV and 150 kV) with Tunisia and an inactive 220 kV - 140 -
link with Morocco,and (b) two isolatedgrids in the south centeredon the two main oil and gas producing areas -- Hassi Messaoud and Hassi R'Mel. Electricitytrade with Tunisia is not only confined to mutual support during capacity shortfallsI';in 1984 net electricityimports reached a level of 72 GwH (Tablel, Attachment1 in Annex II). The two main independentgrids in the south are to be connectedto the main network in 1987.
8.07 SONATRACH'ssales of natural gas are transportedfrom the main gas producing area at Hassi R'Mel along three axes towards the coast. The "center"pipeline serves only SONELGAZ,mainly for power generationand gas distribution in the Algiers region. In anticipation of its additional requirementsat Jijel and Skikda, SONELGAZ proposes to build and operate a second pipelineover the eastern route. SONELGAZ purchases gas at a large number of points along the three axes and transportsit to nearby towns for distribution. In sparsely populatedareas the SONELGAZ system is simply a series of spurs; in the north an interconnectedpipeline network coversmost of the area from the Moroccan to the Tunisian border. High and medium pressure transmissionaccounts for most of SONELGAZ's investment in the naturalgas subsector.
2. Recent DeveloDpments
8.08 Energy Pricing Reform. One of the most importantinnovations in the domestic energy sector during the course of the 1980-84 Plan was the introductionof marginal cost pricing for 60-70b of electricityand natural gas sales. The new system took effect in January 1982 for high and medium voltage consumersof electricityand high pressure consumers of natural gas. A trial applicationof the new system for LV and MP/LP was suspended;the previoustariff system remains in effect for these consumers. The structure of the new tariff system provides very strong incentives to electricity consumers to move their consumptionout of peak periods where possible. However, no inflation adjustments have been allowed since 1982.
8.09 Public EnterpriseRestructuring. During the previousPlan, the first steps were taken towards a major restructuringof public enterprisesin the energy sector. An initial organizationalreform was to be followed by financial restructuringof the enterprises concerned. While the most significantorganizational change was the "re-centering"of SONATRACH and SONELGAZ - divestiture of its peripheral activities -- was also an important step towards improved efficiency in the sector. In 1982 three new public enterprises were created -- KAHRIF, KANAGHAZ and KAHRAKIB -- to take over a number of non-core SONELGAZ activities. In 1983 the process was completed with the creation of ETTERKIB, INERGA and AMC. KAHRIF initially took responsibilityfor about 80% of constructionof new distributionsystems financed under the national electrificationprogram (PNE); other companies took over activitiessuch as civil works and manufacturingof meters. In the latterpart of the Plan, implementationof the PNE fell below target. Delays on civil works were also widely cited as the main cause of late commissioning
1/ It is also used to postpone some investments, to anticipate the introductionof additionalpower levels, to coordinatethe maintenance plans. - 141 -
of SONELGAZ'smajor projects. Implementationof the second phase of the overall reform -- financial restructuringof SONELGAZ itself - is now scheduledfor 1987. The followingelements are essentialif the reform is to have a lasting impact: (a) adoption of long term financial objectives, including self-financingof part of SONELGAZs investment program, (b) an increase in the equity base, for example by consolidating part of the existing local debt, and (c) introductionof an institutionalmechanism to review and update tariffsin line with changes in financialand economiccosts.
8.10 Foreign Exchange Bottlenecks. Problemsrelated to the managementof Algeria'sscarce foreignexchange resourceswere severe and widespreadIn the energy sector during the previous Plan. These problems are likely to be compoundedby the recent collapsein oil prices. Key investmentinputs such as cement are often in short supply, since domestic cement plants are operatingwell below capacity. Similar problems, such as lack of suitable importedequipment and spare parts, contributeto poor performanceby local contractors. The combinationof these factorsoften resultsin delays of 6-24 months on civil works for power stations,substations and transmissionlines. In instanceswhere SONELGAZ is authorized to import certain investmentgoods such as transformers,the delays in issuing the required approvals are sometimesso long that SONELGAZ resorts to buying in large lots and storing for up to three years rather than risk the consequencesof being out of stock. Foreign exchange management needs to be made more flexible and responsiveto avoid the significanteconomic costs of delayson major projects and excessstockholding of importedintermediate goods.
8.11 Response to Lower Oil Prices. The changes that took place in the internationaloil market in early 1986 have transformedthe domestic energy sector's planning environment. The most important impact is the vastly increased uncertaintyabout future load growth, for both electricityand naturalgas. The high and relativelypredictable growth rates of the past can no longer be relied upon. A major effort is now required to develop forecastingand investmentplanning systems that closely monitor changes in economic conditions and include explicit contingenciesfor uncertainty. Present arrangementsdo not provide SONELGAZ with the inputs of up-to-date economicinformation that it now needs. The secondmajor changeto the energy planningenvironment is the significantlyreduced availability of investment resources,particularly foreign exchange. Since early 1986, the Government has been emphasizingthe need to improve capacity utilizationin existing industrial plant, and to minimize the foreign exchange content of new investments. SONELGAZ'sinvestment program is sensitiveto these parameters, both in volume (pura. 8.23) and composition(para. 8.26). The main driving force to increasedomestic energy prices during the presentPlan will be the need to generate additional investment resources for electricityand gas development. While the fall in internationaloil prices has directlyreduced the value of Algeria'senergy exports, the impacton domesticenergy costs is much more limited. Electricityand gas supply are very capital-intensive (para. 8.13); supply costs will be much more sensitive to changes in the exchangerate thar,to changesin the internationalvalue of naturalgas. - 142 -
B. Energy Pricing and Demand Management
1. Economic SuDDlYCosts
8.12 The two principalresource inputs in the domesticenergy sector are natural gas and capital. The combinationof abundant gas reserves, low gas productioncosts, and depressedconditions in internationalgas marketsresults in a very low economiccost for gas (based on the FOB price of natural gas) - in the range US$0.50per million Btu (based on LNG netbacks correspondingto crudeprices of US$15-20/bbl)to US$1.50 per million Btu (assumingincremental gas exports through a new Trans Mediterraneanpipeline, with crude prices at US$25/bbl). Even if oil and gas prices returnto mid-1985 levels, the cost of gas will remain a small proportion of the marginal cost of supplying electricityand gas to final consumers- in the order of 7-231 for low anld high voltage electricityconsumers, respectively. The most importantresource in the domesticenergy sector is capital,and in particularforeign exchange. The mission used available information to derive broad estimates of the patternof marginalcosts of electricitysupply in 1986. A similar exercise is needed to determine the current relationshipbetween gas tariffsand the economiccosts of gas supply - capacity and energy - at different pressure levelsand for each categoryof consumer.
8.13 Natural gas is the marginal fuel for electricitygeneration in all three segmentsof the daily load curve -- peak, shoulderand night. Or, the basis of the mission'sbroad range of economic costs for gas (para. 8.12), marginal fuel costs at the generationlevel are in the range 0.4 - 1.3 US cents/kWh. The approximatepattern of marginalcapacity costs of generation, transmissionand distributionis as follows (Table VIII.l). The band of uncertainty surrounding the distributionestimates is very wide for two reasons: (a) the allocationof projecteddistribution investment between MV and LV is not known, and (b) the marginalcost of LV distributiondepends to a large extent on the patternof expenditureon rural electrificationbeyond the present5-year planning horizon.
Table VIII.l: MARGINALELECTRICITY CAPACITY COSTS, 1986
Generation Transmission Distribution Total - -- (US$/kW/year)---- At generation 100 At HV 108 170 277 At MV 121 183 288 592 At LV 162 245 507 914
Source:mission estimates. - 143 -
8.14 When these costs are combinedwith estimatesof peak-coincidentload factorsat the three consumervoltage levels the followingpattern of economic costs emerges (Table VIII.2). The most significantfeatures of the cost structureare:
(a) the predominanceof capitalcosts -- more than 90%;
(b) the high level of capacitycosts at all voltage levels- exacerbated at MV and LV by high distributionlosses;
(c) the very high cost of low voltage supply,partly reflectingthe high cost of completing the last part of the National Electrification Program.
Table VIII.2: ECONOMICCOSTS OF ELECTRICITYSUPPLY, 1986
EnergyCosts CapacityCosts Total Costs (naturalgas) (capital) (US cents/kWh) --- HV Consumers 0.5 - 1.4 4.3 4.8 - 5.7 MVConsumers 0.5 - 1.5 9.9 10.5 - 11.4 LV Consumers 0.6 - 1.8 18.3 18.9 - 20.1
WeightedAverage 0.5 - 1.5 10.5 11.0- 12.0 (9%) (91%) (100X)
Source: Missionestimates.
2. Coison withTariffs
8.15 The tariffspresently in effect are (a) a marginalcost tariffsystem introducedin 1982 for HV and MV consumersof electricityand HP consumersof natural gas, and (b) the old tariffsystem for LV consumersof electricityand MP/LP consumersof naturalgas. The energy componentof the new tariffappears to have been based on SONATRACH'sselling price ratherthan the economicvalue of the gas in terms of exports or depletion. There have been no increasesin electricityor gas tariffs since 1982. Projectedaverage selling prices of electricityand gas in 1986 are as follows (Table VIII.3); in the case of electricitya comparisonwith the mission'sestimates of long run marginal cost is also presented. The comparisonindicates that electricitytariffs are now in the order of 50% of economiccosts. SONELGAZprojections show that the average sellingprice to low voltage consumerswould now be 52.8 cDA/kWh if the new tariff system were reintroducedfor these consumers. This would raise the ratio of tariffsto economiccosts to 60S for LV consumers,and to 592 for the weighted average for all consumers. For gas consumers,the most obvious discrepancyin the present price structure is the lack of differentiation between the pricesof mediumand low pressuregas. - 144 -
Table VIII.3: AVERAGESELLING PRICES FOR ELECTRICITYAND NATURALGAS, 1986
Electricity --- Natural Gas Tariff (cDA/kWh) Tariff/LRMC' Tariff (cDA/thermie) HV: 16.3 731 HP: 1.07 MV: 24.5 50% MP: 2.85 LV: 39.8 452 LP: 2.87
Average: 26.4 51% 1.77
/a LRMC: long run marginal cost -- based on lower end of the range of estimates quoted in Table VIII.2, converted to cDA/kWhat the mid-1986exchange rate. Source: SONELGAZ,mission estimates.
8.16 The predominanceof peaking capacitycosts in electricitysupply is a major feature of the new electricitytariffs. Many of the tariffs offered provide very strong incentives to electricity consumers to shift their consumptionfrom peak to off-peakperiods (examplesin Table VIII.4). Despite the erosion of the real value of the tariffs by inflation,this structure continuesto provide a satisfactoryframework for major consumers to design programsof energydemand management.
Table VIII.4: ELECTRICITYRATES: EXAMPLESOF TIME-OF-DAYDIFFERENTIALS (cDA/kWh)
VoltageLevel Peak (P) Shoulder(S) Night (N) Ratio P/N
RV 36.6 7.6 3.3 11.1 MV 47.4 10.5 5.6 8.5 LV'S 58.5 15.4 8.7 6.7
Ia Applicationsuspended. Source: SONELGAZ.
8.17 An institutionalmechanism to review and update electricityand gas tariffs in line with changes in economic and financial costs is urgently required. The immediatebenefits of this mechanismwill be: (a) to control the growth in domesticenergy demand and the need to divert scarceinvestment resourcesto meet that demand; (b) to mobilizeadditional investment resources directly from consumers; and (c) to ensure more efficientuse of Algeria's - 145 -
principalprimary energy resource -- natural gas. The remainderof the new tariff system should be phased in as part of the program to restoreparity with economiccosts.
3. Demand Management
8.18 Since the introduction of the new tariffs, SONELGAZhas worked closelywith major electricityand gas consumersto assist them to plan demand managementprograms that will take maximum advantage of the cost-cutting possibilitiesoffered by the new tariffs. In general, the resultshave been disappointing.Very littleprogress has been made in the cement industry,for example. This industryaccounts for approximately63% of total high pressure gas sales and has considerablepotential to reduce its energy costs by a combinationof changes to operating procedures,and small, fast payback investments. In many instances the measures proposed by SONELGAZ were not adoptedbecause the managementwas absorbedby more pressingproblems, such as recoveringfrom very low levels of capacity utilization. One indicationof the impactof the new tariffsin the electricitysubector is the proportionof energy consumed during the peak. SONELGAZ estimates that, for industrial consumersof HV electricity,this proportionhas fallen from 18.3% to 16.3% since the new tariffswere introduced. While this improvementwill lead to valuable (and costless) savings in the SONELGAZ investment program, the consumerresponse so far is much less than might have been expected.
8.19 Industrialopportunities for autogenerationand combined heat and power generation appear to be systematicallyinvestigated, and adopted in cases where costs are shown to be lower than direct supply from SONELGAZ. However the SONELGAZ survey of HV consumers(published April 1985) indicated two areas warranting further investigation. Firstly, there was a need to ensure that industries with installed autogenerationcapacity and "free" energy (i.e. that would otherwisebe wasted) could continueto operate instead of revertingto SONELGAZ supply after technicaldiffciulties with their own plant. Secondly,there was a possibilitythat, by improvingtheir generation efficiency,some of the autogeneratorswould be able to generatea surplusfor sale to the SONELGAZsupply system. In both cases the additionalsupply would enable SONELGAZ to make small but valuable deferments in its investment program. Algerianauthorities have taken these analysesinto account and are on the way of settingan appropriateregulation to solve the relatedproblems.
8.20 The poor responseto the demandmanagement incentives embodl.ed in the tariffs appears to be part of a wider problem - that is, the lack of incentives to managers to cut costs as a way of improving industrial performance. The newly created energy conservation agency (APRU, an enterprisecontrolled by the MEICP)will have to pay specialattention to these institutionalissues if any progress is to be made towardsmore efficientuse of investment resources in the energy producing and consuming industries. A first step in this direction would be to investigatethe feasibilityof a separatefacility to financeinvestments in reducingenergy costs. - 146 -
C. Inestment
8.21 In the present economic environment there are two reasons for re-examiningSONELGAZ's investmentprogram. The first is the Government's overallfinancing constraint; here the Governmentneeds to determinewhich of the Plan's targets should be deferred. The second is the likely impact on energy demand of slower economicgrowth in energy consumingsectors; in this case SONELGAZshould prepare contingency plans for defermentof major projects. The key aspectof the presentconditions is the increaseduncertainty - of oil prices, economic growth and availabilityof investment finance. A more responsivesystem of indicative planning is needed to ensure consistency between macroeconomic objectives and sectors that produce essential intermediategoods, such as energy.
1. Rural Electrf ication Tagets
8.22 The compositionof SONELGAZinvestment expenditure (Tables VIII.17 - VIII.20,Annex II) reflectsthe Government'scommitment to achievingnationwide access to electricitybefore the end of the decade. The two electrification programs (ER and RCN) togetherabsorbed 48% of total electricityinvestment expenditurein the previous Plan. Over the course of the current Plan the rural electrification program will approach completionand the emphasis will shift more towardssatisfying the backlog of connectionrequests in existing electricitydistribution areas. The two programs will still absorb 421 of electricity investment expenditure during the current Plan. The least disruptive way of revising the SONELGAZ investment program, without conflicting with the Government's policy objectives, would be to spread over time the final phase of the rural electrification program.
2. Deferment of Major
8.23 SONELGAZexpenditure on major projects is concentrated in new electricity generation capacity; this accounts for 26.51 of SONELGAZ'splanned investment expenditure in the period 1985-89. In order to illustrate the impact of uncertainty on project timing, the mission reformulatedthe most recent electricity load forecasts (October 1985) for the remainder of the 1985-89 Plan in terms of a small number of key variables (details in Attachment 1, Annex II), under the following assumptions:
(a) The load forecasts implicitly assume a 402 average improvement in capacity utilization among SONELGAZ's present 48 major industrial consumers of HV electricity by 1989. While the potential for such an improvement exists, its implementation requires an adequate allocation of resources for rehabilitation, essential imports etc, all within a suitable framework of managerial incentives.
(b) The load forecasts require timely commissioning of 13 major HV-consuming projects scheduled for completion during 1985-89. It is not yet clear how many of these projgcts will be affected by financing constraints. - 147 -
(c) Output growth rates in the light to medium industrialsectors will almost certainlyfall below levels projectedby the Ministryof Plan in mid to late 1985. At the time of the mission (June 1986) these projectionshad not yet been revised. The revisions will have a substantialimpact on the growthof MV electricityconsumption.
(d) Implementationperformance in the rural electrificationand new connectionsprograms declined noticeably in 1984 and 1985. Even if these programs are not substantiallydeferred in response to financing constraints, the corresponding load and investment forecastswill need to be reviseddownwards.
(e) As a partialoffset to the slowdownin electricitydemand, there is a risk that an additional700-800 GWh (150 MW) of generationcould be requiredin 1989 - with no correspondingincrease in sales revenue- if no firm action is taken to reduce distributionlosses to around 10% by that time.
8.24 If actual performanceis below target in all areas other than loss reduction (i.e. (a)-(d)above), electricityconsumption in 1989 could be as much as 515 MW (2,700 GwH) lower than currently projected (3,320 MW, 14,920GwH). These estimatesexclude the additionalimpact of the necessary tariff increases;this is difficult to quantify. The impact of this load forecast on the power generation investmentprogram could be significant. Total capacity required in mid-1987, on the mission forecasts, would be delayedby 18 months to 1989. The plant that is scheduled for commissioning during the remainderof the current Plan -- 2 x 168 MW of steam turbinesin 1987, and 10 x 100 MW of combustionturbines in 1988 (TableVIII.22, Annex II) -- is too far advancedfor there to be any economicbenefit in deferringtheir completion. The gross reserve margin would therefore rise to 72b in 1988 under this load scenario (Table VIII.23, Annex II). However considerable benefits could accrue from an 18-month deferment of expenditureduring the currentPlan on plant to be commissionedafter 1989:
(a) On the basis of SONELGAZ standard unit costs and construction profiles,the missionestimates that approximately30 of the cost of Jijel (3 x 200 MW steam turbines)could be deferredfrom 1987-89into the next Plan by delayingits completionby 18 months -- this amounts to approximately1 billionDA (1986 costs).
(b) 30-502of the cost of the followingprojects could be deferredbeyond the currentPlan - extensionsplanned for Marsat (2 x 168 MW steam turbines)and Skikda (2 x 300 MW), and a new 2 x 300 MW steam turbine stationat Alger Ouest - savings in the order of 1 billion DA are possiblefrom these three projectsduring the presentPlan.
3. Other Investment Savings
8.25 Major power generation projects and the rural electrificationprogram are the two largest identifiable categoriesof SONELGAZinvestment expenditure. The other major categories (Tables VIII.19 and VIII.20, Annex II) should also be reviewed in detail to identify potential savings. Some deferment of investment in new transmission lines and substations (10-152 of annual - 148 -
investmentby SONELGAZ)will be possible,particularly where these are directly linked to new generating capacity. Forecasts of natural gas demand and investment(17-20% of annualinvestment) should be reviewedin relationto the present prospects for (a) increasing industrial capacity utilization, (b) implementationof major projects, (c) output growth in medium and light industries,and (d) additionallow pressure connections. "Other" investment also warrantsattention, particularly since it is projectedto increase from 82 to llb of total SONELGAZannual investmentexpenditure over the course of the presentPlan.
4. Local versus Foreig Costs
8.26 SONELGAZis widely regardedin Algeriaas a pioneer in the field of import substitution. Where a local supplier does not exist, SONELGAZ systematically investigates the feasibility of establishing one. For materials and small equipment items, the cost from the local supplier is frequentlymuch higher than the cost of the equivalent import. Additional costs are also incurred as a result of problemswith quality and delivery times. The Government and SONELGAZ should take steps to ensure that the presentdrive to minimize the foreignexchange contert of new investmentsdoes not lead to similar cost and quality problems with major projects in the energy sector.
8.27 The investmentitem with the greatestpotential for incurringexcess costs is electricity generation plant. Recent events in international equipmentmarkets have lowered the cost of combined cycle plant relativeto the conventionalsteam plant that dominates SONELGAZ'sinvestment plan over the next ten years. However,under present arrangementsthe foreignexchange contentof a combinedcycle plant would be significantlyhigher than that of conventionalsteam. The trade-offsbetween local and foreigncosts need to be fully examinedduring the currentPlan to determinethe conditionsunder which combined cycle plant could economicallydisplace some of the conventional steam plant scheduledfor commissioningbeyond 1989. This requiresa decision on the premium that should be put on foreignexchange costs for the purposes of project evaluation,and detailed investigationof Algeria's ability to manufacturecomponents of the combinedcycle system.
5. ProjectFinancing
8.28 Despite a steadily growing volume of electricityand gas sales, SONELGAZ'sfinancial situation deteriorated significantly during the previous Plan. In the absence of any tariff increase since 1982 average net cash generationbecame negative. As governmentequity contributionswere limited to covering the cost of the rural electrificationprogram, SONELGAZ was obliged to financea large part of its capital investmentsthrough new loans provided by BAD (AlgerianDevelopment Bank). The missioniunderstands that SONELGAZhas accumulatedsubstantial arrears on its debt to the BAD.
8.29 More recently,in responseto the economicdifficulties triggered by the collapse in oil prices, the Governmenthas started to develop a policy frameworkin which publicenterprises such as SONELGAZwould have much greater financialautonomy. The policy frameworkwould include the setting of long term financial objectives, including self-financing of part of the - 149 -
enterprise's investment program. This may require tariff increases for electricityand natural gas over and above those required to restore parity with economic costs (para. 8.15). In parallelwith the move towardsgreater financialautonomy for publicenterprises, the Governmentis in the process of changing the BAD into an autonomous development institutionwith more stringent lending criteria and terms. This places additional pressure on SONELGAZ to achieve a financial structure that will either meet the new requirementsof the BAD or make the enterprise"bankable" enough to diversify into more commercialtypes of financing.
S9448 - 150 -
CHAPTER IX - THE TRANSPORT SECTOR
A. An Overview
9.01 Since the late 1970s, considerableattention has been given to the improvementof transportinfrastructure and transportservices in Algeria in order to meet the growing needs for balanced regionaldevelopment and rapid urbanization.However, despite a major increasein investmentsin the sector in recent years, particularlyfor road infrastructure,the rapid growth in trafficover the past ten years requiresthat continuedattention be given to improvementsin the transportsystem. With the dominanceof import traffic, the main transportflows are organizedaround the country'smain ports with little long distance movements within the country. However, an increasing emphasis on the developmentof local production and import substitution, particularlyof basic commodities,will cause a shift in the pattern of transportflows and the sector is expectedto play an increasinglyimportant role in the future. Following the recerF decline in oil revenues and an expectedfall in GDP growth from 62 to less than 1 per year, the focus of the Second Five Year Development Plan (1985-89) is now clearly on raising productivity in key sectors and enhancing economic efficiency. For the transportsector, this policyhas importantimplications. It is expected that the major thrust in the sector will be toward increasingthe efficiencyof transport operations, thereby reducing the need for major new capacity investments. At the same times increasedattention is expectedto be given to rehabilitationof existing infrastructureand to improving the financial viabilityof transportenterprises.
9.02 The transportnetwork is extensiveand includes43,000 km of primary (national)and secondary (regional)roads, of which about 80% are paved, 33,000km of local (community)roads, 4,000 km of railways,5,000 km of oil and gas pipelines,7 main ports,and an extensivedomestic air services. Road transportcarries by far the largest share of total traffic. Over 20 billion ton-km per year or about 90% of total freight traffic and over 90% of total passenger traffic are carried by road transport. While road traffic has increasedat about 10% per year over the past decade, the growth of rail traffic has lagged behind mainly due to inadequate attention to track rehabilitationin recentyears. Port traffic consistsmainly of hydrocarbon exports amounting to some 57 million tons in 1985 as well as major import volumes of general cargo and bulk traffic (mainly cereals and cement) estimated in 1985 at 10 million tons and 6 million tons, respectively. Exportsother than hydrocarbons,amounted to only about 2 milliontons in 1985.
B. Main Characteristics of the Sector 1. Road Ibfrastructure
9.03 Algeria is served by a main road networkcomprising about 25,000 km of primaryroads (RN routes nationales)and 18,000km of secondaryroads (CW, chemins de Wilaya). The remainder of the classifiednetwork consists of tertiaryroads (CC, cheminscommunaux) serving mainly rural areas. The main road system (RN and CW) is administereddirectly by the Ministry of Public - 151 -
Works (MPW) and its regional services (Directionsdes Infrastructuresde Base-DIBs),while local roads depend on the Ministry of Interior and local authorities. The road network is far from uniformlydistributed but follows the demographicdistribution in Algeria which in itselfhas been shapedby the topographyand climate of the country. The network is particularlywell developed in the northern coastal areas which account for the major concentrationsof populationand economicactivity. In the Hauts Plateauxand deeper south, the road network is limitedmainly to severalkey nationalroads linking the few centers of population. Traffic on national roads averages about 1,900vpd and pavementwidths are generallybetween 6 and 7 meters.
9.04 Since 1980 there have been great efforts to modernize,rehabilitate and maintainthe existingroad network. Nonetheless,rehabilitation (including pavement strengthening)of the network needs to be pursued to keep pace with the effects of growing and heavier traffic volumes on lightly surfaced pavements, also further improvementsare required in road maintenance operations. At the same time, Algeria is starting to face severe capacity constraintson sectionsof the main road system,particularly in the vicinity of the large urban centers like Algiers. This latter concern has been reflected in a planning study of a future east-west expressway system. Implementationof a first stage of this programhas already started with the constructionof key accessroutes in the GreaterAlgiers area. 2. Road T
9.05 The actual vehicle fleet which is operatingin Algeria is not known accurately as vehicle registration data are not adjusted for vehicle scrapping. The last accurate estimate was in 1976, when all registrations were renewed. The total fleet at that time numbered 480,000 vehicles (includingmotor bikes, farm tractors, and trailers),of which 602 were private cars, 20% light good vehicles and 10% trucks. Since then vehicle ownership increased only slowly due to restrictionson imports by the Governmentalthough recent measures were introducedto facilitateimports of cars by migrantworkers returning to Algeria.
9.06 The total truck fleet (over 5 tons of loadingcapacity) is estimated at about 40,000vehicles with a total capacityof about 640,000 tons. About 801 of this total vehicle fleet capacity is in the hands of state-owned enterprisesoperating on own-account. These fleets developed rapidly during the 1970s to serve the needs of large public enterprises. This raises the issue that own-accountfleets may be operated inefficientlymainly because transportis only part of a much largeroperation and the transportcosts are not identifiedseparately. The Governmentis consideringrestricting further growth of own-account trucking and having the fleets reorganized into well-definedtrucking subsidiaries which will serve their parent enterprises as well as providing for-hire public transport. Public freight transport servicesare currentlyprovided by one nationalroad transportcompany (SNTR) and by a number of regionalcompanies which account respectivelyfor about 71 and 31 of total truckingcapacity. SNTR's role is mainly in long distance transportand as a result its fleet of about 2,350 tractor-trailerunits is operated more efficiently. The remainderof the trucking fleet comprises private own-accountfleet with about 102 of the total capacity. Vehicles of - 152 -
less than 5 tons of loading capacity are of free acquisitionand operation. Total capacityamounts only to 22,000tons, and is privatelyoperated for hire or own account. Road passengertransport services are providednationwide by 5 new branches of the ex-SNTV which operate a fleet of 2,800 buses on inter-cityroutes. SNTV's fleet accountsfor about one-thirdof the bus fleet, the other two-thirdsbeing operatedby local urban transportcompanies. The average road trafficgrowth was about 13S per year from 1972 to 1976 and 8b per year from 1976 to 1985. However,with the expected stagnationin the economy over the next few years and the possibility of limiting fuel consumptionthrough price increases, the rate of traffic growth is likely to fall substantiallyin the immediatefuture.
3. Railways
9.07 The 4,000 km railwaynetwork is operatedby the Societe Nationaledes TransportsFerroviaires (SNTF), a semi-autonomouspublic agency under the Ministryof Transport. The railwayis handicappedby an old network with poor design characteristics,the existence of two gauges, and the lack of long-distancetraffic. Phosphateand iron ore trafficin the eastern part of the country constitutesthe only importantfreight traffic,while passenger traffic is concentratedmainly around the main urban areas, particularly Algiers. In 1985, rail traffic amounted to 3.1 billion ton-km of freight traffic with an average haul of 240 km. Of the 12.6 million tons of originatingtraffic, 6 million tons consistedof minerals,phosphates and coal traffic. Passengertraffic in 1985 amountedto 2 billionpassenger-km with an average haul of only 42 km. However, just over half of the 47 million passengerscarried was suburban traffic. Although rail traffic has been essentiallystagnant over the past decade, there were increasesof 161 for freightand 9X for passengersin 1985. This recent growth is accountedfor by a major increasein domesticcereals movements.
9.08 The financialsituation of SNTF has graduallydeteriorated over the years becauseof a lag in adjustingrail tariffsand a general neglect of the rail infrastructurewhich has contributedto increasedcosts. Freighttariffs have not been adjustedsince 1979 and passengertariffs since 1982. However, the Governmenthas grantedrecently (August1986) a generalraise for freight tariffsof 40%. This raise amountedto 50b for phosphateand 301 for iron ore. These adjustmentswould go a long way towardsreducing the operatingdeficit which was around DA 500 million (US$100million) in 1984. Despite its financial difficulties,in recent years the railway has emphasized the constructionof new lines rather than giving priority to urgently needed rehabilitationof the existing network and improvements in operating efficiency.
