Strategic Analysis. Regime Change in Algeria? Preparations for the Time after Bouteflika. Sample Product

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1 Regime Change in Algeria? Preparations for the Time after Bouteflika Sample Product

2 Table of Contents Executive Summary... 3 The Arrangement of Bouteflika s Succession... 3 Bouteflika s Possible Successors... 5 The Bouteflika Clan... 5 The Army and the DRS... 6 Political Parties and Figures... 6 Impact on Algeria s Political Stability... 9 Impact on Algeria as International Business Location Page 2 of 13

3 Executive Summary The poor health of Algeria s long-term president Abdelaziz Bouteflika gives rise to the question of his succession and the regime s continuity. The 77-year-old Bouteflika suffered an apoplectic stroke in 2013, and his ability to rule has increasingly been questioned. On the public scene, other figures have become the face of Algeria s politics; behind the scenes, army and party officials as well as loyal companions have become the actual policy makers. Preparations for the time after Bouteflika are ongoing, and the question of possible successors has dominated the public debate since Bouteflika s re-election in April The unsettled question of succession could result in a high level of political instability in the near to medium term, possibly destabilising Algeria s security situation, including implications for foreign businesses as well. The Arrangement of Bouteflika s Succession Bouteflika s decreasing health makes the president s succession an urgent matter. A power vacuum following a premature death of the head of state would be likely to increase already existing destabilising factors. The lack of political and economic reforms, the persistent presence of Islamist militants as well as the ongoing turmoil in neighbouring countries, particularly Libya, is likely to disrupt Algeria s security situation in case the succession is not resolved in time. Algeria s most influential ruling elites, including the army and the intelligence and security department DRS (Département du Renseignement et de la Sécurité), are already making provisions for the time after Bouteflika. The fact that Bouteflika ran for a fourth term despite contrary announcements before the elections indicates that the aging president had been the only candidate on which the different actors of Algerian politics could agree. Driven by the overall objective of keeping their power by preserving the regime s structure, Algeria s ruling elite is likely to be arranging solutions for mainly two scenarios: In Bouteflika s Lifetime: The Constitutional Council can declare Bouteflika incapable of ruling because of serious and long-lasting illness (Algerian Constitution); the parliament must then ratify the state of impediment by a majority of two-thirds. In practice, however, Bouteflika loyalists in parliament and leading generals are likely to prevent this kind of impeachment vote to secure their own positions and to institute their favoured candidate. In fact, Algeria s power elites are already bargaining for a constitutional revision to ensure a smooth transition of power. The planned establishment of the so far lacking post of vice president is to prevent a power vacuum in case of Bouteflika s departure and thereby guarantee the survival of the regime. The different segments of the regime have, however, yet to agree on a vice president and heir to the president. Page 3 of 13

4 Bouteflika is likely to resign and hand over power for two reasons: first, a transfer of power would convey the image of a statesman able and willing to control developments; second, a handover to a candidate picked by the ruling elites ensures the regime s continuity. Therefore, the factionalised branches will likely cooperate to ensure their sinecure. Beyond Bouteflika s Lifetime: Algeria s constitution provides for the case of the president s demise in office. According to Article 88, the president of the Council of the Nation assumes the post of the head of state for a maximum period of 60 days, during which presidential elections are to be held. Currently, Abdelkhader Bensaleh of the second largest party RND (Rassemblement National Démocratique), who hails from Bouteflika s native region Tlemcen, holds this chair. The time frame of 60 days is likely to put the ruling elites under pressure, possibly resulting in intensified power As the selection process will probably be pursued without public involvement until the elections, the transition period bears a significant risk of civil unrest. struggles. Given the strategic alliance between the army and the secret service DRS as well as the influence of the generals in politics, a common candidate is likely to emerge from within their ranks. To maintain a pretence of democracy, it can be assumed that at least one opponent will be presented pro forma. However, against the backdrop of the secretive and informal decision making procedures, the selection process will be pursued without public involvement until the elections. Algeria s Presidential Elections Official Votes Pro Bouteflika in Percent Official Voter Turn Out in Percent Page 4 of 13

