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Libya’s new leaders vow to remake ‘cocktail economy'

Libya’s new leaders face immediate battles to get people back to work, tackle fuel and water shortages and improve security, but they are already eyeing a bigger goal: the complete transformation of the Libyan economy.

“The economic inheritance that we received from the old regime is a system that is completely and utterly destroyed,” according to Libya’s new economy minister, Abdullah Shamia.

For a man whose job is now to drum up business and help Libya and Libyans get rich, his assessment is bleak: “There is not a single sector that can add any value to the economy.”

That, according to Shamia, is because for 42 years the economy -- like much else in Libya -- was run according to the self-interest and whimsy of the Qaddafi clan.

The result was an eccentric blend of oil-based socialism, capitalism, paternalism and nepotism, with no clear direction or goals.

“It was a cocktail,” said Shamia.

But it was a cocktail with only one real ingredient: oil. It was the high quality crude that lies beneath Libya's desert sands that paid for all of rallies, private jets and foreign misadventures.

Today the oil sector accounts for as much as 98 percent of Libya’s export revenues, and experts say even that sector suffers from under-investment.

Libya’s National Transitional Council now wants to start building an economy that has a living, breathing private sector and that is not only dependent on natural resources.

“Diversification of the Libyan economy is a fundamental issue we need to deal with,” said Shamia.

While oil and the utility sectors might still see the state play a key role, Shamia hints at a rash of privatizations to come, and, he hopes, an influx of foreign capital.

That kind of investment will be needed to meet Libyans’ high expectations, fanned ever-higher by the fire of revolution.

While many citizens speak of their yearning for democracy, just as many complain about badly paid punch-in-punch-out government jobs to which the vast majority is indentured.

Libyans want their country’s oil riches to make them filthy rich and energy-rich Qatar, Bahrain and Kuwait are cited as role models for the future of the country.

But some experts fear the NTC’s earnest plans to diversify the economy, may be putting the cart before the horse.

“The most urgent task is to get the oil pumping again, they are going to have to put a lot of effort into rebuilding infrastructure,” said Mohsin Khan a former Middle East director at the International Monetary Fund now with Washington’s Peterson Institute.

“Until that is on track it is going to be very difficult for them to do anything, because there will be no revenues.”

According to Ross Cassidy, an oil expert with British research and consulting firm Wood Mackenzie it could take 36 months from the end of hostilities to get production back to pre-war levels.

Still, the NTC has a sizeable financial buffer-zone. It is estimated that the Bank of Libya and the country's sovereign wealth fund have around $170 billion in assets.

According to ex-IMF official Khan, “a good chunk” of that cash will be needed to rebuild infrastructure after months of sometimes brutal war.

Remaking Libya’s cocktail economy may have to wait for the next round.