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LIBYA


  
   

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 34.137     57
  n/a     n/a
GNI per capita
 US $
Ranking is given out of 208 nations - (data from the World Bank)

REPUBLICAN REFERENCE

Area (sq.km)
1,759,540

Population
5,499,074

Capital
Tripoli

Currency
Libyan dinar 

Leader 
Col Mu'amar al-Qadhafi

  

Background:
The Great People's Socialist Libyan Arab Jamahiriya 
Modern Libya, the Jamahiriya, has grown as the political experiment of an idiosyncratic vision that has been more concerned with the implementation of its ideology than the construction of appropriate institutions to manage the state. So long as an adequate inflow of oil revenues could be sustained, the 'experiment' has been able to gain a degree of public tolerance, if not support, thanks largely to the dispersal of public welfare. Ultimately, the Jamahiriya's political institutions have fostered the perpetuation of a kinship based society. As tribal loyalty has supplanted civil society, the grass roots political activity that would typically be organized around business, social, or religious concerns has been suffocated. An effective repressive apparatus has ensured the eradication of civil society and effectively precluded the rise of a sustained opposition movement of any kind. 

Pariah State? 
Although Libya has earned international condemnation, President George W. Bush stopped short of including Libya in his 'Axis of Evil' paradigm pronounced during his 2002 State of The Union Address. Indeed, Libya's idiosyncratic and flamboyant leader Col. Mu'amar Qadhafi was among the first leaders to condemn the September 11th 2001 attack on the World Trade Center and the Pentagon. Yet Libya remains one of America's favorite 'Pariah States'--along with Cuba, Syria and Iran--and its leader is an icon of comedians and variety show hosts' personifications of 'nut-case' evil, bordering on the grotesque. Libyans, and those who are familiar with their country, however, might be puzzled by America's concerns over Libya. Not only is the current Libyan military capacity limited in terms of equipment, and even more so in management, but Qadhafi has been waging a campaign against political Islam since the time G. W. Bush was still prancing around as a fraternity huckster at Yale. Indeed, it might be correct to suggest that Bush and Qadhafi have been consumed by similar passions in recent years. The Libyan leader has long considered Islamists to be the greatest threat to the regime and publicly denounced them as being a disease to be eliminated, "worse than cancer or AIDS". 

Political Opposition and Economic Reform
Moreover, Qadhafi's peculiar political structure and ideology have, in fact, made it difficult for any opposition movement to sustain a successful campaign against the regime. The violent opposition that has sporadically taken place, has largely been a reaction to the ill-conceived economic reforms that have been implemented since 1986 - as oil prices fell to record lows. The reforms have failed to fulfill the intended liberalization of the economy and critically curtailed the State's distributive largesse. This has alienated the poorest elements of society that had typically been Qadhafi's most vociferous supporters. Yusuf al-Muqariyif of the National Front for the Salvation of Libya (an Opposition Group based outside Libya) has even suggested that Qadhafi has created the Islamist threat himself to gain support from Tunisia and Egypt toward the easing of international sanctions, the idea being "either me or fundamentalism". Anti-government protests, by Islamists or others, have not been ideologically motivated. Rather, these have been symptomatic of the fact that Libya's income and distributive network have relied on a single resource. The abrupt shrinking of the public sector showed the vulnerability of this policy and proved unsustainable to most Libyans, who had become accustomed to a high standard of living. Oil revenues have made it possible for Libya to experience a significant political, social and economic transformation since independence and especially since 1969.
The regime that was established as a result of the 1969 revolution has made great efforts to distribute the wealth accumulated from oil production among the population through public services and subsidies for a variety of consumer products. It has promoted large scale, if somewhat misguided, development projects in infrastructure, education and ISI industry. The Great Man Made River (GMMR) designed to facilitate irrigation for agricultural production along the Libyan coastline via an artificial 4000 km river based on Sahara groundwater is a multi-billion dollar monument to Libya's material infrastructure since independence, the result of an extensive program of welfare spending. Radical egalitarian principles based on Qadhafi's Green Book since 1978 improved the material living conditions of the vast majority of Libyans as enterprises were nationalized and housing rental payments were outlawed.
However, the combination of a 50 % drop in oil revenues in the mid-1980's that created a current account deficit have hurt the State's distributive capacity. While the economy's nationalization process continued, the State responded by applying austerity measures and limiting imports of consumer goods. Libyan consumers, who had become accustomed to the availability of a wide range of consumer goods, reacted badly to the austerity measures, sometimes venting their anger through popular protest and by damaging and burning government supermarkets. The depth of the economic crisis was such that the foreign labor force had to be reduced. Typically, the expulsion of Egyptians and, in particular, Palestinians that was masked in political rhetoric over the Arab-Israeli peace process, has more often than not resulted from economic difficulty. This made it necessary to curtail spending and adopt a measure of economic reforms to stimulate greater private sector involvement in the economy. The reforms effectively served to retract the distributive network of subsidies and state employment that had provided the Government's principal source of support from the population. 
Therefore, for a majority of Libyans, the 'reforms' have only contributed to deteriorating standards of living. The failure of these reforms has highlighted the institutional shortcomings of the regime that enacted them and promoted increasing opposition to it that the Libyan government has often blamed on what it has called Islamic 'radicals'.

