Algerian Entrepreneurs See Opportunity in Oil-Price Plunge

11:29 PM Aida Alami 0 Comments

By Aida Alami

ALGIERS -  Algeria, a country that depends on energy for 97 percent of its exports and two-thirds of its government revenue, is facing an economic crisis precipitated by the plunge in oil prices. And that is just fine with Toufik Lerari and Marhoun Rougab, entrepreneurs who see it as salvation for the rest of the Algerian economy.

“Our chance is the collapsing oil prices,” Mr. Lerari said in his office, where colorful pop art paintings decorate the walls. “Now, we cannot wait anymore. We must act. We want to concentrate our energy on what works well in this country. What can you build if you’re not positive?”

Mr. Lerari, 38, and Mr. Rougab, 30, founded a communications company, Allegorie, in 2010, and business has been good — so much so that they want to hold up themselves and others like them as an answer to Algeria’s problems.

If nothing else, Mr. Lerari said, their optimism is a welcome antidote to the government officials who recently warned on national television of an incipient economic crisis. The warnings prompted talk among pundits that political instability could soon follow.

Mr. Lerari and Mr. Rougab — who can recall childhoods of water shortages and slow-flowing faucets, as well as terrorist attacks and curfews that kept them inside at night — live today in a more secure and developed Algeria. Now when they discuss water, they talk metaphorically about glasses half full. When the sun goes down, they seek out pockets of night life in the otherwise staid capital.

But if the country has been remarkably stable in recent years even as the Arab Spring and the rise of the Islamic State have shaken the rest of the region, it has achieved that primarily by doling out generous oil-financed benefits, including housing, cars and pay raises. According to the International Monetary Fund, government spending jumped by 50 percent and civil servants’ salaries grew at nearly the same rate in 2011.

“Once you get low oil prices, the system doesn’t work anymore, and it creates series of dysfunctions,” said Riccardo Fabiani, a senior analyst at the political-risk research firm Eurasia. “As long as there is an effective authoritarian regime in place, there is no incentive to change the system. They need to address issues of governance and transparency, and invest in the human capital of the country like bettering the education system.”

Mr. Fabiani said that while the country had a socialist tradition, its recent protectionism was aimed at maintaining a system of privileges.

“The regime has been talking about diversifying its economy for the past 30 years,” he said. “It remains a place very hostile to foreign investors. They prefer to work with businessmen close to the elites in order to buy their loyalty.”

Protests take place nearly every day, and basic social services, health care and education had been widely perceived as declining even before oil prices collapsed. Now the government of President Abdelaziz Bouteflika is facing budget shortfalls.

In February, Mr. Lerari and Mr. Rougab held their third annual Fikra conference (fikra is Arabic for “idea”) with the goal of inspiring Algerians to think beyond oil. Their call for entrepreneurship, innovation and diversification of the national economy was received by a mainly young audience, whose desire for change was evident.

Fikra, now a major event in Algeria, featured 30 speakers this year, including economists, entrepreneurs and some of the country’s richest businessmen, at the Hotel Aurassi overlooking Algiers. Hundreds of people attended the presentations, which were casual and interactive. The theme was success.

Since French colonial era ended in the early 1960s after a bloody war, Algeria has been relatively closed to the world culturally, politically and economically. The political system has been dominated since independence by one party, the National Liberation Front, while the economy has been choked by cronyism, insider dealing and anticompetitive regulations.

Algeria had its version of the Arab Spring in the 1980s amid another collapse in oil prices. In 1991, the army canceled elections after an initial round was won by Islamists, sparking a decade of civil war and terrorism that killed tens of thousands. Then, military leaders imposed a state of emergency that was lifted only in 2011.

“It is true that Algeria still suffers from a lot of administrative red tape and the fact that things tend to move slowly,” said Mr. Rougab, who said foreign participants at Fikra had difficulty obtaining visas. “But we don’t like to talk about problems.”

That climate has led many young people to crave more interaction with the world now that years of instability have given way to calm.

The Algerian government has promised to ease unemployment among youths, which is over 20 percent, by redistributing energy revenue and offering microcredits to young entrepreneurs who create jobs. The initiative has yet to show significant results, however, in part because banks are not prepared to invest in start-ups.

Still, Mr. Lerari and Mr. Rougab, who are childhood friends, said success was possible through hard work. “We are the first to arrive and the last to leave, seven days a week,” Mr. Lerari said.

They founded Allegorie at a time when the Algerian public relations and communications field was relatively small, and they had to convince big companies of the importance of their services. They plan to build the first video production studio complex in Algeria before the end of the year; an Algerian version of MasterChef is expected to be filmed there in partnership with News Corp.-owned Shine France.

Mr. Lerari travels between Nice, in France, where he has another company, called Tequila, and where his wife and two children live. His wife holds a doctorate in biology and is pursuing a business degree. Mr. Rougab, who was educated at King’s College London, lives full-time in Algiers.

He views living in this sleepy capital as a challenge that he and other young entrepreneurs are surmounting. Despite its beautiful landscape, Algeria is not a tourism destination because it offers few leisure activities. But he thinks the situation has evolved recently.

“Restaurants are starting to open and the social life is richer than it was,” Mr. Rougab said. “There are a lot of beautiful museums in Algiers that have pieces by Delacroix, Rodin that few know about.”

Both Allegorie founders are passionate about photography and like to travel together. They share an office and regularly exchange ideas. Mr. Lerari says he is the hard-nosed, analytical thinker, while Mr. Rougab, who is also an art collector, is the more creative one.

“We always had ideas. Our strength was to carry them out,” Mr. Rougab said.

You can read the article on the New York Times' website

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