The political transition in Libya, even if messy, offers a wonderful opportunity for Libya to leverage its tremendous oil reserves for the benefit of its people after over four decades of mismanagement. Libya, Africa’s biggest holder of oil reserves (and the world’s eighth largest), has very little to show for this endowment. An irony, given that Colonel Qaddafi seized power in the name of the proletariat, only to arbitrarily demolish the very institutions needed to sustain a progressive society.
The transition, if it succeeds smoothly, can set things right. Libya’s current oil production of 1.7 million barrels a day can easily be ramped up to 3 million barrels a day with $30 billion of investment, according to the French Trade Commission. While investment from global majors would be readily forthcoming, the new National Transition Council (NTC) needs to unequivocally signal its intent to be open to serious business. Libya will need to move beyond simply being an oil producer and invest in downstream capabilities such as refining and marketing of petroleum products, which currently falls well short of potential. The operations of the national oil monopoly, the National Oil Corporation of Libya, will also need serious review.
What of the $145 billion in “sovereign” wealth, ostensibly held in the name of the Libyan people? For one, it is way below what oil revenues accumulated over several years would suggest. More to the point, the pattern of holdings is unclear and appears to be vested in companies or trusts controlled by the former leader and his family. This is a pattern commonly found in resource-rich developing countries. If the ruling families in Saudi Arabia and the United Arab Emirates have been successful in keeping the lid on social and political protests, it is largely because a significant portion of oil and gas revenues (albeit much larger than that of Libya) has been ploughed back into their respective countries. The first challenge for Libya’s new government would be to restore the money to where it rightfully belongs.
To give credit where it is due, the former government did invest in raising the stock of social capital. Expenditures on health are about 7 per cent of GDP, while the overall literacy rate is around 83 per cent. However, 30 per cent of Libya’s work force is unemployed, which combined with extreme political repression provided the tinder for the revolt that deposed Qaddafi. The need for rapid transformation becomes even more evident when one considers Libya’s demographics: 33 per cent of the population is less than 14 years of age, while 64 per cent is between 15 and 64. It is clear that Libya’s impressive reserves of human capital have not been effectively utilised. This is both an opportunity and a challenge for the new government.
It is still not entirely clear what the political and religious leanings of the new government will be. The new leadership’s assurances that it would be “progressive and inclusive” will be borne out in time. Hopefully, the new momentum and revival of hope in Libya will be channelled to utilising Libya’s vast hydrocarbon inheritance fruitfully rather than being frittered away on vain projects as in the past. That would be the revolution’s abiding legacy!