Report No. 36270-DZ People's Democratic Republic of Algeria A Public Expenditure Review Assuring High Quality Public Investment (In Two Volumes) Volume II: Annexes and Statistical Annex August 15, 2007 Social and Economic Development Group Middle East and North Africa Region Document of the World Bank FCCL Local Government CommonFund ONA Office National de 1'Assainissement FRR Fondsde Rtgulationdes Recettes (National Agency for Sanitation) FNGIR (Hydrocarbon StabilizationFund) ONID Office National de I'Irrigationet du FondsNationalde Gestion Inttgrt de la Drainage Ressource (Small andmediumimgation schemes) ONM Office Nationalde la MCtbrologie ONOU Office Nationaledes (Euvres Universitaires GDP Gross domesticproduct ONS OfficeNationaledes Statistiquesde GER Gross enrollment rates I'AlgCrie GNFS Goods andnon-factorservices OPEC Organizationofthe PetroleumExporting GOA GovernmentofAlgeria countries GPI GrandsPCrimetresimguCs (Large OP1 Office des Pbrim&res Irriguts GTZ imgation schemes) PCD ProgrammeCommunalde Dtveloppement GermanAgency for Technical Cooperation (local development program) HPC Heavily IndebtedPoorCountry PCSC ProgrammeComplCmentairede Soutien IBL Initial Budget Law A la Croissance(2005-2009) ICAO InternationalCivilAviation Organization PDSRJ? PerspectiveDQennalepour les Ressources ICOR IncrementalCapitaYOutput ratio en Eau ICT InformationCommunicationTechnologies PER Public Expenditure Review IMF InternationalMonetaryFund PEA Programmefor InternationalStudent IMR Infant mortality rate Achievement INSP InstitutNationalde Sant6 Publique PMH Petiteet MoyenneHydraulique (NationalPublic HealthInstitute) PNE PlanNationalde 1'hu (water masterplan) IWRM IntegratedWater ResourcesManagement PPP Public-PrivatePartnership LFC Loi de FinanceComplhentaire PSP PrivateSector Participation LMD License-Maitrise-Doctorat PSRE Programmede Soutiena laRelance (Undergraduate-Masters-Doctorate) Economique(2001-2004) LPA Lease Project Approval RH Rtgion Hydraulique LSI Large-ScaleIrrigation ROSC Reportonthe Observanceof Standards and M A 0 Mostaganem-hew-Oran Codes MATE Ministry of EnvironmentandUrban SANRAL SouthAfrican NationalRoadAgency Managementhlinistkrede I'amenagement SEF Sector ExpenditureFramework dutemtoire et de I'Environment SITC StandardInternationalTrade Classification MCM Millions ofcubic meters SNMG Salairenationalminimumgaranti MDG MillenniumDevelopmentGoal (National guaranteedminimum wage) MDT MinisteredesTransports SNTF SociettNationaledes Transports MEFP Ministerede la Formationet de Fernviaires I'EnseignementProfessionnelle SOE State-ownedenterprise (Ministry of VocationalandTechnical SONATRACH EntrepriseNationalede Recherche Training) d`Exploration et de Commercialisationdes MEN Ministere.de 1'EducationNationale Hydrocarbures MESRS Ministhe de YEnseignement Sup6rieureet SSA Sub-SaharanAfrica de la RechercheScientifique TEU Twenty-foot equivalentunit et de la RechercheScientifique TIMSS Third InternationalMathematicsand MLA Monitoring of learningachievement Science Survey MMR Maternalmortality ratio UNESCO UnitedNationsEducational, Scientificand MoF Ministryof Finance Cultural Organization MOHPHR Ministryof Health, Population,and UNFPA The United Nations Foodprogram Agency HospitalReform UNICEF The United Nations Children's Fund MOL Ministry of Labor USTHB UniversitCdes Sciences et de la MOT MinistryofTransport TechnologieHouari Boumediene MPW Ministry of Public Works VET Vocationaleducationandtraining MFiE Ministeredes Ressourcesen Eau WDI World DevelopmentIndicators (Ministry of Water Resources) WE0 World EconomicOutlook MSB Projetde Modernisationdes Systkmes WHO World HealthOrganization Budg6taire WITS World IntegratedTrade Solution MTEF Medium-TermExpenditureFramework WRM Water resourcesmanagement MTP Ministeredes Travaux Publics WRR Water requirement ratio N.E.C NationalExecutiveCommittee wss Water supply and sanitation NHGDP NonhydrocarbonGDP WTO World Trade Organization NHA Nationalhealthaccounts WUA Water user association OECD Organizationfor EconomicCo-operation WWTP Waste water treatment plant and Development O&M Operationandmaintenance Vice President: Daniela Gressani CountryDirector: Theodore 0.Ahlers Sector Director: Mustapha K.Nabli Sector Manager: Miria Pigato Lead Economist and Task Team Leader: JosC R. L6pez-Calix ANNEXES ANNEX A PCSC: SIMULATION SCENARIOSOF INVESTMENTEXECUTION . ASSUMPTIONS FOR2005.07 ............................................................................ 6 ANNEX B: KEY SECTORINVESTMENTISSUES ............................................................ 17 ANNEX C: MAINFEATURESOF THE ALGERIAN BUDGETPROCESS ...................... 22 ANNEX D:RAILWAYS ........................................................................................................ 26 ANNEX E: ROAD INFRASTRUCTURE .............................................................................. 37 ANNEX F: PORTS.................................................................................................................. 46 ANNEX G: CIVIL AVIATION .............................................................................................. 52 ANNEX H: INFORMATIONONWATER SUPPLY AND DEMAND ............................... 60 ANNEX I:OUTLINE OF WATER LAW NO .05-12 (28 JOUMADA I11426.4 LAW ................................................................................................................... 61 AUGUST 2005) AND REGULATORY FRAMEWORK OF THE WATER ANNEX J: GENERALPRINCIPLESOF ALGERIA'S WATER LAW ............................... 66 ANNEX K:ORGANIZATION OF THE MINISTRY OF WATER RESOURCES ..............67 ANNEX L:REFERENTIELSDENORMED'ENTRETIEN RENOUVELLEMENT(%) ...69 ANNEX M:ALGERIA WATER FACT SHEET .................................................................. 70 ANNEX N: RECOMMENDATIONS OF THE WORLD BANK WATER SECTOR STRATEGY FORALGERIA (2003) ................................................................. 71 ANNEX 0:FROMVISION TO ACTION INALGERIA'S WATER SECTOR...................72 ANNEX P: EDUCATION. SIMULATION SCENARIOS ................................................... 74 ANNEX Q: SUMMARY OF MEASURESPROPOSEDUNDERTHE EDUCATION REFORMPROGRAM....................................................................................... 76 ANNEX R: FUNCTIONS BY LEVEL OF ADMINISTRATION INSCHOOL EDUCATION..................................................................................................... 77 ANNEX S: ALTERNATIVE SCENARIOS ONTHE IMPACT OF THE PCSC ON HIGHEREDUCATION..................................................................................... 78 4 ANNEX T: FUNCTIONSBY INSTITUTIONINTHE HEALTH SYSTEM ....................... 80 ANNEX U:CONCESSIONSAND OTHERFORMSOFPUBLIC-PRIVATE PARTNERSHIP..,,.,...,,,,,,,, .,,,,...,.....,,,,.............,,...........,.......................,............83 ANNEX V: WHAT HAPPENEDTO DA15BILLION INFUNDINGFORTHE SOUTH? ....................................................,......,............,,..................................-85 ANNEX W: LEARNINGFROMTHE PASTAND THE PRESENT: THE ASSETS OF THE STATEAND THE CURRENTINVESTMENTPORTFOLIO ................87 ANNEX X. MANAGINGTHE FISCALSPACEWITH IMPROVEDEXPENDITURE EFFICIENCY.... .................................................................................................90 STATISTICALANNEX .. .. .....................................................................................................99 REFERENCES ...................................................................................................................... 150 5 Annex A ANNEX A. PCSC: SIMULATIONSCENARIOSOF INVESTMENT EXECUTIONASSUMPTIONSFOR2005-07 A.l Each sector envelope was analyzed by the respective sector specialists since no information on the execution assumptions was provided by the authorities. Historical trends ' were considered, as well as current implementation capacity and the specific factors affecting project types. A.2 Water Sector disbursement rates during the three-year period are expected to be 12, 25, and 32 percent, respectively. This yields a cumulative execution rate of 21 percent, lower than the sector's historical average2of 52 percent. Since most activities are expected to start in 2006, almost no disbursementswere expected in2005, when the bids for major projects would be launched or evaluated. A disconnect i s evident between the historically low implementation capacity and the highpressure that the government i s exerting for quick performance. A.3 Transport and Public Works projects were broken down by subsector and have the following execution assumptions covering the three-year period: Transporf (14, 0, and 25 percent). The large cable project would only start in2007 and span four years. Other smaller physical works projects would reach a cumulative 70-80 percent completion rate by 2009. Roads (5, 9, and 14 percent). Segments of the East-West Expressway project already under construction would be completed by 2008, and new segments would be half-way completed a year later, leading to a cumulative execution rate of 50 percent by 2009. Road maintenance would be 100 percent completed during the program (that is, 20 percent per year). Other works would be approximately 80 percent completed, in line with historical execution rates. The execution assumption for the roads sector i s lower than historical trends (80 percent), due to doubts about the feasibility of completing the East-West Expressway project, which carries a large weight (approximately 57 percent) of the allocationfor roads. Ports (4, 1, and 22 percent). Most work would be a cumulative 75-85 percent completed by 2009, above historical trends at 67 percent, and studies and technical assistancewould be fully done. Railways (2, 11 and 25 percent). All studies would be finished by 2006; modernizationof the north beltway would start in 2007 and take five years to complete; and the electrification work would start in 2008, lasting for four years. In addition, the metropolitan Algiers railways work would take place over 2006-08, with modernization and construction of new lines starting in2007 and lasting for five years. Most equipment purchases for the railways category would be spread over 2006-08. Most work would be Detailed figures on the execution assumptions are available for the reader uponrequest. Figures correspond to dataprovided by the authorities up to June 30' 2006. Therefore, some aggregate data provided by the Ministry o fTransport on May 7" 2007 and included inthe Table 5.4 o f Volume Idiffer from datapresentedhere. The historical averagesreferenced for the executionof authorized payments cover the period2002-04. The title ofthis category may be misleadingbecauseit only includesstudies and investments related to road services andurbantransport services, however it is the category title used by the Ministryo fFinance. 6 Annex A a cumulative 70 percent completed by 2009. This assumption compares favorably to the historical execution rate of 53 percent. Overall, the weighted execution assumption for the four Public Works sectors i s calculated at 56 percent. A.4 Education Sector assumptions fall into two groups. Elementary through Secondary Education and Vocational Training are assumed to disburse at a 95 percent rate over the three- year period, above historic rates of 74 percent and 79 percent. Higher Education and Scientific Research are assumed to disburse less rapidly, with an execution rate of 50 percent, below the historical execution rate at 61 percent. The higher execution assumption for the Elementary and Secondary Education and Vocational Training sectors i s based on what was actually built during the last several years (rather than on historical execution rates, which may have been based on inflated budgets). The outlook for Higher Education i s less rosy, however, since the proposed budget is extremely high (an increase of some 225 percent) when compared to actual recent annual expenditures. The Algerian authorities believe that opening up competition to foreign construction companies might allow these higher amounts to be absorbed. However management capacity to administer the process may be a constraint, hencethe lower projected execution rates. AS Health Sector execution assumptions for the three-year period are 40, 48, and 78 percent, respectively. This yields an overall execution rate of 57 percent (compared to the historical rate of 79 percent). The estimates are based on discussions with officials from the Ministry of Finance and Ministryof Health. The 2005-07 expenditure envelope of DA 81,116 million was separated into three categories by project size: large, medium, and small (such as equipment and rehabilitation). In general, it was assumed that "large" projects would take four years to disburse (40 percent the first year and 20 percent for each year thereafter), "medium" projects would disburse over two years (a 60-40 split), and "small" projects would disburse 100 percent in a year. The shares were then used to calculate the relevant weighted averages for the execution rates. Projects ineach of the three categoriesare as follows: 0 Largeprojects-6 medical hospitals and 1 psychiatric hospital, 4 cancer centers, 2 bum centers, 5 geriatric centers, 5 mother-and-child complexes, and 1 cancer institute 0 Mediumprojects-55 general clinics, 113 maternity centers, 6 centers for disease control, 2 cardiology centers, and 1 center for paramedical vocational training 0 Small projects-generally for acquisition of medical equipment and renovation and maintenance of existing buildingsand structures. Overall Results A.6 An average execution rate of 50 percent i s therefore calculated for the four PER sectors (excluding several other miscellaneous categories inserted by the authorities) in the first three years of PCSC execution 2005-2007. This rate is below the overall execution rate of 65 percent calculated using historical averages, and also below the average execution assumption of 70 percent providedby a top down approach employed by Bank staff. 7 4 r I 5 cd 1 W E 5 c 6 z I IE s L c T 4 E Y P t E : r : i t I E r E E r ; E eE 6 it I I E> ? E T 4 bd c i9 .I i 1 c 1 Y B 5 1 N I 0N 0 i% E $3 4 : 5 a i 5 P 7 f ; 9 t i 5r ; i ? e a 2 5 u T E 1 i3 9 $ ,E I I c ; $ a c 5 4 c i f f T C E f f r i C 1 6 E 5 a 5J a e 6 33 ? i> E :i 2 2 i ; ; 3E 95f 3 r i 3 c c j I r ? c ? f I iL I: Y 1 3 i ? L Annex B ANNEX B: KEY SECTORINVESTMENTISSUES Education B.l As describedin greater detail elsewhere inthis report, implementation estimates for the proposed program in the education sector should be based on what was actually built duringthe last few years, rather than on historic ratios of expenditure relative to budgetary appropriations. Usingthis measure, the annual construction target for secondary education (120 new lower-secondary schools, or colleges, and 58 high schools, or lycees) seems attainable since 110 colleges and 44 lycees were built annually during2001-04. The targeted 12 percent increase invocationaltraining capacity from adding space for 6,000 additional students yearly also seems highlyreasonablesince 13,000 training slots were addedin2002 alone. B.2 This is not the case for higher education, whose proposed program is vastly larger than actual recent annual expenditures. The average yearly expenditure i s projected at DA 48.5 billion, more than four times the previous rate of DA 13.7 billion. The annual target for physical plant construction calls for an additional 93,400 student places, compared with an average of some 61,000 per year during 2001-04. The target i s even more ambitious for university accommodations, calling for 70,000 slots to be added yearly compared to the 27,700 average during 2001-04. Conceivably, as the government intends, these higher targets may be met by reliance on foreign construction companies. However, the local capacity to prepare and negotiate contracts and monitor their execution i s a bottleneck that cannot be improved overnight. In any case, the core issue is not whether the scheduled construction of new educational infrastructure can be realized, but whether the expansion makes sense strategically and i s cost effective. B.3 Thinking strategically also calls into question whether it makes sense to expand secondary education capacity when the current rate of capacity utilization i s only 35 percent. In higher education, by contrast, the overall expansion appears justified by Algeria's relatively low enrollment ratio compared to other countries of the region and countries with comparable GDP. Yet, there are other issues about how the money i s to be spent. First,i s the goal of providing large additionalpublicly financed accommodations (covering 75 percent of students compared to the current 50 percent) fully justified by the need to enroll more poor students and girls (who mightotherwise bedeterredby highcost or difficulty infinding safe accommodation)? Second, would it be more effective in terms of educational outcomes to focus on improving the quality of higher education rather than embarking on a relatively costly effort to expand access. Finally, Algeria might reconsider its policies o f allocating students to universities on a regional basis, and taking all major decisions at the central ministry level. Universities could be gradually given greater freedom to select their own programs and students (enabling specialization and economies of scale), and obtain funding for agreed proposals within clearly defined criteria. Greater choice would have important implications for both access equity and quality improvements. B.4 Physical infrastructure construction represents only one part of tabulating costs. In higher education, for instance, if enrollment doubles as implied by the building program and the current student-teacher ratio i s maintained, 30,000 more teachers with doctoral degrees will be required. Since highly qualified university teachers require many years to produce, doubling their number i s likely to be the main bottleneck to expansion in higher education unless (a) teacher qualifications are lowered, (b) the student-teacher ratio is allowed to rise, or (c) foreign teachers are recruited. The first two "solutions" would erode educational quality, and the third would 17 Annex B substantially boost costs. Under any scenario, the total cost of the proposed expansion program will vastly outstrip the infiastmcture cost. Given enough time, the production function of higher education might incorporate greater reliance on information and communications technology to maintain educational quality. Reflection on this opportunity to leapfrog the cost squeeze could usefully begin now. B.5 Eventhough capital spendingwill increasesignificantly inthe years 2005-09, it only accounts for 2 percent of the PCSC program (85 billion DA): Several explanations account for this situation: on average, health projects are much less costly than big transport or energy projects and healthfacilities already exist all over the country. However, Algerian authorities also seem to be waiting for major improvements in health system performance before increasing its resources. As described in detail in another section of the report, the health system faces significant organizational, managerial, and financial problems, some o f which are directly related to how investment projects are prepared and executed, and to the maintenance and monitoring of existing assets. B.6 Deficiencies exist in investment programming. No sectoral strategy sets specific priorities for the health system and provides guidance for investment planning. The health map has several weaknesses, underminingits use as an effective planning tool. First, the failure to include epidemiologic data means it cannot make the link between the health needs of the population and the required health facilities and health staff and equipment. Second, private sector facilities are omitted from its projections. Finally, the norms used to estimate the needed equipment, staff, or number of hospital beds have not been revised since the 1980s and must be updated. B.7 The budgeting process is unsatisfactory. In the "centralized sector investment programs,"' the decisionmaking process i s relatively simple and coherent. First, the Ministry of Health selects projects it deems to be useful, based on its priorities and the information available. Then it negotiates with the Ministry of Finance to obtain the necessary appropriations. Although these projects face many difficulties faced by projects in other sectors, they do not stem from budgeting. In contrast, the "decentralized investment programs" must operate with a decisionmaking process that has many weaknesses. Hospitals submit their list of needs, very often without solidjustification, to the Wali. The healthdirector for the Wilaya acts as a technical advisor to the Wali, but the Wali i s the real decisionmaker. He selects which projects get financing. Consequently, the needs transmitted to the Ministry of Health may be influenced as much by the local political context as by technical considerations. Usually, the Ministry does not question the Wali's project list and uses it as a base for discussion with the Ministry of Finance. When the amount of appropriations by Wilaya i s finally set, it i s given ina lump sumto the Wali, without earmarking the money for specific projects. The Wali therefore may use the money for other projects than those initially presented, or occasionally he may divert some funds to cover urgent recurrent expenditures. Centralized and decentralized sector projects must both operate in an environment in which separate departments are responsible for the operating budget and for ~~ ~ Itis also a minor part ofthe totalhealth expenditures: 5,21percent in2000, 6,72 percent en2001 (source: National Health Accounts, 2003). Inthe health sector, centralized sector investment programs only includethose relatedto university hospitals and a few specialized tertiary care hospitals. All other investments are included inthe decentralized investment programs. 18 Annex B the investment budget within the Ministry of Finance and the Ministry of Health, making coordinationdifficult inways that will be discussed indetail later. B.8 Project preparation and execution suffer in many projects because they start without a proper feasibility study in order to shorten the completion period. Part of the difficulty stems from the fact that Algeria has no consulting f m s that specialize in assisting the government to prepare and execute big investments in hospital projects. Likewise, very few contractors specialize in that field. Consequently, the biding process i s usually unsuccessful. Finally, health departments at the wilaya level and the Health Ministryitself lack enough trained staff to design important projects and assess their costs, monitor their implementation, and evaluate their quality and impact upon completion. B.9 Maintenance policy is inadequate. Hospitals have a very high rate of out-of-service equipment (in 2003, 24 percent of sonographs, 34 percent of endoscopes, and 23 percent of incinerators were out of service).6 Very often, broken machines are replaced rather than repaired iffunds are available. There aremanyreasons for this. First, maintenance does not seemto be a priority in most hospitals (maintenance represented 2.9 percent of the total operating costs of public hospitals in 2004), and no effective procurement policy addresses this deficiency. There are also local constraints, particularly for complex equipment, including a lack o f technicians and spare parts. To address this situation, the Health Ministryordered, as of September 1, 2005, that equipment purchase contracts must contain clauses reinforcing suppliers' obligations for maintenance (a commitment to provide skilled technicians in Algeria, a minimum maintenance and warranty period). These measures certainly move inthe right direction, although care must be taken to ensurethat they are implemented and produce the desiredresults. B.10 Asset monitoring has many weaknesses. There i s no consolidated database of investments madeby different institutions. The Health Ministry keeps close track of "centralized" investments, but it often has no details on "decentralized" investments. In addition, there i s no information available on investments by other ministries. This situation i s likely to create problems with managing investments and coordinating projects. Finally, hospitals do not use depreciation accounting. Thus there is no realistic overview o f their financial situation, making it difficult to anticipate their investment needs and impossible to get a reliable estimate of the value of the health sector's asset stocks. B.ll There are severe shortages in human resources and a lack of information systems. As a result, the Ministry ofHealthcannot adequatelyperform its functions. Transport and Public Works B.12 In Algeria, railway and airport underutilization and road and port congestion are typical. Failure to fully consider intermodal transport issues, stemming from insufficient coordination among the two ministries concerned (Transport and Public Works), is partly responsible. More broadly, these problems are symptomatic, pointing to the lack of a comprehensive and up-to-date strategy for these two sectors. B.13 In railways, a broadly used and good indicator of asset usage is the traffic density or infrastructure utilization density, measured in traffic units per kilometer of line. Elsewhere inthis report, abenchmarkinganalysis is shown for this indicator, comparingAlgeria's with other railways in the region. Algerian railways fared very poorly compared to those in neighboring `See Statistiques sanitaires - Annde 2003, Ministryof Health. 19 Annex B countries, with much lower traffic density. With fewer than one milliontraffic units per kilometer of railway line, Algeria's rail infrastructure stock i s underutilized. The main reasons are (a) uneconomic investments inthe past, and (b) a sharp decline of traffic in the past 15 years (from 5.7 billion traffic units in 1990 to 2.9 billion in 2004) due to railway transport's lack of competitiveness vis-&vis roads, as Annex Eontransport shows indetail. B.14 As for airports, a broad consensusexists among Algerian officials that many small regional airports are underutilized. The underlyingreason i s that some investments seem to be more political than economic, with many walis striving for their own international airports. No clear and crisp evidence supports this consensus, although a number o f indicators point in this direction, as described inAnnex G on civil aviation. Table B.1 shows the same difficulties in project implementation for another sample of projects, despite the fact that in those cases the studies had been completed and the projects were considered "mature." Such delays and cost overruns are caused by several factors, including weaknesses in the technical studies (which led to underestimating costs and implementation difficulties) and insufficient execution capacity of both government agencies and the contractors. Ina few cases, with a significant import component, exchange rate changes may also have contributedto delays and cost overruns. All these difficulties were first identified ina 1994 study by the Ministry of Infrastructure in cooperation with the World Bank,' and later discussed in a 1999 study also prepared with the support of the World Bank.* B.15 Over the period 2000-04, cost revaluations accounted, on average, for 15 percent of the initial appropriations: and for as much as 30 percent in a specific number of individual projects (Table BJ), although these wouldn't seem to be representative of all sector projects according to the authorities. Some cost revaluations are unavoidable, but they should be better forecast and, of course, better controlled. For this, however, project design has to be sound and realistic in the first place. The priority issue i s upstream: it is possible to execute badly a well- designed and cost-estimated project; but it is impossible to execute well a badly designed or unrealistically cost-estimatedproject. *"Modemisation institutionnelle du secteur de l'equipement," July 1994. "Modemisation de l'administration de l'kquipement- Amelioration de l'efficacitk opkrationnelle des services de l'administration," September 1999. The figures are 21percent in2000, 16percent in2001, 12 percent in2002 and 2003, and 19 percent in 2004, according to data Eromthe Ministryo fFinance. 20 Annex C ANNEX C: MAINFEATURES OF THE ALGERIAN BUDGET PROCESSlo C.1 Algeria has a national budget that in practice is a collection of many budgets. These could qualify as annexes, either because some of them escape the Ministry of Finance's control or because they are globally earmarked or belong to local authorities. The national budget is in fact composed of two budgets, established and managed according to different principles and nomenclatures, according to the nature of expenditures and the rules followed: 9 The recurrent budget is arranged by an organizer, which means according to an administrative nomenclature. 9 Thecapitalinvestmentbudget is organizedbysector. C.2 The recurrent budget is incremental: credits are established (and represented) by reference to the previous year's inscribed amounts, without particular reference to the executed amounts (which are not known at the time the budget i s prepared") or the objectives, or to any ciphering system of costs. As for the capital investment expenditures, intheory the reference to a sectoral strategy and to intrasectoral priorities i s left to the Technical Ministries. In practice, however, the budget makes no explicit reference (outside the presentation report) to priorities, strategies, and missions. Budget T i m e Frame C.3 Both the recurrent and capital budgets are prepared and executed according to a similar calendar, but in a disjunctive manner and according to different approaches. The time frame ofthe budgetpreparation for the year n is the following: 9 Marchn-1--framing letters P EndofMayn-l--organizers demandreception 9 June-mid-July-arbitration meetings 9 20-30 July-bilateral discussionspermittingarbitrations at the ministry/ministries level 9 30July-government transmission 9 Government counsel 9 Ministriescounsel 9 Transmissionto theAssembly atthe endofSeptember. Recurrent Budget Preparation C.4 The recurrent budget makes reference to the distinction between elected services and new expenditures. There i s no reference to services and their content. Tables compare the credits inscribed to those inscribed the previous year, and modified during the year. There i s no reference to the activities financed nor to the amounts spent. Investment Budget Preparation lo summarywasproducedfiomMoF/Sofieco (2003). This I'When the budget for year n starts to be prepared (inApril of year n-1), it ignores projected execution for year n-1, but the execution is available during year n-2. 22 Annex C C.5 This process adheres to two different steps, according to expenditure type. Investments and development projects are, inprinciple, inscribedwhenever they have a sufficient "maturation degree" as described in the legal text. The object o f Program Authorizations (PA) corresponds to the total amount of the project. Payment credits (PC) are then inscribed separately by year. The PA could be revised. The Ministryof Finance intervenes inthe initial phase, at the time of registration, but the rest of the procedure, including the definition of sector amounts i s left to the spending ministries. For capital expenditure (Status C), credits are inscribed each year and refer to the Special Treasury Accounts. Nomenclature (Classifications) C.6 For the Recurrent Budget the existing nomenclature classifies the expenditure's nature as follows: 9 Title (1 =debt; 2=authorities allocations; 3=servicesmeans; 4 =public interventions) 9 Part (Title 3 example/ 1=personnel-activity remuneration; 2 =personnel -pensions & allocations; 3 = personnel - social charges; 4 = material and services functioning; 5 = recurrent subsidies; 6 = social action - assistance and solidarity; 7 = diverse expenditures) 9 Chapter 9 Article 9 Paragraph It classifies the Ordunnateurs (MMM.OOO) as follows: 9Ministv (MMM:3numberswherethe first numberisalways equalto 1) 9 Organizer (000:3 numbers)-principal (000, typically the ministers); primary (x00, typically the CEOs); secondary (OOOx, typically leaders of decentralized services); and if need be, replacement or delegate. Example: The chapter situates the expenditure line organically and economically-for example, for the Ministry of Finance, the chapter 31-01 (title 3, part 1, chapter 01) indicates principal remunerations of central administration. The correspondent chapter and nature of the expenditure can vary from one ministry to another. Thus the ciphering structure, which i s constraining and outdated, has induced the creation of additional codes, called sections and subsections, inorder to introduce the organic subdivisions that the legal structure could not codify. Sections and subsections constitute additional chapters. (Notice that a functional recurrent expenditure's nomenclature does not exist.) Inthis way, the ciphering of an expenditure line i s presented as the following: Ministry Section Subsection Title Part Chapter 110 I1 11 3 1 11 Ministry Accounting Decentralized Service Activities Regionaldirections ofFinance general services means personnel of Treasury- main direction remunerations remunerations 23 Annex C C.7 For the CapitalBudget the existingnomenclature classifies key expenditure terms as follows: 9 Sector (Inumberj 1 =manufacturing industries; 2 =mines and energy; 3 =agriculture and hydraulics; 4 = productive services; 5 = economic and administrative infrastructure; 6 = education and training; 7 = socio-cultural infrastructures; 8 = habitat; 9 = development of communal plans. 9 Subsector (2 numbers)-There are 40 subsectors, but two primary forms are used in terms of positioning, one for sectors 1-8, and one for sector 9, which inverts how chapters are designated (see below). For example, 773 designates sector 7 and subsector 73, or health infrastructure; while 799 indicates subsector 79 of sector 9, or sociocultural infrastructures. P Chapter (3 numbers)-There are 118 chapters, each combining a sectoral with a subsectoral designation (337 indicates Sector 3, subsector 37). For example, 412 = fisheries, general study; 413 = fisheries, general infrastructures; 731 = hospitals; 732 = specialized establishments; 733 = light units. As noted above, chapters designating sector 9 are inverted in their ordering. I n this case, the subsector precedes the sector number, indicating that the chapter represents communalplans. 