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Rezig : Les pouvoirs publics prendront en charge les préoccupations des boulangers Autoroute nord-sud : Coup d’envoi des travaux de réalisation de la dernière section UN EXPOSÉ A ÉTÉ PRÉSENTÉ EN CONSEIL DES MINISTRES Levée des obstacles sur 679 projets d’investissement Brahim Merad, médiateur de la république : «La réorientation de l’investissement est vitale» Réunion GICA-ANAM pour le développement de l’exploitation minière Industrie pharmaceutique : une délégation yéménite en visite en Algérie Air Algérie: reprise des vols à destination d'Egypte et de Suisse La partie algérienne prête au lancement des opérations d'exportation vers la Libye M. Arkab évoque avec l'ambassadeur saoudien la coopération énergétique et minière l'ANADE signe une convention de partenariat avec le Haras national chaouchaoua Vers la concrétisation d’une stratégie visant l’investissement dans l’économie circulaire Algérie-Libye : Sonelgaz et GECOL examinent le renforcement de la coopération bilatérale Agriculture: un vif intérêt d'opérateurs américains pour une coopération avec leurs homologues algériens Douanes : nouvelle procédure de demande de renseignement sur l'origine des marchandises exportées Lancement d'un nouveau programme d’accompagnement au profit des startups technologiques (ANPT) Politique de relance économique du Président Tebboune: Satisfaction des investisseurs L’ANNÉE 2021 SE RÉVÈLE PLUTÔT FAVORABLE L’économie algérienne se redresse HAUSSE DES PRIX DU PÉTROLE Les banquiers et les négociants optimistes Sonatrach lance le système d'information intégré à Arzew Annaba 2.800 milliards de centimes pour l’énergie

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World Bank Report Interpreting Fall 2021

The report highlights a double shock added to the country’s economic difficulties in 2020, caused both by the Covid-19 pandemic and a consequent drop in hydrocarbon revenues.It emphasises that the temporary drop in international oil prices has deteriorated the budget balance, the availability of bank liquidity and the external balance, despite the depreciation of the Algerian dinar.Moreover, the World Bank diagnoses that “The overall budget deficit widened considerably in 2020, in the wake of a sharp decline in oil and tax revenues, and an increase in financial expenditure.”Banking liquidity decreased and credit growth slowed down despite strong monetary easing policies established by the Algerian authorities, in the light of the shrink in external revenues, the mobilization of bank deposits to finance the overall budget deficit and the withdrawal of bank savings by individuals.External financing needs increased because of the widening of current account deficit.Imports of equipment and domestic production inputs decreased significantly with the continuation of import reduction policies to protect foreign exchange reserves, which fell by the end of 2020 to around 12.8 months of imports of goods and services. The authors of the report emphasise that the sustainability of the "fragile recovery" will depend on the acceleration of reforms to foster private sector growth and restore macroeconomic balances.The World Bank considers that the main sources of risk to the economic prospects are the health situation deteriorating, the resumption of large-scale social mobilization, foreign exchange revenues lower than expected and an insufficient response from the private sector to the reform agenda. However, the report advises that: “As the increase in public expenditure in 2021 is expected to be short-lived, and foreign exchange reserves now cover less than a year of imports, accelerating reforms to foster private sector development will be essential to drive Algeria’s structural transformation towards hydrocarbon revenues independence, and to move towards sustainable and inclusive economic growth.”According to informed observers and our analysis and in the face of major challenge of gradually recovering global (economic and political) stability and driving the country to a new era, the President of the Republic, elected by universal suffrage on 12 December 2019, has carried out a roadmap that is based on five concomitant work lines, namely to:• Undertake an inclusive dialog to achieve social and political harmony.• Consolidate institutional stability and avoid structural collapse.• Make political and economic life more ethical by relentlessly fighting against any financial embezzlement.• Revive the economic development and growth that have been pending since the collapse of oil price.• Implement a social market economy through non-hydrocarbon wealth-creating economic diversification.The social and political situation, the scaling back of oil revenues and the high expectations of the population, compel the Executive authority to manage to revive the economy after the Covid-19 pandemic without moving towards external debt under the harsh conditions of the International Monetary Fund (IMF), as was clearly indicated by the President of the Republic.Consequently, it is about addressing an ad hoc three-part situation: financial, health and water/food aspects, which were presented in the Government’s action plan and adopted by the upper and lower houses of parliament.It emerges from the analysis of the Government’s action plan a roadmap that sets out priorities for sustainable development in line with Algeria’s commitments to the Sustainable Development Goals platform of the United Nations system to link Algeria to a new era. This is based on:• A new model and mode of governance marked by rigor, transparency, raising moral standard of public and economic life, and modernizing the (institutional reform) State.• Continued efforts in national defence and security in terms of modernization and professionalization.• A new economic orientation based on economic diversification, promotion of industry, entrepreneurship, and new alternative wealth for resilient, inclusive, and solidarity-based economic development (founding a social market economy close to the Adenauer model).• Reforming and modernizing the banking and financial system (Second generation economic reform: microeconomic).• Fiscal reforms to ensure more effective management of public finances (Managerial Pragmatism).• Improving the business climate by facilitating business start-up and access to real estate, bank credit and high-quality public services (acclaiming instead of demonizing private business and FDI).• Social security system strengthening in terms of efficiency and equity with special care to vulnerable populations (Social Justice).• Strengthening human capital through improving the quality of education, scientific research, and innovation by developing skills and training/employability adequacy (Promoting skills and elites).• Social development for a quality living standard (improvement of living conditions).Although the World Bank report unequivocally advocates external debt, there is no doubt that neither this issue nor the questioning of the fundamental principles related to supporting housing and the poorest social groups will be on the official agenda.

