ALGIERS: On the face of it, Algeria’s state-dominated economy has weathered six months of turmoil well, with flightloads of public sector workers heading abroad for holidays even as protesters who ousted the veteran president in April now target his allies.
But business, and leisure, as usual for the North African country’s army of state employees masks a growing economic drama behind the standoff between political, business, labor and military elites and those determined to force them out.
The country’s rich oil and gas resources are still flowing, but thousands of jobs are on the line and growth is stuttering in an economy where official data shows one in four of the under-30s, who form 70 percent of the population, is unemployed.
The resignation of Abdelaziz Bouteflika in April was followed by the appointment of an interim president overseen by the military, and corruption investigations have been opened into some of those around the former leader.
Putting tycoons close to Bouteflika behind bars was a key demand of the protests. But while investigations drag on, five big firms across sectors from sugar to cars are almost paralyzed as their owners struggle to sign pay checks or orders to import materials because their bank accounts have been frozen.
Malik, one of 15,000 employees of detained businessman Ali Haddad, said he had just been sacked as a reporter for Dzayer TV. “The managers told me there is no more money,” he said, withholding his second name for fear of repercussions.
Haddad denies wrongdoing and the interim government says it will find ways to safeguard jobs, but after three months without pay, hundreds of his workers have joined tens of thousands of demonstrators who gather weekly in the capital Algiers.
Elections for a successor for Bouteflika have been postponed indefinitely, despite a dialogue between opposition parties and the non-party government managed by army chief Lt. Gen. Ahmed Gaed Salah.
To limit further dissent, the interim government has held back planned reforms, initiated toward the end of Bouteflika’s 20-year rule, to wind down subsidies, open the economy to investment and create jobs outside bloated public services.
An energy law to cut red tape is on hold and inside Algeria’s sprawling state energy company Sonatrach, which is hoping to boost production by linking up with oil majors, there is growing concern.
“Output is ongoing at Sonatrach, but everything else is completely frozen including talks with Exxon and Chevron,” a Sonatrach source told Reuters, declining to be named due to the delicate political situation. Exxon declined to comment and Chevron was not immediately available.
Any deal with a foreign firm is sensitive in Algeria and needs the support of a permanent president, not a caretaker: the source said it was not clear when the talks may restart.
“No visibility for the short term as politics not economics is at the top of the agenda for now,” the source said. The company spokesman was not immediately available for comment.
The country is a key gas supplier and security partner to Europe in a volatile region: Islamist militants are on the rise in West Africa and to the east, in Libya, two rival governments are fighting for control.
The government has given no growth forecast for this year, but Algiers University economics professor Abderrahmane Aya said the turmoil will cost this year’s GDP one percentage point of growth, which reached 2.3% in 2018, and could get much worse.
“No one can now imagine the magnitude of the economic problem,” he said.
Bouteflika’s fall came as authorities began trying to persuade citizens that a welfare state providing unproductive state jobs and guaranteeing cheap housing, petrol, food, drugs and free hospital treatment was no longer viable.
Oil and gas provide 94% of export earnings and 60% of the budget, but earnings fell 6.3% to $17.65 billion in Jan-June with rising energy consumption eating into gas exports.
Imports, averaging $50 billion a year, provide most of Algeria’s needs, legacy of a reluctance to allow foreign investment due to its 1954-62 independence war with France and once strong ties with the Soviet Union.
The trade deficit rose 12% in the first half of this year, customs data showed.
“Everything seems to indicate that we are going through a long period of economic uncertainty,” Abdelhak Lamiri, a former government economic adviser, wrote in the El Watan newspaper. “The government is not empowered to take strategic decisions.”
Houari Tigharsi, an economist and member of parliament’s finance committee, said investors were apprehensive and non-energy domestic production capacity was down 50 percent.
“If the crisis drags on, we will not only see a fall in growth but the economy will even face disaster,” he said.
Interim President Abdelkader Bensalah has resisted calls to quit from protesters who see him as symbol of the old regime. He says the only way out of the crisis is to hold elections “as soon as possible.”
