Dr. Akacem is Associate Professor of Economics at Metropolitan State College of Denver and the editor of Middle East Forum.1
Algeria is currently going through one of its most defining moments since gaining independence from France some three decades ago. In an address to the nation (May 1993), President Ali Kafi proposed a referendum to take place by the end of 1993. It is still not clear, however, what the referendum will be about. This may be the result of the different forces at work within and outside the High State Council (HSC) that has ruled Algeria since the assassination of the late Mohammed Boudiaf in June 1992.
Moreover, this may signal a certain hesitation on the part of the HSC whether to make a bold move toward full-blown democracy or to maintain the status quo with the military in the background. Failure to make a clear and decisive move hurts the country since potential lenders and investors inside Algeria (as well as outside) will hold off on any investment until they are clear on the consistency and continuity of the government's fiscal, monetary and trade policies.
For the past 30 years, the real power behind all of the successive governments that have ruled Algeria has been, and still is, in the hands of the veterans of the war for independence. It would be unfair to attribute the cause of all of Algeria's social, economic and political ills to this old guard. Nevertheless, the fact that the old guard has hung on for so many years makes it an appropriate target for the masses of disenchanted youth who have no stake in the future of the country.
The danger of staying long in power without an opposition acting as an effective check is that those in government lose sight of their constituency and its needs. They are able to address the current social, economic and political problems with only the outmoded tools and approaches which they are used to but which are useless. Harold Wilson, prime minister of Great Britain in the 1960s, saw this. He resigned his post of his own free will with no pressure from his party or the opposition. When asked why, he replied that after more than a decade of being prime minister one is always tempted to address new problems with old solutions.
Unfortunately, in Algeria and in much of the Arab world, such gallant exits from power are rare. Therein lies the problem for the future of North Africa and the Middle East. This article will deal with the political and economic future of Algeria: the transition from a one-party political system to a multiparty democracy; the factors that led to the sudden departure from the singleparty state-model; the emergence of Islamic fundamentalism and the implications for Algeria's neighbors and for its relations with the West; Algeria's economic outlook; and, finally, discussion of policy options.
A Difficult Transition
Algeria has gone through a number of turning points in its history. What makes all of them similar is the predominant role played by the military. The first was in 1962, when the country gained its independence from France. This was marked by the accession to power of the old-guard veterans of the war. After a very short tenure, the first Algerian president, Ahmed Ben Bella, was ousted by his minister of defense, the late Houari Boumediene. This episode is crucial since it established a political and an economic model that has dominated the country for over 30 years. According to some critics, such a model is at the root of Algeria's current economic, social and political ills.
The Boumediene era, which lasted until 1978, was characterized by a Soviet-style command economy where private capital played a very limited role. The government essentially owned all the productive sectors of the economy, as well as most of the capital. The government at the time embarked on an ambitious program of industrialization opting for an import-substitution strategy and a vast system of government-owned companies which employed a large part of the labor force. However, since the pricing policy followed by the state-owned companies did not reflect true economic costs, most of the companies ran at a loss. That was fine with Boumediene, who was more concerned with equity than efficiency. Algeria was able to muddle through because of the oil and gas revenues that provided the country with vast amounts of foreign reserves. The 1970s were particularly kind to Algeria: two oil shocks translated into a huge transfer of wealth to the oil-producing nations.
The political structure was also a replica of the former Soviet model of one-party rule (the Front de Liberation Nationale — National Liberation Front — or FLN), a controlled press and a security apparatus that discouraged any form of dissent. Whatever Islamic movement there was at the time was kept in check, and many of the leaders were jailed. Moreover, the imams were nominated and appointed through the Ministry of Religious Affairs.2 Friday sermons were regularly sent by the Ministry of Religious Affairs to the imams to make sure that they not depart from the government line.
This heavy-handed approach did not sit well with those who believed that the government had no business controlling what goes on inside a mosque. The imams who openly opposed the policy or dared to challenge it were summarily jailed and others went underground. Such tight controls helped to fuel the resentment of many who later hardened their views regarding the role of religion in a future Algeria.
