Tunisia and Libya -- respectively, the cradle of the Arab Spring and the site of its worst carnage -- are right next door. At home, unemployment is high, opportunities for advancement are small, and political and economic change is progressing slowly. Islamists have grown in strength on the back of popular malaise.
But after a brief flurry of protests in January 2011, early in the Arab Spring, Algeria has maintained political quiet.
Economists and political analysts say that on paper Algeria looks like a country ripe for revolution, but the government has acted to stem discontent by increasing subsidies for basic consumer goods, generous pay raises and a dose of political reform. Algerians' bitter memories of the 10-year civil war between the government and Islamists that ended in 2002 makes them fearful of taking to the streets to protest.
A potential lightning rod from the 50th anniversary of the ceasefire ending Algeria's independence struggle against France passed this month with neither official ceremonies nor protests. Parliamentary elections slated for May are likely to go smoothly, too, said Edward Bell, Middle East economist for the Economist Intelligence Unit.
"They have opened up the process to more political parties, so you'll see a more representative parliament this time around … It will be a relief valve for the opposition groups to have a say in the governing of the country," Bell told The Media Line.
Observers say the government is worried that voters won't turn up at the polls to elect what is largely a toothless parliament. But opposition parties are taking it seriously. Three of five Islamist parties vying in the elections announced they would campaign on a common platform called the Green Algeria Alliance. Islamists are likely to do well as they have elsewhere in elections in Tunisia and Egypt.
But one of Algeria's main secular opposition parties, the Socialist Forces Front, said March 2 it would contest May's parliamentary elections after being absent from the political scene for the last 15 years.
While President Abdelaziz Bouteflika has moved to loosening some political bonds, Algeria's economy is deeply troubled. Thanks to large reserves of oil and gas -- and more recently big increases in government spending for subsidies and pay hikes -- the economy had posted strong growth and unemployment fell in the last decade. The World Bank estimates that it dropped from 29 percent in 2000 to 15.3 percent in 2005 and to 10.2 percent at the end of 2009.
But the decline in the jobless rate subsequently stalled and remains about 10 percent overall and for younger Algerian graduates -- the population mostly likely to explode in social protest -- the rate is 21.5 percent, according to the International Monetary Fund's last assessment of the economy published in January. The EIU forecast the overall jobless rate edging down to 9.8 percent this year. Moreover, large numbers of people work in the informal economy where pay and conditions are poor.
Algeria's growth outlook is poor. While energy prices are near record levels, Algeria has not invested in its hydrocarbon infrastructure and exports have actually fallen in the past two years even though 98 percent of the country's exports derive from the sector.
The government is making some efforts to open up the economy -- it announced two weeks ago that foreigners would be permitted to invest in the local stock market, for instance -- but analysts say the country remains inhospitable for foreign investors. But economists doubt it will bring much new foreign capital into the country.
Only a handful of companies trade on the stock exchange. Economist Abdelmalek Serrai, head of a business consulting office in Algiers, told the Reuters news agency that foreigners would need a more benign business regulatory environment to commit their money. "The Algerian market is still virgin, but Algeria needs to provide foreigners with guarantees and more incentives," he said.
In 2008, the authorities imposed a series of rules that deterred investment in hydrocarbons, limiting foreign ownership in energy assets to 49 percent, collecting taxes retroactively and putting up obstacles to repatriating profits. The World Bank's Doing Business survey, which measures countries for business friendliness, ranks Algeria 148 among 183 countries.
With "a more ambitious program of structural reforms," Algeria's non-hydrocarbon economy -- the parts not connected with oil and gas -- could grow 5 percent annually between now and 2016, the IMF estimates. Without reforms, it warned, growth would be closer to 3 percent, insufficient to make much of a dent in the unemployment rate.
Price rises remain relatively moderate for now, but the IMF warned in January that if the government did not trim back its spending, inflation could emerge. It was rising food prices -- not political demands -- that caused Algeria to experience a brief surge of political unrest 14 months ago.
Could the combination of joblessness, inflation and repression finally spark a rebellion in Algeria?
"It could, but it might not. There is tremendous economic distress in Algeria -- there's massive unemployment of young people -- but there hasn't been an uprising there," Paul Rivlin, a senior economic fellow at Tel Aviv University's Moshe Dayan Center for Middle Eastern and North African Studies, told The Media Line. "There is tremendous memory of civil war that killed tens of thousands, and people are just too tired."
Algeria experienced a mini-Arab Spring of its own in the late 1980s that forced the government to hold free elections. Islamists won, the government canceled the results and a lengthy civil war ensued that led to as many as 200,000 deaths.
Bell of the EIU said that inflation could end up being the biggest threat to Bouteflika's government. "So inflation is a potential area where you could see people getting into the street to protest," he said.
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