But doing that will be tricky, analysts told The Media Line
on Monday as rebel forces entered the capital of Tripoli, putting them
in striking distance of ending the 42-year rule of Muamar Qaddafi.The
first order of business will be to establish some form of workable
government and to get oil exports up and running, analysts said.
Long-term, Libya faces the challenges of preventing corruption and waste
from squandering its oil wealth as well as finding ways to diversify
the economy, which is now almost entirely based on oil and related,
services, and to create jobs.“One of problems that Libya always has
faced in hydrocarbons is that it didn’t have any viable industry apart
from oil and gas. Now, the oil and gas is offline,” Geoff Porter, of the
political risk form North Africa Risk Consulting, told The Media Line.
“The question is how well the Transitional National Council (TNC) will
be able to manage the assets.”On paper, Libya is prosperous. Before
fighting broke out in February, it was producing 1.6 million barrels of
oil a day. The country has an estimated $150 billion in assets,
including stakes in British publisher Pearson, Italian bank UniCredit
and the automaker Fiat, and very little debt. Gross domestic per capita
is about $14,000, putting it on par with many eastern European
countries.After suffering years of Western sanctions in connection
with Libya’s role in the downing of a Pan Am jet in 1988, Qaddafi made
amends with the West and the country began to open from 2006 to foreign
investment. Oil companies poured in, followed by makers of consumer
products and the tourism industry.But Libya also faces serious
problems. Although it had made some moves toward reforming its
government-dominated economy under Qaddafi, the country has little
potential for job-creating sectors like agriculture or industry. Qaddafi
ran the Libyan state as a private enterprise, so he leaves behind few
institutions or experienced managers. Close to a third of the labor
force was unemployed even before the civil war brought the economy to a
standstill.Although rebels stanched the flow of oil from the
country’s Mediterranean ports early in the conflict, an official of
Libya’s Arabian Gulf Oil Company (AGOCO) told Reuters this week that
production could resume in as little as three weeks - if security is
restored. But Porter said no one is sure about the extent of damage and
the lengthy shutdown of operations is likely to have created problems,
such as the build up of waxy deposits in pipelines, which will take time
to fix.The problem is that Libya doesn’t have time to wait. Some 95
percent of its export revenues come from petroleum, which it needs to
pay for essential imports like food and manufactured goods. Before the
war, it was importing 75 percent of its food.While Libya can
probably start exporting small quantities of petroleum, Porter estimated
it would take three to six months for quantity deliveries to begin. In
the meantime, countries may have to come to its aid with loans and other
assistance.Looking further down the road, Libya needs to continue
developing its energy assets, said Charles Gurdon, managing director of
the London-based political risk consultancy Menas Associates. Although
international energy companies (IOCs) returned to Libya after 2006, they
have very little oil to date and many had abandoned their efforts.“The
main thing for Libya short to medium term is to get the IOCs to come
back,” Gurdon told The Media Line. “It may have to change terms and
conditions being offered, which were heavily skewed in favor of the
government. You had some companies in Libya that accepted deal where
they would only receive 7, 8 or 9 percent of any oil they found. The
other 93 percent went to the state. That’s not really viable.”If it
is ready to business, however, Libya has reserves to be exploited. It
has yet to explore for oil offshore, nor has it troubled to tap what are
assumed to be extensive natural gas reserves, Gurdon said.Oil is
critical for the economy’s long-term future because the country has few
other prospects for industrial and agricultural development, analysts
said. Qaddafi invested a lot in education, sending Libyan abroad to
university, but there were no real jobs to come home to, leaving a
dearth of managerial talent. The industry that exists is often propped
up by oil revenues.People tell the story of Qaddafi visiting a
Libyan chocolate factory, only to discover that the chocolate was made
it Switzerland while the plant simply wrapped it in “Made in Libya”
cellophane. The success of other Arab oil states using their petroleum
riches to investment in new industries has been mixed at best.“Libya
has very few natural resources other than oil or gas. The idea that it
will turn into a major industrial power is not gong to happen. In the
past, a great deal of money was spent on white elephant projects,” said
Menas’ Gurdon. “Tourism is certainly a possibility. But it’s not going
to have mass tourism as Egypt or Tunisia. It would work in terms of
soaking up unemployment.”But the biggest challenge of all may be
getting a new government into place and functioning, analysts said. Six
months of civil war have not produced a coherent opposition leadership
and the transition to political stability may well be long and arduous.
Porter, for one, is skeptical that the TNC will succeed.“It’s going
to be hamstrung by infighting, by jockeying for power and over the
distribution of resources to constituencies,” he said. “The likelihood
of violence is high but the level of violence will be low. The
possibility of the TNC being completely incompetent is pretty high.”