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Economic Reforms In Libya And The Opening To The West. How Will They Affect The Revolution Expressed By The Green Book?

By Alessandro Bruno
Libyan Affairs Analyst
bruno@north-africa.com

There is no doubt that Libya and the United States are witnessing a thaw in their relations, as Colonel Ghadafi has announced measures that amount to nothing short of a Libyan equivalent of Glasnost and Perestroika. The principle obstacle to the establishment of full diplomatic links as well as the more important resumption of trade and investment between the two countries, which have a twenty year history of cold war' and diplomatic hostility, remains the objection of the American families of the Lockerbie crash victims. As of early January, hopes of a quick normalization with the US will have to wait, as President Bush has renewed unilateral sanctions against Libya. Nevertheless, current developments suggest that those sanctions will soon come to an end.

As a further signal of Libya's desire, and need, for better relations with the West, just before Christmas, it announced that it would allow International Weapons inspectors to put an end to suspicions and allegations that it possesses any chemical weapons and a nuclear weapons program. It will be interesting to see what the inspections reveal, though most experts agree that Libya may have had a small stockpile of chemical and biological arms. Many observers have suggested, in some cases triumphantly, that Libya's reforms and its opening to the West have come as a direct consequence of US pressure and Colonel Qadhafi's fear that he might face the same fate as former President Saddam Hussein of Iraq. Doubtless, the timing of the announcement from Libya was remarkably close to the capture of the once powerful Iraqi leader. While Colonel Qadhafi has opened his country to inspections, on his part President Bush is rumored to be planning a short visit to Tripoli and that Libya and Israel have discussed the possibility of allowing former Jewish Libyans to visit Libya - as well as restitution of property confiscated after the 1969 Revolution.

However, little has been reported about how the announced economic reforms and diplomatic measures taken to improve relations with the West and the United States in particular will affect Libyan internal affairs. Nor has the question of 'why' this is occurring now been fully explored. This article will challenge the view proffered by Washington and London, or the reasoning they have been hoping most pundits would adopt, that the war in Iraq and Saddam Hussein's capture have scared Colonel Qadhafi into a sudden mood to cooperate with the West.

Indeed, the very reasons for Colonel Qadhafi's overtures to the West by announcing that Libya would give up Weapons of Mass Destruction (WMD) - if it really ever had any significant ones to begin with - are unclear. The triumphal tone, coherent with the US administration's current foreign policy, essentially and predictably suggested that the capture of former President Saddam Hussein in Iraq has essentially scared Colonel Qadhafi into changing his ways. This is a rather simplistic view of course. Rarely, have scare tactics worked with the Colonel. He remained defiant of the US even after Tripoli was bombed in 1986 and endured sanctions for seven years before finally agreeing to submit witnesses to the investigation over the Pan Am 103 crash in Lockerbie. The desire for international cooperation has become crucial to the Qadhafi regime. The efforts to appease the United States are a crucial ingredient to favor this Libyan version of Egypt's 'infitah' of the Sadat era when, the Egyptian President shifted economic policy away from State led growth to favor the private sector while establishing closer ties to the United States. Qadhafi has not suddenly seen the merit of President Anwar Sadat; rather, he needs the US to remove its unilateral sanctions in order to allow US firms to invest in Libya's oil sector. This would encourage investors from all over the world who may be hesitating doing business with Libya fearing US reprisal as provided by the Iran -Libya Sanctions Act (ILSA). The US warning to the German utility giant RWE that it may face US sanctions for a deal to explore for oil and natural gas in Libya is an example of the challenges faced by companies wishing to conduct business with Libya so long as ILSA remains in place.

There could also be a more political explanation for the recent push for economic and diplomatic reforms in Libya, a process that began in 1999 with the Lockerbie trial and culminated with the appointment of the technocratic Prime Minister Dr. Shukry Ghanem in the summer of 2003. We should not neglect the possibility that Colonel Qadhafi is actually laying the framework of a smooth succession of power, or leadership, for his son Saif Al-Islam by strengthening his authority and acquiring new powerful friends in the form of the United States. After years on Pan-Arab adventurism combined with ever evolving socio-political experiments and a brief flirtation with Pan-African idealism in the late 90's, Colonel Qadhafi may have decided to opt for ordinary, but more reliable, stability in order to guarantee his political survival and that of his potential successors. There are no constitutional mechanisms that might be employed to justify any successor to Colonel Qadhafi. He holds no official post and acts as his title is Guide of the Revolution. Tripoli abounds with rumors of the Colonel's rapidly deteriorating health, while his son Saif Al-Islam has held ever-growing public responsibilities having made formal announcements about economic reforms and, more importantly, about the plan to allow IAEA inspectors in Libya to assess the extent of Libya's supposed WMD program. As part of the reforms the very role of the General People's Congress (in essence Parliament) and its General Secretary (read Prime Minister) could well be strengthened and give way to far more technocratic policies in Libya. So much so that it is doubtful that the eroding Revolution - and Qadhafi's idiosyncratic form of government - will survive much longer, in name as well as practice.

