Running businesses in Algeria, anyone?

The Jakarta Post ,  Constantine City, Algeria   |  Wed, 07/23/2008 10:53 AM  |  Lifestyle

The construction site lies in the middle of nowhere, arid desert as far as the eye can see.

Located in Hydra, about six hours drive east of the capital Algiers, the site accommodates some 500 Indonesian and Japanese nationals building a 100-kilometer section of highway.

Indonesian workers at work at their base camp in Hydra. (JP/Pandaya)

"Working conditions here are tough, but we're used to working with Indonesians at least," said Takashi Washimi, speaking fluent Indonesian.

Takashi is a senior manager with Kajima Corporation, part of COJAAL, a Japanese consortium building 400 of the 1,200-kilometer Algerian East-West highway project to be completed in 2010.

Kajima chose Indonesia's state-owned PT Wijaya Karya, its longtime Indonesian partner, to build one 100-kilometer section. under a contract worth US$700 million. The new section stretches from Tadjenanet to historic Constantine City.

There at the sprawling camp in the blistering heat, the Indonesian firm can develop its reputation as a world-class construction company. The project is its first major public works job in Africa.

"Through this partnership with COJAAL, we are learning how to handle major high-risk projects overseas," Wijaya Karya overseas division manager Destiawan told The Jakarta Post.

Businesspeople and diplomats familiar with local bureaucracy see mammoth obstacles to doing business in Algeria such as red tape and complicated regulations not to mention cultural obstacles. Algeria's official languages are Arabic and French, not commonly used in Indonesia.

These daunting challenges may help explain why Indonesian diplomats in Algiers have a hard time encouraging Indonesian investors to do business in Algeria despite excellent bilateral relations.

Algeria, whose oil export revenue accounts for over 80 percent of its foreign exchange income, is expanding its infrastructure on a massive scale, the multibillion dollar 1,200-kilometer six-lane highway is but one example.

Indonesia is hoping for another slice of the pie if a Brazilian company, bidding to build a multimillion dollar suspension bridge in the eastern province of Constantine, approaches Wijaya Karya for partnership, said Bambang Wiwik Wibowo, Wijaya Karya's construction manager in Algeria.

Many construction projects have gone to Japanese, Chinese and Korean contractors, aside from the major tourism infrastructure development projects the United Arab Emirates is currently handling.

So why don't Indonesian companies make the best of the good bilateral relations inspired by shared religion and history?

According to Bambang, besides the lack of experience with high-risk business in Africa, Indonesia cannot compete with its competitors financially.

Under Algerian law, that government provides only 30 percent of the total project value as a down payment.

"Even major Japanese companies have to join forces as a consortium in order to start a project," Bambang said.

One of Indonesia's property giants has reportedly explored an Algerian offer to participate in the construction of one million low-cost houses. The company declined the offer, saying it would be interested only in building upscale apartments.

Private investors are also deterred by an Algerian government policy which blocks money from leaving the country. Only through a government-to-government agreement are such financial transfers possible.

"Indonesian nationals working here have their wages paid in Indonesia. They limit their pocket money to just enough for basic necessities while they work here," Bambang said.

Indonesian representatives in Algeria wondered aloud why Jakarta has shown only lukewarm interest in their reports on ample untapped trade and investment opportunities in Algeria.

An Indonesian diplomat complained that a great deal of hard-earned information about business opportunities in Algeria seemed to evaporate once it arrived in Jakarta.

Indonesian policymakers and parliamentarians often have lacked the will to follow up bilateral agreements, the diplomat says.

In the latest case, members of the Indonesian legislature made light of an agreement to form an association which was reached during their recent visit to Algiers with their local counterparts.

With a population of 33 million people and foreign exchange reserves of US$150 billion, Algeria is an untapped market for such commodities as plywood, coffee and other agricultural products. Algeria relies on imports for its supply of basic commodities.

Ironically, Algeria imports food from Indonesia, such as coffee, through European countries, Algiers's main trading partners besides the United States.

The value of Indonesia-Algeria trade stood at a mere US$167 million last year up from $155 million in 2006, official statistics shows. The balance tips to Algeria, which dominates with oil it has exported to Indonesia since 2002.

"To improve trade relations, both countries have to know each other's potential better," notes Meddy H. Sewaka, economic chancellor to Algeria at the Indonesian Embassy. -- JP/Pandaya

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