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RUEHFR/AMEMBASSY PARIS 2430
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C O N F I D E N T I A L ALGIERS 001741 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 12/04/2017 
TAGS: ECON EFIN IBRD AG
SUBJECT: WORLD BANK OFFICE CHIEF LEAVING ALGERIA CITING 
LACK OF ECONOMIC REFORM 
 
Classified By: Ambassador Robert Ford, reason 1.4 (b) and (d) 
 
¶1.  (C) Summary:  The World Bank is withdrawing its resident 
office director (resrep) here, since the Algerian government 
appears uninterested in implementing new reform strategies. 
The resrep, a long-time observer of Algerian economic issues, 
told the Ambassador November 21, that President Bouteflika 
seems unwilling to delegate genuine authority to any official 
to coordinate economic policy, and that with its foreign 
exchange reserves bulging, the GoA is not inclined to move 
forward quickly on reforms generally.  Instead, the GoA 
appears to concentrate its hopes on its huge, USD 120 billion 
infrastructure construction program.  The resrep said the 
World Bank had concluded the program would help some, but its 
utility was limited by dismal planning and project 
management.  The economic outlook for sustainable, 
private-sector-driven growth in the non-hydrocarbons sectors 
of the economy is still poor, the resrep concluded.  The 
withdrawal from Algiers of the World Bank resrep, an 
important economic reform advocate, will make it all the more 
important that Algeria's key partners, such as the U.S., keep 
raising economic reform issues.  End Summary. 
 
--------------------------------------------- --------- 
WORLD BANKER SEES DISARRAY IN ALGERIAN ECONOMIC POLICY 
--------------------------------------------- --------- 
 
¶2.  (C)  Yves Duvivier who was the World Bank resident 
representative for three years (please protect source 
throughout) told the Ambassador on November 21 that the Bank 
was recalling him to Washington.  The Bank had decided, he 
said, not to keep a resrep in Algeria any longer. The 
Algerian Government was not working on many reforms and 
appeared entirely disinterested in working with the bank on 
new reform avenues.  Duvivier commented that the surge in 
Algerian energy export prices had given the GoA an abundance 
of foreign exchange reserves and robbed the GoA of any sense 
of urgency in addressing structural economic problems. 
 
¶3. (C)  Duvivier noted that there is no one truly in charge 
of economic policy in Algeria now.  Minister of Industry and 
Private Investment, Temmar, wants to be the key official, but 
Duvivier told us that Temmar confided to Duvivier privately 
this autumn that Bouteflika was ambivalent about empowering 
Temmar.  Duvivier said that while Energy Minister Khelil is 
influential on energy issues, and Finance Minister Djoudi is 
on specific government bQet issues, there is no broad 
coordination between stove-piped ministries. 
 
¶4.  (C)  Duvivier opined that there is no one in the Algerian 
government with a vision of how the Algerian economy could be 
in terms of growth driven by diversified private investments 
and a liberalized business climate.  The World Bank receQd 
a request from Minister Temmar, in 2005, for detailedQQsessments of how other countries had diversified their 
export bases.  The bank team provided studies about China, 
India and Malaysia and the resrep offered repeated bank team 
meetings with the Algerian government afterwards to flesh out 
Algerian thinking.  The Algerian government to date has never 
responded.  Temmar told Duvivier that the Algerian government 
wants to revive its old Planning Commission (Commissariat du 
Plan) to be responsible for working out strategies, but the 
Commission is still moribund.  The World Bank identified 
specific sectors, such as ports and port management, that 
hinder economic growth but found the Algerian government 
reluctant to address them due to political sensitivities 
(corruption).  Duvivier concluded that Algeria's business 
climate will stay mediocre, and the chances of sustainable, 
private-sector-driven growth will stay limited.  One Algerian 
official told Duvivier in the summer of 2007 that the World 
Bank should stop comparing Algeria's business climate to that 
in other countries; Algeria, this official allegedly stated, 
is not a "results-driven" country. 
 