9 Article (Inumber)-The article codifies the final nature o f the expenditure. For sector 7, subsectors 73, chapter 731, 1 = new creations; 2 = major repairs; 3 = capital; 6 = developments and extensions; 7 = exceptional capital; 8 = others; 9 = studies. Insum, this nomenclature lacks convenience andclarity. It obeys no specialization rule and does not permit the budget to be integrally described according to a uniformsystem. Hence, it prevents a comprehensive vision and analysis of the whole budget. And it i s extremely hard to adapt to modernintegrated information systems. The ImpactofBudgetStructureandFormatonPlanningandAnalysis C.8 Clearly, neither the formattingnor the structure of the Algerianbudgetrespondsto these needs. A consolidated presentation of the recurrent and investment budgets is impossible. When it comes to the recurrent budget, the formatting does not respond to readily comprehensible codes, such as the conksing designations for the initiating number (see the nomenclature analysis). The budget is simultaneously global and very detailed, yet comments provided by the spending services do not clearly show expenses. The budget i s incremental, lacking explanation of unspent and transferred amounts. Explanations are descriptive (for example, 138 persons are recruited), but without reference to activities (the reason for recruitment i s omitted). Consequently, budget analysis i s precluded as are explicit links with strategies, objectives, or performances. Consequently, the budget i s not, at this stage, an operational tool for realizing the government's intentions. BudgetExecutionand Control C.9 Public accountingprinciplesfor budget executionare defined by Law 90/2.This law defmes the roles and responsibilities of actors (organizers, financial inspectors, public accountants assignataire) in charge of state budgeting and accounting. Decree 92/414 for prior expenses' control obliges keeping budget accounting records of state engagements and of auditing by financial inspectors. The major definition and distribution's principles of roles are 9 Theordonnateur isresponsiblefor initiatingthe expenditure. 24 Annex C 9 Thefinancial inspector controls allengagements. 9 Theaccountantassignatairehasprimaryauthorityoverempowerments (mandates). 9 Theordonnateur's andaccountant'sroles areseparated. 9 Moreover, there is an important decentralization in execution. This decentralization is embodied in the definition of the ordonnateurs and by a decentralized process of execution and cost control. The main institutions involved are the wilayas, administered by the wali; regionalmanagers such as the secondaryorganizers; Hospitals and the other public establishments. C.10 Creditnotificationinvolvesthe following: 9 Recurrent expenses-Credits are voted by principal ordonnateurs. The decree divides each ministry's credits into the part given to central services and the part for decentralized services. In assigning credits to secondary ordonnateurs, each ministry produces detailed manuals for each secondary organizer that include the procedures for tappingdesignated credits. 9 Investment expenses4redits are voted by sector. The Ministry of Finance notifies by subsector the approved programs and credit payments. At the central level, credits are divided into those for principal organizers, those for decentralized sectoral programs level and those for development communes programs. Walk assign and distribute their designated credits. The division of credits by region usually takes a long time and i s a reason for slow initial execution in budgeting. The major part of the Budget is executed inthe secondsemester ofeachBudgetingyear. C.11 SpendingProceduresincludethe following: 9 Standardprocedure prevails when (a) the item is covered by an order form to the supplier and the financial inspector's visa or (b) for payment upon completion of a committed service. A simplifiedprocess would bepossible. 9 The procedure without prior ordering is used for payments executed by previously decided governance, and for payment of the principal and interest due on public loans. The accountantsassignataires are allowedto pay these expenses, which will be sorted out once an order or a mandate payment i s presented by the competent organizer for the concerned budgetingcredits. > The procedure without an ordonnateur's intervention includes expenses that are paid by the accountant assignataire independent of the ordonnateur's role in execution. 25 Annex D ANNEX D: RAILWAYS Railway Sector Overview D.l The Algerian railway sector is managed and operated by the National Railway Transportation Company (SNTF) as a "public service requiring state intervention." The regulatory framework for railways i s governed by an agreement between the state and the SNTF approved by decree on June 28, 1988; and by the Cahier des Clauses Gtnkrales (CCG) [General Terms and Conditions] establishing the public service roles and responsibilities of the SNTF, approved by decree of the Ministry of Transport on December 22, 1990. Railway activities are defined therein as "a public service requiring state intervention," with "all services offered by the SNTF [being] implemented consistent with public service principles." The SNTF is a public industrial and commercial entity (EPIC) under the supervision of the Ministry of Transport. It manages andoperatesthe entire Algerian railway network.** D.2 The Railway affects five areas of the transport market: 9 Heavy mining cargo transported on the Annaba-Tkbessa-Djkbel Onk line. This cargo consists of iron ore and phosphate, andthe railway has a naturalmonopoly. 9 Transportation of general goods across the entire network. For this commercial activity the railway faces strong competition from road carriers. 9 Intercity passenger transportation (main lines) on the Algiers-Oran and Algiers- Constantine-Annaba lines. The railway also faces strong competition for this service, not only from roadtransport (mostly buses) butby air. 9 Transportation of regional travelers between large and medium-size cities. This activity markedly decreasedinthe past decade becauseof strong competition from road transport (buses, minibuses) and inadequate supply of railway services. Ii s envisaged to be run in the future as a compulsory public service. 9 Transportation ofsuburbanpassengers inmetropolitanAlgiers. Thistransportation onthe Algiers-ThCnia and Algiers-El Affroun lines is set to play a key role in the general transportation plan for the Algiers region. As shown inFigureD.1, transportation of goods represents 67 percent oftraffic and79 percent of SNTF revenue. D.3 General configuration of the network is satisfactory, but requires modernization. Algeria has a 4,941 kilometer rail network basically stretching across the coastline as well as along the three North-South corridors (AnnabaDjebel-Onk, Constantine/Touggourt, and Mohammadia/BCchar). With its current structure, it covers the largest cities, the main logistical and industrial centers that generate large traffic volumes, the miningcenters, and all the country's large ports. The only notable exception i s the Hassi Messaoud zone, the main logistical point for l2The SNTFestablished three specialized rail transport companies as subsidiaries: RailExpress for the transportation ofpackages, "particulars," and certain whole-train cargo; the Socittk de Transportation des Grains (Grain Transportation Company); and the Socittt des Transports de Produits Energttiques (Energy Products Transportation Company) for fuel transportation. Inaddition, two specialized rail transport companies are being established: the Socittt pour C'Exploitation des Transports Mintraliers (Company for Mining Transportation Operations) on the easternmining line, and the Socittt pour le Transport Voyageurs de la Banlieue Algtroise (Algiers SuburbanPassenger Transportation Company). 26 Annex D petroleum activity. Infact, other than the need to build the Touggourt-Hassi Massaoud line, the current configuration of the network satisfies the economy's needs. However, infrastructure remains inadequate in several areas, particularly with regard to the telecommunications network, signaling equipment, and track conditions in certain sections. Modernization of the railway network will therefore require sustainedinvestment inthe years to come. Figure D.l Distribution of SNTF Traffic by Market Category, 2004 a/ as a Percentage of Traffic Volume (Traffic Units) b/ as a Percentage of Traffic Revenue Passengers 1 Algiers Suburbs Rsgionai Services ~ g % 18% Pa8sengers 2% Rsolonal Passengers Main Lines 10% \General I Goods 49% [General Goods 61% Source: SNTF. D.4 The modernized network emerging from the complementary plan for economic growth support (Programme ComplCmentaire de Soutien a la Croissance, or PCSC) will entirely satisfy needs for the regional transportation of goods and passengers but will still be inadequate for travelers on the major lines. There are severe layout problems at a number of sections that significantly impede the commercial speed of trains (El AffrounKhemis in the AlgierdOran section, ThenialBouira in the Algiers/Constantine section, as well as ConstantineRamdane Djamel at the link to Annaba). Railway competitiveness for intercity passenger transport therefore depends on eventually installing infrastructure suitable for high speed trains; implementation o f this must be a gradual process, comprising different phases in a planned and coherent framework. 0 Passengers(millionsof passenger-km) declining. In 2004, the railway sector 8FreighI(mi1imnsofton-km) comprised only 2.9 billion units of traffic, 4000 35001 p7 about half the 5.7 billion units in 1990. The 3000 decline was particularly marked for 25w zow passengertransportation, as shown inFigure $500 D.2.This is due to acts of terrorism and the 1wo 500 security situation, but also to the loss of 0 railway competitiveness to its main rival, road transportation. In 1990, the railway's market shares were 16percent and 4 percent for intercity cargo and passengers, respectively. By 2004, these shares had fallen to 10 percent for cargo and approximately 0.5 percent for passenglers, as SNTF traffic had fallen by two-thrds 27 Annex D while road traffic d~ubled.'~However, with respect to passenger traffic, the situation is expected to significantly improve after the ongoing modernizationo f the network. D.6 The railway sector is plagued by poor service and low overall productivity. Currently, 33 percent of suburban trains, 17 percent of regional trains, and no major line trains arrive on time. From a customer's perspective, the poor service has become a disincentive. The situation is similar for transport goods, whose slow traveling times, unpredictable deliveries, and frequently insufficient capacity make railway transportation unreliable. Additionally, staff, equipment and infrastructure productivity are low as shown in FigureD.3, which compares the operational performance ofthe SNTF with selectedrailway networks inthe region. Impact of Railway Activity on Public Finances D.7 The state finances investments and subsidizes railway network operations. The State-SNTF Agreement and the CCG provide for government financial contribution to SNTF through subsidies and contributions to operations, and by assisting with infrastructure investment: P Undersubsidies and operational contributions, the government is expectedto (a) provide a subsidy to cover railway maintenance expenses; (b) provide compensation for public service obligation; (c) provide a subsidy for security at grade-level crossings; (d) provide a subsidy for internal and external training of SNTF staff; and (e) help service loans contracted by the SNTF. P Under assistanceto investment in infrastructure, the government provides financing for (a) renovationand modernization of rail infrastructure and (b)construction of new lines. D.8 The Algerian railway sector is a huge burden on public finances. As shown in Table El.1, state fmancial transfers to the railway sector over the last 15 years have totaled approximately US$6 billion, or about 0.8 percent of GDP and 4 percent o f public expenditure on investment and operations. Duringthe same period, traffic income earned by the SNCF rose to approximately US$1.78 billion. State fmancial transfers to the railway sector were therefore 3.4 times the railway company's "traffic" revenue. Even when transfers for fmancing new lines are excluded, state transfers are still close to 2.5 times the SNTF's turnover. The railway sector i s thus an undeniable drain on the public purse. Reasons for this may be found inthe SNTF's poor operational and financial performance, poor relations between the government and the SNTF, and a less than ideal investment policy. SNTF's Chronic FinancialProblems D.9 The SNTF's recurrent operating deficits lead to cycles of financial crisis. For 1990- 2003, the railway company posted operating deficits each year (before financial expenses and state subsidies) o f between 30 and 200 percent o f its turnover, averaging 80 percent. Even after including the transfer of state operational subsidies, the operating deficit averaged 30 percent of the turnover for that period. l3See World Bank, Algeria: Transport sector policy note, May 2004. 28 Annex D Figure D.3 Railroad Productivity in Algeria and Other Countries InfrastructureUsage Density (Thousands of traffic units per km of line) Egypt 11,069 France Iran 3,971 Morocco ,733 Tunisia Turkey Algeria Staff Productivity Locomotive Productivity (Thousands of traffic units per staff) (Millionsof traffic units per locomotive) Iran 1,600 Egypt 05 Egypt Iran Morocco Morocco France France Tunisia Turkey Turkey Algeria Algeria Tunisia FreightWagon Productivity PassengerCoach Productivity (Thousandsof ton-km per wagon) (Millionsof passenger-km per coach ) France 1,203 Egypt 14.7 Iran Iran Morocco Morocco Tunisia France Turkey Tunisia Egypt Turkey Algeria Algeria Source: International Railway Union; 2003 Statistics(except Egypt, 2004). 29 Annex D Table D.l State Financial Transfers to the Railway Sector, 1990-2004 (Approximate Millions US%) Operating subsidies and contributions 1,659 o f which: Subsidy for infrastructure maintenance 637 Compensation for public service obligation 94 Miscellaneous operating subsidies 31 Financial bailouts o f 1996 and 2005 897 Contribution to infrastructure investments 4,373 Total 6,031 Source: SNTF, Ministry of Finance. (The 2005 financial bailout is included to the extent that it pertains to the repurchase of debts contracted duringthe period.) These recurrent operating deficits plunge the company into cycles of financial crisis inwhich the following occurs: Operational debt increases. Between 1998 and 2003, operational debts rose from DA 1.6billionto DA 5.3 billion. The company lacks the operational cash flow to finance necessary maintenance and investment. The lack of funds has the effect of (a) slashing infrastructure and rolling stock maintenance,l4 (b) decreasing investment below what i s needed for the company to run smoothly, and (c) increasing financial debt to finance vital investments (between 1998 and 2003, financial debt rose from DA 5.8 billion to DA 17.9 billion; in 2000, state funding was provided, the SNTF had a debt-equity ratio of nearly six to one). Interest gradually increases as debt mounts, creating long-term unsustainability. As shown in Table D.2, financial charges increased four-fold from 1998 to 2003, reaching 63 percent of turnover. The interest burden thus caused the company's net earnings to plunge. State subsidies rose to DA 2.5 billion annually in 2000-2004, offsetting the operating deficit but adding interest payments that worsened the company's financial position. Thus, (a) negative cash flows after interest payments prevented the company from repaying its debt; and (b) only financial stabilization measures by the Treasury could pull the SNTF out of the crisis. The Treasury was first forced into a financial bailout of the SNTF in 1996, then again in 2005 when it bought DA 32.7 billion of the railway company's debts after receiving a financial audit report it had commissionedpursuant to a Council of Government decision. Management and Business Factors Driving the Operating Deficits D.10 The Company's management method obstructs better financial performance. Despite laudable recent attempts to correct problems and the indisputable dynamism of its management team, the company i s still run very bureaucratically and infused with a public service rather than a customer-driven culture. It also strives for technical perfection rather than financial performance. l4Numerous locomotives have broken down because the SNTF was unable to purchase spare parts; the same applies to signaling equipment and ongoing railway works. 30 Annex D Table D.2 SNTF Results, 1998-2004 fDA million) 1998 1999 2000 2001 2002 2003 2004 Operating revenues 3,495 4,376 4,272 4,359 4,668 4,395 4,320 Revenues from traffic 3,406 4,323 4,153 4,247 4,462 4,295 4,225 Other operating revenues 89 53 119 112 206 101 95 Operating expenses (6,271) (6,048) (6,326) (6,394) (6,957) (6,492) (4,372) Wages (3,413) (3,375) (3,600) (3,842) (4,196) (4,579) (5,002) Other operating expenses (2,686) (2,407) (2,682) (2,481) (2,852) (3,083) (3,944) Transfer of operating expenses 189 55 258 241 3,506 1,837 5,239 Depreciationandallowances (360) (321) (303) (314) (3,415) (668) (665) OPERATINGINCOME (2,776) (1,672) (2,055) (2,035) (2,290) (2,096) (53) Financial charges (685) (975) (882) (1,316) (1,820) (2,759) (7,037) Net nonoperationalprofit (loss) 1,871 409 1,529 (1,954) 1,916 (1,870) 1,199 NETINCOME (1,590) (2,238) (1,407) (5,305) (2,193) (6,726) (5,890) Source: SNTF (state subsidies not included). Note: Losses and outlays are represented by figures in parentheses. D.11 The lack of commercial aggressiveness has decreased revenue. Turnover at constant prices fell from DA 8.9 billion to DA 3.2 billion between 1990 and 1996 (valued in2000 dinars). Since 1997, turnover has stabilized at DA 4.2 billion on average.This reflects the general trend of railway traffic duringthat period. Since the network's operational costs are partially fixed, the fall inrailway activity deepenedoperating deficits. Although the decrease intraffic inthe 1990swas to some degree exogenous, it is nevertheless the case that the company's lack of commercial aggressiveness-evidenced by its embryonic commercial structure at the central and regional levels-has led to significant losses inmarket shareto roadtransportation ina highlycompetitive environment, thereby worsening the railway's financial performance. In addition, SNTF is currently handicapped by a lack of locomotives. Figure D.4 Changes in SNTF Wage Costs, 1997-04 D.12 In spite of significantly reduced staff numbers, an excessive staff complement 5,000 continues to place a heavy burden on 4,500 operatingcosts. At the beginning of 2005, there 4,QOO 3,500 was 11,080 staff at the SNTF, a significant decline when compared to the figures for the early 1990s (18,400 in 1990). Despite these E2,000 2,500 0Supervision attempts to reduce staffing, the overall staff 0 1,500 productivity remains low, as shown in Figure 1,000 D.3. The staff costs-traffic revenue ratio, as 500 0 shown in Figure D.4, reached 1.18 in 2004 1997 1998 1999 2000 2001 2002 2003 2004 becauseof wage increases and a relative increase in the number of managers. This ratio is Source: SNTF. incompatible with sustainable financial equilibrium, which demands a value in the 0.3- 0.4 range. SNTF i s currently undertaking a number o f actions to increase staff productivity, including throughbetter information systems ans costs management. D.13 The pricing policy fails to ensure financial equilibrium. The absence of analytical accounting and cost-calculation software has prevented calculation of the profitability of eachrail 31 Annex D line in operation until n0w.l' However, reference data for rates comparison on lines with purely commercial activities does permit an initial assessment of pricing adequacy. For the mining transport segment of the market on the haba-T6bessa-Djkbel Onk line, for which the railway has a natural monopoly, the rates are DA 1.07/ton-kilometer (tk) for phosphate, or 1.5 U.S. centdtk. In Morocco, where production conditions may be more favorable than in Algeria, the rate for transporting phosphate i s 2.24 U.S. centshk. The rates SNTF applies thus do not enable it to cover its costs. Realignment of the price structure i s even more important because more than 80 percent of the SNTF's traffic revenue comes from transporting goods (see Figure D.1), in other words, from the commercialactivitiesthat determine ifthe company covers its costs. The Needto ReviseFinancialRelationsbetweenthe State and SNTF D.14 The system of government contributions and subsidies does not work as it should, and cannot ensurethe financial equilibrium ofthe SNTF. Throughout the 1990s, the operating subsidy granted to the SNTF (about US$600 million, financial rehabilitation not included) was a third less than the total projected under the 1988 State-SNTF Agreement and the1990 General Terms and Conditions (about US$912 million). While the situation has certainly improved since 2000 when operating subsidies began exceeding the operating deficits, as noted above they still do not allow the company to meet its financial obligations and repay its debts. The problem i s that the amounts granted annually are hndamentally lump-sum payments, and the division between the different line items i s largely arbitrary, as shown in Table D.3. It can also be seen that the system fails to work as it should, jeopardizing the financial equilibrium of the company, which must then be periodically restored by costly financial bailouts like those of 1996 and 2005. Table D.3 State Operating Contributionsto the SNTF, 2000-2004 (DA Million) 2000 2001 2002 2003 2004 Infrastructure maintenancesubsidies 2,000 2,000 2,000 2,000 2,000 of which personnel costs 1,000 1,000 1,000 1,000 1,000 of which materials and supplies 1,000 1,000 1,000 1,000 1,000 Compensationfor publicservice obligation 500 500 500 500 500 Miscellaneousoperatingsubsidies - - - - - Total (DA million) 2,500 2,500 2,500 2,500 2,500 Total (YOof GDP) 0.06 0.06 0.06 0.05 0.04 Source: SNTF. Note: Negligible mounts are representedby a dash. D.15 The very principles of the government subsidy system are open to criticism. The infrastructure maintenance subsidy probably rests on the premise that, since the state rather than truckers and buses cover road infrastructure maintenance costs, the "harmonization of the different modes of transportation" (CCG Article 20) also means the state should absorb railway infrastructure maintenance costs to maintain a level competitive field. This premise i s not altogether founded in terms of road maintenance costs, although some categories of road users (large trucks) probably pay insufficient road taxes to cover the maintenance costs they cause. However, this can be rectified by a more transparent road taxation system to correct the imbalances. Simply granting a maintenance subsidy to the SNTF to offset costs that should be IsCost calculationsoftware was deliveredto the SNTFinlate 2005 and should be operational very soon. Analytical accounting will be simultaneously implemented. 32 Annex D recovered anyway, also gives the company no incentive to develop an optimal maintenance policy. In fact, state subsidy for track maintenance has been abolished in almost all market economies, along with other "means" subsidies. D.16 The mechanisms for paying compensation for public service obligations seem insufficient. The government's compensation for the public service obligations imposed on the rail operator i s completely justifiable in principle. However, this should not under any circumstances be paid as a lump sum, but rather on the basis of services rendered. Interms of calculation methods, the principle set out in the Agreement and the CCG (Paragraph 1) for providing compensationfor transportation servicesprovided at reduced prices orfree of charge i s generally acceptable, as it stipulates that the amount of the compensation should be equal to the difference between the "general" price applied by the SNTF and the "preferential" price charged by the state for the customer category concerned. In contrast, the current mechanisms for compensatingfor services used as a public service obligation appear insufficient. Inthis regard, Article 21 of the CCG stipulates that the contribution i s disbursed "on the basis of the profit or loss" of the activity in question. This principle i s currently inapplicable as it requires the implementation of analytical accounting and cost-calculation software, which are not yet inuse. As a result, there are endless discussions between the rail company and the regulatory authority on the valuation of the shortfalls attributable to various railway activities. The compensation is therefore disbursed as a lump sum instead of being determined by service or groups of homogenous services. Under such a system, the state cannot make rationalbudgetary decisions or decide if there appears to be particular justification, in light of the compensation that has to be paid, to continue requiring the rail operator to perform one or another function as a public service obligation. Moreover, the principle of compensation based on the profit or loss generatedby an activity gives the railway operator no incentive to reduce productioncosts and improve revenues. Instead, it tends to subsidize the company's inefficiency. The Economic Role of the Railway D.17 The railway must adapt to transition to a market economy. In a context of progressive transition to a market economy in Algeria, rail transportation finds itself competing with other modes of transport, especially by road. A hypothetical situation in which the government distorts the competitive environment by massively subsidizing a less economically viable mode of transportation i s neither appropriate nor sustainable.The railway has no particular advantage inand of itself and i s not an engine for development (as it was inthe American West at the beginning of the century, at a time when the railway was the technically and economically dominant means of transportation). Furthermore, large-scale railway construction is not an effective mechanism in combating unemployment as it i s capital-intensive by nature, and needs companies and foreign labor. For each market segment, choosing the railway sector should thus be based on its comparative advantageover other means of transport, basedon national economic criteria-even when servicing zones currently seen as a public service. Ina market economy, the railway is no longer the "general" means of transport-this now falls to roads-but a specialized means of transport used for market niches in which it can provide services adapted to consumer demand at a lower cost than its competitors. D.18 The investment policy should be assessed interms of economic viability. The railway master planthat still serves as a basis for decisions on railway network development dates from the 1970s, when it was part of an ambitious industrial development planthat never came to full fruition. Railway investments nevertheless continued. It i s in this context that the Ramdane Djamel-Jijel line was built, even thoughthe plan for a steel manufacturing industryinJijel never 33 Annex D materialized.16Similarly, the construction o f the Bordj Bou Areridj-M'sila now inprogress was initially intended to satisfy the demand of an aluminum electrolysis plant that never materialized. For all intents and purposes, these decisions were very costly to the economy. With the exception of suburban railways and specialized lines for TGV-type high-speed passenger trains, the economic benefit from railways i s now generally concentrated in transporting goods. The possibility that an existing "classic" railway line would continue or expand its passenger service i s only likely to be, in the best-case scenario, marginally profitable and could, except in highly unusual cases, be ignored in economic analysis. Interms o f size, experience has generally shown that constructing a new line can hardly ever be economicallyjustified when the tonnage of goods to be transported on the railway line is less than a million per year. In Algeria, such tonnages cannot be obtained without specialized cargo from specialized industrial or mining units that require heavy transportation. Even on the network lines that serve the country's most significant production centers, average traffic does not meet the cited threshold and only exceeds it on certain sections o f lines." The construction o f new lines must therefore always be based on the certaininstallation of heavy industries, andmust pass an economic cost-benefit analysis. How Railway IndustryRecovery Prospects Impact Public Finances D.19 Recovery of the rail industryhas begun within the framework of transport sector reform. In2004/2005, at the request of the Ministry of Transport, the World Bank developed a draft "Roadmap" for reform of the transport sector. Beyond the 2005 financial bailout of the SNTF, the draft Roadmap comprises an overall strategy for the sustainable recovery of the railway sector that would allow it to adapt to its new role in the market economy framework and reestablish the sector on a sustainablefinancial footing. The key components of the systemare (a) rebuilding the institutional and organizational framework, (b) streamlining and modernizing the internal management o f the sector, and (c)applying a new investment policy. An overview o f the draft Roadmap recommendations i s provided inBox D.1. D.20 The railway company will have the means to profitably run commercial activities. A first stage would be to clearly identify which market segments should be put into the commercial transport category and the public service transport category. O f the five railway transport market segrnentsqa) heavy miningtransportation, (b) general goods transportation, and (c) major-line intercity passenger service-appear purely commercial.'* For these activities, the railway company should have total freedom to determine the structure and pricing of the services offered, without state intervention in the management o f the activity and without direct or indirect state financing. l6However, since the railway had already been built when it was decided to abandon the steel manufacturingproject, strictly speaking there was no mistakeon the railway project. l7This is the case o f mining transportation on the Annabajebel-Onk corridor that totaled 2.2 million metric tons in2004, 1.4 million metric tons o f this being iron ore from the Ouenza and Bou-Khadra mines and 0.8 million metric tons being phosphate from Djebel-Onk. On the other hand, regional passenger transportation and passenger traffic inthe suburbs o f Algiers do not share these characteristics. 34 Annex D Box D.1 Main "Roadmap" Recommendations for the Railway Sector by 2012-15 The strategy aims to have a railway sector that Offers services in those niches o f the transport market where the railway sector is competitive, at a quality level adaptedto customer needs and at an acceptable price. I s managed ina commercially and financially grounded manner. Receives state financial assistance only for those segments that provide state-sanctioned public service. Rethinkingthe Institutionaland Organizational Framework Distinguish between rules to be used for commercial railway activities and rules applicable to needed public service activities. Rework the financial relationship between the state and the railway sector: the state provides financing only for state-sanctioned public services and for constructing new lines. During the recovery period, the state will also finance railway upgrading and retooling. Restructure the railway sector by establishment o f an "Algerian Railway Group" composed o f (a) the SNTF as general service provider for activity on the existing network, and infrastructure manager; and (b) specialized rail transport companies (commercial corporations inwhich the SNTF has a stake, either majority or not) operating services under license. Streamlining and ModernizingInternal Management of the Railway Sector Implement a management streamlining and modernization program that allows for the transition from a largely administrative and bureaucratic style to one that is business-oriented and centered on customer satisfaction and financial performance (to be set out inthe Business Plan for the railway group). Establishpartnershipswith the private sector for specialized railway transport companies, inaccordance with agreed terms. Instituting a New Railway Sector Investment Policy Absolute priority is given to modernizing existing rail infrastructure. Rolling stock is increased. Source: World Bank (2005). D.21 Eventually, state funding will be limited to public service contributions and the financing of new infrastructure. Redefining financial relations between the state and the railway sector constitutes a key point of the future institutional framework for railway activity. In this regard, it is proposed that state financial assistanceeventually be limitedto the following: > Payment of compensation by the state for public service obligations explicitly imposed on railways, either for operation of particular services (passenger traffic in the suburbs of Algiers, to be operated within the framework of "public service agreements") or for price reductions to certaincategorieso f customers. To implement a viable compensation system that provides an incentive for maximum efficiency, analytical accounting should be implementedat the earliest opportunity, and the cost calculation soaware delivered in late 2005 should be used. This would allow the most logical estimate of state compensation for services rendered and the company's productivity targets within the framework of the "program contract" between the state and the SNTF. For the reasons explained previously, rather than payingback the real deficits determined by analytical accounting, these new tools would define the "reference costs" or "target costs" used in the formula for calculating the "contribution for a public service obligation." Inthe same way the state can make rational budgetary choices about continuing to operate certain lines as a public service obligation, consistent with its economic and social policy. 35 Annex D k The stateassumesresponsibilityfor security expensesat gradelevelcrossings. > Financing of new infrastructure construction, railway crossings on the road network, andfencing for railway infrastructure. Under this plan, the railway sector would pay for maintenance, renovation, and development of existing rail infrastructure. The infrastructure manager's responsibility for refirbishingcosts will create an incentive for optimizing maintenance strategy. The current system of state-financed renovationdiscouragestrack maintenance in favor of renovationthat has the appearanceof being "free." However, inan intermediaryphasethat will coincide with the 2005-09 PCSC (and which should not exceed five years), the state will provide investment financing for "upgrading" the existing network. From a tax perspective, the sector should be subject to ordinary law, with the sole exception being exemption, for fuel used in rail equipment, from the specific tax used to finance road infrastructure maintenance and renovation. D.22 Investment program priority should be given to modernizing existing network infrastructure and facilities. The main objective of the railway sector's medium-term investment policy should be supporting the modernization and improvement of commercial and financial performance. This is generally the case because the railway investment program's the first priority within the 2005-09 PCSC framework i s modernization of the existing network. The network's general configuration is satisfactory for meetingthe current and medium-termneeds of the economy, except for the extension between Touggourt and Hassi-Messaoud, the major logistical center of petroleum activity, which has been written into the PCSC. With this exception, there i s no route not already served by the railway whose medium-term flow can justify construction of a new line. Some projects from the 1970s master plan, such as the Hauts Plateaux bypass or the Djelfa Ouargla line, are still onthe SNTF's list of new line projects for the medium and long term, but thorough economic analysis should precede any decision to build. 