4. Ports and Maritime Transort
9.09 The Ministryof Transport(MT) is responsiblefor overallcoordination in the developmentof ports and maritimetransport. Port operationsare now handled by semi-autonomousport authoritieswhich were created in 1984 and which operate on commercialgrounds with adequate cost-recovery. There are six major ports - Algiers, Uanaba,Skikda, Bejaia, Oran and Mostaganem -- which in 1985 handledabout 801 of total port traffic,excluding oil products, equivalentto about 17 million tons of dry bulk cargo and general cargo - 153 -
traffic. In addition, the port system handled 54 million tons of crude oil and refinedproducts for export mainly from specializedfacilities at Arzew, Bejaia and Skikda. The port of Algiershandles some 307 of the total traffic, excludingoil products,while the easternports of Annalka,Skikda and Bejaia togetherhandle 50% of the traffic and the western pert of Oran about 13%. With a rapid increasein port trafficof about 82 per y2ar from 1975 to 1984, the ports have experienced considerablecongestion, particularly in the easternpart of the country. This has led to the developmentof new facilities including extensions at port of Bejaia, financed in part by the European InvestmentBank, and a start on a largerscheme for a new port at Djen Djen. At the same time, considerableefforts have been made to improveproductivity of the existing facilities,particularly by eliminatingdirect delivery and making greateruse of storagefacilities. Althoughthere will ultimatelybe a need for additionalport capacity in the eastern part of the country, the current stagnation in import traffic, particularlycement and construction materials, is likely to delay this need until the early 1990s. In the meantime,the main priorityneeeds to be given to continuedmodernization of the existing ports, including the development of container facilities particularlyat Algiers. However, the planning of port developmentis made difficultby the divisionof responsibilitybetween MT, which is responsible for port operations and MPW, which is responsiblefoz constructionand maintenance of port infrastructures. At the present time, the port modernizationprogram for the port of Algiers is being delayed because a decision has yet to be taken on the location,size and phasing of berth extensionsrelated to the developmentof containertraffic.
9.10 Maritime transport is handled mainly by the Compagnie Nationale Algeriennede Navigation (CNAN), a semi-autonomousenterprise, which owns 50 vessels with an average age of about 10 years and a totel capacity of 400,000dwt. A second enterprise, HYPROC, is responsible primarily for movementsof oil and gas productsand operatesa total of 13 tankers,two of which are currentlyin storage. Both enterpriseshave undergone considerable expansionin the last decade on the grounds of potentialsavings in foreign exchange. With the expected stagnation in foreign trade, particularlyoil traffic, both enterprisesshould now enter a period of consolidatingand optimizingexisting operations.
5. Civil Aviation
9.11 Civil aviation plays an importantrole in the Algerian transport systembecause of the large distancesinvolved and the dispersionof population in the southernpart of the country. The system comprisessome 30 airfields open to traffic of which -- Algiers,Constantine, Annaba and 0rPrn-- provide the main internationalservices (972). Considerableimprovements have been made in recent years to airport infrastructurewhich is the responsibilityof the AirportDirectorate of MPW. Major ongoing works include improvementsto the AlgiersAirport, namely the extensionof one of the two runways.
9.12 Air Algerie, the national airline, operates a modern jet fleet comprisingtwo Airbuses, 11 Boeing 727-200, 15 Boeing 737-200, 8 turboprop Fokker 27 and 4 freight aircraft. The airline, which employs 7,500 people. handled 4.1 million passengersin 1985, including 2.3 million international - 154 -
passengers,with load factors averagingabout 66%. Althoughair traffichas been increasingduring the past decade at about lOS per year, traffic is expected to stagnateduring the next few years, particularlyas a result of recent restrictionson internationaltravel for Algerian residents. Aircraft purchases in- the next few years would relate mainly to the replacementof existing capacity, which should be limited because the fleet is still relativelyyoung (less than 10 years).
C. ReceentTrends
9.13 Utntilthe late 1970s, very littlewas done to improve the transport system. However, rapidly increasingtraffic volumesduring the 1970s led to major investmentin the sector during the 1980-84 DevelopmentPlan. Total investmentsin the transport sector during this period amounted to about DA 30 billion (US$6.5billion) compared with a plannedamount of DA 39 billion (US$8.5 billion) (TableIXMl). However, during implementationof the plan, there was a major shift in emphasis with road infrastructureaccounting for over 50% of the investments,almost twice the level initiallyplanned. In contrast,investment in railwayswere only one-thirdof the planned level with much of the investmentgoing into the constructionof new lines for which the economic Justificationremains to be demonstrated.This is indicativeof the low absorptive capacity of the transport subsectors other than road infrastructure.
9.14 Despiteincreased efforts, there has been a lag in meeting the needs for rehabilitationand modernizationof the existing infrastructure.As a result,there is still a backlogof rehabilitationon the road network, a need for modernizationand increasedproductivity in the ports, and a critical requirementfor track overhaul on the main railway network. Added to this picture are the transportneeds generatedby the regionaldevelopment efforts, particularlyon the Hauts Plateaux,and the integrationof the deeper, desert southernareas with the rest of the economy.
9.15 Despite increasingresource constraints,the Governmentcontinues to give high priorityto the developmentof the transportsector. In effect, the current decline in oil revenue is bringing a greater sense of urgency in dealing with many of the problemsin the sector. Among the issues which the Governmentmust addressare the need to (i) improveoperational efficiency and reduceoperating costs in the road transportindustry, in the ports and in the railways (freight car turnaround time); (ii) rationalize the transport investmentprogram by concentratingon high priorityprograms and deferring some major Investmentsin new infrastructure;(iii) establisha sound pricing and fiscalpolicy includingcost based tariffsfor railwaysand adjustmentsto road user taxation so that trucks bear their share of road infrastructure costs; (iv) strengtbenplanning, project preparationand implementationat both the central and local level; and (v) improve operationalefficiency (reducecosts) in the maintenanceand improvementof the road network. - 155 -
Table IX.1: INVESTMENTSUNDER 1980-84PLAN
Total TotalPlanned Actual/Planned 1980-84 (X) 1980-84 (2) (%) ------(DA million- currentprices) …
Roads
NationalRoads 7,993 27 Wilaya Roads 3,514 12 8,300 21 139 LocalRoads 4,816 16 2,600 7 185 Sub-total 16,233 55 10,900 28 150
Road Transport 2,000 /* 6 3,000 8 67
Rail Transport 4,919 17 15,400 39 32
Ports
Infrastructure 2,080 7 Equipment 200 "A 1 Sub-total 2,280 8 2,200 6 104
Civil Aviation
Airports 1,561 5 Air Alg6rie 500 2 Sub-total 2,061 7 3,500 9 59
MaritimeTransport 2,165 " 7 4,000 10 54
T 0 T A L 76
/a Estimates.
9.16 The overall objectives for the sector are mainly institutional, particularlythe need to upgrade efficiency and to improve planning and managementof investments.The Bank has been able to supportthese objectives in highway sector developmentthrough highway projects which have provided broad assistancein planning and project preparationas well as in training for road riaintenanceoperations. The Governmentis also strivingto increase the cost-effectivenessof road constructionand maintenanceoperations by localcontractors who face shortagesof managementstaff and whose performance is sub-optimal. At the same time, the Governmentis now increasinglyaware of the need to improve the financialviability of transportenterprises. Port - 156 -
tariffs already cover operating costs and approval is expected shortly on substantialincreases in rail tariffswhich would take the railwaya long way towards full cost recovery. The Governmentis also committed to gradually bringing fuel prices to world market levels thereby increasing the availabilityof refinedoil productsfor export.
D. Investment Program 1985-89
1. General
9.17 Although initial proposals for investmentin the transport sector during the 1985-89Development Plan amountedto DA 54 billion(US$11 billion), excludingthe Algiersmetro, actual levelsare likelyto fall far short due to increasingresource constraints following the fall in oil prices. The mission has identifieda five-yearcore program for the transportsector, which would amount to about DA 42 billion (US$8.9billion) (TableIX.2). Road infrastructurewould accountfor just over 40% of the total and railwaysabout 25X. The major emphasisof this core program would be on rehabilitationof existinginfrastructure, particularly for the railways,and on a modernization program for the existingports. The main cuts in the programwould be in new rail infrastructure,in the constructionof local roads and in renewal of trucking capacity. They would also include a revised time schedulefor the realizationof the Algiersmetro. The constructionof new railway lines would be limited to ongoing projects,but it is expectedthat these projectswould be implementedat a slower rate than originally planned. Similarly, the constructionschedule for the new Djen Djen port in the easternpart of the country,which began in 1985, is likely to be revisedin line with lower port trafficprospects over the next five years.
2. Road Infrastructure
9.18 Investmentsin roads during 1985-89are expectedto reach a total of about DA 17 billion (US$3.tbillion) of which about 602 would be allocatedto nationalroads, 202 to regionalroads and 207 to local roads. The total core program for the road subsector as a whole would remain in line with the initial plan proposals,but the highest priority would be given to the national and regionalroad network where investmentlevels would be expected to exceed the initial plan allocations. However,substantial cuts should be made in local road programswhere there is currentlya need to improve the selectionand planningof such roadsand to rationalizedesign standards. The estimatedcosts to completeongoing protects on national and regional roads, as of the end of 1985, were estimatedat about DA 5 billion(US$1.1 billion). Based on total investmentsof about DA 9 billion (US$1.9billion) on national and regional roads during the remaining four-year period, 1986-89, the remainderof the plan would only allow a limitedvolume of new investmentsin roads. The main emphasisof the ongoingand plannedinvestments in roads is to step-upthe rate of rehabilitationof the main road network to about 800 km per year, provide for completionof several ongoingmodernization projects, and to cont.iue with high priorityinvestments in severalexpressway sections in the Algiersarea. - 157 -
Table rX.2:
REVIEWOF FIVE YEAR INVESTMENTPLAN 1985-89
PUBLIC INVESTMENTSIN THE TRANSPORTSECTOR PROPOSEDCORE tNVESTMENT PROGRAN
(In millionsof Algerian dinars)
Total Original * 9I8 l..IJ 1037 19U 1030 a- 1 I .2.1M Actual Forecast /A
A. Infrastructures Roads /k National 2.800 2.200 2,000 1.S00 1,500 10,000 8,000 C. Wilayas 900 600 600 600 600 3.300 2,000 Local 1.L,A 1.080QZ,.2 ...AE 40f --AU 4AJ08 5,200 3.800 3,200 2,600 2,500 17.300 17,300 Parts 680 600 730 740 660 3,410 4.200 .Airports __450 __1 350 __4QQAM0 I.8= 2108 Subtotal(MPW.) 6,330 4.780 4.280 3.740 3,460 28,590 23,600
SNTF Infra (metro excl.) LJOU L.S 0 1.82Q 1'M LEE 24401 lis.1
Total Infrastructure L_M Z.3gl iJIB L.3 A DE 3J_19S 2LZM
B. Transoort Eguia. Installations
SNTR 360 350 320 270 300 1,600 2,360 SNTV in1 35Qi9 93Q m5 .L9 LIE
SS0 700 750 820 800 3,620 S,260 SNTF 340 720 200 200 140 1,600 3,100
LandTransport 890 1,420 950 1,0? 940 5,220 8,360
Ports/Maritime Safety 110 150 210 230 180 880 1.510 CNAN/HYPROC 50 60 150 190 470 920 2.260 SONATMAG _0 _$Q Aft _0 _5Q -- & ii
MartimisTranspgrt 220 260 400 470 700 2.050 4,020
Air TransRgrft 170 280 480 790 S90 2,310 2,870
Total Equipment L2RM J.O 1JM &am LiM LIE .L5a2m
C. ITOTL (excludingmetro) A9= &LZE z.Jaa LAM ZLJ ALMZB 5&MIJ
/A Annual breakdown of expendituresfor i987-89 only indicative. Based on original D06globalisationdu Plan" /k Excluded road maintenance expendituresabout DA 700 millions/year
6136B/pi7 (7,12) - 158 -
3. Roadkanort
9.19 The effort in road transportwould decrease substantiallyover the levels of investmentachieved during 1980-84,namely to about DA 3.6 billion (US$750million). The main emphasiswould be on improvedproductivity in road transport, particularlythe more efficient use of the large own-account fleets. Special attention will need to be given to the development of containerhandling capabilities and supportingfreight forwarding services.
4. Railways
9.20 The core programproposed for railway investmentsfocusses mainly on the establishmentof a regularprogram of trackrehabilitation for the existing network. Total rehabilitationover the plan period should reach some 700 to 800 km. Improvementswould also be made to signalling,telecommunications and to existing tunnelsand structures. The constructionof new lines would be limited to ongoing projects,mainly the Beni Saf spur line and the Ramdam Jamel-Jijelline connectingthe rail network to the plannedport of Djen Djen. Total infrastructureinvestments on railways are expected to reach some DA 9.4 billion (US$2billion) compared with an initial planned amount of DA 15 billion (US$3.2billion). SNTF'S existinglocomotive fleet and rolling stock are in relativelygood condition and further procurementof equipment is likely to be relativelymodest at around DA 1.6 billion (US$340million), comparedwith an initialplanned imount of DA 3.1 billion(US$660 million).
5. Ports
9.21 Investmentsin port infrastructureare expected to increaseshavply during 1985-89to about DA 3.4 billion (US$720million). This is due mainly to the completionof port extensionsin Bejaia and ongoingconstruction work at the new port of Djen Djen. However, it is likely that implementationof the Djen Djen projectwill be slowed down somewhatbecause of expectedlower traffic growth during the next few years. Investmentson Djen Djen are expected to account for about one-thirdof total high priority program for port infrastructureand the completionof works at Bejaia about 152. Other major works include the completionof repairs to the Bethiouabreakwater in the westernpart of the country. The port infrastructureprogram will also include provisionfor modernizationof existingberths in Algiers and Annaba and berth extensionfor containerfacilities in Algiers. Emphasiswill also be given to the renewal and modernizationof existingport equipmentand to the gradual introduction of specialized container handling facilities beginningwith port of Algiers.
6. A
9.22 Investmentson airport infrastructurewill remain at about the same level as during the previous plan, namely at about DA 1.9 billion (US$400million). The programwill be concernedmainly with the completionof ongoing improvementsat the Algiers Airport which will account for about one-thirdof total investments. A further third of the programwill involve improvementsto airports in the southern part of the country with the remainderbeing allocatedto improvedequipment and navigationfacilities. - 159 -
7. Airand Maritime Transport
9.23 With the expectedslowdown in foreigntrade, the developmentof air and sea transportshould enter a phaseof consolidationfollowing a periodof rapidexpansion in recentyeats. The shareof investmentdevoted to thesetwo subsectorswould be less tharnlO% of the totalcore investmentprogram-about DA 2.3 billion (US$490million) for air transport and DA I billion (US$210million) for sea transport.Priority would be given mainly to the renewalof existingcapacity rather than to expansion.
58971 - 160 -
CHAPTER X - EDUCATIONAND TRAINING
A. The Socio-Economie Context 1. Introduction
10.01 The dynamics of Algerian policies in the education and training sector derive from the response of the Algerian authoritiesto meet the critical need for skills which followed upon the exodus of the European colonists on Independence. The response was immediate and has remained positiveas evidencedin the very generousallocation of funds made available annually for buildingup and operatingthe educationand trainingresources of the countryamounting to 252 to 30X of the total nationalbudget annuallyover the last ten years and over, 7% of GDP.
10.02 The sustaineddevelopment of the sector is not ascribedsolely to the comparativeready availabilityof funds. The Algerian effort has been the result of a compellingstrategy over 20 years based on the convictionthat the political,social, cultural and economicpolicies and the nationalaspirations were approachableonly if the educationand training system (ETS) was made effectivein terms of adequacyin the number of graduatesand range of skills at all levels and the relevance of its orientationsand objectives. The keynote to the developmentstrategy actively pursued has been the insistence on the linkingof economicgrowth policies with socialadvancement objectives.
10.03 Social justiceconvictions called for redressingof inequitiesand in the first place urgent attentionto a sound basic educationfor all, boys and girls, whether living in rural or urban areas; this also implied support servicesto permit childrenfrom rural areas to attend second-and third-level institutions. Economic developmentplans demandedequally urgent action to raise the skill and education attainment levels of those entering the job market and of the work force in general; the need was for a qualifiedwork force both for the traditionaljob market and for acceleratingnew areas of productiveeconomic activity. The governmentpolicy of decentralizationof authorityand execution of developmentprograms considerablyincreased the demand for skills at the wilayate or regional and local levels, including administrative,planning and managementcapabilities.
10.04 The policy of gradual Algerianizationand Arabizationfor reasons of nationalidentity, dignity, unity and preservationof the nationalculture and heritage depended on parallel action in the ETS; it entailed review of objectives, curriculum content and materials, teacher preparation and re-orientation,and the gradual replacementof the French language as the medium of instructionby Arabic - gradualbecause such a processcould not be hurried, particularlyin view of the small numbers of teachers who could functionadequately in Arabic.
10.05 The economic,political, cultural, and social imperativesdiscussed above have led to remarkable progress in expansion, reorganization, restructuringand reorientationof the system. The ETS, therefore,has undergoneand is undergoingconstant review of objectivesand programsrelated - 161 -
to overallnational policies. The negligibleskill trainingfacilities of 1962 have been revolutionizedby the initiativestaken by the productiveministries anxious to train for their own manpower requirementssince the developing formaleducation system simply could not cope. Programs by these ministries initiatedwith the industriesthemselves were begun mostly at a low level and have graduallybeen upgradedto post-secondaryincluding university level.
10.06 These major and radical gains, however, have not been made without some sacrifice: the degree of coordinationamong ministries involved in training programs could be appreciablyimproved, attention to all factors affecting capital and recurrent costs has been sometimesoverlooked, while pre-requisiteplanning has on occasionbeen rushed.
2. The Demographic Factor
10.07 From the outset, the Government, in considering allocations to social services,had to cater to a population of 12.5 million in 1966 and an estimated 210.6 million in 1984, growing at a rate of over 3% per annum. The greatest problem, however, was the youthful structure of the population (45% under 15 years of age in 1985) with its serious need for educationand other social services. The more rapid urban populationgrowth at 6% has caused serious overcrowdingof schools and oversizedclasses in urban schools. In some of the rural areas, the numerous small and scattered communities cannot economicallybe providedwith effectiveschooling of all types at post-primary level and at the primary levels there remain traditional problems of non-enrollmentof girls. On the other hand, there does occur the phenomenon of unutilizedclassroom space in new socialistvillages to which groups of populationhave been reluctantto relocate.
3. The Economic and Manpower Factors
10.08 The 1985-89iSecond Five-Year Plan reiteratesthe long-termobjectives enunciated in the 1976 National Charter. The medium-termobjectives are: (a) to achieve a balanced economic growth by increased support of non-hydrocarbonprograms; (b) to restore sectoralimbalances through increased developmentof agriculturewater resources and consumer goods manufacturing industries;(c) to develop furthereconomic and social afrastructures;hence, the share of the investmentprogram of these sectors rises to 68.41 of the total planned investmentas comparedwith 60.71 in the 1980-84Plan and 46.91 in the 1974-77 Plan; and (d) improve enterprise productivityand reduce operatingcosts.
10.09 In all instances, the programs set out in the various Development Plans have been constrainedby the unavailabilityof adequate numbers of educated/skilledworkers to ensure efficient and timely execution of the programs. The current Plan, the Second Five-YearPlan, 1985-89 sets out the additionalskill needs in the Plan period at each level for each of the major sectors and compares these with the estimated outputs of the ETS. The deficits remain high despite the very substantialexpansion and broadening skill range of the system over the last Plan period and the further strengtheningin the new Plan period. Consequently,the human resource constraintremains a key element in the effort to realize the Plan and the country'saspirations. - 162 -
10.10 The Second Five-Year Plan 1985-89 sets out the manpower needs by level of educationand skill as shown in Table X.l. Table X.1 in Annex II provides a breakdown of these manpower needs together with the estimated output.
Table X.1: ADDITIONALQUALIFIED MANPOWER NEEDS AND TOTAL QUALIFIEDWORK FORCE, 1985-89
Sectors Level 6 Level 5 Level 4 Level 3/2 Total Total Force /a /b Needs 12/31/84 12/31/89
(a) 5,500 5,500 12,000 68,000 91,000 93,100 184,100
(b) 11,000 42,000 13,700 56,300 123,000 3759000 498,000
(c) 15,500 38,000 38,500 116,000 20,800 226,700 434,700
(d) 18,000 33,700 47,300 117,000 216,000 281,500 497,500
(e) 33,800 55,000 52,700 68,500 210,000 604,500 814,500
Total 83,800 174,200 164,200 425,800 848,000 1,580,800 2,428,800
/a Sectors include: Agriculture (a), Industry (b), Construction (c), Services(d) and Administration(e) /b Levels include: Professionals(University degree or equivalent)- 6 Seniortechnicians (Post secondaryinstitutions) - 5 Junior technicians(Graduates of secondarylevel) - 4 Skilledworkers (Graduates of vocationaltraining centers - 3 Semi-skilledworkers (Schoolleavers with 1 or 2 years of post primarytraining - 2.
10.11 There is a good deal of evidence of the continued need for considerablenumbers of skilled workers in all sectors, except that certain professions- doctors,health workers, fundamental school teachers- are near to surfeit. The point has been reached where further expansionin training capacityneeds to be controlledto ensure that specificspecializations still in comparativeshort supply are assigned priority. On the other hand, the data on manpowerrequirements within the shorter-termperiod of 1985-89appears over-estimatedat the Level 5 (higher technicians)by comparisonwith skill structuresin countriesat comparablelevels of income and under-estimatedat Level 4 (junior technicians)or equivalent. It is difficultto accept that the demandfor additionalsenior technicians will be greater than that for new juniortechnicians or trainedartisans and secondaryschool leavers. - 163 -
10.12 The requirementsfor 24,200 new secondaryschool teachers over the five years of the Plan, already included in Table X.1, could well be an under-estimationin that insufficientallowance seems to have been made for retirements,transfers, deaths and replacementof foreign teachers. On the other hand, there appears to be little possibilitythat the EcolesNormales Superieures(ENS) will produceover 5,000 trained teachersper annum as from 1985. New ENS have only recently been establishedand are not likely to producemore than 2,000 graduatesper annum before 1988. Deficitswill need to be made up from graduatesof the regular schoolsof the universitiesand foreign teachers, particularlyin the areas of technologicaland science subjects. In addition, too, there remains the issue of preparing7,000 and more teachers for the universities,irrespective of wastage and foreign teacherreplacement. This group seems to have been overlookedin the Plan.
10.13 In the Plan projections,the major overall deficit is not in the professionalbut in the sub-professionalgrades, although there is a manifest criticalshortage of engineers. In such a case, the Plan shouldhave assigned greaterpriority to expandingenrollments in techniciancourses and limiting accordinglyprofessional degree programs.
10.14 There is no specific mention of managers in the professional categoriesdespite the repeatedreference in all productiveministries to the importance of building up a solid management capacity. The management requirementis obscuredunder the technicaland professionalstaff headings. The Plan 1985-89 shows a demand for large numbers of new staff under the categoryof Administration- over 88,000 with post-secondaryqualifications and almost 53,000 with Level 4 attainment. Apart from the centralgovernment requirementsand those of the societes nationales, the success of the decentralizationpolicies is at stake. The ETS cannot yet furnish the cadres and qualifiedpersonnel in the numbers required. This deficiencyaccounts for the continuinginvestment backlog and weaknessin supervision,particularly in the constructionprograms of the developmentplans. Successfulexecution of the decentralizationpolicy entails still further expansion of programs tailored to produce well-trained officials - administrators,plarners, accountants,technicians, and supervisorsfor all the developmentsectors within the wilayate and dairate jurisdiction. The Institut National d'Administration(INA) and the Instituteof Planninghave performedvaluable services in training prospectiveregional staff, but the supply of trained staff still falls short of requirements. Further considerationshould be given to in-servicetraining programs.
B. The Educational Policy Framework
10.15 In the Second Five-Year Development Plan, 1985-89, the national education and training resources are once again regarded as the basic instrument to assure effective Algerianizationof a modern industrialized economy and to effect desired social and political changes. The ETS is intended to provide the range of skills requiredto realize the economicand employmentobjectives but it should also help create and serve a unified society imbued with a value system identified with the Arab culture and consistent with Algerian socialist aims. Given this policy, access to - 164 -
educationshould be equal to all segmentsof the populationin all the regions; educationshould aim at assuring that all participateing contributeto, and benefitfrom the developmentprocess.
10.16 These educationalobjectives are those that informed the 15-year perspectiveplanning which providedthe long-termframework and guidelinesfor the short-term"First Four-YearPlan, 1974-77". The basic objectiveof this Plan was reform,relevance, reorganization, productivity. It proposedreforms which were to be introducedat appropriatetimes as pre-requisitesfor each reformmeasure were establishedand implemented.
10.17 The rapid developmentsin the ETS which were reinforcedor initiated after 1975 and which remain relevantto and are re-statedin the Plan 1985-89 relatemost especiallyto: (a) reorganizationand restructuringof the formal system; (b) consequentlyreform of curriculaand curricularorientations: and (c) review of teachereducation objectives and programsto be consistentwith the restructuringand curriculumreforms. These are discussedbelow.
1. ReorgZanization and restructuring
10.18 The structure of the Education and training system has undergone major changesover the past few years. The changes were conceivedfor full implementationfrom Grade 1 to Grade 12 over a 15-year period. Chart 1 in Annex II shows the reformed structure of the ETS side by side with the traditionalstructure which has now been phased out. The most basic change was the establishment of a nine-year fundamental or basic education (Grades1-9), obligatoryfor all school age children(6 through15 years old), to replacethe traditionalsix-grade primary (Grades1-6) and the first cycle or middle secondary school (Grades 7-10). The fundamentalschool would comprise three cycles (Grades 1-3, 4-6 and 7-9). The third would be an orientationas well as a terminal cycle within the formal system. This structurehas eliminatedby 1985 the costly primary Grade 7 which collected these primary school children who failed to gain entry into the secondary middle schools. It also eliminated the terminal middle or first cycle secondaryschool (Grades 7-10) and the rather ineffectivelower secondaryMOE vocational(Grades 7-9/10) schools (agricultureand industrial);the latter were replaced eventually by the technicum (Grades 10-12)--an upgraded secondarytechnical school. Initiallythe intentionwas that the technicum would concentrateon producing Level 4 middle technicians,as compared with the traditionaltechnical lycee (thenGrade 11-13) in which the curriculumwas more theoreticaland orientedto entry to higher educationinstitutions. The general secondaryand technicallycees were reorganizedto follow upon the fundamentalschool, i.e. Grades 10-12 in lieu of Grades 11-13, as the middle school phased out.
10.19 After some initial delay, the restructuring plans are being progressivelyimplemented. The fundamentalschool concept and educational programshad been establishedthroughout Grades 1-9 in 1984-85,although the senior classesof the middle schooldo not phase out until 1988; the lower MOE vocationalschools have been phasedout; the upgradedtechnicums, supported by the Bank Third EducationProject (Loan No. 1378-AL of 1977), are now being constructedat a rapid pace. Two problemshave arisen in this connection: - 165 -
(a) the inadequatesupply of technicalteachers has hamperedtheir operations; (b) the purpose of restructuringand upgrading MOE vocational training facilitieswas to increasesubstantially the outputof middle level technicians (Level4); this purpose,however, has been set aside by the adoption in the technicumsof the Lycee Techniquecurricula with a view to entry into higher educationrather than direct entry to the job market. This redefinitionof the technicums'mission is a cause for concernbecause it divertsan important part of the supplyof much needed skillsat the middle-leveltechnician level.
10.20 Thus, the structuralreforms have had mixed results. An important part of its practicallabor-market preparation objective has been compromised by the reorientationof the technicums. But at the same time, the reforms introduce a number of positive changes: the ineffectualformer first-cycle secondaryvocationally-oriented schools, and the wasted years spent in the extended primary school (Grade 7) have been eliminated;eliminated too is Grade 10 of the middle school; selection into the secondary school and guidanceas to which branch of studies to follownow takes place on a firmer footing at the age of 15/16 instead of at 12; the new structure is more economical; it has more built-in flexibility to meet catchment area requirements,and a broader range of activities in the new curricula to provide students with improved opportunitiesto develop their particular aptitudes. The diversifiedgeneral secondary school has added new branches of a technical orientation to the traditional humanities, sciences and mathematics streams; the technicum provides fertile ground for diversification,but perhaps does so at the cost of excessivelyfragmenting main branches(families) of technicalstudies. 2. Reformof Curricula
10.21 The restructuringas well as the reorientationhas led to continuous review of the curricula,balance and content,at all levels startingwith the fundamentalschool. Curriculahave now been developedwhich are more relevant to schooling objectives and to the Algerian context and consistent with present day understandingof the learning/teachingprocess. Consistentwith its objectiveas an orientationcycle with a more practicalbias and basis for a preliminaryunderstanding of the world of technology,the curriculumof the third cycle of the fundamental school (Grades 7-9) has increased time allocation to science and mathematics and introduced basic elements of industrialarts, home economics,agriculture. The schoolshave been provided with appropriatelaboratories, workshops and equipmentfor the purpose. At the secondaryschool level, two technicalstreams have been introducedin some generalsecondary schools, and four new streams in the technicums- computers and biochemistryin 1984 and agricultureand water resourcesin 1985. The contributionof the InstitutNational Pedagogique(IPN) must be emphasized. It has supported MOE Algerianizationpolicy by its massive effort in the developmentof textbooks and manuals in the Arabic language; (thirty-two million textbookswere distributedby IPN in 1985 includingthree new titles.) - 166 -
3. Teacher Education
10.22 Teacher education programs and methodologies have, except at universitylevel, generallykept abreast of the restructuringand curricular reforms and the desired orientationsdiscussed above. Problems earlier experiencedin the preparationof teachers for the new practical studies of the fundamentalschooling have been well handled; on the other hand, the technicalteachers required for the planned extensive technicumare still in short supply.
10.23 Algerianizationof the fundamentalschool teacher corps is well advanced;foreign teachers have been reduced in secondarygeneral schools from 421 in 1964/65 to 21% in 1984-85 and to 22% in teacher educationcolleges. The Arabizationpolicy has been completedin the fundamentalschool and is progressingin the secondary schools; all secondary first year classes in 1986/87 will be in Arabic, with full Arabizationby 1988/89. The major shortages of national teachers occur in technical specializations,and in math, chemistryand Arabic languagedisciplines.
10.24 Progressin Arabizationhas also been made at the universitylevel, but at a considerablyslower pace. MOHE institutionsin 1985-86still have only 29X of the students attending courses taught in Arabic; in 1984-85 national teachersrepresent 78% of the total teachingstaff, but the majority (901) of the highly qualified staff are expatriates. In support of the Algerianizationpolicy, the universityauthorities have initiated plans to increase the number of students to be enrolled as teacher trainees at the recently establishedENS 1' in an effort to provide the secondary schools with the large numbersof teachers,especially technical teachers, required in fulfillmentof the 1985-89plans.
