25 GENERAL LESSONS FOR LIBYA'S RECONTRUCTION

The lessons here below are extracted from a report prepared by The U.S. Agency for International Development (USAID) in 2004.

The TNC needs to create an optimal reconstruction effort, one that will delineate precisely the policies, laws, institutions, practices and individuals that will determine the context in which Libya’s economic activity takes place. An important question for the TNC is to organize and structure the reconstruction assistance. Does it have the capabilities and the resources (human, financial, technical) to do so??

Preparedness and Planning Before Hand

Lesson 1: Preparing for the post-conflict period should begin tight now and include the participation of various likely donors/contributors as well as include the participation of organizations likely to play a role in the post-conflict government.

Rational Sequencing of Government and External Assistance

Lesson 2: New, post-conflict government and external assistance should be well integrated and structured to address their tasks rather than merely reflecting underlying political tensions and activities of external contributors.

Focus on private-sector led growth

Lesson 3: Even at the initial reconstruction stage, growth and job creation should be expected to come from private-sector led growth and job, not government/contributor spending.

Security and Crime Issues

Lesson 4: Security is essential for reconstruction and economic development.

Lesson 5: Post-conflict reconstruction efforts need to prevent organized (and unorganized) crime from monopolizing economic sectors and from a creating a lawless environment that threatens legitimate businesses.

The economic reform agenda predating the conflict

Lesson 6: The economic reform agenda predating the conflict needs to be addressed early in the reconstruction effort, or underlying issuers that contributed to the situation will continue to fester.

Resolution of Final Political Status

Lesson 7:  Lack of resolution of final political status creates uncertainty and uncertainty impedes economic growth.

Programmes for key political and social constituencies

Lesson 8: Early programmes in reconstruction need to focus on key political and social constituencies, including social programmes to help the most vulnerable population groups.

Capacity Building

Lesson 9: Building new institutions for economic governance takes time and should begin early in the reconstruction process

Lesson 10: Training and educating individuals for economic governance also takes time and should begin early in the reconstruction process. Training in rote tasks such as processing business licences or managing a treasury system can be taught through on-the-job training. However, educating a professional class of analysts and policymakers requires multi-year grdauate education programmes, either in-country in newly redesigned local graduation programmes or abroad.

Lesson 11:  A modern policymaking process needs sound economic data, which requires considerable investments by donors to develop.

Sequencing

Lesson 12: High priority and time-consuming activities should be sequenced to begin towards the start of the reconstruction effort.

Lesson 13: The period at the very start of reconstruction, while difficult and chaotic, is also an important window of opportunity to understand politically difficult reforms and institutional changes- an opportunity that, if lost, might not reappear during the reconstruction process.

Macroeconomic and Fianancial Stability

Lesson 14: Prior to setting monetary and exchange policy, a post-conflict country often needs to create the instruments for setting and implementing policy: a money in circulation, a foreign-exchange market, market data on prices and exchange rates, and a policymaking process in an independent central bank.

Lesson 15: Exchange rate and inflation policy must balance the need for stability with the need of competitive exports, actively responding to neutralize the impact of external capital inflows and other post-conflict macroeconomic phenomena.

Lesson 16: Inflation policies should bring inflation rates down to low, stable levels while still allowing for adjustments in relative price levels.

Lesson 17: In financial sectors, policies should focus on the basics of creating a payment system and of establishing a rudimentary regulatory regime over a private banking industry, while leaving the cultivation of more sophisticated market institutions to a later stage in development.

Balancing and Efficient Fiscal Policy

Lesson 18: Creating or improving systems of budget execution is the first priority for expenditure policy, even before developing a budget preparation process.

Lesson 19: Tax policy should evolve along with the capacity of tax administration starting with simple indirect taxes like presumptive taxes and developing more complex indirect taxes like value-added tax.

Lesson 20: Capital expenditures and investment projects should be integrated into a comprehensive state public investment programme and capital budget.

Open Trade Relations

Lesson 21: Institutions need to be built to address each country's specific trade issues, creating foreign demand for domestic production.

Robust Legal and Regulatory Regimes

Lesson 22: Basic commercial laws and institutions are necessary for jumpstarting private sector development and encouraging foreign direct investment.

Equitable Social-Policy

Lesson 23: Social policy muste volve into well-targeted efficient programmes for those most in need, either from scratch or from pre-existing programmes that were poorly targeted or based on political privilege.

Lesson 24: Gender and women's issues often are particularly important in post-conflict situations, not only because the welfare of women often has been particularly disregarded during conflicts.

Appropriate Sectoral Policies

Lesson 25: Appropriate sectoral policies should provide public goods where needed particularly in infrastructure areas, without creating distortions 'picking winners' or helping some sectors at the expense of other sectors.

Many countries throughout the world have marked their interest in participating in Libya's reconstruction. But the reconstruction efforts require careful planning.

Estimates suggest that it will take at least two years before oil production returns to its peak of 1.6 million barrels/day. Currently, production is as low as 50,000 barrels/day, with no exports. By the end of the year, Libya may be able to produce up to 450,000 barrels/day. Production could also be switfly resumed in the western fields. The main damage has been caused to the mature fields in the west Sirte basin, and this will take time to repair.

The TNC has been clear that it welcomes the return of foreign companies and will honour existing contracts. However, it will not want to engage in brokering new contracts at this point, as itis a caretaker administration and will want to avoid difficult decisions out of fear of being accused of corruption.

More important at this point is for the TNC to

1. Ensure its unity

2. Ensure the maintenance of law and order

3. Implement a policy of reconciliation

4. Introduce a pluralistic roadmap for future political and economic governance

5. Ensure a fair distribution of revenues and provision of services

6. Ensure the recovery by the state of a monopoly on force.