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    China - Algeria: The commercial logic

    China has become Algeria's second largest supply country in November, with Chinese exports to the country amounting to US$170 million, according to statistics released by Algerian Customs yesterday.

    France, the United States and Italy registered the first, third and fourth largest suppliers of Algeria with an export volume of US$322 million, US$164 million and US$142 million, respectively.

    During the past three quarters, China ranked the third largest supplier with an export volume of US$1.169 billion, following France and Italy with US$3.241 billion and US$1.394 billion, respectively.

    It was estimated by Algerian Customs that if China continues to maintain the momentum in November, it could probably surpass Italy to become the second largest supplier to Algeria by the end of 2006.

    China becomes second largest supplier of Algeria in November

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    More Chinese enterprises are welcome to Algeria, and the ties between China and Algeria are expected to be boosted in all fields, said Algerian President Abdelaziz Bouteflika on Sunday.

    The president expressed the hope when meeting with outgoing Chinese Ambassador Wang Wangsheng.

    The two countries, while sharing identical views on issues of various kinds, have always helped and supported each other, said Bouteflika, reiterating Algeria's adherence to the one-China policy.

    Noting China has achieved significant success in its reform and opening to the outside world, the Algerian president hopes more Chinese enterprises can participate in Algeria's construction so as to boost its social and economic development.

    Ambassador Wang, who has served as the envoy for five years, said he believed the joint efforts by governments of the two countries will yield fruitful results for the China-Algeria strategic cooperation.

    The economic and trade cooperation between the two countries has seen a strong trend of development with continuous increase of bilateral trade.

    The volume of bilateral trade rose from the 290 million U.S. dollars in 2002 to 1.77 billion dollars in 2005, and the figure for 2006 is expected to exceed 2 billion dollars.

    Bouteflika: More Chinese enterprises welcome to Algeria

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    Algeria - China: The commercial logic



    Algeria - China: The commercial logic

    by Dr. Hassan el-Msaddeq

    December 4, 2007 -- Algeria witnessed a great economic growth shown by the following growth rates: 6.9% in 2003, 4.5% in 2004, 3.5% in 2005. In fact, this is the first time since 1973 Algeria scored such rates, a fact that helped the country partly pay off public debts. Algeria paid $5 billion in April 2006 out of a debt estimated at some $15 billion. The move helped to save great debt repayment interests, and rebuilt Algeria’s financial and management credibility on the international arena. The rise in oil prices will also enable the Algerian treasury to fund infrastructure projects in civil engineering. Hard currency reserves have attained $80 billion and made of the North African country the second economic power after South Africa.

    What attracts the attention of the visitor in the recent years is the strong presence of Chinese businesses and their hires, more than ever; the number of Chinese workers in Algeria has in fact attained 10,000 according to official statistics. This number does not reflect the truth since the Algerian economic policy has opened the door wide in front of Chinese construction businesses. The Algerian 2001 economic take-off plan aims at upgrading the infrastructures of land and maritime roads, and the building of one million social housing units.

    In this context, Chinese corporations specialized in civil engineering won over many concession contracts for the construction of many installations, and it's sufficient here to name China State Construction & Engineering Corporation (CSCEC). It was the one entrusted with the building of the Sheraton Hotel in Algeria, and Al-Qods Commercial Centre in Shraka municipality considered as one of the largest trade centres in Africa.

    CSCEC has also constructed many civil and industrial infrastructure projects especially the thalassic centre in Oran, and Algeria’s airport. CSCEC was also assigned to build the new premises of the Algerian Foreign Ministry. It is also worth noting that recently the Chinese Industrial Complex (CITRI-CRCC) has obtained the concession to built two major parts of the highway linking Annaba city with Telimsane. The project aims at linking between the east and the west of the country. The cost of the project is estimated at some $ 6.2 billion. In addition, its utility appears in its being the corner stone so long awaited in the ambitious project of the Maghreb Union highway that will link Nouakchott with the Libyan capital Tripoli (some 7,000 km).

