(MENAFN - AFP) Small businesses are prospering in Libya's major cities even as the economy at large is being throttled because of security problems and industrial action which has shrunk lifeline oil revenues.
Its financial woes combined with lawlessness has so far discouraged the return of multinationals, three years after the outbreak of an armed revolt which toppled long-time dictator Moamer Kadhafi.Post-war reconstruction has been slow, with major infrastructure projects on the back-burner even as Libyans endure more and more frequent power cuts, especially in the west of the country.Small businesses have been leading the way in post-Kadhafi Libya, with shops and boutiques in Tripoli and other cities boasting the latest in luxury brands."These investments are thanks to partnerships with foreign investors," said chamber of commerce chief Idriss Abdelhadi.Such joint ventures have "promoted investment in the private sector at a time when the oil crisis has slashed the state budget, not allowing spending on planned development projects," he said.Economic experts, however, stress that trade and services play a secondary role in the overall Libyan economy, with only little value added.
The oil crisis dates back to last July when striking workers and pro-autonomy demonstrators in eastern Libya began blockading the country's main terminals.The action sent production shooting down to as low as 250,000 barrels per day, compared with 1.5 million bpd before the strike.In early January, launch of production at Al-Sharara field in the south after protesters in the area lifted their blockade allowed the country's total output to recover to 570,000 bpd.The oil sector accounts for 7 percent of GDP, 95 percent of state revenues and as much as 98 percent of Libyan exports.
Only last week, protesters shut down oil and gas pipelines to the Millitah plant from Al-Wafa field in southwest Libya.Their action brought output back down to 460,000 bpd, National Oil Company spokesman Mohamed al-Hrari told AFP.- Diversification and private sector -The World Bank, in a report issued last month, stressed "the urgent need for economic diversification in order to ensure long-term financial and economic stability".
It called for reforms "to generate a vibrant private sector", warning that "lack of access to financing, uncertainty in the legal environment and a fragile security situation" were key obstacles.Ahmed Belras Ali, director of Libya's stock market, warned of "a climate of fear among businessmen"."The stock market has lost an estimated 30 percent of its value because of falling share prices," he told AFP.Ali said hopes were pinned on the private sector, "which can serve as an engine of the economy, what with the current weakness of state structures".Libya has lost more than 10 billion in revenues because of the crisis, according to estimates from the oil ministry and the World Bank. Prime Minister Ali Zeidan has even warned that "the government could have difficulties paying salaries".Revising its forecasts, the World Bank said a 2012 fiscal surplus is now expected to turn into a deficit of about five percent of GDP for 2013 and four percent this year."The government has had to dig deeper into its large stock of foreign reserves, which stood at 124 billion at end 2012, to finance its budget deficits in 2013 and 2014," it said.