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Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 19,131     71
     
GNI per capita
 US $ n/a n/a
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 078 - (28/05/10)

The Return of Pragmatism (and Saif-ul-Islam)?
In May, the Libyan government appears to have forgotten its disputes with the EU to resume promoting opportunities for foreign investors, in an attempt to quell the uncertainties raised by the Swiss debacle that began with the temporary arrest of Hannibal al-Qadhafi in July 2008. In the first months of 2010, the Libyan leadership intensified the dispute with Switzerland blocking visas to Shengen pact countries in response for targeted travel restrictions imposed by Switzerland. The combinations of measures, statements and retaliations launched by Libya appeared then to indicate a resumption of isolationist nationalism and a rejection of the pragmatism that had largely characterized Libya’s return ‘from the cold’ in 2004. Libya’s gradual descent into its effectively self-imposed isolation was paralleled by the ever diminishing profile of one of the key figures of Libya’s international rehabilitation in the past six years, Dr. Saif ul-Islam al-Qadhafi. In May, with little fanfare, Libya seems to have switched back its course toward pragmatism and once again through Saif ul-Islam. There have been questions raised about Saif’s role in the Libyan system. Is he, in fact, his father’s designated successor? Saif does not have any official role or title and he does not enjoy the military support needed, to be considered a true successor in the current Libya. His brother Mutasim, is a more likely candidate from that perspective; he is the Libyan National Security Adviser and as such enjoys a close relationship with the conservative establishment, the very same that has been hampering the efforts of the more pragmatic reforms or ideas espoused by Saif al-Islam. Still the Libyan leader Mu’ammar al-Qadhafi is the longest serving ruler in Africa and he has not announced any succession plans.

Saif ul-Islam as Successor?
Many Libyans would probably like the idea of Saif ul-Islam as the designated successor; he speaks a common sense language that expresses their own desires and expectations for Libya. However, there are no certainties in the Jamahiriya where the rule of law takes a back seat to rule by ‘decree’, or rather whim. Nevertheless, the diplomatic debacle of the past months, the last blow of which was a statement from the Libyan leader, who described Switzerland as ‘a Mafia’, has probably raised sufficient worry that Libya would start to lose foreign investment opportunities (especially as oil continues to hover around the USD 70-80/barrel), that the reassuring Saif ul-Islam had to be given visibility again. Saif did not disappoint; he said the sort of things Libyans and westerners want to hear, from plans to promote more tourism to Libya by easing visa restrictions, thus helping to diversify the economy and help create a class of small business people in the ‘Jamahiriya’. Indeed, Saif openly admitted what many have long wanted to hear from a Libyan person of responsibility (though Saif still lacks an official one).

Saif told a crowd at the American University in Cairo that “now it is very difficult to get a visa,” comforting them that “soon, very, very soon, it will be very easy for many people around the world to visit Libya. He even suggested that tourism in Libya should attract millions of tourists. Over the past six years, Saif al-Islam even appointed foreign consultants, famously the Harvard Business School professor Michael Porter, to prepare reform plans, investment incentive plans and business promotion plans to help shift the economy from the mish-mash of ‘Islamic’ socialism that characterizes the current situation (although even this is too specific - the reality is even more disorganized). The conservative opposition represented by the Revolutionary Committees has resisted the shift toward a market economy. Indeed, it can be said that Libya still lacks any actual economic policy. Qadhafi wanted to turn every Libyan into a capitalist two years ago, promising to do away with the welfare state, eliminating government corruption such that more Libyans might enjoy the country’s oil wealth. Unsurprisingly, none of this has happened.

Pragmatism and Its Challenges
Libya had announced that foreign banks could compete for two licenses in March, (just as it enforced a travel ban on citizens of countries from the EU). Saif ul Islam needed to be re-launched into the public sphere to reassure investors, as six banks including HSBC Holding PLC, Standard Chartered PLC and Mediobanca were short-listed for the competition, the winners of which would be announced in July. Moreover, western construction and engineering firms are very interested in help Libya spend its oil money on large-scale projects, and many of these are being planned. However, much hyped business-friendly reforms have never come to fruition and Libya remains fraught with diplomatic and bureaucratic risks. This has also meant that only large companies have shown an interest in cracking the Libyan market, for only they can absorb the risks that doing business there still entails. Nevertheless, the Saif ul-Islam camp appears to have re-emerged in May, which is an encouraging sign for economic reforms.

This is good news even in the oil and gas sector, where the mixture of less market friendly policies and added political risk (as characterized by the Libyan-Swiss dispute) has disappointed the multinational energy firms, which bid to drill in Libya since the sanctions were lifted in 2004. Libya still offers many exploration opportunities, but its recent unpredictability has scared off many companies from approaching. Libya is also said to be drafting a new law governing the energy sector, a law that could change the rules for foreign oil companies and not necessarily for the best. The current head of the National Oil Company (NOC), Shukry Ghanem, who is close to Saif ul-Islam has been drafting a new law to improve transparency and stimulate more investment by offering oil companies better terms. However, the Supreme Council for Energy Affairs, a supervisory body, has been stuffed with conservative (in Libya, paradoxically, these are the more ‘revolutionary’ types) elements, who are trying to block Ghanem, preferring to enforce a more nationalistic approach that diminishes investment incentives. Yet, the Libyan leadership needs oil for social reasons also, and ultimately, the pragmatists may themselves have room to challenge conservatives.

The high oil prices have allowed the state to continue to extend welfare benefits, subsidies on the prices of essential goods, which helps reduce the risk of unrest and admittedly lowers political risk for the leadership and for large foreign investors. Finally, what Libya truly needs is predictability, the kind of certainty and transparency that come from the rule of law, this the ultimate vision proposed by Saif ul-Islam, who has advocated the need for Libya to draft a Constitution. By the sentiments expressed, it could have been the average Libyan who would say the following: “We want predictability in Libya….Now nobody knows what’s going to happen in Libya, who’s going to succeed whom, who’s in charge, who’s not”. Yet, this was the son of the Libyan leader speaking.
 

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