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Libya - ECONOMY
THE LIBYAN ECONOMY is unique in North Africa. Whereas Algeria, Egypt, Morocco, and Tunisia all have large populations, considerable agricultural potential, and well-established industrial bases, Libya possesses few of these advantages. It does however, have abundant energy resources--primarily an attractive type of light low-sulfur crude oil as well as some natural gas. Given the country's small population (3.6 million in 1984) and considerable petroleum-derived income, the Libyan economy has more in common with those of the small oil-exporting Persian Gulf states than with those of its North African neighbors.
Because of Libya's great dependence on oil revenues, the general level of the Libyan economy is closely related to the health of the petrochemical industry. Despite massive investment in agriculture and nonpetroleum-related industry, the percentage of Libya's gross domestic product (GDP) derived from oil has remained fairly constant since the early 1970s, fluctuating between 50 and 60 percent until 1982, when declining oil revenues caused it to drop below 50 percent. Since Muammar al Qadhafi and his associates came to power in 1969, reducing Libya's dependence on oil has been the government's major economic policy objective. Its inability to achieve this goal stems from ill-advised policy decisions as well as the many obstacles to economic diversification in a land lacking in both basic infrastructure and water resources.
Diversification is an important issue because at current rates of production, Libyan oil reserves are not expected to last beyond the second decade of the next century. Thus, the long-term health of the Libyan economy hinges on developing a self-sustaining nonpetroleum sector. Otherwise, once oil reserves are depleted, Libya will become as poor as it was before its current oil boom.
Libya's postindependence economic progress can be divided into four periods. The first period began with Libya's gaining of independence in 1951, included the discovery of oil in 1957, and ended in 1961. The second period dates from 1961, when oil exports moved the country into the forefront of the world's economies. The September 1, 1969, military coup d'�tat marked the beginninng of the third period, a period that saw Libya change from a Westernoriented capitalist country into a strongly nationalist, antiWestern , socialist state. This period also witnessed the government's growing intervention in the economy, which was largely financed by the booming oil revenues of the 1970s. Falling world oil prices in the early 1980s ushered in the fourth phase of Libya's economic development. The falling prices have dramatically reduced government revenue and caused a serious decline in ecomomic activity.
The economic change between independence and the 1980s was dramatic. In 1951, on the eve of independence, Libya, underdeveloped and backward, was characterized by the United Nations (UN) as perhaps the world's poorest country. Experts predicted that the country would have to be supported for years by international grants-in-aid while it organized itself to try to live within its own meager means. However, in less than 25 years, Libya had turned into a rapidly developing country with accumulated net gold and foreign-exchange reserves equivalent to upward of US$4 billion and an estimated annual income from oil revenues of between US$6 and US$8 billion. Although Libya suffered few balance-of- payments problems, it was beginning to be bothered by inflation. The country seemed to have adequate funds at its disposal, however.
At the time of independence, the Libyan economy was based mainly on agriculture, which was divided more or less evenly between field (including tree) crops and livestock products. Agriculture provided raw materials for much of the country's industrial sector, exports, and trade; employed more than 70 percent of the labor force; and contributed about 30 percent of the GDP, dependent on climatic conditions.
For the most part, agricultural resources were limited to two comparatively narrow stretches along the Mediterranean Sea and a few desert oases. The cropland had been maltreated, and the pasture had been overgrazed. Erosion was common, production methods were primitive, and close to a quarter of the agricultural area was held on a tribal basis and was being used inefficiently. Rainfall was unpredictable, except that usually it was scarce and ill-timed. When the rains did come, however, they were likely to be excessive. Groundwater was in short supply in the agricultural areas. In some locations it had been so excessively drawn upon that it had become brackish or saline and was no longer suitable even for agriculture. Because the country has no perennial rivers, there was only limited potential for irrigation and even less for hydroelectric power. At the time of independence, the apparently abundant subterranean water supplies located in the Lower Sahara had not yet been discovered. Even if officials had known about the water, its presence, while encouraging, would not have been very helpful in the short term because of lack of development funds and inadequate transport and storage facilities. In 1986, although agriculture contributed a very small share to the GDP, it still provided employment opportunities for a large portion of the population and was therefore still important. Shortage of water was the main drawback to expansion of cultivable land, but reclamation and irrigation schemes and the introduction of modern farming techniques held promise for the future.
