Libya to Shut Down Most of Gvt in 2009

Libyan leader, Colonel Muammar al-Qadhafi, has confirmed his intention to abolish most government departments from the start of 2009, and to hand over the country's oil revenue directly to citizens to spend as they see fit.

• Colonel Qadhafi first outlined his vision for a whittled down government in his address in March to the General People's Congress (GPC), an annual gathering of the popular committees that notionally hold power in his "jamahiriyya" (entity of the masses).
• Little more was heard on the subject over the subsequent months. However, Colonel Qadhafi returned to this theme in a speech delivered in Benghazi to a rally marking the anniversary of the Fateh revolution that he launched on seizing power on September 1st 1969.
• He said that the new system of direct distribution of sovereign revenue would go into effect in four months time.
• He said that the only ministries that would remain would be those dealing with sovereign affairs: justice, security, defence and foreign relations.
• It would be up to the people to establish new entities to channel the funds that would be allocated proportionately from oil export revenue into activities such as health and education.

Ultimately, people would form companies to undertake projects such as the construction of houses, roads, bridges and airports. He observed that this was the only means to avoid funds being wasted in corrupt bureaucracy—repeating his earlier description of government as an octopus, sucking up the country's wealth and providing little of value in return.

• Assuming oil exports of 1.5m barrels/day, a price of about US$110/barrel and a Libyan population of 5.6m, the plan would entail about US$1,000 per month being available for every Libyan man, woman and child.
• Colonel Qadhafi's initiative reflects his evident frustration with the failure of Libya to take advantage of the combination of rising oil prices and a dramatic improvement in relations with the West to press ahead with economic development and modernisation.

Over the past five years, he has lent his support to a core group of Western-educated officials who have sought to reform the economy through opening the system up to private sector investment. However, progress has been painfully slow, owing to the lack of effective centralised decision-making and to obstacles erected by vested interests within the security elite.

• Public investment in infrastructure and services has similarly been held back by the chaotic state of the Libyan regulatory and administrative systems.
• His second-eldest son, Saif al-Islam, has been closely identified with the efforts to modernise Libya's government, but he has recently announced his withdrawal from active political life.

Colonel Qadhafi's proposals incorporate some of the ideas put forward by Saif al-Islam, notably in the promotion of private enterprise and the reduction of the powers of the bureaucracy. However, it is doubtful whether Saif al-Islam had in mind the wholesale destruction of the apparatus of government.

His denials of any differences with his father or with the "old guard" were hardly convincing.Saif al-Islam may have made a shrewd decision to step away from the limelight for a while. Colonel Qadhafi's plan—if indeed it is implemented—is likely to be every bit as chaotic as some of his previous initiatives, for example the early-1980s move to abolish retail trade and services such as hairdressing on the grounds that they were petit bourgeois.

The Rest @ Viewswire, The Economists, Econommic Intelligence Unit