The second turning point in Algeria's history came in 1978. The death of Boumediene marked a significant departure from the past. Gone was the staunch ideological commitment to a socialist state. His follower, president Chadli Bendjedid, was not as committed to a given model of economic development as was his predecessor. Nevertheless, under his tenure the government continued to own the major part of the productive sector of the economy. Still, Bendjedid's regime was characterized by a willingness to open the economy and to allow the private sector a greater role.
While the new openness was a welcome change, it also created social tensions as a middle class of nouveau riche soon developed that profited from the privatization drive. This further skewed the income distribution in the country, fueling resentment among the poor. All of this came to a boil in October 1988, when hundreds of youths rioted in the streets of Algiers. The government response was a violent one that led to hundreds of deaths and the torture of hundreds more.
The October riots represent a watershed in the history of independent Algeria. For the first time the army was openly used to crush a civilian revolt. The impact on the country is still being felt today. After the riots, a historic decision was made to open the political system. Even more crucial was the decision by President Chadli to legalize the Front Islamique du Salut or FIS (French acronym for the Islamic Salvation Front). The FIS was suddenly allowed to operate as an Islamic party and effectively used the mosques to spread its message. What is not clear is why the Chadli regime chose to legalize an Islamic party. The riots of October 1988 were more of the "bread and butter" kind. The youth and students who rioted did so to protest the miserable conditions of schooling and transportation, the lack of jobs and housing, etc. In other words, the 1988 winter of discontent was not about the lack of democracy, at least in the beginning, and even less about the need for an Islamic republic. In fact, the role of the Islamic movement in the riots was minimal at best.
In any case, once the decision was made, Algeria was not going to be ruled by only one party, the FLN. The main qualification of the FLN's members was that they had fought the French. It was perhaps that qualification that made them unable to connect with the yearning of two-thirds of the population who not only did not remember much (if any) of the struggle to free Algeria, but could not care less. They had more pressing problems.
With Bendjedid's commitment to open the political system, Algeria went from having one party to having more than 50. All of the parties had some form of subsidy from the government, and a great number of them had no clear program or vision for the country. The party that benefitted the most from the opening of the political system was the FIS. No longer having to operate underground, it was now free to openly spread its message and recruit new members from the masses of disaffected youth who filled the mosques every Friday. Others were recruited and attracted to the movement from the ranks of the so-called "hittistes"3 who now have a cause and a vehicle through which to vent their anger against the establishment.
Despite the claim by some4 that the PIS should never have been allowed to become a party because the constitution did not permit the formation of parties based on religion, it is clear from the results of the December 1991 national elections that the FIS did have a significant amount of support. While it is possible that the Algerian constitution, literally interpreted perhaps, may have prevented the formation of a party based on religion, the argument is moot at this point. The FLN was so certain of winning the national elections of December 1991 that it hired experts from France who advised it on how to increase the number of voting districts to its advantage. Even such gerrymandering did not stop the FIS landslide.
Following the victory of the FIS in the first round of the national elections in December 1991, the army took over in a de facto coup d'etat. Bendjedid was kindly asked to step aside, and a council was formed to rule the country with a long time self-exiled hero of the revolution at its head, Mohammed Boudiaf. Mr. Boudiaf had been away from Algeria since independence and thus untainted by domestic politics. Unfortunately, he was assassinated a few months later by one of the guards assigned to protect him.
Since the assassination, the Algerian government has muddled through with the old guard still in charge and with Mr. Belaid Abdesslam, from the Boumediene era, as prime minister.
It would be wrong to conclude that the transition from a one-party regime to a multi-party democracy in the Arab world must always lead to the establishment of an Islamic state. The context, history and economic, political and social conditions differ from one Arab country to another. A government can legislate what its citizens can say but can never legislate what they think. As a result, the fact that we do not have Islamic movements or parties in most of the Arab and Muslim world does not mean that they do not exist. They may simply remain dormant until the appropriate opportunity presents itself, such as in the case of Algeria. We should not be stunned by the "sudden" growth of these movements. They do not appear from nowhere.