5 Source: Wikipedia Bouteflika s Possible Successors In order to guarantee stability and the continuation of the regime, Algeria s key political factions are likely to choose a successor who enjoys a certain degree of support among the population. However, the candidate needs the approval of the following three factions involved in the selection process: The Bouteflika Clan The Bouteflika family is probably seeking to maintain the sphere of influence they have Abdelaziz Bouteflika acquired over the past years. To ensure support, Bouteflika has pursued a policy of patronage and personal networks since his first years in office from 1999 onwards. Relying mainly on the support of family members and persons from his western native region Tlemcen, Bouteflika has created a power centre around himself. Loyal companions have been given key positions in the ministry of defence and in the general staff, creating dependencies of numerous persons who owe their career to Bouteflika. This policy has endowed Bouteflika with far-reaching competencies and powers not only in politics, but also in the economy, which the incumbent president intends to hand over to a successor of his choice. Said Bouteflika: The president s younger brother Said, 56, is a likely candidate for succession from within the Bouteflika Clan. Perceived as influential and the most important power broker in the presidential palace, Said Bouteflika has been the president s special advisor for many years. He was actively involved in the recent reforms of the DRS, a role that enabled him to establish first alliances within the important power elite, ensuring the support of key actors. Among the Algerian people, Said is mainly considered to be the president s closest ally. His importance to the president has generated respect as well as precaution among Algerian citizens. Significance: Said Bouteflika as successor would symbolise political continuity, which would be highly appreciated by the ruling elite. However, a transfer of power to Said Bouteflika would also mean the creation of a hereditary republic, which would likely entail a significant potential for protests. Page 5 of 13

6 The Army and the DRS Bouteflika s successor will depend on the support of the military generals, who have played an essential role in the selection of Algerian leaders, including Bouteflika, since the country s independence from France in Present in state institutions and the economy and endued with far-reaching competences, the army and the DRS constitute the backbone of Algeria s political system. The candidate for succession supported by the generals will therefore presumably be an army sympathiser unlikely to challenge the military s authority. However, there are mainly two reasons arguing against a successor directly from military ranks: first, there is widespread scepticism of the army s obvious involvement in politics; a military candidate would be opposed by many Algerians. Second, a military coup and the subsequent installation of a military president would contradict the army s public support for Bouteflika s fourth term in office. Even though the Algerian army has the capacities to stage a coup, the overthrow of the current regime, of which the army is part, would destabilise the country. Against the backdrop of high security risks in the country and adjacent states, it seems unlikely that the army would take this risk. Political Parties and Figures Algeria s main political parties the FLN and the RND are an important factor of stabilisation when it comes to the question of succession. Even though their scope of action is limited, they constitute an important link to Algerian citizens, as they have formally voted their local and regional representatives. The importance of party representatives as well as of independent political figures has grown in recent years with the decreasing presence of Bouteflika on the political stage. Among the key figures that are likely to be involved in the succession debate are: Ahmed Ouyahia: The former prime minister and current chief of Bouteflika s cabinet is considered a possible candidate for the next presidency; he has a strong political network and enjoys the support of several political factions. The former secretary general of Algeria s second largest party, Rassemblement National Démocratique (RND), which is in close alliance with the ruling FLN, Ouyahia has been part of the regime since the 1990s, often being described as Bouteflika s assistant. In 2014, the president appointed Ouyahia to conduct the constitutional reform, which has enabled Ouyahia to negotiate with key political figures and thus establish contacts in influential circles, including Algeria s legal opposition. Significance: The 62-year-old Ouyahia is said to have personal links with the army and DRS, which makes him a candidate the two main factions the Bouteflika clan and the generals could agree on. Among the population, Ouyahia s political performance is acknowledged, whereas he is rather unpopular as a person and thus enjoys very limited support. Page 6 of 13

7 As Ouyahia hails from Tizi Ouzo in the eastern Kabylie region, which is known to be a stronghold of Islamists, he faces certain resentments among Algerians. Abdelmalek Sellal: The current prime minister has become the most prominent representative of Abdelaziz Bouteflika, particularly abroad. Successor of Ahmed Ouyahia as Prime Minister, the 66-year-old is considered a close ally of the president, whom he owes much of his career. Sellal held several minister posts under the tenure of President Bouteflika from the 1990s onward. Before Bouteflika announced his renewed candidacy in 2014, Sellal was widely regarded as a possible successor. Loyal to Bouteflika, Sellal acted as his campaign manager, touring across the country and speaking on behalf of Bouteflika. Publicly, Sellal refrained from disclosing presidential ambitions of his own. Significance: Sellal is an essential part of the regime. As Prime Minister, he is familiar with the internal structures of the ruling elite, making him a viable candidate for both the Bouteflika clan and the military. In case Bouteflika is prompted to hand over power, Sellal would be a possible candidate whom Bouteflika can rely on to act in his interest. However, as Sellal has served Bouteflika for numerous years, the Algerian population is likely to be hesitant in supporting him as a possible president. Power Circles Influencing Bouteflika s Succession Page 7 of 13

