Five decades on: Despite a sometimes rocky road, the country has prepared itself for long-term growth

The Report: Algeria 2012 – Country Profile

The current status of Algeria as a major hydrocarbons producer has come after a long and challenging history, with political instability a regular concern. Recent years have brought a much greater degree of security and stability, but early years were marked by a number of issues that still influence the country today.

POLITICAL HISTORY: In 1962 Algeria won its independence from France, which had ruled it as a French departement since 1830, following an eight-year war led by the National Liberation Front (Front de Libé ration Nationale, FLN). Upon independence a single-party regime was established for the country, with the FLN named Algeria’s sole legal party. In practice, politics was largely dominated by a handful of political leaders and the military after 1965.

Algeria’s first president was FLN leader Ahmed Ben Bella. Ben Bella was a strong advocate of the nonaligned movement, which sought to maintain a neutral, third-party stance during the Cold War.

However, Ben Bella’s rule became increasingly characterised by splits amongst the higher levels of political leadership and in 1965 popular dissatisfaction led to a bloodless coup by the former defence minister and former head of the National Liberation Army, Colonel Houari Boumediene. (At the time, the country’s military did not use the rank of general, making colonel the highest rank attainable.) After taking power, Boumediene led the country until his death in 1978, surviving an attempted coup in 1967. Under his (also strongly authoritarian) rule, many figures of the independence movement went into exile (such as Mohammed Boudiaf, who would return in 1992 to briefly serve as president) or were put under house arrest.

MAJOR CHANGES: After a short interim period following his death, Boumediene was succeeded as president by Colonel Chadli Benjedid (the army’s highest-ranking soldier in 1978), who ruled until 1992. The later years of Benjedid’s time in office saw major political change and upheaval. Following an oil price collapse in 1986 and a subsequent economic slump, large-scale protests and riots took place across the country in October 1988. The following year saw the introduction of a new, more liberal constitution, with changes including allowing the formation and participation in elections of parties other than the FLN, removing the military’s formal sway over politics and liberalising the press.

However, when the newly formed Islamic Salvation Front (Front Islamique du Salut, FIS), which had triumphed at local elections in early 1990, won the first round of multi-party legislative elections in December 1991, the military intervened, establishing the High Council of State to oversee day-to-day management of the country. Harsh measures taken in response to the election results plunged Algeria into several years of civil conflict between the government and a succession of increasingly extremist Islamist militant groups.

At least 160,000 people died during the course of the décennie noire (“the black decade”), as it was known, with elements on both sides blamed for human rights abuses, and large-scale massacres of civilians attributed to the Armed Islamic Group (Groupe Islamique Armé, GIA) peaking towards the end of the decade.

SEARCHING FOR SOLUTIONS: Attempts by moderates on both sides to negotiate an end to the conflict in 1995 and a ceasefire by the FIS-linked Islamic Salvation Army in 1996 failed to hold. It was only in 1999, when Abdelaziz Bouteflika, a former foreign minister and compatriot of Boumediene, replaced the former minister of defence, General Liamine Zeroual (who assumed office in 1995), as the new president that the conflict began to calm. Bouteflika was elected with 74% of the vote, though all other candidates had withdrawn from the race, amid accusations of electoral misconduct.

Bouteflika had campaigned on a platform of ending violence and encouraging national reconciliation. Shortly after his inauguration he pardoned several thousand Islamic extremists, ahead of the approval that year by referendum of the “civil concord”, which provided amnesty to militants not implicated in murder, rape or terrorism. According to some estimates as many as 85% of Islamist militants laid down their arms under the initiative which, combined with internecine fighting in the GIA and several military successes, led to the group’s disappearance and the end of the conflict. However, a GIA splinter-faction, the Salafist Group for Preaching and Combat (Groupe Salafiste pour la Predication et le Combat, GSPC), remained more resilient, sustaining an insurgent campaign in its stronghold areas in the Kabylie region. In 2007 the GSPC rebranded itself as an affiliate of the international extremist group Al Qaeda, renaming itself Al Qaeda in the Islamic Maghreb (Al Qaida au Maghreb Islamique, AQMI).

