Jalel Harchaoui and Colin Powers
The Privatization of Public Asset
Management
Another worrisome development in recent times has been the state’s and SOEs’ turn to politically connected subcontractors in oil extraction and infrastructure development. Our field investigations established that in April 2024, the National Oil Corporation assigned management of an oil field named NC4 in the Hammada area (not far from Ghadames and the Algerian border) to a private contractor called Arkenu.
Arkenu is reportedly linked to Saddam Haftar, arguably the Field Marshal’s most powerful son, and has allegedly partnered with an obscure Swiss-based firm called Pars Holding for the NC4 contract.
Regretfully, more privatization-type arrangements of this kind appear to be in the offing. The NOC has allegedly been lobbying major international oil services firms such as Halliburton and Honeywell to partner with another new private firm called Isnad, whose ownership is opaque, for subcontracting more field management.
The changes signaled in the NOC’s recent privatization-related moves are not only problematic due to the heightened potential for corruption. We also need to consider how subcontracting public asset management to firms such as Arkenu and their external partners affects job creation.
The relationship with job creation derives from the fact that subcontractors such as Arkenu seek to optimize profits by keeping local staff costs low. Typically, firms like this rely on small teams of foreign experts provided by their external partner (in Arkenu’s case, Pars Holding) to run the actual oil extraction, while they themselves collect rents as the gatekeeper of oil field access. For the communities near the oil fields, this translates to fewer work opportunities.
Changes in Public Sector Management since 2021: Challenges of Armed Actors
Public sector management since the demise of the Qadhafi regime has never been wholly consistent.39 Between 2011 and 2021, it was affected by war, the shifting field of power, and the vagaries of political calculation. This resulted in both lulls in hiring and times of rapid payroll expansion.
For the period as a whole, the trend was one of volatile public sector growth. Since Dabaiba’s ascent to the prime ministership in 2021, underlying trends have largely been preserved, with a few notable changes. In the earliest days of Dabaiba’s tenure—when relations with CBL Governor Sadiq Kabir were at their strongest and when Libya briefly had a single recognized government—the policy emphasis was on salary increases, integrating the workforce in the east, and unifying the wider public sector’s payroll. Concerning the former and with a view to boosting the popularity of his governance, Dabaiba announced both universal and institution-specific pay raises on a number of occasions.
Regarding the second two tenets of his policy, in June 2021, Dabaiba’s government officially incorporated onto the state’s payroll the approximately 400,000 individuals who had been hired by the eastern-based, Haftar-aligned government of Abdullah al-Theni over the previous seven years.
The Haftar-led camp had made most of these hires during 2014–2021, not only within the security sector but also for the purpose of staffing duplicate ministries and creating redundant bureaucracies from scratch in eastern Libya. In addition, Dabaiba’s government agreed to honor the monthly salary increases which the Theni government had instituted for the 300,000 public sector employees in the east who had already been on the state’s books prior to 2014.
With these moves, Tripoli regularized the employment status and benefits of nearly 700,000 people. It also, at long last, reunified the state’s payroll. The effect on the lives of people in the east was palpable, especially when it came to salaries being paid on time.
Unfortunately, these early steps toward public sector payroll harmonization proved short lived.
In September 2021, the eastern parliament withdrew its confidence in Dabaiba’s government. In the months that followed, the coalition of armed groups operating under the banner of Khalifa Haftar’s Libyan National Army (LNA) also began alleging that Dabaiba’s government in Tripoli had halted salary payments.
The claims of Haftar’s men were misleading. The reality was that by requiring verification of identity and citizenship in order to issue salary payments, the Ministry of Finance in Tripoli ended up making financial transfers to the LNA that were less than Haftar et al. had expected: The latter had assumed it could bill salaries for both nonexistent and foreign fighters.
Regardless, the resulting scandal ultimately forced Dabaiba to buy peace with the Haftar clan. He did so by agreeing to drop identity-related procedures and instead granting the LNA the desired lump-sum transfers for the payment of salaries. This increased Tripoli’s public sector salary expenditures in the east and by extension, added to the government’s fiscal strains.
More significantly, it further corroded the regulatory integrity of Libya’s public finances and undermined whatever progress had been made in terms of government unification during the March–September 2021 period.
Things only got worse when a new alternative government was established in the east in the winter of 2022. At its own discretion, the new eastern government launched hiring campaigns for the public sector and resumed issuance of public debt, which in practice meant borrowing from the eastern branch of the CBL and, to a lesser extent, commercial banks in eastern Libya.
In the west , Dabaiba was also spending freely, empowered to do so through his then close alignment with the CBL. A few months later, the damage was done. Public sector spending was marked by opacity, off-budget transfers, and east-west divisions once again. And in an environment of political tensions, jobs and salary hikes were primarily being doled out to purchase loyalty.
Examples of the latter included Speaker of the eastern-based House of Representatives Agila Saleh implementing salary increases for Ministry of Justice employees in April 2024.49 Just as significantly, they also include Prime Minister Dabaiba’s pledges of increased payouts to specific quasi-state armed groups in 2023.
Dabaiba made those promises without amending the annual budget law or consulting the Ministry of Finance, thereby giving the state’s payroll commitments a new degree of ambiguity.
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Jalel Harchaoui is a political scientist specializing in North Africa, with a particular focus on Libya. Before joining the Royal United Services Institute as an Associate Fellow in 2022, he worked with the Global Initiative Against Transnational Organized Crime and the Clingendael Institute in The Hague. His research primarily centers on Libya’s security sector and political economy.
Colin Powers is the Scientific Coordinator and Chief Editor of Noria Research’s Middle East and North Africa Program. He earned his doctorate from Johns Hopkins SAIS in 2020 and was a postdoctoral researcher at Sciences Po Paris in 2022. A political economist by training, his work focuses on issues of development, distribution, finance, and power.
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