NEW LAW DENOTES ALGERIAN PROGRESS AGAINST

UNCLAS ALGIERS 000629

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT PLEASE PASS TO USTR/GREG HICKS
COMMERCE FOR CLDP/MARC TEJTEL

E.O. 12958: N/A
TAGS: ECON EINV PGOV AG
SUBJECT: NEW LAW DENOTES ALGERIAN PROGRESS AGAINST
CORRUPTION

REF: A. 05 ALGIERS 02469

B. 05 ALGIERS 01652

C. ALGIERS 0335


1. (SBU) Summary: A new anti-corruption law, which took
effect March 8, aims to bring Algeria in line with the U.N.
Convention Against Corruption. The law is an important step
in establishing an institutional framework to combat
corruption and comes at a time the GoA has been actively
pursuing crooked officials, notably in the hitherto
untouchable realms of financial services, energy, and local
governance.


2. (SBU) Critics nonetheless decried the new legislation's
exclusion of a proposed article that would have required
members of Parliament (MP's) to declare their assets or risk
loss of parliamentary immunity. The representative office of
Transparency International told us the sluggishness that has
marked each step of Algeria's adoption of the law -- not to
mention Algeria's failed past endeavors combating corruption
-- does not bode well for the discipline needed this time
around. Algeria received a rating of 2.8 out of 10 in
Transparency International's annual corruption index,
underscoring the enduring pervasiveness of both small and
large-scale corruption in the country despite the high
profile investigations. (End Summary.)

NEW LAW AN EXTENSION OF INTERNATIONAL CONVENTIONS
-------------- --------------


3. (U) Algeria's new anti-corruption law 06-01 came into
effect March 8. The law aimed to bring Algeria in line with
its commitments as a signatory to the U.N. Convention Against
Corruption. Among its 74 provisions, the law calls for the
creation of an as-yet-unnamed centralized body to monitor and
combat corruption. (Note: Algeria disbanded its previous
anti-corruption body, the National Observatory Against
Corruption (ONSPC),in 1999 because of its ineffectiveness.
End note.) The law further broadens the definition of
criminal activity, reinforces existing penal sanctions, and
contains specific language aimed at curbing money laundering.
(Note: Per ref A, separate money-laundering legislation was
passed in February 2005. End Note.)


4. (SBU) Sluggishness marked each step of Algeria's path
towards adoption of the new law and accession to
international conventions. The Algerian Senate, which was
expected to pass the anti-corruption law last September (ref
B),approved the measure January 3; it then languished more
than two months before taking effect March 8 with its
publication in the Official Record. Algeria adopted the U.N.
Convention Against Corruption in 2003 but did not ratify the
law until the following year. Similarly, Algeria signed the
African Convention Against Corruption in 2003 but waited
until January 2006 to ratify it. Critics worry that the slow
pace with which Algeria adopted the legal framework to combat
corruption does not portend well for the discipline it needs
to rigidly enforce its laws.

WATCHDOG GROUP GUARDEDLY SUPPORTIVE
OF NEW LAW, SKEPTICAL OF ENFORCEMENT
--------------


5. (U) Speaking at a press conference at the Friedrich Ebert
Stiftung Institute in Algiers March 29, the Director of the
Algerian Association for the Fight Against Corruption (AACC),
Djillali Hadjadj, who represents Transparency International
in Algeria, stressed that Algeria's adoption of the new law
was undoubtedly a step forward but that political will on the
part of the administration would be the key to "fighting
corruption at its roots." He noted numerous examples of how
lack of political will and transparency stifled past attempts
to eliminate corruption in Algeria. He emphasized that
Algeria already had a law requiring public servants to
declare their assets to the government: the unenforced
Ordinance 71 of January 11, 1997. In addition, Hadjadj
mentioned the National Court of Accounts, which is charged
with inspecting public expenses. Citizens have a right to
access its findings, yet it has only published reports twice
in the last 25 years. Hadjadj added that Algeria's previous
anti-corruption body had never publicly released its reports


and that its staff was inexperienced and unqualified.


6. (U) Underscoring the point that the key obstacle for
Algeria remained enforcement, AACC Director Hadjadj
highlighted a few examples of the GoA's missed opportunities
to gain from international experience in the battle against
corruption. He noted that Algeria had failed to follow up
after a 2005 OECD initiative to create an informal
Maghreb-wide group to combat corruption. The GoA similarly
snubbed assistance from the Financial Action Task Force
(FATF). Although FATF first approached Algeria in 2000,
Hadjadj noted, the GoA had not followed up on its
recommendations because FATF requires participating countries
to first undergo an independent evaluation. (Comment: On the
other hand, the GoA actively embraced U.S. advice in drafting
the new money-laundering legislation and Algeria's
Interministerial Financial Cell has repeatedly requested U.S.
training for GoA officials involved in anti-money laundering
enforcement -- requests which we are working on but for which
Department has not yet identified funding. End comment.)


