Algérie - Fondations pour le développement des technologies de l’information et de la communication en Algérie

Foundations for the Development of Information and Communication Technologies in Algeria .4~~~~~A 025 4 ~~~~~~~"   Preliminary Report Report No. 25841 FOUNDATIONS FOR THE DEVELOPMENT OF INFORMATION AND COMMUNICATION TECHNOLOGIES IN ALGERIA April 2003 Global Lnformation and Communication Technologies Department Private Sector and Infrastructure Vice Presidency and Middle East and North Africa Region The World Bank This report is for restricted distribution. Recipients may use it only in the performance of their official duties. Its content may not be released without authorization of the World Bank.  FISCAL YEAR 2003 July I - June 30 Vice President: Jean-Louis Sarbib l Sector Director Mohsen Khalil Country Director Christian Delvoie/Thedore Ahlers Sector Manager Pierre Guislain Task Team Leader Paul Noumba This report was prepared by a team comprised of Paul Noumba, Rachele Gianfranchi Hirschhofer (consultant), Yann Burtin, Isabelle Andress, Anupama Dokeniya (consultant), Mather Pfeiffenberger, Lucy Cueille (CITPO) and Abdul Aziz Wane (CITIN). External contributions were provided by Louis Lengrand et Associ6s (France). Support from the Italian Consultant Trust Fund (General - National Account) is gratefully acknowledged. Peer reviewers were Gareth Locksley and Christine Quiang (CITPO) at PCD stage and Paul Moreno-Lopez (MNSED), Christian Schmidt (MNSIF), and Howard P. Williams (CITPO) for final review. Significant contributions were received from Michel Welmond (MNSHD) and Cecile Fruman (MNCOI). Guidance was provided by Christian Delvoie, Theodore Ahlers (Country Directors), and Pierre Guislain (Sector Manager). Support from the counterpart team in Algeria in the provision of information is gratefully acknowledged-particularly from the Ministries of Post and ICT, National Education, Tertiary Education and Research, Vocational Training, Public Health, and many other public and private institutions.  |"All reVOlutiofIS gcet,atef Unert4ainly, /i.mr * and opportunity,. TTdzy 's iIs i exception. 11ow we responad, how we J;irn: current oposJtiJunities into real befits w.ill ydL e jd ,O. lIuoW quickly wve can enter the 7urope'an I mJ a ,nornwj Socieiya -langernan Report, 1994   ACRONYMS AAI: Agence Algerienne d'Information AIG: American Insurance Group Algerie Poste: EPIC Algerie Poste Algerie Telecom; Algerie Telecom SPA ALBM: Algerian Business Machines ANA : Agence Nationale des Autoroutes ANDI Agence Nationale de Developpement des Investissements ANDRU: Agence Nationale de Developpement de la Recherche Universitaire ANDS : Agence Nationale de Documentation de la Sante ANF: Agence Nationale des Frequences ANVREDET : Agence Nationale de Valorisation de la Recherche et Developpement Technologique APS : Algerie Presse Service APSI Agence pour la Promotion, le Soutien et le Suivi des Investissements ARPT Autorite de Reglementation de la Poste et des Telecommunications ATM: Automatic Teller Machine, Asynchronous Transfer Mode BADR: Banque de l'Agriculture et du Developpement Rural bn: billion CATEL: Les Cibleries des Telecommunications d'Alg6rie CCP: Comptes des Cheques Postaux CDTA: Centre de Developpement des Technologies Avancees CERIST: Centre de Recherche en Information Scientifique et Technique CETIC: Centre des Technologies de l'lnformation et de la Communication CHU: Centre Hospitalier Universitaire CINDE: Costa Rica Investment and Development Board CNAT: Centre National d'Animation de l'Entreprise des Travaux CNC: Conseil National de la Concurrence CNEP : Caisse Nationale d'Epargne et de Prevoyance CPA : Credit Populaire d'Algerie DA: Algerian Dinar DOMSAT: Domestic Satellite Network DWDM: Dense Wave Division Multiplexing Technology Dz-PAC: x25 public packet data network EDS : Electronic Data Systems Corporation EEPAD: Rablissement d'Enseignement Professionnel a Distance EMISPHER: Euro-Mediterreanean Internet Satellite Platform for Health, Education and Research ENIE: Entreprise Nationale de l'Industrie Electonique ENIEM: Entreprise Nationale des Industries de l'Electromenager ENNA : Etablissement National de la Navigation Aerienne ENSI : Entreprise Nationale de Systemes Informatiques ENTC: Entreprise Nationale de Telecommunications ENTV : Entreprise Nationale de Television Algerienne EPE : Entreprises publiques economiques EPIC: Entreprise publique A caractere industriel et commercial ERIAD-SETIF: Entreprise des Industries Alimentaires Cerealieres et Derives de Setif ERP : Enterprise Resource Planning ESIS : European Survey of Information Society EU : European Union EUMEDIS : Euro-Mediterranean