Algeria in numbers

$286bn: Budget for Algeria’s 2010-14 five-year economic plan

$30bn: Amount Algiers plans to spend on rail development during 2010-14

Source: SNTF

For the first time in more than two decades trains are now running from Algeria’s second city Oran to the isolated town of Bechar, 700 kilometres to the south-west on the fringes of the Sahara.

The revival of services on a route first developed during French colonial rule more than a century ago is a symbolic of the country’s drive to rebuild its transport infrastructure. The first 120km of track, from Oran southwards to Tabia, was already in use, but the remaining 580km to Bechar had to be completely rebuilt after more than 20 years of disuse.

The reopening of the route, with modern standard gauge track, could revitalise economic growth

Only one passenger train a day operates in each direction on the route, as it serves a region that is thinly populated. Bechar city has a population of little more than 130,000 people.

However, there is the potential to carry considerable freight traffic. Bechar is an important centre of oasis agriculture, producing dates, figs, almonds and vegetables. Until now, high transport costs have been an impediment to local economic development.

Rebuilding rail lines in Algeria

The railway was originally extended to Bechar in 1905 to support the colonial presence in the region and aid economic development.

There was ambitious talk of the line connecting into a wider network of rail lines to be developed all over French-ruled west and north Africa. Many of the projects came to nothing, although there was a connection northwards to Oujda in Morocco.

During the Second World War, with fuel in short supply, the German-allied Vichy regime in France began work on an extension of the track to tap local coal deposits. But this came to a halt when the Allied forces fighting Germany landed in North Africa.

After the war, work resumed and the line was extended a further 90km to El-Abadia in the north. Surveyors even plotted a route right across the Sahara. But after Algeria and other French colonies gained independence, the project was abandoned. Even the link to Oujda was closed, as political differences between Morocco and Algeria led to a slowdown in cross-border trade. The Bechar line was reduced to a purely local role.

The reopening of the route, with modern standard gauge track, could revitalise economic growth in the remote region. Algeria hopes to woo foreign investment in the local coal mines and plans to develop iron ore deposits at Gara Djebilet and Mechri Abdelaziz, near to Tindouf, in Algeria’s far south-west. Reserves at these sites are reported to exceed three billion tonnes, with a metal content, at Gara Djebilet, of 52.4 per cent. In 2005, executives from Brazilian mining giant Vale visited the site and the Chinese have also shown some interest in the area.

The shortest route to the sea from the iron ore sites lies through Morocco and Western Sahara. But the poor relations between Algiers and Rabat could rule out this option for the foreseeable future. The distance from Gara Djebilet to the newly restored rail line at Bechar is not much greater.

From Algeria’s point of view, construction of a new rail link from the iron ore sites to Bechar would avoid the need to rely on Moroccan goodwill. Regular iron ore cargoes would also boost the financial viability of the line.

Not that this is a prime concern. Algeria has the financial strength to be able to take a long-term strategic view of such projects. For the passenger services, authorities are pricing tickets on the route to make it affordable for local residents. At AD1,245 ($17.2) for a trip from Oran to Bechar, the fare is competitive compared with the local buses that have been servicing the route since the shutdown of the railway in 1990.

“The fares will be calculated on the basis of the kilometre rate that we apply to the whole domestic network,” says Mourad Benameur, director general of state rail firm Societe Nationale des Transports Ferroviaires (SNTF). “Far from being out of date, the train remains an essential means of transport.”

Algeria’s economic plan

SNTF hopes to carry 650,000 passengers a year on the route, together with 700,000 tonnes a year of freight – mostly fuel and cereals.

The reconstruction of the line to Bechar cost AD93.5bn. The government plans to spend much more making further improvements to the country’s rail network.

Of the $286bn budgeted to Algiers’ 2010-14 five-year economic plan, some $30bn has been earmarked for investment in railways. This is on top of the $50bn that has been spent during the past 10 years. Of this, some $18bn was spent on locomotives and the electrification of rail lines. However, the return on this investment has been less impressive than the government might have hoped for. The network has still not been extended beyond the 3,500km inherited from the colonial rule almost 50 years ago. The new line to Bechar, after all, is a modern reconstruction of a route that already existed in narrow gauge form.

Algeria’s transport minister Amar Tou insists that new lines are on the way, promising the extension of the network to the southern towns of Adrar, Menaa, Timimoun, Hassi Messaoud and El-Oued. He says the electrification of the entire network will be completed before the end of 2015.

Tou blames the lack of progress on electrification and upgrade of existing lines on slowness of official procedures for project approval, tender and contract confirmation. Those that have been affected include the route from Tizi Ouzou to Thenia, in the mountains of Kabylia, east of Algiers, and the line from Batna to Biskra and Toggourt. The latter line, the eastern route down into the Sahara, is a crucial corridor for transporting supplies to the rich gas and oil production belt around Hassi Messaoud.

The local media has recently begun to question the efficiency with which major projects are being carried out not just in the rail sector. Almost 45 per cent of the budget for the five-year plan is allocated to the completion of unfinished projects, rather than new developments. This raises wider questions about the capacity of government bodies to manage major projects effectively and to operate them on a financially sustainable basis. SNTF ran a deficit of AD6.5bn in 2008 and has also accumulated serious debts. The government has now agreed to write them off, in an effort to restore the financial viability of the firm.

Concerns have also been raised about the overall socio-economic impact of major infrastructure schemes in the country and their costs and benefits. For example, while the government claims that 100,000 people were employed during the construction of the new East-West motorway, reports from provincial towns situated along the old roads now bypassed, suggest local shops, restaurants, cafes and snack stalls could be put out of business.

In a country with unemployment of more than 10 per cent, where many people rely on informal business, the impact could be severe, even if it does not show up in official statistics.

The government has also announced that the concession for the operation of all 42 petrol stations planned for the East-West motorway will be awarded to state-owned Naftal. Small businesses could again lose out as a result of the government’s decision. Of course, on one level, the development of large enterprises, at the expense of smaller and sometimes informal operators, is a story of economic development in many countries. But the effects on local wealth and job creation could be particularly damaging in Algeria, which already has an economy that is heavily reliant on the public sector.

Road schemes

There has also been criticism of the government’s management of the motorway project, with complaints about the failure to ensure that service stations, and rest and children’s play areas be opened at the same time as the road itself. Public Works Minister Amar Ghoul has admitted that these have only been budgeted for in the 2010-14 public expenditure programme, although efforts will be made to get many of the installations open before the end of this year.

Ghoul has talked of expanding Algeria’s motorway and dual carriageway network to 7,000km. The government says this will lead to the creation of 750,000 jobs, 5,000 companies and as many as 600 consultancy firms. However, the detailed economic analysis behind such broad-brush optimism has not been explained.

The government says that local contractors will carry out many of the big road projects – including new routes around Algiers, a 1,300km motorway across the inland high plateaux and the conversion of several major north-south roads to dual carriageways.

Algeria has experimented with independent project financings, particularly in the power sector. But when it comes to transport, the government is committing largely to traditional public expenditure arrangements.

It can afford to do this because of its strong financial position, having cleared off most foreign debt and accumulated massive reserves, thanks to gas and oil export revenues.

The government is being urged by the Washington-headquartered International Monetary Fund (IMF) to step up efforts to ensure that public spending is managed more effectively. An official projects evaluating agency, the Caisse Nationale d’Equipements et de Developpement (CNED), has now been established to monitor how money is spent.

The CNED will not oversee public-private partnerships but the agency should ensure better implementation of infrastructure projects in Algeria, hopefully without creating additional bureaucratic hurdles.