22 Januari 2016

[220116.EN.BIZ] Hit By Low Oil, Algeria Turns To China For Transport Infrastructure

ALGERIA is turning to China to finance transport infrastructure, including a new US$3.2 billion port, as the North African OPEC member looks for ways to weather the collapse of oil prices.

Shanghai International Port Group (SIPG) is expected to become the operator of the new Cherchell port in Algeria, Reuters reports.

SIPG will be given priority to operate the new port upon completion, according to a source familiar with the matter.

Earlier this week, China and Algeria signed a memorandum of understanding to build the new port, 60 kilometres west of the capital Algiers.

As part of the deal, China Harbour Engineering Co (CHEC), China State Construction Engineering Corp (CSCEC) and the Algerian port authority have signed a framework agreement.

The deal calls for the three to set up a joint venture - 49 per cent owned by the Chinese firms - to run construction and operation.

Managers from SIPG will join the project management team within the first four years, the report said.

The new port, once completed, will become the country's largest port, having 23 berths and capacity to handle 6.5 million TEU and 25.7 million tonnes of bulk.

Algeria, where oil and gas production account for 60 per cent of the state budget, saw energy earnings collapse 40 per cent last year, forcing the government to slash spending, raise some subsidised fuel prices and freeze major projects.

With little foreign debt and more than $130 billion in reserves, Algeria's government says its economy can manage the fall in crude prices.

Nevertheless, it appears Algiers is willing to move out of its comfort zone to help it cope. The Chinese funding represents the first time it has sought external funding in a decade.

Chinese businesses are already well-established in Algeria, especially in housing and construction. In one flagship project, Chinese firms are helping to build a huge new mosque worth $5 billion in the capital Algiers.

Source : HKSG.

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