The March of Islam in Algeria
Trying to explain the rise of Islamism in any country is difficult because of the complex nature of the factors involved. It is often tempting to direct attention at poverty and unemployment as being the most important factors. However, these factors do not explain everything. If they did, we would be at a loss to explain the presence of Islamic movements, albeit not as strong as in Algeria, in places like Kuwait and Saudi Arabia for example. So the existence of a high per-capita income and a secure job is clearly not enough to diminish the appeal of Islamic movements. Something more must be at work.
On the whole, followers of lslamic movements cannot be dismissed as a fringe group whose only agenda is gaining power, though that is clearly one of their goals. There is a sincere desire among a substantial bloc of the followers of these movements for the establishment of a truly Islamic society.
There is no doubt that the FIS scored a stunning success during the elections of December 1991. If the second round of the elections had not been canceled, the FIS would now be governing Algeria. How can the success of the PIS be explained?
The authorities have argued that the PIS victory was made possible in part because great numbers of the electorate decided not to vote. Clearly, this is a weak argument. However. those who did not vote may have consciously made such a decision because there was so little choice in terms of parties to vote for or concrete plans to deal with the country's many ills.
Much has also been made about the issue of the "vote sanction," i.e., that the voters decided to penalize the ruling party for its mismanagement and incompetence in dealing with the country's problems for the last 30 years. While this is no doubt true, it is difficult to assess how much of the overall vote was a vote against the establishment as opposed to a vote for the FIS. Judging from the low turnout, it is tempting to conclude that those who voted were on the whole committed to a clearly defined political preference and supported it.
I would like to suggest at this point a different explanation: the "core" versus the "periphery" hypothesis. The Islamic movement in Algeria is composed of a core constituency and a periphery. The core, the FIS leadership and its dedicated followers, yearns for a just and "clean" society consistent with the teaching of Islam. While it is true that the FIS received considerable help from Iran and Sudan, this does not diminish the fact that the Islamic movement in Algeria is essentially a home-grown movement. It is a mistake to assume that if Iran were not an Islamic republic today, the Algerian Islamic movement would not exist. Moreover, this lends credence to the idea that the Algerian Islamic movement has been manipulated from the outside and that it does not really have strong domestic support. This is incorrect.
The "periphery" of the movement consists of what I call fellow travelers, people who are willing to join the movement but not necessarily because they share the same values, goals and commitment as the core members of the FIS. They are not necessarily fully committed to the establishment of an Islamic republic, for example. But if that were to help them achieve their material goals (better housing, education, employment), then they would support the core.
In the summer of 1991, during one of the many marches organized by the FIS, a reporter asked a woman marcher her reasons for joining the march. She explained that she supports the FIS because it is the only party that has promised to find her decent housing if elected to power. She went on to explain that she was not necessarily a member of the movement, that she had tried in vain to get someone to pay attention to her problem, but that no one did, except for the FIS. This kind of dedication to the everyday problems of those ignored by the establishment earned the FIS considerable support from the periphery. The FIS was very good at reaching those at the bottom of the economic ladder and offering them help. The same thing is currently happening in Egypt, where the Muslim Brotherhood helps feed the poor in some of the Cairo slums. The failure of the secular governments in the Arab world to improve people's lives partly explains the success of the Islamic movements.
If the analysis of the core versus the periphery is valid, then if, for example, a job-producing economic strategy were adopted by the current government, at least part of the support for the FIS from the periphery would diminish. Those on the periphery would find that their material needs were satisfied and would cease to support the FIS. This does not mean that the FIS would lose its power base. It simply means that the FIS would be made up of core members whose goals and objectives would still be a return to the basic fundamental values of Islam, but its support would likely be diminished and thus it would be forced into some sort of coalition with other secular movements. If this is the case, then the current leadership must focus on an economic strategy that delivers jobs and growth in a hurry. That strategy, as we shall see later, may not be compatible with this regime's ideological preferences.