36 Annex E ANNEX E:ROADINFRASTRUCTURE Configuration and Condition of the Road Network E.l Road network density is generally satisfactory. Algeria has an extensive road system approximately 107,000 kilometers (2003), 72 percent of which i s paved. The road network comprises 28,000 kilometers o f national roads, 24,000 kilometers of wilaya roads, and 55,000 kilometers of municipal roads. As seen in Table E2.1, when Algeria's road assets are compared with those of other countries in the Maghreb region as well as Egypt and Turkey, it has the highest per capita network density and the highest proportion of paved roads. Furthermore, the design standards are relatively generous: more than half of the paved roads have a width o f 7 meters or more, versus approximately 10 percent inMorocco. Table El RoadNetwork ConditionsinAlgeria andPeer Countries Indicator Algeria Tunisia Morocco Egypt Turkey Roaddensity (km/l,OOO people) 3.3 1.9 1.9 - 0.9 0.9 Road network coverage (km/km2) 0.04 0.13 0.12 0.01 Paved Roads(YOof total) 72 66 56 78 93 Roads inGood/Fair condition (% oftotal) 39/35 - 47118 52/20 33/19 Source:MTP (2003); World Bank (latest data availablefor the period 2002-04). Note: `Wot available" is signified by a dash. Figure E.1 Algerian RoadConditionsin 1995,2001, and 2003 E.2 The road network needs to be I 100% upgraded. In 2003, only 39 percent of the 90% paved roads were in good condition, while 80% 35 percent were in fair condition, and 26 70% 60% percent in poor condition. The mediocre 50% state of the road network i s certainly not 40% Fair confined to Algeria, as the regional 30% comparisons in Table E.l show; and as is 20% 10% the case inmost developing countries, it i s a 0% major sectoral challenge. In industrial 1965 2001 2003 1995 2001 2003 1995 2001 2003 countries whose road assets can be I NationalRoads Wllaya Roada Municipal Roads reasonably described as properly managed, ' 1 the percentage of the network in good condition i s on the order of 80 percent. Fifty-four percent of Algeria's national road network, which supports most of the country's motor vehicle traffic, was in good condition. The situation is considerably more worrying for wilaya roads and municipal roads, of which only 35 percent and 30 percent respectively were in good condition. These have deteriorated significantly since 1995 because of poor maintenance (Figure E.1). This situation carries high costs for the economy, especially from vehicle operating costs and unsafe roads, and calls for upgrading the road network. E.3 The motorway network planned since the early 1990s is only partially built. To date, Algeria has only 125 kilometers of limited-access motorways. O f the 1,200 kilometers of the East-West Motorway for the entire North of the country, the construction of which started inthe early 1990s, only 125 kilometers are currently open to traffic, while 68 kilometers are well under construction and work i s about to start on another 91 kilometers. Algeria is experiencing construction delays in the motorway, 37 Annex E which once completed, should radically transform transport and trade for 85 percent o f the Algerian population living in the northern belt of the country. Passenger travel times should be cut by half, and transport time for goods should be shaved by 30 percent. Several traffic counts in 2002 on the national roads serving the travel corridor for the motorway recorded 20,000 to 50,000 private motor vehicles for daily traffic, indicating major traffic congestion, especially on cross-town links. InstitutionalFramework, Finance,and PlanningMechanisms Figure E.2 Authority and Public-Expenditure Flowsfor Algeria's RoadsSector E.4 Road infrastructures fall within the purview of the Ministry of PublicWorks.As part of its remit, the ministry plans, schedules, standardizes, facilitates, and monitors the entire national motorway and road network. It builds, operates, and maintains the network, and manages the corresponding budgetary financing. With regard to roads, the ministry i s organized in a central administration as well as in Public Works Directorates (Directions des Travaux Publics, or DTPs) branching out in each of the 48 wilayas and responsible for the maintenance and development of national roads.Ig The Ministryalso supervisesthe National Motorway Agency (Agence Nationale des Autoroutes, or ANA), an EPIC" to which it has delegated responsibility for supervising the design and construction of the East-West Motorway; and the AlgCrienne de Gestion des Autoroutes (AGA), or Algerian Motorway Management, an EPIC created in May 2005 to take responsibility for operation and maintenance of this motorway.21Construction and maintenance projects for wilaya roads are the responsibility of the wilayas; while municipal as well as urban roads are the responsibility of the municipalities. In both cases the DTPs serve as principal contractor. FigureE.2 shows the distribution of responsibilities within the sector. E.5 Road infrastructuresare financed by the state and subnational governmentbudgets. As Figure E.2 shows, the maintenance and development of national roads are financed by the centralized and decentralized capital budgets of the state. A road fund was established in the mid-1990s but has never beenused.ARer several futile attempts to use a concessionary arrangement for the motorway, this operation will be entirely financed by the centralized budget of the state through direct funding and low- interest loans.22 The state's decentralization budget finances part of the development and maintenance l9Developmentincludes the constructionofnewroads andrepavinghegardingexisting roads; maintenance includes routine and scheduled repairs. 2o Etablissement Public h Caractere Industriel et Commercial (Industrial and Commercial Public Entity). 21 Ideally, however, the design and supervision o f the motorway's construction, maintenance, and operation should be under a single entity to encouragebetter project "delivery" and recovery o f construction costs. 22 However the establishment of a toll is expected inthe long runto reimburse the temporary assistancecoming from the Treasury, which is paying for half o f the total allocated for completing the remaining sections of the motorway. 38 Annex E of wilaya roads. Supplementary funds come from the budgets of the wilayas themselves, making it possible, depending on the level of resources of a given wilaya, to not only finance part of the maintenance costs but also the development of wilaya roads. Municipal road maintenance is financed by the municipalities, while development is carried out using the state's budget through the Communal Development Plans (Plans Communaux de DCveloppement, or PCD). E.6 The master planfor roadscovering2005-25 is currently beingupdated.Updatingbeganin 2002 and draws heavily on work from the 1992 Etude Nationaledes Transport (National Transport Study). This masterplan focuses on a sequenced roaddevelopment and maintenance programas well as the related budgets. Yet the assorted data needed for formulation of such a master plan-including traffic data, the costs of unit implementation, and vehicle operating costs, among other factors- have not beenrevised since 1991 insome cases. Inaddition, the master draft currently beingdiscussedat the interministerial level has to take into account the significant railway investment program included inthe Complementary Plan for Economic Growth Support (Programme ComplCmentaire de Soutien ii la Croissance, or PCSC) and inthe Railroad "Schema Directeur" approved by the cabinet on May 2007. Impactof PublicExpenditureon RoadAssets E.7 Public expenditure on road infrastructure in the past 15 years has been affected by the budget constraints of the 1990s. During the period 1990-2004, average yearly investments in road infrastructure^^^ in Algeria have increased to DA 20.8 billion at constant 2000 prices, representing 7.2 percent of public capital expenditure and 0.59 percent of GDP. This i s a relatively low expenditure level since developing countries spend on average approximately 0.8 percent of GDP on road investments according to the estimates of Ingram and Fay (1994), without adequately maintaining their networks, while developed countries tend to allocate between 1percent and 2 percent o f GDP according to Heggie (2004). The reason for Algeria's "underperformance" can be found in the budget constraints of the 1990s. The marked increase in investments since 2001 flowing from the Economic Reforms Support Program (Programme de Soutien iila Relance Economique, or PSRE) can be seen inFigureE.3; during the period2001-04, roadinvestments averaged0.77 percent of GDP. Figure E.3 MTP Road Maintenance and Development Budgets, 1990-2004 E.8 A breakdown of expenditures shows a preponderance of new projects and rehabilitation works to the detriment of maintenance. Over the past 15 years, the amounts allocated for new projects (other than the motonvay) and for rehabilitation represent four times the amount allocated for routine and scheduledmaintenance, as seen inFigureE.3. This i s further skewed if agreed investments for - Source: MTP. Notes: Budgets are at constant 2000 prices and exclude motonvaycosts 23 Excludingwilaya andmunicipalitybudgets for which data are unavailable.Also excludedare the motonvay project's budgets, whichwere not availablefor the periodunderreview. 39 Annex E development o fthe rest o fthe roadnetwork combined. This choice o f intrasectoral budgetary allocation, although it allowed for linear growth of the road network by 20 percent duringthe period 1990-2004, has inevitably pinchedthe budget for maintenan~e~~. E.9 The low level of budgetary resources allocated to road maintenance, which is compounded by the impact of the security situation of the 1990s, is the main reason for the poor maintenance of the network. Over the past 15 years, Ministry o f Public Works expenditure on the maintenance of national and wilaya roads amounts on average to 0.12 percent of GDP. Given the low level of resources within the municipalities and wilayas themselves, it i s reasonableto estimate that less than 0.2 percent of GDP was allocated to the maintenance of the entire network.'' A quick international comparison suggests that these amounts are clearly lower than the levels usually observed since, as a rule, expenditure for road network maintenance falls between 0.5 percent and 1percent of GDP (Heggie 2004). With regard to Algeria, a World Bank study (1999) showed that in 1996 the annual budget required for adequate maintenance of the road network equaled the total of the capital and operating budgets inthe transport and public works sectors (roads, rail, ports, and airports included). The situation was however rectified at the end of the economic crisis of the 1990s, as shown in Figure E.3. With the assistance of the PSRE, the maintenance budgets of the MTP have more than doubled, reaching DA 10.5 billion per year on average during 2001-04. Under the PCSC, DA 18 billion per year, or 0.2 percent o f GDP, is to be provided for the maintenance of national roads over the next five years. E.10 The poor condition of the road network requires costly rehabilitation. Duringthe period 1994-98, reinforcement and rehabilitation works accounted for more than half of the road development budget, and more than double the routine and scheduledmaintenance budget according to a study by the World Bank (1999). This is the inevitable consequence of poor maintenance. However, rehabilitation works are much more expensive than routine and scheduled maintenance works: the South African National Roads Agency (2004) estimates that repair costs are multipliedby a factor of 6 after three years of neglect, and by 18 after five years o f neglect. The inadequacy of routine and scheduled maintenance of the Algerian road network, accompanied by the recourse to rehabilitation programs when action can no longer be deferred, i s a direct burden on public finances, not to mention a hidden drag on the economy through higher vehicle operating costs and the human and material toll exacted by unsafe roads. E.11 Municipal roads are undermaintained for lack of resources. In the past, municipal roads suffered from a marked lack of maintenance owing to the lack of resources allocated in municipal budgets.26The PSRE has allocated specific budget packages from the Ministry of Public Works for the maintenance of municipal roads, on averageDA 1.25 billionper year for the period 2001-04. However, these efforts fall short of requirements inlight of the current state of the network, 34 percent of which is inpoor conditionand 36percent infair condition. Impact of East-West Motorway Construction o n Public Finances E.12 Completion of the East-West Motorway by 2009 requires an annual average volume of works that is approximately 10 times higher than that achieved in recent years. The poor progress made in the motonvay construction works to date (see Table E.2) is due, among other things, to the economic and security crisis o f the 1990s, as well as to difficulties with project financing. In early 2005, *'Data 24 It should however be noted that the development budget covers some heavy maintenance works. on wilaya and municipalitybudget allocations to maintain the roads under their jurisdiction are unavailable at the central level. 26 While the totals of these budgets are not available at the central level, this analysis was unanimously confirmed ininterviews. 40 Annex E the Algerian government decided to complete the motonvay by 2009. The budget package allocated within the framework of the PCSC, including the sections currently under construction, amounts to approximately DA 560 billion (US$7.8 billion), that is, 12percent of the PCSC. This decision calls for a speedy completion, a radical departure from the pace of the past few years, which must bemultiplied by about 10 inorder to meet the target set. Table E.2 BudgetsandProgressReportsonMotorwayCompletion Before 1992 1992-2002 2003 2004 2005-09 (forecast) Autorisations de Programme (DA Billion) ma. n.a. 56 15 561 Kilometers ofexpressway in operation 43 6 56 10 1,070 Source: ANA. Note: Not available is representedby n.a. E.13 Mechanisms for recovering motorway costs from users are under consideration. O f the DA545 billioninprogramauthorizations allocatedto construct the remaining sections ofthe motorway, it is expected (although it is not approved yet) that 50 percent will be financed through direct funding and the balance by temporary assistance from the Treasury, at a nominal interest rate of 1percent over a 30-year repayment period. This arrangement would probably ease the burden on public finances a posteriori. However, we also note that even using a relatively conservative inflation rate of 3 percent, and taking into account a grace period of 5 years, this temporary assistance from the Treasury has a grant component of approximately 27 percent in real terms." The toll to be collected by Algerian Motonvay Management, created inMay 2005 to maintain and operate the motonvay, should ensure the repayment of the temporary assistance from the Treasury and thereby facilitate partial recovery of motonvay construction expenses. A study is currently being conducted to determine the possible rates for and revenue from the toll. This revenue should first be used to cover the costs for the maintenance and use of the motonvay since no budget has been specifically allocated for maintaining the existing legs o f the motonvay. In addition to the economic justification of the toll, there i s no problem from a social perspective since users would have the choice between the toll motonvay and the free parallel roads. Recommendationsto Better ManagePublicExpenditurefor Roads StrengthenPlanning E.14 Improve the methods for preparation of the master plan for roads and for investment programming. The master plan for roads has strategic importance for landuse planning,and a suitable distribution of investments would ensurethat the rail androadnetworks complement one another. Given the future impact on public expenditure from the average volumes of investment in the sector, it is important to consider all the validating factors. This implies in particular (a) a campaign to rapidly update the Roads Database by next year to facilitate more rational planning, (b)due recognition of economic feasibility criteria, and (c) taking into account the needs of the railway investment program currently under way. E.15 Manage decentralized programming. Programming and budget allocation at the level of the DTPs would be best guided by methods developed upstream at the central level, based on the national 27 Updating o f the nominal cash flows for the repayment of principal and interest, at a discount rate of 3 percent corresponding to inflation, yields a net present value equal to 73 percent of the original loan. 41 Annex E master plan. This would above all ensure the cohesiveness of priorities countrywide and consideration of nationalneeds that complement local concerns. Accord theNecessavy Priority toMaintenance E.16 Consolidate the national road maintenance policy. Under the PCSC, DA 18 billion per year has been allocated to the maintenance of national roads for the years 2005-09. The priority accorded by the MTP to preserving the assets of the "basic economic network"28o f roads and other national roads, confirmed within the context of the PCSC, i s fully justified as a rule. As indicated by Birmingham (2005), the "basic economic network" represents approximately 20 percent of the total road network but carries 80 percent of the traffic. After the PCSC ends, efforts would be needed to ensure that maintenance requirements are properly assessed within a policy framework for preservation of existing assets, and that the maintenance programs form an integralpart of network management. E.17 Ensure that maintenance budgets are adequate. According to the calculations of the CTTP,2' usingthe HDM-4model3' within the framework of the maintenance strategy, the amounts allocated to maintenance of national roads under the PCSC3' should facilitate scaling up the national network, while DA 7 billion per year (-0.1 percent of GDP) would be sufficient to maintain the upgraded network. According to an approximate calculation done by the Bank,32for a network o f 25,000 kilometers of national roads ingood condition, with 6,000 kilometers being the "basic economic network," scheduled maintenance would cost about DA 9 billion and routine maintenance approximately DA 1.5 billion per year, for a total of DA 10.5 billion. Therefore, the budget package of DA 7 billion would probably only ensure the scheduled maintenance of 60 percent of the national road network. It must therefore be ensuredthat budgeted maintenance i s adequately set and funded even when there are budget constraints, and that the unit costs used within the framework of the maintenance strategy are kept up to date. Box E.1shows the generalprinciples onwhich aroadmaintenance financing policy shouldbebased. ** The "basic economic network" o f roads comprises national roads on which traffc exceeds 3,000 vehicles per *'The day, with a quarter o f them being trucks. Organisme de ContrBle Technique des Travaux Publics (CTTP), or Technical Control Authority for Public Works, inthe MTP. 30 The Motorways Design and Maintenance Modelwas developed bythe World Bank. 31 Complementary Planfor Economic Growth Support. 32These calculations are based on the following assumptions: (a)scheduled maintenance o f the "basic economic network" is 6 cm BB, 150kghquare meter, 1.05 t/m, 1,050 t/km at US$100/t, half with a periodicity o f 10 years, and halfwith aperiodicity of 12 years; (b) scheduled maintenance o fthe remaining 19,000 kilometers is double surface dressing, US$4.Usquare meter, US$28.7/m, US$28,700/kilometers, 50 percent with a periodicity o f 10 years, and 50 percent with a periodicity o f 10 years; and (c) routine maintenance is US$750/km/year. 42 Annex E Box E.1 GeneralPrinciplesfor Formulating a RoadMaintenance Managementand FinancingPolicy RoadMaintenanceI s EconomicallyJustified The economic costs createdbypoor maintenance are borne primarily by roadusers. When a road deteriorates from a good to apoor condition, every dollar saved on maintenance increasesvehicle operating costs by 2 to 3 dollars. Instead o f generating savings, maintenance postponement or restriction creates notable costs for the economy as a whole. It is therefore unsurprising that road maintenance and rehabilitation projects have an economic rate o f return o f over 35 percent. Securing the necessaryresources for road maintenance should therefore be a priority for every government. How One Secures Necessary Fundsfor RoadMaintenance Once maintenance costs have been estimated, different options are available for securing the necessaryfunds within the existing institutional framework, especially the following: Inmost cases, there is a general packageallocated to the MinistryofPublic Works, which makesthe necessary decisions regardingmaintenance based on priority before carrying out new construction. This can only work if Ministries o f Public Works are not underpolitical pressure to carry out new construction. Another solution entails creating protected budget line items for road maintenance inthe national budget, which assigns responsibility for allocations to the Ministryo f Finance, and thus incorporates decisions into Budget Law. Finally, one can establish a road fund. Inall cases, conducting anexternal audit inthe Ministry ofPublic Works or road agencies is a convincing way to attest to the effective use o f funds from the Ministryo f Finance. How One ImplementsMaintenance and OutsourcingPrograms The internationaltrend is to subcontract an ever increasing portionofmaintenance works through various types of contracts that enable the Ministry o f Public Works and road agencies to redirect their energies toward their programming roles, procurement, monitoring, and evaluation inorder to increase efficiency. Generally, market competition ensures increased efficiency o f 20-30 percent. Source: Road Sector Knowledge-Base,World Bank(2005). E.18 Long-term financing mechanisms need to be established for maintaining wilaya and municipal roads. The situation of these networks is worrying even under the PCSC, with routine and scheduled maintenance of wilaya and municipal roads still being pinched by budget constraints. No more than DA 20 billionhave been allocated for combined local maintenance during2006, while DA 80 billion have been allocated for rehabilitation of municipal roads alone. An optimal use of public funds would emphasize maintenance to forestall extremely expensive rehabilitation works. From all indications, most wilayas and municipalities lack sufficient resources or make tradeoffs that benefit other sectors and thereby contribute to the degradation of rural roads. MTP provides only technical assistance.The economic justification for road maintenance as shown inBox E2.1 therefore calls for the establishment of mechanisms that facilitate rational practices. Inthe case of municipal roads, incentives are distorted further since it is the state's decentralized budget that finances the rehabilitation works caused by the lack of maintenance financed by municipal resources. For the municipalities, rehabilitation works therefore seem to be "free." Formulating precise recommendations for review of the mechanisms to finance rural roads as a whole requires prior in-depthstudy of the management and financing of wilaya roads and municipal roads. By way of example, Box E.2 presentsthe framework for the study of financing options for maintaining rural roads in another Maghreb country where the issues inplay are similar. 43 Annex E Box E.2 Framework for the Study of Financing Options for Rural Road Maintenance in another Maghreb Country Local rural roads inthis Maghreb country, which have neither statusnor "ownership" and are under the vague de facto responsibility o f municipalities, are subject to limitedmunicipal budgets. Within the framework o f the Rural Roads Project financed by the World Bank, a Local Rural Roads Management Study is evaluating institutional, organizational, financial, and technical instrumentsto enable municipalities, provinces, and regions to take charge inthe medium term o f local rural roads, helping them manage and finance construction, rehabilitation, and above all maintenance. Inparticular, the studyincludes the following areas: A review of the current situation infinancing roadworks by region, province, and municipalityand by type of works and roads, with a special review o fthe financing o f maintenance A review of municipal finances, budgets, and roadmaintenance funding A review o fprovincial andregional finances, budgets, androad maintenance funding A review ofroad maintenance methods An estimate o f requiredmaintenance costs and capacities A presentation of suitablemanagement and financing examples andmodels for the maintenance of localrural roads from at least three other carefully selected countries Recommendations based on a study o f the various possible options for financing municipal roads, particularly their maintenance-for example, allocations from municipal, provincial, and regional budgets; transfers from the central budget o f the state; special subsidies for poor municipalities; the creation o f user fees, and so forth Recommendations for organizationo f maintenance management and o fpartnerships to be forged with decentralized state agencies Recommendations for outsourcing maintenance to the private sector basedon several formulas, such as long- term maintenance procurement, rehabilitation and maintenance procurement, and so forth. Source: World Bank (2005). E.19 Ensure road network development that is aligned with economic needs. This i s alrealy taken into account. While priority clearly should be given to maintenance, medium- and long-term investment in the development of a road network must be able to keep pace with economic growth. Within the framework of the PCSC, DA 219 billion has therefore been allocated for the road network rehabilitation and development program, as well as DA 87 billion for the construction of three bypass roads in the Algiers region. These investments, which are an integral part of the 2005-25 road master plan currently beingupdated, should facilitate elimination of existing bottlenecks. Inthe medium term, the road master plan should be regularly updatedto deal with changes ineconomic and social needs. Strengthening Capacitieswithin theSector E.20 Provide technical assistance to municipalities to carry out municipal road rehabilitation works. O fthe DA 200 billion allocated within the framework of the PCSC to Community Development Programs, or Programmes Communaux de DCveloppement (PCD), approximately 40 percent will be used for the rehabilitation of 41,000 kilometers o f municipal roads to improve access to rural areas. Past experience indicates municipalities have limited capacities to properly supervise these construction projects, resulting in faulty design and shoddy work and ultimately driving up future costs, including through costly urgency works after stress of weather. Given the scope of the rehabilitation program under consideration (three-fourths of the municipal roads network), there i s great risk that history will repeat. In the short term, creating ad hoc technical support structures within the Ministries of Public Works and the Interior, and within the Public Works Directorates of the wilayas, would provide the necessary assistance for the municipalities and strengthen the close monitoring of programs. The technical regulations governing the design and construction o f these low-traffic roads should also be 44 Annex E reviewed. In the medium term, these issues should be addressed in the review o f mechanisms for the managementand financing of municipal roads. E.21 Strengthen the capacities of the MTP and the ANA to successfully carry out the ambitious East-West Motonvay construction program. The organizational development of ANA i s already taken into account as part of the decision that turned it into EPIC. The fast-tracked schedule for construction of the motorway calls for public stakeholders in the sector to be redeployed and to strengthentheir capacities to control the quality, costs, and time frame for the work. InMay 2005, at the request of the Ministry of Public Works, the World Bank conducted a preliminary diagnostic review of the motorway project. In particular, this report recommended institutional clarifications as well as a significant strengthening o f the capacity of the MTP, the Wilaya/DTPs, and above all the ANA, as follows: > The MTP in its construction planning and programming functions, the approval of >> drawings, the acceptanceof work, and the approval of toll charges The DTPs and wilayas, byprovidingbetter training to obtainrights-of-way The organization of the ANA as well as its management systems, procedures, and computerization, and the quantity and quality of staff; ANA'Sstrategic objectives, targeted results, andperformance indicators would be coordinated with the MTP. E.22 Support greater local private sector involvement in public works and the improvement of companies' technical capacities. To date, the participation of the Algerian private sector has been relatively low for bothconsulting firms and construction companies. T h i s deprives the MTP of a host of competencies that other countries are able to use to solicit original approaches to problem solving by encouraging competition among ideas and technical options. Development o f the private sector also would significantly increase construction capacities, an essential factor for carrying out ambitious programs like the PCSC. In addition, competing private consulting firms and private construction companies would significantly reduce costs. To help the local private sector develop, the following must bedone: Encourage the DTPs and other decisionmakers in the sector to disseminate information on the studies and works to becommenced. 0 Encourage them to give a bigger market share to private consulting firms for the design and supervision of projects, to local companies for routine and scheduled maintenance, and to private companies with greater resources for rehabilitation, resurfacing, or strengthening. 0 Ensurepayment of invoices from contractors inless than four weeks, and two weeks inthe case of contracts with small companies. 0 Accelerate the privatization of public construction companies, consulting f m s , and regional laboratories. At the same time, the technical assistanceprogram and training sessions geared toward MTP personnel should be open to private consulting firms and private construction firms for a fee, with the incentive of earning certification for being qualified to submit bids on government contracts. 45 Annex F ANNEX F:PORTS Overview of the Port Sector33 F.1 Algeria has a relatively dense network of 10 commercial ports. Spread along the entire coastline of around 1,000 kilometers, Algerian ports canbe classified into three major groups: 0 Three major commercial ports-Algiers, Oran, and Annaba 0 Hydrocarbonports-Arzew, Skikda, and Bejaia 0 Secondarycommercialports-Ghazaouet, Mostaganem, TCnes, andDjen Djen. Figure F.1 Throughput at Algerian Ports in 2004 F.2 Hydrocarbon exports account for most port operations. Ninety-five percent of Algeria's foreign trade is conducted by sea. In 2004, 119 million metric tons were handled at Algerian ports: exports accounted for 91 million metric tons or 79 percent of that total as shown in Figure F.l. This reflects the structure of Algerian foreign trade, which i s based almost exclusively on the export of petroleumproducts, followed by fertilizers and chemicals (1.2 million metric tons in 2004). In 2004, imports totaled 25 millionmetric tons, Source: MinistryofTransporUDPC/SDSI. with agricultural products and foodstuffs accounting for 42 percent, general cargo 19 percent, petroleumproducts 15percent, and ore and metalproducts 11percent. Figure F.2 Throughput Trends at Algerian Ports, 1994-2004 F.3 Algerian port throughput grew on average by 3.8 percent annually over the last 140, decade, with varying results at the different ports. There has been relatively sustained growth 100 VI since 1994 at the ports in Algiers, Arzew, and 80 Bdjaia, which registered annual growth rates of 56 i M ) 3.5 percent, 5 percent, and 4 percent respectively, I 40 as shown in Figure F.2. At Skikda, there was a 20 modest average annual growth rate of 2.1 percent 0Alg.r 0 between 1994 and 2004. However, port use stagnatedor declined duringthe same period in other major Algerian ports, with an average annual growth of 0.8 percent in Annaba, and annual negative growth of -0.5 percent inOran. F.4 There continues to be relatively limited container throughput at Algerian ports. In2004, container throughput at Algerian ports was around 718,000 TEU,34of which 420,000 TEU were 33This annex does not include certainaspectsof the sector linkedto the global problemoftransport 34A TEU (twenty-foot equivalent unit) corresponds to the standard container, which is 6 meters long andhas a capacity o f 30 cubic meters. 