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Americans Called on to Help Reform Libya (LEE KEATH 03.12.07, Forbes)

Gadhafi's change of heart on the economy comes after dramatic changes in Libya's foreign policy in the past few years. He renounced weapons of mass destruction in 2003 and promised to pay compensation to 1988 Pan Am bombing victims, and won a lifting of economic sanctions.

Transformation to a market economy could prove more difficult.

Oil has made Libya the richest country in North Africa, with a gross domestic product of nearly $75 billion. Despite that, hospitals, schools and roads are in poor condition. Unemployment is estimated as high as 40 percent and 1 million of the 5.6 million people live in poverty. Of those with jobs, 97 percent work for the government.

A top goal of the program is to encourage Libyans to become entrepreneurs, opening their own businesses or linking up with foreign investment.

The government would privatize banks and other state firms. Tens of thousands of government workers would be encouraged to leave their jobs with promises of three years' salary and training to open businesses. The hope is to build up sectors like construction and tourism - using Libya's extensive Phoenician, Roman and Islamic antiquities as a draw.

By any standard, Libya has a long way to go.

Beyond oil, there is little industry. Gadhafi himself has complained in recent speeches that "nothing is produced in Libya."

Corruption is widespread. In the ranks of the bureaucracy and state-owned companies, some workers hold multiple jobs, collecting paychecks for all but rarely showing up at any.

In theory, Libya is democratically governed by the "rule of the masses," outlined by Gadhafi in his 1976 "Green Book." All citizens participate in Popular Congresses that form government policies.

In practice, it is highly centralized - putting ultimate power in the hands of Gadhafi. But at the lower levels, the control breaks down.

"You have a situation where no one knows who's in charge, so nobody's in charge," said Michael Porter, a competitiveness expert at the Harvard School of Business who is part of a team of American consultants called in to help draw up the reform plans with the Libyan government.

Ironically, Porter was a top adviser to President Reagan, Gadhafi's nemesis in the 1980s.

Why "ironic"? After all, Reagan won.

Posted by Orrin Judd at March 12, 2007 7:15 PM