Algeria had vowed to develop the car industry, but reduced quotas of car spare parts imports for private vehicle assemblies after the bill rose by a fifth to $1.234 billion in the first four months of this year. Importers get money in foreign currencies from state banks.
Foreign exchange reserves fell by $7.28 billion in the first four months to $72.6 billion. In 2014, when crude prices were at $100 a barrel, they were $178 billion.
Industry Minister Djamila Tamazirt told reporters the quota reductions were “transitional measures to adjust the balance of payments” and correct incentives aimed at the automotive sector.
Four private companies assembling cars are now cutting production, despite growing demand from the country’s 43 million people which may drive up prices of second-hand cars.
Family-owned firm Sovac, which runs an assembly plant with Germany’s Volkswagen, has suspended orders for this year. Sovac head Mourad Eulmi is being investigated for graft, which he denies.
Around 800 workers assembling vehicles under the Hyundai brand were given forced leave by their employer Tahkout Manufacturing in July due to lack of raw materials, according to state media.
While sectors like food, home appliances and mobile phones have been opened up to private companies, the non-energy sector grew by just 4% last year, up from 2.2% the year before.
Bureaucracy abounds and dominant state banks have little experience of commercial lending.
“We will need bank financing to expand our investment,” said Ziad Loucif, communication manager at Cuisinox, a private firm focused on kitchen equipment manufacturing, mainly for hotels. “We want the state to facilitate investment.”
Work on a 185-km (115-mile) railway line has stopped and some 200 employees were put on forced leave for a “lack of liquidity.” The project belonged to detained Bouteflika ally Haddad.
“The government is working to find legal solutions for these companies,” Finance Minister Mohamed Loukal told state news agency APS. “I can assure you that production tools and jobs at these companies will be safeguarded.”
Algerian economy creaks at the seams after six months of turmoil
Algerian economy creaks at the seams after six months of turmoil
- Thousands of jobs threatened as business tycoons detained
- Talks between state energy firm and oil majors frozen
UAE, Saudi Arabia ranked as leading global entrepreneurial ecosystems
RIYADH: The UAE and Saudi Arabia have been ranked first and third respectively in the Global Entrepreneurship Monitor report for 2023-2024.
The report, which assesses the entrepreneurial ecosystems of countries worldwide, is highly regarded by international bodies such as the World Bank, International Monetary Fund and various UN organizations,
Saudi Arabia showed significant progress in its entrepreneurial environment, with its National Entrepreneurship Context Index score increasing from 5.0 in 2019 to 6.3 in both 2022 and 2023.
This reflected the country’s successful efforts to diversify its economy and foster a supportive climate for entrepreneurship, said the report. A notable highlight was increased female entrepreneurship, with eight women starting new businesses for every 10 men in 2023.
The country also has the highest proportion of adults who know an entrepreneur, perceive ease in starting a business, recognize good business opportunities, and believe they possess the necessary skills and experience to start a business.
However, despite high acknowledgment of opportunities and capabilities, there remains a considerable fear of failure, the report concluded.
Additionally, a significant percentage of Saudi entrepreneurs are expected to leverage digital technologies and focus on minimizing environmental impacts and maximizing social impacts, indicating a readiness for future challenges.
Meanwhile, the UAE set a record with its National Entrepreneurship Context Index score of 7.7, the highest in the report’s history.
The report also positioned the UAE as the best environment in the world for starting and conducting new business ventures, surpassing many advanced economies. It also ranked third globally in terms of physical infrastructure.
Significant strides have been made in entrepreneurship education within schools, emphasizing skills like creative thinking, problem solving, opportunity recognition and risk assessment. The country ranked among the top five out of 49 in this aspect.
Saudi Arabia, Azerbaijan discuss climate action cooperation ahead of COP29
- Two ministers discussed opportunities for work and cooperation between their two countries in the field of climate change
JEDDAH: Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman met with Azerbaijan’s Minister of Environment and Natural Resources Mukhtar Babayev on Thursday.
Babayev has also been appointed president of the UN COP29 climate talks which will be held in Baku in November.
