Thursday, September 22, 2011

  • Thursday, September 22, 2011
  • Elder of Ziyon
The Economist Intelligence Unit has an interesting analysis of what's next for Libya. There is a lot of good information in the document, although I am far more pessimistic about the potential political future of the country than they are.

Here is their summary:

Libya’s rebels have pushed the regime of Muammar Qadhafi out of power, and are poised to take complete control of the country. This in itself is a monumental achievement, but it marks only the start of what is likely to be a long and fraught process of rehabilitation. The new leadership must rebuild a state that for decades was run on the whims of an authoritarian leader, determined both to monopolise and to hold on to power. There are few institutions that work, and even fewer that work to the benefit of the general population, so the challenge amounts to little short of building a functioning state from scratch. Views on what form that state should take are as diverse as the regional, ideological and sectarian interests making up its would-be architects, and these stake holders must be persuaded to support the process—or at least not to obstruct it—before it can even begin.

Libya is strategically placed, adequately supplied with talent and well endowed with natural resources. If the state-building exercise is successful, it can quickly become a stable and thriving economy, offering a range of opportunities to business investors both at home and abroad. But the challenges are numerous and substantial, and a post-Qadhafi dividend is not guaranteed. This report spells out those challenges, and the business opportunities that would be the reward of success.

The first section of the report looks at the political outlook. The Economist Intelligence Unit identifies three scenarios, and attaches probabilities to each.

Scenario 1 (60% probability): According to plan - Elections to replace the National Transitional Council (NTC) with an elected government based on a new constitution take place more or less on schedule, although the election results in a weak government and parts of the country remain insecure.

Scenario 2 (30% probability): Permanent transition - The NTC struggles to overcome internal disputes and is distracted by security problems and by outbreaks of popular protest at its failure to deliver adequate services, and therefore fails to stick to its blueprint. The NTC becomes a de facto regime.

Scenario 3 (10% probability): Prolonged instability - The NTC loses control of security and fails to establish an effective interim government. Local groups including remnants of Qadhafi-era people’s committees and Islamist militias take charge of different parts of the country, threatening the viability of Libya as a unified nation state.

The second section of the report starts from the assumption that our central scenario, that the NTC blueprint is adhered to, comes to pass. We then look at the implications and opportunities for business, sector by sector.
I would reverse the probabilities for each political scenario.

The report does give some reason for its relative optimism that Scenario 3 is unlikely:
We consider this scenario to have a very low probability because of the powerful interest that Libyans have in retaining a functional unitary state. The NTC has already established a solid basis for a new Libyan state, and has overwhelming international support. This means that it will have control over the proceeds of Libya’s oil export revenue (past and present), which gives it immense powers of patronage, which would be denied to any breakaway faction.
I am not convinced that, in the Arab world, what makes sense is the most likely to happen. Although the report downplays the chances for Islamist trouble, if recent history is any guide Libya is going to be a magnet for Islamists in the next few months. Chaos strengthens them. And it only takes a small number of rabid fundamentalists to disrupt the will of the majority.

The US Energy Information Administration came out with its own analysis of the likelihood of Libyan oil flowing again soon.

 Either way, timing is important - Libya has only 3-6 months of cash to keep going and it needs to get oil revenues before then.

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