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                            A Special International Report Prepared by
                           The Washington Times Advertising Department - Published on July 2, 1999
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Advertisers

(1) Sonatrach, An International Petroleum Group

(2)Council of Privitisation

(3)Bank of Agriculture and Rural Development

(4)CNEP

(5)Group Touring Club of Algeria

(6)Groupe Enad

(7)Wines from Algeria

(8)Blanky Industry Company

(9)EFG - Hermes

(10)DHL Worldwide Express

(11)Enterprise De Travaux Publics Batiments & Hydraulique

(12)Office National des Aliments du Betail (ONAB)

(13)Hotel El Djazaïr

(14)Halliburton Company

(15)Algeria National Enterprise for Tourism

(16)Investment Promotion, Support and Monitoring Agency, APSI

(17)Hôtel El-Aurassi

(18)Saïdal Group

(19)Mechanical Public Holding

(20)ENCG

(21)Sonatrach, Partnership the strategic choice

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A Special International Report Prepared by The Washington Times
Advertising Department

Written by:
Rod Craig

Propject Director:
Hala Nasreddine

Photography by:
Rod Craig

For more information, call
The Washington Times International Advertising Department
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Privatization goes forward with progress, challenges

18-1.gif (22656 bytes) "Algeria faces multiple challenges," says Ahmed El Antri Tibaoui, secretary of state of the CNPE - Conseil National des Participations de l'Etat, which presides over the privatization program.

"The challenges arise from the presidential elections. We have a new president who aims to give Algeria the place that it deserves and formerly occupied.

"We have the UMA (Arab Nation) - because today throughout the world it is the regional groups which make their voices heard .

"There is a major challenge on the economic side. Algeria has an important role to play in the Maghreb. I think that the major base of the Maghreb economy is here. We intend to build that up.

"On a regional basis Algeria, with her industrial and economic bases, intends to enter into agreements which take into consideration its individuality and engage itself in the relationship between the European Union and the MENA zone. On a world scale Algeria has always played an important role and was one of the initiators of the North- South dialogue.

"Everyone should know that Algeria has completely changed. On a political basis, a real democracy has been put into place with a pluralist assembly and second chamber. There is also a totally independent and free press which criticizes - sometimes perhaps a little too much.

"This is the true proof that there is a real democracy and the world should know it.

There is also an economic democracy where the private sector has an increasing role to play. All the reforms which have been introduced aim to promote a productive private sector, partnerships and foreign investment in Algeria.

"Investment is no longer subject to approval of any sort, now it is declarative. Anyone who wants to invest in Algeria comes and automatically he has international guarantees. - Algeria has adhered to all the associations MIGA SIRVE LOPIQ.

"Our ambition is to put ourselves back with force in the international market. With the situation in the world today we can no longer live in autarchy - saying that Algeria has a strong economy and it can live on its own. We are open to the world and we want to want to write ourselves into this mondialization especially as we have very strong arguments in our favor. "

Legislation had been undertaken to cover the domain of privatizations.

We have a council for privatization which acts for the state and carries through the transfer of property to national or foreign interests

"At one time it was not easy to speak about the subject - now I think the taboos have been removed.

We wanted to be pragmatic from the beginning when we made our first contacts with the World Bank.

We had first to reorganize management methods in the public sector and before privatizing the public sector we had to reorganize the state enterprises, restructure them and above all take away the administrative control of the ministries.

"We have separated the mission of the state as a public power from the mission of the state as a shareholder.

We have created public holdings - eleven in the first phase which run all the sectors of the national economy on a horizontal level - steel industry, engineering, manufacturing, agro-foods, building, major works, services, chemicals. We created the holdings to restructure and prepare the enterprises for privatization. This was done because we didn't want to make the same mistakes as other countries and not to throw the baby out with the bathwater. There could also have been the tendency to have the same approach but the other way round - to say that everything had to be privatized - we didn't want to choose this solution.

"Today the holdings themselves have identified a program of 249 enterprises to privatize which represents about 40 percent of the potential of the main enterprises of the public sector . But we didn't stop at this program. There are four main sectors in the program. The first is the enterprises which we wanted to privatize totally and are in the competitive sector - the hotels, drinks, carbonated drinks, beers, fizzy drinks, mineral water, building materials, commerce, the transformation industry and manufacturing. In these sectors the privatization program has been started.

"There have been offers, local and international investors are interested, notably in the hotel industry and the drinks sector and we think that at the beginning of July we shall have $500 million from these first programs of privatization which are going to continue through the year. So 1999 is really the year of privatization.