8 Mouloud Hamrouche: Prime minister of Algeria until 1991, Mouloud Hamrouche was part of the inner circle of the ruling FLN until the 1990s when he quit the party, reportedly after internal struggles over the military s role in politics. As an independent candidate, Hamrouche unsuccessfully ran for president in 1999 and withdrew from politics for several years. His ambitions to return to the political stage, however, became evident when he announced his presidential candidacy in 2014, a bid he revoked shortly after Bouteflika was named the regime s candidate. Since then, Hamrouche has shown an unprecedented public presence and started a campaign for a democratic transition in Algeria. Significance: Without aligning himself with the opposition bloc, Mouloud Hamrouche has gained the support of several opposition groups and parts of the Algerian electorate by his much-noticed campaign for a peaceful regime change. Furthermore, Hamrouche is respected in the country s economic circles: he is still given credit for the economic reforms during the oil crisis in the 1980s, when Hamrouche was responsible for the realignment of the Algerian economy towards the free enterprise system. The military is said to approve of a candidacy of Hamrouche, as he is perceived as keeping a certain distance to the opposition alliance and thus able to serve as a mediating candidate between political and army officials. Ali Benflis: The 70-year-old former prime minister and secretary general of the ruling FLN was a close ally of Bouteflika until a rupture in Benflis was Bouteflika s main opponent in the presidential elections in 2004 and 2014, calling for political and economic reforms. He was able to mobilise a large number of supporters during the presidential campaign 2014; however, he lost the election, which he labelled as unfair and rigged. Recently. Benflis and other opposition politicians called for early presidential elections by the invocation of Article 88. Significance: Ali Benflis has enjoyed the support of a significant part of the Algerian electorate since the 2014 campaign and is allied with the opposition s umbrella organisation. This is a main reason why Benflis is a candidate unlikely to gain the support of the generals: Benflis is perceived as being too close to the opposition and too critical of the regime. Page 8 of 13

9 Impact on Algeria s Political Stability As Algeria s next president will most probably emerge from the ruling elite and be compromised by mutual dependencies, fundamental changes in the alignment of the country s regime hardly seem likely in the short term. However, during the transition period until the appointment of Bouteflika s successor, a temporary deterioration of the security situation and political stability has to be expected. Two scenarios appear to be the most probable: President by Constitution: Algerian citizens are excluded from the decision making process, which will likely trigger a wave of protests across the country. The regime instates its preferred candidate in the newly created office of vice president, who, according to the future amendments to the constitution, would complete the term of the president in the case of the latter s premature departure. Presidential Elections: In the case of presidential elections, political activists and opposition groups are expected to stage demonstrations. As already seen during the presidential campaign 2014, the temporary During the transition period until the appointment of Bouteflika s successor, a temporary deterioration of the security situation and political stability has to be expected. formation of new opposition groups, such as Barakat ( Enough ), are likely but will not have a lasting impact on the political stability given the regime s assertive approach. In both cases, the regime is likely to make concessions to calm down possible opponents, including higher subsidies, reduction of taxes, limited political participation of opponent groups, etc. In the long term, however, the pressure on Algeria s regime may increase if basic economic and political reforms are delayed further. In this case, the issue of succession if still pending would constitute one of several triggers of protests and political instability. Page 9 of 13

