LIBYA: Reformers make their move

Most of the delegates crammed into the conference suite of Tripoli's Corinthia hotel on

22 February have heard promises of economic reform before. And many have become doubtful whether Tripoli is capable of delivering real change. For despite the commitments of the country's reformers in recent years, there has been little sign of progress. But the fact that more than 500 delegates turned up for the launch of the Libyan Economic Development Board (LEDB) shows that there remains genuine interest in the country's long-term prospects.

Modelled on similar institutions in Ireland, Singapore and Malaysia, the LEDB is the product of the National Economic Strategy (NES) developed over the past two years with the US' Monitor Group (Cover Story, MEED 28:7:06).

The figurehead of the NES is Saif al-Islam Qaddafi, the second son of leader Muammar Qaddafi and chairman of the Qaddafi Foundation for Development. Launching the new body, he said: 'This is a momentous step and one which will increase opportunity and prosperity for the people of Libya. The LEDB has an important role to play in driving an entrepreneurial culture in Libya and providing support to business. It is a signal of Libya's commitment to the diversification and development of the economy necessary to position Libya as a major player in the regional economy.'

To convince doubters that the country is genuinely committed to change, Saif al-Islam also announced a raft of reforms. These include a promise to boost public sector salaries that will see healthcare and education employees receiving a 25 per cent increase on their basic salaries as well as a 237 per cent rise in their housing allowance. The rest of the public sector can look forward to a 110 per cent increase in wages. Salaries for those working for state-owned companies will grow by at least 120 per cent, while remuneration for oil sector employees will be boosted by 275 per cent.

All underprivileged individuals will also be given share portfolios of LD 30,000. These will be managed by the Economic and Social Development Fund.

A personal savings and retirement scheme will initially target children born in 2007 together with underprivileged youths under the age of six before eventually expanding to cover the entire population. The children in question will receive LD 2,000 from the government. In addition to government contributions, the scheme will be funded through mandatory employer payments and voluntary savings.

'A safety net is being put in place to give people the confidence that they can make their way in the new economy,' says Michael Porter, Harvard Business School professor and architect of the NES.

A new law to boost local investment will give Libyans many of the same advantages as foreigners seeking to do business in the country. Under law 6/2007, entrepreneurs will be exempt from import taxes, corporate income tax and stamp duty on contracts for five years and may apply for a three-year extension under certain circumstances.

The reformers are hailing the changes as a turning point in the history of the country. 'They hit some of the big weaknesses identified in the phase 1 assessment of the National Economic Strategy,' says Porter. 'They will start to put in place some structures and institutions necessary for the new economy.'

But even those leading the changes are aware that their reform plans will face resistance. 'Hopefully, the system will get out of the way,' says Porter. 'The mindset, the attitude has to change. Libya has traditionally been a conservative, risk-averse society. People did not believe change could happen. Any idea that was proposed was opposed.'

The initiative is also seen as an important statement of intent by Saif al-Islam, who some believe is being given the opportunity to show that he can be the future leader of the country. 'He is setting a supreme strategy which provides the guid