Libya Tribune

By Prof. Abdallah Shamia

Anyone who has followed the Libyan economy would stand bewildered and wonder how is it possible to achieve and accomplish a quantum leap for an economy that is wrecked, weak, and suffering from the brunt of many problems and incurable diseases that require radical surgeries.

With a bit of optimism, the follower of Libyan economic affairs might reach some optimistic ideas. However, they remain ideas versus a frustrating reality infused with pessimism and abound in obstacles. The previous administration left behind a heavy economic legacy that is represented in an economy with disjointed limbs, void of vision, goals, policies, and lacks a diversified production base, identity, and the simplest administrative basics.

Through a direct examination of some components and manifestation of the Libyan economy, without much trouble, one finds the following:

A flabby public sector that consists of several hollow institutions in which corruption is gnawing away at their fundamental foundations. Most of these institutions, if not all, are suffering from the accumulation of losses, low productive capacities, but even some have halted the production. These institutions also suffer from Old assets, an oversized workforce, a clear weakness in production and productivity rates, Rising costs, and a rampant disruption in administrative and funding structures, and other negative indicators that are often related to the public sector.

An immature private sector that is weak and irresolute working in an inappropriate and unequal environment in several aspects including legislative, administrative and economic aspects. The private sector lacks the necessary infrastructure to start off and assume an outstanding leading role. The old administration fought the private sector and stripped it of its capabilities through blocking many work and investment fields in front of private investors.  For over two decades, the old administration had completely prevented the private sector from taking part in the economic process.

A Large package of accumulated and contradicting economic legislations of laws, resolutions, regulations and directives that hinder the economic movement. On many occasions, some legislations were passed to serve and benefit a particular category of people. All this was reflected on the efficiency that has declined, and often nonexistent.

Squandered economic resources and potential at its forefront we find oil and gas, despite that oil has been pumped at acceptable rates, until recently, in accordance with the quota set by the Organizations of Petroleum Exporting Countries (OPEC). The accumulated oil revenues were supposed to revive Libyan economy, diversify its production and export base, and its revenue sources. However, the inherited reality from the previous administration shows that the Libyan economy continues to depend on crude oil and natural gas as two main income and export sources. 

In fact, apart from the oil and gas sectors, there is no other sector that contributes with an actual added value to the Gross Domestic Product (GDP). In addition, there are other resources that could have been invested to diversify productivity and export base of the economy. However, and for some reasons they were either neglected or dealt with in a superficial way for the benefit of a particular group.

Now and after the authoritarian vision in the economic reins vanished, we have to pose the question:

The Libyan Economy… Where Is It Heading?

In this context, we can point out, in general, to the following points which require a deep discussion and a serious national dialogue that engage all experts and those concerned with economic and public affairs. These points are:

1. Identifying the general reference framework and agreeing on the new identity of the Libyan economy, along with identifying the main features of “our vision” towards the Libyan economy in light of principles and objectives of the February 17 th revolution.

2. Redrawing the State’s and public sector’s roles in accordance with a sound scientific perspective that takes into consideration the specificity of the Libyan case and the bitter past experience on one side, and the specialization and efficiency of each sector on another side. It is important to emphasize the importance of complementarity and concerted efforts and resources of both sectors to achieve the economic and social objectives of the nation and citizens.

3. Experts in economy should review all the economic legislations and objectively study them to the interest of economy through abolishing all provisions that hinder the economic process, making the necessary amendments, and retaining the laws best adapted to promote the economy.

4. Substantive and careful review of all the conducted studies, research, and economic programs which diagnosed reality, identified problems, and proposed solutions to many major issues in Libyan economy. The most beneficial among these studies should be updated and presented to officials to guide them in drawing the country’s future economic path.

These points, in addition to other important points, will place the Libyan economy in an initial path to start off. The issue of priorities and other details will remain dependent on the availability of resources and on the time frame of implementation.

As a preliminary attempt to further explain, in details, the above two points, we emphasize the need to create a clear vision with clear goals, based on which a balanced strategic plan should be developed. This plan should be implemented in phases and based on a scientific and sound process, while taking into accounts the resources and achieving aspirations. In this context, we can propose our vision for the Libyan economy which revolves around vocabulary and terminologies presented in the following comprehensive paragraph:

“A productive economy of diversified income sources and broad productivity base built on technical knowledge in most of its sectors. The national and foreign private sector should have a leading role in embarking into investment and production fields, while the State assumes an outstanding role in accommodating the climate and developing effective economic policies so as to make a better use of resources. An economy that has a competitive advantage in the field of services, especially in non-traditional investment such as free zones, transit trade, and tourism, but also a source for these services on competitive bases. This economy’s performance rates are characterized by being balanced and stable, while the inflation and unemployment rates are moderate. It transparently contributes to the global economy based on equal grounds”.

This was related to the reference framework. As for the role of public and private sectors, most literature, studies, and research point out that the private sector is much more efficient in allocating resources and managing the economy compared to the public sector. Based on this, the State has to step aside from direct economic activity, and open the way to individuals and institutions from the private sector.

In order for our review to be more precise and given the specificity of the situation in Libya, we emphasize on the following:

– The State should continue to provide vital public goods (public utilities) in addition to social-merit goods such as education, health, and housing services. Moreover, the State should open the way for the private sector to invest in providing these services under the condition that this investment is based on sound scientific foundations that serve the public interest. Furthermore, it is important that the State continue to own and manage the strategic sectors.

– The State should step aside from the rest of economic sectors and leave this field to individuals and institutions from the private sector, under the condition that the State accommodates the appropriate legislative and administrative climate to serve the interest of the nation and citizens.

In this regard, we believe that rewarding incentives and effective economic policies should be developed to guide local and foreign investments towards the promising sectors, in which the Libyan economy has a competitive advantage.

These sectors are:

– Activities which are associated with the historic cultural heritage, such as tourism.

– Activities which are associated with the distinguished geographical location of the country, such as free zones, international finance centers, and transit trade.

– Activities which are associated with the locally- available resources, such as petrochemical industry, and others.

Embarking on investing in these sectors has to be in accordance with the correct economic vision that would grant the Libyan economy a way out of the circle of growth and development, to hold a place among the regional and global economies of the future.

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Dr. Abdullah ShamiaA Libyan economic researcher and academician.

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