7. (U) Hadjadj also outlined what he viewed as the key gaps
in the new law and the GoA's anti-corruption posture. Without
naming the magistrate whom the GoA nominated to head the new
anti-corruption body, Hadjadj claimed that he was someone who
lacked a spotless record; the Superior Council of Magistrates
had recently sanctioned him for an unspecified malfeasance.
In addition, Hadjadj remarked that Algeria's new law mandated
that the government anti-corruption body furnish its results
to the President; rather, he argued, it should render these
reports public. Finally, Hadjadj commented that the law
should have included provisions to better engage civil
society groups in the battle against corruption and shield
whistle-blowers from persecution. As a point of comparison,
he highlighted Jordan as an exemplar in the Middle East
because of its work with FATF and its close collaboration
with civil society groups.

ARTICLE SEVEN A KEY GAP
--------------


8. (U) The final law noticeably excluded a provision that
would have required MP's to declare their property to the
government or risk loss of parliamentary immunity. Algerian
MP's opposed to the provision, known as Article Seven, said
they could not justify the provision because it was not
included in the U.N. convention that they ratified in 2004.
Some Algerian political parties, notably the FLN and MSP,
claimed Article Seven would have provoked struggles among
local politicians seeking to embarrass their political
opponents. An AACC communiquQ declared that the omission of
Article Seven had "emptied the text of substance." Critics
argued that Article 36 of the new law -- which calls for
imprisonment ranging from six months to five years or a fine
ranging from approximately USD 700 to USD 7,000 for civil
servants that do not respond truthfully to inquiries into
their holdings -- was too weak.


9. (SBU) The exclusion of Article Seven from the final law
unnerved many Algerians, according to Embassy contacts. The
intransigence of many MP's -- whose monthly stipends and
non-cash benefits such as free housing, household staff, and
interest-free loans greatly exceed the means of typical
Algerian families -- struck many as a direct affront to the
spirit of the new law. AACC Director Hadjadj emphasized that
the removal of Article Seven was a lost opportunity for
Algeria to have a fully transparent legislature in place
before the 2007 parliamentary elections.

RECENT CRACKDOWNS
--------------


10. (SBU) On the positive side of the ledger, the last year
has witnessed a noticeable increase in public investigations
and outcry against corruption. Additionally, there are some
indications that behind the scenes some senior military
officials have urged the GoA to take stronger actions against
corruption. The Algerian press reported that the Supreme
Court would review the case of the former Wali of Blida,
Mohamed Bouricha, who was accused of skimming public funds,
forgery, and bribery. In January, the Director General of the

Algerian Customs Authority, Sid Ali Lebib, announced on
television that he had sacked 100 executives -- including
seven central division directors -- and referred 530 customs
agents to the authorities for corrupt or unprofessional
practices. At the time, Lebib said 2006 would be the year of
fighting against corruption. The Ministry of Justice
dismissed 33 magistrates in 2005 because of "irregularities"
in their rulings and started 755 investigations into
misappropriation of public agricultural lands by the National
Gendarmerie.


11. (SBU) Officials announced late last year that one of
Algeria's largest public banks, the Agricultural and Rural
Development Bank (BADR),misappropriated USD 163 million (ref
C); this came close on the heels of a reported USD 205
million loss at the National Bank of Algeria (BNA).
State-owned oil and gas company Sonatrach suspended over 20
senior executives in June 2005 for taking bribes and
over-invoicing. According to the energy editor of the
Algerian daily El Watan, officials discovered the corrupt
practices after a bidder for a gasket contract at the Arzew
complex complained to Sonatrach that its offer had been
unfairly refused. More recently, the state-owned insurance
fund CASNOS confirmed March 4 that 150 embezzlement cases
(representing a total loss of USD 14 million) were pending in
the courts and that CASNOS had dismissed 68 executives and
669 insurance agents in 2005. President Bouteflika raised
the issue in his remarks in March to the National Association
of Lawyers, noting that the GoA should raise the salaries of
magistrates in order to counter corruption. He also rather
bluntly called on judges not to succumb to pressure from
officials, be they political or military.


12. (SBU) Anecdotal examples aside, metrics on Algerian
corruption remain hard to find. Algeria received a rating of
2.8 out of 10 in Transparency International's annual
corruption index, denoting the pervasiveness of small and
large-scale corruption in the country. AACC Director Hadjadj
told us that his organization does not have reliable
statistics on the annual number of cases in Algeria but he
estimated that annual outflows to offshore tax havens
including Luxembourg and the Isle of Jersey were USD 500
million per year. (Note: Prime Minister Ouyahia cited this
same figure in an interview last year with the French
magazine Le Point. End note.)

COMMENT
--------------


13. (SBU) Despite the slow adoption of the law and initial
skepticism by the AACC, the GoA's increasingly public show of
force against corruption, including President Bouteflika's
comments on the issue, denotes an important recognition of
the need for transparency throughout the Algerian Government.
After the infamous Khalifa Bank scandal roiled the Algerian
economy in 2003, recent GoA crackdowns against BADR and BNA
send the signal that the gangrene in Algeria's banking sector
is not limited to the private sector; public sector banks
will not be immune from oversight either. Similarly, the
prosecution of the Wali of Blida shows that local government
officials are no longer untouchable. The new law, coupled
with the GoA's recent inclination to publicly tackle corrupt
officials, shows Algeria is moving in the right direction.
ERDMAN