After decades of international isolation, Libya has eagerly seized the opportunities offered by the thaw in relations with the West and the end of US sanctions.
Huge hydrocarbon wealth, supporting a small population, is being channelled into massive public investment in new infrastructure. Real estate and tourism are developing too, along with private business, although it is government that continues to drive forward the development process.
Libya is nominally still a revolutionary state. But the central role played by national leader Muammar Qadhafi and his sons, and the importance of traditional social structures, invite parallels with the condition of the Arab Gulf 30 years ago – what one analyst describes as “a tribal petroleum economy”.
The scale of the resources available – by September last year the assets of the Libyan Investment Authority had reached $136 billion – should enable the government to avoid the intense social pressures of housing and employment that Algeria faces. But there is still a long way to go in strengthening commercial business activity.
“Most of the jobs that are created are in the public sector,” says Garbis Iradian, senior economist for Africa and the Middle East at the Institute of International Finance.
However, he says, Libya does not exhibit Algeria’s wariness of foreign investors. Although it is still bureaucratic, it is increasingly liberal in its attitude towards foreign investors: “Overall, I would say Libya is opening up.”
This difference in approach is evident in finance too. “Libya is also moving down the banking reform path, using the privatization of Wahda Bank and Sahara Bank to bring in experienced international partners with the skills needed to handle specialist activity such as project finance,” says Anouar Hassoune, senior analyst at Moody’s, the investment rating agency.
“In Algeria, the banks are highly liquid, but the process of liberalization has been slower.”