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Algeria turns to Chinese knowhow

Four Chinese telecoms engineers three men and a woman sip orange juice in a cafe on an Algiers square, opposite a statue of Emir Abdelkader, the 19th-century nationalist leader.

Three are children of farmers back in China, but the most senior, 25-year-old Yuan Hua, is son of an engineer. Slightly homesick, they say the locals are welcoming but they wish public transport was more user-friendly for visitors with little Arabic or French.

Employed by Shenzhen-based Huawei Technologies , they are developing mobile phone networks both for the former state monopoly, Algerie Telecom , and its private-sector rival, Djezzy , owned by Egypt's Orascom. They are glad for the work, even if expatriate salaries are not as good as they once were.

As China seeks to expand its presence in Africa, it is looking north to Algeria, with which it has historic ties of friendship. China was the first non-Arab country to recognise Algeria's nationalist government in exile in the late 1950s. There are now about 30,000 Chinese nationals living in the north African country, according to the embassy in Algiers.

The bulk are employed by Chinese engineering, construction and other infrastructure companies, mainly state-owned. Their client is more often than not the Algerian state. President Abdelaziz Bouteflika, who at 72 still enjoys the backing of the military elite, is seeking re-election for a third term on April 9.

He has been in a hurry to use the proceeds from oil and gas exports to modernise the country's infrastructure, aiming to spend about $200bn (€157bn, £144bn) on such projects by the end of 2009, and has turned to Chinese knowhow to get things done fast.

"In certain fields, Algeria very much resembles China in the 1980s and 1990s," when infrastructure had to be modernised to attract foreign investors, explains Jinhui Peng, China's commercial attaché in Algiers. "They are following almost the same route to development."

The largest infrastructure contract, a $5.67bn deal to build a 525km stretch of a east-west highway, went to a joint venture between China's state-owned CITIC Group and CRCC, formerly part of Chinese state railways. An impressive new foreign ministry in Algiers is being built by China State Construction Engineering Corporation, which houses its imported workers in a cavernous dormitory building just across the road.

Algerian officials believe that, with its strong foreign reserves, the country can maintain the pace of development even if oil falls as low as $20 a barrel.

Projects include water supply works, airport terminals, university facilities and upgrades to the power infrastructure, with a strong emphasis on housing.

Close to the main square in Oran, the second city, families live in squalor in decrepit blocks of flats dating from before independence in 1962. The shanty-town population was swelled by violence between Islamist groups and the army in the 1990s, which sent villagers scrambling for safety in the towns. Now, however, Oran is ringed by new tower blocks and university buildings, many Chinese built.

As the oil price rose, Algeria was a rich source of jobs for construction workers from China, along with engineers, managers, interpreters - even canteen cooks.

The main opposition parties are boycotting next month's poll, claiming that it will be far from an exercise in democracy. But it can do Mr Bouteflika no harm to point to the progress under his period in office, even as a rump of Islamist fighters continue to hold out in the hills. Many Algerians, battered by the vicious violence of the 1990s, appreciate better housing, water and electricity supplies and college places for their children.

However, the press has noted the paradox of importing Chinese workers when unemployment remains high. Officials from both countries emphasise the numbers of locals employed and training opportunities offered, but a local skills shortage remains.

In Oran, 30-year-old Khalid's complaint is typical: "They pay the Chinese well, and us nothing. If they paid us like they pay them, we would work better." He and his friends work in odd jobs in the informal economy, as they dream of emigration.

The pay differential is confirmed at a building site operated by Zhongding International Engineering Company, which completed a $53m upgrade to Oran's sewerage system in November.

Algerian workers lack skills, a ZIEC employee says on condition of anonymity. And besides, he adds, wage expectations in China are higher. ZIEC employs a few Algerian welders, steel drivers or carpenters at 680 dinars (£6.60) a day.

Its Chinese blue-collar workers, housed in sparse breeze-block rooms, are better paid but have no holidays during their two-year contract, just "one or two" days off a month, he says.

As for direct investment, Chinese companies have, along with other foreign companies, been given pause by recent tax changes and a ban since last summer on holding majority stakes in Algerian companies.

By Eileen Byrne in Algiers

© Financial Times 2009