10.25 The vital activity in the teacher education sub-sector has been reinforcedby the constant conduct of in-serviceteacher education programs and seminarsand even correspondencecourses at wilayateand dairate levels- the correspondencecourse is organizedcentrally by the CNEG (the complementary education organization of the MOE).2' The aim is to bring teachers up-to-dateon the new developmentsand orientationsof the education system. Upgradingprograms for serving teachersare also conductedon a three summer vacationbasis of a cumulativeprogram.
l/ The Institutesat Mostaganemand Oum-el-Bouighihave been convertedinto full-scale ENS with special responsibilityfor training science and technologyteachers. Another such ENS will commenceoperations in 1986/87 at Skida. 2/ Almost 28,000 teachers were enrolled in these upgrading correspondence coursesin 1984, and 18,390in 1985. - 167 -
C. The Specifiesof the SecondFive-Year Plan. 1985-89 1. The Directives
10.26 The Second Five-YearPlan, 1985-89points up some of the issueswhich have caused concern to educationpolicy-makers despite the highly commendable advances of two decades: the economicand social needs which are evolving more rapidly than the resources,physical and human, which presentlycan be made available;regional disparities which have not yet been ftlly redressed; the continuinghigh rate of populationgrowth; the underqualificationof the work force in general;the poor productivitywhich ensues,particularly in the sectors or sub-sectorsof agriculture,water resources,education and local collectivities.The Plan also indicatespriority action areas to lead up to more successfulattainment of the Plan objectivesand implementationof its programs.
10.27 The followinggeneral prioritiesof the Plan are also pertinentto the education/trainingsector:
(a) full exploitationof the achievementsof the previousPlan;
(b) more effectiveutilization of existinginfrastructure;
(c) improvementof the livingconditions of the rural population,through programsin agriculture,water resourcesand farmertraining;
(d) completionof those socia'sector programsof the previousPlan which are still unfinished,with particularattention to be paid to quality aspectsand the reductionof unit costs;and
(e) furtherexpansion and technicaldiversification of the ETS.
10.28 These generalobjectives and the considerationsof the manpowerneeds as worked out in the Plan lead on to specificprinciples or guidelineswhich shoulddirect authorities and planners:
(a) Now that fundamentaleducation has been successfullyenlarged and reform measures implemented,priority in the new Plan period must pass to expansion and consolidationof technical and vocational training linked to economicdevelopment plans. Moreover, the MOHE should be prepared to take a more active role in trainingof higher level technicians.
(b) The ETS administrativeservices are called upon to reduce costs and use existingstructures more effectively.
(c) Improvementof the flow of students through the system will be effectedthrough furtherreinforcement of the system of make-up and remedialclasses which have been instrumentalin reducingthe failure and dropoutrates of the past decades.
(d) Secondaryeducation will be furtherdiversified. - 168 -
2. Present Status and PrOsed Tgets
10.29 The objectivesand targets in the education trainingsector as set out in the Plan are both qualitativeand quantitativein that many of the quantitativetargets assume successful implementationof the qualitative programs. In this connection,therefore, specific activities should be assigned to the IPN; the general statement of reinforcing i.s research capabilityis not enough to direct and harness its capabilities. The main targets for 1989 are set out in tabular form in Tables X.2 and X.3 in Annex II, togetherwith the extent of executionof the 1985 objectivesand targets. Some of the more importantobjectives and targets are discussed below but referenceshould be made continuallyto the specificdata given in Annex II.
10.30 Almostall six-yearold boys are now enrolled in schools,but despite considerableimprovement, the enrollmentrate of 6 year old girls is still not satisfactoryso that in Grades 1-6 female participationtargets are not likely to be met by 1989; insufficientallowance has been made for socio-cultural reluctanceof parentsparticularly in the very isolatedareas where schooling is not within easy reach. For the same reason, it is not advisable in planning to expect a 100% net enrollment of the school age population, particularlyas arrangementsfor handicappedchildren may not be adequateas yet. The very commendablegross enrollmentrate is nearer the set target because of some underage and overage children in the fundamentalschool. (The gross enrollmentratio in 1985-86in Grades 1-6 is 941.) Though regional disparitieswill continue, the effort to improve enrollment and female participationratios in the educationallyunder-privileged and more isolated wilayatesis expectedto make furtherconsiderable progress.
10.31 A second important objective, the completion of the fundamental school reform togetherwith overallAlgerianization and Arabization,has been virtually achieved in 1985 and will be totally achieved before 1989 (paras.10.18 through10.25).
10.32 The third objective- expansionand further diversificationof the science and technicalbranches in secondaryschools - has already seen the introductionof new branches of study as discussedabove. The increase of enrollments in the technicums,however, is unlikely to be sufficient to support the stated goal of 40% of new secondaryentrants to be in technical schools. Moreover,the objectiveitself may be inappropriate.
10.33 A fourthobjective with specialqualitative dimensions is the build-up of resources to prepare well-qualifiedteachers both for specializations presentlyoffered and for new specializationsunder consideration.The annual needs of the fundamentalschool can be met by the facilitiesand resources built up in the previousPlan. Secondaryschool teacherneeds, especiallyof technicalteachers, are unlikelyto be met in the short term. The expansion of the ENS program has come too late to assure adequateoutputs from that source. The low productivityof the ENSEP at Oran should be considerably improvedupon by the recent conversionof two universitylevel institutesinto ENS; it is proposedto establishtwo more ENS to supplementthe existing one at Koubah. However, during the current Plan period, the MOHE will need to - 169 -
draw teachersnot only from these teachertraining institutions, but also from the university faculties and post-secondary technical institutes. Such teacher candidatescould then be given training in the ENS in pedagogical methods. An importantincentive for attractingstudents from these sourcesis the additionalmonthly bursary paid to ENS teacher-traineeseven while they are physicallyattached to the school in which they first enrolledat the university. In the last year of their studies in fact such student receive the full pay of a practicingteacher.
10.34 Some of the 7,000 additionalteachers who will be requiredby the universityexpansion from 121,000to 160,000students uaay come from the 7,000 or so graduates in postgraduatestudies (M.A.,M.Sc., and Ph.D.) at Algerian universitiesand the 3,500 in foreign universities. However, the majority will have had little experienceand would enter the professionat the lower gradesof the universityteacher structure.
10.35 Tables X.2 and X.3 in Annex II also outline the student flow or efficiencyexpectations. Except in certain instances- the high dropout from Grade 7, the failurerate at the Baccalaureat(20-25Z in the last few years) and first year universityexaminations/tests (502) - the flow of studentshas shown steady progressand is on target; there is no reason to suggest that there will be any falling off. Similarly,the proportionof girls in the schoolsat all levelsshould continueto increaseover the new Plan period. The vercentageof girls in total enrollmentshas increasedsteadily from 42X, 39% and 35% in fundamentalGrades 1-6, fundamentalGrades 7-9 and secondary, respectivelyin 1979-80 to 441, 412 and 42S in 1985-86. On the issue of non-achievementof enrollment targets in secondary technical streams, the mission has suggested that this should not cause the Governmentany great concern;of greater concernshould be investigationby the IPN of the reasons for the high baccalaureatfailure rate. If this is improved,there will be no lack of qualifiedstudents for highertechnological and sciencestudies or for entry into on-the-jobtraining.
10.36 Enrollmenttargets in generalare likelyto be achievedexcept in two instances. The target of 775,000in secondaryin 1989 may have been -cet too high if the 50% limit of Grade 9 studentsinto secondaryschools is maintained in the next three years; the outputs of Grade 9 in that period would not be adequate (at 501) to provide total enrollmentsof 775,000 in secondaryGrades 10-12. At the university level, the overall enrollment target should be reached, but it is problematicwhether MOHE institutionswill be geared in time to accept the planned enrollment of 25,000 in the shorter non-professionalcourses.
10.37 Other quality factors, such as curriculumdeveloncent and review, textbooks, teachers' guides, materials and learning-teachingaids, more upgraded teaching staff, can be expected to be given the same positive attentionas has been the case in the last ten years. The reform programsof the 1970s have their own momentumnow and the commitmentof the authoritiesto sustainthem. - 170 -
3. ITe Plamed Investments
10.38 Table X.2 provides the planned investmentsprogram in the Education Sectoras it appearsin the SecondDevelopment Plan.
Table X.2: FINANCINGOF THE EDUCATIONSECTOR IN THE SECONDDEVELOPMENT PLAN, 1985-89
Ministryof Ministryof Ministryof Education Higher Education Voc. Training Total DA DA DA DA Billion Billion Billion Billion a. New Program 19.0 6.5 6.0 31.5 b. Under Construction 17.0 5.2 11.0 33.2 c. Total 85-89 Program 36.0 11.7 17.0 64.7 d. ExpendituresAllowed 22.0 10.0 13.0 45.0 (48.9X) (22.22) (28.92) (100.02) e. ProgrammedCarry-over beyond Second Plan 14.0 1.7 4.0 19.7
Source: Deuxi6me Plan Quinquennal, 1985-89.
The 1985-89Plan providesfor DA 31.5 billion (or about US$6.8billion) of new investmentcommitments for the three educationand training ministries. An even larger amount (DA 33.2 billion,or about US$7.1billion) is programmedin the form of ongoing commitmentsfrom the first Five-YearPlan. All but DA 19.7 billion of this DA 64.7 billion total is scheduledto be implemented(and paid for) during the 1985-89 Plan. Although planned expenditures for educationinvestments account for a relativelymodest 8.22 of total investment expendituresprogrammed in the Plan, they constitutea very major investment effort in relation to what was achieved during the last Plan. Timely implementationof this program would require a significantstrengthening of staff capacities by the agencies involved. The Minisbty of Education is allocatedalmost 49% of the funds to be made available,the Ministryof Higher Education 22% and the rest is allocatedto training(292).
10.39 MOE investmentsaccount for just over two-thirds of programmed investmentsfor the three ministries. A total of DA 19 billion is allocated to the MOE for new investments commitments,whereas DA 17 billion is programmedin the form of ongoing commitmentefrom the first Five-YearPlan. Out of this total, DA 14 billion is scheduledto be implementedbeyond 1989. The breakdown of the MOE's investment programis providedin Table X.3. - 171 -
Table X.3: MOE NEW INVESTMENTSBY CATEGORY
Countryof Number Student EstimatedCost % of Investment of Units Places (Million) Total MOE DA US$
FundamentalEducation
First and second 19,600 784,000 2,940 630 15.4 Cycle (grades1-6) classrooms
ThirdsCycle (grades7-9) 866 312,000 6,700 1,435 35.1 schools
Teacher Housinig 19,600 2,940 630 15.4
Subtotal,Fundamental Ed. 1,096,000 12,580 2,696 65.9
StudentDormitories and Canteens 48 - 240 51 1.2
SecondaryEducation 156 202,800 6,240 1,336 32.7 (entirelyfor schools technicums)
Regional Education 31 - 31 7 0.2 DocumentationCenters
MOE TOTAL 1,298,800 19,091 4,090 100.0
10.40 A major share (35.12)of MOE's investmentprogram is appropriately orientedto expandingcapacity in the new consolidatedprogram for grades 7-9, a key provisionof the Government'sreform program. It is not clear, however, whether the large investmentprogrammed in teacher housing - which accounts for fully as large a share (15.4%)of new MOE investmentsas new classrooms for the first two cycles of fundamentalschooling - is necessary. Clearly, providingadequate housing continues to be a high priorityfor the Government, but inclusionof such a major housinginvestment in the MOE programmay divert resourcesfrom needed investmentsin fundamentaleducation. Before embarking on the program, it would be advisable for the Governmentto assess whether such an extensive program of teacher housing is necessary to support the planned extensionof the fundamentalschool network in remote areas where adequateteacher housing is not available. - 172 -
10.41 A second importantquestion concernssecondary education: the only new investmentsplanned for secondaryeducation (grades 10-12) are for 156 new technicums. Although the Government sees this as an essential step for meeting its new target of 40% technicalenrollments in secondaryschooling, there are several reasons to question the justificationof this proposed fo:us: most importantly,provision of technicaleducation in the technicum program,which has recentlybeen elevated to baccalaureatlevel, carries the risk of supportingan unanticipatedsurge in entrantsto engineeringfaculties and post-secondary technicial institutes, rather than meeting urgent labor-market needs for middle-level technical manpower. Moreover, the lower-than-targettedcurrent share of technical secondary enrollments may reflect a reluctance on the part of secondary school students and their parentsto pursuetechnical education. Finally,the MOE is not as well placed as the MOVT to provide secondarylevel technicaleducation/training of assured job relevance. The Governmentshould, for all these reasons,reconsider the proposed technicum investmentprogram. Alternativeinvestments which merit considerationare: (a) increased MOE allocations for secondary general education;and (b) increasedMOVT allocationsfor secondarylevel vocational trainingcenters. If, in spite of these reservations,the Government does proceed with the proposed technicuminvestment, it should seriouslyconsider measures- such as removalof the baccalaureatfor completersof the technicum program- in order to underscorethe middle-levelmanpower training mission of these institutions.
10.42 An elementof the MOE investmentprogram which is not apparent and which should be supportedis rehabilitationof existingMOE schools. The MOE has been very active arnd successful in its rehabilitation,conversion and re-equippingprogram for 300 existingmiddle schoolsand 100 generalsecondary schools;all middle schoolsare now equippedwith laboratoriesand workshops. It will continue to be involved in such a program; in addition, the MOE Directorateof Infrastructureand the wilayate has delivered 47 new third cycle schools on average annually from 1964 to 1984, 30 lycees and 2,450 classroomsper year. In fact in 1984, 120 new third cycle schools were put into operation.
10.43 The MOHE investment program incorporates both expansion, rehabilitationand equipping of existing structures,but also a major new constructionprogram of university institutes and schools and dormitory accommodationoutside the four main universities.A total of DA 6.5 billion is allocatedto the MOHE for new investmentcommitments, whereas DA 5.2 billion is programmedin the form of ongoing commitmentsfrom the first Five-Year DevelopmentPlan. Out of this total, DA 1.7 billion is scheduled to be implementedbeyond 1989. The number of new places planned to be constructed and equippedare 50,000 and 42,000 dormitoryplaces. Because this is a very high proportion of dormitory places in relation to new classrooms, some reductionin this element of the program may be possiblewithGut sacrificing educationaloutputs; the MOHE should seriously consider the possibilityof such a reduction. In addition,some 88,000existing student places need to be broughtup to standard in institutesin 16 localities. This conversionand rehabilitationis importantto ensure the availabilityof 66,000 appropriate placesfor technologicalstudies; the remainderwould be for other branchesof study. In the new constructionprogram, too, the emphasisis on technology;of - 173 --
the 63 new institutesto be constructed,32 are exclusivelyfor technological studies. The allocationsin the new constructionprogram by type of program allows for only DA 500 million, including just over DA 110 million for furnitureand equipment. This appearstoo low in view of the number of places, particularlyfor technologicalstudies, which are to be provided, including workshopsand laboratoriesfor the 18,000 additionalplaces to train higher level technicians.
10.44 With regard to the Ministryof vocationaltraining and labor (MOVT), the investmentprogram incorporatesequipping of existingstructures but also a major new constructionprogram of vocationaltraining institutions. A total of DA 6 billion is allocated to the MOVT for new investmentcommitments whereas DA 11 billion is programmedin the form of ongoing commitmentsfrom the first Five Year DevelopmentPlan. Out of this total, DA 4 billion is scheduledto be implementedbeyond 1989. Emphasis is being placed on the utilizationof norms, controlof costs and timely implementationof projects. The cost per trainingplaces in the new programsis expected to be reducedby 50X. In addition to the 70,0000 trainingplaces being created as part of ongoingprograms, 100,000 new trainingplaces will be created over the period 1985-89, (60,000 by MOVT). According to the Plan targets the vocational trainingsystem is expected to produce 83,000 senior technicians(Level 5), 152,000 junior technicians(Level 4) and 400,000 skilled and semi-skilled (Levels3 and 2). The MOVT recognizesthat it will not reach the targets of the Plan and that the completionof the proposed program might take place beyond 1989. In additionthe Plan rightlyemphasizes qualitative improvements throughoutthe system. Specifically,the Plan calls for better utilizationof existing capacity,better coordinationamong the various programs, improved curriculaand teachingmethods.
D. Conclusions and Recommendations
10.45 The educationalobjectives of the second Five Year Plan, 1985-89 can be realized for the most part; the physical targets,however, may have been overstated;the question arises whether in the time limit of the Plan, a physicalprogram of the magnitudeand the range envisagedis feasiblein terms of the design, construction,supervision and procurement capacity of the authorities concerned. Financial feasibility of the program is also questionable. The mission recommends action on the lines the national educationalauthorities appear to be consideringto keep the program within feasiblelimits, thereby avoiding imbalances and bottlenecksin implementation. This might be accomplishedby retainingthe overall quantitativetargets of the Plan, but rephasingand aiming at a two- or three-yearextension of the Plan time limit. The formal education system needs to consolidateafter 20 years of continuedactivity. Slower implementationwould provide time to evaluate the various reform measures and the reform as a whole, to research the causesof existingweaknesses, to allow time for specialistteachers to be trained,and to gain furtherexperience. - 174 -
10.46 The mission recommends,however, that there shouldbe no slowingdown of: (a) the vocationalteacher training program; (b) the vocationaltraining centerprogram; (c) the secondaryteacher training program; and (d) reinforcing of the IPN and the MOE highercadre and regionalpersonnel training centers.
10.47 The mission has suggesteda review of the technicumphysical program with particular reference to considerationsof pedagogicaland financial advantagesof more "polyvalent"secondary schools, particularly in the smaller citiesand towns. It may be possibleto add two or three technicaleducation streamsto existinggeneral secondary schools in some towns and avoid setting up a large centrallysituated technicum in a city to serve distant satellite towns. Furtherthought should also be given to the question of whether the technicumsshould allow access to highereducation.
10.48 The Plan proposalsfor greatly expandedvocational trainingcenters and reinforcementof a systematicapprenticeship scheme should be vigorously pursued if the hundreds of thousandsof 15/16 year olds are to be given a reasonablechance to enter productiveemployment. Part of this program could be substitutedfor the proposed expansion of MOE secondary-leveltechnical education,whose justificationunder the proposed program has not been fully established. The remarkableexpansion of vocationaltraining centers by the MOVT has resulted in qualitativedifficiencies. Major problems may be expected in the areas of: planning to meet regional governmentand local level needs; standardizationof programs and equipment; staff training and upgrading;and coordinationamong various providersof vocationaltraining. Priorityshould be granted to the urgent task of improving the quality of trainingprograms and enhancingtheir relevanceto the labor market needs. A number of critical activities,such as instructortraining, training needs assessment,curriculum development, standards and certificationand planning and maintenanceof buildingsand equipment,should be strengthened.
10.49 Measures should also be considered for controlling the flow of students to progressivelyhigher levels of schooling. Intakes into the secondarylevel may be slowed down by reducingthe progressionrate from 50% to 40%. Such a step should be taken in conjunctionwith review of the baccalaureatexamination process. Considerationneeds to be given to ways and means to inducemore baccalaureatesto enrollin the shorter,sub-professional technicalcourses. It may be possible to begin to review the scholarship program at higher education level now that secondary school leavers are increasingto a point at which the higher educationinstitutions may not be able to absorb all those qualifyingfor entry under the presentqualification requirements. Perhaps it may become necessary to introduce a special examination for entry to the universitiesother than the traditional baccalaureatand award scholarships on this basis; an alternative or complementaryapproach may be the introductionof some form of means test, supplementedwhere necessaryby a loan scheme. - 175 -
10.50 Considerableefforts should be devoted to the control of both investmentand recurrentcosts. Unit costs are still high even though there have been considerablesavings in the last decade as a result of measures undertaken. The issue of massive scholarshipsupport and the extensive studentboarding program should be reexamined,as should the extensiveprogram of teacherhousing in basic schooling. The adoptionof norms and standardsin the constructionand equippingof institutionswould be an essentialfeature of a cost reduction program. Similarly a review of the "carte scolaire", wilayateby wilayatewould help rationalizethe school constructionprogram. Finally the weekly workload of teachersshould be reviewedespecially at the secondaryschool level.
S8aSs - 176 -
CHAPTERXI - THEURBAN AND HOUSING SECTOR
A. ReAional Distribution of the Population
11.01 The Algerian populationis unevenly distributed. About 682 of the population lives in the coastal region, which comprises only 5% of the country'sarea. Another 23% is settled in the subcoastalregion and in the high plains in about 10% of the country'sarea. The Saharian region which constitutesthe remaining86% of the area suupportsonly 8b of the population.
Table XI.1: DISTRIBUTIONOF THE POPULATION BY MAIN GEOGRAPHICALREGIONS, 1980
Inhabitant Area in per Region Population Percent Sq. Km. Percent Sq. Km.
A. North (coastal)13,864,144 68.41 113,751 4.75 121.88
B. High Plains 4,734,673 23.36 226,589 9.47 20.90
C. South (Sahara) 1,667,807 8.23 2,052,552 85.78 0.81
TOTAL 20,266,624 100.00 2,392,892 100.00 8.47
B. Urbanization
11.02 The principalAlgerian cities developedaccording to Europeanmodels and were inhabitedlargely by Europeansup until the early 1960s. With the departureof the Europeansafter 1962, the compositionof the urban population changed drastically. Algeriansfrom rural areas moved to the urban centers and occupied the housingleft vacantby the Europeans. Althoughthe migratory influx slowed after 1966, the cities continuedto grow rapidly, spurred by industrialization,economic development, and the natural increase in population. The annual populationincrease of 5.8% for the urban areas - in contrast to the annual rate of 3.2% for the total population- is indicative of the rapid pace of urbanization in Algeria. Of the estimated 1985 populationof 22 million inhabitants,47.5% live in urban areas. Algiers' metropolitanarea has a populationof about 1.75 million; three other cities (Oran, Constantine,and Annaba) have populationsbetween 300,000and 500,000 and twelveother cities number between 100,000and 300,000 inhabitants. This rapid growth of cities and the concentrationof investmenton the so-called productive sector for the fifteen years following Algerian independence contributedto the housing shortage that has become a major problem in most Algeriancities. - 177 -
11.03 In 1977, the seriousnessof the housing shortages pushed the Government to take remedialactions. The Ministryfor Housing,Construction, and Urban Affairs (MHCU), renamed recently the Ministry of Regional Development,Urbanism, and Construction,was created at the same time the institutionsactive in the sector were restructured. Housing became an integral part of nationaland sectoralplanning, and 'he first elementsof a housing policy were formulated and implementedas part of the national economicplans. 1'
C. Objectives of theFive-Year Plans
11.04 The first Five-Year Plan (1980-84) set the following objtctives for housing:
(a) accelerate the delivery rate of housing and reduce delays in construction;
(b) offer housing integrated with social services to improve living conditions;
(c) controlexpansion of settlementsto preserveagricultural land; and
(d) encourage the contribution of citizens in implementinghousing programs.
The second Five-Year Plan (1985-89) reaffirmed the same objectives and stressed actions to (a) increase housing production by a more efficient organizationof the constructionsector; (b) clarifythe tasks assignedto the administration,the publicdevelopers, and the financialinstitutions involved in housing; and (c) mobilize savings of the collectivit6s locales (municipalitiesand willayas)and the citizensto reducethe burdenof housing financeon the Government.
11.05 In order to achievethese objectivesthe two plans envisagedto:
(a) encourage private sector constructionand simplify the procedures individualsface to obtain land,building permits, and financing;
(b) improve the set-up of organizationsdealing with urban planning, housing studies and implementationand better allocate their expertiseat the local and regionallevels;
(c) adopt new statutes for institutionsinvolved in the developmentand managementof real estate (OPGI);
1/ 1967-69:first three-yearplan 1970-73:first four-yearplan 1974-77: secondfour-year plan 1980-84:first five-yearplan 1985-89:second five-year plan The years 1962, 1966, 1978, and 1979 were not includedin any plan. - 178 -
(d) sell government-ownedhousing to their occupants;and
(e) developthe eonstructionmaterial industry.
11.06 The Government has already taken some steps to achieve the plan objectives;it has continued to allocate more powers and autonomy to the wilayas, to restructureand decentralizethe public constructionenterprises, to issue decrees to promote private participationin housing production,and to sell government-ownedproperties to their occupants.
D. PhysicalPerformance
11.07 The first Five-YearPlan envisionedthe constructionof about 700,000 housing units by both the public and private sectors. Out of the total buildingprogram only 652 were completed(458,000 units were completedout of which 333,000 units were built by the public sector and 125,000units by the privatesector).
11.08 The second Five-YearPlan anticipatedthe deliveryof 542,000 units out of which 356,000 are carry-overs from previous programs (out of 674,000units under construction).During the first year of this plan (1985), about 88,000 public housingunits were completedand an estimated110,000 are expectedto be coapletedin 1986. Table XI.2 indicatesthe number of units completedin each year of the plan and the projectionsfor 1986, while Annex 2 provides informationabout the existing hausing stock. The low number of housing units completed is due primarily to the limited capacity of the constructionenterprises and disruptions in the supply of construction materialsrather than to financialconstraints.
Table XI.2: TARGETSAND REALIZATIONSOF THE FIVE-YEARPLAN 1980-84
Targets Achievement 1980-84 1980 1981 1982 1983 1984 Total Rate (%)
A. Public Sector 450 36.3 45.9 72.5 85.6 72.7 333 74.00 Urban 300 25.4 28.6 42.7 45.3 38.6 180.6 60.20 Chelif - - 20 Rural 150 10.9 17.3 29.8 40.3 34.1 132.4 88.27
B. PrivateSector 250"' 20 20 23 32 30 125 /b 50.00
TOTAL 700 56.3 65.9 95.5 117.6 102.7 458 65.43
/a Including150,000 housing units to be sold in the contextof the law related to farmilyhousing. /b Excludingabout 100,000housing units built withoutlicense. - 179 -
11.09 The Government's remedial actions during the two Five-Year Plan periods concentrated on increasing production capacity to solve the quantitativeaspect of housingwithout much regard for either the qualitative concernsor cost and efficiencyin the use of available resources. Housing shortages persisted despite government interventionand the increase in resourcesallocated to productio; overcrowdingmeasured by number of persons per housingunit actuallyincreased from 6.1 in 1966 to about 7.8 in 1985. As a result, government officials realized that public means and central governmentinvestment alone would neither improve the housing situationnor meet the rapid increase in housing demand. New programs are, therefore, designed to incorporateprivate resourcesin the housing supply processas a complementto availablepublic resources. Policiesare formulatedto improve systematic planning and programming of investment and to better utilize nationalresources in developinghousing, especially through a new legislation concerningprivate builders enacted in 1986.
E. FinancialPerformance
11.10 The total investmentfor both urban and rural housing -- budgetary allocations to OPGIs (Offices de Promotion et de Gestion Immobiliere) throughCNEP (Caisse Nationale d'Epargne et de Prevoyance)-- amounted to about DA 50 billion during the first Five-YearPlan. The second Five-Year Plan foreseesDA 81 billion for the same purpose. Table XI.3 summarizes the allocationsin both Five-YearPlans.
Table XI.3: INVESTMENTIN THE FIRST AND SECOND FIVE-YEARPLANS (in millionsof Algeriandinars)
A: 1980-84Plan Total Allocations Budgetaryand Loans Programmed Consumed PercentConsumed Urban and Rural 45,000 31,000 Private 15,000 12,000 Subtotal 60,000 43,000 80 Urbanism& Studies 2,500 2,000 2' N.A. TOTAL 62,500 45,000 N.A.
B: 1985-89Plan Total Allocations Budgetaryand Loans Programmed Urban & (public)Rural 52,000 Private 24,300 Urbanism& Studies 4,950 TOTAL 81,250
1/ MainlyOPGIs (Officesde Promotionet de GestionImmobiliere). 2/ Amountestimated by mission. Source: Second Five-Year Plan except for amount for urbanism and studies,which are estimatesby the mission. - 180 -
11.11 Budget allocationsfor housing programsare governed by a multiyear breakdown and commitmentauthorizations which enable the central government agenciesand the wilayas to award contractsfor works lasting several years. However,the government'sannual capitalbudget refers only to creditspayable within one fiscal year; i.e., it represents the maximum amount that can actuallybe disbursedduring a given year.
11.12 Under "Housing," the governmentcapital budget distinguishesamong credits for physicalplanning and studies,urban housing and rural housing. Table XI.4 summarizesthese data.
Table XI.4: CAPITALBUDGET: GRANT FINANCINGFOR THE HOUSINGAND URBAN PLANNINGSECTORS (in millionof Algeriandinars)
'985 1980 1981 1982 1983 1984 Total Plan 1986
Ph3sicalPlanning and Studies 115 756 949 876 1,158 3,854 1,086 1,200
Urban Housing 72 731 457 497 390 2,147 94 300
Rural Housing 1,608 1,607 2,345 2,345 1,843 9,748 1,603 1,340
Total 1,795 3,094 3,751 3,718 3,391 15,749 2,863 2,840
Source: Ministryof Finance.
11.13 Housingprograms are mainly financedthrough public funds, either as nonreimbursablefunds grants-' (conventionalappropriations from the budget) or reimbursablegovernment loans?' (mostly throughCNEP). Total allocations (capital budget, loans, and operationalexpenses) for the first Five-Year Plan, 1985, and 1986 are shown in Table 5.
11.14 Publichousing finance has playedan importantrole in increasingthe supply of housing in Algeria. Despite the priority given by the public authorities to housing, the multitude of administrative procedures and regulations that governs all transactionson land stands as a serious constraint to the continued development of the sector. Although the availabilityof public funds has not been a major impedimentto housing productionand delivery,it is quicklybecoming an importantone as government revenue from the hydrocarbonsector decreases. The Government,aware of the likelihoodof financialretrenchment, is trying to reduce the share of public financingin housing.
