Country report on ALGERIA regarding Porcelain Products

Submitted To: Prof. Pradip Chakrabarty

Submitted By: Ketan Gosain IMG-04 Roll No.-043030
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Note that the oil & gas sectors employ only 2% of the total labour force. 30% of GDP) have mostly private ownership.33%) and gas (-25%) and complemented by an expected depreciation of the Dinar. This decrease is almost fully attributable to projected lower prices for oil (. Thanks to government spending high job creation occurred in the non-hydrocarbon sectors. However. Transparency International. UN. particularly in construction. World Bank. creating an insecure environment. Agriculture (8% of GDP) and services (ca. The country is rapidly accumulating large foreign reserves and has repaid virtually all foreign debt. The political situation is currently stable. would not exist without the energy sector: many infrastructural projects are driven by the needs of this branch of industry. a change in the constitution allowed for a third presidential term for President Boutéflika.Introduction The hydrocarbon sector covers 29% of GDP. It has supplied Algeria with strong external and budgetary positions. half of it is state-owned. With lower energy prices nominal GDP will contract by about 8% from USD 156bn in 2008 to USD 144bn in 2009. Heritage foundation. this will hardly impact the immediate living standards of the population as 2 . but small radical Islamic groups may resume violent actions. Source: EIU. Non-hydrocarbon industry accounts for another 30% of GDP. A multi-year government economic growth program focuses on rural development and social services. Earlier this year. Much of the economic activity. CIA World factbook. 70% of government revenues and 98% of all merchandise exports. Reporters without borders. Economic structure and growth Algeria’s economy is to a large extent dependent on oil and gas and the energy sector is largely stated-owned. Unemployment has been reduced from 30% at the end of 2000 to around 11% at the end of 2008.

However.this loss of revenues will be absorbed by lower contributions to government coffers and external reserves. withdrew it s bid as it was hit by the US mortgage crisis. The president’s political party. Privatisation of banks has been stalled since August 2007 when Citibank. in light of Algeria’s very gruesome and violent recent history which led to over 100. financial markets are hardly developed: stock market capitalisation stands at a poor 5% of GDP and banking penetration is lower than that of neighbouring countries Tunisia and Morocco. Although domestic banks are stable. when presently known (high quality) oil reserves will have been depleted. From a global perspective. the recent (albeit overstated) mandate given to Boutéflika by the electorate is a sign that Algerians opted for continuity and stability rather than risk another round of civil war. which are readily available. Again. 2009 for a third five-year term. although the poll was boycotted by cash-stripped opposition parties. for Europe the country is a major gas supplier: it is providing 15% of Europe’s gas needs. Overall. together with its allies has dominated the political scene since 3 . Still. some improvement is noted over the past years. the central government. Algeria is at most a middle ranking energy supplier with between 1 % to 2 % of known world hydrocarbon reserves.000 killed in a civil war. Political and social situation Constitutional amendments were approved by the parliament in 2008 allowing the president to be re-elected for a third term. their books contain much exposure to structurally lossmaking state-owned enterprises. when high average returns on equity reached a decent 25%. Its oil production can be sustained for 20 years. He won the re-election with about 90 percent of votes. President Abdelalziz Boutéflika was re-elected on April 10. Banks’ foreign debt is virtually non-existent apart from debt linked to trade finance. an important prospective owner. which owns around 85% of the total banks assets and accounts for 80% of lending. The financial position of the banking sector is reported to be fundamentally sound due to the financial strength of its principal owner. These public banks have not engaged in sophisticated financial activities and excessive risk-taking. Algeria is also involved in an international large-scale carbon capture and storage project in empty gas fields aimed at reducing carbon dioxide in the global atmosphere: an additional long term asset in view of the CO2-reduction initiatives in Europe and the US. who accused the government of electoral fraud. Banks’ assets are largely financed by domestic deposits. No other investor has replaced Citibank and Algeria seems to have abandoned the privatisation process altogether. the National Liberation Front (FLN). Gas reserves could last for a comfortable 50 years at current gas production levels.

