Tue, Aug 06, 2019 page9

• From soccer championship to economic success in Algeria

  • By Rabah Arezki
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  Algeria’s recent victory in the Africa Cup of Nations — the continent’s men’s soccer championship held every two years — was not just the triumphant culmination of a highly contested tournament. Coming nearly five months into a popular uprising that has already driven former Algerian president Abdelaziz Bouteflika from power, it also provides a way to understand the economic reforms the country desperately needs.

  The revolution that has unfolded this year in Africa’s largest country by territory has broad support. Like so many of the region’s protest movements, Algeria’s has been energized by young people who are frustrated by a lack of economic opportunity. Annual GDP growth amounts to less than 2 percent — one-third of the level needed to create enough jobs for Algeria’s fast-growing working-age population.

  The key to addressing the protesters’ frustrations is completing the transition from an administered to a market economy.

  However, this prospect arouses considerable mistrust in Algeria, where many blame market liberalization for the rise of crony capitalism, with the commanding heights of the country’s economy in the hands of a few oligarchs.

  In reality, that phenomenon is the result of decades of state dominance, not the periodic episodes of liberalization that punctuated them. Algeria’s government — led for the past 20 years by Bouteflika — effectively encouraged state or private (crony-owned) monopolies in many industries by maintaining dynamism-depleting subsidies and price controls. This has deterred foreign investment and prevented countless talented Algerians from prospering.

  Just as a soccer team can win only if it includes the most gifted, high-performing players — rather than those with the most money or connections — an economy can thrive only by unleashing the potential of its most capable actors. By allowing market mechanisms to function, Algeria can create a more level playing field, on which talented upstarts can challenge low-performing incumbents.

  Yet, such efforts would mean little if talented players did not have an incentive to compete. Creating a winning national soccer team required mobilizing the top Algerian talents playing around the world.

  Similarly, capable Algerians — many of whom benefited from the country’s massive investments in education since independence in 1962, but left home in search of economic opportunity — need to be convinced to return, thereby boosting productivity and growth. Given the Algerian diaspora’s far-reaching networks, such an effort would also facilitate the country’s integration into the global economy.

  However, no team can operate effectively without a good coach. The national team’s coach, Djamel Belmadi, combined technical and strategic skills with courageous and demanding leadership to transform a collection of individual talents into a well-functioning unit.

  A similar combination of vision and acumen is needed to manage Algeria’s economic transition. To that end, qualified public and private-sector actors must be empowered to guide development, while modern corporate-governance structures must replace, at firm level, the long-dominant top-down approach that insulated senior managers from accountability.

  Finally, just as a soccer game needs a credible referee, an economy needs independent regulators — both sectoral (for example, a telecoms authority) and transversal (competition authorities) — to keep the game fair. Algeria must urgently build a reliable regulatory apparatus with appropriate enforcement capacity.

  However, creating such structures is only the first step. Given Algerians’ fear of market liberalization, steps must also be taken to foster public trust in regulators. Here, technology-based measures, such as digitalizing payments, procurements and social services, can help, much in the way that video footage can settle disagreements on the soccer pitch.

  Now, Algeria must build on the momentum that the current movement has created, and implement bold economic reforms that enable the country to unleash the vast potential of its large, young and educated population.

  That would amount to a victory far more momentous than any soccer tournament could ever provide.

  Rabah Arezki is chief economist of the World Bank’s Middle East and North Africa Region and a senior fellow at Harvard University’s Kennedy School of Government.

  Copyright: Project Syndicate
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