Algeria: government is rethinking state's role in economy

Government Is Rethinking State's Role in Economy

U.S. exports to Algeria dropped slightly to $426 million in 1987 from a 1986 level of $453 million. Algeria should continue to be a major and growing market in 1988 for certain U.S. agricultural commodities. Opportunities are also good for U.S. sales of such items as mining and construction equipment, plastics processing equipment, automotive parts, electric power equipment, and computers. Providing financing continues to be a major factor in selling to Algeria.

For Algeria, 1988 will be another year of austerity. Hydrocarbon exports are not expected to increase in any significant way, and fiscal revenues will be low. Algeria's new budget will run a deficit for the second consecutive year. Projected to be $2.1 billion, the budget would be a $420 million improvement over the 1987 deficit. Total spending on imports 'in 1988 is projected to increase by over 10 percent from 1987.

As virtually all of Algeria's exports consist of hydrocarbons, its foreign exchange holdings (and thus its ability to import) are highly dependent on the price of petroleum and natural gas. Algerian LNG pricing has become more market-sensitive recently, and after a hiatus of several years, the United States is poised to resume LNG imports on a regular basis. As a result, it is expected that the U.S. trade deficit with Algeria ($1.7 billion in 1987) will increase even more.

Having the oil crutch kicked away by the OPEC crisis has caused Algeria to rely more on local resources, particularly in agricultural and industrial production. New Algerian legislation should reflect Algeria's growing realization of the need for change and the role of market forces in the economy. The Algerian Government envisages a leaner, modernized state sector with more autonomy in planning and operation and has stressed the importance of distinguishing between the active role of the state as a provider of "public goods" and its passive role as a shareholder in state companies. The government also foresees an enhanced role for the private sector in areas where entrepreneurial expertise can boost savings, investment, and production.

Algeria has become more receptive to joint ventures; many competent foreign firms are being invited to form companies with Algerian state enterprises. Unfortunately, the establishment of joint ventures with private Algerian firms the most logical method to increase private Algerian technical expertise and capital base-is not possible under existing laws. The U.S. Government has been discussing a possible Overseas Private Investment Corporation (OPIC) agreement with Algeria for some time; such an agreement would provide certain guarantees for new U.S. investments in Algeria. It is hoped that an agreement can soon be finalized.

The Department of Commerce will participate in the 1988 Algiers International Fair June 22 to July 3. A trade mission on water resources is presently scheduled to visit Algeria in October 1988. For further information about trade prospects, contact the Algerian desk officer at (202) 377-4652.

COPYRIGHT 1988 U.S. Government Printing Office
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