Libya: Security of foreign personnel and assets

The probability of a deteriorating security situation in Libya, worst of all the continuation of the confusion in government control and the conflict on the streets, could mean a breakdown in law and order at all levels of the economy.

The security of foreign personnel and assets would feature as a low priority for the security services in a situation of anarchy. Most foreign companies would withdraw all their personnel or leave a caretaker group in charge of plant and equipment.

The preservation of physical assets would be difficult under this scenario and it must be expected that serious depredations would occur.

Colonel Mu'ammar Qadhafi survival, in these circumstances, would be at the cost of systematic damage to development projects and materials imported by foreign companies that wish to finish their contracts.

In the slightly more likely event of Colonel Qadhafi or his family eventually losing control, much would depend on the rapidity with which the new authorities could impose law and order. An army coup d'etat would have the advantage of keeping in place senior officers with experience of peace enforcement whereas an inexperienced group of new ministers and security staff would find it difficult to impose peace and quiet after such an explosion of violence.

The oil sector will be particularly at risk of clashes of opinion and policies. It is an area of activity to which foreign investment is critical for growth. Libya has no history of illegal seizure of assets in the oil industry but oil and gas production could possibly be hit, because in most scenarios some degree of radical thinking could affect the new ruling groups.

Nationalisation is not on the agenda of any of the groups bidding for power. The economic development programme could suffer from random withdrawal of funds. The experienced members of National Oil Company (NOC) will be unlikely to survive a change of government – possibly leaving the whole strategy and management of the oil business in disarray.

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

© 2011 Menas Associates

Libyan government is taking steps to enhance employment

The Libyan government is taking steps to enhance its employment factor to obviate the root causes of dissent which affect other North African regimes. Prime Minister Mahmoud al-Baghdadi has made specific proposals for the banks to deploy their capital in small businesses. It is argued that the talents of senior staff would be better rewarded in this activity rather than remaining in government employment. This and other would-be innovative policies will have no short-term effect but would place the Libyan economy in the right direction for the longer term.

The measures of economic improvement, especially in living standards, have been reinforced by the high level of government spending. In the 2008-12 period, allocations for development total around US$117 billion. So far, US$113 billion has reportedly been spent, of which US$59,700 million has apparently gone to fund housing developments. These accumulated additions to economic growth will play a major role in dampening any dissent which could arise from dissatisfaction over pay rates which have tended to stagnate.

The government has taken some time to develop its appreciation of the dangers of consumer price inflation, caused by the mis-match of supply and demand in a distorted market. Its preferred solution appears to be a moderate attempt to contain demand while also still providing expensive subsidies on staple goods and foodstuffs. So far, the change of policies has been comparatively successful.

The economic news appear to indicate that some real gains are being made in the living standards of a substantial number of Libyans, and especially those in Tripoli or other areas benefiting from large-scale government investment. The government obviously has in mind a bimodal growth strategy, with the larger industries operating as efficiently as possible within the global context while smaller industries, with protected industry status, provide both an appreciable area of job creation opportunities as well as being a useful input of added value.

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

© 2010 Menas Associates