Algeria's ambitious infrastructure plans slow to progress

11 July 2013

Infrastructure programme is beset with difficulties in securing the land necessary for development, contractual disputes and budget overruns

The centrepiece of Algeria’s capital spending is a five-year infrastructure development programme in which the government has pledged to invest $286bn between 2010 and 2014. The ambitious plan follows on from the 2005-09 programme, which proposed investment of $150bn.

The schemes are part of an unofficial social contract with the Algerian people. Algeria’s economy is dominated by the public sector, there is little private enterprise and the standard of living for many Algerians is lax. But in return for its continued dominance of the country’s economy, the government spends considerably on subsidies, wages and, latterly, on massive infrastructure projects.

Infrastructure programmes

The last two infrastructure development programmes have delivered some notable successes. The capital Algiers now boasts a metro system and tramway to ease the city’s overcrowded roads. A 1,216-kilometre highway across the north of the country to connect the borders with Morocco and Tunisia is almost complete. And innumerable housing projects are being developed across Algeria.

“You can’t help but be impressed by the east-west highway, the new universities, the massive housing complexes, the Algiers subway,” says John Entelis, director of the Middle East studies programme at Fordham University in the US. “They are all things that just weren’t there 10 or 15 years ago.”

The government announces new phases of its infrastructure development programme on a near continual basis. Three extensions to the Algiers metro are already being built, and tenders for studies into three more extensions were launched in November. Beyond that, another 14km extension is planned, featuring 14 new stations.

In August 2012, the government pledged to spend $5.6bn on the construction of tram systems around the country. Three extensions to the Algiers tramway are planned. The first is almost complete and work is due to begin on the other two in 2014. The first lines of tramways in Oran and Constantine are also due to start up this year, and extensions to both are now being planned.

It’s a difficult place to build a metro. The cost overruns alone have run into the millions, if not billions

John Entelis, Fordham University

At the beginning of July, the state-owned Entreprise du Metro d’Alger launched the tender process for the construction of the first line of a new tram system in Setif, covering a total distance of 22.4km. A few days earlier, work began on a tramline in the town of Sidi Bel-Abbes. Construction is also due to begin this year on tramlines in Ouargla and Mostaganem, and next year in Setif, Batna and Annaba. Meanwhile, feasibility studies are being carried out for tram systems in Skikda, Tlemcen, Bejaia, Djelfa, Biskra, Tebessa, Bechar and Blida.

The national rail network is enjoying similarly rapid development. The length of the network has increased from 1,719km in 2008 to 4,000km, according to a statement by Transport Minister Amar Tou in late June. The network will reach 6,100km in the next two years, and a  further 5,000km of lines are under study, said the minister. The total length of the network is expected to reach 12,000km by 2017. Algeria’s infrastructure development programme has not all been plain sailing, however. In fact much of the programme has been substantially delayed, beset by difficulties in securing the land necessary for development, contractual disputes and cost and budget overruns.

The first line of the Algiers metro – a project for which studies were first carried out in the 1980s – was due for completion by the end of 2009, but eventually began operations on 1 November 2011. The east-west motorway, which was also due to be delivered under  the previous five-year plan, has yet to be completed.

Lack of direction

Part of the problem is a lack of strategic direction. “The decision to go ahead with a lot of these infrastructure projects is often the result of advice from outsiders,” says Entelis. “You end up with a multiplicity of recommendations from different sources. I don’t want to be overly critical, but I’m not sure anyone is doing a cost-benefit analysis.”

There has been a Bouteflika plan to build a million houses for as long as I can remember

George Joffe, University of Cambridge

The Algiers metro is a case in point. There was a desperate need to reduce traffic and pollution problems in a city that had grown far beyond its capacity to accommodate so many people and vehicles. But the hilly geography of the capital made the construction of a metro system extremely challenging. “It’s an incredibly difficult place to build a metro,” says Entelis. “The cost overruns alone have run into the millions, if not billions.”

Despite the massive investment, as soon as the metro was opened it came in for criticism that the ticket price was unaffordable for the majority of Algerians.

