Libya's Economic Reform Program
Event Featuring:
Overview
Dr. Taher E. Jehaimi and Mohamad Elhage discussed the history of economic reform in Libya and the country's new opportunities for economic development in the years to come. Dr. Jehaimi hailed diversification as a major goal in Libya and listed several new industries that Libya needs to develop. Even with expansion in other areas, Dr. Jehaimi mentioned multiple impediments that Libya must overcome in order to improve its economy. Mohamad Elhage called for a transparent and investor friendly economic model in Libya. He believes economic reforms have been implemented in the recent past, but that Libya still has many policies to implement in order to create a stable and diversified economy. Both had optimistic outlooks on the future of Libya's economy; however, they also articulated that patience and hard work were needed in order to make such drastic changes to the oil dependent nation.
Event Summary
Dr. Jehaimi began by emphasizing the dominating role of oil in the Libyan economy, stating that oil revenues accounted for 90-95% of exports and approximately 60% of total GDP. He believes diversifying the economy, particularly by expanding the industrial base and making Libya desirable for tourism, can bring down these percentages. The oil revenues amassed during the last two decades have had social repercussions as well, specifically the development of a rentier state in Libya. The government uses its oil revenues to fund social programs and the Libyan people have grown accustomed to these services. Furthermore, this reliance on government handouts has led public enterprises to not stress efficiency. The concentration of wealth in the public sector also has resulted in a massive Libyan beaucracy, which Dr. Jehaimi believes has twice the number of necessary employees.
Despite these difficulties, Dr. Jehaimi highlighted the fact that an emphasis on social equity has meant better education, social care, and health for the Libyan people. Libya ranks 58th in the Human Development Index (HDI) among 177 other countries, and has elevated itself six places in the HDI since 1996. Libya has not only met the UN millennium goals when it comes to health, education, and reduction of poverty: it has surpassed them. Libya has also taken steps to improve its economy such as giving the Libyan Central Bank its independence, creating a single exchange rate, recently privatizing 360 companies, and improving the Libyan infrastructure by investing 60% of this year’s budget in roads, housing, water, and sanitation. Another important aim of Libya’s development is to advance the quality of education, something that Dr. Jehaimi hopes the new relationship with the United States can facilitate. This can be accomplished through student exchanges where cultural ties will be created, and Libyan students can receive advanced education in the United States.
Mr. Elhage reiterated the importance of diversifying the Libyan economy in order to guarantee long term economic sustainability that could continue to provide for the Libyan people, even if oil prices drastically decreased or oil reserves ran dry. Mr. Elhage believes that by revitalizing the private sector and investing in small and medium enterprises, the private sector can become more involved in helping Libya develop. Libya’s former economic model was one of a command economy presiding over an enormous oil industry, but, in his opinion, Libya needs to move towards a market economy through use of its oil profits.
Private sector growth can be facilitated by public sector investments. Mr. Elhage stated that the non-oil economy grows by 4% every year, but that this needs to be increased to 6% a year. He posited that the government must stay involved in supporting the private sector because the private sector is not yet functioning properly. Despite all of the difficulties facing Libyan development, Dr. Jehaimi and Mr. Elhage are optimistic that Libyan officials will work with the IMF to create a new, successful Libyan model of economic development.
About this Event
This panel took place at "US- Libya Re-Engagement: The Path Forward" at the Carnegie Endowment for International Peace on June 23, 2006. The US-Libya Business Association and the Middle East Institute jointly sponsored this conference.
Speaker Details
Dr. Taher E. Jehaimi is Secretary of the General People's Committee for Planning and a senior member of the economic reform team headed by Dr. Zlitni. Prior to becoming the Minister of Planning in 2003, Dr. Jehaimi served as the Secretary of Higher Planning, the Governor of the Central Bank, and the Minister of Economy and Commerce.
Mohamad Elhage is Deputy Chief of the division that covers the Gulf Cooperation Council (GCC) countries in the Middle East and Central Asia Department of the International Monetary Fund. He leads missions to Libya and the United Arab Emirates. Prior to joining the IMF, Mr. Elhage worked as an economist in the US Department of Commerce.
Attributions
Garrett T. Berntsen prepared this event summary. He is a third year student at the University of Virginia majoring in Foreign Affairs with a concentration in Middle East Politics. He studied Arabic and Arab History at the American University of Cairo for a semester. He is an Army ROTC cadet and will be taking his commission in the US Army after he graduates. This event summary was peer edited by Julia Shatz.