10 Impact on Algeria as International Business Location A transition period may result in an increased potential for protests, possibly affecting business projects in the country. However, Algeria s commercial policy is rather unlikely to undergo substantial changes with a new administration in the short term; therefore, it can be assumed that the investment climate will for now remain characterised by: Regulatory uncertainty Inefficient bureaucracy and corruption Delays of payments Tight foreign exchange control Large informal sector An increased focus on the improvement of labour skills with the goal of lowering the unemployment rate, which constitutes a major factor in civil unrest, can be expected in the foreseeable future. Furthermore, the economic downturn in Algeria due to stagnating revenues and decreasing oil capacities may press the future Algerian president to revise the nationalist economic policy. Stronger emphasis on the development of the private sector is conceivable, as concerns are growing regarding the heavy reliance on the volatile hydrocarbons sector. However, a possible Improvement of labour skills can be expected as well as a stronger emphasis on the development of the private sector. diversification of the economy will come gradual at best. Still, it can be assumed that restrictions on market entries and business operations in the country for international companies will be lifted in the medium term. This development could particularly concern branches in which international knowhow is sought. Hydrocarbons: Algeria is abundant with natural gas and oil; revenues from these natural resources constitute the government s main source of income. Therefore, the government has invested heavily in the expansion of oil and gas facilities over the past years, in many cases pursuing a restrictive foreign investment policy and high degree of nationalisation. In order to compensate the effect of decreasing oil and gas capacities, however, international companies have been involved in the development of new extraction sites, such as the el-merk oilfields in the eastern province Ouargla in 2013, ran by the Algerian state energy group Sonatrach and its US partner Anadarko. Foreign companies have also been involved by minority interest in the exploitation of new gas fields, such as In Salah in the western part of Ouargla Province. Already in 2013, amendments to the hydrocarbon law aimed at encouraging foreign investors; consequently, foreign oil companies are now taxed on profit rather than on turnover. Investments of foreign companies have thus become more profitable, even Page 10 of 13

11 more with the approval of a 100 billion USD investment plan from 2014 to 2018 in order to increase Algeria s oil and gas output. Heavy Industry and Mining: Algeria provides a significant potential for steel and aluminium manufacturing; resources of zinc and phosphate provide good conditions for mining. However, the government s plans to modernise and develop heavy industry have not yet been implemented. As international companies are only allowed to hold minority interests, foreign investments have been restricted by the government. Nevertheless, in the past years, there have been considerable investments in heavy industry and mining: the construction of a steel mill in the northeastern city of Jijel in the Bellara region in 2014 was financed with about 400 million USD by the Gulf company Qatar Industries and the Spanish engineering department Idom. The Australian company Terramin Resources is a shareholder in the Tara Hamza zinc mine near the coastal city Bejaia. In the context of a new mining law, the placing of further licences can be expected in the upcoming period. Medical Technology: Algeria s hospital and health care sector has been neglected for years; however, in the recent past, the government has heavily invested in the building of hospitals and in the development of medical care. The private health care sector has also witnessed unprecedented progress with the establishment of several private hospitals and Coastline of Algiers. surgeries. As Algeria lacks the necessary medical technology, the institutions had to import most of the technical devices and instruments. A double-figure growth rate was estimated for German technology, such as X-ray equipment and computed tomography, was particularly sought after. It can be expected that the demand for medical technology is likely to increase further, as there are several hospitals to be built and more planned. Pharmaceutical Industry: The Algerian government has announced that it will increase its investments in the pharmaceutical industry in order to stimulate the development of generics within the country and thus minimise the dependence on imported medicaments. The objective for 2015 is to double the local production of pharmaceutics from 38 per cent to 70 per cent. As Algerian pharmaceutical producers are only able to cover a fractional part of the increasing demand, international companies have Page 11 of 13

12 been increasingly authorised to produce generics in Algeria, such as Astra- Zeneca, Sanofi-Aventis, Novartis and Pfizer. The demand for generics will remain high, and it seems unlikely that the future government will revoke Bouteflika s investment programme for the pharmaceutical industry. Car Industry: Algeria s importance as an export market for international vehicles has grown significantly in the past months; the car industry is considered as a promising market for international companies. In 2013, particularly the demand for Western European trucks and utility vehicles increased perceptibly. International car companies that proved perseverant in spite of the difficult investment climate have been able to enter the Algerian market: the car company Renault was able to found an Algerian- French joint venture in Oran, and the German Daimler AG has planned to expand its assembling branch of busses, trucks and all-terrain vehicles. The branch establishment of international carmakers fulfils the need of jobs in Algeria, where the unemployment rate is high and the job market subsided by the government. A possible successor of Bouteflika is therefore unlikely to change the current dynamics in the car industry in the short term. Key Investment Sectors and Localisation in Algeria Page 12 of 13

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