Algeria the 1985-1989Development Plan and The
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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