CHAPTER FOUR 4. ECONOMIC GOVERNANCE AND MANAGEMENT 4.1 Introduction: challenges for economic governance and management 385. In the early years of its independence, Algeria embarked on a major socioeconomic development programme to strengthen its political independence through economic autonomy in relation to the former colonial power. Efforts to achieve this mobilised the whole machinery of the state and had a profound effect on the country‟s economic sectors and all levels of society. Modernising production infrastructures by heavy state intervention from a large public sector and mobilising revenues from hydrocarbon exports were considered to be the ideal mechanism for breaking the vicious cycle of dependence and poverty. 386. To place current reforms and efforts to improve economic governance in their historical perspective, it is necessary to provide a brief overview of Algeria‟s recent economic history. Three major phases in Algeria‟s modern economic development can be observed. The first phase, which started in the initial years of independence and continued until the mid-1980s, was the phase of rapid and planned industrialisation. The second phase started towards the end of the 1980s and was a period of severe economic crisis that led to the reform of the government sector and the implementation of the structural adjustment programmes. The third phase, starting in the mid-1990s and characterised by resurgence in economic growth, was affected by chronic political instability and the fight against terrorism. Finally, at the turn of the century, consolidation of this renewal of economic growth represented a new chapter in the history of the country‟s economic development. It benefited from political stability, the decline in terrorism, a policy of national reconciliation and, more particularly, from the increase in world prices of oil, which constitutes the bulk of Algeria‟s exports. 387. During the first phase of Algeria‟s socio-economic development, the country opted to develop its economy through a centralised, socialist-planned policy, which favoured heavy industrialisation as a means to diversify and transform the economic infrastructure, increase productivity and reduce dependence on foreign markets. The state played a key role in this development strategy through public investments and public enterprises, and by mobilising export revenues. The state implemented a consistent strategy of nationalisation of its strategic sectors, in particular, the mining, banking and petroleum sectors. It also launched a planning process based on a three-year pre-plan (1967–1969) and used it as the main instrument for planning and allocating resources. 128