Watching Libya January 4, 2012

Although occasional fire fights between armed veteran militias and the National Army, a force appointed by the interim government to ensure some measure of security in the Capital, do occur – the last incident took place yesterday January 3, 2012, involved Misrata militiamen and left four dead and some wounded – generally speaking the security situation is improving by the day.

This is shown by the decreasing frequency of such incidents; the last previous clash, in fact, took place on December 11, 2011. The number of weapons in evidence on the streets has also decreased considerably. There are also far fewer check-points than in the first half of December and the ones that there are, are manned by the National Army. Security at hotels and other installations has been transferred to uniformed personnel. Shooting can still be heard, especially at night, and although most of it is ‘celebratory’, isolated episodes of factional shoot outs do occur.

There are power shortages throughout Western Libya due to damaged infrastructure. Until this is repaired, energy providers are resorting to rolling brownouts to keep the load on the grid commensurate with generation capacity. This means a few hours without power every other day. For the most part goods and services are readily available, though at a premium, as the parallel exchange rate is still about 20% higher than the official rate.

Overall the mood is positive. Although some have taken to the streets calling on the Transitional National Council (TNC) to uphold the principles of the revolution, others have gone back to work to keep things moving.  Although government salaries are now being paid, not all employees have gone back to work. Those involved in providing services such as electricity, water and health-care have reported back for duty. If it was not for them, there would have been serious disruptions and instability.

As for the private sector, those involved in vital services – such as imports of food, medicine, spare parts and the self-employed generally – have been busy for a while now. Construction and services to the energy sector are eager and poised to resume work. Providers of professional services such as lawyers, accountants and architects are waiting for regulatory and legal guidelines including those pertaining to tax and social insurance compliance.

The most reassuring factor is the resumption of oil exports as they represent 95% of export earnings. Today Libya is exporting up to 1.2 million barrels/day which is about 75% of pre-conflict levels. This level of output, if it is to be sustainable, will require immediate extensive repair and refurbishment in the oil fields and other installations. Much more work will be needed in the medium term to upgrade production facilities to reach pre-conflict productions levels. Exceeding pre-conflict levels will be on the agenda in the medium to long terms.  See Watching Libya November 16, 2011.

The 2012 budget, which is currently being finalised by the Ministry of Finance (MoF), has 2 main priorities.

1.     Honouring financial commitments towards those who took up arms against the regime including the families of the fallen, wounded, and the displaced, as well as the cost of repairing or replacing housing and infra-structure.

2.     The resumption of on-going projects disrupted by the conflict. 2012 will be a deficit year  and the MoF is expecting to fund it from the $US 23 billion in Treasury reserves – assuming oil revenues at $US 75 per barrel revenue.

The Interim Government (IG) has so far been functioning much better than may have been expected. This technical cabinet has by and large shown itself up to the tasks it was entrusted with. Cabinet meetings are held weekly with proper agendas and minutes. They are followed by public statements and press releases on matters that impact people’s daily lives.

The IG’s efforts to get the international community to unfreeze Central Bank of Libya (CBL) and Libyan Foreign Bank (LFB) assets have been giving results although not all of these assets are accessible yet. The banking sector is slowly but surely beginning to function. One outstanding issue is the position of CBL governor; there appears to be lack of consensus regarding the most appropriate person to fill this technically and politically sensitive post.

So far, commercial law and investment regulations remain unchanged but a reform aimed to modernise these, once the Constitution is in place, are widely expected. An amnesty on all 2011 taxes is also expected. Observers note that sustained efforts are needed in the immediate term to retain foreign investment in Libya and, in the medium and long terms to attract badly needed new foreign direct investment.

Also in urgent need of stabilisation is Libyan investment abroad. Well informed observers on the ground believe that around 140 Libyan investments abroad will require changes at BoD and top management levels, with the aim of retaining only technically qualified and trustworthy persons. This is an evident reference to the regime’s practice of posting unqualified persons to top jobs abroad simply on the basis of their personal or kin relationship to the Gheddafi family and its close associates.

Whilst on the subject of ‘friends of friends’ networks and patron-client relations in pre-revolutionary Libya, we note that mistrust towards persons whose fortunes were the result of commissions obtained for facilitating (or pretending to facilitate) the adjudication of contracts for the supply of goods and services to public sector entities, has not only not abated but is on the increase. This may well disprove the vaunting of a number of representatives of foreign companies – whose successes in the Gheddafi era depended exclusively on their Libyan brokers – that they would soon be back in business using the same methods as before.  There is a fairly good chance that they will be disappointed.  Having said this, the eradication of currupt practices will not be an easy task.

The political process is slow to pick up momentum. The street is beginning to distinguish between the TNC and the IG, with popular sympathies leaning strongly towards the IG. The TNC is perceived to be insufficiently sensitive to the demands of protesters that it live up to its constitutional declaration of August 3, 2011. Some go as far as questioning its very raison d'être. None of the political parties that have emerged so far with a view to contesting elections have much popular support and allegedly ‘recycled’ individuals are claimed to be involved in some of them. More generally, the prevalent opinion in the street is that all those with close ties to the regime should not be involved in the country’s government.

Schools are scheduled to resume this coming Saturday, January 7. It is understood that the Gheddafi  'world view' has been eradicated from the curriculum. The cultural scene is vibrant. After 40 years of oppression Libyans are experiencing the excitement of freedom of expression. New newspapers, websites and magazines have been mushrooming. The country has gone from 4 state-owned TV and 2 radio stations to 11 privately owned TV stations and half a dozen radio ones including some English programming. BBC, very much followed, is available on FM. The visual arts, music and theatre, are coming alive.