What does Algeria’s victory in the Africa Cup teach us about economic development?

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On July 19, Algeria won the 2019 edition of the Africa Cup of Nations. That victory is the epilogue of a very contested tournament with 24 teams where we saw the best of competition, talents and refereeing in the continent. Algeria’s consecration comes amid sweeping political transformation triggered by massive demonstrations in the past few months driven by the youth asking for radical change. This has united Algerians and emboldened the national team. That can-do spirit and renewed momentum are likely to be key ingredients for delivering big reforms.

On the economic front, Algeria’s development model has frustrated an educated young and increasingly female labor force aspiring to economic empowerment beyond subsidies and public jobs. The model is essentially stuck in transition from an administrated economy to a market one. What is more is that decades of state domination with episodes of liberalizations have yielded crony capitalism further distancing the population from appreciating the power of harnessing markets for development.

In Algeria, like in many countries, soccer has triggered passions capturing dreams of greatness and unifying nations. Soccer can offer four lessons for economic development in Algeria which is looking to revamp its economic model.  

 

 

 

The first lesson is the role of competition and the power of market forces. In too many sectors in Algeria, prices are controlled and state or private monopolies are the rule  hence stifling the space for talented Algerians to transform their economy and deterring foreign investment. That is unsustainable considering the shrinking rents coming from oil and gas ever since oil prices have collapsed in 2014. Indeed, soccer illustrates how market mechanisms are an important filter to detect and reward talents based on performance and move away from favoritism.  Without free entry and failure, like in soccer, economic dynamism and momentum rapidly come to a halt.

The second lesson is about mobilizing talents. Ever since its independence from France in 1962, Algeria has invested significantly in education with women topping males in terms of educational achievements.  The national soccer team under Coach Belmadi, who, during his career as a player, has played in the best clubs in Europe, mobilized within less than a year the best Algerian talents playing around the world. Algeria like other developing countries has been plagued with massive brain drain because of the lack of reliable domestic markets to provide opportunities that meet the level of talents and competences of its fast-growing population. Beyond soccer, bringing talents from Algeria and abroad will, combined with increased open markets, contribute to higher productivity and economic growth which has fallen below 2% per annum, a level that is a third of what is needed to create the kind of jobs to absorb new comers. The Algerian diaspora has very strong affinities for their home country, and mobilizing their networks and capital would also help integrate the country.

The third lesson is related to central role of managers. Coach Belmadi exemplifies the kind, courageous and demanding leadership with the required technical and strategic skills who has turned a collection of individual talents into a symbiotic team. In many developing countries like in Algeria, managers are either not selected appropriately or not empowered to lead.  To transform its economy, Algeria, like it did with its soccer team, needs to select and entrust managers in the public and private sectors by relying on the implementation of modern corporate governance. That corporate governance should give these managers the latitude and independence to make decisions, select and reward talents to instill new momentum and rebalance the historical top down approach toward more bottom up at the firm level.

 

 

The last lesson is about the role of the referee. A competent and independent referee is a pillar for a sound and fair game. In the sphere of economics, arm length regulators whether sectoral or transversal, like telecom regulators or competition authorities are complementary to liberalizing markets and avoiding the monopolization of the economy. Avoiding a popular backlash against markets can be achieved by instilling trust in the regulatory apparatus with appropriate enforcement capacity which should become the guarantor of vivid and fair competition. Technology can help and as in soccer with the advent of video assistant referee allowing the referee to visualize the actions and assess whether the initial decision is appropriate.

Algeria has a unique window of opportunity to do bold reforms and transform its economy. It has the pool of individual talents, the natural resources.  What it needs now is the political will to attract and empower talented managers by reinforcing its corporate governance and regulatory apparatus for a creative and fair game just like in soccer.

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