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LIBYA

 
  
   

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 34,137    34,136 57
  n/a     n/a
GNI per capita
 US $
Ranking is given out of 208 nations - (data from the World Bank)

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Area (sq.km)
1,759,540

Population
5,499,074

Capital
Tripoli

Currency
Libyan dinar 

Leader 
Col Mu'amar al-Qadhafi


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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: 006 - (29/04/04)

The west's new best friend in the Arab world
In just a few months, Moammar al-Qadhafi has turned his country from "Pariah State" to what seems to be the most courted one in the Middle East - North Africa (MENA) region. April saw the culmination of the final international rehabilitation process, which began in the summer of 2003 with the appointment of Shukry Ghanem as prime minister. He was given the task of implementing market reforms, which really meant to set the favorable conditions for foreign investment and the removal of international legal fetters such as sanctions. In April, the US effectively removed the all-important sanctions imposed under the ILSA (Iran Libya Sanctions Act) and the oil companies that already explored business deals in March were finally able to sign the deals. Libyan oil could be flowing to the US as early as May. Meanwhile, the Libyan leader visited Europe (for the first time since 1989 - when he went to in Belgrade, Yugoslavia on a meeting of the Group of 77, where he was seated next that other famous Arab leader, Saddam Hussein). 
The visit to Europe was a success, despite a few reminders by Amnesty International of Libya's still dubious record on human rights and political freedom. In this respect, it is interesting to note the first signs that some degree of political reform will accompany the economic one. Qadhafi has announced that he will ask the General People's Congress (the Parliament) to terminate emergency laws in Libya and apply the laws that were in force during the monarchy, which he toppled on September 1, 1969. Since then Libyans have been in a constant state of 'revolution'. It remains to be seen to what extent political reforms, and especially a loosening of security based restrictions, so long as the United States remains embroiled in an ever-worsening situation in Iraq. Col. Qadhafi has chosen this less than intuitive moment - in terms of a the worsening image of the US in the Arab world - to warm up to the United States; the very Qadhafi, whom, through his very defiance was only second to Saddam Hussein as most hated Arab leaders in America. 
The Libyan leader also called for the abrogation of the criminal code introduced after the revolution, which maintained the need to try - and remove - members of the former ruling house of the Sanusi. The Libyan leader also called for better treatment of prisoners and called for an investigation at Abu Salim prison where more than 600 Islamists are detained amid criticism from human rights groups. The leader was famous to have suggested after the adoption of the de-facto constitution that 'there are no prisons in Libya'. Amnesty International, which timed the release of its Libyan Human Rights Report to coincide with Qadhafi's visit to Brussels, said on March 1 it had received from the Libyan authorities "assurances" they would take into account its recommendations for improving human rights in Libya. These include steps such as releasing people detained for peaceful political activities, the abolition of emergency courts, the opening of independent investigations into those who have gone missing inside and outside Libya as well as a moratorium on capital punishment. 
Qadhafi's visit to Brussels and meetings with EU officials follows high profile visits to Tripoli by Prime Minister Tony Blair, Italian Prime Minister Silvio Berlusconi and former Spanish Prime Minister José Maria Aznar. The only remaining obstacle to a complete normalization to relations with the European Union comes from Germany, whose foreign minister Joschka Fischer welcomed Libya's rapprochement. However, he noted that his government had still not reached any compensation agreement - though discussions are said to be in progress- from Libya over a 1986 bombing in a West Berlin discotheque in which two US soldiers and a Turkish woman were killed. Fittingly, the disco bombing in question, La Belle Disco, was what initially prompted the wide scale sanctions adopted by the US, which president G.W. Bush has just lifted at the end of April. 

