Wednesday, 11 May 2011

The outlook for companies in Libya is bleak

The outlook for companies in Libya is bleak, and the prospect for foreign suppliers remains extremely unsettled. Small companies in particular will require some time to repair their positions in the country unless Libya is willing to undergo a period of financial retrenchment and to concentrate on the key oil industry.

This latter approach would give an advantage to foreign suppliers and contractors because the upstream and downstream oil industries are the most capital intensive and have the heaviest requirement for foreign-sourced factors of production. This would, however, also mean ignoring the case for the expansion of education, social welfare, housing and health, together with cleaning up after the war.

The post-war situation is likely to be bitter, and could be troubled by revenge attacks within civil society. The outcome of the current situation, which is a virtual civil war, remains very difficult to predict but there will inevitably be causes for confrontation remaining between the eventual winners and losers. There could also be transfers of ownership of assets from or, less likely, into, the Qadhafi family and also, given the highly polarised distribution of assets in favour of the few rich families, some readjustments so that some assets of those who have benefited from the Qadhafi era are distributed to the poor.

At the end of the war, rejuvenation will be a grey area in so far as there exists few credible development strategies other than those prepared by planners and intellectuals such as National Oil Company (NOC) head Dr Shukri Ghanem but which, because of the impact of the war, are already out of date.

If Libya does not opt for a concentrated drive to restore the underlying oil economy, a new regime might be persuaded to seek popularity through a programme of essentially social improvements and distribution of some of the oil revenues to the people. Having been through a war, self confidence could run high so that the Libyans themselves, also impelled by a need for economies, will want to participate in the re-development process to the exclusion of foreigners, as Iranians did after the Islamic revolution.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2011 Menas Associates

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