NESA Center Alumni Publication
By Arslan Chikhaoui, Executive Chairman of the Consultancy and Studies Center
14 May 2020
New Algerian President Abdelmadjid Tebboune, elected on 12 December 2019 after taking 58% of the votes cast, rolled out a roadmap to address three major concomitant challenges: political stability, security, and the revitalization of the economy. It is a real race against time to both restore order and the trust and confidence between ruled and rulers. In the short run, it is a question of initiating an inclusive political dialogue and reconciliation process while averting institutional collapse. This will be a necessary step to quickly return to the political and social stability needed to re-launch economic development and growth, and thus bring the country into a new era. The current political agenda provides for the new Constitution to be approved by referendum, followed by parliamentary and then municipal elections.
Just as President Tebboune’s cabinet (primarily made of up academics) was starting to implement the roadmap, the country was struck with the Covid-19 health crisis and the concurrent fall in oil price, which accentuated the multidimensional socio-political crisis the country has been facing since January 2019. Consequently, priorities have changed to emphasizing the fight against the epidemic through the establishment of ad hoc measures such as geographic and territorial confinement as well as the implementation of protocols for virus-testing and medication with “Chloroquine” which has had positive results according to the Algerian health authorities. Both the WHO and the UN, on 22 April 2020, welcomed the actions taken by Algeria in its fight against Covid-19. Today, in light of these results, the ruling elite have decided to gradually lift the containment measures with a slow resumption of commercial activities. The health situation is improving daily according to health and sanitary authorities. Many observers say these positive health outcomes have been achieved through “early warning” and enhanced cooperation with China, thanks to its science diplomacy. It is clear that China is currently consolidating its position as a strategic ally with Algeria; bilateral relations date back 62 years, starting with China’s support for Algeria’s war for independence. China, as a member of the United Nations Security Council, holds strategic leverage for Algerian diplomacy. All signs suggest that, in the near future, China will displace other partners of Algeria both commercially and financially.
This dual crisis (health and oil) and the deep political crisis that the country has been experiencing for more than a year will undoubtedly have an impact on the already difficult economic situation. The growth rate of which should only reach 1.8% in 2020, according to World Bank forecasts. The drastic fall in the prices of hydrocarbons, which remain 94.5% of the country’s exports, puts significant pressure on public finances and the trade balance, with a single caveat: Algeria’s external debt is currently zero. The policy of economic diversification to gradually disconnect from oil-rent economy will undoubtedly be affected over time as long as it requires a capture of Foreign Direct Investment (FDI).
In light of the multidimensional crisis Algeria currently faces, the ruling elite is preparing for the post-pandemic era through the revitalization of its economy and an economic diversification policy. The government is therefore creating ad hoc conditions to capture potential foreign direct investment, taking into account that competition will be fierce during a global depression. A proactive economic diplomacy is needed. The spearheads of non-hydrocarbon economic diversification will be aimed at new communication technologies, agriculture, the pharmaceutical industry, agri-food industries, construction, and tourism.
Many observers insist that the revitalization of the Algerian economy post Covid-19 is dependent on political appeasement. In this sense, the Algerian ruling elite will have to carry out both structural and institutional reforms by tackling the original political agenda.
Dr. Arslan Chikhaoui is currently Executive Chairman of the Consultancy and Studies Center ‘NSV’ established in Algeria since 1993 (www.nordsudventures.com). He is a member of the World Economic Forum Expert Council (WEF-Davos), the United Nations Civil Forum (UNSCR 1540), and the Defense and Security Forum Advisory Board (DSF-London). He is an Alumni of the NESA Center for Strategic Studies (NDU-Washington DC). He is also a stakeholder in various ‘Track II’ working groups: New Partnership for Africa’s Development (NEPAD), Security in the Mediterranean, North Africa and Sahel region, Non-Proliferation of Weapons of Mass Destruction in the MENA region, SSR in North Africa.