Political Structure and Risk
The General People's Congress (GPC), a body similar to a parliament in the Jamahiriya, also served as a forum of public discontent over the austerity programs. In an unprecedented move, the regime responded to the criticism with a series of policies designed to address the grievances which was adopted in 1988 at the yearly session of the GPC. It provided the framework of a more liberalized economy, curbed the authoritative excesses of the Revolutionary Committees (RC) and assumed the title of Great Green Charter of Human Rights in the Age of the Jamahiriya. Despite this lofty title, the institutional infrastructure of the Jamahiriya failed to implement the Charter in a manner worthy of its name. The Libyan economy has lacked the necessary institutional infrastructure and administration in order to function properly. The mere elimination of state dirigisme, as occurred in Libya, has not sufficed to generate alternative sources of economic growth. 
Free trade and the removal of price subsidies, coupled with international sanctions from 1992 to 2000 caused price inflation for most consumer goods while average wages remained stagnant. The only beneficiaries of the economic reforms were the private merchants who controlled the import and the sale of various types of merchandise. Meanwhile, worker cooperatives known as tasharrukiyyat entailed a form of privatization that was adapted as best as possible to the Green Book's economic ideology. These allow for the sale of state production assets to one or more individuals, who agree to share equally in the management and profits of their enterprise. By and large this system has not enjoyed much success beyond the small service sector in such areas as appliance or automobile repair, hairdressing shops and photography laboratories where ownership is usually limited to single individuals. In these types of activities earnings are higher but thus far privatization has not resulted in a significant diversification of the economy. Property rights have not been guaranteed and neither has privatization been officially sanctioned in law. In the end it has been far harder to create the necessary regulatory framework to support national markets. This requires financial, legal, and civil institutions in order to provide a free exchange of information and enforce contracts. Another very significant problem is the abnormal lack of any reliable statistical information concerning economic indicators or demographics and it is often necessary to 'play by ear'' in order to 'read' the country's economic performance.
Nevertheless, the end of the UN embargo, which had been enforced since 1992, and increased oil demand have helped increase revenues. Reportedly, GDP has risen steadily since 1995 from 7.8 to 12.6 US$ billion in 1999 while consumer inflation has dropped from the estimated 30-35 % that persisted throughout most of the past decade to 12 %, while in 2000 it is rumored that there was a current account surplus of US$ 1.3 billion. Not surprisingly, domestic opposition to the regime, even in the economically depressed Benghazi region, has been limited since 1998 because of the improved economy. Most Libyans have been able to continue enjoying relatively high material living standards. As promising as the situation appears, the Libyan economy under the Jamahiriya has not made significant progress and has grown ever more dependent on oil exports and strong external demand for its product. The fickleness of world oil markets mean that when they're low and there is a threat of an economic crisis, the regime is not institutionally prepared to manage it, raising the prospect of political instability. 
A more significant political risk than even the price of oil is posed by Libya's tribal structure. More than ceding to an Islamist or secular opposition, in the event of collapse of the current leadership, the country would fracture along tribal lines. There has already been direct evidence of opposition motivated by tribal interests and it partly explains the Libyan leadership's foot-dragging over the Lockerbie incident. Indeed, the Warfalla tribe organized one of the most significant coup attempts of the past decade in October 1993. The tribe is well represented in the regime as one of its members is Major Jalud, an original member of the Revolutionary command Council (RCC) that led the 1st September, 1969 coup, which brought Colonel Qadhafi to power. The coup was a response to the regime's considering handing over the suspects implicated in the bombing of the Pan Am B-747 over Lockerbie, Scotland in 1988 to normalize relations with the West. One of the suspects was a member of the Warfalla tribe and Jalud opposed any normalization plans on that basis. 
Islamist politics in Libya, contrary to Egypt or Tunisia, have not developed successfully. Qadhafi has never provided the opportunity for Islamists to carry out any measure of political discourse as its neighbors have by way of elections and official representation. However, Qadhafi's speeches in the period between 1989 and 1993 when economic hardships were hardest, and violent confrontations between citizens and security forces more frequent, indicated his fear of Islamists operating in Libya. In addition; in April 1993, Qadhafi reversed his unorthodox position and presented himself as a defender of Islamic law. He encouraged the adoption of traditional Islamic punishments for murder, theft and fornication. Alcohol consumption, which had been tolerated in the 1980's, was again condemned. In many ways he adopted the defining elements of what he thought was the Islamists' agenda. Qadhafi's Islamic revival, nonetheless, precluded removing the Green Book as the de-facto constitution of the Jamahiriya. 
