Contractors in Libya have begun working directly with a new network of state-owned utility firms, in the first sign that plans to disband many of the existing government ministries are taking effect.

Libyan leader Muammar Gaddafi announced in March that many of the country’s ministries would be broken up or replaced because of their inefficient bureaucracies.

As part of that plan, the ministry dealing with the country’s utility networks, known as the General People’s Committee for Electricity, Water & Gas, has now set up a series of companies to manage the sectors under its remit.

The new companies include the General Company for the Transport & Distribution of Gas, the General Water Company and the General Desalination Company.

The existing General Electricity Company of Libya (Gecol), which is responsible for power generation and transmission, remains in place.

However, it is thought that a separate transmission company could also be set up in the future, leaving Gecol with power generation.

Contractors are already dealing directly with the new companies. “Our customer is not the ministry anymore,” says one international desalination contractor. “It is the General Desalination Company.”

The new company was established in Benghazi, Libya’s second largest city, and is being run by former senior Gecol managers.

“It is the same people,” says the contractor. “We have not seen any change. We are still dealing with the same people.”

“The ministry is no longer the operational body,” adds a source at one international consultant that has worked extensively on utilities projects in Libya. “The companies are the operational arm of the Libyan government.”

The new companies are state-owned, but there is speculation that they could be privatised as part of Gaddafi’s wider plans to reform the state sector, including handing more of the country’s oil wealth directly to the people.

On 31 August, Gaddafi reiterated his plans to abolish most of the country’s ministries and transfer its oil wealth into private hands in an effort to combat corruption.

Gaddafi also implied that the electricity sector would also be privatised.

“Pay money and the electricity company will become commercial,” he said in a speech to mark the 39th anniversary of the revolution that brought him to power. “Give it money and it will supply you with electricity.

“But when it is owned by the government, the state can act in these matters. It can say ‘extend the electricity [network] to this person, our friend’.”

The Electricity, Water & Gas Ministry was only established in late 2006. Omran Abu Kraa, formerly head of Gecol, was appointed as the head of the then new entity.

At the time, foreign contractors working in Libya were optimistic about the move. The hope was that Abu Kraa would be able to improve the efficiency of the sector because of his experience at Gecol.

Two years later, however, there is still widespread dissatisfaction among contractors dealing with the ministry.