Information Society FINALEP: La Financiere Algero-Europ6enne FTA: Free Trade Agreement Gbits/s: gigabits per second GDP: Gross Domestic Product GECOS : General Computing Systems GFCF : Gross Fixed Capital Formation GEMED: Gesellschaft fir medizinisches Datenmanagement GMPCS: Global Mobile Personal Communications Services GoAl: Government of Algeria GSM: Global System Mobile  HP: Hewlett Packard IAP: International Advisory Panel IBM: International Business Machines ICT : Information and Communication Technology/Technologies IDA: Irish Development Agency INI : Institut National d'Informatique INPI: Institut National de la Propriete Industrielle IP : Internet Protocol IPRs: Intellectual Property Regulations ISI : Import Substitute Industrialization ISP : Internet Service Provider IST : Information Scientifique et Technique IT : Information Technology ITCR : Instituto Tecnol6gico de Costa Rica ITU : International Telecommunications Union Kbits/s : kilobits per second Mbits/s, Mbps : megabits per second MEGAPAC: private corporate x25 data network operated by Algerie Telecom MFP : Multifactor Productivity Growth ML : main line MoF : Ministry of Finances MPICT: Ministry of Posts and Information and Communication Technologies MPT : Ministere de la Poste et des Telecommunications MPTIC: Ministere de la Poste et des Technologies de l'Information et de la Communication MSC: Multimedia Super Corridor NAFTA: North American Free Trade Agreement NMT: Nordic Mobile Telephone NEC: Nippon Electric Company, Ltd. NTT: Nippon Telegraph and Telephone Corporation OBA : Output-Based Aid OECD: Organization for Economic Cooperation and Development ONS: Office National des Statistiques ONDA Office National des Droits d'Auteur OTA : Orascom Telecom Algerie PABX: Private Automatic Branch Exchange PC: Personal Computer PCD: Project Concept Document POP: Point of Presence PROMEX : Fonds special de promotion des exportations PSTN: Public Switched Telephone Network PwC: PricewaterhouseCoopers SATIM Societ6 d'Automatisation des Transactions Interbancaires et de Monetique Sl : Servicio de Impuestos Intemos (Chilean tax administration) SMEs : Small and Medium-Sized Enterprises SMI : Small and Medium Industries SNTF: Societe Nationale des Transports Ferroviaires SOFINANCE: Societe Financiere d'Investissements, de Participation et de Placement SONATITE : Societe Nationale des Travaux d'infrastructure pour les Telecommunications SONATRACH : Societe Nationale pour la Recherche, la Production, le Transport, la Transformation, et la Commercialisation des Hydrocarbures SONELGAZ: Societe Nationale de l'Electricite et du Gaz SPA : Societe par particpations TDA: Telediffusion d'Alg6rie UFC: Universite de la Formation Continue UMTS: Universal Mobile Telecommunications System UNDP: United Nations Development Programme UNIDO: United Nations Industrial Development Organization UPU : Universal Postal Union VSAT : Very Small Aperture Terminal WLL : Wireless Local Loop WTO : World Trade Organization ZTE : Zhongxing Telecommunication Equipment Company  Table of Contents EXECUTIVE SUMMARY ......................................................................1I I International. tren d s. l 2 Keydetermninan tsforICTstrategysuccess .................................................................3 2.1 Spell out a visionary ICT development approach ........................................................3 2.2 Express strong leadership and build political consensus ...............................................4 2.3 Develop and establish an up-to-date ICT regulatory framework ...................................4 2.4 Develop up-to-date information infrastructures through private sector participation ......4 2.5 Develop up-to-date human capital to use the information infrastructures and services ...5 3 Algeria s transition to an information society .5 3.1 Assets Algeria can use to succeed in its transformation . . . 5 3.1.1 A sound telecommunications reform underway since 2000 .5 3.1.2 Unmet potential (solvent) demand .6 3.1.3 Emergence of an ICT private sector .8 3.1.4 Hydrocarbon income .8 3.2 Main challenges . . . 8 3.2.1 Absence of a clear ICT development strategy .8 3.2.2 Strengthening and completing the regulatory framework .9 3.2.3 Unfavorable economic environment .9 3.2.4 Inadequate ICT training .10 3.2.5 Booming underground economy and piracy .10 3.2.6 Brain drain .1 3.2.7 Cost of ICT access .11 4 Growth prospects . 1 5 The way1forward. . .11 6 Action Plan Matrix . . .13 INTRODUCTION: OBJECTIVES OF THE NOTE ............................................ 17 CHAPTER 1: ELEMENTS FOR A VISION ............................................ 