The economic climate in Algeria is changing. Faced with falling oil and gas prices amid uncertain economic times, the country finds itself at somewhat of a crossroads as it aims to broaden its fiscal horizons to meet its pressing infrastructure needs.
After several years of positive growth figures – averaging around 4 per cent since 2007 – the government is faced with a dilemma of understanding how it can bridge the financial gap due to the drastic drop in global oil prices of the past 12 months. For an economy which is predominantly reliant on its receipts from petro-dollars this is not an easy challenge, but one initiative which is increasingly gaining traction is the use of public-private partnerships (PPPs).
The Algerian government has recognised unlocking private sector investment could hold the key to diversifying its economy and meeting its infrastructure needs, building crucial road and rail links, hospitals and health facilities that will stretch from the Mediterranean coast in the north of the country to the arid desert in the south. The question which now exists is how does Algeria attract this external investment into the country?
At present, Algeria does not have in place a structured approach to PPP initiatives, relying on its current mix of public procurement laws and regulations to guide projects through to completion. Potential investors have been turned away because of the lack of a clear and transparent bidding process, meaning the government has likely been failing to achieve value for money due to the lack of competitive friction.
The formal implementation of a PPP framework is now considered to be a priority by the Algerian government to ensure external investors have the confidence in a system which will provide certainty and predictability on all projects. It will also prevent the problems which have dogged previous public procurements from happening again in the future, laying down guidelines on issues such as quality control, expropriation, arbitration of disputes and the respect for commercial agreements.
This a brave step from the government but one which will undoubtedly take them in the right direction. Neighbouring governments in the Middle East and North Africa region, barring just a few exceptions, have failed to diversify their economies and are facing a bleak future because of the heavy influence of their oil receipts. Such a decision to diversify will only help Algeria in the long-term in a social, political and economic sense.
A PPP framework should not be considered a panacea to the economic challenges which Algeria currently faces. But the experienced gained by other countries of running PPP projects should be sought out to understand the potential pitfalls and benefits that such a framework can bring, and any best practice techniques that can be passed on to further assist with its implementation and drive projects to completion to the highest of standards.
With the government now keen to further its long-term vision for the country, the implementation of a PPP policy framework to lay the foundations for its future economic security is of the utmost importance on its path to economic maturity.
☛ Najid Aberkane is executive director at Procuring Group