During the meeting, the two ministers discussed opportunities for work and cooperation between their two countries in the field of climate change. They also talked about joint efforts to achieve the goals of the UN Framework Convention on Climate Change and the Paris Agreement, the Kingdom’s ministry said in a statement.
They reviewed the Kingdom’s efforts and initiatives in dealing with the effects of climate change, such as exploiting renewable energy sources, and managing, reducing and eliminating emissions through the Saudi and Middle East green initiatives.
In addition, the ministers discussed implementing the circular carbon economy approach and its technologies, which was developed by the Kingdom during its G20 presidency and endorsed by leaders, along with other national and regional programs and initiatives.
Saudi Arabia unveils Green Finance Framework in sustainability push
RIYADH: Public and private participation in climate financing in Saudi Arabia is poised to receive a boost with the introduction of the Green Finance Framework.
This initiative, launched by the Ministry of Finance, is aimed at propelling the nation toward its sustainability goals and achieving net-zero emissions by 2060, Saudi Press Agency reported.
The framework is expected to contribute to the efforts aimed at reducing emissions through a circular carbon economy approach, along with positioning Saudi Arabia as a regional leader in sustainable finance.
It was in October 2021 that Saudi Arabia announced its ambitious goal to achieve net-zero emissions by 2060.
With this framework, the Kingdom aims to significantly reduce greenhouse gas emissions by 278 million tonnes annually by 2030, aligning with the commitments under the Paris Agreement.
The Paris Agreement is an international treaty on climate change that was produced in 2015 and compels signatories to work toward limiting the global temperature increase to 1.5 °C above pre-industrial levels.
The Kingdom has been spearheading several initiatives including the Saudi Green Initiative to combat the adverse effects of climate change over the past few years.
On March 27, the Kingdom celebrated its first Saudi Green Initiative Day highlighting the importance of fostering a sustainable legacy for future generations.
The celebration was organized under the theme “For Our Today and Their Tomorrow: KSA Together for a Greener Future” and it highlighted the collaboration of more than 80 public and private sector projects that are part of the SGI.
To date, Saudi Arabia has deployed 2.8 gigawatts of renewable energy to the national grid, powering more than 520,000 homes, with additional projects underway to increase capacity.
Moreover, more than 49 million trees and shrubs have been planted throughout the Kingdom since 2021, and extensive land rehabilitation efforts have been undertaken.
Additionally, energy giant Saudi Aramco, in collaboration with the Kingdom’s Ministry of Energy is building a carbon capture and storage hub in Jubail, which will have 9 million tonnes annual storage capacity upon its completion in 2027.
Closing Bell: Saudi main index slips to close at 12,565
RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Thursday, losing 42.09 points, or 0.33 percent, to close at 12,565.89.
The total trading turnover of the benchmark index was SR10.53 billion ($2.8 billion) as 54 stocks advanced, while 170 retreated.
Similarly, the Kingdom’s parallel market, Nomu, dropped 385.72 points, or 1.43 percent, to close at 26,622.88. This comes as 20 stocks advanced while as many as 42 retreated.
Meanwhile, the MSCI Tadawul Index rose 7.54 points, or 0.47 percent, to close at 1,599.02.
The best-performing stock of the day was Modern Mills for Food Products Co. The company’s share price surged 9.46 percent to SR68.30.
Other top performers include the Mediterranean and Gulf Insurance and Reinsurance Co. as well as Al Yamamah Steel Industries Co.
On the announcements front, Red Sea International Co. announced its annual consolidated financial result for the period ending Dec. 31.
According to a Tadawul statement, the entity’s revenues reached SR1.37 billion in 2023, reflecting an increase of 241 percent when compared to 2022 figures.
The rise in sales is mainly attributed to the strategic acquisition of a 51 percent stake in Fundamental Installation for Electric Work Co., or First Fix, with the recognition in RSI’s consolidated financial statements starting in the final quarter of the year.
Additionally, the company has tactically increased its focus on enhancing its supply chain and adopting competitive pricing strategies while advancing procurement techniques.
