ALGIERS: Traditions of secrecy and red tape mean Algeria will be slow to modernise its command economy, potentially throwing away a precious opportunity for reform offered by windfall oil income.

Its often unresponsive, overstaffed state institutions could also deter investors able to provide jobs vital for political stability, analysts and former officials say.

"Financial ease doesn’t mean economic performance. Our economy is vulnerable, volatile and dependent," said former Prime Minister Ahmed Benbitour.

"Oil masks our economic problems." Secrecy is a deeply-rooted tradition born of guerrilla tactics during the 1954-1962 independence war against France: many in Algeria’s political elite are veterans of that struggle.

Red tape is a legacy largely of the country’s adoption of the Soviet command economy model during the cold war. But to look at the financial position of Africa’s second largest country, the problem is not immediately evident.

Algeria expects its energy revenues to exceed $50bn this year, up from $45.6bn in 2005, thanks to high prices. Foreign exchange reserves rose to a record $70bn at end-September. Foreign debt will be cut to $5bn by the end of this year from $15.5bn at the end of February. During the five past years, economic growth has run at 5%, inflation at under 3%, and the unemployment rate has been reduced to 15% from 30% three years ago.

"The money will go to renew infrastructure, a precondition of economic take off," boasts Finance Minister Mourad Medelci.

Future projects include a 1,200 km (750 mile) motorway, a railway linking Algeria to Morocco and Tunisia and the building of one million houses in the next five years.

All of which is good news for Algeria’s 33mn people, gradually recovering from 14 years of violence between the army and Islamist rebels in which up to 200,000 people were killed.

The oil and gas bonanza adds up to a once in a lifetime opportunity to reform, without undue pain, an economy in dire need of greater efficiency and openness, analysts say.

But the problems are multiple.

Much of the work will be led by a centralised bureaucracy and state banks plagued by a legacy of corruption, red tape and a tradition of lending to loss-making state firms, critics say.

State administrators tend to dislike detailed public accounting of spending and are unused to handling multibillion dollar projects outside the energy sector, they say.

Too little of the cash will go on skills training, and the state may be too busy with the projects to attend to vital reforms streamlining procedures for investors, who must wade through overly complex regulations on trade, tax, property.

A weak parliament dominated by the executive, and newspapers subject to periodic intimidation by influential people, are unlikely to hold ministers to public account.

And to top it all, if oil and gas prices fall substantially, Algeria may have to revise its spending plans sharply.

"Over-investing (in infrastructure) could lead to waste of money and corruption," said economics professor Hocine Benissad, who favours promoting the weak industrial sector. "Economic growth is still too dependent on external factors such as the energy market," said Benissad. "Industry gives you permanent jobs. Infrastructure gives you temporary jobs." Graft watchdog Transparency International (TI) said pervasive lack of information was a warning sign for possible waste and graft: problems that are not exposed tend to persist.

"Access to information held by the government is more likely to be denied than granted," TI said in a 2006 report on Algeria. "The auditor general’s department was created in 1980 and is required under the constitution to publish annual reports, but only two have ever been submitted in the entire quarter century of its existence." A World Bank survey of 1,400 investors and companies in Algeria in 2003 found corruption a major constraint on investment with 75% of companies reporting bribes are paid.

Secrecy

Defenders of the government say it had to focus so hard on security during the bloodshed of the 1990s that it is not surprising its economic expertise is a little remiss.

But love of secrecy also affects the political realm.

When Abdelaziz Belkhadem replaced Ahmed Ouyahia as Prime Minister in May, there was a minimum of explanation. Ouyahia did not publish an "end of term" report on his tenure, and to date Belkhadem has yet to publish the programme of his government.

"Nobody said anything and no one bothered to explain what had happened," complained an editorial in El Khabar daily.

Algeria is economically backward partly because it lacks the everyday habits of democracy, such as accountability and openness, despite the holding of periodic elections, former central bank governor Abderahmane Hadj Nacer said.

"We can’t reach a sustainable economic growth without democracy," he said. "And democracy doesn’t exist in Algeria." Former prime minister Benbitour said Algeria had to draw up clear economic priorities.

"Our problem is that we do not have a road map," he said. "If the state doesn’t tell you where to go, how can you build an economy?"

Secrecy, red tape slow Algerian reforms