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The cost of a civil war

Aug 26 2011 09:47 Sapa-AFP

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Kuwait City - Libyan rebels face a daunting task as they bid to jump-start an economy left in shambles after four decades of rule under Muammar Gaddafi, with their first challenge being to resume oil exports and get basic services running again.

Experts estimate that Libya, known as the "poor oil-rich country", may need to invest up to $100bn over the next five years to build a sound infrastructure to attract foreign and domestic investments.

"I think Libya should invest up to $20bn every year for the next five years to build the infrastructure for basic services," said Lahcen Achy, expert and resident scholar at the Beirut-based Carnegie Middle East Centre.

The rebel government inherits a damaged economy that was almost completely state-run under a corrupt and repressive regime that squandered most of the oil wealth on Gaddafi adventures.

"The new government should begin from scratch. The main difficulty is how to deal with Gaddafi's economic legacy." This took the country backward, with for example no roads between some major cities, Achy told AFP.

"Libya faces structural challenges... As the country almost wholly depended on oil, diversification of the economy and developing the private sector is essential. Key reforms are also needed," he said.

Last year, Libya had a gross domestic gross product of around $90bn, with public spending close to $40bn. Its per capita income is $15 000 for a population of about 6 million people.

Most of the infrastructure is in bad shape as schools, hospitals, roads, ports and other facilities have deteriorated under Gaddafi's rule while the rebels' National Transitional Council (NTC) is seeking funds to restart these services.

Western powers on Wednesday supported a request by NTC that $5bn of Libya's frozen assets be urgently released by the UN security council, which was expected to unblock another $1.5bn on Thursday.

NTC envoy in the United Arab Emirates and spokesperson for the Libya Stabilisation Team, Aref Ali Nayed, said after the meeting in Doha that NTC needed the cash to pay civil servants' wages, meet other basic humanitarian needs, clear mines from towns and cities and restore schools and hospitals.

Putting the economy back on its feet, and mainly pumping Libya's oil again, were also priorities, he added.

"Our next step is to deliver a list of priorities and demonstrate ongoing commitment to the process of stabilisation. I expect to see some extremely fast progress over the coming days and weeks," Nayed said in a statement.

Until oil exports return to normal levels, which may take up to two years, Libya can depend on its huge frozen foreign assets which NTC number two Mahmud Jibril estimated at $170bn.

"Libya is certainly more fortunate than its neighbours Tunisia and Egypt - which overthrew their regimes - because of the huge assets which will be used to modernise the country," Achy said.

More than half of the assets are in the United States ($37bn) and Europe, with the rest scattered in various parts of the world and in investment funds.

Another difficulty the new Libya may encounter is the lack of expertise to manage the country's economic revival, and it will in the interim period need international expertise, analyst Achy said.

The Opec member produced around 1.6 million barrels a day of light sweet crude, one of the best brands in the world and highly suitable for European refineries, of which about 300 000 bpd was used for domestic consumption.

Resuming oil exports is crucial as oil revenues' contribution to the country's receipts are as high as 95%.

"I don't think they can resume production immediately. It might take place in three or four months but to go back to the level they used to produce may take two years," former Libyan oil minister Shukri Ghanem told energy news specialist Platts on Monday.

Ghanem, chairperson of the Libyan National Oil Corporation from 2006 until he fled the country in May, said some key production and transport installations were damaged, and some oil wells were not shut down properly by operators.

Nayed said Libyan exports will be resumed "shortly" and "returning to full pumping capacity will be in phases", without giving an exact timeframe.

Achy however believes that Libya will be able to resume oil exports to pre-crisis level within one year. 

muammar gaddafi  |  libya
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