1/ Concoursdefinitif. 2/ Concourstempoeaire. - 181 -
Table XI.5: SUMMARYOF TOTAL ALLOCATIONS (BudgetaryAllocations and Loans to PublicEnterprises) (in thousandsof Algeriandinars)
Budgetary Allocations Loans to Public Capital Operational Total Year Enterprises Expenditures Expenses Allocations
1980 4,000,000 1,795,751 116,903 5,912,654 1981 6,868,000 3,094,783 182,232 10,145,015 1982 5,600,000 3,752,631 221.555 9,574,186 1983 8,670,000 3,718*203 264,744 12,652,947 1984 8,550,000 3,391,405 308,279 12,,249,684
Total Plan 33,688*000 15,752,773 1,093,713 50t534,486
1985 7,977,000 3,028,296 N.A. 11,005,296 1986 7,900,000 29863 N.Ao 7,902,863
Source: Ministryof Finance.
11.15 Although thus far the financialburden has been tolerable,it will create problems in the future if oil revenue continuesto fall. Moreover, speedingup the rate of housing production,financed by savings collectedby the CNEP, may result in a correlativereduction in CNEP depositswith the Treasury and hence increase the financial shortfall. However, potential savings have not been completelymobilized due to the low level of housing unit quotasmade availableto the savers.
F. Institutional Aspects
11.16 The Ministry of RegionalDevelopment, Urbanism, and Construction,and the Ministryof Interiorare the two main central ministriesworking in the urban sector. Other institutionswhich play a role are describedbelow.
11.17 Wilayas and Communes: Wilayas are the public, decentralized collectivit6sestablished by OrdinanceNo. 69-38 of 1969. The wilara is administeredby the PopularAssembly of the Wilaya (APW) and by an executive chaired by the wali; the latter is appointeuby the central government and representsat the decentralizedlevel each of the centralministers.
11.18 The APW examinesand approvesthe budget. It defines the objectives and plans of action for the wilaya,supervises all operationsrelated to the developmentof infrastructure,energy sources,roads, hydraulics,and ports. It also asumes the responsibilityfor the delivery of rural and urban - 182 -
housing. The APW manages all real estate propertieswhich are controlledby the wilaya and decides on the new urban housing zones (ZUHN)."' It also assists in the creationof public enterprisesfor constructionand investment in the wilaya.
11.19 The firiaucialresources of the wilayaare based on (i) its own funds, (ii) budgetary allocationsthrough loans, (iii) special funds (fonds comnun des collectiviteslocales), and (iv) any proceedsfrom the public enterprises of the wilaya.
11.20 Each wilaya conmprisesseveral communes. The communes,administered by the Popular Assembly of the Communes (APC), are responsible through permanentcommittees to study the economic,financial, administrative, social, cultural,and agriculturaldevelopment as well as issues related to public works and communalfacilities.
11.21 OPGIs were created by OrdinanceNo. 7693 of October 23, 1976 as a public institution in each wilaya. The OPGIs are responsiblefor the construction,management and maintenanceof rental housing in the wilaya. OPGIs became responsiblefor sellinggovernment-owned public housing to their occupants. In fact, the OPGIs have limited executivecontrol and therefore their authorityis limited. The Servicede l'Urbanismede la Constructionet de l'Habitat (SUCH), a department of the Ministry of Regional Planning, Urbanism,and Construction,has a branch in each wilaya and is in charge of programmingand productionprocesses for housing. In addition,SUCH carries out urban studies and coordinatesall project implementation.Consequently, in each city, the OPGI is confined to administrativeand maintenancetasks; becauseof their limitedauthority and their inabilityto enforce regulations the tasks are not adequatelyperformed. Reinforcementof the OPGIs is needed to enable them to perform their duties as full-fledgedhousing developers, in additionto their managementand maintenancefunctions.
11.22 EPLFs (EntreprisesPubliques du Logement Familial)were established after the dissolutionof the ONLF (OfficeNational du LogementFamilial) in 1984. At present,there are 25 EPLFs which are publicdevelopers constructing housingdestined for sale. EPLFs are involvedin acquisitionand development of land and construction.EPLFs' activitiesare financedthrough loans from CNEP.
11.23 CNEP is a financialinstitution founded in 1964 to mobilizehousehold savings. In 1971, its responsibilitieswere enlarged to provide housing finance. CNEP's activity is based on the mobilizationof private resources from householdsand the managementof public funds put at its disposalby the Treasuryfor publicprograms. The private funds are collectedthrough savings accounts; these accounts (bearinga 5% interest rate) are not earmarkedfor housing loans but are prerequisiteto obtain a loan. These funds, which are about 40% of CNEP resources,are used by CNEP to financeEPLF and cooperatives producingowners' occupied houses. Publicfunds (about602 of CNEP resources) are loaned by the Treasuryto CNEP at an interestrate of 0.252 for 40 years; CNEP in turn releasesthem to OPGIs to producerental housing.
1/ Zones Urbainesd'Habitation Nouvelle. - 183 -
11.24 The financialterms of CNEP's loans vary according to the source of funding,the purposeof the loan, and the intendedrecipient. All recipients of CNEP loans, except for OPGI and the nonsaver individuals,must have two years of previous savings to allow an accumulationof a minimum DA 500 in interest for individuals. They must also put a dcwnpaymentthat varies accordingto the income of the beneficiaries120, 25, or 302); the upper limit of loans for individualsis set at DA 450,000. Table XI.6 indicates the differentkind of loans managedby CNEP.
Table XI.6
Source Recipient Purpose Terms
A- Public-managed OPGI Constructionof 12 per annum for 40 funds publichousing years; 4 years of for rent (tech- grace nical specifi- cationsand costingnorms)
B- Privatemobilized EPLF Constructionof 6% per annum for 25 funds publichousing years; 4 years of for sale grace
Individual Privatehousing 61 per annum for 25 saversand acquisitionor years cooperatives construction
Individuals Privatehousing 8% per annum for (nonsavers) acquisitionor 15 years construction
11.25 The repartitionof CNEP use of its resourcesrepresents an unbalatced structure. In 1984 for example, 601 of CNEP resourceswere used to finance rentalloans to OPGIs, 361 for equipmentbonds, and only 4% for loans directly or indirectlydestined for privatebeneficiaries for propertyacquisition.
11.26 The terms for the loans to OPGI are for 40 years at an interestrate of 1%. Despiteof these very concessionaryterms, the OPGIs do not appear to be repayingthese loans,because of cost overrunsand inadequaterents.
11.27 By 1985, the cumulativehousing loans to CNEP reachedDA 52 billion, whereasCNEP depositswith the Treasury (comprisingamounts not disbursedby CNEP) were DA 32 billion. This DA 20 billion shortfallhas pgrownover the last few years at the rate of betweenDA 3 billion and DA 4 billion per year. It representsthe differencebetween total governmentloans to CNEP in a given year and the annual increasein savings obtained by CNEP, all of which are depositedwith the Treasury.
11.28 BDL (Banquede D6velopmentLocal) was createdby decree in April 1985 as part of the restructuringof the banking systemand the transformationof the Departmentof Public Credit in CPA into a public autonomousinstitution. - 184 -
BDL acquiredthe 43 officesfrom CPA and added 34 new offices. At present, it has 77 offices and is still expanding so as to have at least one branch in each wilaya.
11.29 BDL is allowed to perform all of the banking operationsrelated to the developmentof the local public entreprises. It provides loans either from its own resourcesor from funds put at its disposal by the Government for approved income-generating operations, public construction, and non-agriculturalprivate companies. It is envisagedthat BDL will evolve into a full-fledged institutionto finance the local collectivitesand their enterprises.
11.30 BDL lends both its own funds and the advances it receives from the Treasuryat medium-term(7 years) and long-term(12 years)at an interestrate of 5.5% and 2.5X, respectively,with 2 and ' years grace periods. The funds are loaned to those enterprisesapproved by the national plan. About 10% of BDL lendinggoes to privatecompanies.
11.31 BDL's mode of operationis still experimental. It is legally bound to lend to all projects approved by the national plan. Lending to the borrowingenterprise is guaranteedby the wilaya. BDL sees the importanceof strengtheningits urban studiesand evaluationcapacity in order to be better able to analyze the risks and feasibilityof the projects to which it lends its funds. It would also like to have the right to refuse lendingto projects that it finds financially or technically unfeasible. Eventually, BDL envisionsitself as a full-servicebank for the collectiviteslocales.
G. Construction Enterprises
11.32 The constructionindustry in Algeria has been growing to keep pace with the country'srapidly expandingeconomy. Since the 1970s, the industry has emphasizedlarge-scale industrialization and prefabricationwith the aim of achieving a rapid response to increasing housing demands. Maximum efficiency and higher productivitywere expected to result from these industrializedsystems. Therefore,a large share of investmentswas devoted to acquiringheavy prefabricationplants and constructionequipment. However, most of these industrializedconstruction systems proved to be economically inefficient,as a resultof a lack in masteringtechniques.
11.33 The construction/contractingindustry in Algeria is compartmentalized into various national, regional, and specializedfunctions with a marked division between civil works (travaux publics) and building (batiments). Constructionenterprises tend to specialize in one type of work, without diversificationof activities,except at the lower end of the scale (communal and privateenterprises). Most of the constructionenterprises are under the controlof the walis. Recently,a move towards decentralizationresulted in the transfer of more than 100 constructionenterprises at the level of the wilayas. These enterprisesnevertheless remain small and undertake mainly maintenanceworks, buildings, and small civil works. The activities of private constructionfirms are oriented towards housing, small industrial projects,and publicequipments. - 185 -
11.34 Construction is a major employment generator and at present it employs about 24.5% of the non-agriculturallabor force. According to the secondFive-Year Plan, employmentin the constructionindustry is expected to grow at a rate of 6.52 and to generateabout 272 of the new non-agricultural jobs needed to meet the employmentdemands during the plan period.
11.35 About 422 of investmentsin constructionactivities are for civil works (dams, roads, irrigation),34% for buildings other than housing (communaland public,hospitals, schools and factories),and 24% for housing. Most constructionenterprises are hampered by serious managerial,financial and organizationalproblems. The enterprisescannot fulfill their contractual obligationson time. The low productivityof these enterprisesis reflected in the high cost of constructionand in the delays in completionof the works. The situationis detrimentalto housing,infrastructure work, and cost levels.
11.36 The availabilityof constructionmaterials is another hindrance facing the constructionindustry. Frequently,the shortfallin productionof neededmaterial is aggravatedby significantdelays and high cost of imports. In summary, the followingfactors constrain both the contracting/construction enterprisesand the constructionindustry:
(a) shortageof constructionmaterials;
(b) shortageof managerialresponsibility and technicalskills;
(c) overcapitalizationin equipment and industrializedsystems in the past, with a tendencyto moderationin more recentyears;
(d) high costs, resultingfrom high volume of demand, poor cost control and feedback in field operations,estimating and scheduling,and .managment;
11.37 The Governmentis aware of the many problemsfacing the construction industry. The Five-Year Plan stresses the importanceof improving the industry'sefficiency and cost effectiveness.A practicalaction plan is now needed to restructurethe construction/contractingindustry according to the principlesof accountability,competition, and autonomy. The action plan shouldemphasize the followingmeasures:
(a) allow full autonomyto the enterprisesand greater freedom to their management;
(b) encourage competitionon equal terms among public enterprises,the private sector, and foreign contractors;encourage the creation of semi-publiccompanies;
(c) improve the performance of managerial and technical staff by introducingappropriate training and up-to-datemanagement techniques for constructionprojects, including scheduling,programming, and cost control;
(d) improveplanning to ensure the availabilityof constructionmaterial.
58a96 - 186 -
CHAPTER XII - WATER SUPPLY AND SEWERAGE
A. Water Resources
12.01 Total water resources in Alieria are estimated at 16.8 billionm 3 per year, comprising 13.5 billionm of surface water and 3.3 billionm 3 of groundwater. Surface resources, however, are generally difficult to exploit. Most of the rivers are dry in the summer and their water, of poor quality, cannot readily be used for domestic or industrial supply. Their regulationthrough costly reservoirsis often requiredto obtain economically exploitableyields. On the other hand, the rate of infiltrationfrom storm runoff and surface resourcesis high, resultingin groundwaterbeing available over most of the country.
12.02 Most urban areas are presently suppliedwith groundwater,which is also the main source of water for irrigatedagriculture. While surfacewater is under-exploited,groundwater resources are alreadyutilized almost to full capacity. Domestic and industrialuses currentlyaccount for about 252 of water used. These needs will expand rapidly,however, as populationgrows and water consumption,currently below the desirable minimum in many areas, increases. It is estimatedthat only about 35% (300,000ha) of irrigableland is currently exploited. As irrigatedagriculture develops, its water needs will also grow.
12.03 The followingtable gives a very broad indicationof the present and future patternof water utilization. Even thoughwater demandswill still be well below the L- Letical maximum available by that period, serious water deficiencies,and potential conflictsof use, are likely to develop in the more densely populated watersheds,and along the coastal areas where the majorityof the populationis concentrated.Water shortagesalready exist in densely populatedriver basins (Algiersand Oran are examples),where present demand exceeds available supplies necessitating costly inter-basin transfers.-l
Table XII.1: WATER UTILIZATION,1981 (In billionsof cubic meters)
By Source _ By End-User _
Dams 0.56 17 DrinkingWater 0.70 21 NorthernAquifers 1.27 37 Industry 0.14 4 SouthernAquifers 0.60 18 Agriculture 2.54 75 Springs,Wells, etc. 0.95 28 Total 3.38 100 Total 3.38 100
1/ Given groundwatershortages, the Governmentprepared a water resourcesand water supply Master Plan for Greater Algiers with World Bank assistance through an engineering loan made in 1980. The project is now being implemented. - 187 -
Table XII.1 (cont'd): WATER UTILIZATION,2010 (In billionsof cubic meters)
By End-User
DrinkingWater 3.20 37 Industry 0.64 7 Agriculture 4.80 56 8.64 100
12.04 Given these developing resource constraints,integrated watershed managementis of priorityconcern in planning;the needs of agriculturemust be balanced with those of the populationfor drinkingwater; the priorityof use of groundwater(usually of better quality than river-water) for irrigation and for domestic use must be assessed,and there will be increasinguse of treated domestic waste water for agriculture. This has already started in Constantine,and in the Metidja Plain surroundingGreater Algiers. Government is well aware of the need for carefulresource planning and has given absolute priority to the developmentof water resources (para. 2.01). It has also stated that water demandsshould be met in the followingorder of priority; firftly, domestic requirements;secondly, irrigated agriculture; thirdly, industry. Governmenthas also given high priorityto developmentof economic and socialinfrastructure (para. 2.01).
B. Recent Sector Organization and Developments
12.05 The Min5stry of Hydraulics, Environment and Forestry (MHEF) is responsiblefor the developmentand conservationof the country's water resources. Concentrationof responsibilitiesfor water resourcedevelopment, whether for domesticuse or for irrigation,under one Ministry facilitates integratedwater resource management. Up to the late 1970'q an agency of MHEF, the Societe Nationale de Distributiond'Eau Potable et Industrielle (SONADF.)was rebponsiblefor water production. Distributionand maintenance were the responsibilityof Municipalities(responsible to the Ministryof Interior),which purchased water from SONADE. Investmentswere generally financedby Governmentgrant, tariffs were low and service and maintenance levels poor. Municipality indebtedness to SONADE was considerable. A reorganizationof the sectorwas calledfor.
12.06 The Soci6te des Eaux de l'Agglom6rationd'Alger (SEDAL) was establishedin 1977 under a World Bank sewerageproject loan. Intendedas a model for water and sewerage organizationfor Algeria, it operated as a financially autonomous public-owned enterprise, managed as a commercial undertaking,with a corporatestatute. Its parent authoritywas the Ministry of Hydraulics(instead of the Ministry of the Interioras previously). The experimentproved successful;already by 1985, internalcash generation and
l/ Assumptions: Population44 millionswater consumptionlcd 200; industrial needs are 20i of domestic needs; Irrigatedagricultural area doubles to 600,00ha; water utilizationper ha is 8,000 m 3 . - 188 -
customers'contributions were able to cover debt serviceand over 10% of the cost of a new projectfor the city, also financedby loans from the World Bank and commercialbanks; Governmentequity financedonly half the costs of the new project.
12.07 Followingon this success,an entirn reorganizationof the sectorwas carriedout in 1983; 12 more regionalenterprises were created along the lines of SEDAL,covering the entire country,providing water to both urban and rural areas,and all responsibleto MHEF. Again the World Bank providedassistance for strengtheningthese companiesunder a loan to financewater and sewerage works in Oran and Constantine,made effectivein 1985.
12.08 In order to coordinate the operations of the regional authorities satisfactorily,the "Agence Nationalede lVEau Potableet Industrielleet de l'Assainnissement"(AGEP) was establishedin 1985, within MHEF. Its role is to assistMHEF in planningand identifyingwater supplyand sewerageinvestment programs,and identifyingthe requiredlevel of Governmentcontribution to the companies to optimize use of financialresources in the sector. AGEP also sets tariffs to recover costs on a nationwidebasis (with cross subsidy from low-cost to high-costcompanies) and formulatesdetailed sector policies.
12.09 In conjunctionwith the 1983 sectorreorganization, Government issued a Water Code to regulate the allocationand protectionof water resourcesand to set out financialpolicies for the sector. The Code deals with ownership, concessionand use of water resources; it also prescribes that the water utilities companies should be managed as commercial enterprises,setting tariffs that encourageeconomic use of water and enable the entities to be financiallyself-supporting.
12.10 The water and sewerage sector has thus undergone substantial reorganizationover the past 10 years, with overall responsibilityfor the sector concentratedunder one ministry, and management decentralized to regionalutilities companies. The sector'slegal and institutionalframework is appropriateand encouragesthe rational exploitationof water resources. Much remainsto be done, however,to strengthenthese institutionsand improve program implementation.It will take several years to strengthenthe newly establishedregional utilitiescompanies. Further assistance in institution buildingwill be providedunder anotherWorld Bank Project under preparation, the Second National Water Supply Project, which will help expand the distributionsystems of the companies and expand this water productionand transmissioncapacities.
C. CurrentService Levels
1. Water
12.11 Governmentinvestments over the last decade (see below para. 1.13), have been extensive: new household total connectionswere supplied to an estimated2.4 million people between 1977 and 1985. Despitethis achievement, attained in a period of rapid populationgrowth of about 3.22 per annum, during which urban populationalone increasedby 2.9 million,much remains to - 189 -
be done. Becauseof rapid urban populationgrowth, in absolute numbers more people in urban areas are withoutwater than 10 years ago. Annexes12.1 shows water supplyservice levels in 1985 in the urban areas of the 31 provincesof Algeria. Although over 802 of the urban populationis providedwith direct water service lines, only a third can be consideredwell served. Preliminary results from a survey in 36 towns with populationsranging from 2,000 to 3,000 are shown in Annex 12.2. The overallconsumption varies widely, from 20 lcd in Chelyhoun in the Kabylic Mountains to 286 lcd in El Golea in Central Algeria;but in most cases is inadequate. Water consumptionhas been limited by inadequateproduction and distributioncapacity and the high volume of unaccounted-forwater, which in some towns reaches 30% of production. Water supply in most cities is intermittentand availableno more than 12 hours per day. Althoughabout 70S of the rural population(those living in settlements of under 2,000 people) are providedby with public water supply,only about 401 have directhousehold connections.
2. Sewerage
12.12 About 801 of the urban and 25% of the rural populationare connected to public sewerage networks,which in most cases are combined systems also carryingstorm-water runoff. Effluentsare generallydischarged untreated in rivers and along the shorelines,and have caused serious water pollution. Water treatment works are now under construction in Greater Algiers. Government'sfirst priorityhas understandablybeen on water supply;however, improvedsewerage provisionand appropriatetreatment and reuse of effluent are becomingincreasingly serious concerns.
D. PublcInvestment PronTqw
12.13 Throughthe 1960'sand early 1970'sas Governmentsought to build up the economic base of the country through establishmentof heavy industry, investmentin basic infrastructurewas neglected. Systems laid down during the colonialperiod were not expandedor maintained,and water supply shortages became increasinglyserious as population,and specificallyurban population grew. Investmentsin water resource developmentfor irrigation were also neglected. In the late 1970's Governmentstrategy changed, and emphasiswas placed on water resource developmentand on improving basic infrastructure, whose inadequacies had caused serious difficulties for the continued developmentof industry, and for the urban population. The Table below illustrates the increasing importance attached to water and sewerage investmentsthrough successive plan periods. It may be noted that, despite a growth in the proportionof water in investmentsover the last 10 years, the current share, 7.41, still comparesmodestly with that in other countries. For example, the share of water and sewerage alone in public investment (excludingwater resourcesand irrigationdevelopment) is 9.31 in the current Plan for Turkey,and 101 for Tunisia. Investmentin water and sewerageas a proportionof overallpublic investmentis unlikelyto be reducedand may have to be increasedfurther, over the next plan period. - 190 -
Table XII.2: WATER SECTOR INVESTMENT
DA US$ S of Total PIP InvestmentPlan Billion Billion Investment
1974-70 18.5 3.7 3.9 1980-84 23.0 4.6 5.7 1985-89 41.0 8.9 7.4
Note: Includesirrigation and water resourcedevelopment.
12.14 Government'swater resource development strategy for the 1985-89 period is summarizedbelow:
(a) Rehabilitationof infrastructure; (b) Water resourceconservation; (c) Recoveryof the backlogin provisionof domesticwater supplies; (d) Growthof irrigableland area; (e) Mobilizationof new water resourcesand completionof land and water resource studies; and (f) Institutionalbuilding.
12.15 For water and seweragespecifically, the objectivesare:
(a) To improvewater storagecapacity; (b) To increasethe extent of the water distributionnetwork and number of householdconnections; (c) To improvedrinking water suppliesin sparselypopulated areas; (d) To satisfyindustrial needs; (e) To improvesewerage and sanitation,specially in low income areas and in big cities;and (f) To improvemanagement of water supplyand seweragesystems.
12.16 The principle water supply and sewerage projects in the 1985-89 Public InvestmentProgram total DA 9.5 billion. It should be noted that this figureexcludes costs of layingdown distributionsystems apart from the pipes themselves. The projects may thus be regarded as the "core" investmentsin potablewater production,treatment and transmission. The table below shows how expenditureon this type of project has evolved,over the previous plan periods.
Table XII.3: INVESTMENTIN WATER PRODUCTION,TREATMENT AND TRANSMISSION
Total Per Capita InvestmentPlan DA Billion US$ Billion DA Billion US$ Billion
1974-79 4.0 0.8 240 48 1980-84 6.0 1.2 300 60 1985-89 9.5 2.1 435 95 - 191 -
12.17 It will be noted that ongoing investmentsare concentratedin the Algiers, Oran and Constantine areas, while new investments are planned throughoutthe country. The main emphasis of the plan is on water supply, with rather little investment in sewerage (as is the case for most Mediterraneancountries). About 802 of investmentis for large projects,with 20% for small communitywater supply or sanitationprojects. Studies for 11 sewage treatment plants are included,but constructionof only 4 plants is envisagedin the currentplan. The World Bank is supportingor planning to supportmost of the major projectslisted in the InvestmentPlan, throughtwo projectscurrently underway (the AlgiersRegional Water Supply Project and the first National Water Supply and SewerageProject), and througha forthcoming project (the SecondNational Water Supply Project).
12.18 The principleprojects in the InvestmentPlan are described briefly below.
(a) The Algiers Regional Water Supply project (DA 3.3 billion) would improve supplies for 2.1 million people. It comprises the constructionand equippingof an impoundingdam and a diversiondam, constructionof a water treatment plant, transmissionpipelines, water meters and operationalequipment, and a leak detection and repairprogram, to MHEF.
(b) The Oran water supplyproject (DA 1.9 billion)would improvesupplies for about 800,000 people. It comprisesconstruction of a new surface productionsystem, a demineralizationplant and the rehabilitationof existingfacilities.
(c) The Constantineproject (DA 0.7 billion) would improve suppliesfor about 600,000 people. It comprises new water production work, expansion of the distributionnetwork, collectionand treatmentof waste water for reuse in irrigation.
(d) The Ain Zada-BenSetif project(DA 0.6 billion)would improvesupplies for 425,000 people in three cities and villages in Setif Wilaya province. It comprisesa dam (alreadyunder constructionand excluded from the costs), a treatmentplant, reservoir,pumping station and transmissionpipelines.
e) The Ain Dalia/Souk Ahras/Quenza project (DA 0.6 billion) would improvewater suppliesto four cities in the provincesof Guelmaand Tebessa with a current population of about 200,000; the project comprisesa dam (excludedfrom the projectcosts), treatmentplant, reservoirs,pumping station and transmissionlines.
f) ApproximatelyDA 4.1 billion are to be spent on 4,000 kms of ductile iron pipes and fittings,which would permit expansion of the water distributionnetwork in all 13 regionalwater authorityareas. Table X*l :
MAIN FEATURESOF WATERSUpPLY AND SEWERAGESYSTEK =N URRAMCENTERS
PD,tABLE_UATERSUPPLY _ Approximato Consumption _ R26rvatrs Number Avera. Nb. of % of Pop. X of Popul. Kird Population Consumption per capita capacity X of of People per with with Septic Other of Towns ('000) m3/day I/day 03 Consumption Connect. Connnection Sewerasp Tank Systems Sewerage
(1) (2) (3) (4)=L3U (5) (6)="IjxlOO (7) (8)Winxl.000 (9) (10) (11) (12) (2) (3) (7)
Constantine 500.0 57,456 115 50,000 87 22,000 22.7 91 - 9 Coebinate Annaba 273.0 45,000 165 24,200 54 14.040 19.4 95 - S Ccmbinate Sidi Bel Abes 178.9 15.000 84 19,000 127 S,500 21.0 - - - Setif 144.5 29,730 206 7.000 24 10,580 13.7 100 - - C'wbinate Batna 140.0 22,000 157 37,500 171 11.150 12.6 100 - - Combinate BisKra 105.5 13,750 130 11.800 86 12.270 8.6 80 - 20 Coibinate Tizi-Ouzou 10.S 19.980 197 l,SOO 58 4,500 22.6 100 - - Combinate Tilimcen 92.5 16,020 173 30.500 190 9,570 9.7 90 - 10 Combinate Bechar 80.4 6,300 78 9,200 146 9,320 8.6 70 11 19 Coabinate Ghardia 75.3 12,000 1S9 22.325 186 12,332 6.1 - 100 - - Arreridj 69.0 7,870 114 6,000 76 5,020 13.7 100 - CoMbinate Medea 66.4 9.480 143 B,750 92 6,600 10.1 100 - - conkinate ' Maghnia 58.5 7.,00 120 6,750 96 S.070 11.5 93 - 7 CQbinate ' El Eulua 57.1 2,000 35 3,000 150 4,520 12.6 100 - - Coabinate Toupgourt 53.0 2,880 54 1,000 3S 3.000 17.7 - - - - Laghouat 48.5 11,840 244 3,750 32 6,310 7.7 20 80 - Separate Jijel 36.0 8.600 239 14.400 167 4.770 7.5 80 5 1S Cobinate BouKhari 29.2 4,460 153 3.950 89 2.630 11.1 85 - 1S Combinate Chelghoun 26.0 530 20 2,000 377 - - 59 - 41 Combinate El 6olea 24.6 7,040 286 2,500 36 1,67S 14.7 - 45 SS - Bouagui 21.2 5.717 270 5.900 103 - - - 10 90 - Guerrara 19.8 3,760 190 400 11 3,200 6.2 SO SO - Separate Sidi-Aich 18.3 1,188 65 1,600 135 2,950 6.2 95 S - Combinate Aflou 17.9 2,800 1S6 8,000 286 2,030 8.8 - - - - Drean 16.3 749 46 1,000 134 1.280 12.7 60 - 40 Combinate Ghozlane 15.0 1.500 100 1,660 111 1.310 11.S 98 _ 2 Coabinate El Kala 12.5 2,280 182 3,850 169 1.020 12.3 - - - - Tindouf 12.1 900 74 1,4S0 161 770 15.7 40 60 - Combinate Aib Abid 7.4 300 41 300 100 610 12.1 90 - 10 Combinate Souteldja 6.3 1.037 165 1,450 140 470 13.4 81 - 19 CoInate Tablat S.1 1,176 231 450 38 720 7.1 100 - - separate SEni Abbes 3.9 840 215 1,370 163 690 5.7 94 6 - Csbinate Beni SI iune 3.2 618 193 560 91 630 S.1 100 - - Co3binate Igli 2.S 560 224 - - 430 5.8 100 - - Cimbinate El Roaria 2.1 344 164 200 58 283 7.4 100 - - Csobinate
61368/p8 (5,10) - 193 -
12.19 Severalof the projectsinclude construction of dams for multi-purpose use; where this is so, the cost of the dam has been excludedfrom the costs of the water supply project; a dam under constructionat Mexanna, for example, would regulate an estimated 174 M 3/year, of which 48 Mm3/year would be used for drinking watK.rby 1995 and the rest for irrigation. The projects would also supply water for surrounding villages; these too are the responsibilityof the regionalwater authorities.
12.20 Technical assistance is also envisaged in the PIP, for design and constructionsupervision, for strengtheningthe MHEF and the regional water authorities, and for training in water planning and in operationaland financialmanagement. A large staff training program is underway as is a study of current service levels in the sector. A study of the hydraulics constructionindustry is also being undertaken,to determinehow effectiveness can be improved. Feasibility studies for some future projects are also providedfor.
12.21 The Public Investment Program is thus comprehensiveand soundly balanced, comprising institutionbuilding as well as physical construction elements. Given the high priority attached to water, despite financing constraints caused by the reduction in oil revenues, the Government has decided not to reduce the financial allocation to the water sector. The programis, however,currently undergoing some modifications.
