Algeria - Introduction

Located on the Mediterranean coast between Morocco and Tunisia, and also bordering Libya, The People's Democratic Republic of Algeria is the second-largest country in Africa; more than three times the size of Texas. With approximately 36 million inhabitants, the eleventh largest country in the world by area, oil-rich Algeria has recently experienced economic growth through hydrocarbon exports, despite a militant insurgency that has wrought civil instability for the past two decades. Algeria gained independence from France in 1962 after many years of a guerrilla war, which began with an uprising in 1954. Political violence between government forces and an Islamic insurgent group resulted in the deaths of more than 100,000 Algerians in the 1990's. Although security in the country has improved, addressing the underlying issues that brought about the political turmoil of the 1990's remains the government's major task.

Algeria has a population of over 33 million people, of whom 99% are Arab-Berber by ethnicity. The state religion is Sunni Islam, and 99% of the country practices the religion. Over 90% of the population lives along the northern fertile Mediterranean coast, although a population of about 1.5 million nomads and semi-nomadic Bedouin live in the Sahara area. The spoken languages in Algeria are the Arabic- national and official language- spoken by the majority of the population, the tamazight, established as national language since 2002, the French, read and spoken fluently within the society and the English which starts to spread specially among the company and business community. The religion in Algeria is the sunnit Islam. Consecrated state's religion by the constitution which provides as well the freedom of cult, it is practiced by the majority of the Algerian people, that is to say 99%, who remains very tolerant as regard the other religions.

Algeria's economy has grown by more than 5% in each of the past five years, posting 5.6% growth in 2006. Much of this economic expansion has come from increased oil prices as well as policy reforms, as the hydrocarbons sector accounts for over 95% of export earnings. However, nominal GDP per capita, $7,700 in Algeria, is still below the world average of about $10,000; in this respect Algeria ranks 108th in the world. Government efforts to diversify the oil-based economy by attracting investment outside the energy sector have had little success in reducing high unemployment and improving living standards.

The unemployment rate is reported to be about 16%, though some sources estimate it is vastly higher, and 25% of the population lives below the poverty line. Algeria's population includes 90,000 Western Saharan Sahrawi refugees, and between 400,000 and 600,000 internally displaced persons due to the conflict between government forces and Islamic insurgents.

Only 3% of Algeria's land is arable, and less than 0.3% of the land is used for permanent crops. Environmental concerns include earthquakes, pollution, inadequate supplies of potable water, and soil erosion. Despite Algeria's extensive hydrocarbon resources, its energy use per capita is minimal at 822 kWh per person, compared to the world average of 2,962 kW, and miniscule relative to the 12,454 kWh consumed in the U.S. Future economic priority areas for the Algerian government are improving the investment environment, increased privatization, and steps towards accession to the World Trade Organization.

The creation of pluralist facades allowed for a limited tolerance of political opposition without having to make genuine structural changes in the political order. The risks to that order included the possibility that officers could not always control the emptiness of the facades. Additionally, opposition demands for more liberalization threatened the military's enclaves and, sometimes, its economic interests protected within those enclaves.

Islamist demands for accountability and reforms, such as in Islamic banking, threatened the military's privileged position and provided it a pretense to combat the rising Islamist tide in Algeria. Moreover, the Islamist Front Islamique du Salut (FIS) (Islamic Salvation Front) exploited the military's claim to be the protector of Algeria's nationalism, claiming that military corruption was a new form of colonialism. That intervention came in January 1992, when the military members of the High Security Council dissolved the National Assembly and placed one of their own, Gen Liamine Zeroul, as president.

However, the subsequent defeat of the FIS over a decade-long civil war allowed the military to conclude that it no longer needed direct rule, and it retreated from the political arena. Pres. Abdelaziz Boutiflika, elected in 2004 without military interference, distanced himself from his armed forces.

The political context is characterised by continuity since President Bouteflika's re-election in April 2009. The security situation has improved. Sporadic attacks by the Al Qaeda radical Islamist group remain nonetheless possible and could have a destabilising effect, albeit limited, on economic activity and investment.