19 1 Defining information and communication technologies. 9 2 Exploring and exploiting new technologies .22 3 Implications of the ICT revolution .24 4 International experience perspective .25 5 Key &eterminantsfor ICT strategy succes ..28 5.1 Spell out a visionary ICT development approach .29 5.2 Express strong leadership and build political consensus .29 5.3 Develop and establish an up-to-date ICT regulatory fmework. .30 5.4 Develop up-to-date infornation infrastructures through private sector participation .... 31 5.5 Develop up-to-date human capital to use the information infrastructures and services.31 CHAPTER 2: ICT SECTOR REVIEW ....................................................... 33 1 Situation of the sector before the August 2000 reformn ........................................... 33 2 The posts and telecommunications sector reform .................... ....................... 36 3 Initiatives to implement an information society ................. .......................... 40 4 Operators and telecommunications service providers .40  4.1 Algerie Telecom - a difficult start ............................................. 41 4.1.1 Fixed telephony .................................................................. 41 4.1.2 Mobile telephony .................................................................. 42 4.1.3 Data transmission and leased lines .................................................................. 43 4.1.4 Internet services (Djaweb) .................................................................. 43 4.2 Orascom Telecom Algerie .................................................................. 44 5 Potential alternative operators .................................................................. 45 5.1 Tel6diffusion d'Algerie .................................................................. 45 5.2 A lg rie Poste .................................................................. 45 6 Internet service providers .................................................................. 46 6.1 CERIST .................................................................. 47 6.2 EEPAD-WANADOO .................................................................. 48 6.3 GECOS ................................................................... 48 6.4 BMGI .................................................................. 49 7 Computer distributors and service providers . ............................................................... 49 7.1 Major state-owned enterprises .................................................................. 49 7.2 Major private corporations .................................................................. 50 8 Information media player& .................................................................. 51 8.1 Press .................................................................. 51 8.2 Television and radio .................................................................. 52 CHAPTER 3: ASSETS AND CHALLENGES .................................................................. 53 1 Initiatives to develop ICT. 53 1.1 ICT in tertiary education .54 1.2 ICT in primary and secondary education .54 1.3 ICT in vocational training .56 1.4 ICT in research and development .56 2 Assets Algeria can use to succeed in its transformation . .57 2.1 Unmet potential (solvent) demand .57 2.2 Emergence of an ICT private sector .58 2.3 Hydrocarbon income .60 3 Main challenges ..60 3.1 Absence of a clear ICT development strategy . .60 3.2 Incomplete regulatory framework ..61 3.3 Unfavorable economic environment ..61 3.4 Inadequate ICT training ..63 3.4.1 Supply does not meet demand .63 3.4.2 Inadequate training content .64 3.4.3 Insulation of different ICT training programs .64 3.5 Booming underground economy and piracy . .64 3.6 Brain drain ..65 3.7 Cost of ICT access .65 CHAPTER4: OPTIONS FOR ICT DEVELOPMENT . ................................................................. 66 I Bolster the economy's competitiveness .................................................................. 67 2 Bolster the economy's diversification .................................................................. 69 3 Market simulation results ................................................................... 72 CONCLUSIONS: GUIDELINES FOR DEVELOPING ICT ................................................... 74 RECOMMENDATION 1: Define a consistent strategyfor the information society ......... ......... 74 1.1 Give a management structure and political legitimacy to the Algerian Information Society Program .................................................................. 74  1.2 Finalize the Information Society Program ................................................................ 