NATIONAL UNITY: In 2005 the public approved by referendum a charter of national unity and reconciliation aimed at putting an end to the residual violence and closing the book on the décennie noire by offering another amnesty to the small number of remaining rebels, mostly members of the GSPC. The charter, which the government enacted in 2006, also gave immunity from prosecution to the military and said those who availed themselves of the amnesty would also have to agree to forego involvement in political activities.

In 2009 the constitution was altered, via a referendum, to remove the previous two-term limit on presidents, allowing Bouteflika to successfully run for a third term later that year. However in May 2012 Bouteflika made clear that he would not run for a fourth term.

More recent years have seen Algeria seek to improve the long-term prospects of its newfound stability. While the country saw rioting and political protest in early 2011, and continues to see repeated instances of localised socioeconomic protests, it did not see the large-scale unrest, political turmoil and violence that broke out in other parts of the region. In February 2011 the government declared an end to the state of emergency that had been in place since 1992.

LEGISLATIVE ELECTIONS: Domestic and regional civil unrest prompted the introduction of new regulations meant to liberalise elections and increase transparency. These changes were applied to the 2012 legislative elections, which saw over 21m Algerians registered to vote for 44 political parties, 23 of which were legally allowed to compete. Some 500 international observers were brought in to supervise the elections, from institutions like the EU, the Arab League, the African Union, the National Democratic Institute and the Carter Centre. Some $200m was also invested in new transparent ballot boxes to help ensure the election stayed fair.

These initiatives were complemented by reforms encouraging the growing participation of women in Algerian politics. New electoral laws introduced quotas of between 20% and 50% for female representatives on party candidate lists. The new parliament has also been delegated the task of rewriting the constitution in order to advance democratic institutions.

Despite speculations concerning the effect of regional political changes on the ruling party, Bouteflika’s FLN emerged victorious from the parliamentary election, garnering almost half of the vote. Women won nearly one-third of total seats, or 145 out of 462 seats. Though Islamists of varying stripes in neighbouring Egypt and Tunisia fared well in recent elections, Algeria’s Islamists failed to attract a notable portion of votes, in part due to the main Algerian Islamist party being banned from competing. Voter turnout was 43%, with an estimated 1.7m ballots left blank, reducing the active participation rate to about 37%.

A final deciding factor in the outcome of the 2012 legislative elections is the legacy of the Algerian civil war in the 1990s. Memories of the conflict remain fresh in the minds of many. This means that, while socioeconomic inequality has been a concern, the country has largely avoided any radical political changes that might upset national stability.

A NEW CABINET: After a four month-long delay, Algeria’s new cabinet was appointed in early September 2012, an action that largely maintained the status quo instead of incurring notable change. Ministers of several key sectors were reappointed, including the energy minister, Youcef Yousfi; the interior minister, Dahou Ould Kablia; and the foreign affairs minister, Mourad Medelci. One notable change was the replacement of Ahmed Ouyahia as prime minister with Abdelmalek Sellal, a technocrat. Described as a “man of consensus” due to his lack of political affiliation, Sellal served for over a decade before becoming prime minister.

His key responsibilities will include organisation of the next presidential election in 2014 and the continuation of Bouteflika’s reform agenda, which seeks to maintain economic growth, reduce unemployment, and facilitate private participation and investment in Algeria’s industries. To move this goal forward, observers predict Sellal will proceed to amend laws introduced under the former prime minister believed to have hindered foreign investment.

FOREIGN RELATIONS: Relative stability at home has allowed the country to raise its profile in traditional diplomatic forums, and it pursues a diverse multilateral policy. It has especially become known for taking a particularly activist stance in continental affairs.

Algeria hosted a number of summits earlier in the decade. These included meetings for both the Organisation of African Unity (the precursor to the African Union) and the Arab League.

Algeria also remains close with the EU, particularly with France. Under the newly elected French president, François Hollande, Algeria and France plan to enhance bilateral relations by boosting cooperation over a number of key issues, including security and the movement of people between the two countries.

Algeria has enjoyed a friendly relationship with the US as well. In July 2001, Algeria signed a trade and investment framework agreement with the US, facilitating the negotiation of a bilateral investment treaty and a free-trade agreement. Algeria received $1m in 2003 under the US-North African Economic Partnership, which bolstered reform efforts and foreign investment. The US is the leading recipient of Algeria’s exports, importing over 25% of goods, largely hydrocarbons.

