ALGERIA AMBIVALENT AS CHINESE LABOR AND GOODS, NOT

UNCLAS SECTION 01 OF 04 ALGIERS 001112

SIPDIS

SIPDIS

DEPARTMENT FOR EB/CBA WILLIAM BEHRENS AND YASMINE FULENA

E.O. 12958: N/A
TAGS: ECON EINV CH AG
SUBJECT: ALGERIA AMBIVALENT AS CHINESE LABOR AND GOODS, NOT
INVESTMENT, FUEL ECONOMY


SUMMARY
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1. Chinese workers, who first flocked to Algeria in the late
1990s to meet the country's steep labor demand for
construction projects, today number around eight thousand at
any given time. While they are still most prevalent in the
construction sector, many moonlight as traders of Chinese
wares. Algerians households have shown wild enthusiasm about
the low cost and variety of Chinese-made goods now available
after a decade of civil war and three prior decades of
socialist austerity. Nonetheless, there are traces of
resentment of the Algerian Government's reliance on Chinese
labor when domestic unemployment hovers around 20 percent.
President Bouteflika, for his part, has hailed the Chinese
work ethic while criticizing the country's dearth of
investment in Algeria. Concerns about the quality of Chinese
goods and increasingly stringent Algerian import standards
may imperil demand for certain types of Chinese goods and
projects, but Algerians tend to view the Chinese influence
here as a net positive for the country. End Summary.

CHINESE FIRST DRAWN BY CONSTRUCTION SECTOR
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2. A wave of Chinese workers first appeared in Algeria in the
late 1990s as Algeria's security situation stabilized and
demand for housing became a political imperative. The
shortage of adequate housing stock throughout the country --
a function of demographic youth bulge, rural flight during a
decade of civil war, inadequate government planning, a
dysfunctional rental market, and a lack of skilled Algerian
labor -- remains one of the country's most pressing
challenges. President Bouteflika promised one million housing
units would be built during his 2005-2009 mandate. In turn,
the GoA looked to Chinese contractors to finish the job
quickly. (Note: According to the Minister of Urban Planning
and Habitat, Algeria delivered just 132,000 housing units
last year, despite the Chinese contribution. This is largely
the result of poor state stewardship of housing distribution,
Algeria's inadequate financial sector, and bureaucratic
morass. End note.)

STRICT REGISTRATION REQUIREMENT LIMITS ILLEGAL IMMIGRANTS
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3. A May 28 report by the Algerian Ministry of Labor and
Social Solidarity estimated the total number of Chinese
workers in Algeria around eight thousand at any given time.
Despite their relatively small numbers, the Chinese represent
45 percent of the foreign labor in the country. Embassy
contacts in the business community and with the Algerian
Police confirmed the figure, although the Arabic-language
daily El Khabar reported June 17 that the figure could be as
high as 15,000. Workers must register with the Ministry of
Foreign Affairs, the Chinese Embassy, and with the local
police in the area they work. Chinese laborers who overstay
their visas or residency permits, which typically last for
the duration of a particular project, are routinely deported
within a week, according to an Algerian businessman with
close ties to the Chinese community. Given the GoA's strict
monitoring of foreigners and the continuing state of
emergency, it is unlikely that Algeria possesses a sizable
community of illegal Chinese residents, if any at all.

LABORERS MOONLIGHT AS VENDORS
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4. Many Chinese workers employed in Algeria as contractors
hold secondary jobs as vendors of Chinese products. According
to a local adage, there is one bed for every three Chinese in
Algeria: in any eight hour stretch, one is sleeping, one is
working on a construction site, and the other is out hawking
wares on the street. These vendors utilize the so-called
"tabla" sales method of setting up stands on the street for
their goods. Embassy contacts note that for the most part,
the Algerian authorities view the Chinese residents as a
benign foil to other more problematic foreign populations,
such as African migrants. An Algerian importer told Econoff
that as long as the Chinese are here to work and they have
the proper papers, the authorities leave them alone.

ALGIERS 00001112 002.2 OF 004




5. Besides laborers in Algeria for fixed contracts, a
significantly smaller community of Chinese have acquired
residency by setting up trading companies. The National
Center of Trade Registration reports that there are 278
Chinese companies registered nationwide. Two large Chinese
shops recently opened, for example, on the main commercial
boulevard of Algiers. Provided they register their address
with the police, foreign businessmen need not work with a
local agent, although many choose to have an Algerian partner
to facilitate the commercial registration process. According
to Embassy contacts, many of these Chinese relocate from
other parts of the Middle East, such as Egypt, and can speak
Arabic when they arrive. Many are known to marry Algerian
women.


6. Embassy contacts note that Chinese traders rely almost
exclusively on cash for their business transactions and
rarely possess bank accounts. Chinese laborers, for their
part, normally receive their wages in China. With only a
meager stipend for living expenses in Algeria, their "tabla"
trade is an important part of their livelihood.

GOODS TRADE DOMINATES
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7. Simple goods trade dominates the Algerian-Chinese economic
relationship. According to official Algerian trade
statistics, China was the fourth largest provider of imports
to Algeria in 2005, accounting for 6.5 percent of Algeria's
total imports. Algerian exports to China are significantly
smaller, however, thereby lowering China's rank for two-way
trade with Algeria to twelfth place in 2005. Chinese goods
most prevalent in Algeria include electronics, office
furniture, construction materials, clothing, spare parts, and
plumbing products.