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Business creation and development: Actual diversification issues

Since the adoption of the new liberal market economy in 1988 confirmed by the investment codes of 1993 and 2001, the tendency for creating new companies and SMB (small and medium-sized businesses) has been a major and constant positive trend.In 2001, the country had a total of 245,338 firms, and at the end of 2019, there were 1,193,339, being 20 companies per capita and an average of 118,500 companies annually created for an overall growth rate of +386%.If such an increase demonstrates a certain entrepreneurial impetus in the country since at least the past decade, the SMB structure is even more illustrative.The SMB sector is 99.97% composed of private SMB and public SMB which number already in decline because of the economic public companies subsidiarizing, has steadily decreased from 778 public SMB in 2001 to 243 in 2019.The decline of the public sector and the liberation of the private sector initiative will evolve according to organizational modes which tend towards legal entities than natural persons with respectively 56.26% in 2019 compared to 43.73% in 2001 (according to the statistical bulletins of SMB of the Ministry of Industry).Moreover, the structure of Small and Medium-sized Businesses shows a domination of very small businesses (having less than 10 employees) accounting for 1,157,539 entities, being 97% of the total Small and Medium-sized Businesses.Medium-sized businesses (having 49 to 249 employees) account for 473 4773 entities, being just 0.4% of the overall SMB outstripped by small businesses (having 10 to 49 employees) with 2.6%.Regarding dominant activities, services are the leading sector with 54.67% followed by Building and Civil Engineering Works & Hydraulics with 28.32%, while sectors likely to diversify, such as manufacturing and agriculture, account for only 16.75%.70% of SMB are in the north of the country compared to 22% in the highland plateaus and 8% in the South of the country.This unequal distribution, despite the geographical grounds based on the distribution as per major population centres, nevertheless expresses imbalances in territorial development.In a "population-based" development model as in Algeria, growth factors can only benefit the densely populated provinces. The prospects for land potential and natural deposits are in the highland plateaus and the South.Since 2010, drastic measures have been taken in town and country planning through SNAT (National Town and Country Planning Scheme), which advocates a "land-based" development model. This scheme favours investments in the highland plateaus and southern regions of the country.Business failure rate still too high20,550 entities, including 9,246 legal entities, ceased their activities, in 2019.The number of SMB being struck-off is 57,642 in the year, when 37,092 SMB were created.Crafts and agriculture remain the most affected areas of activity (9,857 entities).It is regrettable that support for SMB takes place only in the form of business creation, by activating, on the one hand, several mechanisms of direct financing with lost funds (ANSEJ, CNAC, ANGEM), and carrying out on the other hand, indirect financing for the guarantee of loans and their interest subsidy (SGCI, FGAR and the National Fund for SMB Development (FNDPME)).Algeria has implemented several programs to support and upgrade SMB. All programs were designed and implemented through bilateral or multilateral cooperation instruments.Several programs should be highlighted in this context, including:- MEDA program, in which Algeria received EUR 57 million for the upgrading of 3,500 SMB with more than 20 employees, only 760 of them were able to benefit from the aforesaid program.- UNIDO program for upgrading the competitiveness of SMB operating in the agri-food sector regarding the quality of products and the introduction of certification and labelling.- The Islamic Development Bank’s program for the creation of a SMB information system and business incubators for US$ 1.54 million.- The World Bank's IFC program to boost microfinance and leasing.- Special upgrade programs with German GIZ and French AFD.It is necessary to provide effective support to enable the completion of these upgrading programs, and even to establish a real public policy to protect and preserve the economic activity of SMB.This need is particularly evident with the implementation of the Arab Free Trade Area (AFTA), the short-term advent of the African Free Trade Area and the Algerian-European Free Trade Area.Difficulties and constraints of the present... opportunities of tomorrow The financial support of the undertaking action is currently undergoing a profound revision, in the wake of the reorganization and institutional framework and economic vocation change of ANSEJ. The same applies to the reorganization of mechanisms for promoting and enhancing the innovation and knowledge economy.As a result, the current crisis of entrepreneurship in Algeria and the diversification of the investment portfolio, will soon create new opportunities for profitable cooperation in the field of SMB promotion.Markets of subcontracting and industrial and agricultural potential development, as well as the extension of NTIC economic uses, are all unused branches of activity still insufficiently valued and open to all kinds of opportunities for training, valorisation, investment, and development.The difficulties and constraints of the present, constitute the opportunities of tomorrow. These shall be seized to integrate in due time a fast-growing economy, because this blooming economy is condemned to turn toward a productive and competitive one in a particularly interesting regional geo-economic space.Sources:- Statistical information bulletins of the Ministry of Industry (from 2013 to 2019).- CNRC Statistics 2019.- Academic articles (ASJP electronic platform).