    It is known that the Japanese rival Cojaal has in its turn received a contract to build the third portion of the same highway project connecting Telimsane with Annaba. It is, also, known that the China Civil Engineering Construction Corporation (CCECC) is contributing in upgrading the Algerian fluvial network, while Sinohydro has obtained a contract of purification works in south Algeria hills, in addition to the contribution of CSCEC in a contract to upgrade Al-Mansura in Telimsane. However, the Chinese presence is extending outside the construction sector to include particularly the cell phone service sector. Chinese electronics company Huawei has increased its activities through ZTE Cell Phone Company which launched a training centre in Wahran in partnership with the National School for Algeria Post and Telecom.

    It is worth mentioning that this vigorous presence can be attributed to the high competitiveness of Chinese firms in comparison with other international businesses. The Chinese workforce is cheap, and is paid according to the payrolls used in the home country. Chinese are endowed with a great speed in completing projects in a scheduled time with high quality specifications. However, the key factor that justifies the reliance on Chinese firms is the high social congestion in social housing in Algeria. The presence of Chinese workforce is blemished with a big contradiction as the unemployment rate in Algeria affects 15 % of the active population, and its rate sometimes rises to 30 % among the social category aged less than 25. Nevertheless, this is due without convulsion to the Algerian mentality, namely that of youth who got used to declining tiring jobs and who prefer the public sector hierarchical positions.

    The Chinese worker enjoys a good reputation among various social segments, but this does not go without criticism from the Algerian press in a way that spurs lots of turmoil sometimes, and contributes in the seclusion of Chinese workers from the Algerian society out of fear of reprisals.

    The contradiction that Algerian press insists on exposing every time relates to the issue of the existence of a foreign immigrant work force in a market already suffering from the existence of great numbers of unemployed youth. Nevertheless, the core of the problem does not lie in the competition brought forth by the Chinese work force. The crisis is due to the Algerian youth’s refusal to do hard jobs for low incomes.

    We have to note that the Algerian population has grown to 34 million in 2007, while the average per capita income is US $ 6,670 (third in Africa after South Africa and Tunisia), in a promising Algerian market that has recently took the decision to join the WTO.

    In the current stage, Algeria has to follow a far-reaching privatization policy. The Algerian government has set up a list of 1,220 companies from all economic sectors that form 15 % of the country’s resources. Perhaps this new liberal policy has laid the path for Indian World Company (Mittal Steel) to acquire the largest steel factory in Hajjar not far from Annaba.

    Taking into consideration the abundance of oil, we notice a determination on the part of the Algerian President to manage the revenues in such a wise way different from all previous arrangements that were full of faults. The creation of a Revenue Control Fund makes possible to avoid inflation; and Algeria decided to prepare its public budget according to the base of US $ 18 /barrel, in order to deposit the surplus in the fund in a cautionary measure. It is a good thing if we know that Algerian exports in terms of fuel have attained 98% of its overall exports.

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    Algeria - China: Political relations

    by Dr. Hassan el-Msaddeq

    December 4, 2007 -- We note that the Sino-Algerian relations do not fall under the conventional ties between China and Africa. The Chinese Government has offered diplomatic protection in the case of Sudan and Zimbabwe in exchange for agreements and contracts related to raw materials. Nevertheless, Algeria does not engage in this sample of relations.

    Algeria plays a role aiming at achieving some sort of balance in its relations with France, the USA, China and Russia respectively. The North African country believes that Washington is able to provide it with the means to preserve stability and security on the long term. Yet, this relation takes into account the cultural and economic sensitivity of the traditional French partner, as Algeria is trying to weave relations with Russia, a major supplier of weapons. Finally, the country is doing its best to strengthen trade and political international relations with China.

