Since the country became independent in July 1962, Algerian politics has largely been dominated by the National Liberation Front (FLN), which was established in 1954 as part of the country’s struggle for independence. The steps to statehood began with the Algerian War between France as the colonial power and Algerian independence movements. The matter was finally settled by referendum in April 1962, which saw a voter turnout of over 91 per cent and a ballot of 99.72 per cent in favour of Algeria’s independence. France accepted the outcome of the vote in line with the Évian Accords, which ended the conflict and formalised the idea of cooperative exchange between the two countries.
Civil unrest in 1988 led Algeria’s government to create a multi-party system. This led to parties such as the Islamic Salvation Front (FIS) being recognised as legitimate political parties. The FIS went on to achieve electoral success in the country’s local elections in 1990 by winning more than half of the votes. This electoral success continued in the country’s general elections of 26 December 1991. Fears that it would win two-thirds of the seats led to a military coup, sparking the Algerian Civil War, the dismantling of the FIS and the internment of many of its party officials. This action culminated in the party being banned.
Although the Algerian government crushed the Islamists, a number of jihadist groups emerged and the violence of what is often referred to as Algeria’s ‘dirty war’ peaked between 1994 and 1995, reaching such a level that Gilles Kepel wrote, in his 2002 book Jihad: The Trail of Political Islam, that it seemed at the time like the country’s government was not able to withstand it. However, it appears that by 1996-7, the violence and predation of the Islamists had lost its popular support. Parliamentary elections followed in June 1997.
A new party emerged victorious: the National Rally for Democracy (RND) won 156 out of 380 seats. Nevertheless, a coalition government was formed between the RND, FLN, and the renamed Hamas party, the Movement of Society for Peace (MSP). However, Algeria’s presidential election in April 1999 led to the election of the FLN’s Abdelaziz Bouteflika, who received 73.8 per cent of the vote. He is now in his fourth presidential term and, along with his FLN colleague Prime Minister Abdelmalek Sellal, he now leads the country in more secure, stable and prosperous times – thanks to the tough line taken by successive Algerian governments.
Yet, to what extent has the security situation really changed to attract foreign direct investment? Ian Massey, Head of Middle East and North Africa Business Intelligence and Risk Consulting at Salamanca Group offers an answer: “The Algerian security forces are the most capable and well-funded in the region, which allows them to respond to internal and external threats – yet it’s important to note that the scale of the environment presents a significant challenge.” He adds that there is a corporate memory of the Algerian Civil War, but he believes that any regression towards instability and violence is an anathema for most Algerians, demonstrated by the fact that it was this North African country that was least affected by 2010’s Arab Spring.
“International businesses are therefore very interested in [working] there, but it’s not without its challenges because there are complex partnership arrangements and bureaucratic processes to navigate – but on balance, businesses tend to recognise it as an opportunity,” he explains. For example, Britain’s UK Trade and Invest (UKTI) body is looking to build a strong relationship between Britain and Algeria. UKTI is promoting Algeria as a country that offers strong economic opportunities with the support of other organisations too.
A Passion for Algeria
With this in mind, Chairman of the Algerian British Business Council, Lady Olga Maitland, invited a number of British and international delegates to discuss ‘Partnership with Algeria’ in association with the Forum des Chefs d’Enterprise (FCE) in the offices of London-based law firm Charles Russell Speechlys in October. “I have a passion for Algeria and I have been engaged in the country for ten years,” she declared before handing over to the Algerian Ambassador, Amar Abba, who said that the British and Algerian business communities have come closer together. “We signed an agreement last year to encourage British and Algerian companies to cooperate, and British business is needed to make the economy more competitive,” he said. He revealed that his country has been heavily reliant on the hydrocarbon industry, and that oil represents 40 per cent of Algeria’s GDP. Although he argued that the Algerian economy has been stabilised, the drop in oil price has raised some concerns.
In an article for Middle East news and current affairs website Al-Araby, George Joffe demonstrates why many are calling for more economic diversification: “During the first seven months of 2015 … earnings from hydrocarbon sales abroad – 94 per cent of all foreign earnings – totalled US$21.6 billion, compared with US$37.2 billion in the same period in 2014.”
Massey explains: “The pressure on oil prices has shown how vulnerable it has been with respect to its dependency on hydrocarbons to fund the state budget, and as a result the Algerian government has been reliant on foreign exchange reserves.” He believes that diversification could protect the country’s economy from the external shocks that have been felt as a result of the country’s falling current account balance.
“Diversification could lead to opportunities for international businesses that have a lot of technical expertise, operating in sectors such as healthcare, information communications technology and infrastructure,” he reveals. The conference also examined how Algeria plans to expand its energy market – and its speakers cited opportunities in renewable energy, pharmaceuticals, hotels, tourism and retail.
Rafik Boussa, one of Grant Thornton Algeria’s managing partners, also revealed that Algeria has developed a 15-year investment plan amounting to more than US$700 billion, which started in 2009. Like the other speakers, he also highlighted that a partnership with a local company is a prerequisite to success due to a requirement for local shareholders to own 51 per cent of the shares. Investing in the talented but low-cost local labour will also enable foreign businesses to establish themselves more easily than if they were simply to bring in their own workforce from overseas. This will encourage young Algerians to stay in the country to invest in their own talents and in the country’s future.
Chief Executive of Developing Markets Associates (DMA), Atam Sandhu, adds: “From the UK perspective, we had 1,000 applications for an investment forum about Algeria that we staged in December 2014. The DMA organised this in partnership with the British and Algerian governments, following visits to Algeria by Prime Minister David Cameron, the Foreign Secretary and our minister for North Africa.”
He says Cameron’s government has re-affirmed the view that Algeria is a land of opportunity with a promising future by appointing a Trade Envoy to Algeria, emphasising that there are only 12 envoys appointment by the British government in the world. He therefore believes “the relationship between the British and Algerian ambassadors is amazing; all parties wish to deepen their ties between one another.”
With regards to France, the country’s relationship with Algeria has at times been somewhat frosty, but it is seeking to warm up its relations with Algeria by, for example, strengthening its partnership in the renewable energy and biodiversity sectors. Most commentators therefore conclude that Algeria has a prosperous, stable and secure future that is worth investing in. That’s why Cameron has tasked the British Ambassador to Algeria, Andrew Noble, to double British exports to the country by 2020.