Thursday, November 17, 2011

Libya’s Post-Conflict Future


NYT: Western Companies See Prospects for Business in Libya
Reuters: Update 2- Libya’s Oil Exports to Jump 350,000 bpd in Nov- Sources

Libya recently rid itself of Muammar Qaddafi’s four-decade-long dictatorship, but still faces a difficult task. Months of fighting have left the country’s infrastructure in need of repair. Fortunately, Libya has Africa’s largest oil reserves, which it can use to pay for the repairs. The potential for new investment opportunities in the oil industry also have western countries seeing Libya in a new light.

Countries like France and Britain are vying for a chance to invest in Libya’s oil development and reconstruction. Surprisingly, the United States has not yet shown the same enthusiasm. The hesitation stems from the fear that corruption from the Qaddafi era still lingers in oil contracts. Currently the issue is irrelevant since Libya’s interim government, the Transitional National Council, has said that it will not sign long-term contracts—a task it thinks is better left to a future, elected government. However, the reconstruction process has been slow because of the lack of a permanent government.

The absence of a permanent government is not the only source of instability in Libya. A large number of youths are unemployed, the oil industry is not producing at maximum capacity, and the country’s infrastructure was heavily damaged during the armed conflict. The infrastructure is of particular concern to foreign investors—a potentially large source of money and jobs. Building a good infrastructure will reduce production costs and raise profits, which will attract foreign investors. The future permanent government will have to address these issues quickly to restore stability. It will also have to work on strengthening international ties that eroded under the Qaddafi regime, but which could serve as an important source of reconstruction financing. If Libya cannot stabilize its economy, it may soon face more backlash from its citizens.

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