    Sino-Algerian relations have been consolidated ever since President Bouteflika’s first mandate. The Algerian Head of State, indeed, thinks that China can play a major role in speeding up the pace of the North African country’s modernisation, without imposing special requisites; this is what explains Beijing’s accepting to be the third column in Algerian diplomacy.

    In this context, we recall that the American-Algerian military cooperation is in full swing in combating terrorism. But its pace grew higher after American decision-making circles started for the first time looking for a way to integrate Algeria in the NATO alliance, regardless of rumours about the existence of consultations examining the possibility of setting up military bases. But the issue of Algeria’s joining the NATO does not go without raising strong doubts, once we examine the transitional situation which most Algerian institutions are going through, and Washington’s image in the Algerian public opinion in particular.

    All indicators point to the fact that Washington is heading the way in studying this proposal from all its aspects, especially after realizing the failure to sell out the “commodity” or “scarecrow” of democracy in the Great Middle East.

    Morocco, sister country and neighbour, has enjoyed, since 2004, the status of a major US ally outside of NATO. Washington grants this attribute to countries with which it has close ties in the political, military and intelligence sectors. Morocco, Japan, Australia, Pakistan, and Jordan share this status, which makes these nations eligible for military aid and technical expertise with preferential conditions.

    The contents of the reports and publications of many institutes indicate that the reason the USA wants Algeria to join NATO is to make the latter play a proxy security role in watching the African coast and Mediterranean countries. The role the US wants to attribute to Algeria is due to the situation in Chad, Niger, Nigeria, and Mali which a source of concern for Washington on many levels, especially after Al-Qaida has set a foot in the Islamic Maghreb.

    This role is expected to secure continuous energy supplies to Washington allies in the EU. More important than that is that the concern the US has about the situation in the African coast region (especially between Algeria and Mali). Washington fears that the situation is changing into something like what is going on in the African Horn that has been transformed into a hideout and a shelter for many extremist Islamic movements. Such a status is foreboding many risks according to strategic security reports mainly because of the weakness of national armies and the vastness of the Sahara that allows new hideouts and easy movement. Therefore, Algeria’s assistance seems inevitable in contributing to crush the terrorist threat.

    A research team was formed including experts, researchers and businessmen under the name African Initiative Group (AOPIG) to investigate the strategies that can be adopted pertaining to Algerian oil, and to give due attention to the Guinea basin nations (Nigeria, Angola, Equatorial Guinea, Gabon). This research group’s interest in this region denotes the great importance of this part of the world, which has great potentials that are very promising mainly in the sector of energy in the near future.

    West Africa (African coast states) represents, for the US policy, a crossroads between many regions that possess great oil reserves and vast desert spaces. Hence, it becomes impossible to slacken the reins, or leave the region without security surveillance especially under the threat of radical movements. The aim is, thus, to consolidate stability in this part of the African continent.

    Overall, Morocco, Mali, Mauritania, Niger, Nigeria, Senegal, Chad and Tunisia are participating in the American initiative to combat terrorism. It is noted that since 2002, the USA has reassessed its strategic interests in the African Saharan Coast region within its overall strategy “Global War on Terrorism”. In this context, we can understand the quick action the US has adopted in the African coast since 2002 to combat terrorism and to set up two programs for military action and cooperation, the first called: Pan-Sahel Initiative, and the second, Trans-Sahara Counter Terrorism.

    The first program entered into force between November 2002 and June 2005 through a US State Department funding that amounted to US $ 5 million, to benefit army troops in Niger, Mauritania, Mali and Chad. The programme was designed to combat terrorism, ensure training in the chase of Al-Qaida elements in the Sahara and make use of transport vehicles and logistic support for participating countries.

    The programme includes border protection and the containment of all sorts of smuggling, especially the smuggling of weapons. However, the programme was limited to equipping some units in the four countries and training them via special American troops from EUCOM whose headquarters are located in Stuttgart- Germany. The limits of those tasks were outreached, as it appears that the tasks were not limited to supplying such units with vehicles, equipping and training. The establishment of a Watch Station presumably backed the programme on the borders of Algeria’s Sahara overseen by regional Echelon in southern Spain.

