Remarks by Ambassador Richard Erdman
on the occasion of The U.S.-Algerian Business
Council Symposium on Energy and Water Resources
June 4, 2005

Thank you.  It’s a great honor to be here.  I want to thank Don Wilhelm and the U.S.-Algerian Business Council for the very fine work they do, and that they have done and continue to do, in bringing together U.S. and Algerian businesses, in directly fostering our national policies, in bringing our two countries together, and in working toward a mutually beneficial strategic partnership.

I didn’t really prepare any formal remarks this morning, but I would like to cover three themes and leave a couple ideas with you speaking extemporaneously from a couple of notes I jotted down.  The first theme would be our converging interests; the second theme is expanding opportunities; and the third theme is continuing challenges.

CONVERGING INTERESTS

On converging interests, we have entered a very favorable period of growth and of cooperation between our two countries.  For the last 40 years, we frankly did not have a lot in common with Algeria.  Our cooperation in the energy sector was an important exception, but even that activity was quite isolated.  It wasn’t the kind of activity that brings people interfacing – affecting a two- way exchange culturally and business-wise. 

In the first three decades, this country was following a different political and economic model.  It was a one party state.  It was non-aligned in theory, but in fact quite close to the Soviet Union.  It was following policies of a centralized economy with a very dominant role for the state sector.  Without going into all the reasons, this model collapsed essentially in the 1980s, and there was an opening -- a very rapid opening, but it was done in a very problematic way -- which directly contributed to some of the problems that ensued and the very difficult decade of the 1990s, when this country was in great torment and it was a daily challenge to get through the day, let alone try to think and build for the future. 

That changed with the turning of the page about four years ago with the real defeat, strategically, of the terrorist threat.  And while it was defeated, it wasn’t entirely eliminated.  It was no longer a threat to the country.  And what that meant was for the first time this country was able to begin focusing on the future and on the new model that was adopted.  And that was a model of moving towards democracy and open markets.  At the same time, the United States experienced the tragic events of September 11.  And one of the lessons we drew from that terrible event is that it is in our national interest to help and encourage these countries that are trying to move toward democracy and open market systems, because we are convinced that is part of the answer in addressing the scourge of terrorism -- not only here, but around the world -- by providing for better governance, rule of law, jobs, and greater prosperity.

And so what has happened in the last four years?  For the first time, our two countries have had a shared political and economic vision about where this country should be headed and how we could help.  And we have tried to help this process in modest ways.  We have not provided a lot of resources, because unlike a lot of modernizing countries, this is not a country that needs resources.  It has resources:  human and material.  What is needed is some help in technical ways to better utilize these resources.  And so we have tried to help in the process of WTO accession negotiations by funding an international trade expert to provide advice to the Algerians and help them navigate the WTO accession process.  The expert was not an American, but a Mexican, so he brought some neutral credibility to the process as an international trade expert.  We’ve also helped the accession process in other ways.

We have tried to help with the modernization of some of the legal and regulatory framework as part of the accession process to the WTO.  We have tried to help with judicial reform, the training of judges -- particularly in the area of intellectual property rights.  As in many countries, this country faces a problem in counterfeit goods.  And we are delighted to see that this country is making important progress in this area and that some important court cases that have come about have been decided by judges who received training from the U.S., who have spent time in the U.S. with U.S. judges seeing how they handled this type of legal IPR case.  And we are now helping also in the same area, as this country moves towards open markets where they’re going to face traditional types of legal issues that arise when you have a free economy, when you have commercial disputes, and bankruptcies, and things like that, which is part of the normal law of economic life.  So, we’re helping in that area as well.

We have also tried to help as best we could in the area of financial reform.  We’ve certainly been encouraging them towards bank reform, which is absolutely vital.  We’ve helped a bit with management of their reserves, management of their debt, and even modernization of their tax system.

Apart from the bilateral area, we’ve had converging interests throughout Africa, particularly in the area where we both have an interest in encouraging greater regional cooperation in the Maghreb to the benefit of all countries in the Maghreb and beyond.  We have greater cooperation and strategic interests in the Sahel and in ensuring that this area of vast expanses and governments that are not politically and militarily able to control their vast territories, given the geology and the vastness of the land involved and the fact that these are very thinly populated areas.  So we’re working together to strengthen regional capabilities to increase the ability of the governments of the Sahel to control their territories and help them ensure that they cannot be used as safe havens for terrorist groups in the manner of Afghanistan.

