However, despite the financial realities driving the push for privatization, there has been intense opposition from all sectors of society. Public sector industry makes up the majority of the state’s saleable assets and is the country’s largest – and most inefficient – employer. Algeria’s large labor unions are fearful of lost jobs while, in the volatile world of Algerian politics, the government is afraid of adding to its indigent army of disaffected unemployed. Unemployment in Algeria is acute: currently standing at approximately 30% of the population and 50% among young people.
Resistance also comes from higher up. The complex administrative and legal apparatus of government ownership has created a bureaucratic class whose jobs and privileges depend on the continuity of the system. But perhaps most difficult of all, powerful elites within the government and the military, many of whom have become rich on the back of state-controlled monopolies and a subservient banking system, have operated behind the scenes to obstruct the process.
Given this environment, the progress that has been made to date is not insignificant. Since the decree legalizing privatization in 1995, the authorities have opened almost every sector to private activity, including banking, agriculture, mining, tourism, telecommunications and industry. The lucrative hydrocarbons and energy sectors – the final bastion of state control – are also facing a draft law for liberalization that will be passed in 2002.

STATUS: NUMBER OF PRIVATIZATION AGREEMENTS BY 2001*: NUMBER OF STATE FIRMS LIQUIDATED: NUMBER OF PARTNERSHIP AGREEMENTS AS OF 2000 (outside hydrocarbons sector): TOTAL VALUE:	Legal since 1995 1 approx. 1,000 153 $200 million
*From the list of 88 companies selected by the government in 1998 that needed to be privatized

The poor results of the privatization process should be improved thanks to a new privatization law passed in 2001, which does away with some of the bureaucratic obstacles and makes the decision-making process more streamlined. Says the Minister in charge of the process, Mr. Nourredine Boukrouh, “Our record of achievement is weak, but we are capable of getting a lot done this year. We are reaching the point of no return.”

WHAT’S PROMISING
SIDER, one the country’s largest iron and steel producers and heavily in debt at the end of the 1990s, has negotiated a deal with India’s ISPAT – one of the world’s largest iron and steel producers – to take control of 70% of SIDER’s capital. If concluded, it will represent Algeria’s first full privatization deal.

WHAT’S NOT
The Algiers Stock Exchange. Three state-owned companies were ordered to list 20% of their shares on the newly created bourse in 1999. Aside from a Sonatrach bond issue, there has been no activity since.

The legal framework for the privatization process is in line with most privatization codes around the world: it provides a flexible, negotiable context in which most modes of privatization are available, from a straight sale of assets, to the sale of shares through a competitive bidding process, the stock exchange or private deals. It also provides for a subscription of shares by private investors in the context of a capital increase and concessions.

The government’s repeated objective for these actions is not privatization per se. Its overriding concern is to modernize Algeria’s productive capacity so that, one, it erodes the country’s excessive reliance on hydrocarbon exports and, two, that it will actually reduce the level of unemployment, not increase it. What the government stated it wouldn’t do was continue the long-term funding of its companies anymore, which left Algeria’s SOEs to look elsewhere for cash, ie: open up their equity to the private sector.
The official body set up to manage this process was the National Council for State Participations (CNPE), under which 11 holding companies (subsequently reorganized into five national and five regional holdings in 2000) were created according to sector to manage the state’s assets – approximately 950 national enterprises and 350 local or regional enterprises. Their task was to prepare SOEs for privatization and/or partnership or liquidate the worst cases.

The problem is that after seven years with this administrative framework, not much has actually happened in terms of real privatization. According to the Ministry of Participation and Coordination of Reforms, around 1,000 small state-companies have so far been liquidated, resulting in the loss of 36,000 jobs. In a stage-managed affair, three state-owned companies were directed to list 20% of their shares on the newly created Algiers Stock Exchange in 1999. (Despite lively interest in these initial IPOs, no activity on the new exchange has taken place since.) Finally, a detergents company, the National Company for Detergent Products, has formed a joint venture with Henkel, the German consumer products manufacturer.
Otherwise, no real majority privatization has taken place. To speed things up, the Minister of Participation, Mr. Hamid Temmar, called for the outright elimination of the government holdings as they were, in his view, cumbersome intermediaries between company managers and possible investors. In what many saw as a struggle between pro- and anti-privatization forces, Mr. Temmar was moved to the Ministry of Trade in 2001, his reforms to streamline procedures left undone.
However, his replacement, Mr. Nouredine Boukrouh, formerly the Minister in charge of SMEs, has succeeded in implementing much of Mr. Temmar’s proposals. A presidential decree, issued in August last year, shut down the holdings, eliminated the National Council of Privatization (another intermediary body) and streamlined the CNPE, renamed the State Participation’s Council (CPE). In the place of the holding companies will be 28 equity management companies that will have, in theory, greater powers to deal directly with investors and more room to maneuver.
“What characterizes the new process,” says Mr. Boukrouh, “is that all intermediate structures – the holding system, the National Council of Privatization, the secretariat – have been liquidated. Instead we have made the institutional process more practical by shortening the decision-making route.”
On the investment front, the National Agency for Investment Development (ANDI) was created to replace the former investment agency, APSI. Mr. Abdelmajid Baghdadli, the new agency’s General Director, says the brief is to get closer to the investor. “ANDI will be organized through a decentralized, regional network of ‘one-stop shops’ where investors will find a unique agent to help and support them for all their needs.” Initially, the agency will be providing updated analysis and information on Algeria’s investment environment, then branch out into services to support the specific needs of a particular investor.