Libya's unique political system has been envisaged to function according to the precepts of the Green Book. The system has ideally been intended to function as a direct democracy and to guarantee economic and social equality. However, while a measure of economic equality has existed in Qadhafi's Libya, its political system has perpetuated a kinship based social organization and impeded the political development of the population. These combined characteristics have served to hamper the rise of an effective and united opposition. Essentially, direct "democracy" in Libya works through a peculiar infrastructure that involves grass roots discussion and approval of the general ideas pertaining to policy, defined and made plain by Qadhafi, in a manner that resembles more a consultative than a legislative body. Ultimately, the informational and organizational vacuum that exists in Libya has precluded the necessary degree of coordinated action capable of sustaining a real threat to the regime. 
Libyan citizens are fearful and apprehensive and the Revolutionary Committees have had a de-facto mandate to keep them this way! Libyan society has remained fragmented since the Revolution as exclusion from political activity and the official repression of civil society has promoted kinship as the primary mechanism of social organization. There has been little political evolution among the population and therefore little popularity for more radical alternatives to Qadhafi himself.
Officially, Qadhafi himself does not hold any political office and he is simply referred to as the Brother Leader of the Revolution Akh al-Qa'id al-Thawra and, most recently, as the Philosopher of the Revolution. However, his role is in fact one of supreme authority which he exercises through the Revolutionary Committees. These in fact 'bring' Qadhafi's ideas to the Basic Congresses and Committees for approval, while taking back valuable information on the people's perceptions of certain policies, that are sometimes reversed if these are perceived to threaten wide scale, politically dangerous opposition. While there is no formal Constitution as such, the dictates of the Green Book serve a similar purpose. The Green Book promotes many of the themes common to Arab Nationalism and contemporary Islamic thought such as anti--imperialism, and dependence on the West, social injustice and exploitation and advocates a return to Islam to restore Arab/Muslim power.
Kinship based social organization principles have persisted in Libya as a result of the official encouragement of tribe and family and the prohibition of alternative organizational principles. Economically, the Green Book's "Partners not Wage-Workers" (la-hujara', sharika !) slogan is one of the ideological pillars of the Jamahiriya. The egalitarian ideal of this principle is to prevent labor exploitation but has served to forbid capitalist development in real estate, commercial enterprise or industry. Consequently, enterprises have been limited to small size and family ownership where self -sufficiency has been the guiding principle. No one may obtain more than the property to satisfy basic needs. Really, only the Revolutionary Committees, staffed by officers from Qadhafi's six main sub-tribes retain any real authority and they are the only group that resembles a political party. This is what some observers have referred to as the basis of the Jamahiriya's present 'stateless' society. In fact, however, 'stateless society' meant that those who argued for long term social investment, prudent administration, reduced military spending and greater efficiency were kept at bay.
This tendency is fully confirmed by the fact that a constitutional reform in March 2000 has abolished twelve General People's Secretariats (GPS), the equivalent of ministries in more conventional governmental structures, including the very important GPS for Oil. Analysts have interpreted this move as an attempt by Qadhafi to further de-centralize power to the provinces where the Colonel's extended family members wield important posts in the army and provincial government. The concept of a formal head of state has also been revised in favor of designating an official leader. Initial analysis of the significance of this latest political transformation suggests that there has been a concerted effort to diminish the influence of the technocrats, who were instrumental in negotiating the termination of the UN embargo in 1999, in favor of the ideologues of the revolutionary cadres. Certainly this is in accordance with the pattern of power distribution that has prevailed in Libya since the al-Fatah revolution.
Similarly, educational institutions have also suffered from ideological infiltration; in fact the universities became the largest recruiting ground for the Revolutionary Committees as these stressed the teaching of Arabism at the expense of more pragmatic issues such as the management of an oil economy. The weakness of the educational system has not simply been a matter of odd curricula that, until recently, allowed for such ideological intrusion as the imposition of such courses such as 'Econometrics according to the Green Book' at Tripoli's al-Fatah University. There is also the matter of the difficulty that Libyan students have faced in studying abroad because of their country's international perception as a Pariah state making it difficult for them to keep up to date with global technical and scientific developments.

