Algerian Elections and Prospects for Reform

04.24.2009

President Bouteflika’s recent re-election highlights the need for meaningful reforms beyond the ballot box that can help Algeria address its security and demographic challenges. While the election results themselves were unsurprising, failure to deliver on election promises of stability and growth could have destabilizing consequences.

Although rich in hydrocarbons, Algeria’s economic prospects are threatened by weak institutions and the global economic crisis. One-third of Algeria’s population is comprised of those who are under 30 years of age. The public sector was already estimated as being incapable of absorbing many of these new job seekers. Declining oil prices are set to reduce public coffers and exacerbate this trend. Additionally, as the European economies contract, young Algerians will find fewer opportunities abroad, adding another layer to the government’s job conundrum. These challenges put a premium on boosting private entrepreneurship and small businesses as well as diversification outside the oil sector. However, for this to occur, the government will need to adopt more transparent and inclusive governance practices that create a level playing field for all entrepreneurs.

Corporate governance offers one avenue to ensure that businesses and governments act in a fair and transparent manner. By underscoring democratic values of fairness, transparency, accountability, and responsibility, good corporate practices can reduce opportunities and incentives for crony capitalism. Calling for the fair treatment of all stakeholders, advancing fiscally responsible companies, and underscoring the advantages of a transparent and fair market system, corporate governance standards create safeguards against corruption and mismanagement and create incentives for foreign investment. As a result, corporate governance advances better governed societies that put rules rather than political connections at the heart of the economic system.

The recent launch of the Algerian Code of Corporate Governance through a voluntary and coordinated effort of the public and private sector in Algeria is an important milestone for the Algerian private sector. More importantly, it presents an opportunity for the business community to advocate for the kinds of institutional reforms that can help reduce incentives for crony capitalism, a tricky business even in some mature democracies.