46 Annex F handled at the Algiers port. Starting from low volumes, container throughput has enjoyed a particularly sustainedperiod of growth inrecent years, averaging 22 percent annually since 1997, and a particularly spectacular growth rate of 35 percent in2004. This said, containerization rates remain relatively low, accounting for 33 percent of general cargo (excluding dry and liquid bulk cargoes) whereas over 75 percent of the world's containerizable general cargo i s currently being shipped in containers. This i s explained primarily by the compositionof the traffic: owing to the nature of imported goods, their containerization rate i s relatively low. Nonetheless, there i s a strong imbalance infavor of imports becausecontainers arrive full, while 97 percent of them leave empty owing to the lack of significant containerizable export volumes. Consequently, the cost of usingcontainers to ship imported goods increases significantly, thereby reducing their usefulness. Moreover, port operations are affected by the lack of high-throughput and high-performance container terminals. Only the Bkjaia container terminal is equipped with modern port cranes. As a result, Algeria remains on the sidelines of the burgeoning shipping container traffic in the Mediterranean basin, even though containerization helps to lower costs. F.5 While turnaround times at Algerian ports have been significantly reduced, the time goods spend in transit continues to represent relatively high logistical costs for the economy. In 2003, the average ship waiting time and the average berth time at Algerian ports were 1.9 days and 3.6 days, respectively. It is noteworthy that these figures fell to 0.7 days and 2.5 days, respectively, in 2004 as indicatedby the Ministryof Transport (2005). The average ship waiting time for RoRo ships and container vessels now does not exceed 0.3 days, while the averageberthtime i s less than one day. While these averages indicate significant improvement in the overall performance of Algerian ports, users neverthelesscomplain about the congestion and delays at ports. According to users interviewed for the Investment Climate Survey conducted by the World Bank (2006), on average, a ship has to wait more than sevendays to be brought into port and another sevendays to beunloaded. The waiting periods are clearly still an issue, particularly for dry bulk, general cargo, and containers. Furthermore, customs procedures contribute to lengthy delays inthe transit o f goods. According to this survey, an average of 11.7 days was requiredto clear imported goods through customs in 2001 (compared to 3 days for Morocco), and could take as long as 44 days. Finally, extensive waiting periods at ports result inrelatively highdirect and indirect shippingcosts. According to the Ministryof Transport, the total cost of shipping a container to Algeria i s almost $1,000 (freight and handlingcharges), while it costs no more than $350 at the averageport inthe Mediterranean basin. F.6 Greater efficiency is still attainable. Cognizant that ports should be transit rather than storage spaces, the authorities at Algeria's commercial harbors have taken measures aimed first and foremost at optimizing the use of the existing infrastructure and facilities, improving operational performance since 2003. However, there i s still room for productivity gains from the existing infrastructure and equipment and the labor force. It i s noteworthy that each crane at the Algiers container terminal makes around 7 movements per hour. While this output is quite normal for derrick cranes, the current rate for modern ports equipped with gantry cranes i s around 25 movements per craneper hour. The Bkjaia container terminal, which is equipped with gantry cranes, began operations in 2004 following the establishment of a joint venture with Portek, a Singaporean company, and registers around 13 movements per craneper hour. InstitutionalFramework F.7 The Ministry of Transport is responsible for port services, while the Ministry of Public Works i s responsible for infrastructure development and maintenance. As part of its mission, the Ministry of Transport i s responsible for defining policy for the port sector, regulating and 47 Annex F monitoring port operations, and helping plan and design port infrastructure. The Ministry of Public Works i s responsible for planning, designing, constructing, and maintaining port infrastructure. Figure F.4 Authority and Public ExpenditureFlowsin the Port Sector F.8 Ten state-owned port companies ensure both public authority and commercial port operations. All 10 commercial ports are administered and operated by a port company with Public Economic Enterprise status (a business corporation in which shares are owned by the state). Onthe one hand, these companies exercise public authority over the ownership o f port infrastructure together with the management of the maritime domain,35and on the other hand operate almost all port services. The 10 port companies are owned by SOGEPORTS (SociCt6 de Gestion des Participations de 1'Etat-Ports), the public holding company responsible for the state participation in port companies valued '> N1"istry of PubllcW& I Infrastructure at DA 22 billion. Figure F.4 illustrates the .. Wlya PublicWorl8 DIwtomtm Development L I institutional structure of the sector and the 1 J related public expenditure flows. Source: World Bank. PublicSpending F.9 There has clearly been underinvestment in the Algerian port sector. Investments in Algeria's commercialport infrastructure averagedDA 1.2 billion annually (-US$17 million) between 1999 and 2004. During this period, around 46 percent of the capital budgets for the maritime infrastructure division of the Ministry of Public Works were allocated to commercial port infrastructure, with the remainder being allocated to fishingports and protection sites.36Infrastructure investments in the commercial ports of Algeria are essentially limited to reinforcements, underpinning, dredging, and rehabilitation, costing around DA 0.7 billion yearly. In1999, the Algiers container terminal was also constructed for a total of DA 3.1 billion. This relatively low level of investment did not facilitate competitiveness inthe port sector and partially explains the low level of operations and lack of new terminals at new sites. F.10 Most public port companies have been very profitable. Except for Djen Djen,37 all port enterprises showed operating profits between 2002 and 2004. Table F.l shows that the five largest port companies had very high profit margins in 2004, ranging as high as 60 percent and 35While the 1998 reform of the Maritime Code provided for establishment o f three regional port authorities to administer and act as owners o f the port sector, these provisions have not been implemented. 36Fishing ports and maritime sites are not covered inthis study. 37Djen Djenrecorded operating deficits of 3 percent and 38 percent in2003 and 2004, respectively, primarily because port infrastructure is too large for the limited traffic flows. This port was originally designed to serve a steel mill inJijel that never opened, and the neighboring economic basin provides only limited offsetting demand. Waves also significantly complicate cargo handling. 48 Annex F 66 percent for Algiers and Arzew, re~pectively.~~To the extent that large port infrastructure investments come under the state's capital budget via the Ministry of Public Works rather then from port companies (which finance investments in superstructures and equipment, drawing 30 percent of the fimding from operational cash flows and 70 percent from bank loans), the available i n f ~ r m a t i o n ~ ~ suggests that indebtedness among port companies is limited and that government shares in port companies may be highly profitable. The Skikda port company, whose financial results are publicly available, reported a 40 percent return on equity in2004. Finally, the figures inTable F.l suggest that revenue from government shares in port companies considerably exceeds Ministry of Public Works investments incommercialport infrastructure, making the port sector a reliable source of government revenue in recent years. However, the port companies have not been able to offer their customers quality services at competitive prices, and have clearly not invested adequately inthe application of advancedtechnologies and modem equipment. Table F.l Port Company Operating Accounts in 2004 Other Algiers Oran Arzew Bkjaia Skikda ports OperatingRevenues 6,3 15 2,114 6,715 2,043 2,741 1,968 OperatingExpenses (2,545) (1,276) (2,272) (1,089) (2,098) (1,846) of which Wages (1,428) (894) (671) (569) (829) (949) OperatingIncome 3,770 838 4,442 955 643 121 OperatingMargin 60% 40% 66% 47% 23% 6% Source: Ministry of Transpoflort Administration. Note: Figures are inDA millions except where indicated; parentheses show outlays. F.11 Port charges are fixed in part by the government and in part by the port companies. Until 2005, navigation and public-port-user charges were government parafiscal levies whose amounts were set by the Budget Law. In2005, these charges were defiscalized and removed from the Budget Law, allowing eachport company to determine its own charges for service delivery (including piloting, towing, handling, stevedoring, among others). F.12 Anticipated investments under the PCSC in the port sector involve maintenance work on existing infrastructure, as well as expansion of the Djen Djen port facility. Under the PCSC for 2005-09, investments made by the Ministry of Public Works in commercial ports are limited to reinforcement, underpinning, and upgrading of existing port infrastructure. Assuming that one-third of investments i s allocated to commercial ports (with the remaining two-thirds being allocated to fishing ports and shore protection), these investments amount to DA 10 billion over the program period. In addition, investments in the Ministry of Transport's budget within the framework o f the PCSC include a sum exceeding DA 30 billion for the maritime and port sector, a large share of which will be used to help upgrade the port at DjenDjen, transforming it into a world-class transshipment container terminal. 38 The example of Skikda, for which detailed financial results are available to the public, suggests that Operating Accounts omits navigation fee revenue, which would boost recorded profit margins accordingly. 39 The financial results o f port companies were not made available to the Bank. 49 Annex F Recommendations F.13 Implementation of institutional reforms is essential for increased sector efficiency. Despite the 1998 passage of a law reforming institutional organization within the sector, implementation did not occur. In 2005, the Ministry of Transport revisited the institutional organization of the sector while preparing a Transport Road Map with assistance from the Bank. Specific provisions for the port sector currently includedina draft law include the following: 9 EstablishanindependentMaritimeandPortAuthority (MPA) to ensurethe economic and technical regulation ofthe sector, and monitor implementationof safety regulations. 9 Separate public authority from commercial functions by dividing the existing port companies into (a) local autonomous port authorities that would be fully responsible for managing the maritime ports, specifically with regard to safety and security, the control of navigation, and infrastructure development; and (b) port operation companies, which would provide operational services to port users pending port authority introduction of regular and competitive service concessions. This i s the Landlord Port model that is widely used inthe global port sector. 9 Introduction of competition and private sector participationto provide commercial port services. F.14 Introduction of competition and private sector participation would help improve service quality. The monopoly on commercial port operations held by state-owned port companies i s an obstacle to increased efficiency in the sector. Competitive bidding for port concessions and competition among operators of different terminals will reduce port service costs and improve service quality to users. Furthermore, the introduction of private sector participation would be accompanied bythe basic managerial and technical expertiseneededto modernize Algeria's ports. Results from the joint venture partnership between the Bkjaia port company and the Singaporean company Portek to operate a terminal handling both containers and grain illustrate the potential impact: the operational performance for container handling i s twice as high at this port as at the Algiers container terminal, and certain ship owners have already switched ports. However, terminal concession options that exclude equity participationinoperator companies by public economic enterprises (as local authority or operating company) should be favored. F.15 The port sector presents opportunities for mobilizing private financing. Although port infrastructure investments are currently the responsibility of the state budget, private financing can be mobilized through port terminal concessions (Build-Operate-Transfer, or BOT), particularly for the handling and transshipment of containers. This i s the proposed plan for the port of Djen Djen. Port infrastructure still should be financed inmost cases by the state through local port authorities, while port superstructures and equipment would be financed by private capital. The Portek operating company has providedUS$9 million incashand equipment (gantry cranes) for the port of Bkjaia. F.16 Investments in container terminals are necessary in the medium term. In the context of the opening to foreign trade and trade liberalization, import and export volumes of general cargo to and from Algeria are expected to grow at an average annual rate o f 12percent until 2015;' increasing throughput to 26 millionmetric tons for imports and 5 million metric tons for exports of general cargo by 2015, compared to the current levels of 8.3 million and 1.2 million metric tons, respectively. Assuming an "average" containerization rate of 60 percent, this would result inan annual import of containers of 1,350,000 TEU by 2015, versus a mere 366,000 TEU in 2004. Medium-tern 40Estimatesby GlobalInsight(2005). 50 Annex F investments in high-throughput modem infrastructure and superstructures therefore are required to meet container traffic demands, particularly inAlgiers where the needs are the most pressing. F.17 Improved coordination of planning would optimize upgrading of the national port system. Isolated initiatives taken by a number o f port companies to increase handling capacity of containerized traffic have not facilitated implementation of solutions to meet long-term needs. A cohesive strategy for handling containerized traffic, coordinated with investment planning by the Ministry of Transport, would therefore be desirable. F.18 A review of sector financing methods should be considered alongside sectoral reform. Such a review would seek to guarantee financing of local autonomous port authorities through port charges and other revenue earned by these entities (from leases, royalties, and other activities). Commercial concessionaires would be paid by service beneficiaries, based on rates specified in the concession contracts. The MPA should receive only that portion of the navigation fees and security charges required to finance its operations. The share collected by the MPA could also be placed in a fund for financing investments that meet national and regional development objectives. The state would continue to participate inthe financing of major development and rehabilitation works at port facilities. F.19 The current rate structure should be reviewed from a commercial perspective. Within the framework of these reforms, it is essential distinguish between the amounts levied by local autonomous port authorities and those charged by port service companies: > The fees classified as port dues (navigation fees and charges for the use of public property) should be fixed at a reasonable rate to ensure that local autonomous port authorities can earn enough revenue to cover infrastructure maintenance and operating costs and to finance the expansion of some port infrastructure, that is, break even. This would thus constitute a management instrument determined by the port authority inlight of its long-termobjectives. These fees may, however, be regulatedby the MPA. > Fees charged by port service providers should essentially reflect service provision costs-calculable for each service-or the value of the service provided. In the face of increasing global competition in the port sector, these fee levels are increasingly determined by commercial factors. Assuming that port service providers operate within the framework of the concessions granted to them by local port authorities, those authorities have the primary responsibility for regulating fees (including structure, levels, equal treatment of users/customers, and equitable rates). 51 Annex G ANNEX G:CIVIL AVIATION Overview of the Civil Aviation Sector41 G.1 Algeria has a relatively dense aviation network, with traffic heavily concentrated among the largest airports. The Algerian airport network comprises 36 airports, 16 of which offer international service. As FigureG.l shows, the airports in Algiers, Oran, and Constantine account for 46 percent, 11percent, and 9 percent o f commercial airline traffic inAlgeria, respectively. FigureG.l Airline Traffic inAlgerianAirports in2004 Comrclal Movewnts Q NonComnsrclal Movements 0 10000 20000 30000 40000 woo0 Constanthe Annaba H-Mawoud Ouargia Bbjaia Tlamcen In-Amanas Ghardaia Tamanraeet EI-OUed Adrar Tlndouf Balna Biakra Tabew Jijel Seef Bechar Djanet Touggourt ElOolea H-R'Mel In Salah Illill Timlmoun Mecheria Tlaret B-B-Mokhtar Laghouat Bou-Saada Mascara I urce: ENNA (Etablissement national de la navigationAk-ienne, the National Air Navigation Agency). There has also been heavy air traffic at the Hassi-Messaoud airport, with 18,000 noncommercial flights eachyear. It i s remarkable that three-quarters of Algerian airports account for fewer than 10 flights per day. 4' This annex does not include certain aspectsofthe sector linkedto the global problem of transport. 52 Annex G G.2 In 2003, domestic air traffic fell sharply following the demise of Khalifa Airways, while international traffic grew at a relatively sustained rate. The national private air carrier Khalifa Airways was established in 1999, and gradually gained large market shares of Algerian domestic and international service, securing up to 52 percent of the former and 16.5 percent of the latter in 2002. The airlines liquidation and closure42precipitated a dramatic decline in airline services in 2003, resulting ina 37 percent reduction indomestic airline passengers(FigureG.2a). Air Algkrie has yet to make up the supply deficit, and the number of domestic airline passengers declined by another 11 percent in2004. The number of international airline passengers grew at a sustainedrate of 5.9 percent annually between 2001 and2004. Figure G.2 Airline Traffic Trends inAlgerian Airports, 2001-04 a/ Passengers I 7 , 1 I ' b/ Freight 25 I 20 -r: Traffic 15 Traffic PInternational 10 81 International Traffic 5 0 2001 2002 2003 2004 2001 ZOO2 2003 2004 I Source: Ministry of Transport/DPC/SDSI. G.3 The national airline company Air AlgCrie currently controls a large share of the air transport market. Following the demise of Khalifa Airways, Air AlgCrie held 96.4 percent of the domestic airline market in 2004.43The state-owned company also gained shares in the international market, securing 69.8 percent in2004. The remainingmarket shares are held by foreign companies. G.4 Air AlgCrie has reported stable activity since 2001, and a relatively low load factor. As illustrated in Figure G.3a, the number of passengers traveling on the national airline's international flights increased at an average annual rate of 6.6 percent between 1996 and 2001, while the numbers for domestic flights fell at a rate of 9.5 percent annually. Airline traffic trends have not changedmuch since 2001, and both domestic and international flights maintainedthe same levels in 2004. The load factor fell sharply when compared to the 1990s (Figure G.3b). Registering 59 percent for domestic flights and 63.7 percent for international flights in 2004, the load factor is below the averages for Africa (67.8 percent), the Middle East (71.7 percent), and the entire air transport industry (74.2 percent), and affects the company's profitability. 42 Khalifa received financial support from the Bank of the same name, and its liquidation in 2003 led to the demise of the air Canier. 43 The remaining market shares are held by two small private Algerian companies: 1.7 percent by Air Expresse and 1.8 percentby Tassili Airlines. 53 Annex G Figure G.3 Traffic Trends for Air Alghrie, 1996-2004 a/ Passenger traffic b/ Load factor 80% t 2000 70% f 60% 1500 h Passenger Passenger f Trafflc 40% Traffic loo0 0 InternaUml e Passenger Passenger 500 20% 10% 0 0% i 1996 is97 i9so ims 2000 zoo1 2002 ZWJ ZOM 1996 1997 1998 1999 ZOO0 2001 2002 2003 2004 G.5 Safety and security performance remains very satisfactory. In recent years, Algeria's air transport safety record has compared favorably with industrial countries. While the terrorist threats of the 1990s imposed restrictions that undoubtedly weighed heavily on public airport expenditures, implemented security measures have definitely produced results since no attacks have been recorded inrecent years. Institutional Framework Figure G.4 Roles and Public Revenue and Expenditure Flows inAlgeria's CivilAviation Sector G.6 Air transport infrastructure is operated by public entities regulated by the Ministry of Transport, while the Ministry of Public Works develops and maintains heavy infrastructure. Algerian airports are grouped into three EGSAs, each of which manages a large commercial airport and a number of small airports: EGSA Algiers (16 airports in the NortWSouth central strip), EGSA Oran (10 airports in the EastLSoutheast), and EGSA Constantine (7 airports in the Westhouthwest). The EGSASare industrial ' Source: World Bank. and commercial public entities (EPICs) under the oversight o f the Ministry of Transport, and are responsible for developing and maintaining airport superstructures (air terminals) and for operating airport services. ENNA and the Office National de la M6t6orologie (ONM), or National Meteorological Office, are EPICs under the oversight of the Ministryof Transport and are responsible for air navigation and meteorological services, respectively. The Ministry of Public Works i s responsible for developing and maintaining heavy air transport infrastructure (runways). Figure G.4 illustrates the sector's institutional diagram for air transport infrastructure and services. 54 Annex G G.7 The national air carrier, Air AlgCrie, is a Public Economic Enterprise (EPE) and is gradually moving toward opening up its equity. In 1997 Air AlgCrie became an EPE (a business corporation in which the shares are owned by the state), with the clear objective o f opening up its equity to private investors. This principle i s set by Ordinance 01.04 of August 20, 2001, which stipulates "public economic enterprises in all economic activity sectors are eligible for privatization." Air AlgCrie is still entirely state owned. However, this public company has made considerable efforts in recent years to introduce a subsidiary company program designed in 1999. This program provides for refocusing the airline on its core services, namely international passenger flights, while subsidiary companies would be established to handle other related activities such as domestic passenger flights, freight service, catering, maintenance, and ground- handling services. Shares in these subsidiaries would gradually be openedto private investors. Public Expenditure inthe Civil Aviation Sector G.8 State investments in air transport infrastructure rose significantly between 2003 and 2004 with construction of the new Algiers air terminal. As Figure GSa indicates, the capital budgets allocated to the airport sector44grew, at constant prices, at an annual average rate of 27 percent between 1999 and 2004, reaching on average 0.15 percent of GDP and 16 percent of the capital budgets of the Ministries of Transport and Public Works for 2003-04. Between 1999 and 2004, investments by the Ministry of Public Works increased quite steadily at an annual rate of 13 percent, focusing primarily on reinforcing runways, ramps, and existing movement and parking areas, as well as on construction o f new infrastructure. Owing to construction o f the new Hari Boumedienne international terminal in Ministry of Transport investment inairport superstructures, which represented around one-third o f investments in the airport sector between 1999 and 2002, grew significantly in 2003 and 2004. Program authorizations of DA 21.5 billion (-US$300 million) were allocated to this air terminal between 1999 and 2004, that is, 73 percent of the Ministry of Transport's program authorizations for the airport subsector during this period. The remaining investments were primarilyfor buildingsmall airport terminals and acquiringand installingairport security equipment. Figure G.5 Airport Sector Appropriation Trends, 1999-2004 a/ By ministry,at constantprices b/ As a percentageof MdT and MTPcapital budgets 18% I 1 Ministry of Transport w Ministry of Public 1999 2000 2001 2002 2003 2004 a 1999 2000 2001 2002 2003 2004 Source: Ministryof Finance. 44 These budgets include those for meteorology, but their share is marginal. Between 2002 and 2004, program authorizations allocated to meteorology amounted to less than 7 percent o f those allocated by the Ministry o f Transport to airports. 45 The government originally intended to operate the new Algiers international air terminal as a concession. The bidding process launched in 2002 was unsuccessful, however, since no credible offers were received. Subsequent analysis revealed that the risk Algeria posed, in the context o f some global market instability, was a major reason for the bidding failure. The government finally decided to use public funds to finance the new terminal. 55 Annex G G.9 The Algerianairport systemis unable to self-finance its investmentsin superstructures and equipment. Overall, the EGSAsjust about manageto achieve financial equilibrium, and do not receive any state subsidies46to cover operating costs. This i s due in large part to the fact that each EGSA comprises a bundle of airports with revenues from the large profitable airport each operates cross-subsidizing many other small unprofitable airports. Therefore, in addition to the infrastructure investments by the Ministry of Public Works, the Ministry of Transport provides firm assistance for making all large investments in airport superstructures and equipment (including construction of air terminal buildings and areas, fencing, acquisition of safety and security equipment, and other items) becausethe EGSAs are virtually incapable of self-financingtheir investments. G.10 Airport tariffs are lower than the regional averages. There are four categories of charges for Algerian airport and air navigation services: 9 Airport tariffs (approach, landing, runway lights, parking) are fixed by decree, and are paid to ENNA, which keeps 70 percent and transfers 20 percent to the EGSAs and 10 percent to the ONM. The flows of these charges are illustrated inFigureG.5. 9 Extra-aeronautical charges, which are unregulated, and cover the use of airport facilities (telephone, electrical, and fire-safety services). These charges are set by and paid to the EGSAs. 9 Commercial airportrevenue fromthe rentalofpremises, hangars,parkingareas, and land. These charges are set by and paid to the EGSAs. l+Overflightcharges,whichareestablishedbydecreeandpaidtoENNA,whichkeeps96 percent and transfers 4 percent to the ONM. A comparison of the amounts of two of the airport tariffs with those of a number of Mediterranean airports (Figure G.6) would appear to indicate that airport and air navigation charges are low in Algeria. This explains in part the inability of Algerian airports to self-finance their investments, in addition to the aforementioned lack of productivity. Overall, it seems that users of Algerian airports are largely subsidized by the state, and this includes internationalflights. G.ll Air AlgCrie is heavily subsidized by the state. In 2004, the state granted DA 12 billion (around US$170 million) to Air AlgCrie to upgrade its fleet. With very limited self-financing capacity, the company turnedto the bond market, where it raised around DA 42 billionbetween 2004 and 2005 to finance the purchase of 14new planes. It bears noting that these bonded debts are guaranteedby the "allocation of the annual public service obligation subsidy, to be used exclusively for the payment of coupons.'" In 2005, Air AlgCrie received an operations subsidy amounting to DA 2.5 billion for public service obligations. 46 The financial results o f airport sector EPICSare not available at the Ministry of Transport. ENNA would be capable of self-financing its investments. 47 See ComitC d'Organisation et de Surveillance des Opbations en Bourse (Securities and Exchange Commission). 56 Annex G Figure G.6 Airport Tariffs inAlgiers vis-l-vis Other Airports in the Region a1Passenger fees bl Landing fees INationalTrafficIInternationalTraffic INationalTrafficIinternationalTraffic Tripoli Algiers Algiers Cairo Marseille Barcelona Tunis Paris Casablanca Rome Casablanca Athens 0 500 1000 1500 2000 Istanbul USSlLandlng Cairo 0 500 1000 1500 2000 DZD/Passenger Source: Ministry of Transport. G.12 The public service obligations imposed on Air Algbrie have now been defined and financial compensation has been arranged. Each year, Air AlgCrie applies for a public service obligations subsidy because the airline i s expectedto provide regular service to airports inthe South at state-imposed rates that are lower than the operating costs. Until2004 these public service obligations were not clearly definedor directly compensated. Indeed, the corresponding subsidy was withheld in 2003 and 2004 by the government, which wanted to see signs of increased efficiency at the company. This in turn deepened the deficit. Executive Decree No. 03-501 of December 27, 2003, finally regulated the process for Air AlgCrie by setting the "requirements applicable to the national air transport company responsible for meeting its public service obligations in exchange for financial compensation paid by the state." These standard requirements, which were annexed to the decree, specifically define the public service obligations and obligate the company to have "cost accounting to help identify real costs, revenues, and the profit or loss arising from each public service obligation." However, they do not provide for basing financial compensation on target or reference costs, which would be an incentive for improving the company's management efficiency. G.13 Planned investments in the civil aviation sector for 2005-09 are limited primarily to maintenance, reinforcement, and upgrading work at airports. The airport infrastructure program developed by the Ministry of Public Works within the framework o f the PCSC for 2005-09 focuses on the preservation and upgrading of existing assets. First, priority must once again be given to routine maintenance of infrastructure, which had been neglected in the past owing to the lack of specific budgetary which would help reduce the need for more costly reinforcement work in the future. The PCSC will also facilitate continuationof the reinforcement plan in 13 airports to reduce the average runway time-in-service from 15 years to 9 years, bringingit in line with the international standard of 10 years. Only one new runway will be constructed in Oran. The Ministry of Transport's airport sector program for 2005-09 will also be limited primarily to upgrading work at existing terminals, totaling some DA 13 billion of program authorizations. Recommendations G.14 Implementation of institutional restructuring in the civil aviation sector i s essential for increasing efficiency. With World Bank assistance, in 2005 the Ministry of Transport designed a 48 Section 533 on the routine maintenance of airport infrastructure was not funded in 2004 or 2005. 57 Annex G Road Map for transport sector reform. For the civil aviation subsector, the Road Map guided preparation of a draft law that seeks to do the following: 9 EstablishanAutoriti de Rkgulation et de Supervision de 1'Aviation Civile (ARSAC), or Civil Aviation Regulatory and Supervisory Authority, which shall be responsible primarily for monitoring the application of air safety and security regulations in accordance with international requirements, and the economic regulation of the air and airport sectors. 9 Eventually create local autonomous airport platforms from the EGSAS.~'Regulatory functions should be separatedfrom commercial activities for each airport platform, so that the former would be carried out by local airport authorities while the latter would be the responsibility of commercial entities contracted by local airport authorities. Commercial activities would increasingly be openedto the private sector. This draft law i s currently being discussed at the interministerial level. In light of increasing international obligations for air security, ratifying these decisions and introducing ARSAC are essential. It i s also important to note that the study of the Airport "Schema Directeur" prepared by CTTP i s in the final phase and will be validated as soon as the concerned ministerial commission is installed. Gradually opening the airport sector to competition, particularly through competitivebidding for concessioning airport terminals or contracting airport operations and introducing direct competition among operators for activities such as providingturnaround services for aircraft, will help realize the potential for increased efficiency that currently exists but i s going untapped. Private sector participation, with the awarding to Aeroports de Paris in 2006 of a management contract for the Algiers InternationalAirport, will help increasemanagerial and technical expertise inthe sector. G.15 Reorganization of the financing structure for civil aviation should be considered alongside sectoral reform. The sustainable financing of ARSAC i s crucial to success of the reform currently in progress. There are two major financing options: (a) through government budgets or (b)through establishment of a "regulatee-payer" system to ensure that costs will be recovered from users. The first option does not ensure stable financing and might vary depending on budgetary pressures.The second approach, which inpractice would probably include the deduction of a share of aeronautical and overflight charges at least in the short term, would guarantee adequate budgetary independenceto ARSAC. It would be desirable for ARSAC to move toward service charges to defray costs in a way that accurately reflects the distribution among various regulated activities: air navigation services, airport services, and air transport services. G.16 The rate-setting principles in force should be considered from a commercial point of view. Current financing mechanisms of the airport and air navigation sector (which are based on rates set for the sector as a whole), substantial government assistance for investments, a fixed formula for distribution of fee revenues among the sector's ublic entities, and unclear cross-subsidy mechanisms couldbereviewedinaccordancewith the ICAOPo Policies on Charges for Airports and Air Navigation Services (2004). This policy specifically recommends that "it i s desirable when an airport accommodates internationalflights, that users eventually assume a fair and equitable share of the cost of its implementation. Aqorts should keep accounts on the basis of which costs to be recovered may bedetermined and sharedina satisfactory manner. They should publishtheir financial statementson a regular basis. The following principles should be applied to determine the costs that will serve as a basis for calculating airport charges: (1) costs to be sharedwill include all airport-related expenses and essential additional services including capital costs and the amortization of capital assets, as well as 49I t i s anticipated that these airport platforms will comprise a large airport or a number of small neighboring airports. International Civil Aviation Organization. 