The second sector which is also important concerns nearly all the major industrial complexes which constitute the industrial base of Algeria, among the biggest in Africa.

"We feel that, after the major restructuring which we have already carried out during the last three years, it needs technological updating, better organization, foreign management and fresh capital.

"This is going through well - negotiations are taking place - one of the biggest European companies in metal packaging has just taken 15 percent of our factories in this field. The contract has been signed and the money transferred.

"We are negotiating with the Europeans notably Germans , French, Americans "

Discussions were going ahead with Procter and Gamble concerning production of detergents - with Bluebird to build school buses."

Negotiations were also going on in the field of industrial housing construction - in view of the country's "enormous needs for lodgment".

"We think that before the end of the year at least 15 contracts of association will be signed.”

The shareholdings being offered were not minority ones.

One agreement we have signed for 15 percent and as soon as we have finished, the people want to take 60 per cent We agree. Our partners often want to have the majority which is normal."

"The big adjustments in terms of employment have already been made.

The last three years we have closed more 1,000 firms and we compressed 400,000 people to ensure profitability Those which were not economically viable we closed.

"When our partners take over a factory generally they have a normal staffing ratio based on international standards.

"But we have unemployment benefits - we are one of the rare African countries to have an unemployment fund . Workers are paid during 36 months. The fund has been able to invest money and has consequently been able to set up retraining schemes so that jobless people can set up their own businesses. There were also schemes to convert job skills so that unemployed people can find work.

"Our third axis is with the stockmarket. The Algerian Bourse, set up with Canadian aid, opened in June and we have already launched two operations - the first was for an enterprise which transforms wheat - ERIAD Setif and this worked very well. The second was with a firm which produces medicaments - SAIDAL- this also went well - which proves that people have confidence in the economy. We are going to open another part of its capital because of this."

He added that it had been thought that investors would have waited to see how things were going to go after the presidential elections before placing their money.

"Far from it - 30 percent of the share holding was put on the market and 80 percent of this was taken up."

He added that a third enterprise, the Aurassi Hotel, had been launched on the market- and there were 17 other companies to be put on the market during the year, bringing the total to 20.

The state planned to get out of the hotel field completely - although the first steps had been "a little timid".

Foreign capital was "very interesting" in certain sectors.

"There is much saving in Algeria," Added Mr. Tibaoui - "As long as you explain the way it is done, people will bring out their money if they have confidence. These savers do not necessarily bring it out officially but from, as we say, 'under the mattress', put it to bear fruit in the economic tissue.

"Growth has come back to Algeria - Especially in the industrial sector where after ten years of negative growth we went into positive growth in 1998.

"The last axis of privatization - We found that when we sold bankrupt businesses it didn't bring much to the State. So the small businesses which we were going to wind up- notably those with a local character- we decided to concede to their employees. But definitely not under a system of co-operatives.

"This has worked very well. We asked them to form companies - in 1998 they created 1,520 firms, with about 30,800 new shareholders.

"The money that we normally pay to the unemployment funds is given to them to capitalize their businesses.

80 percent is paid for the purchase of the businesses and 20 percent is kept for operating funds. The state gives them 20 years to pay the rest.

"After a year of this scheme not one of these companies has gone bankrupt. Some of them are recruiting, for others it is not too good, but in the majority it is working well. There is a system of assistance and surveillance.

He plans to continue with the system.

"These are the four ways in which we plan to disengage the state.

"And for the banking system we are setting up a system of consumer credits.

"At one time we had many hypermarkets - 293 - there were 11 public companies - all money losers - so we put them all into bankruptcy.

"Today about 40 percent have been bought by their employees - when they were public it didn't work - now they are privatized it works very well. There are still many hypermarkets around Algiers which are closed today - we haven't wanted to reopen them while they are publicly owned and we are asking for offers from foreign companies.

"We know that the big distributors improve production, they will impose standards of fabrication, delivery and services and our society will be obliged to adapt."

Table of Contents

(1) His Excellency Abdelaziz Bouteflika, President of the Democratic and Popular Republic of Algeria

(2) Country has resources and potential and is moving toward peace

(3) History

(4) Stability predictable for Algeria

(5) Terrorism is costly - in lives and finances

(6) Political Parties

(7) Despite being free, press sometimes is silenced

(8) Local bidders and foreign investors being courted

(9) Despite previous problems, economic future is bright

(10) Institutions

(11) Director-General sees light as country comes out of tunnel