At the time of independence, Libya possessed few minerals in quantities sufficient for commercial use, although iron ore was subsequently found in the Wadi ash Shati in the south-central part of the country. In turn, because of the absence of coal and hydroelectric power, the country had little energy potential. In the modern sense, Libya had practically no industry and, given the limitations of the agricultural sector, could produce few exports to be exchanged for the import commodities the country needed.
At independence, illiteracy was widespread, the level of skills was low, and technical and management expertise and organization were at a premium. (The lack of sufficient numbers of skilled Libyans in the labor force remained a problem in the 1980s; despite large sums of money having been spent on training Libyans, the government still relied on foreign workers.) A large part of the national life was lived under nomadic or seminomadic, rather than settled, conditions. The high birthrate added to the country's poverty. The rapid population increase strained the agricultural economy and resulted in the drift of excess unskilled laborers to urban centers, but these centers, too, lacked sufficient adequately paid employment.
In terms of resources, including human resources, the outlook at independence was bleak. Throughout the 1950s and early 1960s, international and other foreign agencies--mainly the United States and Italy--continued to finance the gap between Libya's needs and its domestic resources. The foreign community was not in a position, however, to undertake an across-the-board and sustained development program to set the economy on a course of immediate self-sufficiency. During much of a 1950s, the country's administrative apparatus was unable even to utilize all the resources made available from abroad.
During the decade after the discovery of petroleum, Libya became a classic example of the dual economy, in which two separate economies (petroleum and nonpetroleum) operated side by side. For practical purposes, no connection existed between them except that the petroleum companies employed limited quantities of local labor and paid a portion of their profits to the government in royalties and taxes. The financing and decisions affecting the activities of the petroleum economy came not from the domestic nonpetroleum economy but rather from outside the country. Although this sharp dichotomy was in the process of relaxation after 1965--perhaps especially after 1967-- it appears not to have been attacked conceptually, at least not with fervor, until after the 1969 change of government.
The laissez-faire arrangement came to an end with the military coup d'�tat of September 1, 1969. The previous government's personnel and much of its administrative framework were scrapped, and the oil companies were put on notice that they were overdue on large payments for unpaid taxes and royalties. In other respects affecting the economy, the new government marked time, except for its policy of "Libyanization"--the process of replacing foreigners and foreign-owned firms in trade, government, and related activities with Libyan citizens and firms. In mid-1970, the government embarked on a program of progressive nationalization.
In addition to establishing at least a temporary veto power over the activities of the oil companies, the nationalization program included sequestration of all Italian assets, socialization (state ownership) of the banking and insurance system, Libyanization of all forms of trade, and steady substitution of Libyans for foreign administrative and management personnel in resident foreign concerns--another aspect of Libyanization. In the petroleum sector, the government put a constantly increasing financial bite on the companies. By the end of 1974, the government either had nationalized companies or had become a participant in their concessions and their production and transportation facilities. The regime thus had a larger share of the profits than under the previous royalty and tax arrangements. However, despite varying degrees of nationalization of foreign oil firms, in 1987 Libya was still highly dependent on foreign companies for the expertise needed in exploitation, marketing, and management of the oil fields and installations that remained the primary basis of the country's economic activity.
After 1972 the government began supplementing its policy of nationalization with an ambitious plan to modernize the economy, modeled largely on neighboring Algeria's experience. The key component of this plan was an intensive effort to build industrial capacity, placing a special emphasis on petroleum-related industry. The industrialization program had two major goals: the diversification of income sources and import substitution. In this latter respect, the plan met with some success, as several categories of imports began to decline in the late 1970s.
In 1981, when oil prices started to fall and the worldwide oil market entered a period of glut, the present phase of independent Libya's economic history began. The decline in oil prices has had a tremendous effect on the Libyan economy. By 1985 Libyan oil revenues had fallen to their lowest level since the first Organization of Petroleum Exporting Countries (OPEC) price shock in 1973. This fall in oil revenues, which constituted over 57 percent of the total GDP in 1980 and from which, in some years, the government had derived over 80 percent of its revenue, caused a sharp contraction in the Libyan economy. Real GDP fell by over 14 percent between 1980 and 1981 and was continuing to decline in late 1986. The negative trend in real GDP growth was not expected to reverse itself soon. .
The decline in real GDP placed great strain on government spending, reduced the level of imported goods available in Libyan markets, and increased Libya's debt repayment problems--all of which combined to lower living standards. The decline in oil revenues also caused the Libyan government to revise its somewhat haphazard way of making economic policy decisions, because it no longer possessed the financial resources to achieve its many goals. Thus, during the early and mid-1980s, development projects were subjected to a more rigorous cost and benefit analysis than during the easy money time of the 1970s. As of 1987, however, it was too early to judge the effectiveness of the government's response to falling oil revenues.