58 Annex G maintenance costs, operating costs, and management and administrative costs. This will be contingent on all the airport revenue and extra-aeronautical revenue that operating the airport earns for the organization responsible for this operation ...."These are commercial pricing principles that seek to recover costs from the actual users of airport services rather than through other users or the state. The same principles apply to charges for air navigation services. InAlgeria, the development and operation of certain airports inthe South surely i sjustifiedby social rather than economic criteria, and therefore require state subsidies beyondthe partial recovery of costs from users. Inthis case, clearly identifying these investments and airport services as public service obligations requiring explicit subsidies i s clearly preferable to simply basing them on the current cross-subsidization system since this would facilitate informed decisionmaking on the allocation of public resources. G.17 Increased institutional coordination would benefit investment planning in the airport sector. The CTTP (the organization responsible for the technical supervision of public works) initiated a preparatory study on an airport master plan on behalf of the Ministry of Public Works. Although the drafting of such a plan i s certainly essential, as no such plan i s currently in place, it should be incorporated into a national airport policy and strategy, the broad outlines of which should be finalized ina Civil Aviation Development PlanandaNationalAirport Strategy,the subjectsoftwo studies soon to be launchedby the Ministry of Transport. G.18 Opening up competition in the domestic air traffic market would benefit a range of user services and reduce the burden of Air AlgCrie on public finances. The demise of Khalifa Airways and the return to a de facto monopoly by Air AlgCrie resulted in a 44 percent decline in domestic traffic from 2002 to 2004. The gradual entry of other operators into the market would compensate for the national airline's inability to meet all transport demands. International experience also shows the added user benefits that come from competition on domestic routes. As previously mentioned, "low- cost" companies would facilitate lower air fares and service charges. This would be an excellent incentive to improve the management of Air AlgCrie, reducing the supplementary costs that currently burden public finances when the state has to cover the company's deficits or finance its investment programs. In a competitive market, there should be price liberalization for air transport (excluding connections meetingpublic service obligations), and all compensatory subsidies to the public operator for public service obligations wouldbe limited to avoid biasing the competition. G.19 Compensation payments for public service obligations should be based on costs that reflect the efficient operation of air transport services. The principles of financial compensation for the public service obligations imposed on Air AlgCrie, introduced by the decree of December 27, 2003, quite rightly limit these compensatory subsidies to the deficits generated by clearly identified public service obligations instead of to overall operational losses. Instead of basing these subsidies on the "real costs" incurred by the company, using reference costs or target costs would ensure more efficient use of public funds. This would greatly facilitate discussions between the Ministryof Finance and the public operator in subsidy negotiations following submission of the profit-and-loss statement. Furthermore, introducing competition to public service operations by awarding contracts through bidding processes that define both the services to be provided and payment for them is a cost- reductionoption that merits future consideration. 59 Annex H ANNEX H:INFORMATIONONWATER SUPPLYAND DEMAND Table H.l PotentialitCs en eau de 1'AlgCrie @Criode de 60 ans, 1943-2003) RCgion hydrographie I Oranie I CheliffI AlgCroisI Constantinois I AlgCrie I Sahara Total ~~ - Melghir du Nord IINgkrie Bassins telliens 597 1,525 3,092 1,893 7,107 57.68 tributaires de la Mkditerranke CBtiers 151 400 1,080 2,630 4,261 34.58 Bassin endorkiques 249 30 130 545 400 954 7.74 (chotts) Total 997 1,955 4,302 5,468 12,722 100 400 13,122 %dutotal 7.6 14.9 32.8 41.7 Souterraine 435 249 751 1,302 2,737 5,000 7,737 Total potentialitks 1,432 2,204 5,053 6,770 15,459 5,400 20,859 Current (BCM/year) 2030 (BCM/year) Domestic and Industrial Use 3.1 4 . 2 4 6 Irrigation(LSI and SMI) 3.4 7.8-8.2 Sources: See Table F1.1. Surveys Projections Year 1966 1977 1987 1998 2000 2005 2010 2015 2020 2025 2030 Population 12.0 17.0 23.0 29.1 30.0 32.3 34.8 37.4 40.1 42.6 44.9 (millions) Dams (%) 52 39 9 100 Wells (YO) 51 16 33 100 Others(%) 41 0 59 100 60 Annex I ANNEX I:OUTLINE OF WATER LAWNO, 05-12 (28 JOUMADA I11426, 4 AUGUST 2005) AND REGULATORYFRAMEWORK OF THE WATER LAW 183Articles Title 1: Preliminaries (2-3) Title 2: Legal framework of water resources and hydraulic infrastructure Chapter 1:Naturalpublic hydraulic domain Section 1: Consistency of the natural public hydraulic domain (4-6) Section 2: Boundaries of the naturalpublic hydraulic domain (7-9) Section 3: "Servitudes" of naturalpublic hydraulic domain (10-15) Chapter 2: Artificial public hydraulic domain Section 1: Consistency of the artificial public hydraulic domain (16-18) Section 2: Inventory of the artificial public hydraulic domain (19-20) Section 3: "Servitudes" of public hydraulic domain (21-29) Title 3: Protection andPreservation o fwater resources Chapter 1:Perimeters of quantitativeprotection(30-33) Chapter 2: Protectionagainst water erosion (34-37) Chapter 3: Perimeters of qualitative protection(38-42) Chapter 4: Preventionandprotection againstpollution (43-52) Chapter 5: Floodprotection (53-55) Title 4: Institutional instruments for integratedwater resource management (IWRM) Chapter 1: Regional Water Plans (56-58) Chapter 2: National Water Plan (59-61) Chapter 3: Institutionalframework of IWRM(62-65) Chapter 4: Information on water (66-70) Title 5: Legal Regime for water resource use Chapter 1:Use of water resources (71-73) Section 1: Legal regime for water resourceuse authorizations (74-75) Section 2: Legal regime for water resourceuse concessions (76-84) Section 3: Commonprescriptions for authorizations and concession regimes (85-93) Chapter 2: Servitudes linkedto authorizations andconcessionregimes (94-99) Title 6: Public services for Water Supply and Sanitation (WSS) Chapter 1: Management ofWSS (100-101) Section 1:Public service concessions for WSS (102-103) Section 2: Delegationofpublic services (104-110) Chapter 2: Specific rules for potablewater (111-117) Chapter 3: Specific rules for sanitation (118-124) Title 7: Agricultural water Chapter 1: General rules for agricultural water (125-130) Chapter 2: Irrigationperimeters (131-135) Chapter 3: Specific rules for agricultural water (136) 61 Annex I Title 8: Tariffs Chapter 1: Common measures relatedto tariffs for water services (137-142) Chapter 2: Tariffs for domestic and industrialuse (143-148) Chapter 3: Tariffs for sanitation (149-154) Chapter 4: Tariffs for agricultural water (155-158) Title 9: Water Police (159-179) Title 10: Final and transitory "dispositions" (180-183) RegulatoryFramework To assess the Algerian legal and regulatory framework for water resource management and conservation, reference i s made to those universal principles and rules that provide a desired general framework for integratedwater management. These includethe following principles: Ecological. Freshwater i s a finite and vulnerable resource, essential to sustain life, development, and the environment. Institutional. Water development and management should be based on a participatory approach, involving users, planners, andpolicymakers at all levels; women play a central part intheprovision, management, and safeguardingo fwater. Instrumental. Water has an economic value in all its competing uses, and should be recognized as an economic good. I. Theseprinciplestendtoreflect,coincide,orevenagreewithpracticesandprinciplesacceptedby 1 Algerian water laws, regulations, and institutions. Algerian laws start with the assumptions that (a) water resources are unique (unicitk de la resource), (b) water has to be managed at the watershed level, and (c) water management has to be conducted in a participatory manner while taking into consideration the environmental and economic dimension (Article 3). The Water Law assigns first priority to meeting the needs o f final consumers (people and livestock) before those o f the agricultural and industrial sectors (Article 2). 1.2 Under the ecological principle, Algeria attempts to take a holistic, comprehensive, and intersectoral view o f water management, including legislation to achieve integrated management responsive to the characteristics o f water resources. Technically appropriate water management is geared, for example, to surface water and groundwater and quality and quantitya51 Consideration of social needs, economic soundness, and environmental requirements are implicit, with the ultimate goal being sustainable use and development o f water resources. Coverage under this principle includes the following: > Water policies. The Water Law states the purposes and objectives o f water policies and acknowledges the multiple roles o f water, encourages optimum use o f water for the benefit o f all, and sets up a framework for integrated water resource management (see, for example, provisions o f Title 4) to ensure quantityand quality. 9 Quality controls and environmental concerns. The Water Law includes the environmental dimension (see, for example, provisions o f Title 3). As water becomes scarcer relative to demand, externalities increase, and knowledge improves, the need to control deterioration o f water quality generates rather broad legislation. Permits (Article44) and prohibitions (Article 51See Title I11of the 2005 Law, which provides for a comprehensiveset ofgovernmentinterventiontools and instruments aimed at qualitative and quantitativemanagement including (a)protection of overly exploited or vulnerable aquifers, (b) anti-erosionplans for upstreamreservoirs, and (c) antipollution and prevention measures. 62 Annex I 46) are used to curb deterioration of water and related natural resources and environmental assets.52 9 Protection and management of water supplies. The protection of water sources has been a traditional concern of water law. Increasing demand and externalities have strengthened this concern. The Algerian Water Law reflects this dimension of water legislation through regulation of the use and development of national water resources (see, for example, provisions of Title 5). b Water planningand river basins. Development of water resources is no longer amenable to piecemeal action. Water legislation worldwide i s rapidly evolving toward integrated water planning to satisfy environmental objectives, economic requirements, and social concerns. Algerian water legislation requires preparation and regular updating of national53 and regional54 water master plans. Hydrological regions are subject to water plans to safeguard the water resources needed for economic improvement and protection of the quality of life (Article 56). Available water resources, flood control, and protection from pollution must be considered inintegratingwater planningwith regionalplanning (Article 57). Plans are subject to adjustment and updating and are implemented through administrative requirements (Article 58). 1.3 Legislation responding to the institutional principle is usually analyzed under the assumption that water-related activities are not confined to the interests of limited groups of users, geographical boundaries, sectoralinstitutions, or nationaljurisdictions. Participation (and venues and opportunities thereof), subsidiarity, and the role given to the private sector are the criteria used to assess the extent to which Algeria views the institutional principle as key to water management.Coverage under this principle includes the following: 9 Vesting responsibility for overall water management. The functional organization for policymaking, water allocation, water management, and monitoring of users plays an important role inthe implementationof a sustainablewater development system. Where these functions are vested in institutions with functional responsibilities for specific water uses or for discrete economic activities, water planning and management might not be objective. To avoid conflict-of-interest problems, many jurisdictions allocate responsibility for policymaking, water allocation, and program and project evaluation to a nonuser agency or ministry. The World Bank" emphasizes the need to separate policy, planning, and regulatory functions from operational functions at each level of government. Algerian legislation does not explicitly entrust overall water planning to a specific institution but does transfer functions of management to the regional level. The hydrographic region i s set as the appropriate unit for water management and the "Agence de Bassin" as the entity responsible for application o f the IWRM approach (Article 64). A consultative institution, the Conseil National Consultatif des Resources en Eau" (CNCRE) is incharge of implementing the water master plan and for examining strategic national options (Article 62). Though overall water responsibility i s not assigned, the Water Law makes provision for recourse to an autonomous regulatory agency to oversee public water services and safeguard the interests of users (Article 65). s2 These aspects mustbe consideredina morecomprehensiveway, includingthrough the provisionsof the 2003 Law onthe protectionofthe Environmentinthe Frameworkof SustainableDevelopmentwho has a Chapteron ((ProvisionsRelatedto Water andAquifers )) (Articles 48-58) 53 PlanNationalde 1'Eau (PNE). s4 PlanDirecteurd'henagement des Ressources en Eau(PDARE). ss World Bank, Water ResourcesManagement (1993). 63 Annex I 9 Conciliation of interests and consultations. To achieve the multiple objectives andreconcile the many demands usually associated with water resources, governments are resorting to conciliation mechanisms and preventive strategies to manage the differences and coordinate activities. The Algerian Water Law empowers the CNCRE to play this general role (Article 63) but does not make explicit provisions for settlement of disputes among users, consultations required for projects with intersectoral or interregional impacts, or a system of agreementsbetweenthe central level and the wilaya level. 9 Stakeholder participation. Democratization of water decisionmaking and water-related activities occurs through public hearings, stakeholder involvement in administrative bodies, andthe organization ofuser associations.Thus stakeholdersmay participate inpolicymaking, legislative discussion, general water administration, and field-level activities. Participation under the Water Law is covered only via membership in the CNCRE, with Article 62 guaranteeing a "seat at the table" for assemblies of locally elected representatives (assemblkeslocales), professional associations, andor users. > Communication and Disclosure of Information related to water resources. The Water Law emphasizes these aspects and requires establishment of an integrated water information management system (Articles 66 and 67). In fact, an effective system of participatory planning and management of water resources must be able to provide timely information about what kindand quality of water i s available where, and about who is usingthe water and for what purposes. It requires adequate surveys, inventories, and cadastres of water sources and supplies, as well as up-to-date registers and records of water usage and effluent discharges, water rights, and the beneficiaries of such rights, with their respective water allocations. The legislation requires water development entities, service providers, and final or intermediate users to submit information to the authorities in charge of water resources (Article 67) but does not insure that such information will be made available to the general public unless water i s withdrawn frompublic supplies (Article 68). 1.4 Issues involving the instrumental principle have important implications for the state's role in water resource management, how resources are distributed, and the efficiency of public spending. Water is not an ordinary commodity. The peculiar characteristics o f this resource stems from its polyvalent environmental, economic, and social roles. Instrumental considerations for water include, among other things, notions of public good; external effects; imperfect competition; risk, uncertainty, and imperfect information; potential for social and environmental inefficiencies and inequity; and vulnerability to monopolization. These dynamics have resulted in water rights systems that are hard pressed to strike a balance among the different demands and requirements resulting from polyvalency and uniquephysical, chemical, and biological attribute^.^^ The instrumental principle arguesthat becausewater is scarce, there i s need for greater attention to the economic value of alternative uses and a greater reliance on economic instruments (for example, water rights,user charges) to improve allocation and enhance quality: 9 Water rights and water markets. While water inAlgeria belongs to the public domain (Title 1, Chapters 1-2), water use rights are granted to private individuals or corporations (Title 5, Chapter 1). Under Article 72, authorizations or concessions for water use give a holder the rights for a predeterminedvolume for a specified periodbasedonnational resources available inanaverageyear. However, noprovisionis madefor theirtransfer or trade. Therefore, water markets inwhich those with water sell to those who need it are not legally formalized. > Charging for water. The Water Law requires tariffs for water services (Article 138) to be on the based on the principles of financial sustainability (equilibre financier), social solidarity, 56 Solanes and Gonzalez-Villareal(l999); TAC BackgroundPapers No. 3. 64 Annex I incentives for water conservation, and protection of water quality. These charges, fixed and recovered by the water service operator, cover all or portions of the investment, operation, maintenance, and infrastructure-renewal costs of managing the public service (Article 139). Provisions are made to adapt pricing to circumstances inwater use (by level of consumption, crop, urban center) to reflect the different markets in which irrigation, urban water, and sanitation operate. Incases for which tariffs do not matchthe operator's real costs, a financial compensation equivalent to the gap could be allocated to the operator (Article 140). 1.5 The rules and principles applicable to the development, management, and conservation of water resources and summarized in the Water Law are an important illustration of how public-based revenues and expenditures express public policy and public involvement in the water economy. There are three particular issues outlined inthe Algerian laws that set the stage for how the state intervenes inthe sector: 9 First, the state is recognized as having an important responsibility not only to develop of water infrastructure but also inits management. 9 Second, public-private partnershipsare explicitly recognized (see, for example, referencesin Section 2, Title 5) since financing for water resource infrastructure is not cleanly separable into public and private sectors. This section of the Water Law-one of the most important additions in the 2005 Law compared to the content of the 1983 Water Code57 as modified and completed by the 1996 Ordinance58--clearly recognizes an important transition must be made to meet water resource challenges. While private investment and management are playing, and must play a growing role, it must occur within a publicly established legal and regulatory framework for long-term development. > Third, the adoption of tariff systems for water as recognized inTitle 7 stressesthe importance of economic principles, such as insuring that users take financial and resource costs into account when usingwater, and the need to tailor solutions to specific circumstances. 57Law No. 83-17 of July 16, 1983. 58Law No. 96-13 of June 15, 1996. 65 Annex J ANNEX J: GENERAL PRINCIPLES OFALGERIA'S WATER LAW Article 2. Les objectifs assignks B l'utilisation, A la gestion et au dkveloppement durable des ressources en eau visent A assurer: l'approvisionnement en eau a travers la mobilisation et la distribution d'eau en quantitk suffisante et en qualitk requise, pour satisfaire en prioritk les besoins de la population et de l'abreuvement du cheptel et pour couvrir la demande de l'agriculture, de l'industrie et des autres activitks kconomiques et sociales utilisatrices d'eau; la prkservation de la salubritk publique et la protection des ressources en eau et des milieux aquatiques contre les risques de pollution a travers la collecte et l'kpuration des eaux usees domestiques et industrielles ainsi que des eaux pluviales et de ruissellement dans les zones urbaines; la recherche et l'kvaluation des ressources en eau superficielles et souterraines ainsi que la surveillance de leur etat quantitatif et qualitatif; la valorisation des eaux non conventionnelles de toutes natures pour accroitre les potentialitks hydriques la maitrise des crues par des actions de rkgulationdes kcoulements d'eaux superficielles pour attknuer les effets nuisiblesdes inondations et protkger les personnes et les biens dans les zones urbaines et autres zones inondables. Article 3. Les principes sur lesquels se fondent l'utilisation, la gestion et le dkveloppement durable des ressourcesen eau sont le droit d'accks a l'eau et l'assainissement pour satisfaire les besoins fondamentaux de la population dans le respect de l'kquitk et des rkgles fix6es par la prksente loi, en matikre de services publics de l'eau et de l'assainissement; le droit d'utilisation des ressources en eau, dkvolu a toute personne physique ou morale de droit public ou privk, dans les limites de l'intkrCt gknkral et dans le respect des obligations fixkes par la prksente loi et les textes rkglementaires pris pour son application; la planification des amknagements hydrauliques de mobilisation et de rkpartition des ressources en eau dans le cadre de bassins hydrographiques ou de grands systkmes aquifkres constituant des unitks hydrographiques naturelles, et ceci, dans le respect du cycle de l'eau et en cohkrence avec les orientations et les instruments d'amenagement du territoire et de protection de l'environnement; la prise en compte des coats rkels des services d'approvisionnement en eau a usage domestique, industriel et agricole et des services de collecte et d'euration des eaux uskes, travers des systkmes tarifaires la rkcupkrationsuffisante des coats d'intervention publique lies a la protection quantitative et qualitative des ressources en eau et des milieux aquatiques, A travers des systkmes de redevances d'kconomie d'eau et de protection de sa qualitk la systematisation des pratiques d'kconomie et de valorisation de l'eau par des proc6dks et des kquipements appropriks ainsi que le comptage generalis6 des eaux produites et consommkes, pour luttercontre les pertes et le gaspillage; la concertation et la participationdes administrations, des collectivitks territoriales, des opkrateurs concernks et des representants des diffkrentes catkgories d'usagers, pour la prise en charge des questions likes a l'utilisation etala protection des eaux et a l'amenagement hydraulique, au niveau des unitks hydrographiques naturelles et au niveaunational. Source: Water Law (2005). 66 Annex K ANNEX K:ORGANIZATIONOFTHE MINISTRYOFWATER RESOURCES The Minister heads the Cabinet, the General Secretariat, and the Inspection GCnCrale. The General Secretariat heads eight Departments: 9 DEAH (Direction des Etudes et des AmCnagementsHydrauliques). This department i s responsible, in coordination with the subsectors, o f water resource and irrigation schemes, data collection, and monitoring. It i s also in charge of delivering a master plan for hydraulic infrastructure and implementingan information system for the sector. 9 DMRE (Direction de la Mobilisation des Ressources en Eau). This department defines the water production and storage policy. DMRE initiates feasibility studies and monitors storage and transfer infrastructure. It also proposes rules and standards for andmonitors operation and management of water infrastructure. 9 DAEP (Direction de 1'Alimentation en Eau Potable). This department defines the actions to be taken to fulfill both domestic and industrial water demand. It monitors the corresponding studies, programs, operators, and implementation. It defines rules and standards for designing and operating infrastructure. It i s incharge of monitoring water quality and resource allocation. DAEP i s also in charge of initiating and pursuingthe reforms of water productionand distribution. 9 DAPE(Direction de 1'Assainissement et de la Protectionde 1'Environnement). This department i s responsible for all decisions to protect water resources. To do so DAPE defines and implements policies for waste water collection, treatment, and reuse. It initiates and monitors related studies. It defines rules and standards for effluent quality, and for treatment-plant and network operation and maintenance. It participates with all the sectors involved to implement environmental and health policies. It i s also incharge of reforming administrationo f the sanitation subsector. 9 DHA (Direction de 1'Hydraulique Agricole). This department defines irrigation and drainage policies. DHA participates in national and regional planning of irrigation and drainage activities. It is incharge of norms and standards for irrigation networks and machinery. It elaborates and implements policies and projects for irrigationwater production and storage. It monitors all subsector activities. It is in charge of reforming administrationof the irrigation subsector. 9 DPAE (Direction de la Planificationet des Affaires Economiques). This department participates in all feasibility studies and i s in charge of assessing economic impacts. It is incharge of investment planning coordination. Once projects and programs are selected, DPAE i s in charge of finding both internal and external financing. It monitors how projects and programs are implemented. It i s in charge o f relations with the Ministry of Finance. 9 DRHFC(Direction des RessourcesHumaines, de laFormationet de laCoopCration). This department is in charge of human resource management. DRHFC is also responsible for cooperation with universities and research activities. It i s charge o f the sector archives. 67 Annex K 9 DBMR(Direction duBudget, des Moyens et de laRCglementation).Thisdepartment evaluates all administrative operational needs. It manages the corresponding budget. It monitors the administration's expenditures. DEMR is also in charge of legal studies and participates inthe drafting of legal documents for the water sector. The DHW (Directions Hydrauliques de Wilaya) are the regional representations of the Ministry o f Water Resources. They implement the sector policy and investment program at the regional level. They are also in charge of implementing projects financed by the Walis. They channel mayor's needs to the central administration. There are five EPICS in the water sector. All are under the ministry's aegis: 9 ANBT (National Agency for Dams and Transfers). ANBT is in charge of all feasibility studies. It is responsible for project procurement, implementation, monitoring and evaluation. The Agency is also in charge of infrastructure operation and maintenance or to procure all or part of these activities as needed. 9 ANRH (National Agency for Water Resources). This agency is in charge of data collection on water resources (location, quantity, quality, and so forth). It i s responsible for water conservation through implementation of quality-monitoring networks and mapping. ANRH studies all phenomena affecting the resource base, including erosion, salinity, and so forth. It i s in charge of monitoring floods. It lists lands available for irrigation and is responsible for monitoring its quality under irrigationand drainage. 9 ONID (National Agency for Irrigation and Drainage). This agency is in charge of feasibility studies and implementation of irrigation schemes. It also provides assistanceto the OPI inof the operation and management of large schemes. 9 ADE (National Water Supply Agency). ADE is in charge of implementing water supply policy through the operation and management and renewal of water production, transfer, storage, and distribution activities for domestic and industrial uses. It i s incharge of water quality control. It i s responsible for improvingwater use efficiency through the management of networks and the implementation of measures for resource conservation and demand management. It plans and implements investment programs. > ONA (National Agency for Sanitation). The agency i s responsible for water resource conservation andthe implementationof sanitation policy with municipalities. ONA is in charge of conducting feasibility studies, monitoring sanitation assets and works (plants, collectors, and networks), and operating and managing all these infrastructures. The agency i s responsible for raisingpublic awareness through media campaigns and educational programs inschools. 68 Annex L ANNEX L:REFERENTIELSDENORMED'ENTRETIEN RENOUVELLEMENT(%) T a m d'entretien Composantes I Taux d'entretien 0.2 Reseaux de 11 distribution Genie civil canal en 2 Gorsses conduites 1 1 Petites conduites 1 0.5 Bornes d'irrigation 3 3 Canaux portes 2 10 Materiel 3 hydromecanique (reseau) Equipements 3 Assainissement 3 interne 2 Assainissement 2 I Genie externe civil des 1 I Reseaux de 1 circulation .5 I Sources: SCET-MarocIAgroconcept: Etude du Cout de I'eau dans les perimetres de grande hydraulique, ORMVA des Doukkala, Rapport Principal. 69 Annex M ANNEX M:ALGERIA WATER FACT SHEET Source: IA.K. Chapagain, A.Y. Hoekstra,2003, Virtualwater flows betweennationsinrelation to trade in livestock and livestock products, Value of Water ResearchReport Series No. 13, LINESCO-ME. Fact Sheet compiledfor the MENA Water DevelopmentReport (2006) 70 Annex N ANNEX N:RECOMMENDATIONS OF THE WORLD BANK WATER SECTOR STRATEGY FORALGERIA (2003) At the request of the Government of Algeria, the World Bank in cooperation with FA0 has prepared in 2003 a document outlining the key elements for a water sector strategy in Algeria. Having assessed the main challenges of the sector (increased water scarcity, inefficient management of existing infrastructure, and deterioration of water quality), the report takes a serious look at the constraints limitingthe potential for water to play a bigger role inthe country's economic and social development, and suggests four pillars that in the World Bank's opinion should form the basis of Algeria's program of water sector reform inthe short andmedium run. Pillar 1: Undertake some urgent horizontal actions across the whole sector for (a) improving the capacity of formulating sectoral policies, (b)translating the general principles of the Water Code with decrees and texts to implement the broader vision for water, and (c) committing and implementing a systematic cost-recovery policy for water mobilization, distribution, and sanitation services. Pillar 2: Reinforce the integrated approach to water resource management by (a) improving the quality o f information and updatingthe National Water Master Plan, (b) empowering water basin agencies, and (c) changing the status of the water mobilizationandtransfer agency into an EPIC. Pillar 3: Restructure the irrigation subsector by (a) limiting the extension of new irrigation schemes to areas where the resource can be secured and rehabilitate existing infrastructure, (b)improving the inventory and diagnostics of small- and medium-scale irrigation, (c) curtailing groundwater use for agriculture needs, and (d) adjusting tariffs and improving recovery of charges. Pillar 4: Improve governance and financing of the water supply and sanitation sector by (a) developing a long-term vision for ADE and ONA, (b) providing more autonomy to public service providers, (c) promoting PSP, (6) improving asset management of existing infrastructure, (e) giving priority to sanitation and quality issues,v> applying a new tariff policy, (g)improving national capacity for investment planning, and (h) developing transparent criteria for the public financing of infrastructure. 71 Annex 0 ANNEX 0:FROMVISION TO ACTIONINALGERIA'S WATER SECTOR Supporting documents/ references Vision Algeria faces important water resource challenges as needsgrow 1996 Water Code (Art. 1 and for water supply and irrigation; as water becomes scarce, quality Ibis) and2005 Water Law declines, and environmental and social concerns increase; and as (Art. 1-2) threats from droughts and floods become more evident. Consequently, there is need for (a)a more rational and planned usageo f water to better meet the needs o f people and the national economy and (b) effective measuresto protect water resources against pollution, waste, and overexploitation. Integrated water resource management is needed to cope with the above challenges. Changes Achieving the vision requires a complete overhaul o f water Country Case Study for institutions, the legal and regulatory environment, and how water Algeria presented by MREat development and management are organized inthe following the IWRM Seminar water subsectors: --- Water knowledge and information Mobilization Water supply for domestic and industrial use (with public- private partnerships) - Distribution o f water for irrigation -- Inteerated Sanitation, and the treatment and reuse o f wastewater water management at the hvdroeraDhic basin level. Goals Thebroader objectives ofnational water policymaking are Country Case Study for --- Systematic mobilization o f all exploitable water resources Algeria presented byMREat Protectionand preservation o f existing resources the IWRMSeminar Development o f planning and dynamic management tools -- Use Better water conservation and demand management o f nonconventionalwater resources. Strategy MRE's water strategy is a medium-term actionplan(2004-13) to PDSRE (July 2003) (informal) achieve goals o f national water policymaking. includes (a)' institutional reforms o f several EPAs to move them towards an EPIC status; (b) improved humanresources inthe sector through staff redeployments, capacity building, and filling staffing gaps with new vacancies; (c) promoting private sector participation; and (4a new tariffpolicy. The medium-term planwill target the rehabilitation o f 35 urban water supply systems, constructiono f 14 large dams, 6 large transfers and a forage program o f 50.000 muyear,9 desalinization units, 77 wastewater treatment plants, and the rehabilitation o f 19 wastewater plants. Plans The PNE is a document required by law, used to - Assess PlanNational de L'Eau the present availability, withdrawals, losses, anduses of MRE-DEAHHydrologic - Formulate the water resources alternative development scenarios for water Regions PNE 2005 Updates resourcesand demanduse at various planning horizons for: - Identifytechnical and operational options to bridge the gap Oranie-Chott Chergui (May between resources and demands. 1997) The 1993PNE is inthe process o fbeing updated for all 4 Cheliff-Zahrez (April 1997) hydrologic regions. Algerois (October 2005) Constantinois (October 2005) 72 Annex 0 Actions Institutional reforms Establishment in 1999 o f a water resourcesministryto coordinate water development and management. PCSC Establishment o f EPICSfor water mobilization, distribution and sanitation services. Loi de Finance 2006 Establishment o f 5 basinagencies to coordinate water resource ANBT (Point de Situationdes management at the basin level. Projets, October 2005) Policies Changes inwater tariffs (potable water, industry, irrigation, and sanitation) adopted inJanuary 2005. Introduction o fPrivate Sector Participation inUrbanWater Supply. Fundfor IntegratedWater ResourceManagement set upto channel funds for Basin Agencies. Investment Package Regular Program includes constructiono f 8 large dams for a total capacity o f 1.14B C M and 10transfers expected to be completed by December 2007. PCSC includes two major packages for the water sector: Package 1has an envelope of US$1.75 billion (DA 127billion) for improving access to potable water. Package2 has an envelope o f US$5.55 billion (DA 400 billion) for improving hydraulic infrastructure (includes large dams and transfers). 