Algeria, a North African country, is currently facing a complex and multifaceted situation. Politically, the country is undergoing significant change and transformation. The 2019 Hirak movement led to the resignation of former President Abdelaziz Bouteflika, but since then, political reforms and efforts to establish a more inclusive political system have been delayed. This political instability is reflected in the country’s socioeconomic landscape, where issues such as unemployment and limited access to essential public services continue to persist. In terms of governance, there have been reticent attempts to strengthen democratic institutions and increase transparency standards. Algeria’s economy is heavily dependent on hydrocarbon exports, making it vulnerable to fluctuations in global oil prices. This economic fragility, combined with a lack of strategic vision and governance challenges, exacerbates the country’s susceptibility to volatility.
Premises of a Failing State
According to a report by the Brookings Institution, fragility, as a tributary of failure, is described as a syndrome characterized by insecurity, lack of state legitimacy and capacity, fractured identities, limited formal enterprises, and susceptibility to shocks. These characteristics reinforce one another, creating a trap that challenges conventional diagnoses of a “root cause” and conventional “solutions” such as the establishment of an OECD-style society. Political instability, particularly when violent, can have a negative impact on an economy’s productivity and transactional capacities, reducing investment and future economic growth and creating a fragile socio-political environment. The Council on Foreign Relations reports instability, due to political reasons, has been increasing in Algeria since early 2019 due to a failed leadership transition and ingoing economic stagnation, potentially leading to further instability as senior military and political leaders have been frequently imprisoned, revoked, and replaced.
Economic Fragility due to Lack of Vision
The absence of a clear economic vision has negative consequences for a country’s stability and growth. A well-defined vision provides direction and stability, while financial vulnerability increases sensitivity to shocks. The Algerian economy, which relies heavily on oil rents, is currently experiencing a crisis due to its dependence on hydrocarbons. According to Pierre Desorgues, oil prices supported the economy during the Bouteflika era, but have since decreased, resulting in a halving of annual oil revenues over the past five years.
Algeria’s dependence on hydrocarbons reveals the economic fragility of its political system. This reliance hinders the development of other sectors and may cause the country to struggle to remain competitive in the long term. According to former Finance Minister Abdellatif Benachenhou, by 2030, hydrocarbon production will be largely absorbed by local demand, suggesting that Algeria may face challenges in maintaining its oil and gas export revenues. This observation is shared by former Sonatrach CEO Abdelmadjid Attar.
A lack of economic vision results in sub optimal outcomes such as slow growth and high unemployment. According to a report by the North Africa Post, Algeria’s economic policy, which is heavily dependent on oil revenues, is negatively impacting its competitiveness. The absence of a clear vision has led to temporary measures such as import bans, resulting in shortages for local businesses. Other indicators of economic fragility include dependence on imports and subsidies, discouragement of foreign investment due to bureaucracy and corruption, and an underdeveloped banking system. The 51/49% law, which restricts foreign ownership of Algerian companies to 49%, further hinders foreign investment.
Algeria, currently led by a military-appointed president, is facing a decline due to the failure of national economic strategies. Today, the country is facing many challenges such as maintaining social peace, reducing subsidies, and diversifying its economy. However, the government has been slow to implement reforms to address its dependence on oil and gas. A lack of economic vision can have serious consequences for Algeria, including soaring debt and export marginalization. Furthermore, economic and social systems that increase inequality are exacerbating societal polarization. To create a sustainable future, the Algerian government must address these challenges with a focus on reducing inequality and promoting shared prosperity.
Lack of Governance
The absence of effective governance can have serious consequences for a country’s stability, security, and economic development. Without strong institutions and accountable leadership, a lack of governance may lead to corruption, social unrest, and reduced investment. An unprecedented health crisis can also have potentially extreme economic and social consequences that may reverse decades of development progress.
The state of governance in Algeria is evaluated according to The World Bank’s Worldwide Governance Indicators (WGI), which proposes six dimensions of governance including: “Voice and Accountability,” “Political Stability,” “Government Effectiveness,” “Regulatory Quality,” “Rule of Law,” and “Control of Corruption.”
According to data from the CEIC, Algeria’s score for “Voice and Accountability” was reported at -0.895 in 2017. “Political Stability” in Algeria has been a topic of concern in recent years.
The risk of political instability has been growing since early 2019 when the former president announced his decision to seek a fifth consecutive term in elections. For the Washington Institute, the ongoing political crisis in Algeria is characterized by a divided political system. In terms of “Violence and Terrorism,” the terrorism index in Algeria stood at 4.43 points, indicating a possible resurgence in jihadist activity. Decreased violence and terrorist threats can have a significant impact on the stability and governance of the country.
“Government Effectiveness” has a significant impact on the stability and governance of a country. The Council on Foreign Relations argues that the risk of political instability in Algeria is strongly felt due to a bungled leadership transition and continuing economic stagnation.
Similarly, the Washington Institute discusses the challenges facing Algeria’s divided political system. For instance, Freedom House mentions that “Rule of Law” and “Control of Corruption” are important aspects of weak governance. Inadequate anti-corruption laws, a lack of official transparency, and bloated bureaucracies contribute to widespread corruption. The weakness of the Rule of Law and widespread corruption can undermine the ability of the government to effectively implement policies and provide essential services. It is crucial for the government to take action to strengthen the Rule of Law and combat corruption to ensure the country’s stability and long-term development.
In light of its economic fragility, lack of economic vision, and lack of effective governance, Algeria can be considered a state leading to failure. The combination of these factors has resulted in a fragile economy that is unable to withstand external shocks and lacks a clear direction for future growth. Additionally, the absence of effective governance has hindered the state’s ability to address these issues and implement necessary reforms. If this situation persists, the country may become a burden on the development of the region. Its vulnerability may favour internal uprisings and make it susceptible to falling into the hands of fanatics, whether military or extremist. As such, addressing these challenges will be crucial for the future stability and prosperity of Algeria.
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