Economic reform and the opening up further for the private sector to take part in the production of goods and services in Libya have been underlined by an article by former Secretary of Economy and Trade Dr. Ali Issawi, published in the biweekly Maal Wa A’amaal (Finance and Business) last week.

The article entitled ‘Who Will Free the Cat’ was critical of economic reform policy in Libya with regards to competition, bureaucracy, laws, company establishment rules, company capital requirements, the black economy, corruption, Izala (demolition & re-development) industrial and commercial parks, urban planning, dual pricing, removal of state subsidies and market distortion.

Issawi said that 'the existing administrative and bureaucratic restrictions on the practice of commercial activity within the law as a result of the unfair laws, procedures and requirements…(are) leading to the black economy to a degree that has not been accurately measured'.

A good example of such unfair requirements, he said, is the 'minimum capital for company formation of 100,000 LD when over 40 countries in the world have cancelled this prerequisite…thereby… opening the doors for the young and newly graduated to start their lives and establish their companies according to their (financial) abilities'.

The article points out the unfair treatment of Libyan companies and businesses comparing foreign companies working in Libya: foreign companies were established with a capital of 100 pounds sterling, some with the equivalent of 3,000 Libyan Dinars and some of which with a capital of only LD15,000 working in the oil and gas sectors some of which have contracts worth a billion dinars'.

To further emphasize the inequality of competition between Libyans and foreigners working within Libya he says that 'in the meantime Libyan companies are not allowed contracts that exceed their capital by 20 times (yet) we find that this condition is not applied to foreign companies."

The precondition is that every Libyan company needs to have a legally acceptable base or location address within the official urban planned areas before it is established. Dr Isawi feels that in view of the Izala/demolition and urban regeneration program, and the fact that the industrial zones/parks are not ready this condition represents an unfair demand. But foreign companies do not have to go through such a vigorous company formation process as local companies, he added.

“The conditions set are not only unfair towards Libyans but biased also towards the foreigner…a fact that I do not think exists in any other country in the world,” wrote Mr. Issawi.

Even the famous Investment Law No. 5, in its original 1997 version, gave incentives and advantages to foreign investors that were not allowed for local investors. Only after great complaints from locals was the law amended in 2007.

'In Libya it’s the reverse ...where ...foreign investors in different countries ask to be treated equally with the locals...Libyans ask to be treated equally with the foreign investors and companies’.

"These restrictions contributed greatly in increasing corruption extortion and forgery ... it is necessary to working to realize balanced treatment and equal competition for all and the removal of restrictions and handicaps that are preventing lawful gain (income)", he stressed.

To remove state subsidies now, he said, would be like putting 'the horse in front of the carriage’ not the other way round. Only when many of the other market conditions are right such as the removal of barriers, restrictions and handicaps to doing business and equal treatment before the law and equal and fair competition – then only then can we talk of market prices and the complete removal of subsidies.

The removal of price subsidies alone is not the solution, as it is not the only cause of the distortion of economic activity in the Libyan market, he explained.

He also pointed out how Libya's average incomes were still lower than some non-oil rich nations that adopted a liberal economic strategy.
Finally Dr Isawi concludes by saying that 'the cat is not dead yet so some should free it?

I have tried and tried but was unable (to free it)' he concluded.