DESPITE PROBLEMS, ALGERIAN REFORM PROCESS MOVING

C O N F I D E N T I A L SECTION 01 OF 04 ALGIERS 002194

SIPDIS

E.O. 12958: DECL: 10/17/2015
TAGS: PGOV PHUM SOCI ECON KWMN AG
SUBJECT: DESPITE PROBLEMS, ALGERIAN REFORM PROCESS MOVING
FORWARD

Classified By: Ambassador Richard W. Erdman,
for reasons 1.4 (b) (d).

OVERVIEW
--------------


1. (C) Under the leadership of President Bouteflika, Algeria
has embarked on a process of serious and sweeping reform.
The process has been uneven, to be sure, and Algeria has a
long way to go before it achieves real democracy, rule of
law, habits of transparency, and open markets. Executive
power is not adequately checked by an independent judiciary
or robust legislature. Political parties still mainly
function as instruments of their leaders and as transmission
belts for decisions taken on high, rather than as vehicles
for aggregating and reflecting grass roots sentiment upward.
Algeria's legacy of failed socialism continues to weigh
heavily, corruption is a daunting problem, and socially and
politically reintegrating a society torn apart by more than a
decade of terrorism in the nineties remains a major
challenge. With the security situation significantly
improved, state coffers overflowing with petro-dollars, and
the public increasingly focused on bread and butter issues,
meeting public expectations in this area will also be
critical.


2. (C) For all these problems, Algeria is on a positive path
toward modernization and has the resources and potential to
become, over time, a quiet success story in the BMENA region.
Bouteflika has shifted the political center of gravity
squarely into the civilian camp, following years of barely
disguised military rule. With the recently approved Charter
for Peace and National Reconciliation, a framework of sorts
has been established for reintegrating peaceful Islamic
elements more fully into society and politics, while fencing
off radical fundamentalists. The press and civil society
groups, despite some harassment, both retain their ability
and will to criticize government actions and shortcomings.
The economy is registering steady growth at 5 per cent or
more and slowly being transformed via privatization, new
non-hydrocarbon investment, and a small but important reverse
flow of Algerians returning after having spent years abroad.
Unemployment, though still unacceptably high, is receding. A
massive 5-year infrastructure investment program is under
way. And, with terrorism defeated strategically and his own
legitimacy strengthened by his 2004 re-election victory,
Bouteflika has finally begun to turn reform rhetoric into
reality.


3. (C) Specifically, the past year and a half has seen a
significant expansion of women's rights; further progress in
reducing illiteracy; and new legislation on judicial,
educational, penal, criminal, and anti-corruption reform. On
the economic front, Bouteflika has pushed through numerous
WTO accession-related reforms and directed an aggressive
privatization effort (over 200 firms privatized so far, with
a target of 300 by the end of 2005). He has also passed
landmark reform legislation governing the hydrocarbon sector;
liberalized the telecommunications sector; approved new
anti-money-laundering legislation; authorized major steps
toward bank liberalization; and won parliamentary approval
for the EU-Algeria Association Agreement, which took effect
this September. In sum, change is occurring and will likely
accelerate over the next 5 - 10 years as the aging liberation
war generation passes from the scene. While Bouteflika is
certainly no Ataturk, intellectually willing and politically
able to make a radical break with the past, he has recognized
the failures of the socialist system, so far mostly used his
dominance of state institutions to press for reform, and set
in motion a modernizing dynamic that over time holds the
promise of transforming Algeria's economic and, eventually,
political landscape in the direction of democracy and open
markets. (End Overview)

CONSOLIDATION OF CIVILIAN RULE, EXECUTIVE DOMINANCE
-------------- --------------


4. (C) Bouteflika's resounding re-election victory in April
2004 -- the first contested presidential election in Algerian
history and the first in which the military remained neutral
-- marked a watershed for military-civilian relations in
Algeria. It changed the basic institutional dynamic,
increasing Bouteflika's legitimacy and making him beholden to
the Algerian public, not the military, for his office. It
also led to the resignation of the longtime Armed Forces
Chief of Staff (Lamari),providing Bouteflika an opportunity
to reassert his formal role as the Commander of the Armed
Forces, replace Lamari with a weaker officer beholden to him,
and appoint new senior service and regional commanders, the
one important exception being Military Intelligence. The
military's increasing focus on professionalization and
modernization also fed this new dynamic.