75 1.3 Follow international technological progress while monitoring domestic evolution toward the information socety ................................................................ 75 RECOMMENDA TION 2: Strengthen the legal and regulatory framework and accelerate the pace of liberalization ................................................................ 76 2.1 Accelerate the liberalization of the telecommunications sector ................................... 76 2.2 Making ARPT fully operational and ensuring its independence ................................. 76 2.3 Open Algerie Telecom to private capital ................................................................ 76 2.4 Strengthen the legislation on intellectual property and curb piracy ............................. 76 2.5 Create a quality certification mechanism for IT service providers .............................. 76 2.6 Enact regulations on encryption and security of electronic transactions ...................... 77 2.7 Extend regulations on personal data and privacy protection to the Internet ................. 77 RECOMMENDATION 3: Promote the use of ICT in the public administration, businesses and civil society ................................................................ 77 3.1 Promote use of ICT by the administration ................................................................ 77 3.2 Eliminate customs duties and implement fiscal incentives for businesses ................... 77 3.3 Multiply Internet access to the Intemet countrywide ................................................. 78 3.4 Encourage partnerships with foreign companies ........................................................ 79 RECOMMENDATION 4: Diffzse ICT in the education and research sector ........................... 79 4.1 Design and initiate specific training programs in ICT ................................................ 79 4.2 Improve connectivity of schools and universities ...................................................... 79 4.3 Encourage research and innovation in ICT as well as partnerships with foreign universities ................................................................ 80 4.4 Create nationwide events ................................................................ 80 REFERENCES .................................................................... 81 BIBLIOGRAPHY .................................................................... 81 Internet sites .................................................................... 83 Portals .................................................................... 83 Provider sites .................................................................... 83 M inistries, political institutions, and administrations .......................................................... 83 Public organization sites .................................................................... 83 Corporate sites .................................................................... 83 Information sites .................................................................... 83 Embassy sites .................................................................... 84 Reports .................................................................... 84 ANNEX: A COMPARISON BETWEEN ALGERIA AND ITS NEIGHBORS ........................ 85 1 Methodology .................................................................... 85 2 Main findings.87   EXECUTIVE SUMMARY 1 INTERNATIONAL TRENDS The rapid expansion of information and communication technologies (ICT) in the last ten years has transformed developed countries into infornation societies. The benefits deriving from the adoption of new technologies have become a central issue in developing nations who also want to profit from this opportunity. Today's technical change is unprecedented in pace and scope. Information and communication technologies (ICT) are at the core cf such change, making spectacular advances. In 1930, a one- minute telephone call from New York to London cost US$300 at current prices; today it costs only a few cents. The cost of I megabit of processing power fell from US$7,600 in 1970 to 17 cents in 1999 - a 99.9% decline over the same period. These revolutionary changes have mainly benefited the developed countries. In the past, errors forced large firms to rework about a quarter of their orders. B-commerce now allows enterprises to check that orders are internally consistent by efficiently matching orders, receipts, and invoices. For example, the General Electric trading post network has significantly reduced its ordering errors and cut costs by 5 to 20%. Cisco