US embassy cable - 05ALGIERS2228

UNCLAS SECTION 01 OF 02 ALGIERS 002228 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, EINV, EIND, ETRD, BEXP, AG, Economic Reform 
SUBJECT:  Algeria Economic Highlights 
 
1. Oil Export Revenues expected to hit $40 Billion 
2. French Interest in Bank Privatization 
3. Booming Mobile Phone Sector 
4. Spanish Aquatia Selected for Desalination Plant 
5. Algeria Among Least Transparent Countries 
6. $51 Billion Foreign Exchange Reserve 
7. Algerian Purchasing Power Down by 7.9% 
 
 
OIL EXPORT REVENUES COULD REACH $40 BILLION 
------------------------------------------- 
 
1.  In an October 15 press conference, Minister of Mines and 
Energy Chakib Khelil declared that total oil export revenues 
reached $32 billion at the end of September, while in 2004 
total revenues were $31.5 billion.  He added that the total 
2005 figure could reach $40 billion if oil prices remained 
above $50 per barrel, which was likely to be the case given 
the current market situation.  Primary energy production 
rose by 104% to 136.2 million Tons of Oil Equivalent (TOE) 
in the first six months of 2005. Out of this global volume, 
the national petroleum company Sonatrach was solely 
responsible for producing 98.1 million TOE with the 
remainder (38.1 million) produced by the company's partners. 
Production for 2004 reached 35.8 million tons of crude oil 
and 89.7 billion cubic meters of natural gas.  Export volume 
reached 78.9 million TOE, which represents 58% of production 
volumes.  Minister Khelil highlighted several major 
investments projects, including a $1.8 billion Sonatrach 
project in conjunction with BP and Statoil for the expansion 
of a gas field in In Amennas, a $3 billion investment in an 
integrated Gassi Touil project, including the development of 
upstream reserves, and the construction of a 5.2 billion 
cubic meter per year natural gas liquefaction plant near 
Arzew. 
 
FRENCH INTEREST IN BANK PRIVATIZATION 
---------------------------------------- 
 
2.  In the framework of public bank privatization, three 
international banks have bid to participate in the opening 
of the public bank, CPA (Credit Populaire d'Algerie). 
According to the French Magazine les Echos, the French bank 
BNP Paribas expressed interest in this operation, which 
should be finalized by end of 2006.  Minister of Finance 
Mourad Medelci indicated that 51% of CPA's capital would be 
offered.  This is the second attempt to privatize CPA.  The 
first offering failed because of outstanding loans without 
payment guarantees and the government's offer at the time of 
only 49% opening of the capital. 
 
BOOMING MOBILE PHONE SECTOR 
--------------------------- 
 
3.  Minister of New Technologies and Communication 
Information Boudjemaa Haichour presented the latest mobile 
phone sector figures in an October press conference.  The 
growing sector has created roughly 50,000 jobs since the 
introduction of mobile telephony.  Investments reached $4 
billion, with $2 billion coming from the Egyptian company 
Djezzy and $1 billion each from the public utility Mobilis 
and the Kuwaiti company Nedjma. The Market comprises 11 
million subscribers, 3.8 million of whom subscribe to the 
long-standing operator Mobilis.  Mobilis aims to have 5 
million subscribers by end of 2005 and 8 million by 2009, 
which would represent 40% of the local market. 
 
SPANISH SELECTED FOR DESALINATION PLANT 
--------------------------------------- 
 
4.  The Spanish group Inima Aquatia landed a contract 
October 17 for the construction, exploitation and 
maintenance of the seawater desalination unit in Mostaganem 
(western Algeria near Oran). The $100 million plant is 
expected to have a capacity of 100,000 cubic meters of water 
daily at a price of $0.73 (52 DA) per cubic meter of 
desalinated water. This plant is one of 10 desalination 
plants throughout the country anticipated in the 
government's five-year program. 
 
ALGERIA AMONG THE LEAST TRANSPARENT COUNTRIES 
--------------------------------------------- 
 
5.  The recently released report of Transparency 
International on corruption ranked Algeria among the least 
transparent countries in the world. Out of 159 countries, 
Algeria ranked 97th, far behind neighboring Tunisia, which 
ranked 43rd and is considered one of the most transparent 
Arab countries.  Morocco, another neighbor, was ranked 78th. 
The Anti-Corruption Algerian Association (AACC) saw no 
surprise in the rating and stated that the social and 
political situation prevailing in Algeria over the past 
years encouraged corruption at all levels, "and everything 
is done by the authorities for expanding such a plague". 
The Association criticized the anti-corruption government's 
speech saying that it aimed at dazzling international 
partners and settling accounts for power holders. 
 
$51 BILLION IN EXCHANGE RESERVES AS OF SEPTEMBER 
--------------------------------------------- --- 
 
6.  While addressing the budget and finance committee at 
Parliament regarding the 2006 government budget, the 
Governor of the Bank of Algeria Mohamed Laksaci declared 
that exchange reserves as of the end of September were $51.7 
billion.  He added that external debt decreased to $17.8 
billion from $21.4 billion in 2004.  The decrease of 
external debt resulted from high exchange reserves, 
anticipated payments, and improved debt management. 
 
ALGERIANS' PURCHASING POWER DOWN BY 7.9% 
---------------------------------------- 
 
7. According to a survey undertaken by the General Union for 
Algerian Workers (UGTA), purchasing power declined by 7.9% 
over the last two years. The survey revealed that the price 
of 164 targeted products and services increased 
significantly between 2003 and 2005. For a 7 member-family, 
food expenses increased by 5.9%, health expenses were up 13% 
(reflecting the cost of pharmaceuticals, since Algerians do 
not pay for public medical services), and budget items for 
leisure and culture increased by 8.2%.  Only the clothing 
budget decreased (by 3.3%), mainly due to the growing 
availability at very low prices through the underground 
economy of imported products from China, Turkey and Syria. 
UGTA indicated that tariff increases on heating and cooking 
gas, electricity, water, transportation, health care and 
telecommunications in 2005 were not included in this survey. 
Inclusion of that data, according to the UGTA, would have 
worsened the result. The survey concluded that AD 24,790 
($340) a month was essential for a family to live 
"normally". 
 
ERDMAN