Algeria Turns to China for Funds as Oil Price Drop Worldwide

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Algeria is turning to China to finance several infrastructure projects, including a new $3.2 billion port, as the North African OPEC member looks for ways to weather the collapse in global oil prices.

Algeria, where oil and gas production account for 60 percent of the state budget, saw energy earnings collapse 40 percent last year, forcing the government to slash spending, raise some subsidized 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.

Now Chinese banks will fund the port in Cherchell, east of Algiers, for a megaport of 23 docks capable of processing 26 million tons of goods per year, according to a source at the transport ministry.

"The port will be funded by China," the official told Reuters.

China's Shanghai Ports Group will manage the project, he said. Another source at the Algerian trade ministry confirmed this.

"This is an important and strategic project [port] not only for Algeria, but for Africa," China's ambassador in Algeria told reporters Monday.

China is Africa's largest trading partner and its investments in the continent amounted to $32 billion at the end of 2014, according to London-based BMI Research.

Chinese workers are seen at the construction site of the new Great Mosque, which is being built by the China State Construction Engineering Corporation (CSCEC), in Algiers, Algeria, Jan. 20, 2016.
China has offered loans totaling $32 billion to African nations in the past two years and investments range from Zambian power plants, cobalt mines in Congo, rail links in East Africa and other infrastructure in Equatorial Guinea.

"We have $60 billion available for projects in Africa in the next three years, and Algeria is in a good position to take advantage of this amount," the ambassador said.