With a small size population of no more than 6.3 million people and oil exports abilities of 1.6 million barrels per day (bpd), Libya looks like a classic text book case ready for an economic take off in the conventional sense but, exactly because of that, the North African country faces the stark choice of which way to go economically as well as politically.
An IMF report on Libya issued last week struck both an upbeat and cautionary tone on the future of the country as it spoke of the twin challenges of stabilizing the economy and at the same time meeting the aspirations of its people.
Estimates have indicated that economy has shown skyrocketing growth rates of more than 116 percent this year, compared to a contraction of some 60 percent a year earlier when people were battling the old regime. Though it is expected to slow next year to 16.5 percent and the years after, yet restoring oil exports to some 90 percent of what it used to be before the revolution was the main reason behind the dramatic change in the scene.
And that is why the economic growth will continue to be influenced by three factors of political instability, security or lack of it, in addition to the possibility of an oil price drop given the creeping softness in the market.
The country was ushered into a new era of political and economic development. The just completed elections that gave the National Forces Alliance (NFA) the lead, is the main feature of the new development. Coming after more than four decades of a one man show, Libya does not lack only political traditions, but lacks any institutions to build on and before that the theoretical framework to operate within.
It was easy for the previous regime of Col. Muammar Qaddafi, which came to power in the era of military coups, where the state controls both the political and economic space, to dictate his theories on governance making use of the huge resources at hand and the small population to do whatever he likes. The outcome spoke for itself in terms of the lack of basic services and necessary supplies to meet people's needs.
Elections were supposed to clear the mess that usually follows up revolutions and decides who is in charge. Based on this new mandate, the new government is expected to come up with policies and plans that address the critical issues of day-to-day life of the people as starter. And given the fact that NFA is in fact a loose coalition that groups some 60 parties, it is hard to imagine that there is a solid unified position and clear vision aside from generalities here and there. What is needed is a build-up of a regime and institutions from scratch that can take the country well into the future, ensuring stability, continuity and prosperity that the people deserve.
But it is no longer simple answers in one form or another of black and white. Questions keep posing: will the government lead the economy or leave that front to the private sector or try a mix of both and to what extent? That is not an easy question to answer specially in a country that has bitter experience with a dictatorial rule and lacks institutions.
During the Cold War era, it was simple to adopt one political and economic system, where the state has a bigger role in running the country or restrict that role. The Reaganomics and Thatcherism's drive for a smaller government and push for privatization though yielded spectacular results in the beginning, but part of their legacy is the mess now being experienced in a form of an international financial and economic crisis.
The blueprint for Libya is how to create a vibrant, energetic private sector that operate as an engine for growth, but to do that it needs vision, capacity building and resources to be able to lay the foundations for the much needed economic take off that meets the aspiration of people who sacrificed their lives hoping for a better future.
But human experience has shown that the profit incentive that drives the private sector is not enough in itself to build a nation. A government role of making the necessary checks and maintaining security is equally important. One lesson came out clearly from the euro zone crisis is the central role played institutions of last resort like central banks in meeting the challenges created by the host of problems that stem out of letting loose private sector to operate on its own set of rules.
Libya's experience will be watched carefully as it combines both political and economic hurdles. Unlike its neighbors east and west in Tunisia and Egypt where Islamist forces got the upper hand after elections, in Libya the liberals and secularists are more in the driving seat, but still within a tumultuous region facing daunting challenges.
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