Algeria is a leader on the continent in the fight against AIDS.  It’s a major voice in NEPAD, the New Economic Partnership for Development -- both issues where we attach great importance.  Algeria has played a major, helpful, and positive role; in fact, they brokered the Accords -- they’re called the Algiers Accords -- between Ethiopia and Eritrea.  Algeria has played an important role in encouraging resolution of the dispute within Sudan.  So in all these areas, and I could list some more, actually one key area I should add is the area of counter-terrorism -- not only in the Sahel, but helping to raise consciousness in the African continent on the issue of the need for greater cooperation in the fight against terrorism.  Another concrete step is that Algeria has been a strong proponent of the establishment of an African Union regional counter-terrorism center here in Algiers.  This will greatly help in terms of training, in terms of raising consciousness, and in terms of increasing the ability of the countries of Africa to address this terrible issue.

So in all these ways, we have had converging interests.  And so we have gone from a period of the first 40 years of this country’s independence, where we had only a very modest level of relations and not a lot in common, to a period of now where we have a very broad convergence of interests.  And you can see this statistically with a little factoid.  In 2002 -- and I wasn’t here then -- we had only a small handful of official visitors, I am told.  In 2003 -- my wife and I arrived in July -- we had about 100 official visitors.  And as my good friend Mourad Adjabi knows, who supported us very nobly and uncomplainingly at the Foreign Ministry, in 2004 we had over 300 official visitors come to the country in all fields:  economic, commercial, political, cultural, military – all sorts of cooperation in the counter-terrorism field as well.  So this is a very fruitful process that is underway, and I hope to make a modest contribution to its continuation to our mutual benefit.

EXPANDING OPPORTUNITIES

Let me move from that to the point I would like to make about expanding opportunities for the U.S.  I already mentioned the technical assistance we are trying to provide in a modest way.  There are also infrastructure opportunities.  This country has basically lost a decade, because of the daily struggle against terrorism.  And so there are many opportunities, whether it’s building new airports, upgrading the railroads, building desalinization plants, upgrading the ports, building an East-West highway, or building modern water treatment facilities.  It goes on and on.  And the government has set aside US$55 billion to spend over the next five years to address these critical infrastructure needs.  Clearly this creates a lot of opportunities for American businesses to participate in this effort of economic renewal and building.

The U.S. role -- perhaps I can say, immodestly, its leading role in Algeria’s energy sector -- is well known and continuing.  Minister of Energy Khelil covered it, and I won’t go into great detail here.  He mentioned the hydrocarbon reform legislation.  Clearly it’s a very positive step that will help keep Algeria competitive, that will encourage greater efficiencies, and therefore more revenue, and that will create more attractive conditions for foreign energy investment.  So we applaud this and, unlike some recent articles in the press here which attributed this to American pressures, I needn’t repeat in saying that that ain’t the case.  This is something Algeria needed to do and, to its great credit, it did it for its own interests. 

I’d like to also focus a bit on the non-energy opportunities in Algeria, because this is a very exciting area for me.  Algeria, and the opportunities remain considerably less well known to U.S. businesses for the moment, at least other than in the energy sector – but, I can tell you the word is spreading, the picture is changing.  We have more American businessmen coming here, passing through my office, joining our pavilion in the Trade Fair, and beginning to explore trade and investment opportunities here.  And so, more and more, the business and investment opportunities here in Algeria are becoming known.  And, again, I’d like to take my hat off to the U.S. Algerian Business Council for being very helpful in this regard. 

I’ve been very proud and struck by our pavilion at the Trade Fair this year.  In talking to our participants, I find almost unanimous views of their sense of the opportunities that exist here in Algeria as it begins to build for the future with the vision and the ability to do so.  Maybe El Dorado, as one foreign entrepreneur recently described to me, is a bit of an exaggeration, but he can be forgiven because he’s been in the telecommunications area where three years ago there were only 40,000 subscriptions and now he’s got five million and thinks they may get seven million by the end of the year -- just a small example.  If you find your niche, you can do well.