Systems, the world's largest supplier of routers for Internet traffic has moved 70% of its customer support online, eliminating 250,000 telephone calls a month and saving more than US$500 million, about 17% of its operating costs. Another change is the growing importance in a number of industries of geographic clustering of enterprises, particularly small and medium-sized enterprises (SMEs). The benefits of clustering derive from external economies such as the availability of information, or proximity to pools of suppliers, customers, and skilled workers. Many high-tech clusters have emerged in industrialized countries. Many competitive clusters also exist in developing countries (Malaysia, India, China, Brazil, Costa Rica, etc). Aside from the massive increase in the use of ICT, the content of industrial products and activities shows an increasing share of information content. For example, around half of the value of a new car lies in its infornation content (design, process management, marketing, sales, etc.). ICTs are now pervasive in work methods, plant layout, the management of quality control processes, lean production, and just-in-time inventory systems. The internal organization of firms needs to be adapted to the major changes introduced by new technologies, while these make it easier to manage operations over long distances. ICTs enable enterprises to separate functions from production processes and to locate them wherever cost, efficiency, and market needs suggest. For instance, an enterprise may design a semiconductor in the United States with an affiliate in India, buy the wafer from a foundry in Taiwan Province of China, assemble and test the chip in the Philippines, and use an independent logistics company to ship it to Germany and market it all over Europe. Thefactors that matter b investors using new technologies and looking for competitive locations are specialized skills, modern infrastructure, strong institutions, low transaction costs, efficient local suppliers, clusters of enterprises and providers of business support.  Overall, ICT plays two roles in the growth process. First it contributes heavily to capital accumulation. Second, it contributes to multifactor productivity growth (MFP).' The contribution of ICT to MFP depends both on technological progress in the production of ICT goods and services, and 2 on efficiency gains in ICT-using sectors. However, the extent to which these two aspects determine MFP growth is still uncertain. The ICT producing sector (manufacturing and services) has provided a considerable contribution to productivity growth in several OECD countries, as well as in the United States in the second half of the 1 990s. There is also evidence that certain ICT-using services have experienced an above-average pick-up in productivity growth in the same period. This indicates ICT spillover effects beyond the ICT sector itself, which is also confirmed by firm- level studies and studies for sectors which are heavy users of ICT, such as retail, trade, transport, and financial services. The experience of countries that made a successful transition to an information-based economy confirms that there is no single path to it, and that each national strategy must be tailored to the country's specific needs. Nonetheless, two generic approaches to the development of an information- based economy can be noted. For most governments the target is promoting a massive dissemination of ICT. This aims at maximizing the spillover effects, mainly on end-users. For other governments, however, the target is promoting the establishment of a national ICT pole of competence, capable of serving both internal and export demand. It must be pointed out nevertheless that having an ICT- manufacturing pole is not a prerequisite for a successful transition to an information-based economy for three reasons. First, proximity to hardware producers may not be as important as proximity to software producers and service providers, which are useful to firms needing skills and advice to implement ICT-related strategies. Second, because of the high entry costs and large economies of scale,3 much of the manufacturing of ICT hardware is highly concentrated, and only few countries have the necessary comparative advantages. The third and most important reason is that several countries that have successfully developed a vibrant ICT sector do NOT have a large ICT- manufacturing sector. Australia is a good example of this.4 Governments should therefore resist believing that deliberately developing an ICT manufacturing pole is a prerequisite to building an information-based society and ensuring enhanced economic growth. lDirk Pilat and Frank Lee, "Productivity Growth in ICT-producing and ICT-using Industries: A Source of Growth Differentials in the OECD?," DSTI/DOC (2001) 4, OECD, June 2001. 