On a similar note, the firm’s net profits during the same period hit SR2.17 million, up from a net loss of SR198 million, which was recorded in the same period in 2022.
This rise is mainly linked to positive impact of the First Fix acquisition, in addition to the improvement in revenues and operating performance.
Moreover, Riyadh Steel Co. has also announced its annual financial results for 2023.
A bourse filing revealed that the firm’s net profit reached SR11.14 million in the period ending on Dec. 31, reflecting an increase of 118.8 percent compared to the corresponding period a year earlier.
The increase in net profit is primarily attributable to a reduction in the cost of revenue and secondarily to a rise in other income in comparison to the previous year.
Furthermore, Al-Baha Investment and Development Co. also announced its annual financial results for the period ending on Dec.31.
According to a Tadawul statement, the company’s net profit hit SR4.94 million in 2023, up from the net loss of SR8.09 million that was recorded in 2022.
The increase was owed to a 39 percent surge in the group’s revenues and reduced financing costs by 73 percent, among other reasons.
Saudi Arabia leads the charge toward energy transition: report
RIYADH: Saudi Arabia is emerging as a proactive leader, pioneering green initiatives to mitigate economic challenges posed by the transformation toward sustainability, according to the International Monetary Fund.
A recent report by the IMF highlighted the intricate dynamics at play and underscored the Gulf Cooperation Council and Saudi Arabia’s strategic positioning in this evolving scenario.
Titled “Key Challenges Faced by Fossil Fuel Exporters during the Energy Transition,” the study discussed climate change mitigation efforts in many fossil fuel exporting countries.
As Saudi Arabia and its GCC counterparts continue to lead the charge toward sustainability, they set a precedent for the global community.
By embracing green initiatives, investing in renewable energy, and fostering economic diversification, these nations are paving the way for a sustainable future, balancing economic prosperity with environmental responsibility.
The report emphasized that the Saudi Green Initiative launched in 2021 aimed at combating climate change and reducing carbon emissions.
It explained: “The Green Initiative is centered around three objectives, including targets for increasing the share of renewable energy in electricity generation up to 50 percent by 2030 and the deployment of circular carbon economy technologies, including carbon capture utilization and storage.”
Key challenges
The IMF stressed the need for economic diversification to effectively mitigate the impact of declining fossil fuel revenues.
Highlighting Saudi Arabia’s progress in economic diversification, the report explained: “The non-oil sector growth has accelerated since 2021, reaching 4.8 percent in 2022 spurred by strong domestic demand, especially in the wholesale, retail trade, construction, and transport sectors.”
Similarly, Bahrain, Qatar, and the UAE are diversifying their economies away from hydrocarbons, the study added.
In the UAE, non-hydrocarbon GDP was expected to grow by 5.3 percent in 2022, driven by tourism and FIFA World Cup impacts.
Progress on the Comprehensive Economic Partnership Agreements will further boost trade, attract foreign direct investment, and enhance integration with global value chains, according to the report.
The IMF highlighted that in Saudi Arabia, “the share of high-skilled jobs has increased to more than 40 percent in 2022, and female labor force participation doubled in four years to reach 37 percent in 2022.”
In its report, the Washington-based lender said the governments heavily reliant on revenues from fossil fuel exports face challenges in maintaining fiscal sustainability as these revenues decline.
“Countries with significant exposure to the fossil fuel industry may experience higher financial sector risks, including balance sheet effects, asset devaluation, and increased vulnerability to international market fluctuations,” it said.
The report added that transitioning away from fossil fuels may result in job losses in the fossil fuel industry, necessitating retraining programs and support for affected workers.
It called for structural reforms to address all the issues. “Accelerating structural reforms to diversify export bases and develop alternative industries is critical for mitigating the adverse macroeconomic effects of the energy transition,”the report said.
The IMF stressed the need for coordinated global efforts to overcome all these challenges. “Collaborative efforts can help ensure a smooth transition, mitigate transition costs, and support affected countries in diversifying their economies,” the report said.