8. The major centers for trade in Chinese products are in the
so-called "Dubai" neighborhoods of Algiers and Setif, some
225 kilometers southeast of Algiers. Former Prime Minister
Ouyahia said on Algerian television last year that quantities
of trade in the Algerian "Dubais" were so great that vendors
had substituted weighing money for counting it. Many Chinese
goods enter Algeria overland through Libya or Tunisia, or by
ship from the real Dubai -- in the United Arab Emirates. Many
other goods arrive via so the so-called "cabas" (tote bag)
method, whereby, for example, a traveler arrives from the
Persian Gulf with hundreds of bottles of Chinese-manufactured
perfume in his luggage. According to the UAE Embassy in
Algiers, they have attempted to limit "cabas trade" by more
closely scrutinizing Algerians applying for visas.

DEARTH OF INVESTMENT
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9. Despite the abundance of trade, there is little Chinese
investment outside of hydrocarbons in Algeria. President
Bouteflika, while touring the Chinese Pavilion at the Algiers
International Trade Fair June 1, pointedly criticized this
shortfall, as recounted to Econoff by the director of the
trade grounds who accompanied the President during his tour.
This trend was clearly reflected in the composition of firms
represented at the fair. Touring the Chinese Pavilion June 8,
Econoff noted numerous booths promoting electronic goods,
agribusiness equipment, machine parts, and vehicles. In
comparison to many other countries' pavilions, there was not
a single booth showcasing industry or sustained investment
opportunities.


10. Since 2002, two Chinese firms -- CNPC and Sinopec -- have
signed three contracts for roughly USD 1 billion in
hydrocarbon projects with Algeria. According to the Algerian
press, China's Huawei Technologies signed a contract in 2004
with state-owned Algerie Telecom to develop a high-speed
internet network. In June, the consortium began developing
the network in four Algerian cities.

DESPITE QUALITY CONCERNS, HOUSEHOLDS
FLOCK TO CHINESE WARES
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ALGIERS 00001112 003 OF 004



11. Concerns about quality and increasingly strict Algerian
import standards may imperil market access for certain
Chinese products. In line with a law passed last year banning
the importation of used vehicles over three years old for
environmental and safety reasons, Embassy contacts note that
Algeria is planning by the end of the year to raise its
standards for new vehicles to the same level as those in
Europe. Chinese vehicles, which are currently available in
Algeria but lack airbags and other safety measures, will fall
well short of these requirements. In the same vein, a 2005
law empowered the Algerian Center for the Control of Quality
and Packaging (CACQE) to bar food imports that do not meet
the World Health Organization's CODEX Alimentarius standards.
As a result, Algerian authorities recently blocked a Chinese
shipment of 4,500 tons of canned beans that were not up to
code.


12. For their part, Algerian households are largely unfazed
by such quality concerns and have responded to the influx of
Chinese products with unabashed enthusiasm. Chinese wares
offer the average Algerian family access to goods that were
well out of reach during the decade of civil war and the
three prior decades of socialist austerity. Not only has the
variety of goods expanded but Chinese products cost a
fraction of their European equivalents. Whereas Algerians
once traveled to Europe to buy goods unavailable here -- and
still do for certain products, such as luxury goods -- the
situation has reversed. Now members of the Algerian diaspora
return to Europe laden with inexpensive goods that they
acquired while visiting relatives here. Families that once
went into debt preparing their children's home for marriage
can now afford a greater quantity of household goods at a
fraction of the cost.


13. While the typical Algerian family has shown a preference
for quantity over quality, contacts in the construction
sector have noted some work shifting to non-Chinese
competitors. Developers of high-end real estate projects
continue to depend on Chinese workers for concrete work and
basic structures, but they are increasingly turning to other
subcontractors, including Tunisian firms, for higher quality
finish work. The Algiers Sheraton is a striking example of
the pitfalls of quick-turnaround Chinese construction. Its
shine long gone since opening in 1999, the Sheraton is rife
with electrical and plumbing problems, shoddy tilework, and
cheap finishes. The lifespan has yet to be seen for a
handfull of high-profile, Chinese-constructed projects
currently underway, including the new Algiers airport
terminal and an expansion of the MFA.

COMMENT: CHINESE A GOOD SHOCK TO THE SYSTEM,
LIKELY TO CONTINUE OPERATING UNDER THE RADAR
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14. Algerians tend to view the role of Chinese business in
Algeria as a net positive shock to the system. Besides the
variety of goods now available, President Bouteflika has
publicly praised the work ethic of Chinese laborers,
referring to them last year as "ideal workers" -- an
inspiration for, and clear dig at, much of the Algerian
workforce.


15. Some uneasiness remains. Part of this is a function of
the skepticism Algerians accord all foreigners. In addition,
despite the critical demand for housing and the implicit
acknowledgment that Algerian labor is not able (or willing)
to meet the country's needs, many Algerians resent the
state's use of Chinese labor when their own unemployment rate
hovers around 20 percent. An Embassy contact involved in real
estate development in Algiers noted that the perceived
Chinese dominance in the housing sector has led to political
pressure to develop deals with other countries, such as
Turkey and Belgium. Similarly, the harsh words of Bouteflika
at the Chinese trade pavilion track with rumors that the use
of Algerian labor was a critical component of China's winning
bid for a segment of the future East/West Highway.


16. Nonetheless, the Chinese in Algeria have largely
succeeded in tempering Algerian suspicion of them by
remaining below the radar. One Embassy contact noted that
Algerians welcome the fact that there are no "Chinatowns" in

ALGIERS 00001112 004 OF 004


Algeria. When not toiling away at one of their many jobs, the
Chinese here are practically invisible. Provided they remain
so, the size of the Chinese community here stands ready to
meet predictions by the Algerian Ministry of Labor to double
by next year and, as recent Algerian editorials have
speculated, grow tenfold in the coming years.
ERDMAN