2 Dale Jorgenson, "Information Technology in the U.S. Economy", American Economic Review, Vol. 91, No. 1, March 2001. 3 An example of the high costs of creating an ICT-producing industry is the following: establishing a new semi- conductor plant cost some US$100 million in the early 1980s, but as much as US$1.2 billion in 1999 (United States Council of Economic Advisors, Annual Report, 2001). 4 David Gruen and Glenn Stevens, "Australian Macroeconomic Performance and Policies in the 1990s", in The Australian Economy in the 1990s, Sydney: Reserve Bank of Australia, 2000. 2  In 2002, the ICT market was estimated at 2.365 billion Euros worldwide, with the USA market valued at 804.1 billion Euros, Japan at 283.8 billion Euros, and Westem Europe at 641 billion euros. Broken down into equipment, software, IT services, and carrier services,5 the European Union market shows the following distribution: * ICT equipment: 150 bn Euros [28%]; * Software products: 65 bn Euros [10%]; * IT services: 140 bn Euros [22%]; * Carrier services: 275 bn Euros [40%]. In per capita terms, these market segments respectively represent approximately: (a) 678 Euros for carrier services; (b) 464 Euros for ICT equipment; (c) 164 Euros for software; (d) and 363 Euros for IT services. In other words, European Union countries spend on average: (a) 2.95% of GDPfor carrier services; (b) 2.02% of GDP for ICT equipment, (c) 0.71% of GDP for software; (d) and 1.58% of GDPfor ITservices. With an average 1652 Euros per capita in 2002, every European Union citizen spent approximately 7.26% of their income on ICT consumption. This figure provides a benchmark against which one could compare the status of development of an ICT market. 2 KEY DETERMINANTS FOR ICT STRATEGY SUCCESS Becoming an information society goes well beyond acquiring and installing ICT infrastructure. It is a social, cultural, and economic transformation process. Allowing technology to deploy all its potential is achieved with a long-term strategy aiming at setting up a favorable regulatory, economic, and social environment. On the basis of international experience, the preconditions for the information society to develop are determined by five fundamental dimensions: a visionary approach, strong leadership for a timely and effective implementation of the vision, an up-to-date regulatory framework stabilizing the business environrnent, up-to-date informnation infrastructures set up with private participation, and up-to-date human capital able to use the information infrastructures to their full potential. 2.1 Spell out a visionary ICT development approach International experience shows that the most successful countries are those with a sound development strategy spelling out the vision, and a roadmap to achieve clearly identified goals. In the EU case discussed later in the note, the vision is based on the need to strengthen the European Community's competitiveness and achieve sustained economic growth that will support job creation. The Bangeman Report provides the visionary approach. In Malaysia, the Multimedia Super Corridor project carne from the Prime Minister's vision of transforming Malaysia from a semi-industrialized country assembling low-end electronic products into an information-based economy that could compete internationally. In Algeria, a visionary ICT development approach is not yet formalized and diffused. The note suggests that core issues for the transition to the information economy are those of diversi fying the economy and improving the country's international competitiveness. This implies the emergence and development of new sources of economic growth. 5 Carrier services are defined as the companies providing communication services including voice, record, data, video and facsimile transmissions. 3  2.2 Express strong leadership and build political consensus Strong leadership is needed to transform vision into action plans, and to ensure that action plans are effectively implemented. Malaysia's and the European Union's approaches demonstrate the critical role expected from political leaders in providing the vision and in empowering executive bodies for effective implementation. In the Malaysian case, the Prime Minister Dr. Mahathir Mohamad has been instrumental throughout the implementation process of the information society program. MDC6 is fully empowered and equipped to implement the government's visionary ICT program, and reports directly to the Prime Minister who maintains a close supervision over the program implementation. In Algeria, there is the need for a strong cross-industry figure able to lead and supervise the timely implementation of the whole ICTreform process. Unless this is done, the slowdowns and delays in the implementation of reforms will diminish the credibility of the government's efforts and undermine its political support. 