Mainly because of Libya's strategic role in World War II, the Libyan government had come to depend on foreign patrons for its financial needs. During the Italian occupation and in the immediate postwar period, first Italian and then United States and British grants kept the Libyan administration solvent. After 1956 the need for direct foreign subsidies declined as the international oil companies began to invest heavily in Libya--causing substantial capital inflows. During the 1960s, the investments of the previous decade began to pay off, and the country experienced the fruits of rising oil wealth. This trend not only reduced the government's need for foreign assistance, but also generated a huge increase in taxable domestic income. However, Libyan physical and human resource development continued to lag, necessitating sustained reliance on foreign technical assistance. This pattern of dependence on foreigners to perform crucial skilled functions, which subsequent governments have been unable to eliminate, has made Libyans acutely aware of their subordinate status in the world economy in relation to the industrialized West.
Consequently, the Qadhafi government has assigned high priority to the achievement of what it perceives as "true economic independence." This theme has been one of Qadhafi's staple arguments and underlies much of the post-1969 revolutionary government's economic policies. Qadhafi's other principal economic objective has been to promote equity, which he equates with socialism. Because of Qadhafi's unique conception of the character of the state, his distrust of the private sector, and his abhorrence of the profit motive, he has maintained that it is only through massive state intervention that economic independence and equity can be attained. Thus, the state has taken control of virtually all economic domains since Qadhafi came to power.
Soon after the revolution, a major Libyanization drive was initiated, which involved the expulsion of the remaining Jewish and Italian communities and the nationalization of the country's banks, insurance, and petroleum-marketing companies. Other measures were enacted to restrict the activities of foreigners in commerce and industry.
Throughout the 1970s, the government expanded its role to take control of Libya's economic resources. The public Libyan Petroleum Company (LIPETCO) was supplanted in 1970 by the National Oil Company (NOC), which became responsible for implementing policies decided upon in the Ministry of Petroleum before the latter was dissolved in March 1986. Similarly, the government exercised effective control over water rights and created a large number of state-owned enterprises to oversee Libya's basic infrastructural facilities, such as highways, communications, ports, airports, and electric power stations. Public corporations were also created to run the state airline and to import certain restricted goods. The public import company, the National Organization for Supply Commodities (NOSC), was given a monopoly over the import and sale of many basic consumer items. In 1975 the government became the sole importer and retailer of motor vehicles. The domestic marketing of certain commodities and the provision of certain services were restricted to the public sector. By 1977 these included construction materials, livestock, fertilizers, fish fodder, insecticides, insurance, banking, advertising, and publishing.
Since the late 1970s, the Libyan government has accelerated its assault on the private sector in a determined attempt to stamp out what it identified as bourgeois exploitation. This renewed effort followed the codification of Qadhafi's economic theories in the second volume of his The Green Book, published in 1978. Many of the regime's most radical economic policies began soon after that date. The first concrete manifestation of Qadhafi's new economic militancy occurred in 1978, when he outlawed rental payments for property, changing all residential tenants into instant owners. The private sector housing and real estate industry was thus eliminated, and the new owners were required to pay monthly "mortgage" payments--usually amounting to about one-third of their former rent--directly to the government; however, families making less than the equivalent of US$500 a month were exempted from this obligation .
Qadhafi initiated another major innovation in 1978 when, during a speech, he urged workers in both the public and private sectors to take control of the enterprises in which they worked by following his dictum: "partners, not wage laborers." This new idea went much further than an earlier law in 1973, which had merely instituted mandatory profit-sharing. Now workers were urged to involve themselves in the day-to-day management of the enterprises in which they worked. Within 3 months of this speech, workers in 180 enterprises had formed "workers' committees" which, in principle at least, ran these concerns.
The most ambitious of the 1978 measures, however, was the attempt to do away with all private commerce, retail as well as wholesale. In that year, the responsibilities of the NOSC were considerably enlarged because the state took over responsibility for the importation of all goods and control over all foreign exchange transactions. In theory, all private commercial transactions became illegal as the state began to open centralized supermarkets run by local people's committees with the aim of undermining the numerous neighborhood shops that previously had catered to the daily needs of most Libyans. Eventually, there were 230 such state-run supermarkets in various parts of the country. Although no one expected such a small number of stores to replace fully the thousands of private sector merchants, state planners hoped that the stores would constitute enough of a market presence in each location to exert a downward pressure on private sector prices for competing goods.
