ALGERIA ECONOMIC HIGHLIGHTS APRIL 2008

UNCLAS SECTION 01 OF 02 ALGIERS 000537

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TAGS: ECON EAGR EPET ETRD AG

SUBJECT: ALGERIA ECONOMIC HIGHLIGHTS APRIL 2008


1. The following is a summary of some economic developments in
Algeria for April 2008:

-- NEW SUBSIDIES TO STABILIZE FOOD PRICES
-- NEW PHARMACEUTICAL PLANT OPENS IN ALGERIA
-- FOREIGN INSURERS ENTER THE ALGERIAN MARKET
-- SONATRACH COMMERCIALIZES GAS SALES TO EUROPE


PRICE CHECK: ALGERIA EXPANDS SUBSIDIES
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2. In the wake of skyrocketing world prices for agricultural
commodities, the Algerian government took several steps to stabilize
consumer prices of staple products. According to the April 8
edition of L'Expression, Minister of Commerce Hachemi Djaaboub
recommended that vegetable oil and dry legumes, such as beans,
should be added to the list of food products subject to consumer
price controls. And the Algerian wheat council (OAIC) announced
publicly that it would offer "internationally competitive" prices to
Algerian farmers for their wheat. OAIC would then sell that wheat
to millers at prices designed to maintain the government price caps
on products at several stages in the supply chain, including the
consumer price of flour and bread. The Minister of Agriculture,
Said Barkat, was quoted on April 11 in multiple domestic and
international papers as saying that Algeria has built up sufficient
wheat stocks, through domestic production and importation, to
obviate the need for further imports in the coming months.


3. The Commerce Minister also announced on April 7 at the People's
National Assembly that the Algerian government has authorized USD
2.5 billion to pay for food subsidies in 2008. Minister Djaaboub
said publicly that price increases on products like wheat, vegetable
oil, sugar and flour are due to sky rocketing world prices and are
not caused by speculation in the domestic market. In 2007, Algeria,
a net importer of food products, spent USD 4.5 billion on food
imports, according to published interviews with a director general
at the Commerce Ministry. Government subsidies for 2007 included
USD 334 million for milk, USD 800 million for flour, and USD 1.4
billion for semolina. The Algerian government often releases
supplemental budget allocations as needed throughout the calendar
year for food purchases or subsidies. Thus, the USD 2.5 billion
authorization announced by Minister Djaaboub is based on current
market estimates, and the total expenditure for 2008 would most
likely be increased later in the year if world prices climb beyond
government projections.


SAUDIS BUILD PHARMACEUTICAL PLANT
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4. The Saudi-financed El Kendi pharmaceutical company opened a new
plant in Sidi Abdellah in Western Algeria on April 12. According to
the company's Website, the USD 30 million facility has a current
production capacity of 156 million drug units per year. But the
newspaper La Tribune reported on April 13 that the factory will
eventually produce nearly 290 million units of generics per year,
which, according to the paper, represents 65 percent of the Algerian
market. The paper quoted El Kendi's Director General, Dr. Essam
Farouk, as saying that this will be the first pharmaceutical plant
in Algeria to receive accreditation from the U.S. Federal Drug
Administration (FDA). The company's Website states that El Kendi's
factory plans have already been approved by the FDA, and that the
agency is reviewing individual production lines. El Kendi, a unit
of Saudi Tabuk Pharmaceuticals, announced that it will produce a
full range of products, including liquids, creams, gels and dry
drugs, such as compressed tablets, capsules and pouches. Production
of injection-based products is planned for 2009. Farouk was also
quoted as saying that, in addition to domestic sales, El Kendi will
export approximately 30 percent of its products initially to
countries in the Middle East, Africa and Asia, and eventually to
Europe and the United States, where Tabuk already operates.


ALGERIA OPENS TO FOREIGN INSURERS
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5. On April 8, the Algerian National Insurance Company SAA signed a
cooperation agreement with the French insurer Macif. According to
various press reports, the agreement includes the creation of a
subsidiary for life insurance, some vehicle coverage, and traveler's
insurance. The agreement came after an announcement that the
government finalized implementing regulations following the 2005
liberalization of the insurance industry. In addition to allowing
foreign firms access to the Algerian market, the insurance law
allows Algerian banks to offer insurance, and encourages the
marketing of life insurance, long considered taboo in Algerian
Muslim culture. The government has been trying to expand the use of
private insurance for property, vehicles and life after an
earthquake in 2003 resulted in over 2,000 deaths, 100,000 homes
destroyed or damaged, and over 200,000 displaced persons in a suburb
of Algiers.

SONATRACH GOES COMMERCIAL
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6. On April 7, national hydrocarbons company Sonatrach made its
first commercialized sale of gas to Europe with the delivery of
30,000 cubic meters of liquid natural gas (LNG) to the
regasification terminal at Barcelona. Sonatrach's subsidiary,
Sonatrach Commercialized Gas (SGC),entered the European market
through the sale of gas to its first client, Hidrocantabrico Energia
of Spain. Sontatrach said in a press statement that its strategy to
create subsidiaries in the European downstream gas market allows the
company to exploit a higher value for its gas, capture additional
profits along the supply chain, and above all, develop an expertise
in direct sales to end-users in destination markets. Sonatrach also
announced four new gas discoveries on April 13 located in the South
of Algeria, two on its own, and two with its joint venture with the
French company Medex. This marks five new discoveries thus far in

2008.

FORD