2.3 Develop and establish an up-to-date ICT regulatory framework Establishing a sound regulatory framework that is conducive to increased private sector participation is critical. More specifically, the regulatory framework, as well as the overall business environment, should be attractive to foreign and domestic private investors. Regulatory clarity and predictability are crucial in order to mitigate investors' risk perception and to promote fair competition. In Algeria, the first challenge is to develop a comprehensive regulatory framework that provides certainty and ensures predictability for potential investors and consumers. The second challenge is to develop internal capabilities to enforce those regulations effectively. The third challenge to further streamline the overall business environment, and accelerate the privatization of the economy. Among the top priorities that the government should address are: (a) strengthening the independence of ARPT; (b) expanding its regulatory mandate to cover the new regulatory areas of the information society; and (c) ensuring effective protection of intellectual property rights to curb rampant piracy. 2.4 Develop up-to-date information infrastructures through private sector participation Private sector investrnent is the driving force of the ICT sector, while monopolistic or anti- competitive environments are major barriers to private involvement. The situation of ICTs is drastically different from other infrastructure sectors such as transport, in which significant public investments are still crucial. The prime task of governments is therefore to safeguard competitive forces and ensure a strong and lasting political will in favor of ICT sector development. There will be no need for large government investment, though government leadership could justify funding of targeted flagship applications for demonstration purposes. Additionally, governments should consider "smart subsidies" to promote ICT use by schools, public administrations, and small 6 MDC: Multimedia Development Corporation is set up to oversee the implementation of the MSC (Multimedia Super Corridor), one of the most visible projects that is being implemented by MDC. The MSC's International Advisory Panel (IAP) meetings have always been a key event in the country with the Prime Minister's presence. IAP members include top ICT company leaders (The Acer Group, Alcatel, BCE Incorporated, Bloomberg LP, Centre for Strategic & International Studies, Cisco Systems Inc, Compaq Computer Corp, Computer Associates, DHL Worldwide Express, EDS, Ericsson, Fujitsu limited, Infosys Technologies Ltd, Intel Corporation, IBM, Lucent Technologies, Microsoft Corporation, Motorola, NEC Corporation, NTT, Nokia, Ohmae & Associates, Oracle Corporation, Reuters Group plc, Siemens AG, SAP AG, Sony Corporation, Sun Microsystems, and Dell Computer Corporation). 4  businesses. In total, the fiscal impact of ICT policy measures will be positive as demand for ICT consumption develops. In Algeria, the challenge to attract private investors in building information infrastructure remains. The international private companies with ICT-related businesses are few and limited. The political instability and social turmoil of the last decade have contributed to weakening the country's attractiveness. 2.5 Develop up-to-date human capital to use the information infrastructures and services The review of international experience also shows that countries, which have a well-educated population with exposure to new technologies, have a comparative advantage in moving towards an information-based economy.' Nonetheless, ICT dissemination should be preceded by a thorough reform of the education system, a re-skilling of the trainers, and a well-designed dissemination plan, which will target first tertiary education and then younger students. Currently, the number of students trained each year in informatics, electronics, and telecommunications remains completely inadequate to bolster the emergence of a competitive ICT sector. Training oriented towards the new professions created by the technological revolution must be set up by the State in cooperation with private professional associations. In light of the above, public-private partnerships must be encouraged, and the regulation in force must be adapted to facilitate increased private participation in the education system in Algeria. In Algeria, the supply of CT skills is deterred by several weaknesses: inadequate ICT training content in relation to market needs, excessive insulation of training programs, inadequate training facilities in relation to market needs (volume and quality), and devastating impact of massive brain drain. 