The United States Lifts Sanctions
On April 23, the White House announced that it would remove most barriers and sanctions that have heretofore forbidden US companies from doing business in Libya. The remaining barriers most notably include the retention of Libyan frozen assets in the US, as well as the prohibition of exporting military equipment and the continued enforcement of a ban on direct air links between Libya and the United States. Libya would also remain on the US list of sponsors of terror, even if Secretary of State Powell said that this would be part of a probationary period after which, he expects Libya to be removed from the 'black' list. This is the legal mechanism effectively barring Libya from receiving U.S. arms exports, and dual military-civilian applications. On the latter issue, the UK and the US had both indicated a willingness to consider exporting some weapons to Libya. Indeed, as mentioned in the April update, Libya is reviewing its military needs and, though any sales would be controlled by an EU defense sales code that ensures weapons purchased are not used for internal repression or international instability, there is little to object to, if the source of such instability is in the form of a militant Islamic nature. What the lifting of sanctions does allow is clearly in accordance to the needs of energy supply. As of April 23, 2004:
The rule that allowed the president to punish non-US firms that invest more than $20 million a year in Libya's energy sector has been cancelled. 
US companies will be allowed to resume most commercial activities, financial transactions and investments.
US companies will be able to buy or invest in Libyan oil, products, allowed US commercial banks, and other financial service providers to finance these transactions.
While limiting U.S. aid, Washington is also expected to continue to vote against loans from international institutions. As for the last part, Libya typically does not need International development loans and it has even funded its own United Nations Development Programme (UNDP) assistance. On the American side, the gradual normalization process is needed to soften opposition to White House policies. Many relatives of the Lockerbie victims are angered by the new US - Libya friendship and have accused the Bush administration of using Libya to deflect attention from Iraq. Nevertheless, the much heralded abandonment of weapons of mass destruction in Libya really means that the US has its alternative and geographically superior oil source, while Libya can get much needed equipment to facilitate further exploration of its precious mineral resources. Oil is the business everyone is talking about. 
Naturally, when foreign companies want to do business in Libya, it is oil business they mean and the US is eager to find alternative sources of crude to the Persian Gulf. Nevertheless, the end of sanctions under ILSA also means that the US will lift any pending official objection it may have over Libya joining the World Trade Organization (WTO). Libya had announced in July on the occasion of the unveiling of the private sector reforms headed by the Prime Minister Shukry Ghanem that it would seek membership in the WTO. Indeed, Libya has been eager to join any relevant international cooperation mechanism and in Brussels Col. Qadhafi expressed to EU acting President Romano Prodi that he was very interested in joining the Barcelona Euromed conference - the conference of Mediterranean cooperation. 
For its part, the European Union would like to see Libya join in order to discuss the problem of illegal immigration from the southern Mediterranean shores to the North. As for cooperation with the US, in March it emerged that Libya may play a role in assisting the United States fighting Islamic Militants - or what is generally branded as Al-Qaida in recent months, in North Africa. The press statement through which the end of sanctions on Libya was announced indicated that the United States' politics would in fact be based on the issues of terrorism, human rights, political and economic modernization and foreign policy in Africa. The new Libyo-American relationship has been sealed at the practical level by the confirmation that there are already a number of respective diplomatic channels in place in the two countries. 

The end of Sanctions translate mean BUSINESS - Oil Business
In April Libya organized a conference to attract foreign investors in Tripoli prior even to the official lifting of sanctions announcement from Washington on the 23rd. Another conference for companies wanting to do business in Libya is scheduled to take place in July in Washington. There is no doubt that many companies are eager to discover Libya's opportunities. This is particularly true for those companies that had hoped to secure lucrative contracts in the rebuilding of Iraq and exploitation of its oil. The more dangerous Iraq becomes the better it is for Libyan oil investments. US oil firms ChevronTexaco, Conoco, Amerada Hess and Marathon were among some 400 delegates at the two-day Doing Business in Libya conference. These same companies are expected to be the first to formalize their exploration and drilling agreements with Libya. Nevertheless, British Minister of State for Trade, Investment and Foreign Affairs Mike O'Brien said Libya still has many obstacles. These are related to assurance of proper business practices and respect for the legal binding of contracts. In this respect, it is not difficult to suggest that financial consulting firms might be very interested in exploring business possibilities in Libya, second only to the oil companies. 

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TOURISM

Resort deal could spur Libya tourism

A British company has been enlisted to design a luxury coastal resort in Libya, the Financial Times reported on April 22nd.
The proposed complex at Sidi Benure will cost between £70m and £120m. It is being designed by WS Atkins, the company behind the Burj Al Arab tower hotel and the Jumeriah Beach in Dubai, developments popular with British tourists.
Libya hopes British tourists will soon be visiting the country in large numbers - a prospect that would have been unthinkable before the recent thaw in diplomatic relations between the two countries.
However, with US trade sanctions against Libya also set to be lifted, attention has turned to the county's potential as a tourist destination.
The Sidi Benure resort will be positioned as a luxury resort on the Mediterranean but will also be marketed to professional football clubs as a potential site for summer training camps.
British businesses seeking business opportunities at the "Doing Business in Libya" conference in Tripoli recently have spoken privately of the difficulties in winning contracts.
Britain and Libya have renewed commercial ties with remarkable speed since Colonel Muammer Gadaffi agreed to scrap the country's weapons of mass destruction in December.
Mike O'Brien, trade minister, and representatives from companies including Shell and BAE Systems, the defence contractor, met Libyan ministers in Tripoli, the capital.
But despite its rapid movement in from the economic cold, Libya is still considered relatively dysfunctional both economically and politically.
BAE Systems is understood to be having problems finalising contracts to rebuild Tripoli airport and manage air traffic. A person close to the talks said the process had been difficult.
This was echoed by others at the conference. "When Blair met Gadaffi it was quite clear that he was making a political commitment to do business with UK Ltd," said one business executive. "The problem we are having is translating that commitment into a real contract."

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