The accusation has frequently been levelled at the Bouteflika government that the infrastructure development programme is little more than a vanity project for a president that wants to leave behind a noticeable legacy. In some cases, the government has created a shell for a new system, but not given it any substance.

“There are huge complaints about the state of the university and education system,” says Entelis. “You can’t help be impressed by the physical infrastructure, but the organisational character of the universities has remained unchanged, and the mindset associated with that has remained unchanged. You also end up with impressive buildings, but no libraries, and no facilities. So those who want real change remain frustrated.”

If Bouteflika is motivated by leaving a legacy then this does not necessarily belittle what has been achieved. But it perhaps explains the frustration among Algerians that much of the money spent is being misdirected.

The government is building a mosque in Algiers that once completed will be one of the largest in the Arab world, while the housing conditions of many Algerians is still desperately bad.

Social housing

The provision of housing has been a major focus of the development programme. But it too has fallen drastically behind schedule. Government targets are continually revised as they are forced to adjust to the reality of progress on the ground. Many of the 1 million houses promised under the 2005-09 programme were completed under the 2010-14 plan. The government has twice revised up its target for the current programme, from 1 million to 2 million and then again to 2.45 million. But early last year, the housing minister admitted that it would be hard pushed to deliver 1.2 million homes by 2014.

The application process for state-owned housing company, Entreprise Nationale de Promotion Immobiliere’s (ENPI) housing scheme was opened on 1 July in 24 local authorities around the country.

The scheme is aimed at those whose income is between six times and 12 times the national minimum wage, or between AD108,000 ($1,352) and AD216,000 a month. The programme involves the construction of 45,000 houses in Algiers and 13,000 each in Annaba and Constantine. Several of the projects have already begun.

“There has been a Bouteflika plan to build a million houses for as long as I can remember,” says George Joffe, research fellow at the Department of Politics and International Studies at the UK’s University of Cambridge. “At the start of every term, he’s announced that he’s going to build a million houses, but I don’t know how successful they’ve been.”

The problem is that the gap between demand and supply has grown so great. “It’s a catch-up game,” says Entelis. “Back in the 1970s, there was a real housing crisis. At the time, there was no such thing as family planning or birth control.

“Supply has never really caught up with demand. There are housing complexes everywhere, but often they are not finished. There are a variety of different reasons for this – a contractor hasn’t been paid, or the government has failed to acquire a certain piece of land, for example.”

According to the housing ministry, 2013 is the year of the “relaunch of housing projects”. The ministry plans to start construction of 650,000 new properties by the end of the year. Several housing projects are in progress. An urban extension programme is under way in Algiers to create 14 new neighbourhoods in the city to accommodate 350,000 people. The scheme comprises 19 sites covering 614 hectares. Of 58,835 houses due to be built under the scheme, 30,676 have been launched since the beginning of June. The government aims to complete 25,000 properties in Algiers by the end of the year.

Financing challenge

In recent months, the government has also moved to tackle the financial aspect of its housing projects. A group of public banks led by Credit Populaire d’Algerie (CPA) has committed AD1.2bn to fund the development of housing for middle income groups. According to president of CPA, the deal is the largest financing operation by a group of banks in the country’s history.

The money will go towards the construction of more than 150,000 rental-purchase and state housing properties by ENPI and another 100,000 rental purchase properties being developed by the state housing agency, Agence Nationale de l’Amelioration et du Developpement du Logement (AADL). AADL is due to complete a total of 150,000 houses by 2014.

Such a vast financing programme will be challenging for Algeria’s poorly developed banking sector.

But if the scheme does work, it offers some hope that the efficiency of the housing construction programme can be improved. It also demonstrates that the government is not going to abandon its social infrastructure programme any time soon.

But Algiers still has a long way to go. Even if all goes to plan, says the housing minister, Abdelmadjid Tebboune, there will still be a deficit of 720,000 houses when the current programme ends in 2014.

Key fact

In August 2012, the government pledged to spend $5.6bn on the construction of tram systems

Source: MEED

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications