The government has successively decided not to renew the technical assistance contracts for the Algiers metro and the management of water supply in the capital.
These two public services had been entrusted to two French companies, the RATP and the Suez group, following the model of “delegated management” in vogue for more than a decade.
These very fresh decisions follow directly from presidential orientations. We remember in particular that a Council of Ministers meeting on March 22 under the chairmanship of President Abdelmadjid Tebboune announced a series of measures aimed at coping with the drastic decline in Algeria’s revenue following the fall in oil price.
The Algerian executive seemed to have decided to do everything to avoid a scenario that would quickly bring us closer to a situation of depletion of our reserves which had just fallen below the $ 60 billion mark.
The official statement issued on that occasion was quite clear. It clearly provided for “stopping the conclusion of study and service contracts with foreign offices, which will save Algeria nearly seven billion dollars / year” (sic). It should be noted that in the 2020 finance law, whose objectives already seemed very ambitious, the planned reduction in the service bill was only 15%. Now it was just a matter of dividing it by 3.
Another government meeting held a few weeks later specified that “the Prime Minister highlighted the government’s desire to reduce these charges which have become a heavy burden on the Public Treasury in terms of currency, at a time when our country is full of human skills. and material potential to perform these services, the realization of which will henceforth be assigned, first and foremost, to national public and private enterprises ”.
Imports of services, a poorly understood subject.
In Algeria, the nature and amount of imports of services remains a subject that is not well known to the media and the general public, the attention of which has been mainly focused on imports of goods, in particular through the statistics published regularly by the Customs administration. .
The bill for services is, however, quite considerable. The Bank of Algeria (BA), in its latest report on monetary and financial trends in the second half of 2018 recalled that over the past 9 years, imports of services have fluctuated between a low of 10.77 billion dollars (2013) and a high of 11.69 billion (2014) per year.
She specified that during the year 2018 this bill reached a total amount of 11.42 billion dollars. The main areas of this type of import concerned maritime transport ($ 2.95 billion in 2018), construction ($ 2.65 billion in 2018) and technical assistance ($ 3.22 billion in 2018).
Already in the 2019 finance law
In an attempt to reduce imports of services, the 2019 Finance Law had already imposed limits on services entrusted by Algerian companies to foreign operators, including the costs of consulting, technical, financial or accounting assistance.
These sums “are only allowed as a deduction from taxable profit” within the limit of 20% of the company’s overheads and 5% of turnover, or 7% of turnover in the case of offices. studies and consulting engineers, details article 2 of this law which however excludes from these restrictions the costs of technical assistance and studies relating to heavy installations (assembly of factories).
This is the first time that a limitation proportional to turnover has been put in place, a measure that the government justifies by the fact that these operations are used as currency transfer schemes and have been harmful to the Treasury. .
Foreign technical assistance in the hot seat
With the measures recommended by the Council of Ministers last March, we had to move to a much larger limitation, the feasibility of which aroused great skepticism. The first objective formulated by the government seemed to focus on foreign technical assistance services.
Let us note first of all that the annual bill for “study and service contracts with foreign offices” mentioned by the Council of Ministers of March 22 amounts in its broadest sense to around 3.5 billion dollars and not 7 billion.
In this area, the government recently announced new measures, the real impact of which is not yet known. According to an official statement from the Council of Ministers, this is “the use of national capacities in the field of maritime transport of goods, which have been reinforced over the past ten years by ten new vessels currently unused (sic), by granting them in particular priority for the implementation of these import operations financed by the Public Treasury ”.
This “untapped” fleet should, according to government instructions, “be mobilized to ensure import operations, especially for essential products, such as wheat and milk”.
Another aspect of the costs of maritime transport and the hemorrhage of currencies that they cause was also recently highlighted by the president of the Association of Algerian maritime agents (Apama), Abdellah Serai, for whom, “port costs in Algeria are much higher than in the rest of the Mediterranean countries ”
“Once all the documents are ready, the goods take four days to leave ports in Algeria, compared to an average of 3 hours in OECD countries and three days in the MENA region. For costs, they are $ 400 in Algeria, $ 250 in the MENA region and $ 24 in the OECD. These are the costs that should speak to us, “said Mr. Serai, who estimated the additional costs in the port logistics chain at just over a billion dollars.
Is construction the main possible source of currency savings?
The annual bill for imports of services related to the building and public works sector has been in the range of $ 2.5 billion to $ 3 billion in recent years. It is undoubtedly in this area that the main sources of currency savings could be located over the next few years.
However, the feasibility of such an approach remains to be demonstrated on the ground where foreign companies, Chinese and Turkish in particular, have carved out the lion’s share for nearly 15 years.
In this regard, too, the government is showing determination. The Prime Minister officially acknowledged “the Minister of Housing to give priority to national design offices and national construction companies to ensure the monitoring and construction of public housing, while instructing other sectors to adopt the same strategy and to have confidence in national skills and, in particular, youth businesses ”.
Declarations in the Council of Ministers will not be enough and it will be necessary to ensure the existence of a qualified national supply to build housing, highways, railways, dams and other major works.
One circumstance should however favor the realization of currency savings in this area. This is the sharp reduction in state equipment budgets already recorded in 2020 and again provided for by the 2021 finance law.
It is probably responsible for most of the reduction in the import services bill of around $ 2 billion anticipated by various sources for the past year.