5. (C) At the same time, growing executive dominance has been
fueled by the lack of adequate judicial and legislative
checks, the general ineffectiveness of Algerian opposition
figures, and Bouteflika's genuine popularity with the
Algerian public, who credit him with improving the security
situation, ending Algeria's international pariah status,
restoring Algeria's financial health, and setting Algeria on
a path toward national reconciliation. A leader with a
populist and paternalistic bent, Bouteflika has increasingly
given the impression he sees himself as the indispensable
leader who alone is capable of leading the Algerian people
from the wilderness of civil strife to a new era of reform,
reconciliation, and democratic prosperity. While such a
mind-set can lead to undemocratic behavior in the pursuit of
laudable objectives, a temporarily overly powerful executive
may be the historic price Algeria will have to pay for
wresting power away from the military.

WOMEN'S RIGHTS REFORMS
--------------


6. (U) In March 2005 the Parliament amended the sharia-based
Family Law of 1984 to permit women to transmit nationality to
their spouse and children. It also explicitly permits women
to marry a foreigner. Other significant changes to the Family
Law include:

-- Marriage by proxy was abolished in an effort to stop
forced marriages, and a common legal age for marriage, 19,
was established for both men and women.

-- When signing the wedding contract, a woman may now choose
the male sponsor of her choice. The institution of the
marriage sponsor (or "wali") was retained, thus formally
denying women full legal equality, but was in practice
completely gutted. Under the amended law, the woman
contracts the marriage, not the wali on local behalf, and may
choose any male to be her sponsor.

-- Fathers are now required to ensure the provision of
housing for all their minor children in case of divorce.

-- Women can ask for a divorce and more easily conclude
prenuptial contracts barring polygamy. Although not
abolished, polygamy requires the prior consent of a judge as
well as of all spouses before an additional marriage can be
approved.

-- As evidence of the growing importance of women in the
Algerian economy, women make up 17.5% of the work force 45%
of these women are under 30. A strong majority of working
women, 60%, work in the private sector.


JUDICIAL REFORMS
--------------


7. (U) Under Bouteflika, 75% of the entire legal code has
been amended or completely changed. This includes the Civil
Code, Penal Code, and Commercial Code. The Penitentiary
Organization Code was also modified to bring Algerian
practices up to international standards. In addition:

-- Some 55% of all judges are women and 50% of the new class
of magistrates are women.

-- The training period for magistrates has been tripled, from
one year to three, since 2001.

-- Algerians are now able to obtain their judicial record and
any other legal or judicial data by consulting two new web
sites maintained by the Ministry of Justice.

-- The former president of the Constitutional Court was a
woman, and two female magistrates began serving in September
on the High Council of Magistrates.

-- Courts are becoming more specialized as the training of
magistrates expands.

-- The Justice Ministry has actively sought U.S. training
opportunities for its judges.

EDUCATION REFORMS
--------------

8. (U) The Ministry of National Education began reforming
primary schools in 2004 and began targeting secondary schools
in 2005.

-- Illiteracy stands at 26.5%, down from 31% ten years ago.

-- Attendance of school-aged children reached 97% in 2005, up
from 89% in 2003.

-- Between 1999 and 2005, the budget for education tripled.

-- 6,000 new teaching jobs were created in 2005 alone.

-- The Government extended some curriculum requirements, such
as the teaching of Arabic and national exam requirements, to
private schools. Optional instruction at private schools,
with authorization from the Ministry of National Education,
is still allowed.

-- Primary schools reintroduced French (after an absence of
several years) starting in second grade and in 2005 began
offering the Tamazight (Berber) language as an elective
beginning in the fourth grade. The study of English is
required beginning in the fourth grade.

-- The Education Minister on October 30 is signing a major
English teaching / curriculum reform program financed by
MEPI.

PRESS FREEDOM
--------------


9. (U) Despite harassment, highly publicized arrests, and
prosecutions of a few journalists for alleged defamation, the
press still is able to vigorously criticize Government and
presidential actions. A new satirical newspaper very
critical of the Government, L'Epoque, began publishing in
August. Its editor in chief is a woman, Baya Gacemi.