The dismantling of the 'Revolutionary' apparatus, in fact, presents fewer challenges in Libya than in countries such as the former Soviet Union, Iran, Syria and especially Iraq. In the latter countries an entire class of apparatchiks in the form of a class or a political party such as the Ba'ath, represented the establishment. Reform, in such regimes cannot take place through one man's interests alone. There are many issues and ideological and practical conditions to consider along with strong official clienteles that have been ideologically and materially co-opted. The Jamahiriya, in contrast, represents a far more personal expression of Qadhafi's vision as based on his own Green Book, a ninety-page document without precedent, which has served as Libya's de-facto constitution since 1977. On several occasions, Qadhafi has contradicted the Green Book and varied his adherence to its egalitarian principles according to need. While, he is alive, he will therefore be able to manipulate, modify and even scrap the Green Book constitution without the need for approval from any political party or clientele. While oil production and exploration will continue to be the single most important source of revenue for Libya, experience has taught that economic diversification is a process that will require foreign investment and expertise. There have been many attempts to liberalize the economy since the mid-80's in Libya, and all were in some way made to fit the ideology of the Green Book. The reforms and economic intentions announced by Qadhafi in recent months appear to be more determined and reflect the desire to boost oil production while diversifying the economy. The appointment of Shukry Ghanem as prime minister and pronouncements over the summer advocating Libya's integration in the global economy combined with the international diplomatic campaign suggest that the planned reforms will be of an unprecedented scale.
Obstacles to reform

However, should any obstacle remain before the reforms will be effectively implemented, it may well come in the form of the Revolutionary Committees and by extension tribal lines. Indeed, observers of Libyan politics have predicted that should the Jamahiriya and its creator collapse the country would fracture along tribal lines rather than ceding to an Islamist or secular opposition movement. There has already been direct evidence of opposition motivated by tribal interests. Indeed, the Warfalla tribe organized one of the most significant coup attempts of the past decade in October 1993. The tribe is well represented in the regime, as one of its members is Major Jalud, an original member of the Revolutionary command Council (RCC) that led the 1969 coup. The coup was a response to the regime's consideration of handing over the suspects implicated in the bombing of a Pan Am jet over Lockerbie, Scotland in 1988 to normalize relations with the West. One of the suspects was a member of the Warfalla tribe and Jalud opposed any normalization plans on that basis. It is also worth noting that many among the Revolutionary Committees are Warfalla members. The coup attempt was also a reflection of the combined RC's and Warfalla's fear that normalized relations with the West would reduce their influence. The role and influence of the Revolutionary Committees will face a tough test in the near future. As Qadhafi's reforms shift ever away from the Green Book and the technocrats led by the Prime Minister, who had to be asked more than once by Qadhafi to accept the post, the Revolutionary Committees (RC) will lose influence and reduce the influence of the Warfalla, an important tribe. As Shukri Ghanem takes care of the day-to -day affairs of state it will be up to Qadhafi himself to hold the balancing act of maintaining a degree of loyalty and cooperation from the RC's to the balance of tribal power.

The RC's might well be relegated to ensuring the implementation of reforms as past experiences suggest that not all will welcome them. Indeed, far from the WMD's and technocratic optimism, in the short term there may be a significant majority of opponents to the reforms. Past attempts at economic reform in the late 80's and the early 90's aiming to stimulate the private sector have inevitably failed to achieve the intended effect of diversifying the economy, while generating the anger of the poor, who most relied on the egalitarian policies and principles of Qadhafi's Revolution.

The failure of previous economic reforms

The regime's economic policies are principled on the egalitarian ethos of Qadhafi's III Universal Theory that has been taught in schools to a generation of youth. The Theory has generally appealed to the disadvantaged and the poor who have typically supported the Regime. Economic liberalization has not contributed to the creation of a viable and productive private sector capable of absorbing the labor cost as a result of economic re-structuring. Therefore, for a majority of Libyans, the 'reforms' have only contributed to deteriorating standards of living. The failure of these reforms has highlighted the institutional shortcomings of the regime that enacted them and promoted increasing opposition to it that the Libyan government has often blamed on what it has called Islamic 'radicals'.