The hostility of Qadhafi toward the private sector was based on his view of merchants as nonproductive parasites; he ignored their role as distributors. In fact, many state proclamations explicitly stated that government policy was designed to do away with the whole merchant class. One newspaper editorial emphasized that "One of the goals of these consumer centers is to cut down on the huge number of merchants who are a burden on productivity." The only type of private sector enterprises that the government did not actively seek to eliminate were small service-providing firms, which were not viewed as inherently exploitative. By 1980 it was clear that Qadhafi's assault on the private sector was not proceeding as fast as he had hoped. Even in a time of relative wealth--oil revenues were nearing their peak and the state had enough revenue to fix the prices of certain goods--the public sector was unable to satisfy demand for many consumer items. The unsatisified demand left room for private sector activity at various levels of legality. Continuing his attack on the private sector from another angle, in 1980 Qadhafi demonetized all currency notes above one dinar (for value of the Libyan dinar (LD), see Glossary). His action was designed to encourage those holding large quantities of dinars to deposit them in the nationalized banks-- thus increasing state control over private sector assets. Many individuals with large cash holdings were reluctant to deposit their savings, however, since withdrawals in excess of LD1,000 were prohibited. They also feared that large deposits could be used against them as evidence of their having engaged in illegal commercial transactions. The main result of the 1980 demonetization, therefore, was a rise in conspicuous consumption, as individuals sought to transfer their savings into material goods, and an increased demand for black market foreign exchange, as persons sought ways to export their dinars.
Most of the post-1977 economic policy innovations of the Qadhafi government were designed to inhibit the private accumulation of wealth and promote an equitable distribution of the national income. The principal vehicles for fostering economic independence in this period have been two five-year plans (1976-80 and 1981-85), which were aimed at directing investment to areas that would contribute to economic autonomy. In the 1976-80 plan, agriculture and industry received the largest share of investment, whereas the 1981-85 plan allocated more funds to industry and public works, with agriculture coming in third.
Most of the planned agricultural investment has been directed to the development of oasis agriculture and irrigation. Ambitious schemes were launched during the 1970s to use the underground fossil water resources of the Tazirbu, Sarir, and Al Kufrah oases to grow wheat and animal fodder crops. Similarly, work has begun on the Great Man- Made River (GMMR) scheme to tap desert aquifers to bring water to the coastal agricultural areas where shrinking aquifers and rising salinity threaten to lay waste to historically productive agricultural lands.
Industrial investment has been concentrated on several large- scale projects at industrial centers along the coast. Existing industrial facilities are located at Marsa al Burayqah, Misratah, and Ras al Unuf. Further expansion of these facilities as well as the creation of new ones was a principal objective of the 1981-85 plan. Most industrial projects were designed to create downstream petrochemical employment, satisfy internal demand for processed petroleum products, and take advantage of cheap energy to build export-oriented manufacturing capacity.
The contrast in approaches between the relatively conservative development plans, with their emphasis on investment and resource mobilization, and Qadhafi's more radical "socialist" policies, which seem to sacrifice efficiency for equity, produced inherent tensions in economic policy-making. In certain respects, the pursuit of equity has hindered Libya's quest for economic independence by discouraging private sector growth.
The political climate of Libya in the mid-1980s placed numerous obstacles in the way of private sector development. The 1978 law requiring all enterprises to be run by workers' committees made effective management almost impossible. Furthermore, since workers' committees rarely accepted economic efficiency or profitability as valid objectives, many enterprises no longer had a clearly defined role in the economy. The result of such policies has been to stifle most dynamism in the private sector. Consequently, when the government needed to ensure the accomplishment of key economic tasks, which it was incapable of doing for itself, it had no choice but to turn to foreigners.
Those Libyans possessing managerial experience or engaged in performing key economic activities prior to 1978 became increasingly alienated by the subsequent directions of government policy; many even left the country. Thus, with a severely handicapped domestic private sector and few competent Libyan managers, the completion and operation of practically all key industrial projects depended on foreign expertise. Furthermore, because the post-1978 economic environment had provided little incentive for the training of Libyan managers, there was little likelihood of easily reversing the shortage of indigenous managers.
Some foreign observers have suggested that the sharp drop in oil revenues, which began in the early 1980s, may lead to a re- evaluation of many of Qadhafi's more radical socialist policies. Such reassessment could reduce some of the private sector's problems and actually contribute toward economic independence. There were some indications that this was indeed happening in the mid-1980s, as many projects of doubtful economic value were postponed.