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Update No: 2 - (01/01/04)

The end of sanctions
2003 has been a landmark year for Libya as it has cleared all major international obstacles and sanctions to its full re-integration into the wider political and economic world. In the previous update it was noted that the UK and Libya have reached a full agreement on the compensation for the families of the Lockerbie victims and that the UN had removed all sanctions against Libya. In December during a meeting of the EuroMed Maghreb countries and EU Mediterranean partners including Italy, Spain and France Libya's Leader of the Revolution Colonel Muammar al Qadhafi had indicated that a settlement for the victims of the French UTA DC-10 which was blown up over Niger in 1989 is very near. Libya never took full responsibility for the victims, but has already agreed to pay 34 million dollars for the families of the 170 victims, after a French court in 1999 sentenced in absentia 6 Libyans to have been involved in this incident. The French President Jacques Chirac had complained that the Libyan leader had been reluctant to cooperate. However, it should be noted that part of the difficulties in this matter concern the fact that the UTA victims want to receive a compensation which is equivalent or comparable to the Lockerbie families. 
In a related matter American officials had indicated secretly during the summer that the US would lift some of their sanctions on Libya. Indeed, in December it was quietly announced that the travel ban to Libya for American Citizens was lifted, even if the matter would be reviewed every 90 days. It is unclear whether the US is satisfied that Libya poses no threat in terms of the all too famous weapons of mass destruction and sponsoring terrorism, or whether it is a gesture of good will to encourage Libya to abandon any such pretenses. More than likely concern over the reaction of the American Lockerbie victims' families is the true last remaining obstacle to a full re-establishment of diplomatic relations as well as a resumption of trade contracts and investment. As a further signal of Libya's desire, and need, for better relations with the West, just before Christmas, it was announced that Libya will allow international weapons inspectors to put an end to suspicions and allegations that it possesses any chemical weapons and a nuclear weapons program. It will be interesting to see what the inspections reveal, though most experts agree that Libya may have had a small stockpile of chemical and biological arms. The allegations of a nuclear program, which Prime Minister Ariel Sharon has proffered, have probably provoked Col. Qadhafi to open his country to inspections and silence the rumors once and for all. 


Need for Foreign Investment
Oil industry analysts have indicated that the speed and apparent ease with which Libya has proceeded to resolve paying over 2.7 billion dollars in compensation in the Pan Am and UTA airliner bombings cases suggests that Libya is in urgent need of investment to help diversify its oil based economy. As noted in the background report Qadhafi has led more than one effort to liberalize the economy, but always without results. However, previous efforts also tried to maintain a closer observance of Green Book principles such as the "Sharika la Ujara" (Partners not wage Workers) slogan that precluded any large scale enterprises as it essentially pushed for family run small business and service oriented operations. The economic overtures of the post-Lockerbie years and 2003 in particular, have been more far reaching. Disappointed with pan-Arab and the pan-African foreign policy experiments Qadhafi has urged the General People's Congress (GPC) - parliament everywhere else - to join the WTO and adopt measures to bring globalization to Libya. Libya needs foreign investment and Qadhafi has in a recent session of the GPC has even criticized public officials for not being up to the task. As always with the Libyan leader, it is important to read through the signals what this means in terms of policy. In this case it suggests that it the era once again belongs to the technocrats. Indeed, the new Prime Minister Dr. Shukry Ghanem has been given full encouragement to pursue a liberal economic agenda aimed to foster private investment in the economy. As some more ordinary Libyans have suggested the private sector is called the civil sector in Libya and while private initiative is progressing, its pursuit will take time in Libya but it has begun. The problem is that while larger scale investments are possible and encouraged now, the assets that the government is selling are inefficient cement and steel plants that were built for political motivations. These companies have been losing money for years and, apart from new business logic they will require significant investment to make them efficient - for the first time. 

