The cabinet reshuffle that "ousted" the reformist Shoukri Ghanem from his prime minister position created a great sense of uncertainty about the outcome of the change and worried western governments and their oil companies. Global oil corporations in particular have begun to increase their investment in the country ever since Libya accepted to pay compensation in the Lockerby case and dismantled its weapons of mass destruction program. Aware of the consequences the impact of the reshuffle would have on foreign investors' confidence on Libya, the new prime minister who replaced Ghanem reacted quickly by promising that reforms will go on.
It has also become evident that the Benghazi events, as Libyan affairs analyst Alessandro Bruno pointed out, were a tipping point that accelerated a change in leadership, while maintaining a certain degree of continuity.
The fast transformation of Libya as it joins the global economy and the "Ghanem Impact" have been felt by many powerful figures in Libya as risks to the stability of the country and a challenge to their political and economic position. The intensity of the debates that took place in the recently held People's General Congress meeting illustrates the tension that Libya's opening to the world is creating internally. The intensity of the debates could not even be tempered by the intervention of Muamar Kaddafi himself, as he wanted to calm fear and guarantee that changes will not be abrupt. But Kaddafi's problem is that he has been seen as allowing too much openness as he has generally sided with his reformist minister Ghanem on most issues.
For Ghanem, the "conservative old guards" have been sending him warning signals for months essentially pointing to his policies as being serious problems for them. The old guards are essentially composed of the influential members of the Revolutionary Committees, representing the symbol of the Libyan regime that plundered the nation's resources over the past three decades. Ghanem's actions as Prime Minister went against what these old guards have been accustomed to and as such, a conflict was just a matter of time, when the opportunity would allow an open confrontation.
But for Ghanem the battle against the "old guards" was not a fair one and victory was not on the horizon.
Even if Kaddafi was to provide all of his support to Ghanem, as he most likely did, and despite the support he enjoyed from many senior military leaders and within the Popular Committees, the Prime Minister could not, ultimately, withstand the attacks from the old guards led by the powerful Ahmed Ibrahim.
Western Support and a Kaddafi Endorsement Were Not Enough to Protect Ghanem from the Old Guards.
The success of Shoukri Ghanem was largely due to the support he received from the Americans and the British; precisely something his opponents have been using to delegitimize him. His success was also due to his ability to apply the concept of "changes within continuity", an equation that challenged the status quo while still introducing incremental transformation, a position not shared by the conservatives. Among the positions he took recently that helped him gain popularity and then added support from Kaddafi was his remark to the Chinese foreign minister when this latter criticized Libya for inviting the Taiwanese president.
Ghanem's reply was rather straightforward when he stated, "When Beijing recognized the State of Israel, it never requested Tripoli's permission." This firm position helped him score some points, taking his opponents by surprise and gaining more support from those who protected him politically. For Kaddafi this was another good move from Ghanem who also recently convinced four American oil companies (Oasis Group) to invest some $10 billion into Libya, more than the $7 billion promised by the Libyans to the families of the victims of the Lockerbie case. For Ghanem having Kaddafi's support and attention was an achievement in itself as no one has benefited from such trust in the past. Kaddafi is known for not trusting anyone.
A Powerless Prime Ministry?
Contrary to what many believe, in particular the opponents of the former Prime Minister, Ghanem did not fall out of grace when he was forced out of his position of head of the government. This is because the prime ministry as an institution was never a center of true decision-making in Libya. Instead, Kaddafi appointed Ghanem to lead the national oil company NOC, the company that is at the heart of the Libyan economy.
Ghanem replaced Abdallah Salem Al-Badri, who is reportedly seriously ill. The illness of Al-Badri may have also accelerated the transfer of Ghanem to NOC.
But it is abundantly evident that the cabinet reshuffle came as direct political and security consequences linked to the February events that occurred in Benghazi. The Libyan leader (Kaddafi)who thought he had the system finally under his control, realized that the old guards have been attempting to reassert their position in the political scene by going on the offensive against the economic reforms led by Ghanem and the western governments' pressure to release the political prisoners held in Libyan jails. The result was a police crackdown on Benghazi demonstrators that led to several deaths and 150 wounded. Finally as a result, Kaddafi retracted back to his total distrust of the system leading him to rehabilitate the Popular Committees, which act as monitors and as a security apparatus on his behalf. This was a turning point for Kaddafi who a few months ago called the members of the Popular Committees "hooligans who forced the Libyan elite to flee their country."
Selective Economic Reforms, Setback for Political Reforms
The stage is now clearly defined and set. Having a firm policy to neutralize the "enemies" of the regime (i.e. the old guards) cannot be achieved by having a reformist as the head of the government because such person would not be able to engage them and deal with them appropriately. Such was the conclusion of Kaddafi. On the other hand, Ghanem's departure from the prime ministry came at the perfect time when the head of NOC had to leave his post due to illness and that only a man the status of Ghanem can replace.
The new Prime Minister, medical doctor and civil servant Al Baghdadi Al-Mahmoudi, reassured oil companies and Western governments that his country will go on reforming its economy to attract investment and lower unemployment. The banking sector is also targeted for an overhaul. Al-Mahmoudi confirmed that the Ghanem economic plan will continue to be implemented. Meanwhile, a setback should be expected on the political reform front despite the recent release from jail of 180 political prisoners, including 80 key members of the banned Muslim Brotherhood organization. The release came as a result of a deal between Kaddafi and the Islamist organization.
Since June 2003, Libya has been moving toward a wider privatization of the public sector. State-controlled economic activity accounts for 75% of GDP, while foreign investment has been limited to just $700 million.
The privatization of state assets would help raise investment inflows. Libya is planning to invest $30 billion to raise its hydrocarbon production by 40% in five years' time. The two successful tenders aimed at selling exploration licenses launched in 2005 were part of this strategy of partner diversification. The return of the American giant Occidental Petroleum to its 1986 Libyan operations and the resumption of the Oasis Group's activities (Conoco Phillips, Amerada Hess and Marathon) have had an encouraging impact on the Libyan authorities to continue on the path of reform. But the Libyan government appears less willing to reform the oil and gas sector and open it to private or foreign ownership. For now, the hydrocarbons sector will remain state domain, contrary to neighboring Algeria's move toward liberalizing that sector. Two other sectors that will remain nationalized are the telecommunications and cement industries. In contrast, the liberalization of tourism and the banking sector is underway. In the tourism sector, the Libyan experience is showing positive momentum with investors coming from Switzerland, the United Arab Emirates, Italy and Britain with money already committed to build tourism infrastructure in Libya. For this experiment to continue and fully succeed, the Libyan authorities must insure that riots such as those of Benghazi are minimized or foreign tourists will think twice before visiting Libya. As for the banking sector, nothing is clear at this stage. There is opposition to its liberalization as many Libyans see it as a strategic sector of national security interest. There has been no progress on this issue despite Kaddafi's call to allow private banks to operate in Libya and to revise the nation's law to allow foreign banks. Ghanem, for his part, has been convinced that without the opening of these sectors through a reform process, the Libyan economy would never improve.
By Arezki Daoud
© The North Africa Journal 2006