The General People's Congress has also served as a forum of public discontent over the austerity programs. In an unprecedented move, the regime responded to the criticism with a series of policies designed to address the grievances was adopted in 1988 at the yearly session of the GPC. It provided the framework of a more liberalized economy, curbed the authoritative excesses of the Revolutionary Committees (RC) and assumed the title of Great Green Charter of Human Rights in the Age of the Jamahiriya. Despite the economic package's lofty title, the institutional infrastructure of the Jamahiriya lacked the requisite efficacy to implement the Charter in a manner worthy of its name. As Dirk Vandewalle has indicated, markets have only been able to function if the state persists in performing its distributive and productive functions while it also improves its capacity to regulate, dispense law, define and enforce property rights, tax and collect information. In other words, markets require a sophisticated institutional infrastructure and administration in order to function properly. The mere elimination of state dirigisme, as occurred in Libya, is not sufficient.

Consequently, the state has only limited itself to an abrupt privatization and shrinking of its public sector. The liberalization measures soon proved to be unsustainable for a vast majority of the Libyan people. Free trade and the removal of price subsidies caused an inflation of prices for most consumer goods while average wages remained stagnant. The only beneficiaries of the economic reforms have been the private merchants who controlled the import and the sale of various types of merchandise. Meanwhile, worker cooperatives known as tasharrukiyyat entailed a form of privatization that was adapted as best possible to the Green Book's economic ideology. These allow for the sale of state production assets to one or more individuals, who agree to share equally in the management and profits of their enterprise. Largely this system has not enjoyed much success beyond the small service sector in such areas as appliance or automobile repair, hairdressing shops and photography laboratories where ownership is usually limited to single individuals. In these types of activities earnings are higher but there is no production such that thus far privatization has not resulted in a significant diversification of the economy.

Privatization and economic liberalization measures have been implemented only to be removed for the last two decades. This raises serious questions as to how much room the new liberal prime minister will actually have to implement the proposed reforms. He faces the not insignificant obstacle of the unreformed political system, which despite the expressed desires of its nominal leader, or 'guide' rather, is often blocked by the vested interests of the more radical elements such as the Revolutionary Committees. There is also the specter of the violent street protests, which took place shortly after the last major wave of economic liberalization in the late 80's and early 90's. Certainly, on paper, the reforms are very interesting but the changes will not come overnight, while those who have a stake in maintaining the status-quo will place an additional obstacle to the normally slow pace of change in Libya. In addition, in order to make Libya attractive to potential foreign investors Libya will have to strengthen, and in many cases develop from the ground up, its institutions. In this sense the large management-consulting firms could be among the first outside companies to benefit from Libya's economic opening.

Need for Foreign Investment

Oil industry analysts have indicated that the speed and apparent ease with which Libya has proceeded to resolve paying over 2.7 billion dollars in compensation in the Pan Am and UTA airliner bombings cases suggests that Libya is in urgent need of investment to help diversify its oil based economy. As noted in the background report Qadhafi has led more than one effort to liberalize the economy, but always without results. However, previous efforts also tried to maintain a closer observance of Green Book principles such as the "Sharika la Ujara" (Partners not wage Workers) slogan that precluded any large scale enterprises as it essentially pushed for family run small business and service oriented operations. The economic overtures of the post-Lockerbie years and 2003 in particular, have been more far-reaching. Disappointed with pan-Arab and the pan-African foreign policy experiments Qadhafi has urged the General People's Congress (GPC) - parliament everywhere else - to join the WTO and adopt measures to bring globalization to Libya. Libya needs foreign investment and Qadhafi has in a recent session of the GPC has even criticized public officials for not being up to the task. As always with the Libyan leader, his pronouncements imply important policy implications. In this case it suggests that it the era once again belongs to the technocrats. Indeed, the new Prime Minister Dr. Shukry Ghanem has been given full encouragement to pursue a liberal economic agenda aimed to foster private investment in the economy. As some more ordinary Libyans have suggested the private sector is called the civil sector in Libya and while private initiative is progressing, its pursuit will take time in Libya but it has begun. The problem is that while larger scale investments are possible and encouraged now, the assets that the government is selling are inefficient cement and steel plants that were built for political motivations. These companies have been losing money for years and, apart from new business logic they will require significant investment to make them efficient - for the first time.