    The second column in the axis of the Algerian diplomacy is France, as the European country believes that that competing with the USA and China in the field of equipment and communications is worthless. France hence is allocating more attention to other sectors that yield higher surplus. France opened for example a great mall as a branch of the Carrefour Company in January 2006. This confirms the new trend the French are adopting to affirm their economic presence. Algeria’s engagement in the market economy and its expected joining of the WTO presages privatisation of more lucrative sectors such as banking and tourism. French groups bet on compensating for what they have lost to Beijing and Washington. Such sectors are not well known to Beijing and are remote from assimilating the Anglo-Saxon system. They are rather notorious to France, in their system and dealings. The fact that the adopted language in Algeria is French may be also a positive aspect.

    As far as Moscow is considered, we can assert that the positions bequeathed by the Cold War, namely concerning the Western Sahara are still having heavy consequences on bilateral relations. Moscow played the role of a major supplier of weapons to Algeria, especially after selling Sukhoi 30 aircrafts, Mig 29 fighters and anti-missile systems to the North African country worth US $ 7.5 billion. Currently, Algeria, which has concluded a contract to get two submarines model Kilo from one of the Russian workshops, wants to upgrade its marine fleet.

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    December 4, 2007 -- Algeria ranked fifteenth on the scale of oil-producing countries in 2005 that’s to say it supplies 2.2% of the world production, in addition to that it is classified sixth in the production of gas. Its buffer stocks are estimated at some 2.3% of world reserves (fourth in the world). Because of this, Algeria has the USA and the EU as traditional clients. OPEP data show that Algeria has exported 1.8 million barrels a day; the EU share of those exports amounted to 45% (Italy, Spain and Germany are key clients). Algerian exports to the USA have reached 27.6%, while its exports to Asian-Pacific countries together barely exceeded 4.2% (BP Statistical Yearbook). This explains why China is trying today to get rid of the attribute of the marginal client by multiplying investments in the Algerian fuel sector.

    We point, in this context, to the $525 million contract signed by giant Chinese company “China Petroleum & Chemical” in 2002 in view of upgrading Zarziteen fields near Hassi Massoud deep in the Sahara. It is noted that 75% of the project financing has gone to Sinopec whereas 25% is held by the Algerian national company Sonatrach. In addition to that, another Chinese company (China National Petroleum Corporation, CNPC) has undertaken the construction of an oil refinery in the Adrar region not far from Sbaa Basin. In 2004, both Sinopec and CNPC managed to win oil exploration concessions in Wadi Maya Basin, where the first is operating in Al Hujaira and Jarara complexes, and the second in the Almazid Basin.

    CNPC managed in March 2005 to win over a contract to renew a refinery located in Skikda. Algerian corporation Naftal, in cooperation with Soralchin, took the initiative of amalgamating in January 2006 to form a cartel dubbed Naftachine specialized in distributing refined oil products (Kerosene and benzene). Soralchin is a joint venture that unites Algerian national corporation Sonatrach (with a 30% share) and Chinese firm CNPC with a 70% share in the capital.

    Nonetheless, in competition, the American interests remain vigorously present through Anadarko and Amerada companies operating in the fuel sector. We should not neglect the debate that blemished the fuel laws recently and made many foreign investors hesitate in implementing their projects. We recall how the Parliament passed in March 2005 a law enabling foreign companies to acquire majority or dominate all the capitals of the well they explore. Nevertheless, this policy has been criticised and opposed severely in a way that led to a substantive adjustment to the core of this liberal policy in October 2006, through a decree 10-06, July 2006 that provides that national corporation Sonatrach holds the biggest share in the capitals of extraction projects.

