|Opening up to the world, Libya bets on economic prosperity (Daily Star)
|Paradoxically the first country to "fall in line" with the new political parameters post-Sept. 11, 2001, was the country characterized by the US as the "pariah country" of the greater Middle East region.
Libya chose unconditional normalization of relations with the US and the international community. This came hand in hand with a noticeable effort to modernize and liberalize the country's economy. The ideological evaluation and justification of this sudden political shift are the subjects of heated debate in the Arab world.
Whatever position one chooses to defend, it is a fact that for Libya the end of sanctions, together with a more pragmatic management of its resources, removes some of the major restraints on its development potential.
Libya, with only 6 million inhabitants, produces 1.5 million barrels of oil a day, accounts for 3 percent of the world's oil reserves and 1. 5 percent of its gas reserves, has tourist potential, and enjoys an important geopolitical position.
The end of UN-imposed sanctions and of the unilateral US sanctions under the "Iran-Libya Sanctions Act" could not have come at a better time for Libya.
An extended period of high oil prices has restored some balance to the country's macroeconomic essentials.
Since 1999, Libya has been enjoying a surplus in its balance of payments that accrued to an amount representing 20 percent of its Gross Domestic Product (GDP). In 2004 alone the surplus is expected to exceed 10 percent of GDP. Combined with foreign currency reserves of circa $20 billion and one of the lowest indebtedness rates in the region, Libya's economic solvency is an important asset for the future development of the country.
Together with a huge market potential, this may have played an important role in the willingness of the international community to forget the past and start doing business with Libya. Subash Chandra of Morgan Keegan Inc summed it up well when he said: "Libya is seen as a spectacular opportunity."
The multitude of potential construction projects needed to modernize most sectors of Libya's economy - the oil and gas sectors, healthcare, education, transport, aviation and tourism - may be one of the reasons for the royal treatment accorded lately to Gadhafi in Europe.
Last March, Royal Dutch/Shell signed a preliminary gas exploration agreement involving an initial investment of $200 million. Negotiations were furthered by Tony Blair's visit to Tripoli. French Total is hoping their negotiations get a boost during Jacques Chirac's planned June visit.
US oil companies afraid to be left behind have been aggressively returning to Libya. Oxy Chairman Ray R. Irani said after meeting Gadhafi in a tent in the desert that the Libyan president wanted "to put all the problems with the West behind him. We're keeping our fingers crossed."
US companies don't have the public endorsement of their government yet, but Libya is eager to entice American investment as it is the final step needed for full international recognition.
There are several indicators that Libya has been preparing for the return of foreign investors for quite a while. Gadhafi, by appointing reform-minded Prime Minister Shukri Ghanem during the 2003 General People's Congress, signaled he was prepared to consider economic reform.
In his speech he "urged Libya to take advantage of the opportunities of globalization" and for the first time hinted at a possible departure from the slogan of "Partners, not wage earners" that sums up the economic credo of the Third Universal Theory, a home-grown adaptation of socialism applied in Libya since 1977.
The first liberalization measures seem audacious by any definition: a program earmarking 360 companies for privatization by the end of 2008, amending investment and property laws to allow the ownership of material assets by foreign investors, reducing fiscal pressures and unifying the exchange rate.
A total of 54 state-owned companies will be offered as early as this July to foreign investors, according to the General Board of Ownership Transfer. Such quick and dramatic measures are raising the concerns of many in Libya. Board director Mohammed Ahmed al-Ftise, prefers to use the terminology of "property base enlargement" instead of using the capitalist-charged word "privatization."
Visitors to Libya are left with no doubt that the country is heading towards a market economy. Luxury shops, sidewalk cafes, Western magazines and tourists are the most visible signs of economic liberalization. Yet there is a feeling of unease. Young Libyans have grown up learning and reading about the evils of capitalism and this sudden flip in direction is unsettling.
There has been a consorted governmental effort to sell the new policy. Saleh Ibrahim, economics professor, director of Tripoli's Graduate Studies Academy and economic advisor to the government explains that some small and medium size firms will be offered exclusively to the Libyan people with the aim of wealth redistribution even if that means a lower income for the state from the sale of the companies.
"A market economy does not contradict the Green Book. One can contribute with work, but also money to a company. In the two cases he is a partner," argues Ibrahim. He even predicts the setting up of a stock market in Tripoli soon as part of the privatization drive.
The Daily Star