The point is, the opportunities are great.  They need to be explored.  And that particularly in the area of energy and water, many of the solutions to the challenges and needs that Algeria faces can be met with the right mix of U.S. technology and management skills.  We see evidence of this with some of the state-of-the-art technologies represented at the U.S. pavilion.  One firm has equipment the size of a small refrigerator that can produce up to 65 liters of pure, fresh water from desert air per day.  Think of what this means for the desert communities in this country and other semi-arid countries for their quality of life.  Think of what it means for these people where water is often scarce or, if it’s available, it’s unhealthy because of its high salinity content.  From their very desert air, they can produce their water needs rather cheaply, very purely.   And think what it means for making their deserts bloom.

Another firm has state-of-the-art technology for the treatment of water with double the quality of the water that’s treated and at half the price.  Think of what that could mean for this country where they have enormous needs to modernize their water treatment facilities as part of an effort to conserve the precious commodity, but also to address environmental needs. 

What is striking to me is that these firms have come not just to sell to the Algerian market, but to establish a strategic position for long-term cooperation and production with a view to making Algeria a base for a regional market.  In sum, I’m absolutely convinced there are enormous opportunities.  If you pose the question strategically where this country will be in five or ten years, I have no doubt this will be a much more prosperous place.  I find it also very encouraging that we are now beginning to see leading-edge Algerian entrepreneurs begin to make significant investments.  This should be encouraging for foreign investors, because if you don’t have domestic investors investing, it raises the question to someone outside, “Well, there must be something wrong if the domestic investors aren’t getting involved.” 

And so, we’re seeing some very important investments that are underway or will be shortly underway; whether it’s building 36 three-star hotels across the country, whether it’s building the 12^th largest float glass factory in the world that will go online next year --and also in the agro-industrial area, where we have some very significant investment going on.  It’s below the radar screen right now, but we have some US$60 million in investment in this area as well as state-of- the-art U.S. technology intimately involved.  What we’ve seen from some of these investments to date, particularly in the agro-industrial area, they have turned this country in some cases from an importing, consuming nation to an exporting nation; and that’s very positive.

CHALLENGES AHEAD

And my third theme is the challenges ahead; and I’m going to have to count on Mourad to pass on the word (to others in the Government).  I was hoping we’d have a couple of Ministerial friends here.  I’ll have to beat them up in private!  First, we need reform of the banking and financial system.  It’s critical for this country and for unleashing the talents that are there and for allowing real entrepreneurial spirit to go forward.  Second, we need officials to have a better understanding of the role of foreign investment.  The importance of foreign investment is not the amount of capital that comes into this country.  It’s the ability of the foreign capital to galvanize and to mobilize domestic capital that exists in this country and, in so doing, to effect a transfer of technology to create economic activity and jobs -- to absorb a younger generation eager to work and to move forward.

Third, there needs to be better communication between the government and the private sector.   Very recently, if I can share a confidence, I hosted a very small dinner with a leading private businessman and a leading official in the government -- both good friends.  And it became immediately apparent these people have never had a real conversation before.  We need better communication.  You have a government that understands that the future of this country is in the private sector.  So the government and the private sector both need to understand and to begin to regard each other as allies in a common endeavor.  And that common endeavor is creating a better life for all Algerians.

Governments do not create wealth.  They distribute it.  It’s the private sector that creates wealth.  But you need both players.  The government creates the playing field, and it’s the private sector, which are the players, that makes the game work and that scores the goals.  Both are vital.

Fourth, There needs to be more transparency in decision-making and rule-making.

Finally -- and I really wish that Mourad would pass the word on -- they really need to invest in education and to make sure that the investment in education is strategically targeted.  English language capability, for example, is vital to this country.  Not because there’s any great competition with France, (frankly, at the strategic level, we share the same interests in making sure this country is prosperous, healthy, and democratic and stable), but again, as one of the ways to ensure that this country is neither a producer nor an exporter of terrorism and instability.  English language capability is important so that the youth of this country can compete effectively in an English-based global economy.  It’s important because it will make Algeria a more attractive target for foreign investment.  And it’s important because it will give the youth of the country access to English-based knowledge and state-of-the-art technology.  So I encourage the Ministers to go visit the English faculty at the university and see what the faculties there say about the priorities that have been made in spending money.  And I think they will conclude that there is a dreadful under-investment in this area, given the condition of the facilities there.  So I think there needs to be some more emphasis there to make this a greater priority -- not only verbally, which it clearly is, but also in terms of where precious government resources are used to build for the future of this country.

Thank you very much.