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Analysis
Post-Elections: Algeria's Economic and Political Challenges
When Economy Affects Politics
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Dandy Bouteflika is in very much control of Algeria's political process, (Reuters photo) |
The Algeria's democratic experience cannot be isolated from the global economic and financial crisis of the mid 1980s.
Severe drop in oil prices and significant devaluation of the US dollar deteriorate Algeria's economy, which heavily depends on oil revenues — 98 percent of its income.
This had caused Algeria's economy to be too fragile to cope with global challenges.
Twenty years after the Feb. 23, 1986 constitution's advocacy of political pluralism, some
more pessimistic observers of Algeria's future suggest the probability of the re-occurrence of the catastrophic 1986 economic crisis.
This is ascribed to the decline of Algeria's revenues because of deteriorating oil prices and the devaluation of the US dollar internationally, which led to a social explosion known as 1988 October Riots.
In this sense, one wonders what the political and economic challenges Algeria might encounter in wake of the presidential elections of Apr. 9, 2009, with the world's most colossal and most complex economic and financial crisis.
Economic Conditions Force Political Change
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Many warn against the risk of the re-occurrence of 1986 scenario and the re-occurance of political chaos.
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Political economy's approach could best analyze Algeria's political experience.
The oil crisis in Algeria in the mid-1980s had led to political openness, and to the decision makers' support for political pluralism.
For decision makers, political openness could make up for the decline in oil revenues for maintaining Algeria's social stability.
The decline of Algeria's oil revenues emerged concomitantly with the global oil problem.
The Algerian revenues dropped by 35 percent — from $13 billion to $8 billion — during 1985 and 1986.
Consequently, Algeria experienced a crippling debt crisis as the rate of debt services to the revenues amounted to 78.8 percent, compared to that of 1984, which led to a democratic experience.
The first phase of political transition was marked by conflicts between the ruling elite that had lost their royalties, and the Islamic Salvation Front, FIS — an umbrella group that included wide spectrum of ideologies.
FIS took advantage of the critical economic and social situation to mobilize the irate social groups, prodding them into challenging the regime.
This had resulted in a bloody clash which caused heavy human and material losses to Algeria, and destabilized its security.
Is it possible to revert to the 1986 scenario within the context of this global economic crisis?
There are two different ways to answer this question. The first one is represented by the official optimistic and reassuring proposition that Algeria will be immune to the economic crisis — a preposition supported by some reports of international economic and security institutions.
The second proposition warns against the risk of the re-occurrence of the 1986 scenario, and the reversion to social and political chaos.
The official proposition cites the huge expenditure reserve amounted to $ 140 billion by the end of 2008 as a reason why Algeria is immune to the global financial crisis.
According to Prime Minister, Ahmad Ouyahia, Algeria is going to adapt to the global economic crisis for the next three years due to its huge expenditure reserve.
Ouyahia mentioned that the resources of the fund of revenue control worth 4,000 Algerian dinars, and the banking surplus, which was 2,000 billion Algerian dinars by the end of 2008, will make Algeria's economy unscathed.
According to the official viewpoint, Algeria's banking system is not linked to the global monetary system.
This has led Ahmad Ouyahia to assert, at the onset of the global crisis, that Algeria's economic and financial system will remain for a long time immune to the crisis, perhaps for the coming five or 10 years.
The official Algerian accounts regarding the financial crisis depend on the fluctuating oil prices.
In case the oil price drops to $ 60 a barrel, Algeria will be immune to the crisis within the range of five to six years.
In case oil price drops to $ 10, Algeria will be immune to the crisis for a period ranging from two to three years.
The World Bank's report on the global economic prospects for the year 2009, issued at the end of Mar. 2009, shows that Algeria is one of the countries which will maintain positive development at the rate of +2.2 percent in 2009.
It is expected to achieve +3.5 percent in 2010 in spite of the decline of the global economic activity by -1.7 percent.
Oil Factor
| Yet, there are some pessimistic warnings, since most indicators other than those pertaining to oil are negative. |
However, on the other hand, Algeria and the other Organization of Petroleum Exporting Countries (OPEC) members will experience a significant decline in the production of crude oil.
The decline is expected to reach 2.9 percent in 2009, compared to 4.5 percent in 2008, because of the drop of oil prices and energy production.
Yet, the same optimistic view was validated by the US Central Intelligence Agency's report on the status of global economy at the end of 2008.
It listed the countries which could surmount the global crisis according to their trade-balance indices.
Algeria was globally ranked the 14th next to China, Germany, and other countries. And, it was the fourth in the Arab world, largely due to its trade surplus achieved in 2008, which was estimated at $ 32.08 billion.