E. Conclusions and Recommendations for the Future
12.22 The water sector has undergonefundamental organizational and policy changes over the last 10 years, and Government has accorded a high priority to improvingwater and sewerage infrastructure. This priority is appropriate, given Algeria's rapidly growing population,and the backlog in provisionof water and sewerage infrastructurethat built up over the 1960's and 1970's. The followingmay be consideredin future planning:
1. Institutional Strengthen
12.23 Althoughthe institutionalframework is now appropriate,strengthening the 13 regional water authoritiesand AGEP to operate fully effectivelywill inevitably be a long-term process. Staff training programs need to continue through the next plan period, as do programs to assure adequate maintenance, improve leak detection and reduce unaccounted-forwater, improve metering, billing,financial management and accounting. 2. Cost Recovere and National Tariffs
12.24 Governmentpolicy is to set water and sewerage tariffs at a level sufficientto assure satisfactoryoperation and maintenance,debt service and a portion of new investments. Tariffs are also to be uniform nationwide to meet goals of social equity. Water production costs, however, vary very widelyover the country,depending on distance from the water source, terrain and populationdensities. As an example, of new projectsin the PIP, capital costs alone of water provision vary from US$1/m3 in Tamanrasset to - 194 -
US$0.08/m3 for Ain Dalia-SoukAhras. A substantialcross-subsidy from the low cost to the high cost water companieswill be necessary,to ensure that the revenues of high-cost companies are sufficient to meet their requirements.Detailed knowledge of the cost structuresof all companieswill be necessary to implement this policy effectively. Not all of the newly establishedcompanies yet have a sufficientlystrong financialmanagement to assess actual costs accurately. A particularemphasis will have to be placed on accountingand financeover the coming years, to assure that Government's two policygoals in this area are successfullyachieved.
3. Sewerake and Polution Contro
12.25 Priority in the PIP up to vow has rightly been on correcting deficiencies in water supply provision. Except in Algiers and Constantine, little or no provision has yet been made for treatment of waste water. Water quality,already poor, is likely to deterioraterapidly downstreamof rivers near major towns and along shorelines. River pollutioncould have serious health implicationswhere river water is used for irrigationof foodcropsor for domestic purposes. A further problem is the existing sewerage networks themselves,which are frequentlyantiquated and leaking, and will lead to increasingsewage ponding in streets and risk of contaminationof drinking water, unless rehabilitationmeasures are undertaken. Governmentis aware of the problem [para. 12.15 (e), (f)]. In the next plan period, increasing emphasiswill be placedon sewerage.
4. IntegratedWatershed Mngement
12.26 Government is well aware of the need for integrated management (para.12.14 (viii)]. Several dams under construction in the current investmentprogram are multi-purposedams, intendedfor irrigationas well as for domesticwater. Programsto treat wastewaterfor irrigationhave begun in Algiers and Constantine. Water master plans have been prepared for several river basins. Increasingcoordination with the Ministryof Agriculturewill be necessaryto ensure that good use is made of the water made available by these works, that appropriatecrops are cultivatedwith waste water and, in water-shortareas, that water conserving methods of irrigation are used. Combined projects between the MHEF and the Ministry of Agriculturemay be appropriate.
58563/plI 1-IS VL
4h is :I - l: is in~ ~ ~ ~ ~ ~= if I oill 9l of I"
II -- II
IlI ,V tO.4 r4Vol
.;ip V0LE MMEli ttURILWD 1969-1995 (3111.. of D64t1
1969 to10 1971 1972 973 1971 1m 1976 1977 1978 1979 1980 1981 1982 1983 1914 1995
AbImItwet 32sot. 2,427.02sU6.9 2 ,1B.t2.73.2 3419.7 4,967.0 5,314.8 3*353.5 6,737.4 7$040.0 9,845.5 I0I901.B HAIM2. 12MUM.4149547 17s892.2
FQsi PuOt 984.6 1069.2 1t,10.0 1,35.7? Wa53.0st1e.8 197U.5 2,190.1 2.504.9 2097.0 3600.0 nsa n na na na D
TOd /1 17*27.4 19.511.020192.1 24.69*9 28,494.0 4342.S 456551.35P243.9 "66201.9 81.009,1 102*230.0131.772.2 M1AN.8 16S.609.2189,728.4 2109943.2 236.27.4
&IutwIo 12.9 12.4 13.0 1.5 9.6 7.0 10.9 9.4 0.1 0.3 7.7 7.5 7.2 6.6 6.8 6.9 7.6
FOO uostu 5.7 5.5 5.8 5.5 5.4 3.6 3.9 3.9 3.8 3.5 3.5 na na na nOa na
Told n 190.0 lOOi 100.0 10.0 1t0.0 O1l00 100.0 1I0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 ftg~ 44.4 44.0 45.1 4.0 56.1 45.6 35.5 41.0 46.0 41.5 45.9
tld lm 2,986.7 32194. 3.363.6 3,374.6 3,10.4 3,419.7 4,254.9 3*881.6 3,600.2 4,046.6 4261.1 4#772.4 49958.5 4,616.4 Sts08.8 5,189.1 5.552.3
tO 1 3i,30H.5 35,314.9 32.372.9 41*160.9 43019.2 43U.42.5 45199.7 49,977.5 53.017.0 59,512.4 65M523.2 67a287.t 69.101.0 734000.3 79,591.9 82,994.8 87.861.0
06lutms 7.9 4.5 0.3 -7.9 10.0 24.4 -0.9 -7.2 12.4 5.3 12.0 3.9 -6.9 8.5 3.6 7.0
tl/ A 9.3 -8.4 27.3 4.5 1.9 3.1 10.4 6.3 12.2 10.1 2.7 2.7 5.6 7.7 5.6 5.9
Prim Duftas hwifftwo 741.2 75.4 77.8 83.3 07.9 100.0 116.7 t3U,9 148.7 166.5 184.0 206.3 219.Q :38.5 258.8 280.1 322.2 ham-88ctwe 51.2 53.4 60.6 57.8 64.5 100.0 99.1 110*7 123.1 133.9 154.1 195.0 220.6 226.1 240.2 252.4 265.0 Tbl Jl 53.4 55.4 62*4 S9,9 6.2 10.0 I1908 112.9 124.9 136.1 156.0 195.8 220.6 226.9 241.4 254.2 268.6 ktriftwW1 144.0 141.3 128.3 145.0 136.0 100.0 117.7 123.7 120.8 124.3 119.4 0OS.8 9.6 105.5 107.? 111.0 121.6 c1I -2.5 -9.2 13.0 -6.2 -26.5 17.7 5.0 -2.3 3.0 -4.0 -11.4 -5.8 5.9 2.1 3.0 9.6 lob, 100.0 97.5 80.6 300.1 93.9 69.1 01.3 83.4 9S.9 82.5 n5.473.0 68.8 72.9 74.4 76.6 84.0
'-4
DuwbI slv of n_lweA and A estimats n liuldiMSmmmm services. -198- Table 2V.2
aOIQLftI atL 6OFe=S am
196 1991~~~~~~~l 196 1963 1964 10
Is" Privt ftel Soial ptnvu Ttal soial pta Ttl Xcul Prwt tWoTlouiall Private Toal tal
ClU1S 1.111 IsUO1m3.111 tout 1.55 2: 1.112 1*456 26 944 18213 2W227 1t5 1604 2.69 2.06
_a 106OX 1344 46 72 l.ot 429 6 1tl6 334 s5 9" 360 647 1.00' 1.o. em that 46 260 m 435 193 618 3 145 5o 3o in 03 371 166 S39 rSl 2f 650 9 274 59? 671 28 577 u11 220 49 19 2 741 994 1194 Otl 103 60 16 66 64 15t a8 45 11 5 46 It 77 48 125 133 other I 1 2 0 2 24 0 4
99 39 126 77 39 116 Re 40 76 47 123 102 t Si 15 132
VEITE 69 134 22 76 IS5 2-9 68 145 213 7 153 224 72 160 23 2*2
Pottoe 35 41 76 33 so 83 29 4 74 32 4 77 32 40 n762 Tom 7 1 1t 5 11 16 5 it 16 5 11 16 3 10 13 13 N4ola 10 16 26 t 20 29 9 22 30 9 23 32 9 24 33 so otsa. 2 12 14 3 13 16 3 it 14 3 12 is 3 16 19 17 Otr 35 51 66 26 57 6s 23 5 79 2 62 64 24 78 102 90
IUN IstutLw6 26 6 32 16a 26 1s 7 22 14 9 22 1 11 22 24
Tomatoes 8 4 12 8 4 U 6 4 12 9 5 14 7 6 13 14 I 0 3 2 0 2 2 4 2 1 0 1 0 0 0 0 oubmn 15 2 17 6 4 12 s 3 0 4 3 7 4 5 9 10
1086810608 295 Its 410 269 146 41 26 40 413 290 260 55 302 23 as 46
PAM7(3 3 14 179 25 2 oi 23 9 120 16 62 t1o 1 112 1t (aao tallm. (30) (11) (11 (17) t(3) (70) (14) (I ("99I (12) (64) (76) (13) ) (111)
m E 171 26 197 17 2 19 167 29 9 27 US 149 31 16 (;.ec al 159 25 18 1 2 192 1 2 1 150 22 In 137 2a 165 144
Vim 1 1 t6 t4 16 6 146 16 164 141 13 154 127 17 144 e 14?o 17 164 143 7 16 14 1 159 as 1 120 17 137 11o
CamI 4a 4 4 43 3 46 a3 3 4 4a 44 a41 4 45 a ( tIWA 61 U9 US 59 11 176 17 120 177 56 139 t6 3 122 361 15
OMlt o 1 a 71 5 n 5 ts 7t 15 16 n7 6 n 4 67 n n flU lS 4 a 3 35 0 4 38 3 4 37 41 3 6 3 OMIUKIUEMs 67 3 to 73 34 107 63 10 a6 45 11 53 46 9
3.2nt3 me 2290 2,1 .62 2.0 2M 4.27 10w 27 3."9 173 2070 3.9 1M94 2437 425 4.24 (hC,me 39 13 8a a 74 It n 54 U14 S1 13 24 37 19.13 991 2.46 2.96? t14t46 2.24 SO= 2.1t b2.i 359 t1.2 2.46 37 SO9 267 3P25 S
03411*WA 309 4.420 7.?1 316 4.421 7 4 bW36h7 449 75 2. 431 72 2425 03 7.W7 7510
7 304X3 Ufa M J 31.i6 64 30 U59 4413.611 2t2 21 3U.55 317m
14351M 91 U hI 91 346 86 3!9 U I1 1 5 456 75 76
m.lin. WA 3.03 3.35 19.319 SIM3.93 3gwam63sow 39. 3.769Ptno1 hoem 398 . 1,416 40 3 hus Of 64Wtg 11g414 &VAdoj_. MIS:llI IM A.IER1AIIMItRalS WYFIII SCRCII
Igo~~~~~~~~~~~o 110 (Estinul,) 190 1931 1902 193?. 184 1952 Imia Ptint Tta sociala Priate T.1. Social Privat Tout Stial Prtvite Total Scild Friv-t total Total
tt11. t2 242l 923 90 t24 70 31 1*522 65 64 t1.298 S45 815 1,460 3.403
V011 0 927 326 434 760 273 360 633 228 270 492 242 344 586 Is34m u1 397 160 on5 so5 105 450 252 92 344 222 76 9 218t 82 300 542 IbltlUll >~27 S1 714 an3 J2 525 142 341 4B3 1T3 2?4 44U 141 361 S02 1eSI16 baa 72 is M1, 47 39 37 23 40 26 21 49 39 25 6$ III llIbr 3 2 S 2 1 3 2 0 : 12 0 1? 5 S \
9031 EW0 27 25 52 24 25 51 14 19 33 16 20 36 19 26 45 46
249 342 59 205 3 528 14t 266 415 163 32 491 195 325 520D 724 . mIoos 77 105 112 48 36 134 65 129 194 48 112 16 43 klaus 101 144 145 54 10 172 39 t40 t79 36 157 193 37 10 207 37 206 243 RAs 280 t17 101 Itt 16 110 .126 14 9 113 IS 1 121 13 182 19S 137
Tinetm, 43 3 95 it13 55 168 29 23 52 52 40 92 52 10 122 174 'U-' 4k0 (I'001)l 2.72 t25 2.117 2,451 210 2.66.9 1.411 103 1.514 1733 143 1,S7. 1.249 144 I1m3s lob gram 32 30 62 113 S 5 160 35 27 62 41 14 '7 39 40 79 140
Ftiling 422 355 39 255 28 .7 2ll5 230 amI lI ('66041 121 266 214 21t 123
- 2"1 195 206 182 IS3 100 FM8 3 66 6,9 baival lioistrv of Arlcultwo. 'Statistiaoi islelo'. 26798pt3 ALGERIE LIVESTOCKHMWERS BY SECTO ('000 head)
Cattle Pure bred SIieen Goat Camels Norses Paultry Total Qa Milk CM Total ]98Q
.Secteur sotialiste 91.2 43,5 43,5 1,001.8 20,1 0.7 8.9 .Secteuw prive LZALi9 8oo.2 62_ 12368.1 2.703.1 t4S.#1.026.8 TOTAL 1,3SS.1 843,7 lOS,5 13,369,9 2,723,2 149,2 1,035,7 1,500 61.000 .__ .- . -__. 1251 .Secteur socialiste 88,5 42,S 42,5 1,126,7 15,3 - 6.3 .Secteur prive 12a7. a1L 6S,Q 12.612.4 2,733.Z 12L 64 TOTAL 1.376,4 858,2 107,5 13,739,1 2,749,0 152,4 870.8 1,600 104,000
.-- : - - - nuz. .Secteur socialiste 93,B 42,6 42.6 1,271,1 14,0 - 5,2 .Secteur priv 1.407.4 S2. 6S,Q 14,227.7 2843.1 165.6 840 TOTAL 1,SO,2 894,6 108,6 15,498,8 2,857.1 SS,6 845,8 2.400 99.000
.Secteursocialiste 87,9 40,1 40.1 1,139,1 7,7 - 3.8 .Secteur prive LI. S4.8 S35.0 66.a 16.562.7 2-9S.S0 147.7 80f.1 TOTAL 1,641.9 975.1 106,1 17.701.8 2,962,7 147.7 809.9 2,500 113,000 1 - _ - S . - .
.Secteur socialiste 84,7 39,0 39,0 867.8 1.1 - 3,1 .Secteur prive 1.319.3 724.8 664 14.t96.7 2LO0.1 t25.4 646.8 TOTAL 1.404,0 763,8 105,. 15,664,5 2,809,2 125,4 649.8 6.800 114,000 '~~ - - - 198S .Secteur socialiste 27,0 27,0 .Secteur prive 734.8 215b TOTAL n.d. 761,8 103,0 n.d. n.d. n.d. n.d. 9,700 130.000
1986 (Privision) .Secteursocialiste 35.0 35,0 .Secteurprive 749.8 91 TOTAL n.d. 784,8 126,0 n.d. n.d. n.d. n.d. 13,500 165.000
sas (prvision) .Secteursocialiste 60 66,0 .SecteurprIve 286.8 IZL.l TOTAL n.d. 852.8 194,0 n.d. n.d. n.d. 550.0 15,500 220.000 - - - . -a - . ~~~~~~~~~~~H ~Sureas:HAP, Directionde la productionanimale, Direction de 1'aviculture,Statistiques agricoles.¢ .0 ALGEIA FIIMCAL VIELS IF NAINCRWS 1T FARMING SECTO (PJiNa)
IS80 1981 3982 19P3 1984 1985
Scaial Privat Total scial Private TOul Social Private Total Social Pr,vzte Totel Social Pevsate TotW1 Total aurn NM 745 656 60 700 5 63 63 522 56 6S 478 ,47 *72 532 582 974 Dowd .t M50 723m 05 793 574 728 672 634 62 673 439 5954 %8 488 557 936 kwl" 94 m s4 741 539 03 597 591 593 786 549 622 557 487 05 1-102 Sot. 6W9 633 675 547 60 573 544 Sit 531 456 500 76 506 521 S12 435
307 658 413 m33 4U6 440 241 475 337 211 426 293 1ot S10 288 348
Fati 7,114 8,341 7.776 60061 6I560 6,361 5.13B 5911 5.60 5.094 72M 6,377 6,094 8,125 7.222 11.677 tslus 11,000 8.750 9.57 9.600 7,813 8.375 13.00011.727 12.125 9,600 10.182 10.000 14P333 10.100 11.077 11,154 WM 5.400 6S5I6 6*143 4.313 7,000 6.72 4.500 7*136 6.433 4.211 73I 6h469 4.131 8.583 7.364 9.333 kIs 8,0S0 8U417 8.429 5.333 8a462 785 4.66? 9.000 8.701 S000 0.833 8.067 4.333 114375 10.263 8,059
Tue 8.125 7.500 7.9"7 14,125 133780 14800 3.625 5S750 4.333 5.778 8.000 6h5I 7429 Uu47 ".385 12,429 O
UIeuhlAIaI 1U 7 17 17 13 17 10 6 10 13 it 13 30 8 10 Ti 2,909 3.75 3,263 3,071 6.875 7,636 2.333 3M375 2,696 2M733 4.000 392?0 292.94 3636. 2.021 ctm t979 7.77 7.089 5,795 6*"3 6.50 6.333 6.053
34M 2,831 2,746 2#901 2-563 2,577 1.40B
FlU 1.69
Sme UlSita r t fsricultWt lStSUtlow fAricole.
s-I - 202- TablePage IV.6 1 ALIA AGRICULTURL.INPINPRICES, 1974s1980-6
NOIINAIPRICES 1974 19 19"1 1 13 19 19M 1
Fertilizers (DA/Ta)t) Amnitrate 349 349 349 349 349 482 706 "a 12-18-18 so 552 552 552 552 690 1.006 1.120 TSV 461 461 461 461 461 S90 39 1.000 04? 622 4t 622 622 622 779 1.111 1.250 Plant Pioctim 2.40 ( it) 0.44 0.44 0.44 0,44 0.44 6.1 11.3 13.5 Itanbto8 (MA/Ton) 441 441 441 441 441 5.184 9.011 104273 Fenthion4 (DA/i) 2#209 2.209 2.20 2.209 2.209 24.361 28.319 33.360
Eguipnt (DA/Unit) Tractor-65w 24.936 24.936 24.936 24.936 41tS00 41S00 51.876 64844 Cove"rcp 3.511 3.511 3511 3.511 9.625 8.625 8.625 10.781 Coebine 60.446 60.446 6Ot446 60.446 939000 939000 116.3751419468 Labor Min.salam /1 (DA/la,) 12.25 19.90 75.00 90.00
S"d Durus-select(DA/) 0.69 1.29 1.44 1.72 1.72 2.3 potato (lA/K) 0.93 t.80 3.50 oodBeanm (DA/Ks) 0.24 1.79. 1.79 2.20 2.20 3.08 Cramsplant (BA/Plant) 8.00 24.00 40.50 0.50 46.00 aliv plant (DA/Plant) 5.00 9,60 15.90 15.90 18.30
Feed/2 (DA/K) Bairy cow 0.39 0.62 0.93 0.93 1.07 1.82 Yountsteer 0.47 0.8 1.06 1.06 1.22 1.84 she (tattenin 0o.4 0,4 0.95 0.95 1.1 1.8
NominalPrice Index NOMINALINDICES - -- - a--- 1974 1910 1981 1982 1983 1984 11M 1986 Fertilizers Asonitrate 100 100 100 130 ;00 138 202 221 12-18-1 10.0 100 100 1t0 tO0 125 182 203 TSP 100 100 100 100 100 128 182 217 DAP 100 100 1t0 100 100 12S 179 201
Plant Protection 2.40 1t0 100 100 100 100 1.386 2.568 3.068 Nmnebe80 100 100 100 100 100 19321 2.043 2W2 Fenthion40 100 100 100 100 100 1.103 1.282 1.510
Eeuipmnt Tractor-65p 1oo 10 t00 100 166 166 208 260 Covet , j .. . 100. 10t. 100 1t0 246. 246 246 S07 Coabi 10too 100 10 100 14 154 193 234
LUbor an.soed, /1 t00 12 612 735 - 203 - Table IV.6 Page 2
DwumseIect 100 1IV 209 24 240 333 PetstO 1t0 194 376 BMed anto00 746 746 917 917 1,283 Oran plant 100 300 50 5 57s Oliveplant t00 192 318 318 360
FVsd/2 Dare cm 100 1s9 233 238 274 467 Towu estue 100 170 226 226 260 391 She. (fattIng) 100 100 23. 238 275 450
IAL INDICES/3 194 190 1981 1992 193 1904 1985
Ferti!*zsn Asorntrate 100 51 45 44 41 53 73 12-10818 100. 51 45 44 41 40 6 TSP 100 51 45 44 41 49 65 PAI 100 51 45 44 41 48 64
Plat Protiction 2.4D 100 51 45 44 41 532 922 nabeO too100 51 45 44 41 507 733 Fenthon40 10 51 45 44 41 424 460 EtPuiptt Tractor-6Shp 100 51 45 44 A8 64 75 Cover-crop 1OO S1 45 44 10.) 94 so Cobing 100 51 45 44 63 59 69
Labor un. shaPer/ . 100 . 03 235 264
ouros1eoct tOo0 95 85 96 89 Potato 100 1145 BroadDians 1t0 300 305 35. 329 crae p1mnt 1t0 153 1?4 182 OlivePlant too 90 122 114
Feed/2 Daircow 100 01 97 2 98 Tounestr t00 87 92 87 93 Show(tattmnirn) 100 51 9, 91 99
GDPDeflator (1974100) 100.0 194.4 220.3 229.7 244.9 260.4 278.6
Sercil Utnistre it Aiiutere mdUt est 1ste
/1 19750.1979 an 1 Pric Ietl wd. /2 1974. 1977#nd 1"4 Price levlg ue. A3 WeflateIUllna thIrVe1 3 Etlate - 204 - Table IV.7
1 ALGERIA PRODUCERPRICES OF CEREALS ANDGRAIN LEGUNES (Dinars/Kg)
1974/75 1975/76 1976/7 1977/781978/79 1979/80 1980/81 1981/82 199V83 1983/84 1984/85 NONINAL I DurunUhest 64 76 86 100 120 125 125 140 140 10 200 Breid Vheat 58 68 78 90 110 115 11S 130 130 IS0 190 Barlow 41 S0 55 60 80 80 80 80 80 100 140 cats 35 35 39 40 40 70 70 70 70 90 130 maizn 48 48 50 65 65 100 100 100 100 160 18S Rice(Grade2) 112 112 112 1S0 150 150 15O 150 150 160 Lentils Yellow 100 185 250 270 290 300 300 300 300 330 430 White 75 160 250 270 300 300 300 300 300 330 430 Grmet 120 205 270 270 290 300 300 300 300 330 430 Beans Grade1 160 205 270 290 290 300 300 300 300 330 430 Grade2 141 185 200 220 290 300 300 300 300 330 430
Source,$AP - 205 - Table IV.8 Page I 21 1 ALBRIA AICULTRL tY PRICES,19)4t1190w
1974 190 1981 1902 1903 1914 190 NOINLPRICES (e/WOx)
Duru.Wheat 54 125 125 140 140 160 200 Ifeadheat 48 115 t1S 130 130 150 190 Darlev 32 80 80 80 80 100 140 GrainLetms 90 300 300 300 300 330 430 (DA/Kg) Potatoe(In-season) 0.55 1.10 1.30 1*60 1.90 1.90 2.50 Onions 0,45 1.04 1.60 1.60 2.00 2.60 2,60 Tontou" (frmsh) 0.35 0.80 5.20
Orane 0*42 1.45 3,15 4,30 pates(branchette) 3.00 4.50 6.50 iO0.5 Olives(for oil) 0.38 1,31 1.37 1,54 (DA/01) Winmgrae (12-12.5) 3.75 7.70 13.60 (DA/Kg) Beet 5.60 15.00 18.00 23.50 24.00 25,00 iO.00 Laob 6.30 17.00 24.00 26.00 26.00 33.00 nilk 0.75 2.00 2.00 2,00 2.50 2.75 3.00
NOMINALINDICES 1974 1980 1981 1982 1903 1984 1995
DuNeWeat 100 231 7,1 259 259 296 370 BreadWhat 100 240 240 271 271 313 396 Darvie 100 250 250 250 250 313 438 OrainLegume O0 33 333 333 333 367 470
Potatoes (In-sason) 100 200 236 291 345 345 455 Onions 100 231 356 356 444 578 578 Totoes (fresh). 100 229 1486
Orang 100 345 750 1024 Dates(branchette) 100 1S0 217 350 Olie (foroil) 100 345 361 405
Wline wes(12-12.5) 100 205 363
Total Ctos 100 247 452
1ee 100to 268 321 420 429 446 536 Lamb 100 270 381 413 413 524 Milk 100 267 267 267 333 367 400 -206- Table IV.8 Paae 2
RA. inICES 1974 10 1981 1962 1983 1984 195 lXi ihu * 100 its 105 113 106 114 133 BrWdshat 100 122 109 118 111 120 142 balow 100 127 113 109 102 120 157 BrainLoguw 100 170 151 14 136 141 171 potos (I"es#) 100 102 107 127 141 133 163 Onto" 100 118 161 155 181 222 207 Toautom(trah) 100 116 571 OUtt Bardn Cros /1 100 111 276 Orawn 100 176 I8 367 Dato (branhett) 100 76 83 126 Olivs (top oil) 100 176 164 156 Vinegrape (12-12.5) 100 105 139 hot 100 136 146 183 175 171 192 Lamb 100 137 173 180 169 201 mlilk tOO 136 121 116 136 141 144 GDPDetlator (1974c1O) 100.0 196.4 220.3 229.7 244.9 260.' 278.6
SOuve NAPand amnk estiaates. - 207 - Table IV.9
2679Ep33
Public Investment.1980-1984 (DA million)
1980 1981 1982 1983 1984 Total
CentralGovernment
BudgetAppropriation 153 96 175 764 94 594 ActualExpenditures 49 20 111 41 78 299 Implementation 321 21% 631 541 83% 502
Institutes
BudgetAppropriation 83 121 126 67 128 525 ActualExpenditures 33 39 73 49 47 241 Implementation 40% 23% 592 732 371 462
Provinces
BudgetAppropriation 1,082 1,283 1,282 850 691 5,188 ActualExpenditures 480 537 748 741 649 3,155 Implementation 441 421 582 871 931 61S
CreditAllocation 1,410 .1,651 1,022 1,386 1,820 78,289 ActualExpenditures 749 1,1214 649 1,029 1,417 4,968 Implementation 531 ; 681 63% 74% 78b 681
Total (Budget+ Credit) 2,492 2,934 2 3n4 2,236 2,511 12,477 ACtualExpenditures 1,229 1,661 1,397 19770 2,066 8,122 Implementation 491 471 61% 79% 821 651
Offices
Credit.Allocation 1,517 1,431 1,877 1,631 1,533 79989 ActualExpenditures 501 471 715 1,236 1,603 4,525 Implementation 321 332 38% 761 1041 561
ConsolidatedInvestment
BudgetAppropriation 1,318 1,50O 1,583 993 913 6,307 ActualExpenditures 562 596 932 831 744 3,695 Implementation 431 401 591 841 85S 591
CreditAllocation 2,927 3,082 2,899 3,017 3,353 15,278 ActualExpenditures 1,250 1,595 1,364 2,265 3,019 9,493 Implementation 431 521 471 752 90% 621
Total (Budget+ Credit) 4,245 4,582 4,482 4,010 4,266 21,584 Actual.Expenditures 1,812 2,191 2,296 3,095 3,794 13,187 'Implementation. 431 481 5n7 77 891 611
Source: MAP, Direction G06urale des Etudes et do la Planification, Evaluation du Premier Plaa Quinqueual 1980-19849 Annexes,Tables 31 and 32. - 208 - Table IV.10
SOIIt(&OrWMROACIIS.1985
lIsl - -p !tn Crop
Price btput frek Vidi 6rm Usluc Area GrosIlalue 10/K) '603(-O) ('MS) (t/b ('f103) (V ('VOM) (0 (' 0 (V
Crop * 1,317 20291.1100l.0 301? 7.1 8,841.3 43,?
Cerea, 7300 2967 1.012 SA,0S.8 25. 31 1.0 S1.4 1.0
2.0- 1031 1061 0.975 2,01S.0 10.2 grewUet 1.9 592 579 0.936 ,I'm.8 S.1 Belly 1.4 13116 11 1.102 1,842.t 9.1 Ot 1.3 112 133I. 0.892 19S.6 0.?
6raLel3t 138.6 0.? km." 1.3 16 55 0.291 60.8 0.3 Pa 2.8 29 7 0,37? 79.8 0.t forap"Is 1.3 O" 46 1.814 1,103.7 5.5 10 21 21.6 2.1 tetable 5,416.6901 46.5 127 63.2 :,91 61.2
PoAtes 3.5 Itm2 62- 11.677 2,534.0 12.S Toeas 6.5 145 13 11.15t 942.5 4.7 bmwNhe s.5 137 16 Ls%3 7?3s. 3.? holot LS' 280 31 9.33 1,0.0 7.6 Other 6.S 561 Q0 7.013 3,646.5 18.0
6S t11 2 55.0 71s.0 3.S 2 1110.0 715.0 100.0
Ina tW 24 45.0 2.3 It 41.? 31Qt 66.8
Tgto 2.5 1M 1 12424 5.0 2.1 to 71.4 310.7 71.4 1o 2.5 3 3 1.O 1.5 0.d 0.0 Oil"06 L5 9 7 1.s MS 0LI 0O
TroCrops m ,328.Q I.S 124 32.7 1,619.6 728
Catrw 6.0 23t 31 ol5 1,3LI 6.l 38 I01.0 1,3600 110.0 llt SiS3.01 t0 0.6O M73.0 1.3 0.0 0. 0.0 StontFrut 3.0 so 66 0.Its, i5.0 a.? 24 36.4 59.5 6.1 pplesPm 1.0 175 Si 3.241 17S.0 0.1 7 Sl0 VA 5s.a Olte 3.S 100 71 1.fa 350.0l .7 3S 1. I31.5 1.3
Stines 149 371.5 4.8 4 2.B 93 9.8
Ulnyapu 1t.S 135 110 1.227 232. 1.0 0.Q 1 0 . Table p S 140t 32 4.375 77.a I.8 4 1. 16.3 1,ZS ?As1 6.0 1 2 0.3 6.0 o.a0.00.0 0.0
Sm: w - '209 -Table.IV.11
UER,IJUTPOI WELDS smTeotS,1973-N
Our.UheetbruUhutt rrtw Potatmes
frea output Yield &a Gipw. yeld ilres uWt Vitld fres Output Yield 0000) ("lOMX)(41M) VOWVOM) (44;'6 V' ) ('0) 4%) ('l0) VM0tt (nt/R;
1973 1,Sl 69 4S4 go 46 571 76 374 476 06460 s.. 1974 1,413 631 447 788 460 584 690 33t 490 97 646 6.? 1975 1 1,191 796 739 667 13 5 743 869 III 958 8.1 197 1,560 1,036 664 735 S94 80 932 589 632 113 776 5.3 i97 1,2 573 440 605 54 420 741 M 351 1978 1,34 70M 569 630 1 605 li6 39? 5X 99 682 6.9 19m 1,317 700 S3 620 373 9 80 4 565 77 Sol 6.5 1990 1,344 9276% m7270 s 5 S0s 96 79 00 76 S91 7.1 1911 .1,19S 76 636 610 40 m 071 Ss 603 0935 6.4 198 1,l19 633 566 520 3" 662 15 43 S93 7 415 S.6 1903 099 492 547 S03 290 S92 719 44? 622 77 491 6.4 198s 1,007 586 582 539 300 557 994 503 S06 7 SO 7.2 1985 1,062 1,034 974 579 54.2 336 1,194 1,316 1,102 6? "21 lt.?