Privatization?
Nevertheless, the agenda is very ambitious for a country that saw rapid and complete nationalization between 1969 and 1973. Shukri Ghanem has prepared a large scale plan for privatizing state owned factories and companies and the plan is to be extended until 2008. In early December, Ghanem said in a press conference held in Tripoli on Saturday that this plan covers privatization of mineral industries, especially iron, steel, chemical industries, and factories to assemble trucks and buses, textile, and shoes companies, and state owned farms. The Libyan prime minister did not explain the number of companies to be included in the privatization plan. In September Ghanem said that the number of these companies will be more than 300. The plan would will be applied in three phases until the year 2008, noting that the Central Bank will sell shares of these companies and factories until a stock market is founded. Any fear that the leader of the Revolution had not envisaged privatization on such a scale my be reassured that in June, just prior to appointing Ghanem, he had called for the privatization of the oil sector, banks, public companies and even the airports. To observers and students of modern Libya these reforms wholly reject the principles outlined in the Green Book and raise many questions as to how these may be implemented while the Green Book is still used as the Constitution and ideological foundation of the Jamahiriya. While no one has officially dared to ask this question, the issue has clearly not escaped the attention of the Harvard educated Ghanem. He has suggested that the guiding principle of privatization aims at "improving the national economic performance and the living standards of individuals through expanding the base of property owners." Meanwhile the oil sector still accounts for 90% of government revenue and it also needs investment. 
There has been a lot of international interest in investing in Libya. In the week of 25th December a large Canadian business delegation visited Libya with an eye to investment. No doubt, however, that investment will be channeled to the oil and energy sector as both require large funding and foreign technology. In this sense little will change, Libya has always relied on foreign technology and expertise to guarantee the success and profitability of the oil industry, which has proven vital to political continuity of the Jamahiriya. What may change, in the new climate and the official adoption of private sector initiatives is that more Libyan technicians and managers may be trained to play a greater role in the new economic vision.
Other than oil, a likely beneficiary of private enterprise may finally be the often toted Tourism sector. There is no doubt that Libya is an excellent travel destination with archaeological and natural attractions to satisfy any requirement and there have been small scale tourism companies operating even during the embargo period. There is need for tourism infrastructure and perhaps more significantly, if Libya is to seriously consider developing the sector it also needs to overhaul its consular regulations in order to facilitate entry to the country as its neighbor Tunisia has done. Ultimately, the resolution of the sanctions and Libya's openness to the market really means that there will be many opportunities for foreign exporters to take advantage of a new market that needs to replace infrastructure and consumer goods. Throughout 2004 some of the more interesting opportunities for exporters and potential investment will be examined. 

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ENERGY

Libya's new oil licensing round due Q1 2004

Libya should launch a new round of oil exploration and development licensing in the first quarter of 2004, a senior official with the national oil company said recently, Reuters News Service reported.
Tarek Hassan-Beck, director of planning at Libya's National Oil Corporation (NOC), said the country needed to bring in foreign investment to develop its oil potential, much of which has been under-exploited because of U.S. and now-lifted U.N. sanctions.
"After the last decade's tough times of these sanctions, we have a lot of homework to do, upstream, mid-stream and downstream," he told Reuters on the sidelines of a petroleum conference in Qatar.
"We expect in the first quarter of 2004 to start a big competition for upstream contracting, on an open bid approach, with a legal document that will be a lot more flexible than the previous ones," he said.
Libya is now producing 1.4 million barrels of oil per day, according to trading sources. The United Nations lifted minor sanctions against Libya in September after a deal between Tripoli and families of victims of the 1988 bombing of Pan Am flight 103 over Lockerbie in Scotland.
But U.S. sanctions dating from 1982 and strengthened in 1986, which ban the import of Libyan crude oil, as well as direct trade and commercial contracts with the country, still remain, and continue to keep U.S. firms out of Libya.
One set of U.S. companies -- the Oasis group formed by Marathon (nyse: MRO - news - people), Amerada Hess (nyse: MRO - news - people) and ConocoPhillips (nyse: MRO - news - people) -- is trying to extend permits it holds for Libyan oil concessions, the bulk of which expire in 2005.
The group's output in Libya peaked in 1969 at over one million barrels of oil per day, but their concessions, and those of other U.S. companies, were left dormant in 1986 when the expanded sanctions were introduced.
An NOC official said at the Doha conference that the permits were still under negotiation, but that progress was being made.
Hassan-Beck also said that Libya's ENI /NOC joint venture, Al Fiil (Elephant) field, should be ready for first oil in 2004 or 2005.
"That will be on stream, I hope, around the middle of this decade," he said, adding that a pipeline needed to be built to take crude some 700 km to the coast.
"It is going to start around 50,000 barrels per day but it will triple this," he said, but added that it was still being discussed whether to bring the field to full capacity straight away, or in stages.
"The initial rate of production will decide how fast and how much we will exploit the field," Hassan-Beck said.
He did not say how large the field's reserves were, but only that it was "one of the unique fields that are being found these days worldwide."
Analysts have estimated that the long-delayed field holds about 500 million barrels of oil. 

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