RABAT, (Reuters) – Muammar Gaddafi’s decision to abolish much of Libya’s state bureaucracy may herald a much bigger private sector role in a society impatient for the benefits of an oil bonanza.

Although similar reforms during his four-decade rule have failed, observers say the ageing revolutionary’s announcement this month could mean drastic change in a country where the state has long told everyone what to do.

“This is no hollow speech,” said Rajeev Singh-Molares, a senior partner at Monitor Group which produced a national economic strategy report for Libya.

“There’s a real intent to make government more efficient at decision making and channelling the $110 a barrel oil price into making meaningful differences in people’s lives.”

Gaddafi told the General People’s Congress or parliament that ministries known as General People’s Committees had failed to manage the $37 billion state budget and that big projects in the oil-exporting desert country were behind schedule.

Most committees should be dismantled and power given to ordinary people to devise new ways of sharing out oil wealth. Departments dealing with foreign affairs, defence and security will probably stay.

The move is in tune with public aspirations for lifestyles closer to those in other oil producing Arab states and with private sector hopes that the state would drop economic decision making to take on only a regulatory role.

In time such a move could bring more foreign investment, although that is not a specific focus of the reform. Foreign involvement to date is focused on oil and gas but is expected to grow in banking, services, tourism and infrastructure projects.

“People want an end to the corruption, lack of accountability and inefficiency that is everywhere in utilities, education, transport, health..,” said Libya expert Saad Djebbar, a London-based Algerian lawyer.

“The country needs big change and the only man with the power to give them that right now is Gaddafi.”

Singh-Molares says the emphasis is on fostering enterprise.

“There is also an intent to make investment funds available to people to start businesses rather than just creating government jobs,” he said. “It wouldn’t be a big leap from that to allow private enterprise to enter sectors of the economy where they haven’t been before.”

Some government activities could even be farmed out to the private sector, he said.

The new system is still being worked out.

A government statement last week said the new committees would make state agencies more competent and “organise the relationship between the citizen and the state, which will play the role of organising services and not providing them”.

Gaddafi himself said the General People’s Committees should be replaced “spontaneously by real committees to be created everywhere by citizens. Citizens will get part of the oil revenue directly. They don’t need intermediaries”.

Whatever the details, Libyans say action of some sort is vital to turn oil wealth into rising living standards.

Measured by per capita Gross Domestic Product, Libya ranks alongside Mauritius, Botswana and South Africa as among Africa’s wealthiest states.

In reality Libyans complain of poor schools, hospitals and utilities and must cope with archaic banks and red tape.

New businesses struggle to compete against corrupt apparatchiks who have thrived under statist policies that made monopolies of lucrative sectors.

Libyans now have more opportunity to compare their lives with others thanks to satellite TV and the Internet. They can measure their incomes with Gulf Arab states that, like Libya, have big oil reserves but boast better living standards.

“The Libyan people must be wondering where all the money is going,” said Oliver Miles, deputy chairman of the Libyan British Business Council and a former UK ambassador to Tripoli.

“Libyans are frustrated by a lack of progress — some aspects of their lives are changing but only inch by inch.”

Gaddafi’s plans to reform the bureaucracy and give people economic power also appear in line with his no-party system of government by town hall committee, a system which in theory gives the last word to ordinary people at the grass roots.

But in reality a devolution of economic power will not mean a devolution of real political power, analysts say.

Critics say his system of grass-roots government is a chimera and real power sits atop a draconian police state.