Libya

Published October 18th, 2000 - 02:00 GMT

Indicators: 

1997 

1998 

1999 

GDP real growth rate (%) 

1.6 

5.4 

Inflation (%) 

6.0 

5.0 

18 

Exports (% of GDP) 

33.5 

31.4 

-- 

Imports (% of GDP) 

11.4 

10.7 

-- 

 

 

 

 

 

 

 

Political Outlook 

 

During the first week of May, the trial of two Libyan agents accused of killing 270 people in the December 1988 bombing of Pan Am flight 103 began in Camp Ziest, Holland. The case is expected to last more than one year, since the court must hear over 1,600 defense and prosecution witnesses. The two suspects, Abdelbaser Ali Mohammed Al Magrahi, 48, and Al Amin Khalifa Fhimah, 44, have already pleaded not guilty to charges of murder. Meanwhile, Libyan leader Mu'ammar Qadhafi has promised to accept the court's judgement, but added that he did not believe this would imply any further investigations into the actions of Libyan officials or himself. 

 

Still, Qadhafi's statement signified a refreshing outlook towards the outside world. Throughout the past decade, mutual hostility and accusations have scarred this North African nation's relations with the West. Libya is still suffering from seven years of UN sanctions, and is now courting western businesspeople in an attempt to allure foreign capital to develop its neglected infrastructure and revitalize its economy. 

 

In early March, Qadhafi abolished most of his country's ministries, including the energy department, and named a new Prime Minister to head the scaled-down government. Mubarak Al Shamekh, Libya's 50-year old former housing minister, succeeded ex-Prime Minister Mohammed Ahmed Al Mangush, who held the post since 1998. The new premier has at his disposal two deputy prime ministers: former maritime resource minister Bashir Bujeneh, who is responsible for production, and Bagdadi Mahmudi, who is in charge of services. 

 

With the energy ministry abolished, the National Oil Company (NOC), under the supervision of the General People's Committee (GPC), the Libyan top legislative and executive body, now manages the state's energy policy. Qadhafi's decision to dissolve most of the ministries confirmed his disapproval of the outgoing cabinet's economic guidelines.  

 

In the medium-term future, Libya’s economy may receive a boost from American investment. Commerce Department sources indicated that Libya could soon be included in the Eizenstat Initiative, a U.S. trade scheme for North Africa valued at $2 billion. The U.S.-Libya rapprochement has not, however, proceeded entirely smoothly. While many had expected the State Department’s 20-year travel ban to be lifted, the U.S. Senate issued a surprising recommendation to continue the prohibition on US citizens travelling to Libya.  

 

For the moment, Libya would best be served by focusing its efforts on rectifying its diplomatic and commercial ties with the more proximate Europe. Romano Prodi has worked vigorously to bring Libya into the EU's Barcelona partnership program, which links 26 European and Mediterranean countries. Inclusion in such an initiative would instantly boost Libya's international standing.  

 

Economic Outlook 

 

International executives have been responding to opportunities posed by lingering American economic sanctions. Hundreds of businesspeople from Britain, France, Italy, Russia, China and Canada have recently visited Libya, lured by its roughly $12 billion in annual oil revenue. The British oil firm Lasmo is one of the numerous multinationals to have signed hefty contracts. In addition, Airbus, the European aircraft consortium, is prepared to sell 24 passenger jets valued at $1.5 million to Libya's national carrier. 

 

Since the U.S. administration continues to prohibit commercial activity with Libya, American firms are the main losers in the game. Recognizing this lost opportunity, US businesspeople with strong political connections have initiated a quiet but feverish lobbying campaign to have this ban lifted. These efforts have borne fruit. Following Qadhafi's release of the two Lockerbie suspects, the White House eased economic sanctions on food and medicine. Plans are currently in an advanced stage to ship 20,000 tonnes of durum wheat to Libya, and tens of millions of dollars of additional deals could be signed by the end of this year. Furthermore, the US government has permitted Occidental Petroleum and Oasis, a consortium consisting of Conoco, Marathon and Amarada Hess, to survey wells they once operated. 

 

In recent months, Qadhafi has publicly acknowledged the need to diversify the economy beyond the energy sector. The Libyan ruler had grown increasingly frustrated with the government's protracted dependence on oil revenues, which account for approximately 95 percent of the state's foreign exchange revenues. The recently approved revised budget includes expenditures of $6.65 billion (versus $7.58 billion in 1999). Merely 20 percent of spending will be derived from oil revenues.  

 

These figures do not, however, signify that aggregate public expenses are due to shrink. In the 2000 development budget, which is separate from the main budget and consists primarily of infrastructure investment, spending will be doubled to $3.82 billion. 70 percent of these outlays will accrue from oil export proceeds. Higher oil prices also strengthen the Libyan economy. Last year's real GDP growth reached 5.4 percent, higher than a previous forecast of 4.2 percent. This year, the economy is projected to expand by 4.7 percent. 

 

 

Conclusion 

 

The Camp Ziest trial signifies a new phase in this North African state’s international relations. Libya is already bearing the fruits of relaxed international economic sanctions, as numerous commercial contracts have recently been signed. Foreign interest is strong in this market, which possesses bountiful oil resources and the need to build up an underdeveloped national infrastructure system. Qadhafi and the country’s administration should approach this rare opportunity prudently by accelerating economic reform and solidifying the country’s foreign investment laws. 

© 2000 Mena Report (www.menareport.com)

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