The performance of public industrial enterprises in Algeria : an empirical study

• Main Author: Belhoul, Hafida C.
• Published: Keele University 1984
• Subjects: 382; HB Economic Theory
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.238240

The aim of this study is to assess the performance of the Algerian public industrial sector and identify the reasons for its inefficiency. The study is based on an empirical analysis of six public industrial enterprises: SONIC (pulp and paper), SNMC (construction materials), SNIC (light chemical), SONATRACH (hydrocarbons), SNS (iron and steel) and SONACOME (mechanical engineering). In this representative study of public industrial enterprises, 171 plants and complexes were investigated. In order to measure the efficiency of these public enterprises, input utilisation (raw materials, intermediate inputs, fixed capital and labour) is analysed. Given that Algeria is a capital-scarce econcny, emphasis is placed on fixed capital utilisation via the calculations of U1 (ratio of actual over planned output), U2 (ratio of planned over technical output) and U3 (ratio of actual over technical number of shifts or time utilisation of fixed capital). It was found that the average rate of fixed capital utilisation for the public enterprises studied was 72.81%, 76.64% and 71.27% as measured by U1, U2 and U3, respectively. With this information and according to evidence provided by the plant managers, it was concluded that the different inputs were inefficiently used in all the public enterprises studied and, by and large in the entire Algerian public industrial sector. Four causes of inefficient utilisation of inputs were identified: organisational factors, shortages of inputs, allocative inefficiencies and demand shortages. The potential for significant increases in industrial output and employment, therefore, exists. A cross country comparison among Turkey, Egypt and Algeria showed that several causes of inefficiency encountered in Algeria were also observed in the other, more experienced countries characterised by similar economic systems. From this study, some policy recommendations directly related to the problems encountered, emerged.