-- The Government of Algeria is currently revising the
Information Code with the collaboration of journalists and
editors. The Information Code really amounts to a new code
of journalistic ethics; upon its completion, journalistic
practices would, in theory, no longer be addressed in the
Penal Code (i.e., defamation would be de-criminalized). The
Information Code's promulgation is expected in 2006.

-- Algeria has 45 daily newspapers, which sell a total of 1.5
million copies, although the circulation of most of these
papers is very small. The 49 weekly publications sell
622,000 copies, while the 11 monthly periodicals sell
600,000.


-- A television channel in the Tamazight language will soon
be launched. Its programming will include news programs in
five different dialects: Berber, Chenoui, Mozabite, Chaoui,
and Targui.

-- The International Federation of Journalists, which
suspended its activities in Algeria in 1996, reopened its
office in Algiers in 2004.

MONEY LAUNDERING AND CORRUPTION
--------------


10. (U) While corruption remains a serious problem some
steps have been taken to address it.

-- Legislation on money laundering was officially adopted
February 2005 and in October the government decreed that all
transactions over 50,000 dinar ($685) must be effected by
formal money transactions (ie checks, not cash).

-- Algeria also adopted an Anti-Corruption law this year
which implements Algeria's EU Association Agreement
commitments, broadens the definition of corruption, and
stiffens penalties.

-- President Bouteflika has publicly spoken out against
corruption in strong terms, asserting no one, regardless of
position, will be exempt. The GOA is making an example of
certain high-profile offenders by firing or prosecuting
senior customs officials, 60 magistrates, state energy
company officials, and two governors.


ECONOMIC REFORMS
--------------


11. (U) Algeria ratified the Association Agreement between
the EU and Algeria this year. The agreement was brought into
force September 1. In addition, as part of its accession to
the WTO:

-- Algeria has passed by executive decree several laws
required to bring Algeria into conformity with WTO norms,
including the Law for Copyright and related rights,
trademarks, patent and integrated circuits; the Law on
Commercial Practices; the Law for IPR Protection; the Law on
Foreign Trade; the Law on the Protection of Animal and
Vegetable Species; the Law on the Suppression of Technical
Barriers to Foreign Trade; and most recently, elimination of
a ban on wine imports written in to the 2005 Supplementary
Finance Law.

-- Also in July, Algeria passed a new Law on Hydrocarbons
that more fully opens the hydrocarbon market to competition
and foreign investment and transfers the regulatory function
of the state energy company to a new state regulatory agency.

PRIVATIZATION
--------------


12. (U) There are currently roughly 1,200 public enterprises
that are open for privatization which will be sold off
individually through public tenders and should be offered for
100% foreign control. According to the Minister for
Privatization, some 200 of these firms have been privatized
so far and the target for 2005 is 300.

-- The Ministry of Finance released bid packets in July 2005
offering the economy's first bank privatization.
While state-owned businesses were privatized in the past,
this is the first time in Algeria's history that a foreign
entity will be allowed 51% ownership of a state bank, with
the remaining 49% divided between the state and private
Algerians.

-- Algeria has agreed to a U.S. Department of the Treasury
technical assistance program that will advise Algeria on bank
privatization and will involve a resident Treasury advisor to
help with each step of the process.


TELECOMMUNICATIONS AND TECHNOLOGY REFORMS
--------------


13. (U) Algeria has made substantial strides in opening up
its telecommunications sector over the last three years and
is now one of the regional leaders in this area.

-- From 2001 to 2004, the Government spent approximately $486
million on developing the telecommunications sector as part
of opening the sector to competition. Another $165 million
was allotted to scientific research.

-- The number of mobile telecommunications subscribers
reached 11 million in 2005. Private entities control 66% of
the mobile telecommunications sector. There are only 3.8
million subscribers to land-line communications. Though the
land-line market is currently 100% state-owned, in March 2005
an Egyptian consortium won the first private land-line
license. The consortium plans to begin operations before the
end of 2005.

-- In 2000, Algeria had 1,000 Internet subscribers. By 2005,
there were 100,000, with an estimated 1 million expected by

2010.

-- In 2000, there were 200 cybercafes across Algeria. By
2005, 6,000 were officially registered with the authorities.

-- Nearly 10 million Algerians have cellular phones in 2005,
compared to 54,000 in 2000.

ERDMAN