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WEEKLY NEWSLETTER
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Libya
Index
An instructor teaches students in an automotive repair class
Courtesy United States Information Agency
Growth in Libyan industrial capacity began in force only after
1969. Earlier manufacturing efforts concentrated primarily on
processing domestic crops and livestock products and on handicraft
products. Before the revolution, 90 percent of Libya's
manufacturing establishments were located in Benghazi or Tripoli,
and 75 to 80 percent of these were owned by Italians. Nearly 90
percent of the manufacturing establishments were private, and most
employed fewer than 20 workers.
This situation started to change after 1969. After marking time
for almost a year, the new government opted for a restricted
industrial policy resembling the policies of Egypt and Algeria. In
the late 1970s, the industrial sector (including manufacturing) was
planned by the government, which had assumed control over those
aspects of industrial production that were deemed sensitive or too
large for the domestic private sector. The new policy leaned
heavily on freeing industry, including manufacturing, from
dependence on foreign ownership or control. In what appeared to be
in part at least a function of its new policy, the government
required local companies that engaged in trade to be Libyan and
nationalized the properties of Italians, who represented the bulk
of the country's entrepreneurship and private sector.
Before 1980 the government concentrated on developing light
processing and petrochemical industries. Processing of foodstuffs
continued to remain a high priority, and the largest number of
plants built during the 1970s were in this area. Other major
manufacturing projects during the decade included textile
complexes, a new oil refinery, two petrochemical plants, a
fertilizer factory, and an electrical cable plant. Gains in value
added from manufacturing over this period were impressive. In
constant 1980 dollars, value added in manufacturing rose from
US$196 million to US$760 million in 1983. Still, in terms of
contribution to GDP, in 1983 manufacturing contributed only 4
percent of the total. (See;
table 6, Appendix.) In that year, an
estimated 80,500 people worked in the manufacturing sector, about
7 percent of the total labor force. Light industries--mainly food
processing--continued to comprise the largest share of total
manufacturing capacity by the early 1980s.
Encouraging the development of heavy industry became a high
priority for the government in the 1980s. The 1981-85 development
plan called for the allocation of LD2.725 billion to heavy
industry--15 percent of the total development plan allocation and
second only to agriculture at 17 percent. However, as indicated
earlier, because expenditure under the development budget was
highly dependent on oil revenues, actual expenditures often failed
to reach planned levels
(see Public Finance and Banking
, this ch.).
Thus, the government's drive to build heavy industrial capacity in
the 1980s has been hampered by declining revenues, and many
projects were running behind schedule.
Key heavy industrial developments under construction in the
1981-85 plan included an expansion of the ammonium/urea plant at
Marsa al Burayqah, a new ethylene unit at Ras al Unuf, and the
large iron and steel complex at Misratah. The Ras al Unuf ethylene
plant was completed in 1986, and the other two projects were
nearing completion in early 1987.
Projects in the early stages of development in 1987 included a
fertilizer complex at Surt, an aluminum smelter and coke plant at
Zuwarah, and a further expansion of the Ras al Unuf petrochemical
plant. However, all these projects were in serious jeopardy, as a
result of the 1986 decline in oil prices, and Libyan planners were
re-evaluating the impact of industrial projects on the balance of
payments .
During the period of high oil prices before 1981, the
development of import-dependent heavy industry seemed feasible.
Libya enjoyed cheap energy costs in comparison to Europe and
possessed the foreign exchange to pay for raw material imports. The
1980s decline in oil prices has reduced Libya's advantage in terms
of energy costs and greatly cut into its supply of foreign
exchange. Whereas in 1979 it may have been possible for the
government both to import industrial raw materials and subsidize
food imports, by 1987 it was becoming increasingly clear that the
available foreign exchange was insufficient to accommodate both
programs.
This problem was obvious in existing industry during the mid1980s , when production and productive capacity ratios for selected
manufacturers varied substantially from year to year, depending on
whether imported raw materials were available. To cite a dramatic
example, in 1983 Libya had a productive capacity of 18,000 washing
machine units but produced only 4,533. As a result of cutbacks in
foreign exchange allocations in 1984, only 289 machines were
produced (productive capacity remained unchanged); thus, used
capacity decreased from about 25 percent to under 2 percent.
Used capacity in other manufacturing industries varied widely.
In 1984 oil refining operated at 36 percent of capacity, methanol
production at 84 percent, ammonia at 91 percent, and tractor
production at 67 percent. The country's unused manufacturing
capacity could be traced not only to the scarcity of foreign
exchange but also to Libya's general shortage of labor.
The construction industry has played a prominent role in
economic development, as one would expect in a country largely
devoid of infrastructure before the mid-1960s. The construction
industry got its start as a result of foreign oil company
investment during the 1960s, but since 1969 it has grown in
accordance with the government construction projects called for in
the successive five-year plans.
In 1975 the government began to reorganize the construction
industry to make it more efficient. At that time, there were about
2,000 contractors, many of them small proprietorships or
partnerships. The minister of housing was given the authority to
merge contracting firms into a smaller number of larger firms
capable of carrying out large construction projects. Firms with
capital in excess of LD30,000 were converted into corporations, and
the majority shares were sold to the public or the government.
Previously, the government had set up several state-owned
construction companies to build factories and to carry out civil
engineering projects. Among the firms were the National Industrial
Contracting Company, the General Corporation for the Construction
and Maintenance of Roads, and the General Corporation for Civil
Works.
The many government-sponsored construction projects of the
1970s created a booming industry, so much so that by the end of the
decade Libya had become the world's leading per capita consumer of
cement. This was a significant economic achievement, particularly
because the 1978 housing law effectively had eliminated private
residential construction. In 1986 construction supplied about 11
percent of GDP, second only to public services in the nonpetroleum
sector.
The construction industry, however, was damaged more than any
other sector by the severe cutback in the number of foreign workers
in Libya in the mid-1980s. Between mid-1983 and mid-1984, the
number of construction workers dropped from 371,000 to 197,000,
mainly because of the departure of foreign workers. Nonetheless,
construction remained the number one employer during 1984.
The cutbacks in development spending, together with the foreign
worker exodus, led to a decline in overall construction. As an
illustration, in 1985 the cement industry, which had been expanded
during the building boom, was capable of producing 6 million tons
a year, but domestic demand had dwindled to only 4.5 million tons.
In addition to the construction decline, there has been a rapid
decline in another economic area, that of traditional handicrafts.
Rural artisans have taken up more lucrative employment, and
utilitarian handmade products have been replaced by factory-made
goods. In an effort to provide continuous employment for those
artisans who desire to continue their trades, the government has
set up several training centers and provided subsidies for raw
materials. Most artisan production is purchased by the government
for resale or export. The more popular craft items are carpets,
pottery, leather goods, fabrics, and copperware.
Data as of 1987
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