3 ALGERIA'S TRANSITION TO AN INFORMATION SOCIETY Algeria looks at the building of a modern and dynamic ICT sector as a promising opportunity to make its economy more competitive and further diversified from hydrocarbon. However, in terms of information infrastructure development, the country lags far behind its neighbors. 3.1 Assets Algeria can use to succeed in its transformation Algeria can use the following major assets in undertaking the transition to the information society: (a) sound telecommunications reform underway since 2000; (b) unmet potential and solvent demand; (c) emergence of an ICT private sector, although still fragmented; and (d) hydrocarbon revenues. 3.1.1 A sound teleco,nntunications reform underway since 2000 Algeria is in the midst of reforming its information and communication technology (ICT) sector. With the support of the World Bank, the government began a postal and tele communications sector reform in 2000. Its main achievements include: (a) adoption of a pro-liberal telecommunications policy 7 It is worth remembering that the worldwide strong growth of the ICT sector led to a shortage of executives and technicians at the same time as the supply of services was expanding. For example, Motorola was forced to cancel its project of a software development center in Egypt because of the inability of the Egyptian educational system to provide the engineers and technicians necessary to develop this center's activities. In effect, such a center requires a critical mass of 300 to 500 highly qualified engineers to be competitive, which the Egyptian market was not in a position to provide. 5  statement in 2000; (b) enactment of a new Post and Telecommunications Law (Law 2000-03) in August 2000; (c) establishment of an independent regulatory body (ARPT) which has been operational since May 2001; (d) corporatization of Algerie Telecom (AT) and Algerie Poste (AP); and (e) award in July 2001 of the second GSM license to Orascom Telecom Alg6rie8 (OTA) for US$737 million. As a result, the number of fixed-line subscribers increased from 1,600,000 in 1999 to 2,000,000 in December 2002. Similarly, the nunber of mobile subscribers increased in relative terms, reaching 400,000 in December 2002 compared to 72,000 in 1999. With the opening up of the Internet market to competition in 1999, more than 75 ISPs were granted licenses. The total number of Internet subscribers increased to 60,000 in 2002 compared to 20,000 in 1999. Figure 1: Highlights of Algeria's telecommunications sector reform | - t T _ - - Mobile Subscrlber evolution in Algeria Post and Telecom reform agenda 400000 _ __________ _ 2350C000 - 1999 2000 2001 2002 150000 ,44 A? e 10s0coo0 ,,0 __ ~~~~~~~~~~~~~~0 2003 2003 2004 2005 0 2r'd GSM award of the license; C-2nd GSM: beginning of commercial operations. To carry the reform effort further, in May 2001 a Steering Committee composed of representatives of the public, private, and education sectors was set up to report on the development of the information society in Algeria. The decision process was stalled during 2001-2002 because of prerogative issues between ministries, and the committee's recommendations in its October 2001 report were never implemented. 3.1.2 Unmet potential (solvent) demand The demand for ICT goods and service consumption remains largely unmet. Long waiting lists for telephone services (800,000 for fixed lines and 600,000 for mobile) show the scope of the situation. Teledensity remains low at 64 per 1000 people in 2001 for fixed, and below 3 per 1000 people for mobile. Tunisia and Egypt, which had a similar teledensity in the early 1990s, outperformed Algeria by the end of the decade. Telecommunications tariffs for services provided by Algerie Telecom (the state-owned public operator) are generally low with regard to connection, subscription charges, and local calls, but remain high for international calls, implying an urgent need to rebalance tariffs. 8Since then, OTA has invested US$550 million (including the first payment of its license fee), and has created 1,000 direct jobs and 5,000 indirect ones. 6  Figure 2: Algerian telecom performance vs. neighboring countries Teledensity of fixed lInos Operational Profile of tho Algarlan Telecom Sector 10 32s