Because of declining revenues, the government has been unable to finance much of its ambitious drive to replace the private sector. The expansion of the state-run supermarket system ended as funds grew tighter. By 1985 the stores were unable to supply most basic consumer items, thus failing to drive down private sector prices. Similarly, the government was compelled to expel many foreign workers who had been the mainstay of the economy. Between 1983 and 1987, the number of foreign workers in Libya fell drastically, going from more than 560,000 to about 200,000. This decline was achieved primarily by cutting the number of unskilled foreign laborers employed by the public sector to perform basic service tasks--jobs that many Libyans could fill. Whether the increased demand for labor in the wake of these expulsions will result in a greater Libyanization of the work force, or merely in a rise in the number of unfilled jobs will depend largely on how much the government relaxes its restrictions on private sector employment. In the mid-1980s, few public sector funds were available for hiring Libyans at the higher salaries they would require.
In 1984 industry, including the exploration, production, transport, and marketing of petroleum products (crude petroleum, natural gas, and condensates derived therefrom), contributed about 60 percent of GDP (at factor cost) and virtually 100 percent of exports. Industrial activities also occupied from 30 to 38 percent of the total labor force in 1984.
Libyan industrial development has been heavily dependent on the oil sector, both for investment revenue and for raw inputs. Throughout the 1970s, the government implemented numerous measures to increase its share of the profits from oil exploitation and marketing. By the mid-1980s, the revenue accruing to foreign oil companies engaged in lifting Libyan oil was taxed at a rate of about 95 percent.
Since the early 1960s, the petroleum industry has increasingly dominated the whole economy, although in 1984 it provided direct employment for fewer than 10,000 Libyans. The development of the oil industry was remarkable, both in terms of its rapidity and its proliferation. An exceptional combination of circumstances contributed to the development of the petroleum sector. Like Algerian oil, Libyan crude oil, while having a rather high wax content, is lighter and easier to handle than crudes from most other petroleum areas. It also has a low sulfur content, which makes it easier on internal combustion engines and less of a pollution contributant than other crudes. For this reason, Libyan crudes had a receptive market in Europe from the start; furthermore, Libya is one-third closer to European markets than the oil ports of the eastern Mediterranean. When the Suez Canal was closed by the June 1967 War, forcing tankers from Iran, Iraq, and the Arabian Peninsula to go around the Cape of Good Hope, the advantages of Libyan petroleum were enhanced. Moreover, the lay of the land itself, which allows the output of the wells to be piped directly and easily to dockside totally over Libya's territory, assured steadiness of supply, which has not necessarily been the case for eastern Mediterranean pipeline outlets. In addition, Libya's petroleum development benefited from the technology and experience acquired by the industry in other parts of the petroleum world during the preceding fifty years. Thus, by 1977 Libya was the seventh largest oil producer in the world. However, Libya's position declined somewhat in the early 1980s as OPEC production quotas were cut. By 1986 Libya was only the fifteenth largest producer of crude oil.
For the petroleum industry, the military coup of 1969 did not represent a rupture of continuity; it did, however, introduce a shift in government attitudes toward the purpose and function of the foreign operating companies in line with its general nationalist-socialist political and socioeconomic orientation. It is therefore useful to visualize Libya's petroleum development in terms of two periods, dividing at September 1, 1969, with the earlier period serving to prepare for the later.
Active exploration started in 1953 after oil was discovered in neighboring Algeria. The first well was begun in 1956 in western Fezzan, and the first oil was struck in 1957. Esso (subsequently Exxon) made the first commercial strike in 1959, just as several firms were planning to give up exploration. The first oil flowed by pipeline from Esso's concession at Zaltan to its export facilities at Marsa al Burayqah in 1961. The rush was on, with other companies entering Libya and additional discoveries being made. The original major strikes were in the Sirtica Basin, one of the world's largest oil fields, southeast of the Gulf of Sidra; in 1987 this area was still the source of the bulk of Libya's output. In 1969 a major strike was made at Sarir, well to the southeast of the Sirtica Basin fields, and minor fields were located in northwestern Tripolitania. New deposits were found in the Ghadamis sedimentation basin (400 kilometers southwest of Tripoli) in 1974 and in offshore fields 30 kilometers northwest of Tripoli in 1977.
