TRIPOLI (Reuters) – A tussle over economic policy between reformers and conservatives is unlikely to sink Libya’s post-sanctions opening to private enterprise but may inject more uncertainty into the process than some investors can tolerate.
Conservatives who thrived under statist policies are opposing reforms pushed by the modernizing Saif al-Islam, leader Muammar Gaddafi’s most prominent son, playing on long-held popular suspicions about capitalist exploitation, Libyans say.
Reformers are confident they will eventually prevail, in part because the leadership will come to see a flourishing market economy as no threat to its power and in part because globalization will offer irresistible benefits to all Libyans.
“Non-understanding of the reform program creates horror and panic among the people, but as it is explained to the people, obstacles will vanish,” Islam said last month.
“A few will continue objecting but they will have no role, they will become marginalized,” he said of the conservatives.
Foreign observers of the North African oil-exporting OPEC member nation tend to agree, but say liberalization may turn out to be a lot slower in coming than Saif would like.
The government’s aim is to use the private sector to drive reform of the Soviet-style economy, which remains burdened by red tape, a bloated civil service and complicated tax, customs and financial regulations that deter foreign investment.
First results can be seen in downtown Tripoli – a dozen good new private hotels have sprung up, some offering direct Internet access from customers’ rooms. Foreign retail clothing chains and luxury goods suppliers have arrived en masse.
Central Tripoli, once sleepy, is snarled with queues of four-wheeled drive vehicles and smart limousines. Some cafes offer free wireless Internet links for laptop-toting executives.
But some politically influential Libyans feel a threat to businesses they have developed using links to the state.
“The last period was (state) monopolies. Now people feel they could lose their positions and they resist that,” said Abdulla Fellah, a long-time observer of the reformer/conservative struggle who runs a flour mill and a business consultancy.
For years Gaddafi has voiced support for free market reforms and railed against graft in state-run enterprises, pointing a finger at those who seek to slow and control the pace of change.
But he has also said that Libyans must not confuse economic reform with political reform: The ban on political parties and the ballot box will never change, he says.
His continued use of revolutionary terms unsettles some reformers. Last week he urged Libyans to watch foreign residents to see if they were “colonialist forces with big ambitions”.
He also praises so-called revolutionary committees of loyalists who wield wide influence in the military, the press and government institutions and enforce obedience to Gaddafi’s “state of the masses” system which bans political parties.
Asked why Gaddafi did not take sides in the economic struggle between conservatives and reformers so that investors knew where they stood, Fellah replied that change needed time.
“This process needs to be done gradually, not suddenly,” he said. “I’m confident about reform but it will take time.”
For the moment, Libyan businessmen are happy with recent moves to simply investment, rent out property, and allow companies to employ Libyans — in the past Libyans could not employ one another as this was deemed exploitative.
But they also have unhappy memories of previous policy U-turns and are therefore instinctively cautious.
For example a 1996 liberalization of the retail sector was derailed by a decision by the state to create “purification committees” to uncover corruption and violations of financial regulations. Many shopkeepers ended up in jail.
“There is a widespread feeling here, going back to the early days after the 1969 coup d’etat and the associated socialist revolutionary fervor, that foreign companies are at best a necessary evil, to be milked in the interests of the people,” then British ambassador Anthony Laden said in a 1994 speech.
“Perhaps after 35 years of the state telling everyone what to do, those in charge have difficulty with the idea that economic decision–making has to be devolved to individuals and companies, with the state stepping back to a regulatory role.”
The reformists themselves have also sometimes unnerved investors will precipitate policy announcements.
Islam announced the privatization of the two state mobile telephone companies last month, saying it would be launched within days. To date, there has been no announcement.