Relations with the UK have also improved. William Hague, the UK’s foreign secretary, visited in October 2011, followed by a range of political and economic visits. UK commercial interests have been expanding outside of the hydrocarbons sector, with memorandums of understanding signed in education and health.

On the eastern front, Algiers has witnessed a budding relationship with a number of other emerging markets, including Turkey, Korea and, most notably, China. Trade with China has exploded in recent years, with China the second-largest source of national imports in 2011 (valued at $4.7bn). China was also a key buyer of Algerian exports during the same year, purchasing $2.18bn worth of goods – an 85% year-on-year increase from 2010. Furthermore, Chinese demand for Algerian exports is expected to rise further in 2012, with the continued expansion of Algerian energy exploitation. Economic relations between the two countries have also been encouraged by the growing participation of Chinese firms in major Algerian construction and public works projects. The state has increasingly awarded contracts to Chinese companies, in light of their adherence to deadlines and their work efficiency.

ECONOMIC HISTORY: At the time of independence, Algeria faced major social and economic challenges. The economy had been badly affected by eight years of war, during which as many as 1.6m Algerians had died. Most of the country’s professionals, skilled and semi-skilled labourers, and civil servants had been French colonists, the great majority of whom left upon independence, while 70% of the indigenous population was unemployed. In the aftermath of independence, agricultural and industrial production fell sharply.

Algerian economic policy in the early decades of independence leaned heavily towards a socialist command economy model. Agriculture, industry and oil extraction facilities were nationalised. Algeria’s first president, Ben Bella, supported autogestation ( self-management), which was later declared official state policy at the 1964 FLN congress and under which enterprises were put under the control of their workers.

The policy proved largely unsuccessful and further damaged productivity, leading Boumediene to move away from it on coming to power, though he continued to pursue socialist and statist policies – by 1971, 90% of industry was under state control. Boumediene focused largely on long-term development planning, with an emphasis on heavy industry, financed by energy exports, while neglecting agriculture. Partly as a consequence, agriculture production as a share of GDP fell from around 15% in 1965 to 9% in 1985. Such policies ran into difficulties as many of the new industries failed to turn a profit and the economy became increasingly dependent on oil. This led to a serious slump when prices collapsed during the 1980s oil glut By contrast, Benjedid pursued liberalisation. A fall in oil prices in 1986, with receipts declining by 70%, exacerbated pre-existing problems, leading to an economic crisis and making energy-revenue-based industrialisation untenable; following strong growth in the first half of the decade, 1986-88 saw negative real growth.

In response to such problems, Benjedid and Mouloud Hamrouche, the key architect of many of the liberalising economic reforms and head of the government under Benjedid from 1989 to 1991, shifted away from the country’s socialist course, declining to continue calling the country a socialist state as part of constitutional reforms in 1989. New economic policies included breaking up some state enterprises, giving some more autonomy and privatising the others. Benjedid also shifted the focus of development away from heavy industry and long-term planning (he abolished the Ministry of Planning) and towards smaller-scale light industry and the redevelopment of agriculture. Against a backdrop of worsening violence, growth in the early 1990s was anaemic or even negative, and the country, burdened by heavy foreign debts, signed a debt rescheduling agreement with the IMF in 1994. While growth picked up somewhat in the latter half of the decade, reaching 5.1% in 1998, unemployment continued to grow, hitting 29.5% in 2002. However, as levels of violence fell significantly in the early 2000s, the economic situation improved. Average annual growth in the first decade of the 2000s stood at 3.67%, compared to 2.26% in the 1980s and 1.57% in the 1990s, and the country has not witnessed a year of contraction since 1994. In 2010 unemployment fell to under 10% for the first time in over 30 years. In 2002 the country signed an association agreement with the EU, implemented in 2005. The country has now paid down its foreign debt amid windfall oil prices, and has accumulated massive reserves it plans to invest in infrastructure.

OUTLOOK: The progress Algeria has made in terms of its overall development trajectory is impressive, with several years of peace and sizable economic growth now under its belt. There are still challenges, including the country’s worrying hydrocarbons dependency and stubborn persistence from AQIM, while a number of key industries have yet to fully realise their potential. Nevertheless, with steady liberalisation, privatisation and diversification, long-term prospects seem to be secure.