LBY - Economy

Economy

The Libyan economy depends primarily upon revenues from the oil sector, which constitute practically all export earnings and about one-quarter of gross domestic product (GDP). The discovery of the oil and natural gas reserves in the country in 1959 led to the transformation of Libya's economy from a poor country to (then) Africa's richest. The World Bank defines Libya as an 'Upper Middle Income Economy', along with only seven other African countries. In the early 1980s, Libya was one of the wealthiest countries in the world; its GDP per capita was higher than that of developed countries such as Italy, Singapore, South Korea, Spain and New Zealand.

High oil revenues and a small population gave Libya one of the highest GDPs per capita in Africa and have allowed the Libyan Arab Jamahiriya state to provide an extensive level of social security, particularly in the fields of housing and education. Many problems still beset Libya's economy however; unemployment is the highest in the region at 21%, according to the latest census figures.

Compared to its neighbors, Libya has enjoyed a low level of both absolute and relative poverty. In the first six years of the new millennium officials of the Jamahiriya era carried out economic reforms as part of a broader campaign to reintegrate Libya into the global capitalist economy. This effort picked up steam after UN sanctions were lifted in September 2003, and as Libya announced in December 2003 that it would abandon programs to build weapons of mass destruction.

Libya has begun some market-oriented reforms. Initial steps have included applying for membership of the World Trade Organization, reducing subsidies, and announcing plans for privatization. Authorities privatized more than 100 government owned companies after 2003 in industries including oil refining, tourism and real estate, of which 29 were 100% foreign owned. The non-oil manufacturing and construction sectors, which account for about 20% of GDP, have expanded from processing mostly agricultural products to include the production of petrochemicals, iron, steel and aluminum.

Climatic conditions and poor soils severely limit agricultural output, and Libya imports about 75% of its food. Water is also a problem, with some 28% of the population not having access to safe drinking water in 2000. The Great Manmade River project is tapping into vast underground aquifers of fresh water discovered during the quest for oil, and is intended to improve the country's agricultural output.

Under former Jamahiriya prime ministers Shukri Ghanem and Baghdadi Mahmudi, Libya underwent a business boom, with initiatives to privatize many government-run industries. Many international oil companies returned to the country, including oil giants Shell and ExxonMobil.

Tourism was on the rise, bringing increased demand for hotel accommodation and for capacity at airports such as Tripoli International. A multi-million dollar renovation of Libyan airports was approved in 2006 by the government to help meet such demands. Previously, 130,000 people visited the country annually; the Jamahiriya government hoped to increase this figure to 10,000,000 tourists. Libya had long been a notoriously difficult country for Western tourists to visit due to stringent visa requirements. Since the overthrow of Gaddafi's government, there has been revived hope that an open society will encourage the return of tourists. Prior to the uprising, Saif al-Islam Gaddafi, the second-eldest son of Muammar Gaddafi, was involved in a green development project called the Green Mountain Sustainable Development Area, which sought to bring tourism to Cyrene and to preserve Greek ruins in the area.

In August 2011, Ahmed Jehani, head of the Libyan Stabilisation Team appointed by the rebel National Transition Council, estimated it would take at least 10 years to rebuild Libya's infrastructure. He also noted that Libya's infrastructure was in a poor state, even before the 2011 civil war due to "utter neglect" by Gaddafi's administration.