73 Annex P ANNEX P: EDUCATION-SIMULATION SCENARIOS Table P.la MultilevelModel-Science Score and Pupil and School Characteristics (N= 5,878) Dependent Variable: PupilScience Score in% Less than university University 0.64 0.46 n.s. Mother's education level I 1I Less than university University 0.76 0.67 n.s. Type of habitation Semi-durable 1S O 0.36 *** Case. hutteor durable Others 0.74 0.36 ** Household wealth Average 2.16 1III 0.71 *** Small Large 0.90 0.75 ns. School charges (Droit de scolaritb)No Yes 1.24 0.61 ** Equipment in school -0.14 0.09 * Type of school Fullboarding 1.23 1.04 ns. Semi-boarding No boarding 0.43 0.79 ns. Indicator of school autonomy -0.28 0.17 ** Percentage of women teachers in the school 0.05 0.01 *** Constant 48.37 2.59 *** Level2: interschoolvariance 8.92 1.38 Level 1: intraschoolvariance 111.30 I 2.09 Percentageof interschoolvarianceexplained 22.70 Percentageof intraschoolvarianceexplained 3.96 -210gL 44,575.90 74 Annex P Table P.lb MultilevelModel-Mathematics Score and Pupil, School, and Class Characteristics (N=5,875) DependentVariable: PupilMathematics Score inYO Parameters I Reference category Other category(ies) Coefficient S.E. Sex Boy Girl -3.64 0.41 *** 13 years -3.64 0.41 *** 14years -2.38 1.63 ns. 15 years -2.78 1.62 ** 16 years -5.23 1.67 *** 17 or 18 years 4 . 6 1.74 *** -5.46 1.94 *** Family size Less than or more than 1child One child -1.75 0.87 ** Language spoken frequently at homeNationalor maternal language French 0.14 0.52 ns. Father's education level Less thanuniversity University 0.01 0.69 ns. Mother's education level Less thanuniversity University 2.77 1.00 *** Type o f habitation Semi-durable 1.46 0.53 *** Case. hutte or durable Others 0.52 0.53 ns. Household wealth Averaee 0.10 1.04 ns. 0.45 1.14ns. Distance between school and home Equalto or less than 5 kms More than 5 kms -0.65 0.61 ns. Repeatedin7th or 8th Grade Repeatedonce -0.46 1.17ns. No repetition Repeatedtwice 0.84 1.16ns. Expenditureon school charges No Yes -0.23 0.64 ns. Expenditures other than on pupil materials No Yes 1.05 0.47 ** 0.21 ns. 1.76 0.97 ** 1.04 n.s. Less than 4 years of postsecondary 4 years ofpost secondary Age of 8th grade mathteacher Less than45 years 45 years or more Math teacher had preservice training inmath N o Yes Percentage of math textbooks in the class Less than 75% - Higher or equal to 75% Level2: interschool variance 15.06 (2.57) Level 1: intmchool variance 232.63 II (4.46) Percentageof interschoolvariance explained 22.17 Percentageof intmchool variance explained 2.03 - 2 l o g L 75 Annex Q ANNEX Q:SUMMARY OFMEASURESPROPOSEDUNDERTHE EDUCATIONREFORMPROGRAM Targets Enhancing Access ImprovingQuality Change Structure Preprimar) Provide one year in every 1 year inpublic sector primary school Primary 100percent primary Replacement of 1,8 19primary Upgradeteacher qualifications to Reduceto 5 years completion classes Bacc +3 throughin-service training Introducecompetency-based instruction(Approche par les Competences), with concurrent evaluation andongoing remediation Introduce nationalend-of- cycle examination Reform preserviceteacher training (new programs = Bacc+3, first batch in2205) Lower All primary completers to Upgrade teacher qualifications to Increaseto 4 years Secondary attend lower secondary 603 new lower secondary Bacc +3 through in-service training schools 80 percent o f students to Reformthe end-of-cycle examination complete lower secondary Replace 50 schools (Brevet) (attain final year) (Total all classes: 2,293) Reformpreserviceteacher training, as Target for pass rate in inprimary Brevet not indicated Upper Improvetransitionfrom 290 new upper secondary Upgrade teacher qualificationto 1-year tronc commun Secondary lower secondary to (target schools Bacc+4 inspecialty with two broad not given) specializations (Arts and Replace 15 upper secondary Reform preserviceteacher training Science/Technology) Increasepass rate in schools Baccalaureat to 70% Reducednumber of 700 canteens; 370 demi- Baccalaureat pensions;29 boarding facilities specializations to 6 (from 15) Vocational 30,000 additionalteaching posts Increasediversity o f Training Not stated Public sector: offerings for Training o ftrainers apprenticeship, and 250 amenagement distance and continuing d 'etablissements Improve student counseling inlower education secondary school to ensure that 100boarding facilities motivated students enter programs Encourageprivate sector Partnership with enterprisesin activities curriculum development, student training Establishobservatory to study students' labor market performance Higher Increaseenrolment to 1.1 Build 467,000 additionalplaces Recruit 25,000 additional teachers Institutecredit transfer Education millionin2009 sedagogiques and with doctoral qualifications system through adoption accommodation for 350,000 Introduce new courses of LMD system idditional students Create mechanisms for quality Zreate26 universityrestaurants assurance Ereate30 offices of the ONOU Source: Bsu Staff Elaboration from MEN. 76 Annex R ANNEX R:FUNCTIONSBY LEVEL OFADMINISTRATIONIN SCHOOLEDUCATION Function Ministry Wilayat Commune Institution(lower and upper secondary schools Legalframework Preparationoflaws and administxativerules Planningof Definitionoftypes of schools Enrolmentprojectionsand educational and normsfor provisionof school mapping to services schools, teachingloads, identify requirementsfor administrative staff additionalschools/teachers Pedagogical Content of curriculum, Organizeexaminations Organize classes syllabus, textbooks, andother (earlierprimary-level accordingto syllabus instructionalmaterials examinationwere prepared and conductedby Continuousevaluationof Rulesfor conduct of exams; wilayats) pupils' performance administration of examinations Personnel Preparationof rules for Managementofteacher Management managementofpersonnelin posts andallocationacross collaborationwith MFP and schools, basedonnorms MoF Settingcriteria for recruitment ofpersonnel (Salariesare set by MFP and MoF inlinewith those for other civil servants) Budget Annual Budget o fMEN- Provideestimates of Preparation reconciliationof aggregate requirementsfor additional needs andresources,as well schools/teachers as allocationsto wilayats basedon regional and nationalmeetingswith chiefs Provideestimates of of wilayas nonpersonnelexpenditures for secondary schools Budget Execution Construction and Maintenanceof Procurementof materials rehabilitationof schools primary schools from requiredby institution, and roomsaccordingto own funds using allocationreceived physicaland fmancial from wilayat allocations by Ministry. Dir.de Logementet Provisionof materials EquipementPublique of to primary schools the Ministry of Habitat from own funds undertakesrehabilitation. Distribution of nonpersonnelfunds for lower secondary andupper secondary schools, including for maintenance Supervisionand Inspectionof schools Supply of information Supply of Reportsof physicaland Monitoring requiredby Ministry informationrequired financial execution by wilaya Reportsofphysicaland Supervisionand financial execution monitoringof school construction within jurisdiction Sources: Bank staff compilation from various sources. 77 Annex S ANNEX S: ALTERNATIVE SCENARIOS ONTHEIMPACT OF THE PCSC ONHIGHEREDUCATION The main drawback of the PCSC expenditure projections is that total sectoral financing requirements, covering both recurrent and capital costs, have not been estimated nor have the trade-offs and policy choices been explicitly considered in relation to their fiscal impact and achievement of sectoral goals. Three scenarios are considered here to evaluate the realism of the PCSC projections and assess the impact of cost sharing inhigher education (Figure S.1). Figure S.1 Projected sectoral expenditures under three alternative scenarios (% of GDP) 90 8.5 8 0 7.5 7.0 6.5 6.0 9 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Bank staff calculations. Assumingno changes are envisagedinother parameterssuch as pupil-teacher ratios or class size, other key assumptions of the three scenarios are as follows: 9 Scenario 0. Continues the status quo for internal efficiency parameters in school education and transition rates between educational levels. Enrolment increases are therefore drivenby demographic trends. 9 Scenario I. Incorporates the PCSC targets for enrolment at different levels by assuming a substantial and rapid improvement in internal efficiency in lower secondary education (by 2009), a more gradual improvement in upper secondary education, and higher pass rates in the Baccalaureate and transition to universities. This improvement in internal efficiency is associated with increases in per-pupil nonsalary spending on materials and teacher training, which double by 2014. 9 Scenario2. Limitsthe percentageof students with access to free accommodation to 30 percent (versus the current 50 percent) and better targets scholarships. Assuming that these measures affect the richest segments of the population, whose demand will not beaffected, there is no impact on enrolment. Four main conclusions can be drawn from these scenarios First, the PCSC enrolment targets for higher education cannot be met unless internal efficiency in lower secondary and upper secondary schools improves, together with higher pass rates in terminal examinations. Inthe status quo scenario 0, the upper secondary GER rises to just 78 and the number of university students rises to 1.1 million in 2015 (the PCSC target is to reach this number by 2009). Only with the improvement in internal efficiency in scenario 1 does the 78 Annex S secondary GER rise above 100 and the number of university students reaches 1.6 million (1.2 million in2009). A short-term problem (common to all three scenarios) is that the arrival in2009 of the double cohort in lower secondary-due to the shortening of the primary cycle-will require a large number of classrooms and teachers. Obviously, these will not be built or hired, respectively, since i s the bubble is temporary, but additional provision must be made in the recurrent budget for leasing rooms and hiringtemporary staff. Second,both the continuation o f the status quo (scenario 0) and higher sectoral targets (scenario 1) require significantly more spending inthe short run. Inthe first case, sectoral expenditure rises to 7 percent of GDP in2008 and declines thereafter to about 6 percent in 2015. Inthe second, it rises to 7.4 percent of GDP between 2008 and 2012 and increasesto 8.4-8.8 percent of GDP until 2015 (Figure S.1). The spike in2009 (to 8-8.8 percent inboth scenarios) i s causedby the arrival of the double cohort in lower secondary education from reduction of the primary cycle to five years. However, inthe first case, expenditures rise from increasing enrolment in lower secondary and upper secondary education in the initial years, then decline as the smaller cohorts of following years pass through primary and reach lower secondary school. Notice inscenario 1that initial expenditures are only somewhat higher than inscenario 0, despite the much higher increase in enrolment, because of savings from improvements in internal efficiency. In later years, expenditures rise mainly becauseof the expansion inhigher education. Third, a modest reform of higher education financing in scenario 2 allows a saving after 2009 of about 0.5 percent of GDP compared to results in scenario 1. These savings stem from reduced investment (in student accommodation) and associated recurrent expenditures, and fewer scholarships. This shows the substantial impact of even limitedmeasuresof cost sharing. Fourth, the PCSC investment program underestimates the investment requirements for school education by DA 80 billion for the period 2005-09, if sector targets are to be met. Projections for the needed number of new schools and major rehabilitations, assumed to be 10 percent, may be too low. On the other hand, requirements have been overestimated by about DA 40 billion for higher education andDA 21 billion for vocationaltraining (Table S.1). Schooleducation VET Higher Education Scenario2 investment(2005-09) 244a 45 243 PCSCinvestment(2005-09) 166 66 283 aExcludes the expenditure spike from the 2009 arrival o f the double cohort in lower secondary education caused by restructuring the primary cycle. 79 Annex T ANNEX T: FUNCTIONSBYINSTITUTIONINTHEHEALTHSYSTEM Function Ministry of Health Ministry of Labor Health Regions59 WilayalDSP Providers and Social (hospitals, health SecurityMckness centers) Legal Preparation o f laws framework and administrative the M O L for l a i s rules and decrees with a financial impact on the social security system Planningof - Public providers: Give orientations for The wali health services definition o f types o f health activities authorizes the providers and norms according according opening o f new for number o f beds to the priorities, private hospitals -and equipment available ressources Private providers: and regional authorization o f epidemiological construction for new context private hospitals Financing - Public providers: sickness funds pay a flat contribution to the M O H based on the requirements o f the Budget Law which complements the appropriations from the State budget - Private providers": sickness funds reimburse insured patients based on the nomenclature for medical acts and the reimbursable rates (the difference with the actual price is covered by OOP) Budget Centralization o f the - Current - Current Preparation needs expressed by expenditures: DSP expenditures: health institutions collects budget preparebudget and wilayas and, forecasts and forecasts and based on that, transmits them to transmit to the discussion o f the the M O H wilayas amount o f - Investments: the - Investments: appropriations with wali centralizes the submit their needs the MoF needs expressed by to the wilayas health institutions (he may make changes before transmitting them to the MOH) ''Regarding health regions, their functions as described inthe table are those defined by the law of July, 14 1997.However, they do not seem to play any concrete role on the field. 80 Annex T Budget - Current Responsible for all Procurement o f Execution expenditures: investments except materials required allocates budgets to for university by institution health institutions by hospitals and based on allocation category o f certain specialized received expenditure ("titles": hospitals personnel, drugs, maintenance...)and approves transfers o f money between titles when asked by health -institutions Investments: responsible for investments projects for university hospitals and certain specialized hospitals Personnel Definition o f Recruitment o f Management personnel staff ifbudget managementpolicy, available and preparation o f following the rules personnel status in o f the civil service, collaboration with allocation o f MFP and MoF bonuses to certain Exception:the categories o f staff MinistryofHigher inapplication of education is legislation responsible for the corps o f university hospitals physicians. (Salaries are set by MFP and MoF in line with those for other civil servants) Delivery of care Coordination and Encourage good Public providers: orientation o f health utilization o f the organize the activities different levels o f delivery o f care care according to orientations given at the central, regional and wilaya levels Privateproviders: organize the delivery o f care almost without any constraint Public health Definition o f public Proposition o f General Executiono f policy health policy regional programs responsibility in public health terms o f policy (public coordination and providers) enforcement o f public health policy, communication on public health programs 81 Annex T Supervision Definition o f Supervision o f the Functions : general Collect and and evaluation evaluation policy, collection and competence in transmit data on general responsibility utilization o f health terms o f activity and for supervision and data enforcement o f financial execution evaluation o f regulation, (public providers providers centralization of only) information requiredby MOH, evaluation o f health institutions activities at the wilaya level, inspection o f health institutions Source: Bank aff based on interviewers. 82 Annex U ANNEX U:CONCESSIONSAND OTHER FORMSOF PUBLIC- PRIVATEPARTNERSHIP U.1 Public-PrivatePartnerships (PPPs) to contract public service delivery to the private sector are legal and financial arrangements whose terms specify the respective obligations and responsibilities of each partner for all or part o f the design, financing, construction, implementation, management, and maintenance of infrastructure projects. U.2 Such partnerships can allow public authorities to better manage investment and operating expenditures for infrastructure projects. For that to happen, expertise must be developed in risk assessment and financial feasibility methodologies geared to PPPs, as well as to tendering bids and preparing contract documents. These methodologies differ from conventional procurement procedures. U.3 The wide appeal of PPPs (including Algeria) lies primarily in maximizing the effectiveness of government outlays by having the private sector take charge of obligations normally carried out by the public sector. Oversight of operating and investment costs relies on results-based obligations (no services, no payment), and depends on establishment of clear and transparent tendering procedures to maximize efficiency and enhanceproject legitimacy. U.4 A number of such initiatives are being started or are under way in Algeria. The main works include the following: P Production of desalinated water (10 "Build-Operate-Transfer," known as BOTS) under way)-signed or inprogress P Water distributionmanagementinmajor cities (preparation ofthe Constantine, Oran, and Annaba files) P Assignment ofmanagementofthe Algiers airport (study under way) P Assignment of management/concessionof the DjenDjen container port (study under way). US Although important work is being done in the area of PPPs, three critical shortcomings can be noted: P Consolidation of knowledge is lacking about procedures, risk sharing, and technical arrangements from projects either in progress or already completed. At the moment, no entity or institutional mechanism is responsible for collating PPP- related information and disseminating it to the oversight ministries working in this area. P P Sectoral legislationis beingadaptedto PPPsrather than draftinga general legislative framework tailored to this new phenomenon. Such a framework would allow the government to adopt a consistent position on numerous PPP-specific issues (procurement, expertise-related problems, pledges, and so forth). P P Government institutions lack organized andpractical information about the needs of investors and their financiers, investors' perception of risk, and how files are put together and infrastructure-related and PPP contracts are drawn up. For example, risk analysis, a key element of PPP implementation, seems to be piecemeal rather than systematic. One reason for the confixion evident at the start-up o f PPP contracts may 83 Annex U be the small number of previous PPP projects, which limits the lessons that can be drawn from prior experience. Not resolving this shortcoming could lead to a significant gap between what governments deliver and investors expect, as well as suboptimal risk sharing. The (unsuccessful) attempt to enter into a concession arrangement for the Algiers airport i s one such example. Recommendations U.6 Based onthe above, Algeria needs to take three major actions: 9 Enactmentoflegislationwith the scope andproceduresto implementPPPprojects. Such legislation would provide the legal instruments to facilitate partnership projects. It should also assemble and include relevant legal documents developed at the sectoral level. 9 Development of a conceptual methodology for PPPs, including how they are structured and monitored. This methodology could draw on international best practices, while tapping knowledge developed in Algeria. Regular channels of dissemination should be established to disseminate what i s learned widely within the government, particularly inoversight ministries. 9 Establishment of a centralized hub of PPP expertise. The mission of this clearing house would be to gather and later to develop and share knowledge and practices about PPPs in Algeria. The relationship between this hub and the Caisse Nationale d'Equipement pour le D6veloppement (CNED remains to be defined. 84 Annex V ANNEX V: WHAT HAPPENEDTO DA15BILLIONINFUNDING FORTHE SOUTH? (fromEl Watan,March27,2006) Through a series of visits to 7 out of 23 wilayas that received funds for the South in 2002 and 2003 for urban planning and management, electricity, roads and leisure activities projects, a commission headed by the walid de M'sila discovered that the populations in these communes have not seen any significant changes or improvement in their living conditions despite the staggering sums that were theoretically allocated for these projects. Invisiting these communes, we were able to learn about the gross disparities between the theoretical sums allocated for these projects and the actual completion o f these projects. Either these projects do not exist or have been partially started insome places, or inother places nothing has happened. Incases, there i s no evidence of any equipment purchased or work completed, and money has been systematically misappropriated. The funds for the South involved an amount of DA1.3 billion. These funds have been managed invery questionable circumstances by individuals designatedbythe ex wali at the department of local administration. We were told that 373 projects were allocated to hand-picked entrepreneurs based on project profiles. During our visits to these different communes, which on paper had benefited generously from the funding for the South, we were repeatedly shocked by the destitution of the areas, the lack of basic infrastructure and facilities. This situationwas confirmed inthe communes of Ouled Slimane, Zerzour, Mohamed Boudiaf, Ben S'rour, fin Farbs, Bir El Fodha, and Sidi M'hamed, where substantial amounts had been supposedly injected into these communities. 9 Inthe commune of Ouled Slimane, where living conditions are particularly harsh, the programme for the South allocated a sum of DA 24.5 million to the commune for urban improvement (roads), extension of the electricity network, and the completion of the Ouled Slimane-Meguessem Road. Except for the main road of Ouled Slimane, which merges with National Road 46, we did not find any evidence of work or equipment for this amount: no urban improvement projects, no Ouled Slimane Meguessem Road, no public electricity, and even less o f its extension. 9 The commune of Zerzour received a total amount of DA 8.9 millions for urban improvement (roads) and the installation of public electricity. In Zerzour, there were only a few meters o f sidewalks but as for the rest of the commune, it has not lost any of its rural poverty. The same i s true for the communes of Mohamed Boudiaf, which had been allocated DA 8 million for roads development, and Ben S'rour, which had been given DA 31 million for the improvement of roads and public electricity. The roads of Mohamed Boudiaf remain marshs. A member of this commune told us in Ben S'rorur, "Nothing was done according to standards and the population continues to be frustrated bythe pitiful stateo fthe roads andthe absenceof electricity." 9 InpiinFar& there hasnotbeenany urbandevelopment projectnor anypublic electricity project initiated. Citizens have seennothing, even though funding allocated on paper was DA 7 million for urban development, DA 4 million for urban development infin Alleg (dechra), and DA 31million for the extension of the public electricity network. 9 In Sidi M'hamed, there have been no urban development projects (DA 5 million disbursed), no stadium development (DA 21 million disbursed), and the road leading to the Square of the Martyrs (DA 3.5 million disbursed for its restoration) quickly deteriorated and "did not last even one day" a citizen toldus. 9 In the commune of Bir El Fodha, an urban development program for the dechra of M'gaitaa had been planned for an amount of DA 6 million and the development of a 85 Annex V soccer playing field inTelilat for DA 1million, projects for which there i s no evidence of work. One citizen told us, "Twenty six million dinars were allocated for the roadbetween Bir ElFodhaand Telilat, for a distance of about 8 to 10kilometres. Itwas completed one year ago and it is already deteriorated: the pavement didnot even last for one week." The hydraulic sector also received funds from the South program. Forty-two drill holes were made according to official reports and then were abandoned without equipment, no energy, no pumps, and no enclosures. The hydraulic department intended to provide equipment to eight wells, and planned 24 others. Only three wells were actually equipped and the seven remaining-three at Sidi Ameur, two at Tamza, one at M'cif and one at Djebel Messad, representing a sum of DA 27.3 million-were abandoned. Project initiators in the rural communes that received exorbitant sums completed the drilling only to abandon them. They startedthe extension of the electricity network even though there was no initial griddesigned, and went so far as to planning swimming pools in 13 rural communes. But work stopped with the diggingof the holes inparks and abandoned areas. Pools have never been filled with water nor been fenced off. These 13 swimming pools estimated at DA .8 million ach have never functioned (no water, and no fencing). For the populations in these communes, the construction of these swimming pools was an expression of the gross incompetence on the part of the authorities inthe wilaya, and the origin ofthe riots that shockedthe commune o f Slimane. 86 Annex W ANNEX W: LEARNINGFROMTHE PASTAND THE PRESENT: THE ASSETS OFTHE STATEAND THE CURRENT INVESTMENTPORTFOLIO The stock of capital assets W.1 Despite the large past public investment, the register of state assets is incomplete. Between 1985 and 2004, total public investment was nearly DA 4,000 billion, equivalent to nearly 9 percent of GDP. Yet the current value of the stock o f assets is not known, let alone its contribution to economic activity and employment. W.2 Much progress has been made in the area of the state "private domain." A full inventory o f buildings, land, and real estate i s now nearly complete. Also, the provisions for "protecting" these assets appear to be robust; and the responsible administrative entities are well respected for competence and integrity. One difficulty i s that the value of the state's private assets cannot be accurately estimated or projected because the inventory does not consider depreciation. An obvious recommendation i s a program to estimate depreciation of private domain assets, initially on a pilot basis. A simple methodology could be based largely on internationalnorms. W.3 Beyond the private domain, there is no reliable knowledge of other assets. These were created by the vast cumulative government investments of the past and are still economically functioning. Consequently, the economic value of the major capital assets cannot be estimated. There are several reasons why such an estimate would be useful: 9 Prevent duplicationbetweenproposedprojects andexistingassets. 9 Exploit opportunities for positive externalities. > Reduce external diseconomies, including adverse impacts on the natural environment. 9 ImproveallocationofscarceO&M budgetaryresources. W.4 Budgetary allocations are insufficient to cover operations and maintenance needs for the existing stock of assets. It i s understandable that officials in the respective ministries view this as a serious problem. However, it does not follow that all assets created in the past must be fully funded in the future simply because they exist. In the absence of a convincing demonstration o f the actual economic contribution of the major components of the capital stock ineachsector, the rationale for continued fundingoftheir operations andmaintenance remains in doubt, and the "right" level of such funding is moot. To allocate resources to operate and maintain major assets that have lost their utility amounts simply to wasting resources in the future because they were wasted inthe past. A review of the current economic contribution of capital assets i s thus timely. Given the overall inadequacy of O&M allocations, saving recurrent expenditure on assets that are no longer economically viable would free up resources to pennit full hndingof operations andmaintenance for thosethat are. Therefore, the logical andpractical prerequisite for any budgetary reallocation exercise must be that all "savings" from a review of the capital stock must accrue as fully additional budgetary resources to the ministry responsible for identifying the savings. A review o f assets should first be undertaken inthe water, transport, and public works sectors, because it i s more practical to begin with large infrastructural assets. The exercise could be extended later to cover the social sectors. Possible steps for developing this review are illustrated inBox 3.1. 87 Annex W Box W.l. Proposed Procedureto Review PhysicalAssets Eacho f the three ministries would conduct a review under the oversight o f the Ministryo f Finance following central norms and timetables. They would receive appropriate assistance. The reviews would take place inthree stages: Stage 1. Using the asset registry already available inthe DirectionGenerale duDomainNational as models (and whatever asset registries currently exist inthe other three sectors), complete a full inventory o f physical assets. Establishprocedures to update the inventories inreal time. Define a methodology to place the essential information on each asset on the Internet, minimally including its nature, size, location, and current physical state. Formulate recommendations to protect assets "at risk." Stage 2. Followthe above steps for the other major sectors. Draw a stratified sample o f assets that originally cost more than a to-be-determined threshold. This would be an iterative exercise to assure that the most expensive assets ineach sector would be included, but not so many as to hold up the review. Tentatively, a suggestedthreshold o f DA 100 millionseems reasonable. For each asset inthe above sample: 1. Calculate requirements for funding its operations andmaintenance at full capacity, andcompare with actual funding allocated over an appropriate past period. 2. Calculate the current capacity utilization rate. 3. Estimate the economic contribution o f the asset at actual and optimal capacity utilization. 4. Formulate a conclusion on the current rate of return o f the asset and its cost-benefit ratio (giving zero weight to past investment as sunk cost). 5. Formulate recommendations on those assets within the sample which merit full O&M funding, taking into account other relevant economic and social consideration inaddition to the cost-benefit ratio. 6. Formulate aplan o f action for the liquidation or "mothballing" o f the other assets inthe sample. Based on the results, formulate recommendations for improved allocation o f the given O&M expenditure envelope, assuring that any reduction inO&M expenditure on an asset is fully offset by an increase in O&M expenditure on other assets within the ministryconcerned. Stage 3. Follow the above procedure for other sectors. I t can roughly be estimated that Stage 1 would take about 12 months, with another 12 months for Stage 2. Ifthe exercise were to beexpandedbeyondthe threepriority sectors, the timeframe would be estimated at about three years. For Algeria, however, the economic and financial benefits o f this review could extend very far into the future. The portfolio of major investment projects under implementation W.5 The current situation. Many projects are yet to be completed several years after the date originally envisaged. Inparticular, the execution o f some important projects (for example, the Algiers subway) has been adversely affected by lags inthe scheduled release of funds, even though the aggregate amounts were inthemselves sufficient. Despite anecdotal evidence, there i s no clear diagnosis o f the main problems in project execution-their nature, specific capacity limitations, the reasons for delays-let alone what to do about them. Some much-delayed projects may have lost their original rationale. Others may need to be redesigned inresponseto changed circumstances. Others might yield greater benefit if appropriate action were taken to speed up implementation. In each of these cases, the project's ex post rate of return would likely be lower than the ex ante rate that justified approval in the first place, and so is the expectedefficiency o f Algeria's ongoing investment expenditure. W.6 Special considerations apply in the social sectors because there may be no large, physical, capital projects. In education, for example, the cost of individual schools i s relatively small compared with the much greater overall cost of financing teacher training 88 Annex W (US$600 million over 10 years), but it is found in the current budget and thus escapes evaluation as an "investment" project. These kinds of programs-small physical investments with large recurrent costs over significant periods of time-need to be submitted to scrutiny just as rigorous as for large physical investments, albeit with review modalities adjusted to the nature of the program. W.7 A review is recommended of the execution of major investment projects. This review would identify reasons and actions in response to project execution delays. As in the recommended review of assets, a fundamental feature should be that identified savings should be reallocated as additional expenditure for project execution within the concerned ministry, leaving its overall expenditure envelope unchanged. This review would be conducted by each ministry under the guidance and oversight of the Project Preparation Review Directorate of the CNED (see "Quality Assurance and Project Approval," below). With appropriate assistance, the review would focus initially on the transport, public works, and water sectors. The following steps would be taken. 9 List the major projects in the sector (with "major projects" as defined below in "Quality Assurance and Project Review," subject to further iterations of definition). 9 Classifyprojectswithinfour categories: 1.Suitable for acceleratedbudgetary appropriations and other action appropriate to their earliest completion. 2.Suitable for continued funding at the budgetary appropriation level as envisagedinthe financing planand without need for corrective action. 3.Require major redesignor rephasing becauseof delays, or for other reasons. 4.Should be shelvedbecause of delays, or for other reasons. 9 Classifyprojects inthese four categories, for internal government information and, ifappropriate, for broader information. 