Algerian vote seen as mandate for profound economic change. New government expected to submit reform package

Algerian officials foresee greater democracy and profound economic change ahead, based on the ``overwhelming support'' that voters gave to constitutional revisions in Thursday's referendum. The vote, Minister of Interior Hedi Khedin declared, has shown that ``the people of Algeria are in favor of change.''

According to official returns, 92.3 percent of voters cast ballots in favor of President Chadli Benjedid's proposals to reduce the power of the ruling National Liberation Front (NLF). The referendum grants the prime minister greater power and makes him accountable to the National Assembly. The vote was called after October street riots broke out in protest over declining living standards.

Mr. Benjedid has already chosen a close associate and reformist, Kasdi Merbah, as his new prime minister. The new government, expected to be announced later this week, is likely to submit an economic liberalization program to a party congress on Nov. 27.

``The appointment of Merbah as prime minister is a first step in an eight-month plan intended to institute a complete political and economic overhaul of the country,'' one senior diplomat said. By gradually removing the old faces of the FLN administration, ``a new (reformist) team will be in place by next June.''

Benjedid is said to be pressing for economic reforms to draw the country, whose debts now total more than $24.5 billion, out of its present doldrums.

Many Algerians believe that their best hopes for a thriving economic future lie with Europe, rather than the Middle East. Such a move, economists say, would almost certainly mean making a deal with the World Bank and persuading France to take the lead for a rescheduling of debts.

For years, Algeria has relied heavily on oil and natural resources, which represent 98 percent of hard-currency earnings. As with most OPEC nations, however, it has been hit hard by the sharp fall in energy prices. This has been compounded by the FLN's socialist policies, which have led to spare parts' shortages and a top-heavy bureaucracy.

Two years ago, Benjedid was finally forced to introduce an austerity program as well as limited reforms aimed at making state enterprises more efficient. But despite Algeria's enormous agricultural potential, it barely manages to produce half of its food requirements. Live chickens are flown in from Yugoslavia, while even oranges are imported from Morocco.

Since last month's riots, the authorities have ensured the supply of running water and have sought to keep shops well-stocked with basic food items. But Benjedid's measures have made few inroads in alleviating Algeria's 40 percent unemployment, high prices, and market shortages.

``The present socialist system is far too centralized,'' says one Western economist. ``It has created such a stifling bureaucracy that the working atmosphere is simply too unrewarding for people with initiative.''

For the average Algerian, who earns less than $250 a month, prices are frustratingly high. Locally grown fruits such as pears and tangerines cost $2-3 a pound, while shoes are marked at $30 to $50. Army officers and party officials enjoy privileges unavailable to most citizens.

As a result, a black market, where prices are four to five times official ones, flourishes for hard currency and imports. Economists estimate the size of the parallel market at $1 billion or more a year, with Algerians from abroad or professional smugglers bringing in cars, electronic equipment, and clothes with every ship or plane from France, Spain, or Italy.

Algerian businessmen complain that there is not enough incentive to come back and start up local enterprises. One private restaurant owner claimed that he had to wait nine months for a permit to build a restroom. Another entrepreneur said that he had to wait so long for official letters to apply for spare parts or commodity allocations that his company regularly lost orders. Kickbacks and corruption among party or government officials are another source of resentment.

Major changes in the financial sector are needed if Algeria is to encourage foreign investment. The government still controls marketing and distribution, and even with far-reaching reforms, Algeria's drive for an efficient economy may take a long time.

``If you talk of privatization you are also talking about reducing party powers,'' notes one Western economic analyst. Benjedid may succeed in breaking down FLN control through decrees or encourage of private initiative. Yet, as another Western diplomat observes, the government may have to allow certain bureaucratic obstacles ``to wither away.''