The Islamic movement has a dual base of support, one fully committed to the establishment of an Islamic republic, even through a jihad or holy war — as evidenced by the almost daily murders of officials. The core can also be divided into two groups, one moderate and perhaps willing to find a political solution to the crisis, the other more militant, seeing the answer to the current political impasse only through a jihad. Nothing that the government does can change this group's determination, and the group is here to stay. Somehow it must be allowed to play a role in future Algerian politics. This does not necessarily mean that it can do so as an Islamic party, since that may violate the literal interpretation of the Algerian constitution as it now stands.
Finally, the other base of support comes from those voters who have lost all trust in politics as usual. They wanted a party that would clean house and produce concrete results. In a way, the FIS acted as a sort of Ross Perot for part of the disenchanted Algerian electorate. This group was tired of the hogra (abuse, injustice), and lack of due process, ills they believed the FIS would be able to fully address once in power.
Clearly, finding jobs and improving the overall standard of living of the average Algerian will not be enough. There is a sincere desire on the part of both the periphery, the core and the rest of the electorate for a democratic state where the average citizen can have his/her day in court. Meeting the material needs of the population is only part of the solution.
It is wishful thinking to assume that the FIS or the other more moderate Islamic movements such as the Enahda or Hamas will disappear. Secular forces need to find a way to "cohabit" with the Islamic movements or preempt their advantage by adopting part of their platform in addition to reforming the economy. There is a need for tolerance on both sides for peaceful cohabitation to work.
The future of Islamism5 in Algeria depends essentially on how the army decides to deal with it. This in turn depends on whether Khaled Nezzar remains at the helm or is replaced by someone more determined to aggressively pursue the movement. It has been reported in the French press6 that Mr. Nezzar's health is poor. Should he be unable to continue to run the military, the future of the Islamic movement depends on his successor. There are two groups within the military: those who support an aggressive and direct confrontation with the FIS and its supporters and those who still hope for some sort of dialogue and a peaceful resolution.
Economic Outlook and Policy Choices
It is clear that a drastic revision is needed in the way the economy has been managed. Unfortunately, the recent change of government with Abdesslam as the new prime minister does not bode well for the future. Mr. Abdesslam was instrumental in shaping the economic and industrial policy of Algeria under the Boumediene regime. His choice signals a return to the past. His own program7 is replete with references to Algeria's industrial strategy, which, according to him, was destroyed by successive governments after the death of Boumediene. In a new world where the former Soviet Union and Eastern Europe have abandoned communism for the sake of market reforms, the government program makes frequent references to the glory days of post-independence in Algeria.
While privatization is a must, the question is how to achieve it in Algeria with the least amount of social pain and civil unrest. It is clear that the Abdesslam government is neither willing nor able to abandon the "values inherited from the revolution of November 1st."8 This means that the state can still be expected to maintain substantial control of the economy. However, the same program also states that foreign capital is welcome and no limits shall be placed on the extent of its participation except in some sensitive areas such as oil and gas, for example.9
Moreover, recently an official of the Algerian government argued that the economic model chosen after independence had the support of the whole population, as did the war of liberation.10 The same official went on to argue that since there were no Algerian capitalists after independence, the government had to take the lead and build the country. A socialist model of development was the answer.
The issue of the choice of the right economic and political model was not resolved in a free and democratic manner, contrary to the official suggestions. In 1962, the Algerian people were not consulted as to the choice of either the economic or the political system to be followed. Most simply assumed that a national government must be better than the colonial one and expected it to improve their standard of living and allow them the basic freedoms that the French did not. It is precisely because of the lack of these basic freedoms — economic and political — that the ruling national front simply ran out of steam and lost all credibility in the eyes the population. It is partly for this reason that millions of Algerians voted for the FIS.