SwrcM:197-79, in re Statistiqu deUlre 191 199-5 WlOP. - 210 - Table IV.12
2679Ep35
Inputand OutgutPrice Changes 1974-1985(Selected years)
1974 1980 1983 1984 l985 DA/Unit
InEuts
Fertilizers(NPK)(t) 552 552 .552 690 1,006 Prot. chemicals(2,4D)(m3) 437 437 437 6,066 1t,298 Machinery(65 BP tract)(Unit) 24,936 24,935 41,500 41,500 51,876 Indices (1974- 100)
Fertilizer 100 100 100 125 182 Protect.chemicals 100 100 100 1,388 2,585 Machinery 100 100 166 166 208 outputs DA/Unit
Cereals(durum)(ql) 54 125 140 160 200 Grain legumes(lentils)(ql) 90 300 300 330 430 Vegetables(potatoes)(kg) 0.55 1.10 1.90 1.90 .2.50 Fruit (oranges)(kg) 0.42 1.45 3.15 4.30 Meat (beef)(kg) 5.60 15 24 25 30
Indices(1974 - 100) Cereals 100 231 259 296 370 GrainLegumes . 100 333 333 367 478 Vegetables 100 200 345 345 455 Fruit 100 345 750 1,024 Meat 100 268 429 446 536
Source: MAP 1 6~~~~~~~~~~~~~~~~~~~~~~~~uLERI UWEOf CKnICALPLMT PMI£CTIOiBY FWXl.' SECTOR,sI9?980-1984.185
*Esteate) g 1979/80 198/'1 19S!:_ 1982/83 196q3?4 1984185
Solid (tots) Scial Private Total Social Private Total Social Private Total Social PTOta9ajt SocialPrivata total Local Private fwicade 10,070 5,464 15,534 8e121 5705 130826 :10.734 6,290 1?.024 6760 5,31? 12.079 5915 4P353 10,268 4547u 4.545 9.092 llerbicide 142 39 181 31 22 53 1-342 6 1,348 6 10 76 496 26 522 1.134. 138 1.272 lnesticide 4,314 4.184 8.498 2.446 3.31 5,826 '2104 2.693 4,797 2*295 3,397 5t692 29144 2.342 4,46 1,571 2205 3,76 Diveuse 464 176 640 2.?36 203 2,439 860 367 1.227 342 23? 581 182 130 312 168 63 231
Lieuid t(lOOl)
Fwi:cade 148 16 164 42 6 40 223 20 243 57 1 58 72 3 75 81 tB:! 263 lubscide 423 26 449 335 15 350 306 22221 328 263 452 25 477 612 22 634 lscticide 814 100 914 318 28 346 638 71 709 380 64 444 575 127 702 1789 83 1,872 Saversie 104 6 110 740 31 1 384 8 392 606 5 611 415 IS 430 362 50 412 . .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.
Croped Area 2,24029386 4,626 2.076 292024W278 1,875 2,08 3,963 1739 2.0.0 3809 1,8492.437 4,286 4,248 t'O01108). Solid (KtWH)
Fugicide 4.50 2.29 3.36 3.91 2.59 3.23 5.72 3.01 4.30 3.89 2.57 3,17 3.20 1.79 2.40 2.14 Herbicide 0.06 0.02 0.04 0.01 0.01 0.01 0.72 0.00 0.34 0.04 0.00 0.02 0.27 0.01 0.12 0.30 lscticide 1.93 1.75 1.84 1.18 1.53 1.36 1.12 1.29 1.21 1.32 1.64 1.49 1.16 0496 1.05 0.49 Diverse 0.21 0.07 0.14 14.08 0.09 0.57 0.46 0.18 0.31 0.20 0.12 0.15 0.10 0.05 0.07 0.05
Liuuid(Lt/Na)
Fwdicide 0,07 0.01 0.04 0.02 0.00 0.01 0.12 0.01 0,06 0.03 0.00 0.02 0.04 0.00 0.02 G." Herbicide 0.19 0.01 0.10 0*16 0.01 0.08 0.16 0.01 0.08 0.15 0.01 0.07 0,24 0.01 O.tl 015 si lnscticide 0.36 0.04 0.20 0.15 0.01 0.08 0.34 0.03 0.18 0.22 0.03 0.12 0.31 0.05 0.16 0.44 Diver. 0.05 0.00 0.02 0.36 0.01 0.18 0.20 0.00 0. 1o 0.35 0.00 0.16 0.22 0.01 0.10 0.10 a
Source: w ALGERIA FERtILIZERUSE BY FARMIN6 SECTORtl979/80-1984/85 (Tons) (Estimate) 1979/80 1980B/1 1981/82 1982/83 1983/84 1984/85
Product Social Private Total Social Private Total Social Private Total Social Private Total Social Private Total Social Private Total\
33.5-0- 889641 48,805 137t446 93936046.407 139.767 72,065 4598591179924 67,173 38,986 106,159 1OO99764t207 165t204 130,281 73902420330 21-04 176 258 434 2.233 507 29740 186 171 357 85 309 394 20 466 486 240 58 298 a 18-4-D 17,709 2t449 20,1S8 19#679 5464 25,143 14406 4,65319.059 10,132 3.54513677 7.735 2.440 10,175 23.891 129,96536846 0-46-0 73,323 309249103,572 779450 309336107.786 61,582 29,124 90,706 53,27230,334 83,606 240392 3,57627,968 964650 444320 140,970 12-18-18 36,706 50,847 87,553 48,468 58,044 106.512 33636 61w323 94,959 34,181 62.232 96,413 39,953 49.929 89,882 49466 91,793 141s259 0-20-25 41.776 4s635 46,411 427M 2.355 45,132 37.188 3t448 409636 24.511 3,594 28,105 24.392 3,576 27t968 11,687 2,20813,895 0-0-50: 370 152 522 591 75 666 532 B1 613 147 134 281 178 4 182 2.223 251 2P474
Nutrient N - 337324 22P946 60,270 41h103 23,602 64,705 30,810 2,tj95 54.405 28,446 210231 49,677 40,025 28.038 68,063 53,929 3 824 91.?753 P205 56,83725,121 81,958 61M95927,387 899346 48,44727#265 75,712 40.221 27,50567.726 26t848 12,470 39P318 66.686 43,313 1G,0i.1 120 179236 10,387 27,623 199714 119074 30.788 15,61711.941 279558 12.354 12f167 24,521 13.379 9,88323,262 12,93717.200 30,137 '
CropneArea 2,240 2W386 4r626 2,076 2,202 4,278 1,8t5 2M088 3,963 1.739 2O070 3,809 1,849 2.437 4,286 4,2* ('0100Ha)
Kg/Na N 16.7 9.6 13.0 19.9 10.7 15.1 16.4 11.3 13.7 16.4 10.3 13.0 21.6 11.5 15.9 '1.6 P205 25.4 10*5 17.7 29.8 12*4 20.9 25.a 13.1 19.1 23.1 13.3 17.8 14.5 5.1 9.2 25.97 1(20 W7 4A4 6.0 9.5 5.0 7.2 8.3 5.7 7.0 7*1 5.9 6.4 7.2 4.1 5.4 7.1
Total 49.7 24,5 36*7 59*1 28,2 43*2 50.6 30.1 39.8 46.6 29*4 37.3 43.4 20,7 30.5 54.6
Source: W
'at C
'- Is
Is
~isi ;S - 214 -
AsLVgt Wtes 4' Table5.1: Oruanizatio-aStructure of Litht Industries
WorkersEmployed Functions ProductS (84) Prd DizducttinonIarts Dewelangnt 2. Buildinamaterials and class Cements- brickworks Before 1982 SocieteNationale Matertaux de + + + + All products(cement. brickworks. Construction(SNNC) sanitaryware) . DISTRIMACM(Distribution) et 42 distri- All products(cement. brickworks, . buttonenterprises in the wilayas:EDINCO + + sanitaryware) . EDWC (researchand development) + -idem- . ERCC(cements& derivatives-CentralRes. + _ ) . ERCE 1,830 ( - Eastern ) + - - - )Ordinarycements, lime and plaster. 2.ZSO . ERCO ( "- Western ) - - - )specialcements, asbestos-cement 2.450 . ERCE ( - key exchanges) + - - - . EPRE (brickworks 635 - Eastern Region) +- - - ) 11,360 . EPRO - WWestern 0 ) + - - - )8ricks,silico-calcareous prod., tiles 1.235 .EPRC( " -Central 0 ) +- - - 2.840 . ECE (ceramics(san. ware-Eastern Region) + - - - )Sanitaryware, ECO ceramictiles 1,010 ( - U Western +)+ - _ ) 1,200 . ENA (marble) +- - - Marble
* Woodworks M
Before t982 -SocieteNationale Liege et Bots (SNLS) + + + All products SocieteNationale de Comnercialisation du bois brut (SOKACOS) + After 192 : Retrocessionof monopolyfrom SPNACOBto ENA8 + EntrepriseNationale Menuiserie 6ener. et de Prefabriques(ENMOP) + + ENAS + Generalwoodworks and prefab.materials S,820 ENATS + + + Furniture,Wood processing, 4.460 -EXAQS + Hardware,ironwork, Project EN-Liege + + + + Cork New industrial GGlass process Before 1982 -SocieteNationale Industrie Chimique + + + + (SNIC) After 1982 ENEVA + + SNiC + Glass and abrasiveproducts 1.820 0-l ECVE (ceramics-crockery)Eastern Res. + + SNIC ) 1,720 EVCO ( U U )-Western Reg.s S#IC - )Ceramics(crockery) 900
6485B/P4 Table5.: O anizatiolStuture ofLight Iustrie (cont')
WorkersEmpwlyed Functions Products (84)
Production ll 1trSNUhiMSRt ntLsL .eeon II.Cellulose Industries
. Societe Nationale des Industries de la Cellulose (SONIC) 0 + + A11 types of papers S.100 AfterL19I2 fENEPAC + + + Cardboard, . CENPAP + + + + Cellulose, pulp III. Food and TobaccoIndustries Before1982 . SNSEMPAC + + Flour and Semolina . SOGEDIA + + Glycerides. sugar. cannedfoods SNEMA + + + Mineral waters . OMACO(imports monopoly) + All food industries . CITA + + + + Tobaccoand matches After 192_ ENAPAL(imports monopolyunder the su- e + Glycerides. mineral water pervision of he Ministry of Comerce) ENIAL(Enterprise promoting food Snd.) + All food industries for development . ERIAD(Reg. enterprises of food ind.) t + ENIAL ENIAL Semolina, flour and derivatives Alger + + - - Semolina, flour and derivatives 2,975 - Tiaret + + - - Semolina, flour and derivatives 1,470 - Sidi Bel Abbes + + - - Semoltna. flour and derivatives 3.250 - S6tif + + - - Semolina, flour and derivatives 2.260 - Constantine + + - - Semolina, flour and derivatives 2.690 . ENCG(national comwanyof glycerides) + ENAPAL EWAL Edible oils, detergents. oil for industrial 4,030 use, Margarine . ERASucre (national sugar company) + ENAPAL ENAPAL Sugar and derivatives 1.670 . ENAJUC(national companyof cannedfoods + ENAPAL ENAPAL Juices and cannedfoods 2,370 and Juices) . EKAL(mineral waters of Alger) + EIAL ) 1.960 . EMIB(mineral waters of Batna) + + )ineral water, Deverages 615 . ElIS (mineral waters of Saida) + + ) 970 SNTOA(national companyof matchesand + + + + Tobacco,matches 4,330 tobacco)
64853/pS to Table5.1: oanizationalStructure ofLiaht Industries (cont')
WorkersEbvlyOd Functions Products (84)
EnnhttonDistibuton welolv
IV. TextileIndustries
Betore 1982 . SOSITEX + + + Textileproducts and works, clothing 35.000 . SNCOTEC(marketing co0pany) + Textile products and works, clothing After 1982 . ECEDI (national comany, which promotes + manufacturing Industries) .DISTRITEX(distribution and exports) + Textile products and works, clothing . COTITEX(regionalized) + _ _ _ Cotton yam 1,100 . S5ITEX + - - - Silk 1,025 . ELATEX + - - - Wool 3,660 . INDITEX + - - - Threads and yarns. cloth 4,040 ECOTEX(large share of the private +- - - Textile works, clothing 7,940 sector: 60 )
V. Leather and hides
Before 1982_ . SOWIPEC(national coauanyof leather A hides) + + + + After 1982 .DISTRICH(distribution) + DIEDIN . ENIPEC + _ _- Tannery, synthetiC leathers, footwear 2,310 .EMAC + _ _- leather goods, leather ganoents/clothing S,420 . DEUIMAS(private sector about 70Z) + _ _ ereational and sporting Industries
646S/p6 4 TablgS.2: Productsof Liaht Industries InstalledCapacity ad ouction
Installed Production Actual Capacity Target Target Production capacity Target Production Utilization Achievement for 1986 Taret for 1986 (1984) _ .V . 'a2teRat (Production) Installed
3 Cement (10 T) 10,000 58723 68750 4.776 5.539 48% 55% 74% 84% 82% 6.900 69% Bricks, etc. (10 3 T) 1,990 1.392 1,S86 1.513 1.661 76% 83% 81% 109% 105% 1,747 88% Ceramic tiles (103M2 ) 2,650 2,300 2.200 2,019 2,040 76% 76% 93% 88% 93% 2,300 87% Sanitary ware (103 T) 29 14 13 14,5 12 49% 39% 82% 05S% 90% 22 76% 3 2 General woodworking(10 M 3 4,448 2,171 3.604 904 954 35% 21% 81% 42% 26% 2,300 52% 119 115 119 129 Prefab. wood. 3compnts.(10 M2) 121 112% 108% 64% 112% to8% nd - Flat glass l00 T) 15 6 13 30 13 19% 85% 98% 48% 100% 26 173% itollowware (103 T) 76 42 47 41 43 54% 57% 45% 97% 92% Ss 72% Crockery (T) 18.100 12,870 16,300 9.690 10.250 55% 57% nd 75% 63% 12.900 71% Piseitingpaper (103T) 55 40 37 29 32 54% 78% 76% 73% 85% ) 3 Packing board (10 T) 89 67 69 64 67 72X 76% 75% 95% 98% )124 #614 3 I Semolina J10 T) 1.219 1,195 1,121 1,124 1,205 94% 99% 98% 94% 99% 1,240 102% Flour (10 T) 1,105 1.150 1.123 929 1,032 86% 93% 85s% 81% 92% 1,200 109% Edible oil l003T) 285 290 294 279 275 97% 97% 108% 96% 93% 280 99% 3 Soap l00 T) 82 74 73 77 77 94% 94% 9s% 103% 1OS% 74 90%X Margarine and fats (103T) 27 19 19 15 15 57% 57% 86% 81% 81S 19 70% Canned vegetables (103T) 27 4 3 3 2 12% 8% 18% 7S% 68% 24 29% Tomato Concentrate llO3T) is a 17 7 is 45X 71% ssx 81X 104X 34 227x 01 Mineral water (103H ) 1,610 1,190 1,294 1.054 1,129 66% 70% 73% 89% 87% 1,6s0 102% I Carbonated bev. (10 3 H2 ) 2,854 1,437 1,930 969 1.310 39% 46% 67% 67% 68% 2,300 81% Cigarettes (IO packets) 1.030 804 804 769 799 75% 77% - 96% 99% nd nd Cotton yarn (T) 34.020 29.355 29,264 24,636 27,194 72% 80% 71% 84% 93% 27.500 81% Wool yarn (T) 8,371 7,110 7,203 s.911 6.189 63% 66% 70% 83% 86% 9.600 102% Finished cotton fabrics (103 LM) 120,399 95,oss 89,696 86.254 86,963 72% 72% 81% 91% 97% 87,000 72a Finished wool fabrics (103 LM) 34,024 16,949 15.903 8,831 9.721 26% 29% 99X s2% 61% 13,000 38% Finished silk fabrics (103LM) 12,544 8,202 9,102 8,663 9,987 69% 73% - 106X 110% 17.000 136% Blankets (103) 1.459 1,319 1,108 1.509 1.371 103% 94% 84% 114% 124% 1,400 96% Shirts (103) 3,379 3,165 2,925 2.355 2.654 62% 79% 89% 74% 91% 1.800 53% Footwear save shoes (l03pairs) 4,106 2,892 2,956 2,795 3.112 70% 76% 70 87% OS% 4.00 110% Shoes (t03 pairs) 18,783 18,281 18,783 16,780 18,138 92% 97% 99% 92% 97% 21,000 112% 3 Fancy leather goods (10 pieces) 2.125 2,031 2,125 2,508 3,058 124% 144% 104% 124% 144% 4.100 193%
Source: Ministry of Light Industry
04/28/87 . 64858, p. 7
Ca Table5.3: PublicSector: N Lrof [loveesRunerations. Value-added,Prouctivity of Labor 5.3.1Buildino materials (cennt, bricks etc.... sanitary ware)
Indices 80 81 82 83 84 8S 80 81 82 83 84 85
(1) Number of employees 16,277 15,897 17,010 17,376 18,013 - 100 98 0OS 107 111 - (2) Salaries(1OI¶A) 481 543 682 564 609 - 100 113 142 117 127 - (3) Salaryper capita (1030A) 29 34 40 32 33 - 100 116 136 110 115 - 2.717 - 100 107 104 142 154 - (4) Productions 2 ld (106DA) 1.766 1,883 2,844 2,506 (S) Turnover(10 DAI 1,815 1,946 1,933 2,663 2,897 - 100 107 106 144 160 - (6) Value-added(10'DA) 1.338 1.314 1,209 1,714 1,794 - 100 98 90 121 134 - (7) Productivityof labor (6)/(1)(103 0A) 82.2 82.7 71 "9,9 "9,6 - 100 101 87 120 121 - (8) Investments(106DA) 781 942 791 629 838 - 100 121 101 79 106 - (9) K(*) (106DA) 11.209 12.151 12,942 13.571 14,409 - 100 108 115 121 129 - (10) K/L (9)/(1)(103DA) 689 764 761 781 800 - 100 111 110 113 116 -
04/28/87 64858, p.8 Table5.3: Public Sector: o rgf Wogs fjgtiM. Valueadded.ProdictivitY ofLab S.3.2S
Indices g0 8I at 83 84 as____ s0 81 82 83 84 85
(1) Number of e uloyees 30,413 11.657 12,504 12.381 13.218 - 100 112 120 123 127 - (2) Salaries (10 DA) 3 783 346 434 454 474 _ 100 106 132 139 145 - (3) Salary per capita (10DA) 27 29 34 35 35 - 100 94 110 113 114 - (4) Productionsold (1050A) 2.504 1,106 1.395 1,901 1.880 - 100 134 169 231 228 - (s) Turnover(106A M 841 1.128 1.416 1.931 1.898 - 100 134 168 230 226 - (6) Value-added(lobDOA 521 650 901 1,209 1,188 - 100 12S 173 232 288 _ (7) VA/L (103 OA) So 56 72 94 89 - 100 112 144 188 170 - (8) Investments(1060A) 504 706 687 303 214 - 100 140 136 51 42 - (9) KWs)(10 60A) 1.3S6 2,062 3 2.749 3,052 3.266 - 100 1S2 203 22S 240 - (10) K/L = (9)/(1)(1ODA) 130 176 219 237 247 - 100 135 162 182 190 -
04/28/87 648S8,p.9 o
. l Mii S.3:Public Sector: Nlber of ENi Rmr tionS. Value-added.ProductivitY of Labo 5.3.3£LA5
Indices 80 81 82 83 84 8S 80 81 82 83 84 8s
(1) Numberof employees 2.315 3,017 4,088 4,885 5.358 - 100 130 177 211 231 - - - (2) Salaries (10DA) - - - 169 187 - - - - per capita (1030A) 25 28 31 30 35 - 100 111 107 122 124 - (3) Salary 360 - (4) Production sold (10%0A) 135 164 212 395 487 - 100 122 157 292 (5) t106 OA) 135 166 217 403 491 - 100 122 160 298 363 - Turnover 470 540 - (6) Value-ad ed(lO'DA) 78 119 1S9 364 29S - 100 154 206 33 39 39 75 73 - 100 187 187 227 212 - (7) VA/L t10DA) - (8) Investents (10'OA) 11 8,4 17 34 6- - - - - (9) KS ) (Joe 0A) 262 270 287 321 327 - - 103 110 123 124 - 3 62 S8 54 - (10) K/L = (9)/(1)(10 DA) 113 89 70 66 61 - 100 79
04/28/87 64858. p.10
'*C X I,- Table5.3: Public Setor: lmber of fle s RM ratios. Vaue-added.Poutivity of Labor 5.3.4Cellulos
Indices S0 81 82 83 84 65
80 81 82 83 84 85
(1) NMber of eloyees 5.679 5.682 5,777 5.861 s,97 - 100 100 (2) Salaries ( O DA) 102 103 105 - 3 188 206 235 236 242 - 100 110 12S (3) Salary per capita (10 DA) 125 129 - 27 33 36 40 40 - 100 109 121 121 (4) Production s 121 - 2 ld (00OA) 446 535 549 S85 713 - 100 (5) Turnover (10 DA) 120 123 131 160 - 578 672 698 724 921 - 100 116 121 (6) Value-added (IOSO) 134 148 - 209 216 252 243 308 - 100 103 121 116 148 (7) VA/L (103 OA) 36 38 - 44 41 51 - 100 106 122 114 142 - (8) Investments (100A) 123 39 6 4S 70 55 - 100 32 37 57 4S - (9) K(*) (10 0A) 851 890 935 3 1.005 1060 - 100 0OS 110 118 125 - (10) K/L (9)/(1)(10 0A) 1so 157 162 171 177 - 100 105 108 114 118 -
04/28/87 64858. p.11
;I1 Table5.3: PblicSector: NALer of Eloyees.RMLneratio. Valueaded. Productivit of r 5.3.5Aricuitural and Food Industries. Tobacco, thes talyceride. suaar. canned foods. iuices. mineral water. tobacco. matches)
Indices 80 81 82 83 84 -5 ______o80 81 8 83 84 85
(1) Number of e aloyoos 19.692 20.181 20.290 18,756 19.736 - 100 102 103 9S 100 - (2) Salaries O11OAA) 587 609 691 680 707 - 100 104 118 116 120 - 3 (3) Salary per capita l00DA) 28 28 33 35 35 - 100 100 118 125 125 - (4) Production sold (10A) 3,364 3,789 3,972 5,246 6,254 - 100 113 118 156 186 - (5) Turnover (10 DA) 3,86S 4.353 4,589 5.666 6.454 - 100 113 119 147 167 - (6) Value-added (t00A) 2.462 3.211 2,914 3,532 4,190 - 100 130 118 143 170 - (7) VAJL (100 DA) 125 1S9 144 188 212 - 100 127 115 150 170 -
04/28/87 64858, p.12
0*
.J1 Table V.3 -224 - Page 6
Table5.3: Public Sector Nufflber ofEmloyees. Remunerations. Value-added, Productivity ofLabor 5.3.6.AF.I. (ERIAD)Semolina-Flour
80 81 82 83 84 85
(1) Numberof employees 22,567 23,156 25,428 25569 25,704 - 6 (2) Salaries (10 DA) 704 781 891 1,044 1,040 - (3) Salary per capita (1030A) 31 34 35 38 38 6 - (4) Production sold (10 DA) - - - 3,127 3,454 - (5) Turnover (106DA) - - - 4,397 4,895 6 - (6) Value-added (100A) - - - 805 1,159 - (7) Value-addedper capita . - - 31 45 -
04/29/87 64859, p.l3 -225 - Table V.3 Page- 7
Table5W3: Public Sector: Nuber ofEmployees. Remunerations. Value-added. Productivity ofLabor
5.3.7.Total A.F.I. - Tobacco-Matches
80 81 82 83 84 85
Investments _ 6 . Value (IO DA) 1.646 1,S84 1,678 972 914 - . Indexes 100 96 102 59 56 - K (') 8 . Value (10OA) 6,170 7,754 9,432 10,404 11,318 - . Indexes 100 126 154 169 183 - K/L * Value (106DA) 146 179 206 235 249 _ . Indexes 100 123 141 161 170
Sorce: Ministry of Light Industries The value used to approximatethe capital stock is the cumulativevalue of public investmentsin the subsector at year-end 1979, plus the sum of annual public investmentflows in the subsector.
04/29/87 64851.p.14 Table5.3: PublicSector: NALer of Enloees.rm tions.Value-added. Produtivity ofLabor 5.3.8.Textil-Leater
I Indices 80 81 82 83 84 85 80 81 82 83 84 85
t1) Number of emuloYces 30,413 35,546 40,257 45,000 46,917 - 100 117 132 148 154 - I (2) Salaries(10 DA) 783 891 1,138 1,243 1.618 - 100 114 145 159 207 - I (3) Salary per capita (103DA) 27 27 30 31 35 - 100 100 111 115 130 - *4) Productionsold (106DA) 2.504 2.966 6 3.246 4.703 5.867 - 100 118 130 188 234 - .51 Turnover(IO DAa 2.566 3,013 3.334 4,750 6,557 - 100 117 130 185 255 - tb) Value-added(10 DA) 1,888 2.238 2.396 3.157 3 2.806 - 100 119 127 167 149 - (7) Value-addedper capita (10 DA) 62 63 60 70 60 - 100 102 97 113 97 - (8) Investments(10 6 0A) 6 2,338 1.690 988 808 657 - 100 72 42 35 28 - I (9) K(*) (10 DA) 9.254 10.944 11,932 12.740 13.397 - 100 3 118 129 138 144 - I (10[ K/L (10 DA) 304 308 296 283 286 - 100 101 97 93 94 -
04/29/87 6485B. p.l5
I*C a.¢ - 227 -
B.Heavy Wdtries I
I
I
P^ 0
Al V-- - 228 - TableV.4 Page I Table5.4:List of Enterprises undrthe Supervision ofthe Ministry ofHeavy hinstries
Enterprise HeadOffice MainActivities 1. - Minesand Ouarries 11.FERPHOS TEtESSA Productionand marketing of ironand phosphates 12.INORF ALGER Production,import-export and distributionof non-ferrousmetals, usable substances 13.EXASEL AIN SFARA(CNE) Productionand marketing of salt 14.ERE" BOUHEROES Miningexploration 15.EOENIMES ALGER Studiesand worksfor the mining sector 2. - Imr and Sta)1 21.SIOER ANNABA Production.marketing, imports and exports of iron ironand steelproducts and semi-finishedproducts 22.ENTPL ORAN Productionof "longproducts" (welded wireworks. extendedmetals, electrode soldering ... ) 23.ENTIPP (ANADIB) ALGER Productionof tubesfor hydrocarbons, irrigation 24.EN3 ALGER Productionof metal crates 25.RECUP./OUEST ORAN ) ) Reprocessingof ferrous and non-ferrous metals. 26. RECUP./CENTRE ALGER) non-metallicmaterials, lead ... Exports 27.RECUP/EST ANNABA) 28.SIOAL ALGER Distributionof technical (medical) equipment andassembly of blowtorches 29.PROSIOER ANNABA Productionof sheetmetal TN. 40, vault-panelsand crashbarriers, sandwich panels, assembly of buildingmaterials 3. - MechanicalIndustries 31.SNVI ROUIBA Production,imports and marketing of vehiclesfor industrialuse and industrialpanel body 32. PFM BERROUAGNIA Productionof hydraulicmaterials (sluices-pumps) 33.PFMD CONSTANTINE Productionof machinetools and accessories 34. PVP ARZEW Production of cyclesand motor cycles Guelma 35. PlA SIDI BELABBES Prouductionand imports of agriculturalequipment 36. B.C.R. SETIF Nut-and-boltworks, screw-cutting industry, tap trade. cutleryindustry 37. ENWP AIN SHARA(cru) Production.import and marketing of materialsused for publicworks 38. A.M.C. EL EULMA Productionof controland measure instruments (ex.SONELGAZ) (water,gas and electricitymeters) 4. - NatalIndustries 41.FERROVIAL ANNABA Constructionof railway material (Annaba) 42. ENCC aRAm Productionof structuralsteel and boilerwork 43.BATtKETAL AtM DEFLA Production, hoisting,structural steel, industrialbuildings 44. PRONETAL ALGER Productionof metalequipment (sanitary ware, furniture, radiators) 45.ENF TIARET Productionof caststeel. boilerwork (smelting works) S. - n ctrigal and EleCtrnics Industry 51. ENICAB ALGER Production of electricand telephone cables 52. EMEL ALGER Productionof electronic equipment,electric supply service(electrification) 53. EKIEH TIZIOUZOU Productionof miscellaneoushousehold items and incandescentlamps 54. ENASC ALGER Supplying(imports), installation and repair of elevators 5S.ENIE SIOI BELAOBES Productionof electronicappliances for general consumer use SG.EUTC TLEMCEN Productionof telecoamnicationsequipment (telephoneexchanges and stations) 57. EMPEC SETIF Productionof batteriesand accumulators
04/30/87 64858, p.17 £TUDES ET TRAVAUX. a) Etudes et d'engineering g6n6r2l des projcts al. SIDEM ALGER . Ex6cution d'6tudes de maturation It s2. ENSID ANNABA . . i ptojets, supervision travaux), g6otechniqur a3. SERSID ORAN . Engineering (dtudes, gestion de PMI et PME. a4. SONARIC TENES . Conception et rCalisation a5. ENEtt ALGCR . Engineering mdcanique Jijel. a6. SIDJI JIJEL . Developpement projet sid6rurgique b) Travaux genie-civil, batiments, routes et voies ferrdes bl. GENISIDER KHROUB(Cne) . lerrassements, b2. COSIDER ALGER . Tcrrassements,G6nie-civil. batiment industriel, tlectricite et tuyau- b3. TRAVOSIDER ORAN . Terrassements, genie-civil, terie industrielles et de batiment, montage charpente, logement. couverture et bardagc, naterioux de c3ns- b4. REALISDER ANNABA . Terrassements, g6nie-civil, truction, logements. genie-civil, VRD. b5. ERI ALGER . lerrassements,
-AUTRES Fnrmotion - Electricit6 Electronique 71. ENCLC ve .* Institut National de 72. INGM BOU MERDES . de Recherebes on Mnintcnonce 73. INMA AL"Ck . InstiLut National d'Etudes et inrormatiques 74. CESI Al.GER . Centre d't.udes ct systhmes et information du sectcur MILO. 75. CENIDIL ALGCER . Centre de documentation
13-3cr I0C TableauSS Capac,t6sr#elles do prodactmnde biensdo lmxustnelourde (source tild).