much better than Libya but definitely below Tunisia The EU has a clear interest in a stable political and social environment. Frustrated youth could affiliate themselves with radical Islamic groups and a civil war could re-ignite. very comfortable fiscal surpluses of more than 9% of GDP have been attained. have largely been successful. Many enterprises to be privatised figured already on the initial privatisation lists of 1995. monetary and exchange rate policies are reasonably effective. Although structural changes are towards more market. The government has made progress in restoring domestic order. Economic policy Overall policy direction is geared to open up of the economy. sometimes violently. Moreover. not Arab. With the adoption of some policies encouraging democratic practices. potentially radicalising. the fiscal situation would have shown very large deficits of up to 50% of (non-energy) GDP. These Berbers have long aspired. the domestic security situation has improved steadily in recent years. 4 . Negotiations for an EU association agreement are underway. The government is unlikely to grant autonomy but has offered to allow usage of Berber language in schools. if energy-related revenues are excluded. Enthusiasm for privatisation further stalled when the financial crisis began in the US in the summer of 2007: it has not resumed since.a. However.it poses a long-term risk.With fiscal revenues of over 40% of GDP (75% energy–related) and expenditures mostly at around 35% of GDP. A minority of Berber are also Muslim but identify with their Berber rather than Arab cultural heritage. The EU wishes to mitigate Algeria’s social risks. that could feed back into Europe and is keen to diversify its energy delivery for the medium and long run. Muslim minority in France. level of corruption) and ease of doing business Algeria scores similarly poor as Morocco and Egypt. this tri-partite coalition has 249 of the 349 parliamentary seats. although in 2008 and 2009 a marginally higher inflation of 4. progress here is very slow.independence in the early sixties. These have resulted in government reserves of at least 30% of GDP in 2008. although sporadic terrorist attacks by radical Islamist groups still occur. reduce state influence in economy and maintain macro-economic stability.5% is registered and estimated. Despite a favourable global environment and bureaucracy hindered the reform policies. despite a difficult socio-political environment. Algeria is a strategic energy source for the EU. In terms of results. Currently. for autonomy. Efforts to limit price increases to 3% p. Algeria is the homeland of a large. However. At the same time the government is entering an ambitious five-year development program valued at USD 150bn (or one year’s GDP). Algeria has succeeded in somewhat opening the political process. Almost all Algerians are Berber in origin. The training and performance of the army and security forces have been improved. Price inflation is contained partly through mentioned implicit and explicit price subsidies. The projected fiscal deficits in 2009 and 2010 of approximately 3. enabling them to more effectively confront armed opposition. The real effective exchange rate is considered to be close to its equilibrium level since 2003 and thus poses no threat to economic stability.5% of GDP can easily be absorbed by these reserves held at domestic banks. However. The next parliamentary election is scheduled for 2012. the influx of youth into the labour markets is such that –if current low employment perspectives in the non-energy sectors persist. In terms of governance (civil and economic freedoms. Although unemployment has halved in the past five years thanks to government development programmes. accession to the World Trade Organisation is stalled as Algeria is not sufficiently willing to address the issues of intellectual property and the very substantial implicit gas price subsidies benefitting energy-intensive domestic industries.

The desired growth of the porcelain industry can be achieved by investing in accordance to the business environment and the barriers of entry for the new entrants are very low. the firm can provide employment opportunities and also considering the fact the government can provide some subsidies initially which can provide great market penetration strategies. Also. new entrant can be competitive in the industry conditions and thrive depending upon its core competencies. Considering all the above factors and doing the analysis of the market in Algeria we can suggest that the country offers immense potential for this highly labour intensive industry. The trade relations of Algeria are very good with EU so in that case a potential market is available. being highly labour intensive industry.Prospects regarding Porcelain Products As we can see in the previous sections Algeria has accumulated large foreign reserves and has virtually paid all its debts so trade prospects remain very good in the country. the current political situation in the country is also stable. 5 . Apart from this. Given above factors.

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