9 Quantifythe internalfundingreallocationresultingfromthe review. > Forge agreement on the specific mechanism and modalities between the Ministry of Finance and the ministry concerned.This ensures that: 1. Projects in Category 1 receive the full internal reallocation of the reduced budgetary appropriations for projects inCategory 3 and Category 4. 2. Action is taken to remedy delays in implementation of projects in Category 3, including the possibility of additional funding for external assistance in project execution andmanagement. 9 Formulateinterimrecommendations to gradually improvefundingmechanismsand project execution capacity, as well other measures to ensure that projects are completed on time. 9 Recommend a time-bound action plan for extending the exercise to other sectors, adopting it as neededto take into account the very different nature of "projects" in sectors other than physical infrastructure. 89 Annex X ANNEX X. MANAGINGTHE FISCAL SPACEWITHIMPROVED EXPENDITUREEFFICIENCY X.l Algeria can gain fiscal space through greater efficiency in investment. The oil windfall will not be permanent, and ongoing investments have long-term implications for current spending. It goes without saying that bad projects will simply lead to more loss of fiscal space. Hence, the level and composition of expenditure matters. In fact, for countries relying on external hydrocarbon revenues, fiscal space requires that the efficiency of spending be improved in order to ensure adequate resources to sustain current spending. This is especially true for health, education, and infrastructure maintenance(IMFNorld Bank 2006). X.2 The concept of "fiscal space" has emerged as a major concern for policymakers worldwide. The term refers to constraints to public expenditure that have the potential to raise productivity and yield returns in the future; or alternatively, that would serve to achieve social goals. Concerns have been raised that the success of fiscal policy ineconomic stabilization-for example, Algeria in the 2000s-were achieved through cuts in infrastructure. This has indeed occurred inmany parts of the world. Ifprivate investment replaces public investment, these cuts would not necessarily be aproblem, but the problem i s particularly challengingincountries prone to Dutch disease. Some oil producers, such as Egypt, have seen private investment increase steadily despite their oil windfalls. However, Algeria has not benefited from such a development, which requires diversification and gains in productivity to offset pressures on nontradables. In Algeria's case, the share of public investment has increased in detriment of the share o f private investment; and such trend has worsened under the oil windfall. As a result, "scissor-shaped" curves can be seen when comparing Algeria and Egypt for both for private and public investment (Figure X.1 and FigureX.2) Figure X.1 PublicInvestment (YOoftotal) Figure X.2 Private Investment (% oftotal) 80, I 1 ` 0 O II 2oO I Source: Bank staffestimates X.3 There is no unique definition of fiscal space. Countries have, in fact, adjusted the concept to their needs. An early definition applied to Pakistan has fiscal space as the non-interest, non defense spending (also excluding public enterprise losses) as a percentage of GDP (The World Bank 2004). Another definition applied to Ecuador has fiscal space as the non-interest, non-wage and non-pension primary spending (World Bank 2004). The fiscal space can also be defined in terms of stocks (assets, liabilities and net worth) or flows. Both concepts are interrelated: e.g. a country can initially raise its revenue, to improve its finances, and ina second stage consider the most efficient use o f such financing to stimulate growth and improve solvency. 90 Annex X X.4 Ideally, interms of stocks, fiscal space i s defined as the gap between the actual level of expenditure and the maximum level of expenditures that a government can undertake without impairing its solvency.60 Fiscal space i s lost if the financial costs of a project or program are greater than its financial return (or its effect on net worth and solvency i s negative). There is a further loss ifthe corresponding subsidy to fill the gap is not welfare enhancing (that is, its social benefits are not greater than its costs). Inpractice, estimating such a maximum level of expenditure for Algeria is impairedby data shortcomings. X.5 Alternatively, in terms of flows, Algeria has four sources of fiscal space that are quantifiable: improving the efficiency of fiscal expenditure, increasing revenue mobilization, mobilizing grants, and increasing sustainable borrowing. Improving efficiency implies reducing waste, leakages, and corruption so that the government's budget flees up resources and reallocates them to social and basic investment. Greater technical efficiency frees fiscal space because it enhances the cost-effectiveness of projects. Increasing revenue mobilization covers new revenues, such as the oil windfall. The third action, mobilizing grants, is not relevant to Algeria because the level of grants i s approximately zero. Finally, increasing sustainable borrowing also does not apply because Algeria i s in the process of reducing public debt, not contracting further external borrowing, and rather repayingdebt inadvance. X.6 The four sources of fiscal space can be represented visually by a diamond. Figure X.3 and FigureX.4 represent Algeria's options for creating fiscal space duringthe PSRE 2002- 04 and the PCSC 2005-07. The diamonds reflect the actual situation-no grants, significant revenue arising almost exclusively from hydrocarbons, net lending by the central government, and the size of the investment program as originally announcedby authorities. This last feature i s slightly modified from the original diamond depicted in IMF and World Bank 2006, which essentially deals with budget reallocations obtained through improved efficiency. Inthe case of Algeria, the amount correspondsto the upper ceiling of maximum resources actually invested (or added) to the 2001 level-assuming, that is, that they are efficiently invested. Ifthat assumption Figure X.3 FiscalSpace onthe PSRE2002- 04 FigureX.4 Fiscal space onthe PCSC 2005-07 Improved Improved RevenueEffort RevenueEffort Improved Improved Increase Expenditure Increase Expenditure of Grant Aic Effeciency of Grant Aid E1feciency New Borrowing I New Borrowing Source: Bank staff estimates does not hold, as we know to be the case for the PSRE, the actual fiscal space would be smaller than depicted by the diamond. All sources o f fiscal space are estimated as a percentageo f GDP. X.7 There are important differences in the Algerian management of its already available fiscal space for financing their investment programs. 6o Concepts and definitions in this section are basedon IMFandWorld Bank,2006. 91 Annex X 9 Thesize of revenue mobilization. The PCSC involves a revenue effort (arising from the oil windfall) more than 5 times greater thanthat ofthe PSRE. 9 Lending. The PSRE required positive annual net lendingequivalent to 0.4 percent over the whole period. The PCSC requiredno net lending. 9 The degree of potentialfor improved expenditure eflciency. The PCSC involves an investment inannual resourcesthat i s about 3 times higher that of the PSRE.61 X.8 There are two natural implications of the fiscal diamonds: 9 First, Algeria does notneedto create morefiscal spacethrough an improved revenue effort, new borrowing or increased aid, 9 Second,Algeria rather hasfiscal space available to other uses thanjustfinancing its huge public investmentprogram. Possible candidates are a reduced tax burden on small and medium enterprises and employment, a more accelerated debt repayment, and liquidation of existing contingent liabilities in enterprises andpublic banks. 9 Third,the best optionfor Algeria topreservefiscal space will be throughsignijkant improvements in expenditure eflciency, even inthe extreme case that the oil windfall disappears (assuming continuationof the policies of no external borrowing or grants). X.9 Ultimately, the potential to maximize the fiscal space that is contained in the PCSC will depend on two conditions: preserving a sound fiscal stance, so as to prevent imbalances; and on implementing highquality projects, whose financial return or social rates of return have a positive effect on net worth. Whereas fiscal trends are explored in Chapter 2, public investment and its corresponding institutional issues are explored inChapter 3 and Chapter 4. ~ The projected increase in the capital expenditure ratio has 2001 as reference year and, inthe case o f the PCSC, includes the investment program to the Southern regions. Data are from IMF. 92 Annex Y ANNEX Y :OBJECTIFSGENERALESDELA REFORME EDUCATIVE62 AmClioration de la qualit6 de l'enseignement Am6lioration du rendement du systkme Cducatif Comment ? 1. Enactionnant l'ensemble des leviers d'amClioration qualitative de l'enseignement 9 Programmeset mkthodesd'enseignement, 9 Manuelsscolaireset autressupportsdidactiques, 9 Qualificationdel'encadrement pkdagogique et administratif, 9 Rhovationdel'administrationdel'tducation, 9 RCorganisationdel'etablissement scolaire, 9 SoutienB lascolaritC. 2. En fixant des objectifs concrets, mesurables et Cvaluables d'amblioration du rendement du systbme Cducatif. Quels sont ces objectifs ? 9 FaireparvenirB lafindel'enseignement obligatoire 90% des Clbvesquientrenten 1breannee primaire ; 9 Faire admettre dans l'enseignement post-obligatoire 75% des Clbves de 4bme annCe moyenne ; 9 Orienter vers l'enseignement secondaire g6nCral 50% des Clbves qui accbdent au post- obligatoire 9 Atteindreuntaux derCussiteaubaccalaurkatde 70% Comment atteindre ces objectifs ? 1. Faire parvenir A la fin de l'enseignement obligatoire 90% des CMves qui entrent en l4re annCe primaire. Actuellement seuls 66% y anivent. Commentfaire ? ~ 62Document provided by the Ministry of Education. It hasno official source, but is believed to berelated to the CarteScoluire. 93 Annex Y 1.1 RCduireles dkperditions. Situation actuelle des dkperditions Cjuin2003-annCe de rCfCrence). Mesures hprendre 9 Mesuresd'amklioration qualitativedel'enseignement 9 Renforcement desactivitCsderemkdiationpkdagogique 9 DCveloppemntde l'enseignement adapteet delapddagogiediffCrenci6e 9 RCductiondes disparitks interet intrawilayasenmatikredetaux d'encadrement. 1.2 AmCliorer les conditionsde scolarisation. Dans l'enseignement urimaire 9 Fairepasser letaux d'occupation des locaux de 35'5 Clbvespar salle de classe en 2003 B 30 en 2008 9 Eliminerlesystkmedeladouble vacation en2008 9 Fairepasser leratio des klbvesbknkficiairesdes cantines scolaires de 35% en2003 B 60% en 2008. Dans l'enseignement moyen 9 Maintenir lataille de ladCcisionpkdagogiqueB 38jusqu'en2011endkpit de l'augmentation des effectifs 9 Amkliorer lataille deladivisionpeagogique B compter de2012jusqu'h atteindre 34 en2015 9 Fairepasserletaux des Clkvesdemi-pensionnaires de 11%en2003 B 20% en2012 Mesures hprendre Pour l'enseignement urimaire 9 Les objectifs entermesde taux d'occupation seront atteints en2008avec la suppressionde la 6bme AF 9 Inscrirelarbalisationde 1.600cantines entre2005 et 2008 (plusde 8.000actuellement et prks de 1.OOO en cours) 94 Annex Y Pour l'enseignement moyen 9 Larkalisationduprogrammedecollegesinscrit entre2005 et 2009 9 Larkalisationduprogrammededemi-pensions 1.3 Mettre en place 1'Cducation prkscolaire :Fairepasser le raux des 616ves inscrits dans les classes prkparatoires de 9% en 2003 (57.000 Clbves) B 75% en 2008 Mesures riprendre 9 DCgager une capacit6 d'accueil de 480.000 places en utilisant les capacitb en surplus en 2008 (19.000 salles de classe qui pourront accueillir 380.000 Clkves A raison de 20 par salle de classe) qui viendront s'ajouter aux 100.000 places actuellement destin6es B cette catCgorie d'Cl6ves (57.000 eleves enpr6scolaire et 48.000 Clkves AgCs de 5 ans). 9 Former 24.000 enseignants (lpour 20 Clkves) en r6affectant les enseignants qui seront en surplus en2008. 9 Elaborer lesprogrammesd'enseignement et lesprogrammes deformation. 9 DCfinirlestatutdel'ttablissement et del'enseignant d'kducation prkscolaire. Quand &valuer? 9 Des Cvaluations annuelles peuvent &re effectuCes car les taux de dkperdition, les taux d'occupation des locaux et les tailles des divisions pkdagogiques sont calcul6s chaque annCe au cows de 1'enquCte statistique exhaustive. . 9 Des Cvaluationsintermbdiairespeuvent &re faites : En2007, pour les Clbvesquiont entamClecycle moyenen2003. En2008, pour les Clevesquiont entamCle cycle primaireen2003. 9 Une Cvaluation pertinente de l'amdioration du rendement du systkme Cducatif dans l'enseignement obligatoire ne pourra Ctre faite qu'en 2012, annCe o i ~la cohorte qui a entamC l'enseignement primaire en 2003 acheverale cycle obligatoire. 2. Faire admettre dans l'enseignement post-obligatoire 75% des Clltves de 4&mannCe moyenne Actuellement 48%. Commentfaire ? 2.1 AmCliorer le taux de rCussite : Mesures d'amelioration qualitative ; et rhovation du systeme d'kvaluationdes Cleves. 2.2 IntCgrer la formation professionnelledans le dispositif d'orientation L'orientation vers la formation professionnelle doit Ctre intCgrCe dans le dispositif d'orientation B partir de la annCe moyenne. 3. Orienter vers l'enseignement secondaire gCnCral 50% des Clbves qui a d d e n t au post- obligatoire. Actuellement 87%. Commentfaire ? 3.1 Augmenter la part de l'enseignement technique et professionnel L e pourcentage d'Cleves orient& vers l'enseignement technique et professionnel doit Ctre de 30% (au lieu de 13% actuellement) 3.2 Augmenter la part de la formation professionnelle L e pourcentage des Cleves orient& vers la formation professionnelle doit Ctre de 20% (au lieu des 12% issus des deperditions de la 9&meAF actuellement) 95 Annex Y Mesures hprendre 9 Renoverlesystemed'orientation 9 Crker des cellules d'information et d'accompagnement des eleves au niveau des ktablissements scolaires 9 Introduire la dimension technologique dans les contenus d'enseignement A partir de la 3kme annke moyenne afin de susciter des vocations pour les filikres de 1'ETP et de la FP 9 Valoriser I'ETP et laFP enoffrant aux kleves lemaximumd'opportunitks d'accks aumarch6 dutravail 9 Valoriser I'ETP enoffrant lapossiblilitk A 20% des klbvesquiachbventavec succks ce cycle d'acckder B une formation supkrieur courte 9 Rechercherl'adhksion desparentsd'kleves lanouvelledkmarche, Quand &valuer ? 9 Des2005 pour lesklbvesquivont acckderaunouveaucycled'enseignement post-obligatoire. 9 En2007 pour lesklevesquiont entamk lenouveaucycled'enseignement moyenen2003. 9 En2012pour lesklkvesuiont entamk lenouveaucycled'enseignementprimaireen2003. 9 L'kvaluation de l'kvolution de la rkpartirion des orientations entre les trois segments de l'enseignement post-obligatoire se fera annuellement. 4. Atteindre untaux de riussite au baccalauriat de 70%. Commentfaire ? 4.1 Rkduire le nombre de candidats au baccalauriat La restmcturation de l'enseignement post-obligatoire est l'orientation vers l'enseignement secondaire gknkral de 50% seulement des admis dans ce cycle va avoir pour effet immkdiat de rkduire de moitik le nombre de candidats aubaccalaurkat et par la merne, de relever le taux de rtussite A l'examen. 4.2 Mesures d'amilioration qualitative. Les mesures d'amklioration qualitative (nouveau programmes, disponibilitk des manuels scolaires, nouvelles mkthodes, disponibilitk des equipements didactiques, enseignants mieux formks) vont avoir des incidents sur le taux de rkussite qui devrait atteindre les 70%. Quand &valuer? Les rksultats A l'examen dubaccalaureat seront kvaluks 9 En2008 pour leselbvesquiont entamk lenouveaucycled'ensignement secondaireen2005 9 En2010pour les elevesquiont entamk lenouveaucycledel'enseignement moyenen2003 9 En2015 pour les klevesquiont entamk lenouveaucycle del'enseignement primaireen2003 Une evaluation de l'kvolution du taux de reussite au accalaurkat sera faite annuellement. Les caractkristiques et le contenu des programmes visent a dkvelopper les connaissances et les compktences likes: A la maitrise du contenu disciplinaire, aux mkthodes d'intervention pkdagogiques, A l'adaptation au contexete kducationnel, A la planification et B l'kvaluation de l'acte pkdagogique, et au dkveloppement de l'aspect relationnel. 4.3 Les composantes des programmes (disciplines) de la formation initiale des enseignants Les programmes de la formation initiale des enseignants visent une formation sptcialiske d'enseignants pour chaque niveau d'enseignement conformkment aux cahiers de charge elaborks a cet effet. Ces programmes intkgrent les aspects acadkmiques en fonction des profils formks (formation dans la 96 Annex Y discipline), les aspects pkdagogiques et pratiques ayant trait la situation pkdagogique et ainsi que les aspectsrelationnels. 4.4 L e systltme de formation en cours d'emploi et de perfectionnement des enseignants. L'objectif assign6 B cette formation est le perfectionnement et l'amklioration du niveau de qualification des enseignants. L'organisation de cette formation diffbre selon le corps. a) pour les instructeurs : ce corps est en voie d'extinction. Cependant afin de permettre aux intructeurs encore en exercice d'stre intkgrks dans le corps des instructeurs, des cours de formation par correspondance sont assurks par 1'Office National d'Enseignement et de la Formation B Distance (I'ONEFD ex CNEG). L e programme a pour objet de renforcer le niveau de culture de base et de combler principalement les dkficits dans : 9 Les langages fondamentaux (languearabe et clacul pour les arabophones, langue franqaise pour les francophones) 9 La culture gknkrale like aux activitks de l'kcole et en didactique des disciplines et en psychologie de l'enfant. b) Pour les MEF, PEF et PES :ces trois corps bknkficient de 06journkes d'ktudes ktalkes sur l'annke scolaire, l'encadrement est assurk par les inspecteurs qui adaptent le programme de formation en fonction des dkficits constatks lors des inspections. Amelioration du suivi scolaire et 1'Cvaluation des Clltves Dans le cadre des objectifs visks par le ministbre de l'kducation nationale, deux objectifs principaux sont assignks au systbmed'kvaluation projetk : 1. Fournir des informations sur les niveaux de performance atteints par des populations scolaires dkterminkes : 9 foumir graceadesktudes,desinformationssur lerendementsusystbmekducatif. 9 aider les responsables de la politique kducative a corriger les dysfonctionnements kventuels du systbme. 9 Identifierles distortions existentsentrelesculescurriculaofficiels et les curriculrkalists. 9 foumir unkclairage a propos des facteurs associks aux diffkrences de rendement constatkes entre kcoles, entre classes, entre 6lbves ou entre d'autres sous-groupes. 9 fournir des donnkesdebasefiables enmatibederendementscolaire afindepouvoir tracer les grandes lignes des futures rkformes. 2. Utiliser les instruments dkveloppks, les adapter, les diffuser, contribuer a la crkation de banques a d'instruments permettant une meilleure sklection ; aider a l'optimisation des processus de selection et de donnkes et aider optimiser les processus de sklection et d'orientation: aider a la construction d'orientation ; contribuer a l'kdification d'une banque d'items ; diffuser les instruments d'kvaluation parmi la communautk kducative ;promouvoir et encourager l'kvaluation formative. 3. La mise en ceuvre de ce systbme d'kvaluation, associee uncertainnombre de mesures qualifikes a <>permettront de : k d'amkliorer laqualiteet lapertinence del'enseignement dispenskauxniveaux fondamental et secondaire griice B unmeilleur << feed back >>. 97 Annex Y 9 de mieux mesurer le niveaudes connaissances acquises par les klkbves grtice la formation dupersonnel aux technique d'kvaluation. 9 de concevoir des outils didactiques mieux adaptks aux besoins des praticiens et plus en rapport avec les programmes. 9 de mettre en place un systbme d'information pedagogique mieux adapt6 aux besoins de la communautk kducative et A mQme de fournir aux dkcideurs les outils facilitant le dtveloppment des strategies tducatives A long terme, ondees sur une kvaluation fiable du fonctionnement du systbme et sur des donnkes objectives et quantifikes. 9 derestaurer lapkdagogidans sadimensionoriginelle. 9 de fonder la promotion sur des donntes essentiellement pkdagogiques, qu'il s'agisse de la promotion des klbves d'une annke B l'autre ou d'un cycle vers un autre ou de la promotion vers diffdrents corps ptdagogiques qui devrait dksormais se baser sur le mkrite pedagogique et scientifique et nonplus sur le seul critbre d'anciennetk. L'amklioration des performances pkdagogiques des enseignants par leur meilleure qualification Qualifications requises pour enseigner aux diffkrents niveaux d'enseignement :Dans le cadre de la nouvelle politique de formation initiale, la structure de la qualification des enseignants requise par niveau d'enseignement se prksentecomme suit : 9 Enseignement fondamental ler et 2bme cycle : Maitrise de l'ecole fondamentale (MEF): Baccalaurkat et 3 ans de formation dans les Institus de Formation et de Perfectionnement des Maitres (IFPM) 9 Enseignement fondamental 3eme cycle : Professuer d'enseignement fondamental (PEF) : Baccalaurkat et 4 ans de formation dans les Ecoles Normales Supkrieurs. 9 Enseignement secondaire gknkral et technique : Professuer d'enseignement secondaire (PES et PEST) : PES pour l'enseignement gknkral et PEST pour l'enseignement technique : Baccalaurkat et 5 ans de formation dans les Ecoles Normales Supkrieurs. Description gknkrale des caractkristiques et du contenu des programmes de formation des enseignements .Les caractkristiques et le contenu des programmes visent iidkvelopper les connaissances et les compktences likes la maitrise du contenu disciplinaire, aux mkthodes d'intervention pkdagogique, iil'adaptationaucontexteCducationnel,alaplanificationetiil'kvaluationdel'actepedagogique,etau ddveloppement de l'aspect relationnel. Les composants des programmes (disciplines) de la formation initiale des enseignants. Les programmes de la formation initiale des enseigants visent une formation spkcialiske d'enseignats pour chaque niveau d'enseignement conformkment aux cahiers des charges klaborks cet effet. Ces programmes intbgrent les aspects acadkmiques en fonction des profils formes (formation dans la discipline), les aspects pkdagogiques et pratiques ayant trait A la situation pkdagogique et ainsi que les aspects relationnels. Unsysthme de formation en cours d'emploi et de perfectionnement des enseignants. 98 Statistical Annex STATISTICAL ANNEX Section A.l: Central Government Revenue and Expenditures Table A.1.1: Compositionof Central Government Revenue, 1993-2005 (inbillions of DA) Table A.1.2: Compositionof Central Government Revenue, 1993-2005 (inpercent oftotal revenue and grants) Table A.1.3: Compositionof Central Government Revenue, 1993-2005 (inpercent of GDP) Table A.1.4: Compositionof Central Government Expenditure, 1993 -2005 (inbillions of DA) Table A.1.5: Compositionof Central Government Expenditure, 1993 -2005 (inpercent of total expenditure) Table A.1.6: Compositionof Central Government Expenditure, 1993 -2005 (inpercent of GDP) Table A.1.7: Budgetary Current Expenditure (Initial Budget Law) by Ministry,2000 -2006 (inbillions of DA) Table A.1.8: Budgetary Current Expenditure (Initial Budget Law) by Ministry,2000 -2006 (inpercent of total) Table A.1.9: Summary of Central Government Operations, 1993 -2005 (inbillions of DA) Table A.1.10: Summary of Central Government Operations, 1993-2005 (inpercent of GDP) Table A.1.11: Summary of Central Government Operations, 1993 -2005 (inpercent of nonhydrocarbon GDP) Table A.1-12: Sectoral Allocation of Budgetary Capital Expenditure, 1996 -2004 (inmillions of DA) Table A.1.13: Sectoral Allocation of Budgetary Capital Expenditure, 1996-2004 (annual percentage change) Table A.1.14: Sectoral Allocation of Budgetary Capital Expenditure, 1996-2004 (inpercent of total) Table A.1.15: Sectoral Allocation of Budgetary Capital Expenditure, 1996-2004 (inpercent of GDP) Table A.1.16: GDP and Non-hydrocarbonGDP; Consumer Price Index,, 1993 -2005 (inbillions of DA) Section A.2: Investment Budget Table A.2.1: Investment Budget Execution, 1990-2004 (inmillions of DA) Section A.3: Other Fiscal Tables Table A.3.1: BudgetAllocations to ANSEJ and MainAgriculture Funds (inmillions of DA) Table A.3.2: Budget Allocations to Special Accounts o f the Treasury, 2000 -2005 Table A.3.3: Current Expenditure by type, 1995-2005 (inthousands of DA) Table A.3.4: InvestmentBudget Sector Breakdown of Payment Credits : 1996-2004 (inmillions of DA) Table A.3.5: Investment Budget Sector Breakdown of ProgramAuthorizations: 1998-2006 (inmillions of DA) Table A.3.6: Investment Budget Sector Breakdown of ProgramAuthorizations: 2000-2006 (inpercent of total) Table A.3.7: Government's Social Transfers (inthousands of DA) Table A.3.8: Share of State Contribution to EPIC (inthousands of DA) Table A.3.9: Approved (initial) and Executed Current ExpenditureBudget (inthousands of DA) Table A.3.10: The Original PCSC, 2005-2009 Table A.3.11: Investment Executionper Sector, 2005 Table A.3.12: Program Authorizations (1995-2000-2005) Table A.3.13: Budget Payment Credits (1995-2000-2005) 99 Statistical Annex Section A.4: Transport and Public Works Table A.4.1: Program Authorizations inthe Road Sector (excl. highways) : 2000-2006 (billions of DA) Table A.4.2: Payment Credits inthe Road Sector (excl. highways)), 1999-2004 (inmillions of DA) Table A.4.3: Capital Budget -Program Authorizations - 1999-2004 (inmillions of DA) Table A.4.4: SectoralBreakdown- 1998-2004 (millions of DA) Table A.4.5: Operating Budget, 2000 -2004 (millions of DA) Table A.4.6: Some ProblemProjects inTransport Table A.4.7: Cost IncreasesinRoadProjects Section A.5: Water Sector Table A.5.1: The 41 Largest Water Projects Underway as of End-2004-Their Initialand Final Budgets Section A.6: Education Sector Table A.6.1: Enrolment inPrimary Education(thousands), 1962 - 2004 Table A.6.2: Enrolment inlower and upper secondaryeducation (thousands), 1962-2004 Table A.6.3: Education PassRate, 1962 -2004 Table A.6.4: Education Success Rate, 2004 Table A.6.5: Primary Pass Rate andFemale Illiteracy, 2004 Table A.6.6: Student / Teacher Ratios andRecurrent Expenditures, 2004 Table A.6.7: Local FiscalResources and Recurrent Expenses, 2004 Section A.7: Health Sector Table A.7.1: PopulationDynamics, 1996-2004 Table A.7.2: Mortality Indicators, 1996-2004 Table A.7.3: Prevalenceof non-communicable available diseases, and risky behavior in2002 (among population25 and above) Table A.7.4: Communicable diseases, number of cases, 1996-200 4 Table A.7.5: Sharedfundingof the operating budgets of public health establishments Table A.7.6: Self-generatedresources ofpublic healthestablishments Table A.7.7: Private expenditure on services inthe private sector, 2001 Table A.7.8: Public healthcare services inAlgeria, 2004 Table A.7.9: Private healthcare services inAlgeria, 2004 Table A.7.10: Operating expenditures by type of establishment (inmillions of dinars and %) 100 23: : o o a m 0 w m - 0 : 0 4 5 m m m - n 3b rA a El ':y: m y w q : m q : : : : : : Q ! m y v , y:e 10 0 v m e - W m W N w v e o - 0 0 0 + 8 W -3 d m 0 3 4 rr, 3 0 0 0 0 ;; o o o ; : ; ; ;: : ; o o o o o o N' e" e N' n d ru 0 TP o m y o " : :cqqq : 5SSF;X : : : : : : : w, b-! q '9m N M ~ N m o w o o W M u Y ?q n .. B0 0 cu !! 0 c, En 8 a8: 3 %8 P 8 Statistical Annex TableA.1.7 BudgetaryCurrentExpenditure(InitialBudgetLaw) byMinistry,2000 - 2006 (inbillions of DA) Bndgetiuy Current Expenclihueby Minishy(inbillions of dinars), 2000-2006 f i u s t e i i a l depzutments 2000 2001 2002 2003 2004 2005 2006 Presidency ofthe Republic 2.3 2.3 3.2 3 3 3.4 4.0 4 4 Services ofthe Government Chief 0.7 0.8 1.1 2 4 1.8 2.0 1 9 Nationaldefense 141.9 149.5 167.4 170 8 201.9 210.0 224 8 Interior,localcollectivities 74.7 80.0 125.6 146 1 143.7 148.4 173 1 ForeignaEfairs 9.8 10.1 13.4 13 6 15.0 15.9 20 4 Justice 9.8 10.0 11.7 14 7 15.9 18.3 194 Finance 17.9 19.1 22.1 24 5 25.9 26.5 26 2 Energyandmines 0.8 0.9 1.1 1 3 17.1 3.2 3 4 Water resources 3.2 3.2 4.4 4 5 4.6 5.0 4 6 Trade 2.1 2.0 2.5 2 8 4.6 2.8 3 0 Rehgious affairs andWaqf 5.0 5.4 6.4 6 5 6.5 7.3 8 1 Moudjahidine 60.1 81.3 107.7 103 6 104.9 109.6 110 1 Environmentandteritorialmanagement 0.4 0.6 0 6 0.6 0.7 0 7 Transports 3.5 3.5 3.7 3 8 15.9 1.8 4 4 Nationaleducation 135.8 137.4 164.1 186 1 186.6 214.4 222 0 Agnculture andruraldevelopment 16.0 16.6 18.9 19 1 9.2 9.5 21 1 Publicworks 2.3 2.1 2.2 2 3 2.4 2.7 2 8 Health,populationandhospitalreforms 35.1 38.3 49.1 60 7 63.8 62.5 70 3 Culture 4.3 4.5 6.5 5 5 5.1 2.7 4 2 Communications 0.7 3 6 SmallandMediumbusinesshdustries 0.1 0 5 0.3 0.5 0 9 Highereducationandscien~cresearch 38.7 42.9 58.7 68 3 66.5 78.4 85 3 Postalservices andinformation& communicationtechnology 1.2 1.1 1.1 1 8 1.8 1.1 1 1 Youthandsports 5.3 5.8 6.7 9 1 7.5 8.8 10 6 Technical andprofessionaltr- 8.1 9.1 12.5 14 2 14.8 16.4 17 0 Housingandurbanisation 21.8 18.4 19.0 40 1 4.1 4.7 4 9 Industry 0.3 0.3 0.4 0 4 0.4 0.4 0 4 Labor and social security 40.9 37.8 23.9 22 6 14.2 21.3 19 5 Employmentandnationalsolidarity 0.1 0.1 31.4 43 6 31.7 36.8 47 9 RelationswithParliament 0.0 0.0 0.0 0 1 0.1 0.1 0 1 F i s handmaritimeresources 0.2 0.3 0.5 0 6 0.6 0.7 0 7 Tourism 0.5 0.5 0.7 0 8 0.7 0.7 0 8 Reformparticipation& coordinationandinvestmentpromotion 0.1 0.2 0.2 0 2 0 3 rlib-total 642.4 683.6 866.9 974.1 971.5 1,017.8 1,118.1 Commoncharges 187.6 152.0 186.4 167 4 228.5 182.2 165 3 Total 830.1 835.6 1,013.4 1,141.5 1,200.0 1,200.0 1,283.4 Source :%stere des Finances,Loi de Finances, 2000-2006 Notes: 1) Until2004, culture andcommunicationswere mixed. 2) In2000, public works, environment andurbanisationwere mixed. 107 Statistical Annex Table A.1.8: Budgetary Current Expenditure (Initial BudgetLaw) by Ministry, 2000 - 2006 (inpercent oftotal) BudgetmyCuwent Expenditure byMinisay (inpercent of total), 2000-2006 W h i s t e l i d depalhents 2000 2001 2002 2003 2004 2005 2006 Presidency ofthe Republic 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Services ofthe GovernmentChief 0.1 0.1 0.1 0.2 0.2 0.2 0.1 Nationaldefense 17.1 17.9 15.9 15.0 16.8 17.5 17.5 Interior,localcollectivities 9.0 9.6 11.9 12.8 12.0 12.4 13.5 Foreign&airs 1.2 1.2 1.3 1.2 1.3 1.3 1.6 Justice 1.2 1.2 1.1 1.3 1.3 1.5 1.5 Finance 2.2 2.3 2.1 2.1 2.2 2.2 2.0 Energy andmines 0.1 0.1 0.1 0.1 1.4 0.3 0.3 Water resources 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Trade 0.3 0.2 0.2 0.2 0.4 0.2 0.2 ReCous affairs andWaqf 0.6 0.6 0.6 0.6 0.5 0.6 0.6 Moudjahidine 7.2 9.7 10.2 9.1 8.7 9.1 8.6 Environmentandtentorialmanagement 0.0 0.1 0.1 0.1 0.1 0.1 Transports 0.4 0.4 0.4 0.3 1.3 0.2 0.3 Nationaleducation 16.4 16.4 15.6 16.3 15.6 17.9 17.3 Agriculture andmaldevelopment 1.9 2.0 1.8 1.7 0.8 0.8 1.6 Publicworks 0.3 0.2 0.2 0.2 0.2 0.2 0.2 Health,populationandhospitalreforms 4.2 4.6 4.7 5.3 5.3 5.2 5.5 culture 0.5 0.5 0.6 0.5 0.4 0.2 0.3 Communications 0.1 0.3 SmallandMediumbusinesshdustries 0.0 0.0 0.0 0.0 0.1 m e r educationandscient& research 4.7 5.1 5.6 6.0 5.5 6.5 6.6 Postalservices &dormation andcommunicationtechnology 0.1 0.1 0.1 0.2 0.2 0.1 0.1 Youthand sports 0.6 0.7 0.6 0.8 0.6 0.7 0.8 Technical andprofessionaltraining 1.0 1.1 1.2 1.2 1.2 1.4 1.3 Housing andurbanisation 2.6 2.2 1.8 3.5 0.3 0.4 0.4 Industry 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Labor andsocialsecurity 4.9 4.5 2.3 2.0 1.2 1.8 1.5 Employmentandnationalsolidarity 0.0 0.0 3.0 3.8 2.6 3.1 3.1 RelationswithParliament 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fishtngandmaritimeresources 0.0 0.0 0.0 0.1 0.1 0.1 0.1 Tourism 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Reformparticipation& coorctnationandinvestmentpromotion 0.0 0.0 0.0 0.0 77.4 81.8 82.3 85.3 81.0 84.8 87.1 Commoncharges 22.6 18 2 17.7 14.7 19.0 15.2 12.9 Source :MinisteredesFinances,Loi de Finances, 2000-2006 Notes: 1)Until2004, culture andcommunicationswere mixed. 