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Financial market: Breaking the Contingencies of a Directed Economy

The banking fabric is made up of twenty banks, including six public institutions, deployed across 1690 agencies, a ratio of one branch for each 26,000 inhabitants, with the global average of one branch per 10,000 inhabitants.Moreover, the dominance of traditional public banks is recorded with 1186 agencies, a rate of 70% of the entire banking fabric.It is worth reminding that the opening of the financial market to private investment backs to more than thirty years. The pioneering Law on Money and Credit (90-10) had not only liberated the financial market but also imposed broad autonomy on Banque d’ Algérie.This option, which seemed to presage the birth of a new financial market free of institutional interventionism, soon encountered implementation difficulties and setbacks dictated by the difficulties of changing the entire banking ecosystem from a socialist economy to a market economy.The national economy's dependence on oil revenues has long impacted the financial market in many ways.In ten years (from 2010 to 2020), the national currency depreciated by 37% against the euro in the official market from 102 DZD to 161 DZD for 1 euro and the trend is not about to recover.On the trade side, although the volume of imports decreased by 18% in 2020, exports significantly fell by 35%, widening deeply the annual trade deficit, estimated in 2020 to $10.59 billion, against $6.11 billion in 2019.This situation has an effect on the monetary situation of the banks. The level of liquidity has declined substantially from 1403 billion DZD in 2019 to below 612 billion DZD by the end of 2020, a decline of more than 56%.This alarming situation, which has impacted banks’ ability to finance economic activity, has been aggravated by a predictable response from banking clients, leading to hoarding and widening of the banking inclusion deficit."Over 6000 Billion Dinars Non-Banking Fiat Money"In 2020, for example, there was an increase in non-banking fiat money estimated at 12.93% with an estimated volume of 6140.7 billion dinars, which represents 34.73% of the money supply circulation, an increase of 2% compared with 2019.This reflects a relationship of trust that tends to be broken, benefiting informal channels that are harmful to the necessary revitalization and diversification of the economic activity.The trend described here is explained in the configuration of the banking fabric and its mode of operation dominated by the reflex of refinancing chronic public-sector deficits and prioritizing them over other economic agents’ needs.It should be noted that 51.67% of bank credit was granted to the public sector in 2020, compared to 48.32% for the private sector.Moreover, despite the fragile social situation, households received only 8.20% of the credit granted by banks in 2020. This situation does not allow the mobilization of sufficient levels of savings or bank deposits.In this regard, bank deposit figures show an increasingly apparent reluctance towards the public banks which record a fall in sight deposits and fixed-term deposits estimated at 17.08% and 7.8% respectively.Private Banks, on the other hand, recorded a notable improvement in the volume of deposits with 10.62% for sight deposits and 30.53% for fixed-term deposits, respectively.Thus, a paradox is emerging in the banking world with, on the one hand, a concentration of financial capacity in the hands of public banks that benefits the public sector through loans granted on the basis of guarantees from the Public Treasury.On the other hand, private banks are sparing no effort to remain in a constrained market, taking over an increasing number of clients, with a low level of commitment in terms of investment in banking infrastructure, or financing of structuring economic projects.These are, in fact, mainly banks that finance a limited number of foreign investment projects or those that do not involve any financial risk, such as the housing and real estate development sector.By contrast, these banks are making progress in modernizing and digitalizing banking services, and even are waiting for the economic electronic certification mechanism to be put in place, to incorporate a new generation of reforms.This dynamic comes at a time when public banks are struggling to modernize and shed bureaucratic management in relation to their environment.However, this problematic situation must not obscure the economic potential of the national financial market, which has not yet fully demonstrated its strengths.Despite the constraints experienced, each year new branches are created. For the year 2020, there were eighteen.Banque d’Algérie attempts to organize the banking and financial market by adapting it to the economic pressures facing the country.Many measures are being taken to lubricate banking operations and curb the problem of liquidity drying