As stated earlier, the issue facing the Algerian authorities is not whether to privatize the economy, but how. Despite encouraging statements made by Belaid Abdesslam and his government, the current leadership is not likely to undertake a massive privatization program. The current government fears privatization may mean selling off the public-sector companies, which would increase unemployment and thus fuel further resentment by a restless youth. This would simply give more ammunition to the Islamic movement, which would exploit it for its own ends.
The key for a successful transition from a planned economy to a market economy is to minimize as much as possible the negative effects of privatization. But before any government can do so, it must first be able to identify and target those who would be affected in order to assist them financially for a limited period of time. This simple, and yet crucial, task has yet to be undertaken by the Algerian government. Without an adequate data base on the needy and displaced work force, no government will be able to develop a social safety net. Without it, an aggressive privatization strategy will be difficult to undertake.
Having quickly targeted the group that would likely need help, the next step is to deal with the excessive debt burden consuming over two-thirds of the hydrocarbon export receipts. Refinancing existing debt simply delays the inevitable. What needs to take place is an aggressive program of debt conversion whose goals are to reduce the overall debt level and eventually replace debt by foreign investments.
For this to happen, there needs to be an ideological break with the past. The command economy functioned only as long as Algeria had the hard-currency earnings to maintain it. It no longer has these resources.
Debt conversion can work in a rather simple manner and would at least provide both relief and time for the authorities to strengthen the institutions needed to support a market economy. An example will illustrate the point.
Let us assume that a foreign investor has an interest in starting a project in Algeria. The investor can, for example, buy Algerian debt at a discount11 and convert it into equity in Algeria. The investor exchanges an IOU denominated in foreign currency and in exchange gets an ownership stake in, say, a state-owned company such as a refinery or a steel or cement factory. Depending on the company and the sector, the foreign investor could end up with the majority of the shares. Thus the company would cease to be government-owned. This could be a start toward a gradual privatization program. In a second phase, the government could sell off its remaining ownership stake to the general Algerian public.
In such a transaction, it is important to note that no money changes hands and thus no money is created by the Algerian Central Bank. Hence, no inflation. This example of debt conversion could be repeated in a number of sectors such as tourism, oil and gas, national airlines, etc. For this to be successful, no sectors should be declared out of reach, as the economic program of the Abdesslam government notes.12 The only criterion should be the beneficial impact on the economy, particularly on employment in the short run. How much and where capital comes from is irrelevant to the government. After all, foreign investors are not going to pack up their factories and go home. Clearly a strategy of equity investment is far superior to that of debt.
For foreign investors to come in, they need to receive an adequate amount of domestic currency with which to purchase equity in national companies. As this entails an exchange rate that makes sense, a problem arises. The current government of Mr. Abdesslam is adamant about not allowing the Algerian dinar to go through a free fall. Even though the dinar has already been devalued considerably in the last few years (from about 5 dinars to the U.S. dollar to about 22), the multilateral agencies such as the World Bank and the I.M.F. are still not satisfied.
Their argument — as well as that of other donors and creditors — is that unless the Algerian authorities close the gap between the black-market exchange rate and the official one, the latter will remain overvalued. This would deter both potential foreign investment and any non-oil exports that could have been generated as a result of a market-oriented exchange-rate policy.
The opposition to a "cold" devaluation policy designed to drive the Algerian currency toward a market-determined level has been argued on a number of grounds. First, the present government, like others before it, argues that a cold devaluation policy would have a drastic effect on the public sector's debt repayment. Since a significant amount of the external debt is owed by government-owned companies, a cold devaluation would entail a hefty increase in the dinar equivalent that these state-owned companies would have to come up with. Given the precarious condition in which all of the state-owned companies (except those in the oil and gas sector) find themselves, a cold devaluation could mean the end for most of them.