Nevertheless, the agenda is very ambitious for a country that saw rapid and complete nationalization between 1969 and 1973. Shukri Ghanem has prepared a large-scale plan for privatizing state owned factories and companies and the plan is to be extended until 2008. In early December, Ghanem said in a press conference held in Tripoli on Saturday that this plan covers privatization of mineral industries, especially iron, steel, chemical industries, and factories to assemble trucks and buses, textile, and shoes companies, and state owned farms. The Libyan prime minister did not explain the number of companies to be included in the privatization plan. In September Ghanem said that the number of these companies will be more than 300. The plan would will be applied in three phases until the year 2008, noting that the Central Bank will sell shares of these companies and factories until a stock market is founded. Any fear that the leader of the Revolution had not envisaged privatization on such a scale my be reassured that in June, just prior to appointing Ghanem, he had called for the privatization of the oil sector, banks, public companies and even the airports.

To observers and students of modern Libya these reforms wholly reject the principles outlined in the Green Book and raise many questions as to how these may be implemented while the Green Book is still used as the Constitution and ideological foundation of the Jamahiriya. While no one has officially dared to ask this question, the issue has clearly not escaped the attention of the Harvard educated Ghanem. He has suggested that the guiding principle of privatization aims at "improving the national economic performance and the living standards of individuals through expanding the base of property owners." Meanwhile the oil sector still accounts for 90% of government revenue and it also needs investment.

Improvement of International Image?

There is no question that the Libyan leader has been actively trying to restore relations with the rest of the world. Apart from the final agreements over the compensation of the families of the Lockerbie and UTA victims early in the fall of this year, there are strong rumors that the Libyan embassy will re-open for business in London. It is rumored that the Libyan mission will be located in London's elegant Kensington and Chelsea area - in a building valued an estimated 10 million Pounds. Since 1994 Libya has maintained only a diplomatic representation mission after its embassy was closed after the killing of a British police officer by a Libyan diplomat who was firing at a group of protestors of the Libyan regime. Diplomatic relations between Libya and the UK were restored in 1999. Libya is placing great importance to improving bilateral relations with Britain and early in 2003, the two governments represented by the assistant secretary for production affairs at the Libyan people's general committee, Al-Baghdadi Ali al-Mahmoudi held talks aiming to develop and support economic ties in all fields. The move is all the more surprising as it came at the eve of the Iraq war crisis, when it was evident to all observers that the Anglo-American coalition was determined to wage war on Iraq.

In that respect the Libyan leader has also adopted surprisingly moderate tones. This suggests that formal diplomatic channels will be Libya's instrument of choice in pursuing its interests - ideological as well as economic - abroad. Qadhafi's recent foreign policy speeches have been targeted at the Arab League. Having for the last five years focused on developing closer ties within Africa going as far as to propose the formation of an African Federation, with Libya at the head, the Libyan leader has recently signaled his intention to renew his commitment to Arab causes. This past October he held talks with President Mubarak of Egypt, in which he described the need to revamp the Arab League. Such a move was needed, he said, in order to face the challenges of Iraq and Palestine. Qadhafi suggested that Libya would be forced to withdraw from the League if measures to reform it were not taken soon. Other important signals of Libya's willingness and determination to improve relations with the outside world were provided by landmark official state visit to Libya by Prime Minister Jose-Maria Aznar of Spain this past September 17. Moreover, in mid December a Canadian business delegation visited Libya to investigate investment opportunities - mostly in oil exploration.

In recent speeches Qadhafi has indicated more interest in inter-Mediterranean partnerships and even in the proposed Mediterranean free-trade zone, which is slated to be launched in 2010. In addition, Aznar's visit carries important political significance as far as the United States are concerned. A key ally of President Bush, Aznar's visit is a further signal that the US may consider removing its sanctions sooner, rather than later. Aznar declined comments about whether or not he had a special message from Washington, or whether he would relay any message from Tripoli, but hinted as much when he declared that "Spain shares information with its allies". Nonetheless, at the time of writing, President Bush has announced that the US will not remove unilateral sanctions against Libya, while the WMD inspections have begin in earnest during Christmas 2003. Ultimately, however, the diplomatic and economic reforms that Qadhafi has undertaken, including the public renunciation of WMD's were prompted far more by Libya's internal economic and political situation than by indirect pressure from the United States after the invasion of Iraq and the capture of Saddam Hussein. It would therefore be inappropriate and dangerous to suggest that the "Regime Change" ideology currently favored by the White House and its ideological strategists can boast success, at least as far as Libya is concerned.

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