ALGERIA ECONOMIC HIGHLIGHTS FEBRUARY 2008

UNCLAS SECTION 01 OF 02 ALGIERS 000287

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EAGR ENRG EPET ETRD AG
SUBJECT: ALGERIA ECONOMIC HIGHLIGHTS FEBRUARY 2008


ALGIERS 00000287 001.2 OF 002



1. This cable summarizes key economic developments in
Algeria during February 2008, and includes:

-- Motorola to Open Office in Algiers
-- Bouteflika-Putin Meetings Stoke Fears of Gas Cartel
-- U.S.-financed Desalination Plant Inaugurated in Algiers
-- Bahraini Bank to Invest USD 3 billion in Algeria
-- UAE Firm Announces USD 150 Investment in Algerian Dairy


HELLO MOTO
--------------


2. Motorola representatives told us that the company will
open an office in Algiers by the end of March. The office
will coordinate the marketing of the company's products and
services in Algeria. Currently, Motorola products are
marketed by individual country representatives and
distributors. The opening of an office in Algiers, which has
been discussed for several years, marks an important
commitment by the company to the Algerian market.

GAS CARTEL: YES OR NYET?
--------------


3. President Bouteflika's trip to Moscow in mid-February
stoked concerns that Algeria and Russia are leading a charge
to create a "gas OPEC," even as both Bouteflika and Russian
President Vladmir Putin avoided speaking directly about such
a cartel publicly. Bouteflika did say publicly that it was
important for the two gas producers to maintain a dialogue on
energy issues, and that major suppliers of gas should
coordinate their energy policies and work together to fight
restrictive import laws in European markets. In December
2007, Sonatrach President Mohamed Meziane told the Wall
Street Journal that the 2006 gas cooperation agreement
between Sonatrach and Gazprom had lapsed in mid-2007, and had
resulted in "nothing concrete." Russia provides the EU with
45 percent of its gas imports, and Algeria provides 21
percent. Meziane's comments helped ease European fears of
gas supply restrictions or price manipulation. Relations
between Algeria and Russia also seemed to cool when Algeria
announced that it wanted to return defective military
aircraft purchased from Russia. But Bouteflika's trip to
Moscow, along with Energy Minister Chekib Khelil's subsequent
comments that a gas cartel might be in Algeria's interest,
rekindled speculation that major gas suppliers like Algeria,
Russia and Qatar may try to elevate the position of the Gas
Exporting Countries Forum (GECF).

(DESALINATED) WATER FOR EVERYONE
--------------


4. On February 24, in a ceremony attended by the Ambassador
and OPIC President and CEO Robert Mosbacher, President
Bouteflika inaugurated the Hamma Seawater Desalination Plant
in Algiers. The plant, touted as Africa's largest,
represents a USD 248 million investment and will produce up
to 200,000 cubic meters of drinkable water per day. The
project is a joint venture between General Electric Ionics,
which holds a 70 percent stake in the plant, and state-owned
Algerian Energy Company (AEC),which owns the remaining 30
percent. OPIC provided a USD 200-million loan guarantee for
the project.


5. The plant is the first large-scale joint venture reverse
osmosis plant in North Africa, and is the first of a total of
14 desalination plants planned by the Algerians. The
desalination plants are an effort by Algeria to address
significant shortages of potable water. Two additional
plants are expected to be completed in 2008: one in Beni Saf,
in western Algeria, that will produce 200,000 cubic meters
per day and one in Skikda, in eastern Algeria, that will
produce 100,000 cubic meters per day. At the inauguration,
Energy Minister Khelil announced a target of 2.3 million
cubic meters of potable water per day from seawater by 2011.

BAHRAINI INVESTMENT IN ALGERIA

ALGIERS 00000287 002.2 OF 002


--------------


6. On February 19, the Bahrain Gulf Finance House (GFH)
announced plans to invest USD 3 billion to create an economic
development zone in Bouinan, Algeria. GFH plans to target
companies in the energy, finance, telecommunications and
tourism sectors to locate in the zone. The announcement
followed the signing in January of a framework agreement
between the Algerian and Bahraini governments during an
international tourism meeting in Algeria. If the project
moves forward, it would represent the largest Bahraini
investment in Algeria to date.

EMIRATIS INVESTING IN COWS AND CONDOS
--------------


7. On February 13, the Emirates International Investment
Company (EIIC) announced plans to invest USD 150 million in
the Algerian dairy sector. The investment in the western
Algerian region of Tiaret would create the largest dairy
operation in Africa. EIIC intends to raise 10,000 cows for
the production of 90 million liters of milk and 3,000 tons of
meat annually. Algeria's milk production relies heavily on
imported milk powder, the price for which has increased from
USD 1800 to 3500 per ton in recent years. The EIIC
initiative would not only reduce Algerian milk imports, which
totaled USD 1.06 billion in 2007, but it also would reduce
the cost of milk subsidies by the government. In addition to
the dairy project, EIIC also announced a plan to build a
residential and commercial park in Algiers worth USD 5
billion.
FORD