In order to repay their dinar debt to the Central Bank, they would have to do so from profits. However, these are nonexistent for most of the public sector. The next logical step would be to generate higher profits through a more realistic pricing strategy of the goods and services they sell. Doing so would translate into such massive price increases of these goods and services that such an option will not even be considered.
In the final analysis, the only option left to the public sector is further assistance from the government, which often takes the form of further credit allocation and thus added pressure on the budget. In the end, a cold devaluation strategy strikes at the heart of the Algerian model of economic development. The very model that the Boumediene government devised in the 1960s as the only way out of under-development is now threatened by the demands of the multinational agencies as well as the problems of the economy.13
Finally, the other argument advanced by the current government relates to the fact that the Algerian economy relies almost exclusively on oil and gas for its hard-currency earnings. The standard economic argument is that a market-based exchange-rate regime is supposed to make a country more competitive, thus enhancing its export capability. In the view of the Abdesslam government, choosing a market-based exchange rate regime would not produce any benefit in the short run in terms of new exports from the non-oil sector. In essence, the Algerian economy would be subject to a massive shock in terms of higher import costs, higher prices, the shutdown of a number of state-owned companies, and other negative factors without a visible benefit in the short run.
While, it is true that some of these things are likely to occur, they are nevertheless poor excuses for the current regime's stasis. The price of doing nothing would be a lot higher. And the longer the authorities delay the necessary adjustment, the higher it will be.
Unfortunately, the obsession with foreign ownership may limit the extent to which foreign capital can play a role in saving Algeria from the economic abyss. Even though a debt-conversion program together with a sensible market exchangerate strategy could offer one potential way out of the crisis, they are unlikely to be adopted soon. This will not be welcome news to those who may have had an interest in investing in Algeria, particularly in the oil and gas sector, where the country needs all the help it can get in increasing the recovery rate from individual oil wells. Those investors who, at the moment, may be marginally interested but are scared away because of the high political risk could be swayed by a good debt-conversion program like that of Chile.14
A debt conversion program is not a panacea. It is one possible technique for dealing with the pressing political problems and the need to create jobs fast. It also could be a catalyst for other improvements. Another benefit from a debt-conversion program is that Algeria would not have to seek further financing from private sources and thus would not increase its external debt. Equity is far better than debt, but it does require that the negative connotation often associated with foreign ownership be done away with.
Several questions about Algeria's future suggest themselves. Will the military be able to share power with other secular as well as Islamic parties? Will the present leadership accept the formation of an Islamic government since the FIS has been banned? Under what conditions would an Islamic regime be allowed to govern? Will Mr. Abdesslam or his successor cohabit with a cabinet dominated by "moderates" from the ex-FIS?15 Some in Algeria think he may not mind. Finally, should the health of Mr. Nezzar make him unable to continue as head of the military, who will replace him? There are clearly two wings within the military. The future political makeup of Algeria will depend on which wing predominates. In any case, the current civil unrest and ongoing assassinations of intellectuals and members of the Consultative Council give reason to worry.
The most likely scenario involves a muddling through, with the military the real power behind the scene. As long as the military remains a solid bloc, the country is likely to try to buy time until the economy recovers enough to enable it to create a reasonable number ofjobs and improve the lot of the average citizen. This may lessen the support for the FIS from the periphery and would leave it with its rather substantial core support. Regardless of the makeup of future governments, the demands of those who voted for the FIS cannot be ignored. Some kind of representation is a must. This need not jeopardize the democratic process, but there must be an end to the cycle of violence before any meaningful dialogue can begin.
In the end, what is really needed is a constitution that explicitly protects a multiparty democracy regardless of who is in power. Amendments guaranteeing freedom of speech, press and political association should be explicitly stated. Perhaps the referendum to be held by the end of the year can address these issues. Moreover, rules of the political game and due process are extremely important, more important than what results from them. For this to be achieved, an independent judiciary must uphold the constitution. If necessary, an amendment to the constitution can, for example, make it impossible for any party, regardless of its majority, to abolish democracy. This may very well lessen the secular parties' fear that the Islamic movement's commitment to democracy is only "one election deep."