2) In2000, publicworks, environment andurbanisationwere mixed 108 0 0 0 0 0 0 0 0 0 0 c 3 3 3 d 0 0 cl 0 *I 0 cl cl 0 0 cl rl 0 0 cl 0 0 3 # a 01 2 3 eo ae7 t- ae7 w ae7 :B h 0 d 0 r4 rn 0 0 cl r4 0 8 rl 0 8 0 0 8 el a el 00 a ch r- a Q\ W a 43 Statistical Annex Table A.3.1 BudgetAllocationsto ANSEJandto MainAgriculture Funds (inmillions ofDA) Total NAME 2002 2003 2004 2005 Period (LFC) 2002-2005 NationalFundfor SupponofYouth Employment Allocationto ANSW - 4,500 4,500 5,500 4,000 18,500 NationalFundfor the Developmentof AgriculturalInvestment(formerFNRDA - 1st) 25,800 41,182 40,000 27,500 134,482 NationalFundfor the DevelopmentofAgriculturalInvestment(formerFNRDA- 2nd) 0 0 0 8,500 8,500 'Fundfor Combating DesertificationandDevelopingPastoralismand the Steppe 500 4,000 3,660 5,000 13,160 Fundfor RuralDevelopmentand LandDevelopmentthroughConcessioning 0 2,840 8,000 13,000 23,840 GRAND TOTAL 30,800 52,522 57,160 58,000 198,482 118 StatisticalAnnex Table A.3.2 Budget Allocations to Special Accounts of the Treasury, 2000 -2005 (1/2) No. OF HEADING 2000 2001 2002 2003 2004 2005 TOTAL ACCOUNT 2000-2005 ~~ ~~ 302-061 Capital Expenditure 14,535 16,900 11,400 32,270 25,730 25,375 126,210 302-062 Interest rate subsidy on investments 2,100 1,100 994 1,960 3,950 0 10,104 302-073 Expenditureon the Domestic and External Obligations o fthe State 453 500 4,001 4,300 4,667 508 14,429 T E R R I T O R I A L D E V E L O P M E N T A N D E N V I R O N M E N T 302-065 National Fundfor the Environment and 500 1,250 0 PollutionControl 0 0 1,750 302-08 1 National Fund for Territorial Development 0 100 700 700 0 0 1,500 302-113 National Fund for Protectionof the Coast andCoastal Areas 0 0 0 80 0 0 80 Fundfor the Promotionof Traditional Craft 302-066 IActivities 225 200 400 825 National Fundfor Zoosanitary Promotion 119 Statistical Annex Table A.3.2 Budget Allocations to SpecialAccounts of the Treasury, 2000 -2005 (2/2) 302-042 Fund for Natural Disasters and Major Technological Risks 100 100 100 11,400 3,000 100 14,80( 302-075 Fundfor CompensatingVictims of Terrorist Acts 5,000 5,500 5,500 4,700 0 4,000 24,70( 302-089 DevelopmentFund for SouthernRegions 5,000 7,300 18,330 16,720 17,500 32,900 97,75( Fund for Compensating Victims and 302-112 Survivors of Victims o f the Events Accompanying the Movement for Perfecting 0 0 0 800 500 0 1,30( the NationalIdentitv CULTURE 302-014 Fund for the Developmento fthe Art, Technique, and Industry of Cinematography 100 0 50 15( 302-092 NationalFund for the Promotion and Developmento fthe Arts andLetters 100 100 100 100 0 50 45( National Fund for Preparingand Organizing 302-119 the Exhibitionon "Algiers, Capital of Arab 1,000 1,00( Culture 2007" 302-102 Fund for Promoting Industrial Competitiveness 0 600 1,500 2,130 2,000 3,500 9,731 I GRANDTOTAL I 88,208) 96,1501 114,418) 194,281) 172,1521 209,7181 874,925 Source: Ministry of Finance 120 Statistical Annex TableA.3.3 CurrentExpenditures,ByType, 1995-2005(inthousands ofDA) CHANGES INCURRENT EXPENDITURE 1995-2005 RECAPITULATIVE SUMMARY BY NATURE (inthousands of DA) (*) includingpensionsofMoudjahidines Source : Ministry o f Finance Table A.3.4 InvestmentBudgetSector Breakdownof PaymentCredits: 1996-2004 (in millionsofDA) 1996 1997 1998 1999 2000 2001 2002 2003 2004 Industry 5,877 6,900 8,800 8,860 8,130 7,875 8,415 8,822 0 Agricultureand Water Resources 25,180 30,281 40,615 40,638 50,385 75,136 97,083 91,641 85,115 o f which :Water Resources 17,630 23,315 30,450 32,486 39,100 51,423 67,297 74,399 71,013 ProductiveSenices 2,165 1,955 4,318 4,415 3,827 7,087 15,497 20,295 18,075 Infrastructure 35,298 42,414 48,800 57,650 66,846 105,857 110,059 118,116 119,807 Transport 38 34 35 10 31 199 300 500 171 Roads 10,447 14,194 8,263 14,588 16,388 38,931 40,105 42,804 50,566 Ports 1,562 2,603 3,604 3,352 3,387 5,500 6,050 8,788 7,502 Airportsand Meteorology 1,875 2,462 4,320 5,128 4,885 7,405 7,542 11,968 14,367 Rail 8,580 8,016 8,630 9,888 9,800 12,259 14,020 10,998 13,094 Adminislrative Infrastructure 12,796 15,105 23,948 24,684 32,355 41,564 42,042 43,058 34,107 Educationand Training 24,200 28,700 36,600 37,195 42,920 62,989 66,788 69,129 85,542 HigherEducation 4,129 4,781 10,970 11,278 10,859 18,530 20,972 23,720 30,314 Education 16,739 19,998 21,852 21,183 25,420 34,850 35,576 34,411 42,116 Training 3,332 3,921 3,778 4,734 6,641 9,609 10,240 10,998 13,112 Sociocultural Infrastructure 9,000 8,690 10,200 10,281 14,005 23,607 29,820 38,152 48,733 o f which :Health 3,853 3,512 4,295 3,885 7,534 13,278 16,011 20,296 24,782 Housing 9,490 10,310 54,000 62,741 72,777 90,363 98,410 93,282 78,973 Other 43,590 49,000 18,477 18,778 22,500 27,100 26,806 28,510 39,200 P.C.D. 20,900 21,250 21,000 24,126 32,000 36,975 42,007 45,697 36,645 SubtotalInvestment 175,700 199,500 242,810 264,684 313,390 436,989 494,885 513,644 512,090 125,900 82,000 19,565 16,200 32,620 66,611 54,093 155,780 207,910 301,600 281,500 262,375 280,884 346,010 503,600 548,978 669,424 720,000 Source: Ministry of Finance 121 Statistical Annex TableA.3.5 InvestmentBudgetSector Breakdownof ProgramAuthorizations:1998-2006 (inmillionsofDA) Miningand Energy 1,700 3,300 3,000 9,900 9,165 13,900 0 0 0 40,965 RuralElectrification 0 2,000 0 8,000 8,165 12,900 0 0 0 31,065 AGRICULTURE - WATER RESOURCES 56,259 41,250 90,461 158,149 203,418 176,780 131,697 166,936 229,558 1354,508 Agriculture 8,961 9,000 10,331 18,350 21,364 4,033 1,880 2,532 5,375 81,826 Forestsand Environment 4,559 3,778 4,081 18,365 14,395 12,584 12,731 13,233 33,183 116,910 Water Resources 42,700 28,422 76,011 121,384 167,641 160,050 116,886 151,008 190,417 1,054,519 Fisheries 39 50 38 50 17 1 I3 200 163 583 1,253 SERVICES 5.154 2.965 3,811 11397 21,783 16.960 17.930 39,150 44390 163.440 Telecommunications 2,814 1,500 2,466 6,534 17,565 11,503 12,225 9,004 36,538 100,149 Storageand Distribution 1,000 80 5 0 170 1 4 240 517 2,017 Transport 40 40 26 960 320 92 159 19,144 900 21,681 Tourism 0 0 0 140 30 12 8 215 750 1,155 InformationTechnology 1,300 1,345 1,314 3,664 3,698 5,352 5,534 10,547 5,685 38,439 lmplementingresources 0 0 0 0 0 0 0 0 0 0 ECON.ADMIN. INFRASTRUCTURE 51,148 51,030 58.717 141,294 190333 201,439 121,471 676,447 1,166,121 2,657,900 Roads 6,886 15,080 15,631 63,522 76,256 77,442 37,697 368,720 486,300 1,147,533 Pons 3,000 2,551 2,750 9,600 9,551 10,908 7,652 18,259 47,390 111,661 Airports and Meteorology 5,060 4,250 4,760 7,401 10,535 17,562 15,057 24,364 12,025 101,014 Rail 10,000 6,405 6,650 25,121 38,670 39,388 13,218 175,496 510,618 825,566 InfrasbuctureAdminiskation 26,202 22,745 28,926 35,650 55,221 56,139 47,847 89,608 109,788 472,125 EDUCATION-TRAINING 40,780 26,000 33,570 87,423 86.050 97,126 80,437 152,360 241,114 844,860 Higher Educationand Scientific Research 21,280 5,000 7,600 31,386 25,421 24,878 36,376 97,203 153,510 402,654 Education 15.976 17.000 21.055 42.153 43.669 53.980 35.646 39.980 70.445 339.903 Training 3,524 4,000 4,915 13,885 16,960 18,268 8,415 15,177 17,159 102,303 SOCIOCULTURALINFRASTRUCTURE 6,641 8,870 10,099 27,135 49,633 35,053 52,621 61,963 103,900 355,915 Health 2,551 3,720 5,885 14,851 21,880 21,000 19,979 36,704 50,225 176,795 ProtectionSocialandMoudjahidines 400 600 Youth and Sport Culture 28,580 Communications Source : Minisv of Finance Note: Data for 2005 and 2006 are those of IBL. 122 Statistical Annex Table A.3.6 InvestmentBudgetSector Breakdown of Program Authorizations :1998-2006 (Percentage ofTotal Investment) rts andMeteorology InfrastructureAdministration 7.6% 8.6% 8.6% 5.4% 1.9% 1.5% 8.4% 6.2% 4.9% 6.51 EDUCATION-TRAINING 11.8% 9.8% 10.0% 13.2% 12.3% 12.9% 14.0% 10.6% 10.9% 11.6% Higher Educationand Scientific Research 6.2% 1.9% 2.3% 4.8% 3.6% 3.3% 6.4% 6.8% 6.9% 5 . 5 1 P.C.D. 5.8% 9.1% 11.6% 6.4% 6.6% 7.6% 5.9% 3.2% 1.9% 4.8% TOTAL INVESTMENT 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Subtotalcapitaloperations 2.1% 0.0% 0.6% 1.0% 3.1% 8.6% 0.0% 4.0% 7.0% 3.5% Total capitalbudget 102.1% 100.0% 100.6% 101.0% 103.1% 108.6% 100.0% 104.0% 107.0% 103.5% Source: Ministly of Finance Note: Data for 2005 and2006 are those of IBL. 123 Statistical Annex Table A.3.7 Government's Social Transfers (inthousands of DA) 2003 2004 IBL 2005 IBL Credits SECTIONS Executed Creditsrevised 2005 Revised 2006 (b) 1- HABITAT 99225 71250 78855 107625 142000 ** Social Subsidyto the National FundofAccomodation (FONAL) 36000 25000 33000 33000 40000 Accommodation 52455 45500 44855 64625 82500 * Aid Fundto the Property Access as partof the implementationof" Renting - Selling" 10000 0 1000 10000 19500 * InterestsImprovement "CNEP" 770 750 0 0 0 2 FAMILIES SUPPORT - 81444 86864 92247 92777 112986 * Families' benefits 32446 35230 40224 40754 42242 * Support to Education 30419 33918 39863 39863 45196 - Subsidyto the Centerof Universities' Works 19014 21746 25690 27790 (Parts relativeto grants, restaurationandtransports) 25690 -- Grants for students o fprimaryand secondary establishments 341 374 384 384 414 -- Student canteens 3634 3893 6044 6044 6494 Grantsto ForeignEducation 1430 1905 1745 1745 4498 Supportto the deprived students (2000 DA per student) 6000 6000 6000 6000 6000 * Access to 18579 17716 12160 12160 25548 -- Public Gas and Electricity Ruralelectrification 6600 7056 11000 11000 24388 distribution of gas 10800 9500 - Clearenceas the reductionof the electricity invoicing inthe wilayas of South 1179 1160 1160 1I60 1160 3 SUPPORTTO THE RETIRED PEOPLE 52530 *** Subsidyto - 56923 76697 62880 62880 Differential supplementarybenefitof Moudjahidine's retirement 31923 45180 34750 34750 29558 Differential supplementaryservedto small pensions 21800 24117 20430 20430 18572 the military retirement'scashregister 3200 7400 7700 7700 4400 *4Subsidy - HEALTH 60023 63447 59703 67389 67389 to hospitalestablishments 59340 63232 59456 67142 67142 ** Subsidyto the fund o femergenciesand activities o fmedical care 100 0 0 0 0 Schoolhealth 559 165 197 197 197 * Fees of care and stays ofthe deprivedpeoplesociallynot insured - Central Hospitalo fthe Army 24 50 50 50 50 5 Moudjahidine - 63355 71315 75281 75782 77300 * Moudjahidine's pensions 62121 70000 72914 73415 72913 * Regulationsof expenses realisedby the CNR as the owed contributionto the validationo fthe years ofparticipationto the NationalLiberationWar 1000 1000 2000 2000 4000 * Moudjahidines' andbeneficiariestransportfees 153 200 200 200 210 * Fees for care, takingwater therapy and stays inthermal stations for Moudjahidines 110 160 160 170 * SpecialAssistancefor 77 Moudjahidine 4 5 7 7 7 6 SUPPORTTO DEPRIVEDPEOPLE, HANDICAPPED - PEOPLE,AND TO PEOPLEWITH LOW INCOME 50663 47886 46546 46612 51112 * Contributionto the ADS 19500 19028 20400 22966 25600 * Contributionto civil servantssocial works 7521 8137 8533 8533 10462 * Contributionto the funds of naturalcatastrophesand major technological risks 11400 3000 100 100 100 124 Statistical Annex ** Contributionto the SpecializedEstablishmentsof Social Protecion 3170 3996 4085 4085 4208 Pensionsand Benefits to HadicappedPeopleto 100% 3583 4320 5000 5000 5076 * Compensationto transport expensesinthe south 0 1800 0 0 0 * Contributionto the associativemovement 1538 2098 1662 1662 1574 * Allocation to the funds for victims andbeneficiaries' compensation for the nationalidentity'sachievement 800 500 0 0 0 ** Transportfees for handicappedpeople ChildhoodProtection andAssistance 110 130 167 167 4000 45 73 46 46 46 ** Contributionto Social Securityfor specific categories 2996 3604 4053 4053 46 OperatingSubsidy ofAir Algeria 0 1200 2500 0 0 GENERALTOTAL 411633 417459 - - 415512 453065 503317 Social Transfers / BGE 23.8% 21.7% - - 21.3% 19.7% 19.2% SocialTransfers / GDP 8.0% 8.5% -8.0% 8.6% 8.8% 125 Statistical Annex Table A.3.8 Shareof StateContributionto EPIC (inthousandsofDA) MINISTERIAL DEPARTMENTS PRESIDENCY OFTHE REPUBLIC ResidenceDjenaneEl Mithak NATIONAL DEFENSE NationalInstituteof Mapping RELIGIOUS AFFAIRES AND WAKFS EstablishmentEL ASR -1 ENERGY AND MINES National Officeofthe GeologicalandMiningResearch Subsidyto the schoolofMines El Abed INDUSTRY Algerian Instituteof standardization 24,000 Algerian Instituteof IndustrialProperty (MAPI) 10,000 0 Kational ~nstituteof Produchvityand lndusmal Development 15,000 0 COMhlUNICATlON AND CULTURE 3,716,683 3,098,158 TelevisionNationalEnterpnse(ENTV) 1,480,023 1,458,023 Algerian Broadcasting(TDA) 709,500 669,500 National InstituteofSoundRadioBroadcasting(ENRS) 766,000 515,000 Press ServiceAgency (APS) 278,860 269,860 NationalCenterofDocumentation,Press andInformation 13,000 13,000 Contributionto the Press 5,000 5,000 Contributionto the NationalOffice of InformationandCulture 326,000 10,000 Contributionto the NationalBallet 14475 14,475 Conhibution to the NationalSymphonic Orchesha 6,300 6,300 Contributionto the Theatrical Activities 82,000 119,000 Contributionto the Office RiadhEl Feth 0 18,000 Conhibution to the InternationalCenter of Press 50,000 0 NATIONAL EDUCATION @J,000 0 Conmbution to the NationalOffice School Publications'Expenses 60,000 0 AGRICULTURE INationalCentreofArtificial Fertilization & Genetic Improvement 4,000 4,000 NationalChamberofAgriculture 10,000 10,000 ZoologicalGardenandof Leisure- Civil Concord 50,000 50,000 0 0 100,000 80,000 40,000 40,000 NationalAgency of the Results'Promotionandthe ResearchofTechnological Develonment 60,000 40,000 YOUTH AND SPORT 0 0 NationalAgency for YouthLeisure 0 0 Contributionto the Office of Olvmoic Comolex . . 0 0 TRAINING Ah'D PROFESSIOZlALEDUCATION 26,000 26,000 Center of Studies andResearchof ProfessionsandSkdls 4,000 4,000 NationalCenter ofEducationandDistanceLearning Nationallnstitue ofDevelopmentand ContinuingEducationPromotion TRANSPORTS 14,705,000 9,175,000 State SNCF Convention 2,500,000 2,500,000 ~ OperatingSubsidyAir Algeria 12,000,000 Conhibution to the NationalOfficeofMeteorology( O W 197,000 167,000 EstablishmentNIof AutomobileTechnique's Control (ENACTA) Conhibution to the Establishmentsfor the Airports Management(EGSA) SMALL, MIDDLE SIZE ENTERPRISE AND CRAFKMANSHIP 63,500 140,000 NationalChamberofCrafhnanshipand Professions (CNAhl) RegionalChambsrofCrafhnanshipandProfessions(CRAM) 40,000 40,000 NationalAgency of TradionalCraftmanship(ANART) 15,000 15,000 COMMERCE 28,000 50,000 Conhibution to the Regional Chambersof CommerceandIndushy (CRCI) 15,000 Contributionto the Algerian ChamberofCommerce andlndushy (CACI) COUNTRY PLANNING AND ENVIRONMENT Contributionto the NationalAgency ofCountryPlanning(ANAT) WORKING AND SOCIAL SECURITY Contributionto the NationalWorkingInstitute IFINANI-P Financial andEconomiqueInformationCenter Conmbutlonto the Centerof Studies andProfessionEngeneem of Fmance Conmbutionto the Equpment KanonalCashRegisterof Develoimcnt (CNED) EMPLOY.\lE.NT AND NATIOSAL SOLIDARITY 87,000 Contributionto EPlH 87,000 COMMON EXPENSES ProvisiontowardsPublicService GENERAL TOTAL 19,455,983 Source : Miaistry ofFinance 126 Statistical Annex Table A.3.9 Approved(initial) andExecutedCurrent ExpenditureBudget (inmillions ofDA) Credits Credits Credits Credits Credits Credits Credits Credits MINISTERIAL .pproved Executed Approved Executed Approved Executed Approved Executed DEPARTMENTS BL 2001 31/12/2001 IBL 2002 31/12/2002 IBL 2003 31/12/2003 IBL 2004 31/12/2004 Presidencyofthe Republic 2,394 2,990 2,506 2,984 3,314 3,596 3,381 3,861 Government ChiefServices 970 1,887 942 2,565 2,377 1,562 1,810 2,015 NationalDefense 159,969 160,080 167,380 166,464 170,764 170,404 201,930 207,880 Justice 10,977 10,458 11,642 11,214 14,662 13,326 15,865 15,547 Interior, localAuthorities 103,934 99,447 121,682 122,797 146,114 133,392 143,701 143,667 ForeignAffairs 10,914 12,038 12,256 14,220 13,615 15,421 15,009 15,826 Finance 21,803 18,997 22,019 19,366 24,470 22,098 25,888 22,593 Resources inWater 3,494 3,390 3,949 4,562 4,499 4,584 4,563 4,983 Small, Middlesize EntrepriseandCraftmanshi] 116 101 147 144 452 460 340 274 Energyand Mine 990 803 1,103 867 1,273 932 17,116 13,673 NationalEducation 153,249 151,765 158,109 158,288 186,106 182,326 186,62 1 209,909 CommunicationandCulture 4,629 4,965 4,774 7,244 5,478 5,718 5,103 7,175 HigherEducationand ScientificResearch 47,122 47,113 58,743 58,701 68,283 64,344 66,497 68,829 Youth and Sports 6,500 6,421 6,326 6,647 9,055 9,275 7,473 9,066 Commerce 2,213 1,880 2,338 1,973 2,771 2,253 4,556 4,039 Post Oftices& Technology of Inf. & Com. 1,086 916 1,142 957 1,786 1,500 1,838 794 Education& ProfessionalTtraining 10,649 10,570 12,499 12,383 14,177 14,315 14,804 15,116 ReligiousAffaires andWalcfs 6,100 5,838 6,383 6,002 6,499 6,400 6,487 7,118 Habitat and UrbanPlanning 18,881 18,367 18,967 17,549 40,075 39,979 4,119 4,156 Industry 293 258 336 320 366 336 366 354 Working and SocialSecurity 48,325 48,152 23,794 23,813 22,582 22,511 14,190 24,904 Employmentand NationalSolidarity 92 84 30,708 31,638 43,619 43,399 31,691 34,773 Moudjahidine 102,180 78,858 107,260 100,514 103,629 95,615 104,913 122,176 Agriculture& RuralDeveloppement 17,485 19,347 16,888 21,775 19,140 18,921 9,214 9,793 Relationswith the Parliament 41 29 47 36 72 59 79 54 Health, Popul.& HospitalReform 45,748 47,616 49,117 51,436 60,732 61,956 63,770 66,047 PublicWorks 2,212 2,143 2,249 2,167 2,339 2,378 2,350 2,666 CountryPlanning& Environment 415 345 573 444 601 525 612 589 Tourism 565 483 69C 753 751 586 722 636 Transport 3,588 3,594 3,717 3,686 3,845 3,950 15,910 16,915 Fishingand HalieuticResources 301 261 502 322 634 414 620 478 Subtota 787,233 759,194 848,789 851,832 974,081 942,532 971,538 1,035,907 CommonCharge 161,349 278,445 204,373 186,796 167,412 220,887 228,462 205,331 GeneralTots 948,582 1,037,639 1,053,162 1,038,628 1,141,492 1,163,419 1,200,000 1,241,237 Source: ACCT 127 Statistical Annex Table A.3.10 The Original PCSC, 2005-09 AMOUNTS UNDER FIVE-YEAR PROGRAM Sectorsand Categories (DA billions) (%) (US$ millions) 1. Improvement of Living Conditions 1,908.5 45.4% 24,786 IHousing 555.0 13.2% 7,208 University 141.0 3.4% 1,831 Nationaleducation 200.0 4.8% 2,597 Vocational training 58.5 1.4% 760 Public health 85.0 2.0% 1,104 Water supply (excludinglarge works) 127.0 3.0% 1,649 Youth and sports 60.0 1.4% 779 Culture 16.0 0.4% 208 Household utility connections (gas and electricity) 65.5 1.6% 851 National solidarityactivities 95.0 2.3% 1,234 Development of radio and TV 19.1 0.5% 248 Religiousinfrastructuredevelopment 10.0 0.2% 130 Territorialdevelopment operations 26.4 0.6% 343 Commune-level development programs 200.0 4.8% 2,597 Development of Regions in the South 100.0 2.4% 1,299 Development of High Plateau Regions 150.0 3.6% 1,948 II. Developmentof Basic Infrastructure 1,703.2 40.5% 22,119 Transport sector 700.0 16.7% 9,091 Publicworks sector 600.0 14.3% 7,792 Water sector (dams and transfers) 393.0 9.4% 5,104 Territorialdevelopment sector 10.2 0.2% 132 111. Support for Economic Development 337.2 8.0% 4,379 Agricultureand ruraldevelopment 300.0 7.1% 3,896 Industry 13.5 0.3% 175 Fisheries 12.0 0.3% 156 Investment promotion 4.5 0.1% 58 Tourism 3.2 0.1% 42 SMEs and crafls 4.0 0.1% 52 IV. DevelopmentI Modernization of Public Services 203.9 4.9% 2,648 Justice 34.0 0.8% 442 Interior 65.0 1.5% a44 Finance 64.0 1.5% 831 Commerce 2.0 0.0% 26 Postalservices and new ICTs 16.3 0.4% 212 Other central government sectors 22.6 0.5% 294 V. Developmentof New Communications Technology 50.0 1.2% 649 PROGRAM GRAND TOTAL, 2005-09 4,202.8 100.0% 54,581 Memorandumitem: Exchange rate used: US$l= DA 77 Note: This Table contains provisionalfigures that do not correspond to the authorized PCSC amounts. Sources:Working documents/Ministry of Finance. 128 Statistical Annex Table A.3.11 Investment Executionper Sector, 2005 (InMillion ofDA) SECTORS AND SUB SECTORS ICREDITS I EXPENSES YO INDUSTRY 500 95 19.0 Mines 500 95 19.0 AGRICULTURE AND HYDRAULIC 133,638 138,542 103.7 - Agriculture 3,628 3,223 88.8 - Forest and Environment - 16,467 9,794 59.5 Hydraulic 113,298 125,438 110.7 - Fisheries 245 87 35.5 SUPPORT TO THE PRODUCTIVESERVICES 25,283 12,050 47.7 - Telecommunications - 12,434 6,145 49.4 Storage and distribution 158 46 29.1 - Transport 3,685 2,161 58.6 - Tourism (Craft industry) 180 6 3.3 - Computer Science 8,826 3,692 41.8 ECONOMICSAND ADMINISTRATIVE INFRASTRUCTURE -- 250,485 185,234 74.0 Roads 114,004 93,219 81.8 Ports 18,515 12,957 70.0 - Airfields andMeteorology 29,089 26,264 90.3 - Rail - 39,249 22,834 58.2 Administrative Infrastructure 49,608 29,961 60.4 - Country planning 20 0 0.0 EDUCATIONAND TRAINING - 91,392 84,540 92.5 Higher Education and R.S 31,764 29,763 93.7 - Education 45,049 39,761 88.3 - Training 14,579 15,016 103.0 SOCIOCULTURALINFRASTRUCTURES 51,285 35,567 69.4 - Health 27,764 16,880 60.8 - Social Protection andMoudjahidine - 1,116 1,491 133.6 ---Youth and Sports 10,822 10,02 1 92.6 Culture 5,133 3,865 75.3 Communication 5,018 1,912 38.1 Worship 1,432 1,397 97.6 SUPPORTTO HABITAT ACCESS 70,765 67,516 95.4 MISCELLANUOUS 130,960 66,796 51.0 PSD 38,100 37,235 97.7 INVESTMENTSSUBTOTAL 792,408 627,576 79.2 OPERATIONSINCAPITAL SUBTOTAL 255,302 244,961 95.9 CAPITAL BUDGET TOTAL 1,047,710 872,537 83.3 129 0 0 0 0 0 0 3 0 8 0 m 2 a! vi 0 0 0 0 0 0 0 0 0 8 0, m 2 z vi ~~ c o o c 2- m 3 c o o c 80 0 0 0 0 0 0 0 0 0 0 0 0 2 0 2 1If% i' W m 2 3 3 c c c c e d rr - 2 c o o c z z- c 0 0 0 0 0 0 0 m 0 0 3 0 0 0 0 0 ~ 2m 3 3 m d m ** (0 z 3 0 0 3 N 00, CI (u 0 0 2 88 N 3 W r 4 ", e"00" vi CI i s 0 00 CI ""d 2 m W W" 3 m 3 In" w" N" 0m 2 L- W CI i' r - 6 m o o l ! m w o o o c 3 m w 5 0 0 9", c o l - -! 0 d d P -!mu- - d z -! 7 o m o o w o w 0 00 9 0 m m w m m -!! *! mm w l - c - m 0m l--!-! m 0 rn 3" p- 3 6 0 0 0 0 0 0 0 o w 0 0 m o w l - m w 00, w-!-!! - 2 m 2 0 0 0 0 m0, t w 00 c e c c c 5a - c c c c e 0 a a - c c e sacc c - c c c zacc c - c c c c c c Q - c.1 c c c e c c -cr c.1 c c c c c a - c e c c c s oc - F E- Statistical Annex Table A.4.1 ProgramAuthorizations inthe Road Sector (excl. Highway), 1990-2004 nbillions ofDA) In 2000 dinars Inpercent of GDP Year Development Maintenance Total Development Maintenance Total 1990 14.09 2.73 16.82 0.56% 0.11% 0.67% 1991 11.55 2.17 13.72 0.38% 0.07% 0.45% 1992 12.88 2.19 15.07 0.45% 0.08% 0.52% 1993 14.77 3.64 18.41 0.56% 0.14% 0.69% 1994 11.44 2.82 14.26 0.44% 0.11% 0.54% 1995 10.85 2.71 13.57 0.40% 0.10% 0.50% 1996 11.39 2.57 13.97 0.39% 0.09% 0.48% 1997 15.35 2.4 1 17.76 0.51% 0.08% 0.59% 1998 9.34 2.35 11.69 0.33% 0.08% 0.41% 1999 11.31 2.29 13.60 0.36% 0.07% 0.43% 2000 13.50 3.50 17.00 0.34% 0.09% 0.42% 2001 20.83 4.80 25.62 0.51% 0.12% 0.63% 2002 20.86 11.83 32.69 0.49% 0.28% 0.78% 2003 22.97 12.45 35.42 0.47% 0.26% 0.73% 2004 42.41 9.79 52.21 0.78% 0.18% 0.96% Nominal prices Year Development Maintenance Total 1990 3.10 0.60 3.70 22.00 555.8 1991 3.20 0.60 3.80 27.70 844.5 1992 4.70 0.80 5.50 36.50 1048.2 1993 6.50 1.60 8.10 44.00 1166.C 1994 6.50 1.60 8.10 56.80 1491.5 1995 8.00 2.00 10.00 73.70 1990.6 1996 9.97 2.25 12.22 87.50 2564.7 1997 14.20 2.23 16.43 92.50 2762.4 1998 9.07 2.28 11.35 97.10 2781.7 1999 11.28 2.28 13.56 99.70 3168.4 2000 13.50 3.50 17.00 100.00 4023.0 2001 21.70 5.00 26.70 104.20 4235.6 2002 22.05 12.50 34.55 105.70 4455.3 2003 24.90 13.50 38.40 108.40 5264.3 2004 47.63 11.00 58.63 112.30 6100.4 Source : Ministry of Public Works (MTP) 134 Statistical Annex Table A.4.2 Payment Credits inRoad Sector (excl. Highway), 1999-2004 (inmillions of DA) Maintenance Total Maintenance Maintenance. - communal Maintenance- Subtotal Road Road Year national roads wilava roads roads Other Maintenance DeveloDment Sector 1999 2,500 2,500 12,080 14,58C 2000 3,500 3,500 12,888 16,388 2001 6,000 500 500 7,000 32,130 39,13C 2002 9,500 1,500 1,500 12,500 25,080 37,58C 2003 10,500 1,500 1,500 3,000 16,500 23,304 39,804 2004 5,000 1,500 1,500 8,000 39,625 47,625 Source : Ministry o f Public Works (MTP) 135 StatisticalAnnex Table A.4.3 Capital Budget Program Authorizations, 1999-2004 (inmillionsof - DA) CapitalBudget,PublicWorks ProgramAuthorizations,1999-2004 - (inmillionsofDA) 1999 2000 2001 2002 2003 2004 Roads 15,080 15,631 65,525 73,589 78,950 33,787 ofwhich: Maintenance 2,500 3,500 8,250 12,500 16,500 8,000 Ports 1,551 1,750 8,600 6,951 4,000 2,538 Airports 2,380 1,540 4,826 5,715 6,750 100 Total 19,011 18,921 78,951 86,255 89,700 36,425 CapitalBudget,Transport - ProgramAuthorizations,1999-2004 (inmillions ofDA) 1999 2000 2001 2002 2003 2004 Studies 50 26 960 320 92 159 Airports and Meteorology 800 590 575 225 13,515 7,956 Rail 3,055 7,350 10,195 36,670 34,700 10,195 Total 3,905 7,966 11,730 37,215 48,307 18,310 CapitalBudget,PublicWorks PaymentAppropriations, 1999-2004 - (inmillionsofDA) 1999 2000 2001 2002 2003 2004 Roads 14,580 16,388 39,130 37,580 39,804 47,625 ofwhich: Maintenance 2,500 3,500 8,250 12,500 16,500 8,000 Ports 1,912 2,287 4,400 3,450 3,787 5,000 Airports 1,948 1,500 3,305 2,252 2,995 4,000 Total 18,440 20,175 46,835 43,282 46,586 56,625 CapitalBudget,Transport - PaymentAppropriations,1999-2004 (inmillionsofDA) 1999 2000 2001 2002 2003 2004 Studies 20 31 199 300 500 203 Airports andMeteorology 640 1,285 1,900 690 4,028 5,750 Rail 7,000 9,000 11,334 13,000 7,450 9,715 Total 7,660 10,316 13,433 13,990 11,978 15,668 Source: MinistryofPublic Works (MTP) 136 Statistical Annex Table A.4.4 SectoralBreakdown - 1998 -2004 (millions of DA) Sectoral breakdown of program authorizations 1998 1999 2000 2001 2002 2003 2004 Transport 40 40 26 960 320 92 159 Roads 6,886 15,080 15,631 63,522 76,256 77,442 37,697 Ports 3,000 2,551 2,750 9,600 9,551 10,908 7,652 Airports and Meteorology 5,060 4,250 4,760 7,404 10,535 17,562 15,057 Rail 10,000 8,405 6,650 25,121 38,670 39,388 13,218 Total 24,986 30,326 29,817 106,607 135,332 145,392 73,783 Sectoral breakdown of payment appropriations 1998 1999 2000 2001 2002 2003 2004 Transport 35 10 31 199 300 500 171 Roads 8,263 14,588 16,388 38,931 40,105 42,804 50,566 Ports 3,604 3,352 3,387 5,500 6,050 8,788 7,502 Airports and Meteorology 4,320 5,128 4,885 7,405 7,542 11,968 14,367 Rail 8,630 9,888 9,800 12,259 14,020 10,998 13,094 Total 24,852 32,966 34,491 64,294 68,017 75,058 85,700 Execution of program authorizations by sector 1998 1999 2000 2001 2002 2003 2004 Transport 9 10 16 30 66 28 128 Roads 8,906 14,739 16,751 34,783 41,891 44,356 47,899 Ports 3,343 3,056 3,309 4,937 6,304 6,945 5,426 Airports and Meteorology 3,658 4,969 4,814 6,934 7,415 10,491 12,155 Rail 7,355 7,304 9,627 6,591 10,115 9,970 14,382 Total 23,271 30,078 34,517 53,275 65,791 71,790 79,990 Source: Ministry of Public Works (MTP) 137 Statistical Annex Table A.4.5 OperatingBudget, 2000 -2004 (millionsof DA) Operating Budget, PublicWorks Expenditure - (inmillions ofDA) 2000 2001 2002 2003 2004 2,324 2,06 1 2,249 2,339 2,350 2000 2001 2002 2003 2004 3,463 3,492 3,717 3,845 5,910 TableA.4.6 SomeProblemProjectsinTransport Project Start year I Endyear ILength (Years2 Actual planned Actual Railway line TebessdAin M'lila- 181Km IIIBudget1ActualIPlanned 1988) 19881 1994) 20051 6) 17 Road B B n i Mered /Chiffa 1989 1990 1994 2003 5 13 Road section LakhdarialRNS 2nd tranche 1996 1996 2001 2004 5 8 Mostaganem fishing port 1996 1996 1996 2004 0 8 B6ni Haroun D a m 1987 1987 1993 2001 6 14 Structures to divert the oueds Chiffa and Harbil 1983 1984 1988 2004 5 20 Project costs Increase Initial Updated ((2)-(1))41) (1) (2) Yo MDZD MDZD Motonvay East-West section BeniMered 509.1 700 4,264 Motorway East-West section ElAfroun 433.1 439 2,340 Motorway East-West section ElAfroun (structure) 126.6 233 528 Motorway East-West Bouira bypass lot roads 336.1 1,065 4,65 1 Motonvay East-West Bouira bypass lot 1-3/2nd 241.8 435 1,487 Motorway East-West Bouira bypass lot 2llst 33.1 188 250 Road ElAffroun-Houceinia 0.0 9,750 9,750 RoadBouira ElAdjiba -20.5 9,753 7,753 SquareAddis Abeba 33.8 1,150 1,539 Crossroads Chevalley 0.0 2,700 2,700 Lahadaria-RNS 77.3 480 851 Lahadaria-RN5 2nd tranche 179.9 2,243 6,278 Lahadaria-RN5 2nd tranche structure 262.6 2,851 10,337 Lahadaria-RNS 2nd tranche tunnels 0.0 5,000 5,000 Source :Ministryof Public Works 138 Statistical Annex Table A.5.1 The 41 Largest Water Projects Underway as of End-2004- Initial and FinalBudgets Type of Project: Dams and Transfers Year Initial Final Budget budgeted budget budget increase Chiffa Harbil 1983 797.0 4.740.4 x5.9 Oued Mellouk 1987 449.2 5,432.6 x12.1 Beni Haroun Dam 1987 1,000.0 20,989.9 x20.8 Tichy Haf 1988 375.1 4,430.6 XI1.8 Koudiat M 1990 712.0 5,928.3 x8.3 Telesdit 1991 699.9 5,506.4 x7.9 Taksebt 1991 1,307.6 12,170.6 x9.3 Koudiat A 1993 2,880.4 17,505.6 x6.1 SMBT 1993 1,554.3 7,659.9 x4.9 Nador Boukourdoun. 1994 1,864.6 3,017.1 x1.6 Koudiat Rosfa 1996 1,552.9 4,648.9 x3 Sikkak 1996 2,526.4 3,927.5 x1.5 Kramis 1998 3,000.0 8,858.9 x2.9 Beni Harounpump.st 2000 8,500.0 13,090.8 x1.5 Cheliff 2001 6,867.8 12,467.8 x1.8 Kerrada 2001 8,857.7 8,857.7 MA0transfer and WTP 2001 18,274.5 18,274.5 Zit Emba - Zardezas Bouroumi - BoukourdaneSPI 2002 6,000.0 11,861.0 X I.9 2002 5,000.0 7,646.4 x1.5 Douera Mazafran 2002 8,000.0 8,000.0 Bougous 2002 6,984.4 7,800.0 x1.1 F elKhanga-AinDalia 2004 3,000.0 3,000.0 Water Supply Gargar-transfer 1998 1 1,500.0 12,460.0 x1.1 Sidi Abdelli transfer 2000 4,700.0 7,437.0 x1.6 Rehab Constantinenetworks 2001 4,000.0 4,000.0 Shop desalinationUnits 2002 4,800.0 6,900.0 x1.4 0Athmania transfer 2004 14,000.0 25,800.0 x1.8 Koudiat Medaour transfer 2004 8,000.0 18,000.0 x2.2 Mexa transfer 2004 3,600.0 3,600.0 Tilesdit transfer 2004 4,500.0 5,800.0 x1.3 Sanitation Constantine 1984 732.0 5,338.5 x7.3 Batna (floods protection) 1993 1,620.0 3,102.3 x1.9 Algiers repairsofthe collector 1993 1,389.4 3,556.9 x2.6 Algiers WWTP 2001 1,200.0 3,000.0 x2.5 Oran 2003 4,000.0 4,000.0 Irrigation Mitidja West 1989 1,028.0 5,068.6 x4.9 MoyenCheliff 1989 850.0 6,471.1 x7.6 Oued Rhir 1994 2,300.0 4,263.4 x1.8 Mina 2001 1,600.0 4,690.2 x2.9 Oued R'hir 2 2002 3,300.0 3,300.0 Bas Cheliff 2002 2,800.0 3,709.1 x1.3 Source:MRE. Note: Budgets are in thousandof dinars. 139 Statistical Annex Table A.6.1 EnrolmentinPrimaryEducation(thousands), 1962 2004 - Source: MEN, Donnees Statistiques, various years. 140 Statistical Annex Table A.6.2 Enrolment inlower and upper secondary education (thousands) 1962 - 2004 Source: MEN, Donnees Statistiques, various years. 141 StatisticalAnnex Table A.6.3 EducationPassRate, 1962-2003 BaccalaurCat pass rate Primary Pass Rate BEF Pass Rate II 1962-63 45.0% 57.1% 1963-64 35.4% 63.0% 65.7% 1964-65 29.0% 66.0% 54.8% 1965-66 28.5% 52.0% 20.1% 1966-67 29.1% 56.5% 31.3% 1967-68 30.6% 55.9% 21.4% 1968-69 59.1% 43.6% 1969-70 51.0% 52.2% 1970-71 45.8% 54.7% 1971-72 31.O% 43.8% 1972-73 48.6% 32.0% 43.9% 1973-74 37.7% 37.8% 39.0% 1974-75 41.O% 47.7% 1975-76 22.2% 45.9% 44.7% 1976-77 23.9% 46.0% 29.2% 1977-78 24.3% 48.5% 25.6% 1978-79 22.6% 49.8% 25.9% 1979-80 25.0% 58.6% 24.7% 1980-81 37.7% 63.0% 40.9% 1981-82 21.1% 66.6% 33.0% 1982-83 20.0% 71-4% 36.1% 1983-84 25.3% 72.4% 33.7% 1984-85 29.7% 76.4% 1985-86 25.9% 82.5% 1986-87 19.2% 81.7% 1987-88 24.4% 81.5% 32.1% 1988-89 18.5% 81.5% 23.0% 1989-90 21.0% 79.5% 18.5% 1990-91 19.2% 80.5% 29.0% 1991-92 22.6% 80.1% 23.9% 1992-93 12.0% 79.5% 30.9% 1993-94 17.9% 79.6% 36.5% 1994-95 19.4% 79.5% 39.2% 1995-96 23.1% 77.5% 32.4% 1996-97 26.6% 74.5% 39.5% 1997-98 23.4% 73.0% 41.4% 1998-99 24.6% 66.3% 33.2% 1999-00 32.3% 77.4% 41.6% 2000-01 34.5% 78.9% 41-5% 2001-02 32.9% 79.4% 37.7% 2002-03 26.0% 78.8% 35.0% Source: MEN, Donneesstatistiques, various issues 142 Statistical Annex Table A.6.4 Education Success Rate, 2004 Adrar Chlef 55.3% 38.2% Laghouat 64.3% 38.6% OumElBouaghi 55.6% 44.9% Batna 50.2% 41.4% Btj'ia 58.7% 37.9% Biskra 47.7% 41.1% Btchar 51.5% 43.5% Blida 55.2% 38.5% Bouira 58.9% 41.7% Tamanrasset 45.2% 21.4% Ttbessa 64.1% 45.6% Tlemcen 70.5% 42.8% Tiaret 53.9% 31.9% Tizi-Ouzou 55.0% 42.9% Alger 65.9% 39.3% Djelfa 61.1% 43.5% Jijel 64.6% 41.6% Setif 51.6% 44.7% Saida 75.1% 56.3% Skikda 58.3% 43.5% Sidi Bel Abbts 67.7% 44.0% Annaba 85.1% 51.2% Guelma 69.8% 46.9% Constantine 67.9% 42.5% MCdta 57.9% 36.8% Mostaganem 57.6% 43.1% M'Sila 38.4% 35.0% Mascara 67.6% 38.3% Ouargla 40.2% 38.8% Oran 65.0% 48.0% El-Bayadh 53.0% 56.5% Illizi 33.2% 12.2% Borj Bou Arreridj 59.4% 49.9% Boumerdts 46.6% 36.3% El-Tarf 65.2% 45.9% Tindouf 28.0% 12.1% Tissemsilt 69.3% 50.6% ElOued 47.1% 30.3% Khenchela 49.1% 38.6% Souk-Ahrm 56.6% 40.0% Tipaza 57.4% 42.2% Mila 60.6% 46.6% Ain-Defla 56.1% 45.5% Naama 53.0% 45.2% Ain-Ttmouchent 66.5% 49.7% Gharda'ia 61.7% 43.1% Relizane 68.6%) 48.4% Average 57.3%I 41.2% Source: MENDonnees Statistiques 143 Statistical Annex Table A.6.5 Primary Pass Rate and Female Illiteracy, 2004 Primary Pass Rate Wome, Adrar 39.7% 50.4 Chlef 55.3% 51.3% Laghouat 64.3% 45.5% Oum ElBouaghi 55.6% 42.3% Batna 50.2% 43.6% Btji'a 58.7% 44.6% Biskra 47.7% 43.3% Btchar 51.5% 28.2% Blida 55.2% 30.3% Bouira 58.9% 43.5% Tamanrasset 45.2% 54.6% Ttbessa 64.1% 49.3% Tlemcen 70.5% 39.4% Tiaret 53.9% 48.6% Tizi-Ouzou 55.0% 39.9% Alger 65.9% 23.7% Djelfa 61.1% 61.6% Jijel 64.6% 41.0% Setif 51.6% 42.4% Saida 75.1% 45.5% Skikda 58.3% 38.8% Sidi Bel Abbts 67.7% 33.8% Annaba 85.1% 25.2% Guelma 69.8% 38.6% Constantine 67.9% 27.5% M6dta 57.9% 52.5% Mostaganem 57.6% 52.6% M`Sila 38.4% 47.4% Mascara 67.6% 45.1% Ouargla 40.2% 35.3% Oran 65.0% 26.2% El-Bayadh 53.0% 46.0% Illizi 33.2% 51.4% Borj Bou Arreridj 59.4% 42.9% Boumerdts 46.6% 35.1% El-Tarf 65.2% 36.5% Tindouf 28.0% 38.2% Tissemsilt 69.3% 57.5% ElOued 47.1% 38.9% Khenchela 49.1% 53.6% Souk-h a s 56.6% 43.8% Tipaza 57.4% 37.4% Mila 60.6% 43.4% Ain-Defla 56.1% 53.1% Naama 53.0% 39.7% Aiin-T&mouchent 66.5% 33.4% Ghardai'a 61.7% 34.8% Relizane 68.6%1 53.7% Average 57.3% I 42.3% Source: MENDonnees Statistiques 144 Statistical Annex TableA.6.6 Student/ Teacher RatiosandRecurrentExpenditures,2004 StudentI Teacher Recurrent ratio Expenses (in AD) I Adrar 26.1I 28,289.4 Chlef 25.2 21,145.2 Laghouat 24.9 23,380.2 OumElBouaghi 23.4 23,780.1 Batna 23.8 23,066.1 Btji'a 22.0 23,897.1 Biskra 27.5 20,959.5 Btchar 21.2 29,216.6 Blida 24.8 21,450.6 Bouira 20.4 27,043.1 Tamanrasset 23.1 31,480.1 Tkbessa 24.6 22,433.1 Tlemcen 20.0 26,157.0 Tiaret 24.6 22,742.0 Tizi-Ouzou 20.4 27,419.1 Alger 21.2 25,232.5 Djelfa 29.2 18,998.4 Jijel 22.2 23,893.3 Setif 24.2 21,997.8 Saida 20.3 28,376.0 Skikda 22.6 23,893.4 SidiBelAbbes 19.9 26,886.6 Annaba 19.9 26,682.5 Guelma 20.6 27,020.0 Constantine 21.1 24,828.8 Medta 21.1 24,903.7 Mostaganem 22.3 23,557.6 M'Sila 26.1 20,983.0 Mascara 21.1 24,547.4 Ouargla 27.4 22,733.4 Oran 23.3 21,974.9 El-Bayadh 21.3 28,990.8 Illizi 18.1 41,119.8 Boj BouArreridj 22.9 23,392.3 Boumerdhs 22.4 23,023.3 El-Tarf 19.5 27,885.1 Tindouf 23.3 32,100.8 Tissemsilt 22.3 25,334.1 El Oued 25.9 21,509.7 Khenchela 23.9 23,486.9 Souk-Ahras 20.7 25,870.1 Tipaza 23.3 22,980.0 Mila 24.5 21,644.3 Ain-Defla 24.7 21,321.6 Naama 19.4 32,262.4 Ain-Tkmouchent 19.1 28,849.6 GhardaTa 23.6 24,743.8 Relizane 23.3I 22,795.5 Average 22.81 25.130.8 Source: Bank staffcalculationsbasedon MENdata 145 Statistical Annex Table A.6.7 LocalFiscalResources and Recurrent Expenses, 2004 Local Fiscal Recurrent Resources Per Expenses (in AD) Capita (in AD) Adrar 443.6 28,289.4 Chlef 459.3 21,145.2 Laghouat 1,049.6 23,380.2 Oum El Bouaghi 316.4 23,780.1 Batna 811.1 23,066.1 Beji'a 1,432.2 23,897.1 Biskra 962.4 20,959.5 Bechar 751.2 29,216.6 Blida 1,475.8 21,450.6 Bouira 824.0 27,043.1 Tamanrasset 2,114.5 31,480.1 Ttbessa 1,911.3 22,433.1 Tlemcen 1,111.3 26,157.0 Tiaret 618.9 22,742.0 Tizi-Ouzou 880.5 27,4 19.1 Alga 2,364.9 25,232.5 Djelfa 482.9 18,998.4 Jijel 636.5 23,893.3 Setif 894.5 21,997.8 Saida 813.6 28,376.0 Skikda 1,746.5 23,893.4 Sidi Bel Abbbs 940.7 26,886.6 Annaba 2,702.8 26,682.5 Guelma 1,020.1 27,020.0 Constantine 1,582.1 24,828.8 MedCa 631.7 24,903.7 Mostaganem 1,102.2 23,557.6 M'Sila 540.8 20,983.0 Mascara 701.0 24,547.4 Ouargla 2,843.8 22,733.4 Oran 2,185.1 21,974.9 El-Bayadh 808.6 28,990.8 Illizi 1 ,635.0 41,119.8 Borj Bou Arreridj 756.5 23,392.3 Boumerdbs 723.6 23,023.3 El-Tarf 653.1 27,885.1 Tindouf ,079.4 32,100.8 Tissemsilt 536.9 25,334.1 ElOued 607.1 21,509.7 Khenchela 749.4 23,486.9 Souk-Ahras 1,112.1 25,870.1 Tipaza 805.0 22,980.0 Mila 691.8 21,644.3 Ain-Defla 603.6 21,321.6 Naama 1,083.8 32,262.4 Kin-Tkmouchent 1,098.5 28,849.6 GhardaYa 1,042.4 24,743.8 Relizane 610.3 22,795.5 Average 1,269.8 25,130.8 Sources: MENdata and Poverty Map 146 Statistical Annex Table A.7.1 Population Dynamics, 1996-2004 1996 1997 1998 1999 2000 2001 2002 2003 2004 Total population(millions) 28.6 29 29.05 29.51 30.39 30.84 31.32 31.83 32.37 Life expectancy 69 70.7 70.9 Births per 1,000 27 21.8 21.6 Deaths per 1,000 6 6 5 5 Total fertility rate, childrenper women 3.6 3.4 2.8 2.7 Populationof youth (15-64 year old) % of total 57.8 58.3 58.9 59.5 60 60.7 61.4 62 62.7 Populationof people 65 yrs & above, % of total 3.6 3.7 3.8 3.8 3.9 3.9 4 4 4.1 Table A.7.2 Mortality Indicators, 1996-2004 Source: World Development Indicators 2005, WHO2005, NSP Table A.7.3 Prevalence of non-communicable available diseases, and risky behavior in2002 (amongpopulation25 and above) Source:PAPFAM 2002, WHO 2006 147 Statistical Annex TableA.7.4 Communicablediseases,numberof cases, 1996-2004 1996 1997 1998 1999 2000 2001 2002 2003 2004 Tuberculosis 16,776 16,617 15,334 15,314 18,535 18,193 19,105 19,730 Typhoid 3,969 3,957 3,017 2,735 2,639 1,612 2,411 741 1,090 Diphtheria 107 30 57 17 3 31 - 7 8 Tetanus. 26 31 16 19 19 15 12 4 13 Measles 21,003 19,573 3,301 2,503 1,889 2,743 5,862 15,374 2,926 Cholera 5 Malaria 221 197 256 701 541 435 307 427 163 HIV positive (new cases) - 894 160 121 121 159 266 Note: HIVdata show newly d ectedcases, except for the 1999 figure which is a cumulative figure. Source: INSP: Donn6esde Mortalite 1995-2000, WHO: TB Epidemiologicalprofile, 2005 Table A.7.5 Shared funding of the operating budgets of public health establishments Source: Ministry of Finance -2005/2006: budgetforecasts TableA.7.6 Self-generatedresourcesof publichealthestablishments in millions of dinars 1996 1997 1998 1999 2000 2001 2002 2003 Self-generatedrevenues 869 1194 1194 1233 1233 2936 1234 1244 % operating budget of public health care establishments 2.0% 2.5% 2.4% 2.4% 2.3% 4.5% 1.6% 1.5% 148 StatisticalAnnex Table A.7.7 Private expenditure on services inthe private sector, 200163 Figures in DA 000 Amount Yo total Mutuelles 111,374,800 3.6 Businesses 1,903,078 5.0 Households 35,153,042 91.5 TOTAL 38,430,920 Table A.7.8 Public health care services inAlgeria, 2004 I CHU I EHS IGeneral I Polyclinics I Health I Treatment TOTAL I I hospitals centers rooms Number Of 13 32 229 543 1,292 4,4 12 6,521 I Number of establishments beds I 15,162 I 5,978 I 34,17164 55,311 Table A.7.9 Private health care services inAlgeria, 2004 Medical Laboratories Inpatient Maternity Medical General Dentists' imaging clinics facilities specialists practitioners offices centers Number of establishments 118 206 I 69 I47 4,61 5,799 I3,580 I I I I I Table A.7.10 Operating expenditures by type of establishment (inmillions of dinars and %) Type of establishment 1994 YO 1999 Y O 2004 YO CHU 8,73 1 28.6% 13,111 24.1% 22,791 23.8% EHS I 1,735 1 5.7% 1 4,452 8.2% I 9,843 I 10.3% I Secteurssanitaires 20,047 65.7% 36,733 67.7% 63,141 65.9% TOTAL II30,513 II100% II 54,296 III100% II95,775 II100% I Source: Ministry of Health 63 Incontrast to the summary table inthe NHA,this table excludes two types o fexpenditure: payments in kindmadeby the cooperatives, which are not, strictly speaking, health expenditures; and private-sector investments. 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