Algeria offers business opportunities for the US private sector

ALGERIA OFFERS BUSINESS OPPORTUNITIES FOR
THE US PRIVATE SECTOR -
THE US-ALGERIA BUSINESS COUNCIL PLAYS KEY TRADE FACILITATING ROLE

WASHINGTON FILE, BY PHIL KURATA

APRIL 12, 2005

Washington, DC— The U.S.-Algeria Business Council is working to bring U.S. investment and trade to Algeria to bolster Algerian President Abdelaziz Bouteflika’s strategic decision to integrate his country into the global economy.

In an interview with the Washington File, council president and chief executive officer Ismael Chikhoune said Bouteflika’s efforts to defeat terrorism and promote reconciliation are showing results.

"It’s becoming stable. They (the Algerian government) are pushing reforms. They are privatizing a lot of public companies that the government cannot handle anymore," Chikhoune said. "So that is why there is a desire to move to an open economy. We can definitely say now that Algeria is open for business."

The operations director of the council, Elisabeth Lord Stuart, says Bouteflika deserves credit for leading Algeria out of civil war into the beginning of a new era of budding democracy and open markets.

" Algeria is a success story in the Arab world. You’ve got a country that faced civil war, external and internal terrorism for years. They were shut out to the outside world," Stuart said. "It’s a country that has cooperated with the U.S. government on all levels, militarily, politically and economically. It’s a time for Algeria to play a new role in the region, something that Bouteflika is pushing forward."

Bouteflika became president of Algeria in an election in 1999 with backing from the military and ruling FLN (Front de Liberation Nationale) party. Several months after assuming power, he won overwhelming endorsement in a referendum for a reconciliation plan that granted amnesty for thousands of Islamists.

Since then, the level of violence has declined markedly and Bouteflika has been credited for transforming Algeria’s international image. In 2004, Bouteflika won re-election for a second five-year term, and monitors from the European Union said the balloting was free and fair. He was one of several Arab leaders invited to the Group of Eight Sea Island Summit in Georgia in 2004. (The G8 nations are Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and Russia.)

Diversification and privatization have been key themes in Bouteflika’s economic policies. His government has made it clear that it will no longer support loss-making public companies. Chikhoune says the Algerian government has put up about 1,200 companies for sale and about 350 have been sold off.

One company that the government will not privatize is Algeria’s largest, Sonatrach, the national oil and gas monopoly, which employs tens of thousands of people, Chikhoune said. "Bouteflika has put forward a clear strategy of diversification, developing other industries, to get the attention off Sonatrach," Stuart said.

Algeria has accumulated a large foreign reserve surplus as a result of rising energy prices, enabling it to embark on a massive economic modernization campaign. " Algeria has money. It plans to spend $60 billion in the next five years. Spending $12 billion per year is going to attract a lot of business," said Stuart. "Its spending calculations were based on the price of oil at $19 per barrel. Now the price is in the mid-$50 range."

The JP Morgan investment bank said Algeria’s foreign exchange reserves totaled $43 billion in February, dramatically above its external debt of $23 billion.

To publicize the business opportunities to Algerian and American businesses, the council has held a number of symposiums, conferences and other trade-related events in the last six months. In February, the council organized a symposium in New York on privatization of the Algerian banking sector, which is needed to finance international trade and investment deals. In late March and early April, the council put together a conference in Houston, Texas, to discuss projects related to Algeria’s energy and water resources. The council will also participate in the American pavilion at the International Trade Fair in Algiers in early June.

Chikhoune said the council is playing a role in rebuilding Algeria’s agriculture by helping to improve the quality of fruits and vegetables in the country. The council introduced the California Green Valley company to Algerian partners and formed a joint venture called Agrinput, which is bringing new seeds, equipment and knowledge to Algeria. One offshoot of this venture involved sending five Algerian farmers to California in March 2004 to learn strawberry cultivation at one of the biggest strawberry producers in the world. When the farmers returned to Algeria, they went to different areas of the country where they trained more people in strawberry production. Agrinput plans to export strawberries to Morocco, Spain and Egypt. Transport systems to deliver the strawberries are being introduced as a result of this project. " California and Algeria have the same climate," Chikhoune said. "This is part of the politics of privatization."

The council also has been involved with a company called Portek, which aims to modernize the port systems in Bejaia, in eastern Algeria, Chikhoune said. A U.S. government agency, the Overseas Private Investment Corporation (OPIC), is financing this project, as well as work at the Hamma desalination plant, which is expected to provide 25 percent of Algiers’ freshwater needs when it is completed.

Chikhoune said the Northrop-Grumann Corporation, known primarily for its defense-related work, plans to invest in health care in Algeria in cooperation with Johns Hopkins Hospital of Baltimore, Maryland. He said Northrop-Grumann and Johns Hopkins are engaged in discussions with Algerian partners about building a modern hospital in Algiers, which would be a regional medical center.

U.S. government officials from the Export-Import Bank and OPIC have endorsed Algeria as an attractive target for U.S. investment. Algeria completed a Trade and Investment Framework Agreement with the United States in 2001, and the U.S. government is advising Algeria about accession to the World Trade Organization, one of the goals of the Bouteflika government.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)