Algeria's positive adaptation to the global economic crisis in the short term is still based on Algeria's oil revenues in previous years, and through which it managed to reduce its foreign debts from $ 29 billion in 1999 to less than $ 5 billion.
Yet, there are some pessimistic warnings, since most indicators other than those pertaining to oil are negative.
The food import bill for 2008 is equal to Algeria's oil revenue in 1986 which tripled to move up from $ 2.5 billion in 2003 to $ 8 billion in 2008.
Food imports amounted to 30 percent of the total Algeria's imports while Algeria's proportion of food exports had not exceeded 0.2 percent of its total exports.
These indicators prove that Algeria's economy is incapable of striking the balance outside the domain of oil.
Even the draft of President Bouteflika for the coming five years (2009 – 2014) in which he promised the voters to allocate $ 150 billion for public spending depending on oil revenues.
However, oil revenues are expected to decline in 2009 according to estimates of the Algeria's Energy Minister, Chakib Khalil, to $ 40 billion, compared to $77 billion in 2008.
This means that the revenues were reduced by $ 37 billion, less than those of 2008.
This amount of money is approximately the same as the one allocated for imports in 2008, which was $ 35 billion.
Obama's stimulus plan aims at stimulating spending and thus increasing the demand of energy, which will not make oil prices in decline.
Oil and Algeria's Democratic Transition
| The democratic experience during the period from 1999 to 2009 depended on "democratic manipulation" of the presidential coalition of three political entities... |
Obama's energy plan is based on the use of alternative sources of energy to curb dependence on oil exported from the Middle East and North Africa.
Algeria could resort to alternative resources of energy in case the oil prices are still declining.
In this sense, Algeria will have to face the greatest challenges of maintaining political and social stability.
Algeria's political situation will worsen in case oil revenues drop to their minimal limit.
The democratic experience during the period from 1999 to 2009 depended on "democratic manipulation" of the presidential coalition of three political entities including the Society of Peace Movement (MSP) and National Democratic Assembly (RND), an offshoot of the National Liberation Front (FLN).
This coalition managed to monopolize the political process in the parliament, as well as in local municipalities.
The success of such a "democratic manipulation" could be ascribed to the financial bloom resulted from rising oil prices in 2007.
Yet, in legislative elections of 2007, 65 percent of registered voters boycotted the elections.
This is an indicator of the existence schisms within all factions of the the opposition parties, including "Islamic" ones.
It is an indicator of the weakness and fragility of "the Democratic Pole", which includes the Front of Socialist Forces and the Rally for Culture and Democracy that boycotted the presidential elections, and withdraw from the political process.
In case internal chaos ceases to exist, it is questioned whether such parties, who draw their popular support from social anger at governmental policies, are going to secure popular support.
Many Algerian experts have warned decision makers against the pessimistic scenario or the scenario known as the "black swan", which may have catastrophic consequences on Algeria's national security.
According to Copenhagen-based Saxo Bank, oil prices could drop to less than $ 25 a barrel.
In addition, Algerian economic expert Abdurrahman Mebtoul, who had been a consultant in the Ministry of Energy for a long time, called for the establishment of an independent committee to rescue Algeria from the global economic crisis, and avoid the re-occurrence of 1986 scenario.
The committee should be put under the direct control of the president, and shall include experts who are going to work with Algeria's central bank and key ministries.
Mebtoul believes that the repercussions of the economic crisis will go beyond years 2013 and 2014.
Status Quo
| Algeria's political system is heading towards being a presidential one, especially after President Bouteflika amended article 76, which allowed him to run for unlimited presidential terms. |
Algeria cannot get out of the crisis unless it changes from a "revenue" economy to a "production" one based on four pillars: institutionalization, knowledge, information technology, and good governance.
It is not quite easy to implement such a change, especially since the political and financial elite, that has established itself through a revenue economy far from the society's needs, will be an obstacle to change.
It is believed that political reforms in Algeria will remain tied up with oil revenues which have managed till now to maintain the social and political balance.
Bouteflika's victory in the presidential elections will solidify the presidential coalition's control of the parliament.
Algeria's political system is heading towards being a presidential one, especially after President Bouteflika amended article 76, which allowed him to run for unlimited presidential terms.
In case the economic crisis intensifies, some Muslim and Tamazight opposition leaders will be emboldened to challenge the current political system based on the mechanism of the "democratic manipulation".
For example, Medani Mezraq, the former national commander of the Islamic Salvation Army, calls for the establishment of a political party for the movement.
The roles of the local and Tamazight parties should not be overlooked.
The Socialist Forces Front under the leadership of Ayat Ahmad, and the Rally for Culture and Democracy led by Said Saadi have significant presence in Algeria's tribal Berber regions.
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Dr.Saidj Mustapha is a professor of political sciences and international relations,University of Algeria.
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