    Irrespective of this review that has set limits to the openness and privatisation policy witnessed by the fuel sector, Algeria’s interest lies now in setting up good infrastructures to convey fuel, namely the recent project (Transsaharan Gas pipeline= TSGP) to lay a fuel conveyance pipeline linking between Beni Saf in Algeria and Wari city in Nigeria.The project is expected to begin its activity around 2015. The aim of the project lies in carrying the oil extracted from Niger and Mali through Algeria to Europe. Asia is expected also to have a good share (through the Swiss channel and the Bad El Mandeb straits and then off to China), especially that Chinese companies are very active in Western Africa (we have pointed to this in articles published by the Weekly 'Alarab' paper “We … and China”, and the file on the African Oil Stakes). In Niger, CNPC owns an oil exploration concession in two promising regions: Blima and Ténéré. Therefore, the transport of fuel to China through Algeria can reduce the distance by the fifth. That is, instead of shipping oil through Harcourt port in the Atlantic then through South Africa to the Pacific, the new pipeline seems a magic solution to the problem.

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    Algeria - China: Military cooperation

    by Dr. Hassan el-Msaddeq

    December 4, 2007 -- Military cooperation can be considered the last diplomatic axis in terms of significance. It is an evident issue in the Sino-Algerian diplomatic relations. This was made clear in the speech delivered by Algerian President, Abdul Aziz Buteflika (November 2006) in Beijing where he underlined that “The People’s Republic of China, after becoming a Super Power, has managed to preserve its identity and a sensitivity that makes it capable to consider the interests of developing nations. It is in fact a great partner interested in opposing the attempts of setting up a unilateral world, in which all great decisions are imposed”.

    Therefore, it becomes obvious that Algeria sees in China a great diplomatic support that would enable it to overcome western pressures; it is in fact widely known that China offers subtle support to Algeria regarding the Western Sahara issue.

    A statement by Chinese Ambassador Liu Zhenmin in October 2006 noted China’s support of the organisation of a referendum for a final settlement, a solution rejected altogether by Morocco.

    China is also a military ally in this divergence. However, trade with China in the military field remains weak, because the Chinese military industry is a developing one that is still medium in size. The problem with the Chinese military industry is relevant when we consider Beijing’s ongoing dependence on Russia as far as this sector is considered. Nevertheless, China has approved to build a training ship for the Algerian marines. A contract was signed therein in December 2002, and the ship was actually handed over in June 2006. It is worth noting here that in the military field, and contrary to all other cooperation files, there is a close cooperation in the nuclear domain, a fact that has been raising great concern for Washington since 1990, and that has resulted in its accusing Algeria of making a nuclear bomb with Chinese technical help (see Washington Times, 11 April 1991).

    The Sino-Algerian cooperation in the nuclear sector dates back to 1983, and has resulted in the building of a nuclear complex in the southern part of the country in Ain Ousara region with a reactor dubbed “peace reactor”. It was inaugurated in 1993. In addition to that, since 1989, Algeria has possessed a low capacity nuclear reactor that it has received from Argentina. It is located in Drarya station not far from the capital. However, in 1995, Algeria refuted the rumours launched by many American papers and signed the Nuclear Non-Proliferation Treaty, opening its nuclear stations to be monitored by the IAEA.

    Algeria has also committed itself in 2004 to sign the additional protocol that allows the IAEA inspectors to conduct surprise visits without prior notice. However, the North African country commitments were not materialised giving, hence, full reins to new doubts around the current researches. Doubts grew stronger especially after Algeria expressed its support, during a recent visit by the Iranian President, Mahmoud Ahmadinejad, to the endeavour of Tehran to acquire civil nuclear energy.

    However, Algeria moved forward after that to express its goodwill signing with the USA a cooperation agreement in the civil nuclear sector, in June 2007. Algeria expressed its desire to continue its nuclear project, but in exchange it has granted Washington the right to inspect its researches.