Produets 1043T) ciUs 15179 WA*itft 1985 Accrlaoseot CsJ Ob fectia 87 Total pr 987 l1uod.Fer(I0~~~~~3T) 4615 4615 -11 ______450 Zinc(10*3r)______291 ______.__ 2
(10*3T)Phos(l>n) I ~~~~~~481566 1218 651 ____ 1~ ~31 165221 Sw1-03 3 40 2201S7I__ I221 Rond6bt*tN103234) 2 75 44514 451 f0rletafl(10631 351 ____661_ 1 1 ____I__ ch wudfr(O3T_) 7701 13 _ _ _ _ I W n(Uits)3 83S - Cwni__ns______6700 _ _ _ _ 6__ )t - ~ ISS 4 _001 _____ 4 Corw1 nI GolarsC17 6 23~ 19 17925t051 135IS Ioteurs ~~~~~1 6s6 1201 43t7tI 13 TrscteursAar.(, 4 620 1 ______7 1,10" sKNbAtteusesCi 371 __ __ _0__ __ 4 ______miotocbt 1 2767 47434 2 4 54 CYcww 13 4S61 7787 978 6478 ponms 58)1 3360 28 ______3651 Vanrmseft raccordsC' 6601 66 ______I 6691 Rcbinett*er'T) 1 72117201______10 froiseuses(Uhnt6s) I I 1 I Tourts(-) ' 2501 25 C rtews6 lec (1) 240 001 240 Cornteum au(-) 13000 .. 130 C m teurs g-) 30 ______30 Cableslect I 0M3T) 2 24 S 47 Cables t ~ .C*) ______31______21______Rc t.radiosCUnit") 235 001 235 109 6 350 TV noir et blnc(t' 1000001 300oa 40 100 44000 TV couteul') 26301 90 50 1(0# 240000 Centrax twlEh(I 68 00 8800_1__ 68000 Postes tIli ( ) 1400 14000 _ 1400 Ritngdmte trsrl 36" 135 __ . 282201 417 3 C_SW&*M7 18N4 93 23 33 150O Chstote;;;ba 1 202 12 im-12 ______Table V.6 - 231 -
M.~ ~~it torF- 1'-' 1>*'1' § S 1 ~~~il-l1'ii Ii 11!
ii8;~~~~~I 1I 'I> I -232- Table V.7
TabM=5.7 Cometm d. risulta [SID84-85 (1056in).
ICPTE.RESULTAT. TOTALMILD. 1984 TOTALMILD. 1985 margecomerscial_ 3 127 3487 producUonvue 17093 21 780 consomm.Inerm.blens 7938 8 358 consomm.interm.services 1 915 2041 orstaUonsfournles 3501 3622 VALEURAJOUTEE 15236 17751 esIme 5791 7001 ilmpotsot ts 4477 4 689 frets Inncies 2069 2 228 amortlssementsSt orov. 2872 2907 RESULTATEXPLOITATION 1 117 1 338 chars horsoxololteton 4317 3 116 produitsNho ploitation 2001 1469 RIRSULTATBRUTEXERCICE -1199 -310 ImpatsX wfixca 1 542 1 304 RESULTATNET EXERCICE -2741 -1 613
MILD.Comptes de r6ultsts.
RtNet Rlt.rut. c AmorUss. Fg] Frals fln. II
Persoel V-5 _ 0ou50
-5 °°° ° S 000 10 000 15 000 200COO -233 - Table V.8
Tablea5.8 Comptesde r6sultatA branche MINES 84-85. (10*6 Din)
fCPTE.RESULTAT. MINES1984 MINES1985 margecommerciale | 27 37 dproductionvuend 735 903 consomm.Intermkd.blens 18 179 consomm.mlt. srces 142 147 1restations fourni,e,s 31 -31 ,VALE*URAJOUTEE 498 65ta personnel 3521 3961 'impotset taxes 491 6~7 ,fraisfinanciers J 751 130 Iamortissementset prov. 113 1ll iRESULTATEXPLOITATION -69 -20 chargeshors exploitation 65 85 produltshors exploltation 39 31 R'ESULTATBRi'T EXERCICE 9 -74 Impots/ Bin6fices _ 5 64 RESULTATNET EXERCICE -150l -138
MINES.Comptesder6sultats.
Rt.Net Rt.Brut AmorUss. 194 Fraistin. 1
Impots Personnel...... v.ajouth. r _Il200 30IF 50
-200 -100 0 100 200 300 400 500 600 700 - 234 - Table V.9
,CPtE. RESULTAT. SIDERUR61E84 SIDERUR61E85 margecommerciale 0161__2 141 rodU^ctnvendue 5_700 8_54 consomm.intermtdbiens 3 097 3673 consomm.int. services 783 764 restationsfournles 121 127 VALEURAJOUTEE 4 043 5634 pIot Z 1 522 2099 impotset taxes 1 1 358 1524 'frasfinanciers 938 543 j tssementsS_V._ 1 144 1 065 RESULTATEXPLOITATION -270 405 charrgeshors exploitation 1534 598 produitshors exploibttion , 610 27 'RESULTATBRUTEXERCICE -1 195 -167 IlmpIs / 8llfices 3061 20_ 'RESULTATNET EXERCICE 1 -1 501 5_61
SIDERURGIE.Comptesderesultats.
Rt.Net Rt.Brut Amortiss. Fralsfin. 1 Impots 1985 Personnel V-2jouti0 5
-2 000 -1 000 O 1 000 2 000 3 000 4 000 5 000 6 000 - 235 - Table V.10
TAbleau5.10 Cointes do r6sultats branche C. MfTAtIOISMA,85 (1006 DID)
CPTE.RESULTAT. CNMETALLIJES.84 CNMTALLIQS.85 margoconmerciale 68 131 producUonve4 1 798 2871 consomm.intmd.biens 673g 972 consom.It. SeVIces 374 446 Drstatlonsfounies 775F 615 VALEURAJOUTEE 1 7551 2 20 Lrsonneml 7011 91 imootset taxes3 52 frais nnanciers 1471 173 amorUssomentset prov. 1 318 363 RESULTATEXPLOITATION 239 300 chargg horsexplolWtaon 378 511 roduitshors exploittion 135 16 RESULTATBRUT EXERCICE -5 -47 ImoBtst Bb*flce 171 196 RESULTATNETEXERCICE _-175 -242
CN.METALLIUJS.Comptes de r6sultats.
At.Nete Rt.Bruto Amortiss. Freistin. impfts 198 Persomel V.500 0 0 0
-50O O 500 I 000 I 500 2 000 2 500 - 236 - Table V.11
TabjeaS.11 CgMota di rhsutIt braNchMECNlaJ 84-85. 16i
jCPTE.RESULTAT. MECANIOJE1984 MECANIME1985 Mras comenrcials 1366 1122 oproductionveNo 6058 6 4456 consomm.lnterm6dblens 2 561 1982 1consomm.int. services 300 308 Iprestatlonsfournies 108 103 VALEURAJOUTEE 5 21 5 360 personnel 1664 1917 Iimpotset taxes 1726 1626 tfrah financiers 545 1100 amortlssnkt et Drov.87 84< 1EULA EXPLITATION _7321 211 ,chareshors exploitation 1 492 1371 1pvoduitshors exploitstion 916 02 RESULTATBRUT EXERCICE 156 -263 Impots/ Benfce 715 486 IRESULTATNETEXERCICE -563 -745
MECANlIOE.Comptesderhsultats
Rt.Net Rt.Brut X Amortiss. 1 Fraisfnn. = Imp6ts II ! fi !90 Personnel V.a-0ut0e0M1000 2 30 4 5 6000 -I1000 0 1000 2 000 3 000 4 000 5 000 6 000 - 237 - Table V.12
tAbtemJ. 12 CaMotede tisultat branchCU. ELECIRI(IJ-LCTROI(E 84-85. (106 Dn
PIRESI tT ELEC-ELECTRON.84 ELEC-ELECTRON.8S mar commoclslo 152 ______57 priduefonvenduo . 2801 3018 cosom. Intdblo _ 1 130 1204 consom.int. serves i 93 119 pstatuonsfoirnios 5806 659 VALEURAIOUTEE 2361 2318 .ersonnl 739 894 Imootst taxes 751 721 frausfimacter 302 26 amrtUssmntset rov. 265 294 RESULTATEXPOITATION 430 178 1choes hors mioltaUtlon 722 484 oodultshws xploitatlon 210 339 RESULTATBRUT EXERCICE -82 34 lmd6ts/ BOhfIces 256 223 IRESULTATNETEXERCICE 1 -338 -189
ELEC.ELECTRON.Compteder6sultats
Rt.Net RtBrut J Amorss. 1984 Frl (n 1984 ImpOts Personnel
- 0 50 1000 15002000 2500 - -O~~~~~~~~~~~~~~~O
us
z to~~~~~~~~~~d z~~~~~~~~~~LMR 1teLA#J -tD,.. e 10 V II - IsI 21
It % II i001 4 -§w~A OV - 240 -
Annexes
Attachment1
sensitivityof ElectricityLoad Forecasts(1989)
Sigh Voltage MediumVoltage Low Voltage Transmissionand DistributionLoss4s Summry
StatisticalTables
VIII.l. EnergyBalance - SONELGAZinterconnected system, 1975-85 VIII.Z. EnergyBalance - SONELGAZisolated systems, 1975-85 VIII.3. NationalGeneration and SONELGAZ'osses, 1975-85 VIII.4. ElectricitySales and Numberof Consumers,1975-85 VIII.5. Structureof Total ElectricitySales by VoltageLevel, 1975-85 VIII.6. High VoltageElectricity Sales by EconomicSector, 1975-85 VIII.7. MediumVoltage Electricity Sales by EconomicSector, 1975-85 VIII.8. Structureof HV & NV ElectricitySales by Sector,1975-85 VIII.9. LV ElectricitySales, Consumers and SpecificConsumption, 1975-85 VIII.10.Electricity Consumption and GDP, 1975-85 VIII.ll.Fuel Efficiencyof SONELGAZThermal Power Plant, 1975-85 VIII.12.Capacity Balance - SONELGAZinterconnected system, 1975-85 VII.13. InstalledCapacity - SONELGAZisolated systems, 1975-85 VIII.14.Electricity Transmission and DistributionCapacity, 1975-85 VIII.15.Energy Balance - SONELGAZnatural gas operations,1975-85 VIII.16.Structure of SONELGAZnatural gas operations,1975-85 VIII.17. SONELGAZInvestment Expenditure (current DA), 1979-85 VIII.18.Structure of SONELGAZInvestment Expenditure, 1979-85 VIir.19.Projected SONELGAZ Investment Expenditure (constant DA), 1985-89 VIII.20.Structure of ProjectedSONELGAZ Investment Expenditure, 1985-89 VIII.21. SONELGAZSales Revenuesand AverageSelling Prices, 1975-85 VIII.22. ProjectedCapacity Balance - SONELGAZinterconnected system, 1985-92- interimSZ forecasts,April 1986 VIII.23.Projected Capacity Balance - SONELGAZinterconnected system, 1985-89- mission'slow scenario,August 1986 -241 - ATTACHMENT1
Sensitivityof Load Forecasts(1989)
1. A kceyelement in the optimizationof the energy sector investment program is the timingof SONELGAZ'smajor projects. Expenditureon major projectsis concentratedin new electricitygeneration capacity; this accounts for 26.5% of SONELGAZ'splanned investment expenditure in the period 1985-89. While SONELCAZemploys a detailedand sophisticatedmethodology for its electricityload forecasts, their usefulnessis diminishedby a policy of derivingonly one "central"forecast. A more explicittreatment of uncertaintywould give the Ministryof Plan a better basis on which to judge the impacton the energy sectorof differencesbetween Plan objectivesand performance. In order to illustratethis sensitivity, the mission reformulatedthe most recent electricityload forecasts(October 1985) for the remainderof the 1985-89Plan (Table1) in terms of a small numberof key variables. The missionhas not quantifiedthe additionalimpact of possible tariff increases.
Table 1
Forecastsof Total SONELGAZElectricity Load, 1989 (GWh)
ConsuMption (a) Losses (b) Generation RV MV LV Transmission Distribution Required
5,070 5,200 4,650 840 1,100 16,860
Source: (a) SONELGAZ,rounded estimates, (b) missionestimates.
High Voltage
2. The main determinantsof RV electricityconsumption are the Government'ssuccess (a) in commissioningthe new projectsin the Plan, and (b) in raisingcapacity utilization rates among existingRV consumers. A reviewof the likelytiming of 35 possiblenew RV consumersindicates that a maximum of 13 projectscould be at various stagesof start-upby 1989. A centralestimate of their 1989 consumptionis 820 GWh. Unlessunscheduled projectsare designedand commissionedbefore 1989, the balanceof the projectedload growth (1265 GWh) will have to come entirelyfrom 48 RV consumersalready connected in 1984; total 1984 sales to this group were 2985 -242-
GWh. The additional load represents a 42X increase in average capacity utilization over the period 1985-89, e.g. from 3000 to 4300 hours/year. This conclusion restson two assumptions- that no major plant extensions will be commissioned by existing conaumers, and that electricity consumption is directly linked to capacity utilization.
3.. In the present economic circumtances it would seem prudent to consider the possibility that some major projects in the Plan may be deferred as a result of financing constraints. An equally important consideration is the feasibility of a 35-45X improvement in capacity utilization ir five years. The followingtwo scenariosillustrate the impactof dif,.- g performanceassumptions in thesetwo areas (Table2).
Table 2
Sensitivityof HV Load Forecasts,1989 (GWh) Scenario Kish Low
1984 cowumption 2985 2985 improved capacity utilization8/ 1194 597 Performance of projects in Plan b/ 820 615
1989 total 4999 4197
(1985/89 annual growth) (10.92) (7.12)
Sources mission estimates £ a/ assumes40Z improvement(high) and 20% improvement(low). b/ assums 10OZ achievementof Plan objectives(high) and 752 (low).
MediumVoltage
4. Requestsfor new mediumvoltage connections are only usefulfor the firsttwo years of a planningperiod. Beyondthe firsttwo years,SONELGAZ load forecastersdepend on informationfrom the Plan on the projected growth rates of individualeconomic sectors. As a resultof the presentstate of the worldoil market,these growth rates are likelyto be lowerand less predictable than the rates observed over the previous Plan, 1980-84. An additional uncertainty is the recent rapid increase of private sector activity -243-
outsidethe frameworkof the Plan. At the time of the wission (June 1986), SONELGAZwas preparingnew load forecastson the basis of the same sectoral growth ratesused for the load forecastsissued in Oct;ber1985. The lack of up-to-datesectoral growth projectionsclearly reduces the qualityof SONELGA2'sload forecasts.
5. Total MV sales projectedby SONELGAZfor 1989 are 5200 GWh (Table 1). Startingfrom a base of 2940 GWh in 1984, this representsa 12% annual gro*th rate of MV electricityconsumption. Three economicsectors accounted for 50% of total MV sales in 1984 - water and energy (17%),food, tobaccoand matches (14%),and public services(19%). The annualgrowth rates projected by the Plan for output in these three sectorsare 10%, 9%, and 7% respectively.SONELGAZ assumes i 5% averageannual growth rate for output in sectorsnot specificallycovered by the Plan. The electricity consumption-weightedaverage -.towth rate of output in these sectorsis thereforeabout 7%, and the impliedratio of electricityconsumption growth to output growthis in the range 1.5-2.0.
6. In the absenceof revisedprojections of sectoralgrowth rates, the missionhas assumedthat these growthrates will be in the range 3-5Z. If this range is confirmed,MV electricityconsumption growth rates of 6-10% will have to be seriouslyconsidered (Table 3).
Table 3
Sensitivityof MV Load Forecasts,1989 (GWh)
SONELGAZ/Plan Mission Mission Scenario (October1985) (high) (low)
Growth rates -- sectoral 5-10% 5% 3Z -- MV consumption 12% 10% (,%
1989 MVconsumption 5200 4735 3934
Source: SONELGAZ,mission estimates
Low Voltage
7. CurrentSONELGAZ forecasts of LV consumptionalready include a reductionof severalkey growthrates comparedwith performanceduring the 1980-84Plan: - 244 -
4-
(a) Specificconsumption of "ordinary"consumers is projectedto grow at lese than 22 annually(to 1242 kWh/y in 1989),compared with nearly52 anumallyduring the previousPlan.
(b) Specificconsumption of governmentcousumrs is projectedto grow at less than 1X annually(to 5315 kWh/y in 1989),compared with nearly42 annuallyduring the previousPlan.
(c) The annal growth of the number of goverment consumers is projected to fall from 252 during the previous Plan (mainly due to the new wilayacreated during that period)to about 6S over the period1985-89.
8. The main uncertaintyin LV consumptiongrowth is the likely performancein connectingnew ordinaryLV consumers,compared with the Plan's objectives.These connectionsare made throughtwo separateprograms;
(a) The Rural Electrification(ER) program aims to have as close as possiuleto 1001 electrificiationby the end of the present Plan. SONELGAZhas translatedthis objectiveinto 530,000new consumersover the period1985-89 - about 106,000new consumers per year.
(b) The New CustomerConnections (RCN) program is a concertedeffort to meet the backlogof connectionrequests in existing distributionareas. The SOVELGAZtarget for 1985-89is 835,000 new customers-- about 167,000new customers per year. 9. The annualaverage target for totalnew connections(ER plus RCN) is therefore237,000, compared with recentresults (1983-85) in the range 170,000-185,000(Table 4). The noticeabledecline in performancein 1985 affectsboth programsand clearlywarrants special attention from all agencies involved-SONELGAZ,Kharif and the electrificationgroups in the wilaya.
Table 4
New OrdinaryLV Customers,.980-85 (thousand)
1980 1981 1982 1983 1984 1985
RE program 50.5 55.4 69.9 85.2 79.8 74.9 RCR program 79.1 80.6 86.8 100.5 105.6 94.4
Total 129.6 136.0 156.7 185.7 185.4 169.3
Source: SONELGAZ -245-
-5-
10. The mission suggeststhat a range of 180,000-220,000average new connectionsper year be used as the basis for projectinggrowth of ordinaryLV consumptionover the remainingfour years of the currentPlan (Table5).
Table 5
Sensitivityof LV Load Forecasts,1989
SONELGAZ mission Mission (October1985) (high) (low)
Ordinaryconsumers ('000) - number in 1984 1,969 1,969 1,969 - additionsin 1985 ... 169 169 - total in 1989 3,334 3,018 2,858
LV consumption(GWh) - ordinaryconsumers 4,141 3,748 3,550 ggovernment consumers 505 505 505
Total LV consumption 4,646 4,253 4,055 (1985/89annual growth) (12X) (1OX) (9X)
Source: SONELGAZ,miision estimates
Transmissionand DistributionLosses
11. SONELGAZ's1989 target transmissionand distributionlosses (Table1) are 5% and 10% respectively.For transmissionlosses, this targetpresents no particulardifficulty, provided there is no unexpectedrequirement for large inter-regionalenergy transfers. This could be caused,for example, by a major delay in commissioningplanned new generatingcapacity. The distributionloss target,however, represents a major reversalof the trend observedduring the last few years (Table6). Increasingdistribution losses appear to be v ix of non-technical losses (e.g. delays in integrating new customers into the billing system) and technical losses; the latter are possibly due to the lower prioritygiven to reinforcementand renewalof electricitydistribution networks as a resultof the urgencyof the new connections'programs. -246-
-6-
Table 6
Transmissionand DistributionLosses 1979-85(GWh)l/
1979 1980 1981 1982 1984 1985
Transmission 273 210 387 556 483 572 b/ (5.02) (3.4%) (5.42) (6.9X) (5.3X) (5.7%) Distribution 318 598 502 520 907 1047 (9.1X) (14.4%) (11.1%) (10.32) (15.5Z) (16.12)
Sources SONELGAZ a/ in 1985 total losses(transmission plus distribution)were 1556GWh. b/ transmissionlosses as a proportionof total energyavailable to SOWELGAZ networks. ci distributionlosses as a proportionof energydelivered to MV and LV networks.
Swumary
12. This diagnosiscrudely quantifies the scope for improving implementationperformance in the electricitysubsector during the current Plan. The main area of uncertaintyconcerns the futureload - total electricityconsumption in 1989will be as much as 2700 GWh lower than currentlyprojected (Table 7) unlessa numberof targetsare met. A secondary area of concernis the impactof distributionlosses - unlessappropriate action is taken,an additional700-800 GWh of generationcould be required withoutany correspondingincrease in revenues.
Table 7
Sensitivityof Load Forecasts,1989 (GWh) SONUKIAZ Mission Mission (October1985) (high) (low)
RV 5,070 4,999 4,197 MV 5,200 4,735 3,934 LV 4,650 4,253 4,055
Total 14,920 13,987 12,186 (growthX 35/89) (122) (llX) (82)
Source; SONELGAZ,mission estimates
DCraig;esa 3162P - 247 - Table VIII.1
R bla: USCAZ gyotm(OA) 1975-0
195 19716 1977 1978 1979 1980 198L 1982 198 198N4 19851 2,808 3,302 3,668 4,182 4,794 5,452 6,240 7,051 7,975 8,86 t - _ _ - - - 2X 2 2*632, 3 2, 31 2 3 O 3,90 489 5 37 30 *4 2 1:. 92 2.35 2520 us tpqorta as na 1 (6) 3 no (27) (17) 72 as baW Awilab1a 2,8 3,302 3,668 4,183 4,780 5,455 6,240 7,024 7,958 8,888 ad looma/ 334 419 471 412 546 762 770 929 1,195 1,500 VA Total sales 2,474 2,88 3,197 3,M 4,242 4,693 5,470 6,095 6,764 7,385 605 788 916 1,089 1,334 1,52D 1,84 2,.00 2,73 2,472 no 1,097 1,223 1,340 1 58 1,709 1,859 2,036 2,210 2'467 2 638 Imvoltap 771 873 941 1,108 1,199 1,313 1,571 1,884 2,067 2,276 a
a/ CalaziatdasdiffEru0 betw esrgaailable Id total sales awsa: Sa
Table VIII.2
Rgy bl : SiE Z Ilatd System(Oh) 1975-8
1975 1976 1977 1978 1979 1980 1981 1982 1985 1984 1985 GmaUion 328 422 472 613 686 770 907 1,092 1,131 1,201 us
0~intustia2Dzbine8 278 355 395 519 578 642 774 964 993 1,031 o DMass1;1ait 47 63 73 90 108 12S 127 M 1 170 as p9 _wba 3 4 4 3 0 2 7 8 0 0 us
uSmi 1Msuoud 241 309 336 .i34 447 442 437 518 541 540 as 1I3i MI1 37 46 59 85 131 200 312 399 391 417 ua 0 0 0 33 33 23 47 52 64 74 u Otber a/ 50 6l 77 60 75 105 110 125 134 170 us loom bl 45 5% 66 2O 11 70 91 135 198 153 uO Total sales 283 365 406 595 676 700 816 957 933 1,049 us 175 237 243 336 389 389 436 535 507 3513 Da = Dwk e 49 63 96 181 191 2D9 260 '(76 249 303 us low leap 58 65 68 76 96 102 120 147 177 232 a
81 Calaniaad a TeidU b/ Ca8ilated 9aZ a uiferce betwm gemuatw .idtotal SOmc 8GWM - 248 - Table. VIII.3 rdu 4wtbm .ad so= loo 1975-S
1975 1576 177 1978 1io9 19 l 1 1995 194 1985
(_ 33,3 3,724 4,140 4,79 5,*474 6,2 1,147 8,116 9,089 10,009 a 2,8 3,= 3,668 4,15 4,788 5,415 6,240 7,O 7,"8 8,8 321 422 472 613 685 770 90 1,092 1,131 I,21 324 312 275 42 636 gm 1,00 1,x0 l,10 1,170 a P 1 1t 1X212 2Z 472 407 5 775 65 632 urn I ~~~~~~~~~~0 62 110 92 4 i9 t 2 T UM,5 3,460 4,415 S,217 6,110 7,12l 8,1!55 9,376 10,199 11,259 us
hul SZ low" us u5 S 808 83 1,077 1,390 1,618 na Tcomotsd ~~~~~334419 4! 412 5m 6 770 9219515im Oa 1ao1ae~ 45 S8 a 20 5S Ua
; ~ ~ ~ ~~U US US US 273 3WQ Z72 5Efi uS OS 05 Oa Da 318 5I0 907 1,072 us hwU AwAIe 3,137 3,653 4,149 4,969 5,52 6 02 77 8,916 9,19 10,089 Da
Amk', 1,I, i, 72 1,38 2,279 2, 25 2,965 dl& eto tELV1) 2,357 2,621 2,991 3,544 3,SM74,7 5,W S,w 6,761 6SV3 ns 2, 2,r ~~3,4 4,9 4,517Y4,9 5,449 V 01"Fe1,9 2,M 2,5 2,8 3, 712 608 707 -w 37 g wFa ~~~~~ndlan as 3 18 6 6 Da s ussV 5 12 1 9 16 a
a Diffmcs be ta loos calculaoti in table 1 d 2 a 91FZ Ofromisig ad distantitosboom so: sa - 249 -
Table VIII.4 SigOt Wl =1 Mbw of £oo, 1975
197 1976 1917 1978 1979 190 1969 1985 1983 194 1985 Blein(Gam Iat-orA SYuU 2,474 2,886 3,197 3,M 4,242 4,693 5,470 6,0ff 6,764 7,385 s j > va it 1?88Il Is$ ~~~~9161 .'7 IS 1:S2j. 1.80312jSO 2,000 2,42,230 2,'76382,472
T"Xaed (OW System 283 365 406 5s 676 700 616 957 933 1,049 na
24 36 39 369 WW 51335l nal T%W jf24 X t t 128| | Bf 303 ft ti (sa ) 2,756 3,249 3,603 4,364 4,918 5,393 6,286 7,052 7,697 8,434 as hIaJvThltage 780 1,02a 1,i. 1"64Z 1,725 1, 2,278 2 2,7 2,9 Da
*Ahm Of 1,04,90 1,161,651 1,218,568 1,279,373 1,373,370 1,602,362 1.741,884 1,903,3592,094,916 2,253,858 Da - ~~~ ------wvborw ~ 4 3 4, 9? 5,1 6,1~34 ,~ 97 0,~ 1,95 na low Thlcqe 1 0 1,156,662 1,23,196 1,273,190 1,mI53 1,591,601 1,713,0W 1,J356 2 6 2,21412,125 na
8.c: 9ZW
Table VIII.5 Stuwt of T£ al zlu icity Sol" by ThItq lev (2), 1975
1975 19t6 1977 1978 1979 1960 191 198 1984 198S
TOWSales (2) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 na 3f b l 28 31.5 32.2 32.6 354A 36.2 35.9 35.6 35.4 na 41 39.6 39. 40,4 33846 36.9 35.3 35.3 34.9 X& low Tbltp 30.1 25.9 21.0 26.9 63.3 26.2 6.9 28.8 29.2 29.7 na
9: z: - 250 - Table VIII.6 NO u RbWlactrieit Sa1bo by Fomc Bad=e (Qb 195-
1g9 196 197 1978 199 1980 18 19621 196 19f8 19 00 00
&Osu~~~~~~~~~~~~~~~~~~m ~~~~~~na
____ li iS~I i I'Mtlit 'li
780.1 1.9 11565l 1424.8 722.1 189. 28. 25.2 23.1 MO4 m
Table VIII.7 MWdhmvDUMS mactricity Sales by 1e.maic Sucta (Qii 1975.
