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Eureka: Economic report: Algeria Eureka: Economic report: Algeria
by Akli Hadid
2018-03-03 08:56:45
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Every economy has something I like to call “economic hardware” and “economic software.” Economic hardware is basically the availability of products vital to the survival of society, for example food, water, housing, heating and so on. Economic software is the interaction between economic units as in banking, renting property, transportation, business etc.

alger01_400Regarding economic hardware, Algeria is doing fine by all means. You can buy as many as 10 loaves of bread for a dollar and a sandwich at any store will cost you between a dollar and two dollars. Water is largely available although some regions are prone to drought. This year it was in the East where a steel mill had to be shut down due to drought. But overall water shortages are few and far between and the dam system works well, with 80 dams in the country. Healthcare is free but doctors do complain about a shortage in staff and medical equipment which makes healthcare what they like to refer to as “wartime medical care.” There are housing shortages especially in the bigger cities. But overall food, water, housing just about works.

Now regarding the software, some works needs to be done. First by its geography, Algeria being the 11th largest country in the world, transportation and logistics can be complicated. Roads are available, but while transporting goods and services around the country you pretty much have to sleep in your car or truck, as there is a shortage of hotels or housing available for those transiting through a city. The banking system and housing systems tend to be very opaque making financial transactions and relocation within the country very difficult. Interest groups are virtually unheard of, they exist but again operate very opaquely, and are almost clandestine. Same goes for recreational spots including pubs, restaurants, entertainment venues or sports venues tend to be overpriced, barely exist, and when they do exist tend to operate almost under the table.

Business “software” can be very rigid, unreliable and prone to difficulties. While in theory, what I call the “business hardware” works well, that is it is easy to set up any business in the country for locals if they follow the rules. Regarding the “software” human resources are scarce and tend to be unreliable, business partners are not always honest and straightforward. Note that Algeria is an Islamic society where family is the core unit and people outside the family tend not to be trusted. So most business tends to be conducted within families and outsiders are viewed with suspiscion. A lot of times Algerians will want the money, but will not always be willing to deliver the effort, clarity and transparency that goes with the product.

Over the last couple of years there has been noted positive changes including the near completion of highways connecting large portions of the country, a simplification of the banking system and legal problems for those who do not deliver projects or for those engaging in fraud or in breaking the law. Algeria has become relatively safe.

Now I'll give my two cents regarding how some of Algeria's problems can be solved.

How do you get the economy back on track?

Simply stated by reducing opacity. Agriculture, industry and services are waiting to be provided by due to the opaque nature of business transacttions land is waiting to be plowed, industries are waiting to be operational and services aren't being provided. Those who want to engage in such commercial activities don't always know what the rules are as in setting up the business or moving their business forward.

The other factors in internal mobility. Business in different regions would blossom if Algerians had the means to move around within the country, that is the country needs less opaque housing rental systems, transportation systems, recreational facilities and of course more robust labor contracts.

Since foreign currency can no longer be gained solely by exporting fossil fuels, how do you bring in hard currency?

There's three ways to bring hard currency into the country. First is by selling products to foreign countries and be paid in foreign currency known as exports. Then you have immigrants to foreign countries who send remittances. The there are foreign visitors to the country.

Regarding exporting products to foreign countries, you need to look South. That has been done to a certain extent, including by building highways that go all the way to Nigeria. But you need to start with chambers of commerce and/or free trade agreements or trade partnerships with countries in the South. Without an Algeria-Mali chamber of commerce for example, how do you trade with a country when you have nowhere to go if something goes wrong.

Regarding immigration, what Algeria is doing right now is sending mostly single men, sometimes single women, to foreign countries. Single people rarely send remittances. So the idea is to send families abroad that will be more serious about sending some of the cash they earned abroad back home. The the question is what families do you send? Unfortunately a lot of times when families immigrate they tend to have negative perceptions of locals in their adopted countries and the negative perceptions tend to be validated within the family. This means some families can adopt radical views on the locals. So the idea is there needs to be some kind of occupation that Algerians specialize in abroad. Filippinos have their au pair, Tunisians have their bakeries, Moroccans their grocery stores and Koreans their dry cleaning stores. That is, Algerians need to be able to pick up an occupation abroad that they can turn to if they find nothing else.

Now, and finally, to tourism. Tourists tends to look for an escape from their dull 9 to 5 routine and look for places where they can be inspired and can interact. Algeria has the tourism “hardware” that is sights are stunning and beautiful, but the “software” including transportation, housing, recreational facilities, friendly hosts are still kind of lacking.


        
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