Algeria's Future in the Balance

ALGERIA is going through a major turning point in its history, both on the political and the economic fronts. The change will be rough and perhaps even explosive. This winter may turn into a true winter of discontent for the millions of youths who are left without a stake or a future in the economy.The advent of democracy in this North African state dates back to October 1988, when general discontent exploded in the streets of Algeria and several hundred people were killed in clashes with the authorities. Since then, however, the country has become the first Arab state with a multiparty system and a freer press. For 30 years, Algeria endured a single party rule much like those of the Soviet Union and the rest of the third world. But now the country has more than 50 political parties. Nevertheless, the new Algerian democracy is already being tested. This past June, the country experienced unrest and strikes called for by the Front Islamique du Salut (FIS). The FIS was protesting the "rigged" election rules that favored the ruling Front de Liberation Nationale (FLN) and the gerrymandering involved in increasing the number of the national assembly seats from 296 to 542. The serious problems that the country faces are economic, not political or even religious. Thus turning Algeria into an Islamic republic will not make its problems disappear. Many who follow the FIS do not seem to understand what Islam is all about. Islam is not about violence. It is not about forcing views on others. It is not about undemocratic processes. It is about modesty, moderation, understanding, and respect for other people's views. In the final analysis, however, the result depends on everyone's interpretation of what Islam is all about, and therein lies the problem. The success of the FIS in last year's municipal elections was actually more of a vote against the FLN. The common wisdom is that the FIS is in fact a response to 30 years of mismanagement, corruption, and a ruined economy that failed to meet the aspirations of the up-and-coming generation of Algerian youth. Those who support the FIS see in it a return to equal justice, accountability, honesty, and due process - values that were destroyed by 30 years of a socialist experiment gone bad. The process of opening the economy has already started. The recent proposed sale of 25 percent of Algeria's hydrocarbon reserves to Western oil companies to help Algeria pay its debt is a move in that direction. Such a move, which has already been opposed by the FIS, would have been unthinkable just a few years ago. Nevertheless, it has produced an uproar in the country and clearly underscores the serious difficulties currently facing the Algerian economy. To begin with, the size of the public sector needs to be greatly reduced. Currently, more than 80 percent of the state-owned companies are running at a loss with their deficits being covered by the treasury. With Eastern Europe dismantled and world attention focused on its rebuilding, as well as on the troubles of the Soviet Union, the next Algerian government needs to find some innovative ways to shift some of the attention its way. The world is being carved up into regional blocs. Algeria must make a move to link itself up with these regional blocs and do it fast. The country is very well positioned geographically to serve both European and North African markets. With unemployment at 1.2 million and growing at 200,000 a year, the Algerian economy is unable to produce the needed jobs without some foreign investment. With the present debt service choking off any hope for future growth, equity investment is certainly better than more debt. In order to facilitate an increase in foreign as well as domestic investment, prices in general need to be freed in all sectors - from interest rates to airline tickets, medical services and even the basic necessities. There is no reason to subsidize everyone regardless of merit. With population growth constraining economic growth, what is needed is a clear targeting of those who are in real need of support. Unless Algeria restrains its present high population growth rate of 3.2 percent - and 70 percent of the population already is under 30 years of age - Algeria will be unable to significantly alter the living standards of a restless population. Given that Europe has effectively closed its doors for future immigration from Algeria, the next logical step is to bring the jobs to it and thus relieve the explosive pressure from the labor market. In the process, this will also help diversify the economy and move it away from the hydrocarbon sector to which it has been addicted for the last 30 years.