My 2 Cents: The “Libyan Personality” and Libya’s economic challenges

“The Libyan Personality”, as an identity, was formed through centuries of Bedouin life. The primary and basic character of a “Libyan” is moved by the rhythms of the desert. It’s not a personality that can easily plan ahead, understands limits, or relates effort with results.

It’s forged by the harsh reality of its environment, where time is measured not by minutes and hours, but by sunrise and sunset, not by days and months, but by seasons and moon cycles. Its sense of results, is not based on localized work – as in the agricultural societies of Tunisia and Egypt, but based on herding in the desert and searching for water, which does not depend on work, location, or institutions, but on nature and God.

This spatial dislocation also means that the person you trust comes above any institution or structure. It’s also a character that is as limitless as the desert, has very little sense of bounds and rules; it’s simply regulated by religion, custom, and social trust. It also does not easily understand the distinction between what is private property and public good.

The Bedouin roams freely in search of water and pasture, wherever he is in the desert, he is at home and everything around him is his, so generosity, chivalry and dependence on others is fundamental to his survival.

As stability begins to hopefully return, albeit slowly, to Libya and the Transitional Government of Ali Zeidan takes further steps towards progressing the normative functions of government, the leaders of the government will be under extreme pressure to meet the high expectations of the Libyan population while having to put in place effective policy solutions that do not create long-term structural challenges.

How government leaders make these initial decisions regarding economic choices, legislative reforms, and governance structures will shape the short-term and long-term functionality of the country’s economy and determine the direction the country will take for a long time to come.

Principal among these is how to structure an effective monitoring and redistribution schemes for the revenues from oil exports. As oil resources have come back on line, and Libya’s foreign assets are returned, there is increasing popular pressure to maximize redistribution in the form of a wide range of public services, subsidies and public sector employment.

As has become evident in other oil-producing states in the Arab world, like libya over the past half a century and those of the Gulf Cooperation Council, the use of oil revenues to finance the bulk of government expenditures and to provide jobs for the majority of working citizens has a skewed impact on economic incentives among the population, reinforcing high long-term unemployment rates and low human capital development.

Moreover, evidence also shows that these distorted policy choices are negatively correlated with positive governance outcomes.

Job creation is also an immediate need in Libya, where the unemployment rate – before the civil war – was estimated at 30%. As such, the new government will be under significant pressure to expand public sector employment, especially given the large number of people who are now not only young and unemployed, but also armed.

In the broad view, the new Libyan leadership will need support on developing an alternative model for the expenditure of oil revenues (possibly drawing from Norwegian or Alaskan examples), one that decreases the disincentives towards productivity that are inherent in oil-dependent economies.

More importantly, Libya’s leadership needs to steer towards the development of a regulatory environment that promotes inclusive, private-sector-led growth. This will require assistance in crafting commercial laws that encourages firm start-up and growth, which has been lacking in Libya for at least four decades.

Even if a business-friendly regulatory framework is put in place, the private sector will not be able to necessarily create the jobs needed for Libya’s unemployed because of serious problems with educational quality. Young graduates generally lack the skills needed by private sector employers – since the present educational system in Libya has been designed to produce graduates that meet the needs of the public sector.

In this regard, Libya needs serious educational reforms that will, over the longer term; help realign educational outputs with private sector labor market needs. In the shorter term, the government needs to quickly develop training programs that can help fill the immediate gaps in the skills packages that Libyan youth bring to the job market.

Finally, the new Libyan government will not be able to make important decisions without the data on which to do so. Libya lacks any viable, recent census, labor force surveys or household surveys, and economic decisions in the past were not based on any data-driven understandings.

The new government will need to also develop reliable statistics and data instruments to help Libyan officials establish a solid baseline understanding of the population and economy, one that allows for policy makers to develop more appropriate regulations and policies to promote economic development and growth, while allowing them to assess progress and results stemming from such policies.

As Libya begins to think through and develop a new social contract that will form the foundation of its State building, finding the right balance between the “Libyan personality” and Libya’s future economic reality will require a visionary leadership.

A visionary leadership that will have to make hard choices and offer innovative and credible solutions without the luxury of having enough time to deliver results to a restless population with very high demands and expectations. How Libya’s new leadership responds to this difficult challenge, will almost certainly determine the future of the country and will be the ultimate measuring stick, against which Libya’s “revolution” will be judged by future generations.

Hafed Al-Ghwell is currently an Advisor to the Executive Director for the Arab group and Dean of the Board at the World Bank Group. Hafed can be reached via twitter @HafedAlGhwell or by email at [email protected]