up.Capital increase from 15 to 20 billion DinarsThe banks were ordered to increase their share capital by 15 to 20 billion Dinars at the end of 2020 and the deadline was extended to June 2021, to allow the 5% of non-conforming banks to comply.In addition, Banque d’Algérie’s policy rate was reduced to 3.25%, as was the mandatory reserve rate, reduced to 2%, and the participation premium rate in the bank deposit guarantee fund to 0.1%.The overall objective of these measures is to manage the liquidity crisis within banks and to prevent the phenomenon experienced at post offices from spreading to banks, which could have a very negative impact on economic activity in general, beyond its social aspect.Financial precariousnessThe approach adopted shows the precarious financial situation, but also the absence of strategic scope solutions, enabling the financial inclusion of the informal market and the profound reform of the banking system to be achieved.Some measures are taken to diversify banking services, such as the establishment of Islamic finance mechanisms, on the assumption that one of the causes of the remoteness from the banking system is, for many, the usury banking practice, which is prohibited on a religious level.Experience shows that this is a measure that allows the diversification of benefits to a clientele already familiar with bank financing, but it does not attract informal market assets, although it is still too early to judge the final relevance of this approach.Moreover, in terms of financing, it is noted that it is difficult to boost the stock market at this delicate stage. Some banks, using the regulatory framework of private equity firms, have tried to find funding solutions specifically dedicated to investment.Such is the case of the Investment Finance Company, created in 2021 by two public banks "BNA" and "BEA". This initiative, while laudable, remains occasional and sporadic, dictated by an expectation of the public authorities, knowing that these two banks suffer from recurring and urgent needs for the financing of the annual investment plans of the two largest national companies: SONATRACH and SONELGAZ.The needs of these two companies are constantly evolving and are traditionally financed by credits guaranteed by the Public Treasury, giving rise to recapitalizations, for the companies themselves and for their funders.Banks called upon to adopt International StandardsAlgeria, faced with a crisis situation, prefers to treat its symptoms first. However, several solutions are emerging in a reform strategy around three main axes:- To encourage Public Banks to be more rigorous in their management by complying with international standards, in particular by changing the line-up of the Board of Directors in order to introduce independent actors able to influence the decision-making system of these institutions;- The possible opening up of the capital of certain public banks to private investment, which will, in the long term, mitigate the effects of the current distinction between public banks and other banks and thus bring new financial, managerial, technological and human resources to the institutions concerned.- To circumvent the problem of under-densification of the banking sector, by accelerating the process of digitization of banking services, in particular, by boosting the activities of GIE Monétiques and SATIM, and establishing shortly the Economic Electronic Certification Authority.Soon the Postal Bank ...In addition to these ambitious projects, thought is being given to the creation of the Postal Bank, which will be a major innovation. This will allow the banking system to benefit from the current network of post offices, which has 357 branches, more than all the banks combined.Let us remind that Algérie Poste is an institution that manages more than twenty-two million current accounts and a significant number of savings accounts.Thus, despite the difficulties encountered, the financial market remains promising and is only at the beginning of a long process of reforms that are bound to move towards openness, professionalization and modernization.This ineluctable orientation will also extend to other financial institutions, such as the Algiers Stock Exchange, which volume of activity is derisory, compared to its counterparts in the region.On another level, the imperative need to diversify sources of financing through the revitalization of private equity firms, is an ideal solution. And the recent creation of the Investment Financing Company by BNA and BEA, shows the interest in this niche of capital activities that offers new solutions for financing investments and economic activity.In this context of renovation, Banque d’Algérie sets itself the challenge of moving beyond the regulation of transactions and currency, towards modern financial aspects that are even more structuring for the country’s financial future. 


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