Brief Introduction into Libyan Economy
In 1967, Colonel Gaddafi took over one of the poorest countries in Africa. By the time he was assassinated, Gaddafi had turned Libya into Africa’s wealthiest nation.
Libya had the highest GDP per capita and life expectancy on the continent.
Less people lived below the poverty line than in the Netherlands.
Libya has a developing economy depending mainly on petroleum. Although the oil industry employs only a small percentage of the country's workers. Majority of the Libyan workers are employed by service industries and agriculture. Libya has a high unemployment rate. Although Libya makes a large amount of money from oil, many Libyans live in poverty.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: Not Graded
- Economic Freedom Status: Not Graded
Global Ranking: Not Ranked
Regional Ranking: Not Ranked in the Middle East/North Africa Region
Notable Successes: N/A
Concerns: N/A
Overall Score Change Since 2012: N/A- Libya’s economy is at a critical level as security disrupts and sectarian tensions deepen. With the state’s legitimacy eroding, the government confronts the daunting challenge of stabilizing the macroeconomic environment in the midst of political turmoil. The economic infrastructure is significantly degraded, and economic uncertainty remains very high.
- Libya. (n.d.). Retrieved June 07, 2016, from http://www.heritage.org/index/country/libya
Industries
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- Mining. Petroleum makes much of Libya's total economic production. The largest oil reserves in Africa are seen in Libya. Most of Libya's oil mines are located in the north-central portion of the country. The government controls petroleum mining in the country. Libya also mines gypsum, iron ore, lime, salt, and sulfur.
- Service industries produce services rather than goods. Such industries form about 30 percent of the total economic production in Libya but employ over half of all Libyan workers. Government services create important service industries such as Hotels, restaurants and shops which benefit from tourists who visit from Egypt, and other countries.
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- Agriculture only plays a small role in Libya’s economy. Only about 5 percent of the land is useful for agriculture. Libya imports most of the foods. The country is able to produce almonds, barley, dates, olives, potatoes, tomatoes, and wheat. Farmers also raise such livestock as chickens, dairy cattle, goats, and sheep. Families own most of the farmland. Due to this Mechanized farm machinery is used only on large farms, while traditional tools are used on small family farms.
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- Trade: The export of oil and petroleum products make up almost the total value of Libyan exports. Electrical equipment, food, machinery, and transportation equipment are major imports. The value of Libya's exports is higher than that of its imports. Libya's leading trade partners include China, France, Italy, Spain, Turkey, and the United States.
Healthcare and Education
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- The health care system partially state-run, as there is a very small amount of private hospitals in some areas. In comparison to other Middle Eastern states, the health status of the population in Libya is above average. Childhood immunization and vaccination is almost universal. The clean water in the country supply has increased, along with the improvement of sanitation. The country’s major hospitals are in Tripoli and Benghazi.
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Controlled Economy vs Free Economy
- Open Markets: the government is interested in foreign investments. State-owned companies distort the economy, political instability weakens international trade and investment. The financial system is restricted by unstable political/economic conditions and limited access to financing severely distracts any meaningful private business development
→ Investment freedom 5.0%,
→ Trade freedom: N/A
→ Financial freedom: N/A.
- Regulatory efficiency: it is affected by ongoing political instability. The labor market stays weakened, and the large informal sector is an important source of employment. Decreased revenues because of lower oil prices and increased payments for state salaries and the few amount of food and oil to an estimated budget makes about 50% of
Private Property Vs Public Property
- Libyan property rights are complicated because of past government policy actions, and a weak regulatory system. In March 1978, the government eliminated all private property rights and most private businesses.
- Renting property was illegal back at that time and ownership of property was limited to a single house per family. Reduced rate of mortgages were paid directly to the government. But many Libyans were exempted from paying for rent depending on the family income.
- This destruction and process of official documents followed several years later, has served to complicate any subsequent effort to prove clear title of property throughout Libya. The post revolutionary interim government made little progress on improving the situation.
- Trademark violations and Intellectual property are widespread and violators are adept at producing reliable fakes. The U.S. brands remain vulnerable to this activity. The Law of intellectual and consumer Property Protection is enforced by the Trademark Office including the Ministry of customs, and economy.
- Enforcement in general requires a specific legal claim. When Libya is applying for entry to WTO, it is not a member yet, and so on is not a party to Agreement on Trade-Related Aspects of Intellectual Property Rights
- Regulations and law on investment and ownership of property allows domestic and foreign entities to establish business enterprises and to be engaged in remunerative activities mostly. However, regulatory and legal environment has some complexity such as a systemic bias which will obviously favor the government sector companies and Libyan firms over foreign entities.
- Investment law and commercial law are different when dealing with foreign ownership business restrictions for enterprises.
- The law does not grant foreign investors the right to have any private property. There is considerable mystery in public and private in markets for rent; many aspects of these arrangements are left for local officials.
Tax System
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Business Discussion
- Libyan regulatory system lacks clarity and transparency, regarding the function and responsibilities of the government institutions.
- Accurate and current information on the Libyan market and key commercial regulations is difficult to get.
- The post-revolutionary period has seen an evolvement of civil society, and some non-governmental organizations have sanctified themselves to transparency, most notably in the energy sector.
Trade Restrictions
There were no laws that limited foreign investment in particular sectors, but the law required investment projects valued at less than five million Libyan dinars (USD four million) to be at least 51 percent Libyan owned and for the foreign investment to exceed two million dinars.
Management Of Economic Crisis
Oil is what keeps Libya’s economy running. Oil and gas production accumulate for 65 percent of the country’s GDP, 96 percent of exports, and 98 percent of government revenues. As follows, development and collapse in the oil sector directly affects the economy in Libya. Due to the crisis issues that took place in Libya recently there has been many up and down in the economy but the country has been able to rise itself after each crisis.
The civil war that took place in the country disrupted production, facilities and pipelines, causing a dramatic fall in oil production rates from an average of 1.7 million barrels per day (mbd) in 2010 to less than 0.5 mbd in 2011. This resulted in the total collapse of the economy.
After this crisis situation the economy formed back in 2012 as oil production increased much faster than expected, reaching an uprising of 1.4 mbd. It is clear from the crisis situations that the country had to undergo, that as long as oil production and oil price remain at a constant level, the Libyan economy would be able to manage to get back up to a suitable standard for the country not collapse economically.
The civil war that took place in the country disrupted production, facilities and pipelines, causing a dramatic fall in oil production rates from an average of 1.7 million barrels per day (mbd) in 2010 to less than 0.5 mbd in 2011. This resulted in the total collapse of the economy.
After this crisis situation the economy formed back in 2012 as oil production increased much faster than expected, reaching an uprising of 1.4 mbd. It is clear from the crisis situations that the country had to undergo, that as long as oil production and oil price remain at a constant level, the Libyan economy would be able to manage to get back up to a suitable standard for the country not collapse economically.