One can only speculate as to what might have happened after the first round of elections in December 1991. The army might not have moved in if it had sincerely believed that the constitution protected the return to democracy. I have also argued elsewhere16 that perhaps the FIS should be given a chance to see if it can deliver on its promises. Given the economic problems of the country and the lack of a clear program to address them, the FIS might not succeed. But at least it has earned the right to try. However, since the establishment feared the creation of an Islamic republic with no possibility of return to a secular form of government through the ballot box, it felt the need to intervene.
In the short run, the Algerian authorities are faced with a "Catch 22" situation. They must resolve the political impasse before they can spare the time and energy to focus on the economy. At the same time, however, they must address the needs of the economy before the political situation improves.
The recent dismissal of Belaid Abdesslam by the High Council is yet another troubling sign. The new prime minister, Redha Malek, a member of the old guard, is as ideologically committed to the left as his predecessor. It is not clear whether the new prime minister is committed to open-market reforms either, and therein lies the problem for the country.
It has been alleged that Prime Minister Malek has taken longer to form a new government because a number of prospective candidates for positions have declined. A plausible explanation is that Mr. Malek is rumored to take a tougher stance against the Islamists, and some potential candidates are fearful of reprisals.
In any case, the government is running out of "easy" options. Perhaps the time has come for moving boldly on both the economic and political fronts. Not doing so may be worse in the long run.
l The author wishes to thank Dr. Arthur Fleisher and Larbi Sellaoui for their comments.
2 This has led some to note that even religion was not immune to the nationalization program of the Boumediene government.
3 Hittiste comes from the Arabic word "Hait" meaning a wall. A hittiste refers to the unemployed who spends his day outside leaning against walls.
4 See Mohammed Akacem, "Europe May Feel Algeria's Strife," The Wall Street Journal Europe, July 3-4, 1992.
5 Assuming that some compromise is reached and that the FIS is allowed to return under a different name and perhaps a leadership with which the establishment is comfortable.
6 See Le Figaro, "Algerie: Le Regime SOllS La Menace Islamiste," June 4, 1993, pp. 1 and 5. Recently, Mr. Nezzar moved to the High State Council from the Ministry of Defense. It is assumed that he still wields a significant amount of power and has probably picked his successor.
7 See "Programme De Travail Du Gouvemement," September 1992, Algerian Government.
8 Ibid., page 2.
9 But that need not be the case. Argentina, for example, defied the commonly held belief in Latin America that a natural resource such as oil is too strategic to be sold-even to foreigners-and privatized. See The Wall Street Journa.l, "Argentina Succeeds in Sale of its Oil Company Stake," June 29, 1993, page A-10.
10 See "Programme des reformes l!conomiques en Algerie," speech by Ahmed Benbitour given in May 1993 at the World Bank, Washington, D.C., page 2.
11 The discount on the Algerian debt varies between bonds and loans, but discounts of 30 to 40 percent are not unusual.
13 A devaluation would bring an added benefit to the revenue side of the budget. Now, oil and gas revenues in dinars would constitute a greater share of total revenue. The fear, however, is that the same devaluation would also lead to a drastic increase in the cost of imports that would translate into higher domestic prices and thus inflation.
14See Akacem, "The Secondary Market for Algerian Debt: Implications for Debt Conversion," a paper with an emphasis on debt conversion in the oil sector, given at a World Bank seminar, January 15, 1993. An earlier version was published in the winter 1992 issue of the OPEC Review.
15 Assuming he lasts that long. Early in July, 1993, he was quoted as saying that the Algerian Army put him in power, which angered the members of the High State Council. At this time, the rumor in Algiers is that his days may be numbered.
16 Mohammed Akacem, "Islam Scores a Fundamental Victory," in The Los Angeles Times, January 3, 1992. Other secular political parties, namely the Front des Forces Socialistes. argued for a continuation of the election process.