Identifier
Created
Classification
Origin
08ALGIERS1120
2008-10-15 17:16:00
CONFIDENTIAL
Embassy Algiers
Cable title:  

FINANCE MINISTER DETERMINED TO BUILD PRIVATE SECTOR

Tags:  EFIN ECON EINV AG 
pdf how-to read a cable
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C O N F I D E N T I A L SECTION 01 OF 02 ALGIERS 001120 

SIPDIS

CAIRO PASS TO TREASURY ASEVERENS

E.O. 12958: DECL: 10/14/2018
TAGS: EFIN ECON EINV AG
SUBJECT: FINANCE MINISTER DETERMINED TO BUILD PRIVATE SECTOR

REF: ALGIERS 728

Classified By: Ambassador David D. Pearce, for reasons 1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 ALGIERS 001120

SIPDIS

CAIRO PASS TO TREASURY ASEVERENS

E.O. 12958: DECL: 10/14/2018
TAGS: EFIN ECON EINV AG
SUBJECT: FINANCE MINISTER DETERMINED TO BUILD PRIVATE SECTOR

REF: ALGIERS 728

Classified By: Ambassador David D. Pearce, for reasons 1.4 (b) and (d).


1. (C) SUMMARY: Finance Minister Karim Djoudi told the
Ambassador that Algeria's economic situation is generally
strong, and that Algeria will weather the current global
economic crisis relatively unscathed. Djoudi shared his
vision for the Algerian economy, and said that his priority
now lies in reducing the size of the public sector, and
increasing the breadth and depth of the private sector
outside of the oil and gas industry. He stressed the need
for Algeria to create new incentives for investment in
sectors such as agriculture, housing and services, and noted
that this may best be achieved through the empowerment of
small and medium sized businesses. He did not focus on the
recruitment of foreign investors, but rather, on the
development of a positive economic climate that would
encourage both domestic and foreign investment in key
sectors. He said that Algeria must take advantage of current
high oil prices to build the infrastructure necessary to spur
such investment. Djoudi also noted our bilateral cooperation
programs with his ministry, and said he was interested in
further cooperation in the area of small business
development, as well as technical assistance that might flow
from recently revived negotiations on a bilateral customs
agreement. END SUMMARY.

TOLD YOU SO
--------------


2. (C) Finance Minister Karim Djoudi gave the Ambassador a
run-down of Algeria's economic highlights during the
Ambassador's introductory call on October 5. He noted that
Algeria seems poised to weather the storm that has battered
the global financial markets, echoing comments made the
previous day in public testimony before the parliament.
Djoudi has led other government officials in praising
Algeria's decisions to pay down its public debt, keep its
currency only partially convertible, and grow its foreign
exchange accounts to USD 137 billion in safe treasury bills
rather than creating a Gulf-style sovereign investment fund,
crediting these decisions with providing Algeria immunity
from the current global financial shocks.



3. (C) Minister Djoudi noted that the failed 2007
privatization of the state-owned bank Credit Populaire
d'Algerie (CPA) proved the need for strong rules regarding
the transfer of public assets and the need for Algeria to
improve the "visibility" of its economic strengths and
markets. Djoudi told the Ambassador that Algeria's economic
growth outside of the hydrocarbons sector is approximately
six percent, with rates of production increasing 5.5 percent
overall, and 4.5 percent outside of the oil and gas sector.
He noted that Algeria's public debt has been reduced to under
six billion dollars in both international and domestic debt
balances, and that inflation remains in check. He noted that
the Algerian insurance market is now open to foreign
companies and is a growing sector, and said that Algeria
continues to gain new "commercial partners" in various
sectors. The minister lauded the government's two massive
infrastructure programs launched since 2001; the first, he
said, was worth USD 200 million, and the current program that
will run through 2009 will cost USD 250 million. Djoudi
lamented, however, that Algeria still imports significant
volumes of agricultural products, and noted "food security"
as a priority issue.

GROWING SMALL BUSINESSES
--------------


4. (C) Djoudi shared his vision for Algeria's economic
future, which, he said, requires a reduction in what he
called the "public economy" and an expansion of the private
sector. He said Algeria needs to grow its economy outside of
the oil sector, and the way to do this is through the
development of small and medium-sized businesses.
"Fundamentally," the minister said, "we need permanent
investment in the private sector." He said the government is
providing incentives, "both fiscal and legal," to encourage

ALGIERS 00001120 002 OF 002


investment, but that "concrete" measures were necessary to
develop new markets and enhance the competitiveness of
Algerian businesses, and to increase the "visibility" of
Algerian markets and products. Djoudi said the government
will encourage microfinance loans to spur growth in the
agriculture sector, which he highlighted as a key sector for
development along with housing and services. The government,
he said, must act now to grow the private sector, while it
still has the wherewithal to do so from oil revenues. "We
must utilize the open window that we now have as a result of
high oil revenues," the minister said.

OPEN TO COOPERATION
--------------


5. (C) On the subject of bilateral relations and the
Treasury Department's Office of Technical Assistance (OTA)
programs, Djoudi was eager to revive the program on small
business credit assessment with the Small Business
Administration that stalled after the Minister Delegate for
financial reform and her staff were relieved of duty in the
June cabinet reshuffle (reftel). Regarding the bilateral
customs cooperation agreement that the ministry recently
indicated an interest in completing, Djoudi noted that he
would like to see technical assistance provided in practical
areas like counterfeit detection, since "our people need very
specific training, rather than information exchange alone."


6. (C) COMMENT: Djoudi's focus on small and medium-sized
business development as a means to achieve measurable
economic diversity was backed up by specific plans such as
micro-lending to key sectors, in contrast to similar
discussions with the Ministry of Small and Medium Enterprises
which focus on aid and training to artisans and craftsman.
Djoudi clearly felt vindicated by the current global economic
crisis and seems intent on encouraging Algerians to invest in
their own country and create their own businesses. He noted
the need to develop new domestic markets, to help Algerian
businesses handle price sensitivity when competing with
international marketers, and to sensitize Algerian
businesspeople to the ideas of competition and risk. Always
cautious, Djoudi did not take high oil prices for granted but
rather as a window of opportunity. We have already followed
up with Customs and Border Protection at the Department of
Homeland Security, who are also interested in concluding the
customs agreement Djoudi highlighted.
PEARCE