SactoF 1975I 1,6 197 17 19 1960 . OI 198 198 1M a/ 2 * = sb]"o DecB9 (~~I * A4 2 Z M5f.4 . ..7I
&as a
o1d9& 1p96 1O a1 "a1rt 4t 2 147.6
TMI1 1146.8 123.8 1435.7 1763.4 1M.2 20U.2 2M16.2 24.9 2715.8 29M0.8 a Table VIII.8
k tim .15 ui WA£)rdlty him by uacrt W. I9S-
W1 19S1 17 _19 199 19go im I=t it is am
t a~~~~~~~~~~~~~~~~~~~~~~~~~a X;_____ 12 60. 0 2 t ai iii i:! ,. 9' _1~ 10 1601.0 360*. 160.0 lQD.O 165.0 300 360* 1.60 36ID.O -
Table VIII.9 LT iuwtfY Sam.i.. qG t %1fic &ftwtim, 19154
______a__ I1s Im6 191 198 19 190o1 199 1 19w18n 195 him WAiW - W Ws 1,01 1.2 1,40 3.44 1,919 2, W us W1. ~ 43 i is is~~~a PA me. W~~~~~~ - -~~~~~~~~~~~T
3.Im (Wa as 23 252 239 33D 321 2363 a
WmL Wm11 MD8 Iln8' 1,60,7 ,3 1,U2 I'1,08 2,6 1 M 2.21 ,33 Uggtisticml Ditt3sur/ 0 0 0 4 26 ~ 7 1 -79 '
/ CMIA" BOta- bm" u 1 eel 1 #1be 4 1miL'm 1, " a is: 1O 31! _la IgSa lErihli_ s Aii r Table VIII.I1 - 253 - swlEfficiay of SMLU Tml fr Pl2i,1975-83
1975 196 19" 1978 1979 190 1981 1982 198 1984 19h Staem1Mibias Iul fuel Co's h) 5,973 7,G30 8,094 8,852 8,553 10,464 10,072 10,934 13,712 14,994 na fueloil 0 Q 0 1,111 973 866 205 689 70 4MD gasoil ~~ ~u ~~00 165 W 17 9 367 na nat=wa1 gao 5,973 7,WO 8,094 7,61 7,5 9, 9,85110,1426 12,969 14,584 na
icu (OAM2,14 2,632 3. 2. 2,9~ 3,621 3,891 3,905 4,89% 5,1476 Va a '.ltb/Q*t)24 2.7 2.7 3.0 2.9 . 2.6 2.8 2.8 .2.7 34.s 32.2 32;1 29.0 29. 29. 33.2 30.7 30.7 31.4 a
otl fuieam's Qh 516 1,299 1,058 6,904 10,62 10,59112,619 15.833 17,122 16,283 M feloil 0 0 0 5 Z 167 94 63 55 no Pasoil. 0 0 0 -6 is liZ 184 252 na 2 ;atga 516 1.9 1,0 4M ? ?, X5 12,9 13 99 13,176 aamiatd Pas 0 0 0 0, S, 1,9' 1 17 in O O 0 2,332 1,142 2,35 2,441 2,6'd 2,879 2,800
Gation (OA) 377 646 778 1,67 2,143 2, 2,733 3,58 3,777 3,776 us Nfsq4imcA2e'(ItbQ*O 1.4 2.0 1.4 4.7 5.0 4.8 4.6 4.4 4.5 . uf1cautcyI7X)/c62.9 42.7 63.2 18.3 13 10 18.6 19.5 19.0 19.9 Oa DiesalPlaa bI Ps oil us'n kb 0 0 0 235 240 162 3zJ 352 440 515 na 33 3 23 47 52 64 74 tsj E coalc°(G) 0 0 0 0~~~~~37.2 17.2 7.2 16.9t 1 6.8 6.9 6.94 na 0 0 0 12.0 12.0 120 12.5 12.6 12.4 12.4 as
.. O 1 (e) lla b 7sX~s 4 l~~~~~tapieblonod potIm
fte: I thoie (tbh)-1.163 kWh ise the basis for Efficiy calodiala Sac: SZ - 254 -
Table VIII.12 Capety b1.: UmZ Ttaoteld Sytan. 19W3-
19S 1976 197 1978 1979 190 1961 19M2 1989 1984 1985 t banllod Capcity (0) 12 1132 USS 1470 1463 1$O 1It =56 292 2592 as soba 7 3 7m 767 76 76t 7 S 123 1aS na vytPI=Ny~~~~ Pl4 5 ?a0 w 8t 2^ z^ ; 25ns 28S Oa
andumD 612 682 726 803 902 105 1%72 1306 1526 1677 u Rnw r (Z) 66 57 a2 62 40 57 43 na tAl&g GwAratia (Qa) 2WB 3302 3668 4182 4794 5432 6240 7051 7975 816 as
tabines 29 3621S 48% Ss654 732 m 1 q 2 2846282D as rA*acPlfoto=--C %i 14 123 426 37 37a as4 t P 311343S 315 1 22 .U 2% Q 2S9 S l
Sya lowfactor (Z) 52 55 58 59 61 7 d1 6 G 60 "
urce: SM Z
Table VIII.13 Iotallad Capacity: SQZ Ialated Syvas, 197545
1975 1976 1977 1978 1979 191 1961 1982 1992 1984 1985 Tt Tnaalled Capacity(0) 144 169 188 357 357 407 435 444 444 444 na Coatiac tubiin 125 124 132 302 302 344 375 375 375 375 Xs Dimi PIRot 19 45 56 S6 56 63 61 69 69 69 as QGo Guaco (M&) 328 422 472 613 692 770 9068 1092 1131 12DI na QstnZ8 3 5 53 93 578 6U 274 993 IC31314 na tXpld:t0 3 34 22 25 24 29 30 31 M %B1Plat6 4 3 73 108 125 12 I 138 170 u (asmpit Fa9Q5 O 61 22 23 24 23 28 ns
SOD:- 52C - 255 -
Table VIII.14 MletriityTraission ad DatributieuCpaciy, 1975-85
1975 1976 1977 1978 1979 1980 1981 1982 1980 1984 1985
Miab~~~1t~ 4,471 4,901 5,065 5,342 5,996 6,12) 5,792 6,269 6,781 7,215 iv Kai~na~It~o 18,530 19,790 20,779 :22,22 24,199 26,562 28,63 30,Q 34,12 36,6m1 us I3w4a,,egs 10,866 11,480 12,16 13, 14,3 216,449 188',83 21:795 25,656 3629,814
RVAW ~~2,J97 ,0 3,374 3,594 3,754 4,295 4,473 4,818 5,353 5,673 Da MrBV= W) 10,fD 11, 02D1 2 1 12,13813,102 147,6 16,711 18577 20,81 23,353 na
Sourcea: SaZ2
Table VIII.15 Ewa Bhlmn: SZ5 NBtwal GasOperadiws, JS17-85
1975 1976 1917 1978 1979 198D 19a 1903 1980 1984 1985 TwaassijM a12,441 5E 16, 18i9Q 23,735 29,432 33,677 37,22 41, 46, 49,936 n T%~ M ssama 13S 267 5X76 t 498 73 33 zr Oa VA Dalvwriu timi pwr atio 6,489 8,330 9,152 11,937 15,O 17,257 19,676 23,0W 26,965 27,760 Sn bighwessury 3,399 4,594 5,8m0 71 8 , 610,310 10,8 10,770 11,718 13,506 u dMaibqut nwb 2,374 3,089 3,229 4, ,6C3 5,504 5,795 6,829 7,425 8,669 i udfia pream Saus 253 318 367 453 56 654 72) 945 gos iv 1w presaze gal" 1,549 2,258 2,414 3, 3,769 4,31 4,606 5,29 5,901 6,751 D 4 4td~ztia,loses. 572 512 448 44 3mS 6: 533 841 579 1,013 D Coessiclonasc 41 2D 48 79 127 109 125 0 1 us no bJ 1btals my1nlot mtdi thse of SLAELZ c S slare not p.e of distri~it~ublosses
Table VI1I.16 Structureof 8 M NaturalGb peatiu (S), 1975-8
1975 1976 1977 1978 1979 1980 981 1982 1983 1984 1985 DMivari.s 7himimi3 p 52 50 52 52 54 57 58 56 us Tlhhlrtry) 28 29 32 31 0 31 30 26 25 2? ua Di*ributikos m) 19 19 18 171 1 17 16 17 16 17 ua 100 100 100 1O0 100 10 100 1O0 100 G100 u
Source: 82QZ - 256 - Table VIII.17 mt O1 (= n _a) 19794
1979 1980 1981 196n 1981 1964 195
II.tricity 1,247 1,91 1,998 2,199 2,472 2,716 3,248
distr*Am s513 767 939 1,W7 1,5N 1,645 2,0 e l e :04 ~~~~~424UZI 716 IJ1M 1,2a 1a55 w so 1d ~~~~262239 8 411 0
lgaac 328 315 2m2 379 354 657 969 ------
zowa: 319 Y22 16 18 as Otbwss449 476 447 D4 27 382 210
Tsl a,dite a/ 2,024 2,731 2,697 2,852 3,034 3,755 4,457 a/ Tbtaemy notmdc tlos of S8Q aws: =E=
Table VIII.18 SUM*=eof S z iuveguit^"uttwe (2), 1795
1979 1980 198L2 192 198 1964 1985
1a7city 61.6 71.1 74.1 77.1 81.5 72.3 72.9 16 V2?.0 30.Q 15.2 16.1 18.7 15.7 n. 16.0 9.3 15.i 13.0 9J.I 10.4 25.4 28.1 3.8 2.4 46.8 Fatwu1s 16.2 11.5 9.4 13.3 11.7 17.5 21.7 _"10.6 X 6.8 4.1 8. 6.3 11.6 16.9 iou 5.6 4.8 5.2 8 5.3 4.9 2.4 Otbws 22.2 17.4 16.6 9.6 6.8 10.2 5.4
ts1 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Sw=: MW - 257 -
Table V111.19 ftojactoda_L~ _u. (aint liiv), 1958
1985 1986 19W 1988 1989
4,990 5,625 6,366 6.O 8*2,9
sS l,442 i,IAAOJ922 -2,3 2,42X 3,620 a4||~~~;f 99, 022 Ism 1$207 1,;31 dXatdh~t1oa 2,3 2,679 3,01 3,21 3,428 e 1," 1, X,7'4n 1,9 G, :23 I : 313 YMMIlSX 1,091 1,398 1,665 2,000 2,297
- d"{ 7S_~ ~~~~~~_g X,X7~~~~~00 1,729- 1,047g- * 0 1~~~~57621 mea 321 35 w t i ~~132 1 244 2 6 w 1763Sm 'I 1 72 1O Oth.. s506 632 903 1,137 1,335
Ut1bpdtue.- - 6,59 7.653 8.904 9,997 1.911 a/2mtu1 =S Mt ustcb thou of SWDuZ Se: 92:
Table VIII.20 Stzictmof pijd nw imwbne S2ydLttw (D), 15-8
1s 19s6 19W 1968 1989
Zlac£tricit 75.8 73.5 713 68.6 69.5 24.9 25.9 24.3 30.4 9 o a611.6 12.10 di9gi 3..0 J3.7 32.3 n twelXG . 16.6 18.3 18.6 20.0 19.3 - ~~~~~~ -. _ - - - trix 11.X 12.0 124~ ~~~~12.9 162.4 daihuas S5: 6.2 6.7.1 6. Otbwr 7.7 8.3 10.1 11.4 11.2
TOW 100.0 100.0 100.0 100.0 100.0
:~~~~we - 258 -
TableVIII.21
8dz, plo bmi ad su t , 191w
iWS iWO 191? 1910 1919 196 196a 1982 196 1984 190
0 0 ~~~~~~~~~s as Z 2§ l 1, od him. id"M" as na an an VA 8:i 8:1 81 8:118:11 lale =u us as us tos 1,555 19? 2,473 3130 2888 us X uOa u 14p 1,2 a , 2,23k Oa as VA an uea yas 37h a as nou an as la Z77 O
o.s3 -L - 259- Table VIII.22 pojec.d Cap¢ciyim;: Sma ftm 1996-9 UM8 htsa PancagoApri 196)
AM 19" lo#1" 1990 19n ~iss
Qi~azvesCm.ra (0i) 9,829 10,21013,10 14,60 16,41018#790 21,020 a,2 0 Imiu Din_tC) 1,1W0 2,070 2, 21,960 3,320 3,740 4,180 4,610 Rtiro (N) 120 10 12 65 NMCpaci, (NO 23 359 336 100 56 400 600 T*iatuMCqpcity () 2,6W 2,925 3,2 4,253 4,253 4,789 5,069 5,604 CaormRmwhzgl (D) 44 41 17 45 28 21 22 sy8 lowVactor (Z) 60 56 54 S5 S 6 57 57 58
9ore: SZ
Table VIII.23 NtojaxedCapacty Bais: NIos 'a 1w Wbrcoate19-49
AM - I.Lmie - t 198s lgt ~~~~1969 0a. G tia (Wa) 9,829 10,615 11,465 12,392 13*762 Ybd= Dad 0t) 1,870 2,164 2,424 2,41D 2,8 Ia2lxmu GE) 12D 10 NWCbWity Om 23 3 36 100 stauludcapciy t 2,68W 2,91 3,23S 4,23 4,23S GM" low" M r)k (2) 44 35 34 72 52 ystmIcaFactor (D) 60 56 54 57 56
wc: saEz - 260 -
EDUCATIONANDTRAMG qool,--- '.es, 0,0.7.Vd .4 N, - 261 -
Table X.1 Skilled manpower demand and supply from the education and trainingsystem.
Chart 1 Structureof the formaleducation system.
Table X.2 Targetsand implementationof first and second five-year plans (1980-84and 1985-89).
Table X.3 Reform proposals and qualitativeachievements for the 1985-89 Plan. - 262 - Table X.1
ALGERIA - kLUERlE SKILLED MANPOWERDEMAND AND SUPPLY FROM IHE EDUCATION AND TRAINING SYSTEM - BALANCE MAIN D'OEUVRE (fUALIFIE
Additional Estimated Needs/Nouveaux Outputs/ Shortages/ Besimns Provisions Surpluses 1985-89 de Sorties Ecarts
L&esl 6 Univ. Graduates 83,e00 77,000 (8,800) Niveau 6 Cadres Superisurs OF WHICH
Ei.Qineers/ ingenteure 32,200 1O,000 1/ (22,:200) Aqricultural and Forestry Engineers/ 2,500 1,600 (900) lnq. Agronomes et Forestiers V'eterinarians/V.tornaires 700 600 (100) krchitects, etc/Architectes etc. 3,400 1,000 (2,400) Lawvers/Jur i ste 3,200 3,500 +300 Uoctors/Medecins 10,000 7,7u0 (2;300t Ientl ts/Denti tes 3,000 2,300 (700) P-lharmacxsts/Pharmacions 1,6800 1,500 (100)
Level 5 Higher Technicians 174,200 .3,000 *91,200) 4ihveau 5 lechniciens Superieurs
OF WHICH
Aqr i culture 5, 00 1 ,13 3.Q) TechnoloQi cal /loechnoloqiques 70,000 I/ 10,000 (;,.Ovi Health/Sante 25, tQ0 1/ 18, 000i (Av,oo..) Fundamental School ihird Cycle leachers and Voc. Irainers/ 49,o000 44,Ou.)U (Q,0o Enseignants (PEM) et Formateurs
t ~ieI 4 Middle Level lechnicians 164.200 152ISo,t.,I0)0,!O.; (4 veaU 4 ;echtniciens et Aqents de Maitrise
OF WHILH fit. iXCtul ture 12 4Q0.) 4, vu ' " ! lidi.tctr al / 1r:dustr ieJ 1 , 7 .)o 12, of.). (I '.)0,3 rtne-. nd;SchoolIeachers/Enseignants 35,00o 47,500 1250o: l lea J th , ant e 1E) * '005 18, Oovz +80v0*t
Lr..,eA *31e S¶kilJed arid $emi-Sk1 led 4:45,80'X 408C i,t.o (1 e,/C
1. Approximation/Estimation Sources Pl n Wuinquennal, 1985-89 - 263 -
Chart I ALGBRtA
Thetoenud fiwn-eaOwemut Plffi 10213-8
Structure of the paornl EXdnation System Pre-torm and 1985/86
Niggle School _ boeraiJy6L. -Y_ tiveraWs.. -e
-~~~~~~~~~-J1-mE - - - {-o-LI- - ol- -i-
T8gnicaLLycJTeehni ui
lutiaUsoLlechnaleg
-11-2 1 4 0
- luc @ceati (EScul 5mdavalsL _ Teacher .nIaln_i T) h
-lwl-lll-l-~ ~-s- ~ ~- ||§|§-~ ~ ~ ~ ~ ~ - 4IPsk BA K T lfIitU1* ofjghnlchq
_ILMattioelTreg. ...IMSaMINIE ii..
VoctionalInstitute
JO MARKETANO APPRINTtCESHIP o Selection Process Saccalaureat A/ Universitiesincluding short courses b/ TeacherTraining: (1) instructeur,01) instituteur.and (iii) specialistteachers. 1/ Technicumsor technicallyc6es, and 9/ ENS and Ecole NorraleSupDrieure d'Enseign _ht Polytechnique(technical and science teachers). August1986 Ooc 3894V/17 C4°' 1 -264 - Table X. 2
/°S~~~~~~ot gwu~iag u io&u 'wt.- 'iW4& tSIQ 1NUCttStl "failitm as Rpm tl ntlts KM g312a l,iq tt 1 -- ~stollOW4$
Ittf. Ittptt ktBe tiim t aes P.dmI , b1i .lm l.st let W b
0.19 pgtlS 3335~~~~siWI4 3164.1 32 5403.3 I1of q,tto 413.1 432 43.41 90.f*04w elk 30 Kkbo %IJ. 41 449 54.4 1 of4 W sift a2."2 3 fiJI "I 48 1i1 We3t o. t* po. a-it 1.11 82 2 411 34-It lull. et to 46.-Il0 ea10~ 80. of mitt e. to e.-iit 9314 uft.fa*3Uto (Sul et.. k@w 7$ n 1 us S i Il. to p 3tl to to ocs.s.13 in ut1} tftvl. Wef" .;*tl t
1htl. *tifi3. Of olas tlst. tt5.14 ftldh3*7 5124324it-l XI st"
81-69 424.3 61.1. 81410 928. 243.4 I -trto W.163 43.31 I ifts .41 in 4421 112-13 fears *XX ot Ivt,twt 113-bit 12d5.4t00 393.2
30313tilwoI t if to ep. tills fro 941
t. buiv "Kaust 0.B 603316 392.4 320.9 356.9t M1 @1.9 42.1. 00. wIKWA, ill am4 32.3 405 sit 246.. V isa.ba ,t to *1 42.4 ito 4. w.4 I labtal n 2901 in 49 21.31 a.1t I Ltale S S too 352 ... 411 44t 42.41 I littArm 1201332 to1 39.4 25.2% a135.4 attd tf. to W. i3-it 3.5 a 342
lowl tl. 44 ml$ cf. to M4. IF13 13.111 37.
S. t.gg, iSuttam tItt lb.Be tnattr 30 43.5 21.5 2, Wi l_$tdtah [u. 63U .1 .
to I0.utet "Kw. 61-6 23.3 Mg.
Pta0 Pta ktut ltart ktd Ito" tlit ftt ft. tm,tamItaisto. 44 1t4W, ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~Its
.14 Earl,P t,tUlt for.). too. ut-ol1121 1302.9 30 t 23,8
SusMleUt*3 U 1owl 25 5 6 in33i~t lb lam to334 1. Ik). its . ad Two. 3J24 171.t2f fy03. is Lan & paN3titS 34 34312.312 am stto e 033w *i31ol. at.gt 7tt
C. ttittd6 tOttti
fatIlam 44.4 lit asllo 40.4 449 liwa11 4.3
9. SIIU liasetna twttotto lItaBoeop
fmllmt 3440 U.S 04.4 of nt*to1Su. I03d3 Fr1sms LI 94. Be4*154 to *tO.er tuft. Ftott 40.2 49.4
t. rt3str53tra1 t4lstio*3 3Ipfi
etrot i t votitst t Ut414o4 so 1 40 10 lo 15 44w4tt31lt 43
31 latN 90t4201.0 is V49 of t34 WIEM ag -, ttwtls 4ts1 so#?-*
2 1311-14 4$Wt -265 - * , Table X.3
,^. ~ ~ Pa PIa. _l- 09U 7p tws< PI. 40 *w1 M&AMMItION MPS Otl"'W *wwM 01" =M ttxlVG'
0. 1144iySESmoetla. ~ ~ ~ ~ ~ ~ lc tlS *.~ ~~~~~~~~~~~99f l"'I'dM^*
Ptoe e tog§ ma m m soa .e
S. s"4100 of eIa , 9sWMM_r 62-* 4.01 7.01 9ww.dmo1 0.0 4.ft 3.211 lay..lewlow I nWeI44.01 0.2 10.011.62lL DeuWoav t9l9MIASr .1
Dreamt "A .
Ppm-..tSbte-mat 05m.w0142 05w.) IPSO21042 btoepl tobWS Smmor. 12.3 lw0 10 IS.5
qOp-int owl 5omt.0 bswolm gtmlwe.l 3M2ol wow-o" atOmwvow'
am 4.1iI,lt OWftt11800 *,oomDac 1* Oftmerwea 004*,0~ 21240M :m 1t0o0stx no
¶geg, P.l *at-e 2 sa .oa. helle poet. S0% ISSUS 1 218 I2MI Sm E4l6,s7gwa1 20 1 hiewtom VVs V0.6~~~u lo* 99.4 tratstutow *n*-on *G*r *O6~~~~~~~~~~~~~~~~~~1.1 0 .U..tlaletrwttaw. 8t a.112 21. UAw911aIlEso 0.0 o
36 mo4w1 (S6Ir 0-10 St= 3s- ssa rm_1 laSso .4. reach" do 1001 J40210 41800m5 14 0 MeorsdOo 21 sof t97. son OL3
"s m *or a- "out an W.Smiuse8 tOw. P0 CM"s 1.49li? 12 I rQl- m X 9mb|e o.a raaATom. as
It ) ra *tio272
1 *4116 1 79
X *sr'sI Alowia,.t8abe 0 f o,4- Of0q 751242 0.bl
ISpt-l* el Mt uau7S.se 40v11211 S@t Stm.w 12 a 2 l*Ows ean.St 70.4 gd1w.re06o,mlras AItwAS" _dt77
17-09 14408065 010U 47041170 310527 two I4 l 4.4 1109111m an1
01070e I "Orareeorv e60erpect tl4S tEll 1I 40mw0chelWODlxpO 44.1.914.0 4 1 ft1w
~~~s.ora~~~~~~~~~~~. ~~14.64 14.4 to.ag ona pot 01,44 1,0
1.1060 s£1901S 0AM"tOMQ%~*41.tO N - 266 -
WATSPPLY AD SWRAGE
=-s"M z _ = _ \
*~ A EB73TErACOWS =EVICELEVELS 18130 WM ANN
twoeielIaye Comia Amato 1904Estiut. 196 Estito 1966urba 97 Ub Asa r Urban Poplstie Cb.of Living urba Peplati 1b.e Living pudlatis Pspulatla upulatie l t., I PepIati. harters Pepulatimm hatwor StiuG
I Agrur l0,03t 1 5,tM 4.21 2 Z 9,070 so" 221,9 9,420 4,050 43.0 2 El Ama 126,2 18,8 3.5 237,000 192,620 02,0 16,4s0" 3091.
S @tA 101,0532 13, 5.56 267,7 7,2 10 1 3 93960 66.2 & bijDa 79,207 111,7O0 3.17 13,90 1.22,790 I3,8 IU 100 89m08.0 I lakra 106,46 10,7 4.93 253,400 204,50 2,090 2,900 214,350 30,520 00.8 1 hlchar 52,644 7,114 3.41 96,200 81,000 13,220 51,00 43,000 63,050 94.2 9 Ilitd 245,469 376,963 3.96 4,00 36,240 60,640 905,000 512,00 2, 0.0 1o beira 44,634 ,267 .79 8,0 57,010 12,260 23000 10,5603,4 la aset ,406 35,041 544 21,300 10010 4,200 45.9 12 lubasa 73,313 120,619 4.63 165,00 6525 21,120 123,020 &.P 52"39.47 13 fece 166,16 216,14t 2.39 7,4 18, 4,9 23,0 12,2" 180 71.6 14 tiaret 103,9 157,518 3.35 205,200 1 0 1002.7 '1X, 112, 3130,6 I5 Tiii Saco 30,701 12,244 4.15 1670 134910 228 1743 14,50 750 .4 1 Algiers 1,04,96 ,42,2 2.97 5,4,00 2,11,210 272,no 2,54, 2,397t450 m270 94.6 18 I jal a 45, ,6211 7.0 I I00 167,300 116,40 2,03 .0 7 I 39,163 62,936 4.41 35,100 70,0 12,070 32,"0 23,00 42, 62.3 19 Setif 17,317 262,653 3.99 277,700 16,9002 211,0 2,80 80.4 20 Said& 74,667 128,21 5.0 N8O0 113,900 26,5 1 63.0 21 Skikda 99,217 139,243 3.22 173,9 1,120 23, 1 ,500 147,730 2, 82.3 22 Stdi DI bbso 157,7 203,136 2. 23,600 21S5,20 3,49 2,2 220,270 3,0 90.2 23 Amoeba 161,5 291, 2.97 506,200 2900 5 ,42 2, 1,0 2,1 0.6 24 bI1I ",514 155,56 4.24 20l,100 153," 1,270 55 600S1000 ,UO 70.0 25 Ctustatia 29,347 425,45 3.26 53,200 434,020 71,620 S144:40 1gm:10 21:250 01.4 26 N.4.. 66,507 104,i0 4.17 13700 100,9 0 20,400 ,20 72.0 27 Intqaf 131,"3 181,952 2.96 223,200 174,540 32,510 229,800 179,700 33 470 11.2 28 O'Sila 45,463 99,263 7.36 163,100 13,640 17,650 175,100 146,910 1,I6O 3.9 29 lhana 107,422 139,260 2.39 164,300 129,300 2,20 120 132,300 2100 78.7 3 ha1la 55,430 101,275 5.63 146,600 115,7s 19,930 166,00 122,370 210 77.9 31 ra 381,221 534,236 3.96 766,600 712,940 116,200 ,000 74,210 122,90 9.O MAL41.11 4,45,723 6,534,227 3.65 usR 16,04,320 0,640,270 9,434,O 7,741,150 1,253,50 82.1 IF ALM=R
TITCSOr IdYE MMDSOS SY IN LOU AV-AS - 128
Estimated WATER SUPPLY SERVICES SANITATIOM SERVICES Population Consumption Per Cap. Cons. Staraoe Service Ave. No. Of S of Pop. % of Pop. Other Type of aut In l.OOo m3/day I/day Volume, m3I of Cons, Lines Pers. Per Line With Sewen With S. Tank Systm S2sawor (1) (2) (3) .(8)=Lj (S) (6)=L1x1000 (7) (8)=(Z)xl.O00 (9) (10) (11) (12) (2) (3) (7)
Constantine S00.0 S7.456 115 S0.000 87 22.000 22.7 91 - 9 Combined AMnba 273.0 45,000 165 24.200 54 14.040 19.4 9S - S Combined Sidi Bel Abes 178.9 15,000 84 19,000 127 8.500 21.0 - - - _ Setif 144.5 29,730 206 7.000 24 10t,80 13.7 100 - - Combined Datna 140.0 22.000 157 37.500 171 11.150 12.6 100 - - Caubinted BIsKra 105.5 13.750 130 11.000 86 12.270 8.6 to - 20 Combined Tizi-Cuzog 101.5 19,980 19t 41,500 58 4.S00 22.6 100 - - Combinad Tiliocen , 92.5 16,020 173 30.500 190 9q.S0 9.7 90 - lO Cobined Dechar 80.4 6.300 78 9.200 146 9.320 8.6 70 11 19 Combined Ghardia 75.3 12.000 159 22.325 106 12.332 6.1 - 100 - lordi Wun Arraridi 69.0 7.870 114 6.000 76 5.020 13.7 100 - - Combtned Nea 66.4 9.480 143 86750 92 6.600 10.1 100 - - Cofned fsghnis 56.5 7.000 120 6.7SW 96 5.070 ll.S 93 - 7 Comined El Eulwi 57.1 2.000 35 3.000 1So 4.520 12.6 100 - - Cobdined touobOurt 53.0 2.880 54 1,000 35 3.000 17.7 - - - - 0x La at 4W.S 11.840 244 3.750 32 6.310 7.7 20 - Seprated a31o1 16.0 1.600 239 14.40 16t 4.770 7.S so S is Coined 0gar El Soeghari 29.2 4.460 1S3 3.950 89 2a630 11.1 aS - 1S Combined Cthl~un 26.0 S30 20 2,000 377 - S9s 01 Cobined E1 Gobes 24.6 7.040 286 2.S00 36 1.675 14.7 - 45 SS -
Ummeaut 21.2 5.717 270 5.S00 103 - - - 10 90 GLerrams 19.8 3,760 196 400 11 3.200 6.2 50 S0 - Separate Stdi-Aich 18.3 1 188 65 1.600 135 2.9S0 6.2 9S S - Comined Aflou 17.9 2.600 1s6 8.000 286 2.030 8.8 - - - Orson 16.3 .6Z 1.000 134 1.280 12.7 0 - 40 C4ed oulane Is. IS.00 1001 1.660 111 1.310 1M5 96 _ 2 C1 d El Kala 12.S 2.280 182 3.850 169 1.020 12.3 - - _ Tindosf 12.1 900 74 1.450 161 770 1S.7 40 60 - CZ>tned A1b ^bid 7.4 300 41 300 100 610 12.1 90 - 10 Combined seutoldja 6.3 1.037 16 1.4S0 140 470 13.4 61 - 19 Colbined Tablat S.1 1.176 231 4S0 38 720 7.1 100 - Separted mni Abbas 3.9 840 215 1.370 163 690 S. 94 6 - C5ome Bent S1oanw 3.2 618 193 560 91 630 S.1 0- Combined Igit 2.S 560 224 - - 430 S.8 0 _ - Combined El 0aria 2.1 344 164 200 58 283 7.4 100 - Cogmied At/antic Oce an
a
1< (J~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 s.2!
ALGERIA
0 MAINPORTS MAIN NATK)NALROADS M~-IAINSAHARA TRACKS .. I STANDARDGAAGE R)JtWAYS **.fi.NARR: GAUGtRAILWAYS INTERA)A AnMT SECONODARYAIRP0T -OIL PIPEtSS _-GAS PWEDS RIVERSAND NTEUJTTENTStA -- _WTERNATIONA ESODAN IBRD1WO4R ol 5 o M e di t e r r an an S e a
ALGIERS Ti Soa oDj llouSkikd ASAA
'>2be !bbei-,SIdi |XeS X / ~~~~) s ,Biskron Ahro
Ti CVel 'SosdrAf hebel D Ifo O Onkz/
\ }^,+180hodh w~~~ Touggour i ElOued'%s.
Ghordaia95;/> 4D
AL ~ $ LGhoudotLebahouauflaHossl/Messooud
El Goleo _ 3
or OnsmorOrss H Aro [,Pdrar~~~~~~~~~~~~~ \ J
n\P.nSolah
9togsgone ) _\/<
N~~~~~~
\ \ I/ _ ~_f / \t,Dionets _ \ \~~I25
X | N ~ tTamanrassetn./
>~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~h Rt a.*,WNi
"w VW s bES~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~m-1 /Wnhznlo - nTfo lRt. e m
av~ ~ ~ ~~~~~~~~~~~~~~~~~~Cb5-. d10-
NNOVEMBER198