Algeria’s accumulation of revenues from oil and gas in recent years have enabled the government to set forth some of the most ambitious public infrastructure development programmes in the region. The treasury holds almost $200bn in foreign reserves, in additional to an oil stabilisation fund in which it has accumulated more than $60bn – and that is just the money it has saved.

Flagship projects

In terms of expenditure, the government’s five-year plan for 2005-09 committed more than $150bn to the development of social infrastructure such as rail, roads and housing. Flagship projects in the programme included the Algiers Metro, a 1,216-kilometre East-West motorway linking the Algerian borders with Tunisia and Morocco across the top of the country, and the construction of a million houses. The 2010-14 programme saw the budget increased to $286bn, and targets raised too, with the construction of more than 2 million houses on the agenda.

Delivering the projects on time and to budget, though, has been challenging. The Algiers Metro was completed without serious delays, although there have been complaints that the cost of tickets means it is not a genuine public service. Sections of the East-West motorway have also been delivered, but five years after the target completion date, the road is still not fully operational and the project has been blighted by huge cost and time overruns.

Housing delays

The government is also struggling to deliver on its housing projects. Many of the million houses due for completion in 2009 were rolled over into the current programme, and further delays have been suffered in the past five years. By the end of March, just 826,665 houses had been completed against a target of 2.45 million, according to government figures.

The speed with which the government can deliver housing projects has been consistently below the almost 500,000 a year targeted in the current five-year plan. Just 250,000 houses were completed in 2013, and the government may struggle to increase this to a planned 300,000 in 2014. The construction target for 2015-19 is a more realisable 1.6 million units, or 320,000 a year.

Restructuring plans

In an effort to address the shortfalls, the government has embarked on the restructuring of the state housing company, Societe de Gestion des Participations Indjab (SGP Indjab). The company will be divided into five geographical units, covering Annaba, Algiers, Bechar, Oran and Ouargla, and will be operational from early 2015, the government announced in August.

The government hopes that by restructuring the company, it will be able to increase its output to 80,000 houses a year, compared to an estimated 15,000 in 2014 and fewer than 5,000 in 2013. While increasing the output of SGP Indjab is a positive step, it will fall far short of meeting the construction deficit. The company aims to increase housing production by just 10,000-20,000 units each year.

Foreign investment

The government will continue to rely on the participation of foreign private companies in housing construction, although its determination to accelerate the rate of delivery means that the costs it faces in doing so are rising rapidly. The government allocated $60bn to housing construction for the 2010-14 period, compared to an actual spend of just AD67bn ($813m) in 2000.

The 2010-14 development plan also devoted $30bn to increasing rail network coverage to 10,500km. Delivery is again behind schedule, but in June, the Transport Ministry announced plans to build two high-speed rail lines, one running north-south and a second running east-west. Studies for the two lines are due to begin in 2014.

2015-19 plan

At the beginning of June, the government presented to parliament its next five-year plan, covering the 2015-19 period. According to the prime minister, Abdelmalek Sellal, the four pillars of the plan are energy, industry, agriculture and tourism.

The government is also projecting an upturn in growth in the coming five years, with forecast average real GDP growth of 7 per cent over the period. This will be fuelled by 9 per cent growth in the non-oil sector and a recovery in oil and gas production. Hydrocarbons output has been declining for the past decade, but is expected to pick up over the next five years with several new gas provinces due to come onstream, particularly in the southwest of the country.

GDP growth may increase from an average 4 per cent over the past five years, but the 7 per cent target is ambitious. The government expects growth in 2014 to be 4.5 per cent, up from 3 per cent in 2013 and 3.3 per cent in 2012. Non-oil growth is unlikely to average 9 per cent for the next five years – and has, in fact, been declining in recent years. The forecast for non-oil growth in 2014 is just 5.4 per cent, compared to 6.3 per cent in 2013 and 7.1 per cent in 2012.

Industry’s contribution

The government’s new five-year plan includes an acceleration of industrial growth – as well as an increase in the contribution of industry to GDP from 5 per cent to 10 per cent, although this has been promised for many years and not delivered. Public sector industrial production has grown by an average of just 1 per cent a year in the past three years. Industrial projects currently under way are very few, with the steel plant being developed by Qatar Industries at Bellara in the northeast the only significant new industrial project for several years.

Among the plans highlighted by Sellal in his presentation of the plan were a new fertiliser complex and the development of iron reserves at Gara Djebilet and Mecheri Abdelaziz near the town of Tindouf in the west. But the government has been promising the development of the deposits for many years, and the difficulty of getting the product to market remains a significant barrier.

Mining sector

The action plan also includes plans to double marble and salt production and open new mines in six provinces for the exploitation of lead/zinc, barite and gold resources. The development of the mining sector has been disappointing in recent years. A planned zinc mine in the northeast being developed by a joint venture including Australia’s Terramin Resources has come to nothing, and another Australian company, GMA Resources, pulled out of the country’s only gold mine project after it ceased to be viable.

In an effort to improve the efficiency of the state industrial sector, the government has announced plans to slim down the number of public firms from 23 to 12. The move is designed to improve competitiveness and decision-making, said Energy and Mines Minister Abdesselam Bouchouareb.

Oil earnings

The reality is that the bulk of industrial infrastructure development is likely to continue to be in the oil and gas sector. The government’s non-oil earnings for the first four months of 2014 were just AD703.5bn ($8.5bn), while the oil sector still accounts for a third of GDP. Bids are due in October for the country’s fourth oil and gas licensing round since the creation of state licensing body Alnaft in 2005, and the government is also seeking to develop shale gas resources that are the third-largest in the world.

Tall order

But, even in the oil and gas sector, the government has set out targets that it is unlikely to meet. The five-year plan includes the aim of doubling electricity production by 2017, building six new refineries by 2018, numerous petrochemicals complexes and a renewable energy programme that includes the speedy delivery of 23 photovoltaic projects and a wind farm.

The government has had some success in building new electricity infrastructure to keep up with rapidly rising domestic demand, but plans laid out in 2005 for one new refinery came to nothing, making six look like a tall order. Renewables plans are likely to go ahead, but a 2011 target to add 22,000MW of renewables capacity by 2013 have been quietly dropped.