13 July 2018

Shaking Up Algeria's Government, One Small Reform at a Time

Algeria's economy is struggling, and its citizens are becoming increasingly dissatisfied with the stubborn ruling parties that have held a tight grip on power for two decades. The economic woes have galvanized members of the feeble political opposition, who are demanding reforms such as economic diversification and the loosening of restrictive foreign investment regulations. Dramatic economic reforms are unlikely under the current Algerian leadership, but even small changes, especially adjustments to foreign investment laws, are big in the context of the country's long-stagnant political system.

Algeria's political system has remained tightly controlled by its ruling parties for almost two decades, but major economic difficulties have prompted those in power to listen to the opposition more seriously than ever before. Opposition parties have found the space to effectively channel real economic grievances, and they are helping nudge economic reform forward. To appease the growing opposition, the government will be motivated to enact minor economic reforms in an effort to keep the tide of domestic unrest at bay. And even these small changes signal a very new way of moving forward for the restrictive Algerian government.

The Big Picture

One of the slow-moving themes we follow at Stratfor touches on the struggle to implement reforms in North Africa. Across the region, governments faced with growing populations and flailing economies are trying to adjust economic expectations for their citizens, who are often used to substantial subsidies and low taxes. Algeria, which has one of the biggest economies in North Africa, has the most tightly controlled government. Thus, it faces some of the biggest barriers to reform. This means even small changes in Algeria are notable.

Setting the Stage

Algeria is Africa's largest country by landmass and is among the 10 largest on the continent by population. It's a major regional influencer, helping its neighbors fight transnational jihadist militant groups and serving as a crucial transit point for the Mediterranean migration crisis. Algeria also delivers critical natural gas supplies to Europe, thanks to its massive reserves. But the economy of this North African giant has grown increasingly unstable since global oil prices dropped in 2014, and the country has found itself in a precarious position.

Currently, Algeria's budget is tight and only growing tighter, while paltry foreign investment hampers infrastructure plans and the economy, reliant on oil and natural gas exports, remains unbalanced and heavily state-driven. Over the past few years, the government has pushed austerity reforms to try to balance the budget. But the Algerian population, which has grown used to substantial subsidies, is becoming restive in response.
The History of Algeria's Stagnant Political Scene

For the past 20 years, Algeria has been ruled by the deeply entrenched political powers that helped the country transition out of a bloody civil war: longtime President Abdel Aziz Bouteflika's National Liberation Front (FLN) and its coalition partner the National Rally for Democracy (RND).

When Algeria won independence from France in 1962, it was led by a secular, security-focused government. Almost 30 years later, the government used its military to invalidate election results that gave an Islamic party a majority in parliament, setting off a cycle of violence that lasted nearly 10 years. To bring the "bloody decade" to an end, the government embraced an extremely tight top-down form of control, in which almost all political power rested in the shrouded, oligarchic ruling FLN party. And for the past 20 years, the political scene has remained unchanged.

Despite the existence of a parliament containing dozens of other parties and many civil society organizations — including trade unions — political parties in Algeria lack a significant amount of legal power or cohesion. Rumors of internal coup attempts and instability within the ranks of FLN and RND abound. But opposition groups have never been able to effect any concrete change within the military or intelligence services, and in 2018, the ruling party's grip on power remains as strong as ever.

The country's political class is currently readying itself for the 2019 presidential race and for the likely inevitability of a fifth five-year term for the ill and aging Bouteflika, who continues to rule despite the effects of a stroke he had years ago. Prime Minister Ahmed Ouyahia echoed many other prominent Algerian politicians last month when he affirmed his support for Bouteflika's candidacy. But uncertainty is growing over the president's ability to deal with Algeria's mounting economic challenges, galvanizing some typically stagnant political opposition groups to push for economic reforms and even, in some cases, for the president to step down.
How Economic Grievances Are Changing the Game

By no means is Algeria's crippled political opposition strong enough to oust Bouteflika. Few dispute that real power in the country rests with the military, the president and the shadowy circles of party support around them. But there is a crack in the ruling powers' firm facade of control that presents a threat to all political groups and classes in Algeria and thus could realistically mobilize change: the weak economy.

The Algerian political opposition, feeble as it is, has seized on the tangible economic stress felt by many citizens in the wake of several years of budget cuts, high unemployment rates and austerity measures. The population is struggling, and the government's current policies seem unable to bring any relief. Algeria's foreign investment regulations are some of the most restrictive in the world. Consequently, the country has received a paltry amount of inbound foreign direct investment over the last few years in comparison to its neighbors, and it's facing stagnant growth and minimal infrastructure development.

Domestic unrest stemming from this worsening economic situation has helped the country's nascent political opposition chip away at the entrenched powers. Protests and demonstrations across the country have fueled small opposition efforts like the Barakat, or "Enough" movement, and the Mouwatana, or "Citizens' Democracy," movement, which emerged just this year and seeks to introduce change within the political structure. In a viral letter penned by a dozen well-known Algerian politicians, authors and activists, Mouwatana demanded that the ruling government introduce economic reforms, working within the boundaries of the system, and also asked that Bouteflika step down if he cannot perform these changes. There is also some strength in the ranks of political unions, whose main goal is economic reform, not political overhaul. Frequent labor strikes prompted by those unions have the power to hamper business continuity.

Islamist political parties are another source of some vibrancy in the restrictive Algerian political scene, though too much activity from the country's Islamist-rooted parties, including the major one, the Movement of Society for Peace (MSP), is likely to alarm the ruling powers and could result in their political condemnation. Grassroots Islamist politics, after all, represents a channel to popular will and dissent that the ruling secular parties cannot easily co-opt, and the possibility of an electoral victory by an Islamist party invites comparison to the catalyst that sparked Algeria's civil conflict in the 1990s. Cognizant of its limited ability to act within the system, MSP leadership in their annual summit in May called for all political parties to reach a consensus on economic reform, hoping to avoid any pushback that might have come from trying to advance its own agenda.
Small Steps Down a New Path

Because the opposition parties and political unions are channeling the legitimate demands of Algerians weary from growing economic malaise, the ruling government has to be careful how it deals with them, and cannot harshly and sharply shut them down. Indeed, under significant pressure to introduce more comprehensive changes to the foreign investment regulations, the government seems surprisingly willing to shift some legal strictures around it.

This doesn't mean the opposition will be able to challenge the ruling parties, nor can observers expect massive economic progress. But the ruling parties will likely begin to open up slightly on economic reform while maintaining the tight grip they have on government affairs. Because of Algeria's many constraints, the opposition's push will not result in an economic overhaul but rather a slow reform, and the country's investment potential and future economic growth will remain stunted for the next several years. But they will ultimately contribute to adjustments to foreign investment laws, moving the country slightly further down the path to an economic rebound.
Challenging Apathy and Changing Attitudes

A legacy of fear and political opacity has stunted the development of political opposition in Algeria. The fact that opposition leaders are able to speak out right now — even in small ways — about the government's economic decisions is a major development. But no matter what reforms they are able to pursue, all parties, including the two ruling parties, are fighting the overwhelming apathy of Algerian voters, who have grown used to having no impact on their government.

Low turnout in last year's parliamentary elections signal Algerians' unwillingness to participate in large enough numbers to make significant changes. But with each passing year under leadership viewed as stagnant and inept, the cracks that form will provide opportunities for building energetic dissent. If the opposition can channel that dissent in the right way, demanding accountability and flexibility within the political system rather than making an unrealistic attempt to implode it, Algerians may become confident enough in the possibility of small changes that they get more politically involved.

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