--------------------------------------------- - 
HUGE INFRASTRUCTURE PROGRAM OF LIMITED UTILITY 
--------------------------------------------- - 
 
¶5.  (C)  In the meantime, Duvivier concluded, the Algerian 
government makes economic decisions on a day-by-day basis 
with little thought to medium or long-term consequences.  He 
highlighted that the Algerian government's huge 
infrastructure program (which President Bouteflika's calls 
the Algerian Economic Growth Support Plan and so far totals 
 
about USD 120 billion) is, in fact, a collection of scattered 
projects that are not integrated into a broad strategy.  Many 
of the projects were dusted off the shelves where they had 
waited for years.  Some of the infrastructure projects may be 
useful; others probably will not be.  Duvivier noted that in 
its recently published report on the Algerian government 
expenditures and the infrastructure program, the World Bank 
concluded that public investments in Algeria were relatively 
inefficient compared to neighboring countries, and that the 
Algerian government should slow down its infrastructure 
programs to allow for better management of ongoing projects. 
(Duvivier noted that the World Bank had to water down its 
criticisms substantially in order to secure Algerian 
government agreement to release the report, and it still took 
nearly two years to get the approval in August 2007.) 
 
------------------------------------------ 
SOME POSITIVE STEPS BY ALGERIAN GOVERNMENT 
------------------------------------------ 
 
¶6. (C)  Duvivier pointed to some positive changes.  The 
privatization of the large state-owned bank, Credit Populaire 
d'Algerie, would be a major step forward.  (Comment:  On 
November 27, the government officially announced the 
postponement of this privatization.  End Comment.)  Duvivier 
also said that with World Bank help, the Algerian Government 
had finally privatized urban water system management, which 
should result in substantial improvement for the populations 
of Algiers, Oran and Annaba.  He said the Algerian government 
was inept in its first water system privatization, that of 
the Algiers system, and there were genuine questions about 
the transparency of the process.  The Algerian government 
improved its technique substantially for the subsequent 
privatizations in Oran and Annaba, the resrep stated. 
 
------------------------------- 
SOME OTHER AGENCIES LEAVING TOO 
------------------------------- 
 
¶7.  (C)  Duvivier said the Bank is withdrawing him, because 
its project portfolio has dropped from 13 projects early in 
this decade to just one now (the remaining project aims at 
building Finance Ministry administrative capacities). 
Duvivier commented that he was sure that some Algerian 
government officials were pleased, since they are tired of 
World Bank nagging behind closed doors.  Other officials, in 
contrast, were surprised that the World Bank will not keep a 
resrep here.  Duvivier noted that several United Nations 
agencies also are withdrawing their representatives from 
Algiers, including the International Labor Organization. 
This is partly due to their inability to secure much change 
in Algerian policy and practice, and partly as a cost-saving 
measure.   Looking forward, Duvivier noted that the World 
Bank has formally proposed to the Algerian government that 
the Bank set up a Partnership Agreement with the ministries 
of Finance, Health, Rural Development and Industry/Private 
Investment, and with the Central Bank and the think-tank 
National Economic and Social Council to help each of these 
Algerian entities with their own projects.  Duvivier said the 
World Bank is waiting for an answer. 
 
------- 
COMMENT 
------- 
 
¶8.  (C) We know Duvivier from the 1990s when, as a World Bank 
project officer, he helped fund a cooperative agreement 
between the Algerian Finance Ministry and Fannie Mae in the 
U.S. to help establish an Algerian mortgage guarantee agency. 
(This agency now is ineffective and a U.S. Treasury OTA 
project will try to help.)  He was well connected in Algiers 
and is not inclined to excessive pessimism.  His analysis of 
the weakness of Algerian economic policy is very similar to 
what Ambassador heard December 2 from the CEO of one of 
Algeria's largest private-sector industrial conglomerates who 
bemoaned that no one in government here can make binding 
decisions on commercial policy issues except Bouteflika 
himself.  The lack of urgency that Duvivier sensed is quite 
apparent to us, and the departure of an IBRD resrep here 
takes away an influential advocate of reform.  The Bank's 
International Financial Corporation will maintain a 
representative but our sense is that Duvivier was really 
trying to channel Algerian efforts into useful reforms.  His 
absence will be a loss.  That, in turn, makes it all the more 
 
important that Algerian's key economic partners like the U.S. 
keep raising microeconomic and structural reform issues 
ourselves. 
FORD