DEVELOPMENT OF LIBYAN ECONOMY SINCE 1969 THESIS SUBMITTED FOR THE DEGREE OF Doctor of Philosophy IN ECONOMICS By NIGHAT ALVI UNDER THE SUPERVISION OF Prof. Mohammed Shabbir Khan DEPARTMENT OF ECONOMICS ALIGARH MUSLIM UNIVERSITY ALIGARH (INDIA) June 1982 \ /^3<9^ CIL. u-li ABSOIRACT Oil was discovered in comnercial quantities in 1559 and since then its revenues have been increasing and forming the "bases for the countr3''s social and economic growth and development. Petroleum is an exhaustable natural resource and although jjihya possess a considerable amount of oil reserves, it is still limited. The oil market is not controlled by Libj/a, so the possibility of crises or finding a substitute, make it unacceptable for the coumtry to depend on oil as the onl;;,' source of income. ICtiiie oil is being depleted the countr^ should seek solutions Lo its problems. Ihe coun Lr;;^' must finci ano ihcr source of incoine to subs li- tute for oil. A feasible substitute seems to be industrialisation. Tlxe Gomiir;} has the necessar;y capital for inve.jtmciit in capital ^oods and social and overhead capital, ana it has the necessary cheap I'uel and some of the needed raw material. 'Ilie country need to proceed into the indus­ trial field caref-illy with extensive studies, since it does not have the industrial experience either in the public sector or in the private sector. llie country's main problem is the lack of incustrial labour, both skilled and •unsld.lled. Therefore it need to encourage labour into this field and help to train them. The government intervened directly and and indirectly in helping the country to industrialise, and progress has been recorded in this field, both b;y the private sector and to a greater extent by the public sector. Ihe country's industrialisation is exi)ected to be a success ixnd to give the country the needed economic security. It does not mean that the other sectors of the economy should not be de 11 developed, "because they are highly developed. Other sectors of the economy especially a{<;ricultural sector are equally important and need attention. It should he an roiond development and one sector should form the basis of the other. Tlie development of oil industr;>' and the resultant increasini^' reve­ nues had a {jroa L impact on the socio-GConoLiic life of the country, causing the economic structure to ho changed. Trie Libyan economy before the aiscovory of oil was dependent upon foroi^^'n aid and the revenues from few ajricultural ezports which irac very insufficient for economic devel­ opment of the countr;)'. 'llie per capita income was one of the lowest and the public work was undeveloped. Ihc country \u.v, verj- much affected by Luc Iliid I'forid liar and much of i Is infrastructure was lost in the war. ilxC diijcovery of oil gave the coun cr;, a chance to ex[:)erionce a ii±{ja rate of economic (^.-rowth. But that opportuni^^ wac not jsroperly availed at Iha L Lime by the jjibyan ^-overnment. 'Ihe Libyan people were still poor after many years of the oil discovery. Ite most important evenM; in the Libyan history is the First September I969 Hevolution when a few yoixng army officers overthrew the monarchy and established the military rule under the leadership of Colonel Qathafi which latter became a socialist state. It is since that period that we are going to analyse here. A modern educational system, communication, industry, trade, and agricultural development all accompanied the revolution of 1969* Ibe problem is that oil is an exhaustable commodity and is not going to last for ever. It is unacceptable for a country to depend on one resource in its economy, especially if the price of the commodity is not stable. Oil constitute about 99 pei" cent of the country's total IIX exports and about 60 per cent of its general national product. It is obvious bhat Libya depends on only one so\irce of income. Libya is a developing country where the revenues from oil provides a golden chance and briir_,ht hope for future development. The country needs security for continuing this process of development. 