Algeria, 1962-2002 and Beyond: The Political Economy of Oil andGas (fwd)

["Clement M. Henry" <chenry@mail.la.utexas.edu>]

Here is one that should be of interest to those playing Algeria or wishing
to learn about this country.

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Clement M. Henry
Professor of Government
University of Texas at Austin
Austin TX 78712
tel 471-5121, fax 471-1061

---------- Forwarded message ----------
Date: Mon, 16 Sep 2002 11:52:00 +0100
From: Ali AISSAOUI <ali.aissaoui@oxfordenergy.org>
To: algeria@40th-anniversary.gov
Subject: Algeria, 1962-2002 and Beyond: The Political Economy of Oil  and Gas

Algeria, 1962-2002 and Beyond: The Political Economy of Oil and Gas
French colonial rule in Algeria, which extended from 1830 to 1962, had a
brutally disruptive effect. Not only did it dispossess the Algerian
society of its freedom and wealth but it deprived the indigenous people
of their integrity, leaving them intellectually and morally disoriented.
At independence in 1962, following a seven-and-a-half-year war of
national liberation, the stakes of which were raised by the French oil
and gas discoveries in the Saharan provinces, Algeria was a country in
dire straits. In addition to the dislocations caused by the war and the
heavy toll taken of the nation’s population, the economy had been hit by
the unexpected exodus of one-tenth of its population, the relatively more
educated, skilled and wealthy European settlers, the pieds noirs.
        To consolidate its shaky foundations, the new Algerian state
relied on the prestige of a revolution that led Algeria to liberation and
the prospects of the Sahara’s hydrocarbon resources over which Algeria
had gained nominal sovereignty. These were to become the sources of the
legitimacy and wealth upon which the ANP (Popular National Army) and the
FLN (National Liberation Front) would base their domination of the
Algerian state, and the state its domination of society, for the next
several decades.
        So long as the values and ideals of the revolution continued to
be meaningful to the people and the rent generated by the hydrocarbon
industry was substantial and perceived as judiciously allocated, the
system commanded a degree of loyalty among the Algerians. However, the
FLN’s ideals gradually became more and more divorced from the social,
economic and cultural reality. A demographic explosion, an increasing
generation gap, changes in social values and moral standards, shrinking
hydrocarbon rents and the inability of the state to sustain growth,
employment and social welfare, all combined to undermine the system. By
the end of the 1980s, long-suppressed political movements bearing new
societal demands expressed dissatisfaction with the prevailing order,
questioned its legitimacy, and pressed for fundamental constitutional,
political and economic reforms.
        When the incumbent regime gave in to these demands in 1989 and
ended the monopoly on political life of the ruling FLN, new political
associations, many dominated by Islamist groupings, emerged to clash with
established interests and with each other. The political and economic
situation of Algeria was hardly favourable to the establishment of a
stable multiparty democracy, and when political liberalisation stalled in
January 1992, the process erupted into open confrontation. Since then,
Algeria has been gripped by a conflict resembling, in many respects, a
civil war.  Although the intensity of the violence has decreased in
recent years, it continues to affect the otherwise steady transition
aimed at ending the state’s enormous sway on the country’s economic and
social fabric.
        As Algeria is emerging from the traumatic experience of the last
decade, and a ‘rejuvenated’ FLN is back in power, the government faces
the daunting task of rebuilding the destroyed infrastructure, offering
better protection against an unrelenting ‘residual’ terrorism, and
alleviating the economic hardships imposed on the masses for more than a
decade. In the medium and longer term, rapid population growth will put
further pressure on the government to focus on the increasing demand for
health services, environmental protection, education, and social
infrastructure. Widening the basis for the hydrocarbon rent and
stabilising it will help the government to respond to increasing social
needs while attenuating budget deficit and public debt. However, it will
offer little help in absorbing the mass of unemployed young people, which
beset the country and threaten the prospect of restoring political
stability. Hence, the vital need to radically change the prevailing
incentive structure in order to discourage rent-seeking behaviour, unlock
the economic potential of the country and foster development of
labour-intensive activities in the non-hydrocarbon sector.). Therefore,
the key political issue is to radically change the prevailing incentive
structures, including wages, taxes, subsidies, and access to credit in
order to discourage rent-seeking behaviour, unlock the latent economic
potential of the country and stimulate productive investment and greater
non-hydrocarbon output.

Ali Aissaoui’s Algeria: The political Economy of Oil and Gas (Oxford
University Press, 2001) incorporates research carried out at the Oxford
Institute for Energy Studies. This book provides a broad description of
the oil and gas sectors, highlighting those features which give the
country a physiognomy of its own compared to other petroleum-exporting
nations of the developing world. The analysis is set in the context of
history, economic policy and international relations. It also identifies
the specific challenges that Algeria will face in the future in
developing its wealth to the best advantage of the economy, the society
and the environment.

Copies available from all good bookshops and from the Oxford Institute
for Energy Studies, 57 Woodstock Road, Oxford OX2 6FA, UK; Tel: +44 1865
311377; Fax: +44 1865 310527; E-mail: publications@oxfordenergy.org;
Web-site: www.oxfordenergy.org.