    Many Algerian decision-makers consider that keeping the nuclear research will help Algeria regain the status it had in the golden epoch of the 1970s, when it was the spokesperson for many developing countries in international forums. Attempts to continue the nuclear work are considered by Algerian diplomacy as a way to get back to the potent Algerian role in international relations.

    Thanks to its good relations with the Human Rights Committee (early 2007), Algeria managed to refute the allegations of western powers who depict the violations happening in Darfur as an “extermination of an unarmed people”, on the basis of conclusions included in a report presented by American Judi Williams to the Council.

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    December 4, 2007 -- Historically, China has rushed to conclude close ties with Algeria ever since the latter got its independence in 1962; however, those relations have witnessed an obvious revival in the last five years, when Algeria has become China’s first class economic and political partner in Africa, a situation that serves the interests of both parties. Nevertheless, some look at the situation from a conventional perspective highlighting the issue of access to raw materials and energy. Nonetheless, one cannot ignore the existence of political, economic and geopolitical objectives as well.

    In December 1958, China took the initiative of recognising the ad-interim government of the Algerian Republic. This step was soon strengthened by visits by Zhou Enlai, Chinese Premier, to Algeria (1963 and 1965), followed by the visit of Houari Boumédiènne to Beijing in 1974. After eight years, Chadli Bendjedid visited China. Then, President Jiang Zemin visited Algeria in 1999. Former Premier, Li Peng visited the North African country in 2001. Chinese President Jintao paid a visit to Algeria in 2004. Algerian Foreign Minister, Mohamed Bedjaoui, paid a visit to Beijing in April 2006 to pave the way for the visit of President Abdelaziz Bouteflika in November of the same year.

    The truth is that Algeria has always occupied a distinguished status namely in the Chinese strategy in the Arab Maghreb. Bilateral trade relations testify to a perpetual growth that has leapt from $191 million in 2000 to $1.75 billion in 2005, and to $2 billion in 2006. China occupies the fourth rank on the list of countries that provide Algeria with basic needs and commodities, after France, Italy and the USA in a row. But this rank is liable to leap to number one as China’s imports from Algeria (6.84 % of the total imports) has witnessed a quality leap that reached 42% in comparison with the rate of 2005. China climbed to the third rank with a quota of 8,1 % of the market after it has displaced the USA coming hence after Italy (8.84 %), and France which occupies the first rank with 20.75% (Source: Algerian Ministry of Commerce - Ministère du commerce Algérie). Trade between Algeria and China remains tilted to the interest of the latter as the Chinese have realized a trade surplus of 1 billion Dollars in 2005, a surplus that increased to 1.49 billion in 2006. It is expected this trade surplus will exceed 2 billion Dollars in 2007.

    China’s imports from Algeria are weak if we exclude fuel, whereas its exports, to satisfy many of Algeria’s needs, are very significant, notably concerning many commodities such as textiles, and household gadgets and appliances. In this context, the Algerian President, in his address in Beijing in November 2006, considered China “a friendly country and a special partner”.

    The dynamism known at the level of the Chinese-Algerian trade sector cannot obscure the truth of the weakness of Chinese investments that did not exceed $600 million in 2005. Compared with the size of American and French investments, Chinese ventures remain inconsequential. Statistics of United Nations’ CNUCED note that Algeria got $1 billion of direct investments in 2005. Direct investment savings reached $ 8.2 billion. Nevertheless, the rise scored in direct investments is attributed to the increase in the rate of investments flowing from Gulf countries in 2006 and 2007.

    Overall, China was classified among the top ten countries investing in Algeria in 2001, whereas the USA, Egypt, France and Spain represented 40% of the direct investment savings in the country. After 7 years, China’s investments are still weak as one reviews the movement of investments flowing into Algeria. Nevertheless, what counts is to investigate the nature of the Chinese-Algerian cooperation touching on three dimensions: oil, commerce and politics.

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