'Rie diversification of the economy is the most desirous goal in securing the path to a better future, 'itiis goal can be achieved through industrialisation of tne coiintry. Ind­ ustrialisation will both answer the need of bhe country' for diversifica­ tion anu increase tne per capita income, ii'ouj' factors are necessary for every coion ti'y in order to develop its economy! capital, foreign oxci ange, Si'dlled labour, arid a Liarket. Capital and foreign exchange proseul no :ii-oblon for Libya. fhe tuird factor, skilled labour, is wi-a t t.ie cuuutr;; is or^ in^ to develop through ttie s^steii of ecucation, vocaoiouai trailing, on-the-job training for Libjans by imported labour and encouragement of the Jeaouins to receive education and turn to industry and agriculture, liie fourth factor also presents some ijroblem as there is lack of communi- Cc„tion and trans])ortation facili Lio,o but it is hoped that the conditions will improve in the coming years, heavy investments are made in this field by bhe [government. The development of communicaiion and transpor­ tation system will help in the expansion of local and external markets wiiich can be further developed by better production and governmental nelp for exports through trade agreements. Libya in developing its industry, should not neglect agricultural and other sectors of the economy, but more importance should be given to industrial sector. Libya in its search of development needs to find its own way—a way acceptable to Islamic law. Islam indicates that the gov- ernwent must act for the good of the society; The Prophet said, " all of you are manag°^s and every manager is answerable to those whonn he manages." Therefore, the governucnL is the manager of the society' and is responsible for its good. It must interfere, if needed, as much as required. To Luslim^ Islam is no I only a religion but also a way of life. Q3,thafi claimed that he has found a way based on Islam which he called a third way in his Green liook and provide solutions to economic, social and political problems of the society. Tr-e Lib;yan economic development is an unusual and interestini^ expe­ rience in the developing world. Even tho worst cri Lies of Liu;ia's poli­ tical 3 fcratt.g;j concede that the structural change in tho pattern nas ^roatiy influenced tho conditions of tho masses in a positive maniior. .uiu oj a L _'enains probably the most convincing rationale of watchint_, the couroc o± c-Gonoiiic uevelopmtnt of hor multi—dimensional but integrated economy aurin^j the revolutionar;) era in tue mirror of its immediate past, 'llie new econo lic tec\/i i oal LJ. O as have emergent from the last two plans along with "cheir special bearings and the im.pact of these plans on che society is a rewarding and facinatini^ subject of studi''. All economic ana social changes in the revolutionary era in contrast to the stagna­ tion of pre-revolutionary period go to make a topic, the study of which is worthwhile in many ways. Every covintry has different circumstances for its econom.ic develo­ pment. Economic development started in the 18th century in Western Europe with the development of industry, follovred by the rest of the European and other countries. But this exam.ple cannot always be a good guide to the development for every countrj'. Circumstances are now different from those which prevailed in the loth century. The developing V countries, most of them ex-coloniesj are not in a position to follow the English example, since they do not have colonies where they can huy cheap raw material and SHII it back as a manufactured products at a higher price. Most of the middle eastern countries are poor and a ^'reat number of obstacles stand in their way such as lack of skilled manpower, and lack of absorptive capacity. Lilya iras one of the poor countries before the discovery of oil. The revenues from oil has given the country' the chance to join the family of developintj,- nations. But oil has tied the country's economic growth to the export sector, and gTowth in the export of oil over all other sectors has secured the way for development. Libya as a latecom.er to econom.ic development can get all advantages of modern l-oiowhow for industrialisation. Ihe releviint questions are: what pe.th the country should follow for its develoTjment? Is it the agricultural iray, which was one. of the source of incc.ie for the country before oil or is it the industry? If it is inuus trj' what kind of industry, light or heavy; What kind of techniques ;j,re gQl;^j to 'lo used? Is it to be capital using and labour saving or labour using and capital saving? The circiimstances in Libya are unique because the coxintry has agricultural land but an underdeveloped water supply. The necessary water must be developed before the coiintry can strive for increasing investment in the agricultural sector. Libya need to industrialise not because it is the trend of most of the underdeveloped nations and not because of national pride, but because it is the country's way to a better future. It will develop the country faster. Libya is a country with abundant capital but a shortage of labour. The country has necessary fuel to produce energy for industry and possesses the necessary raw material for some industries like steel and some food processing industries, "but it is necessary for Litya to use these existing resources effectively to develop its industries and diversify its economy.