Since 1977 efforts to tap new deposits have concentrated on Libya's offshore fields. The large Bouri field was due to be brought on-stream by the NOC and AGIP (Azienda Generale Italiana Petroli), a subsidiary of the Italian state oil company consortium, in late 1987. Other offshore exploration ventures were launched following the settlement of maritime boundary disputes with Tunisia in 1982 and Malta in 1983. Libyan access to offshore deposits in these formerly disputed areas was significant, because they may contain as much as 7 billion barrels of oil.
Petroleum production in 1985 was still governed by the Petroleum Law of 1955, which was amended in 1961, 1965, and 1971. The government, through the Ministry of Petroleum, preferred to grant sizable concessions to a number of different foreign companies. To induce rapid exploitation of deposits, the typical concession contract called for progressive nationalization of Libyan operations run by foreign companies over a span of ten years, with the Libyan government's share starting as one-fourth and ending at three-fourths. The government extracted most of its compensation in the form of product sharing. When early concessions to several large companies by Esso, which was the first to export Libyan crude in 1961, proved to be highly profitable, many independent oil companies from noncommunist countries set up similar operations in Libya. In 1969 about thrity-three companies held concessions. Concessionary terms were somewhat tightened during the 1970s, as the postrevolutionary government pursued a more active policy of nationalization. The vehicle for this policy was the revamped state NOC, which, as noted, was formed in 1970 from LIPETCO. In July 1970, NOC's jurisdiction was expanded by legislation that nationalized the foreign-owned Esso, Shell, and Ente Nazionale Idrocarbuno (ENI) marketing subsidiaries, and a small local company, Petro Libya, and transferred their operations to NOC. These operations included managing companies in the importing, distributing, and selling of refined petroleum products at subsidized prices in Libya. In 1971 the companies were merged into a single countrywide marketing enterprise called the Brega Company, which also marketed oil and gas abroad for the government.
The new government's nationalization campaign commenced in December 1971, when it nationalized the British Petroleum share of the British Petroleum-Bunker Hunt Sarir field in retaliation for the British government's failure to intervene to prevent Iran from taking possession of three small islands in the Persian Gulf belonging to the United Arab Emirates. It was not until late 1974 that a compensation agreement was reached between British Petroleum and the Libyan government over the settlement of these nationalized assets. In December 1972, Libya moved against British Petroleum's former partner Bunker Hunt and demanded a 50-percent participation in its operations. When Bunker Hunt refused, its assets were nationalized in June 1973 and turned over to one of NOC's subsidiaries, as had been done earlier with British Petroleum's assets.
In late 1972, a 50-percent participation had been agreed upon with the Italian joint company, ENI-AGIP, and in early 1973 talks began with the Occidental Petroleum Corporation and with the Oasis group. Occidental, accounting for about 15 percent of total production, was one of the major independent producers. In July 1973, it agreed to NOC's purchase of 51 percent of its assets. The Oasis group, another major producer, was one-third owned by the Continental Oil Company, one-third by Marathon Petroleum, and one- sixth each by Amerada Petroleum Company and Shell. The Oasis group agreed to Libyan 51-percent participation in August 1973. On September 1, 1973, Libya unilaterally announced that it was taking over 51 percent of the remaining oil companies, except for a few small operators.
Several foreign oil companies balked at the Libyan proposal but soon found that the government's policy was firm: agree to Libyan participation or face nationalization. Shell refused to accept Libyan participation in its share of the Oasis group, and its operations were nationalized in March 1974. A month earlier, three other reluctant oil companies had been nationalized: Texaco, the California Asiatic Company, and the Libyan-American Oil Company. They finally received compensation for their assets in 1977.
Political events of the 1980s convinced many American-owned companies of the advisability of selling off their Libyan operations. In 1981 Exxon withdrew from Libya, pulling out its long-standing subsidiary operations. Mobil followed suit in 1982, when it withdrew from its operations in the Ras al Unuf system. These withdrawals gave NOC an even greater share in the overall oil industry. Another round of advancing nationalization was made possible in 1986, when United States President Ronald Reagan announced on January 7 his intention to require American companies to divest from their operations in Libya. It was unclear at that time, however, whether the five companies involved would sell their shares to NOC (probably at a substantial loss), or merely transfer them to European subsidiaries not affected by the president's sanctions. According to the latest estimates available in early 1987, NOC's share of the total equity in Libyan petroleum operations stood at 70 percent, with two operating subsidiaries and at least a 50-percent share in each major private concession.
Although NOC nominally had been under control of the Ministry of Petroleum, foreign observers were uncertain what real control the ministry had over the NOC. The ministry's dissolution in March 1986 produced little comment, which seemed to indicate that NOC was the principal instrument of government policy in the oil sector and controlled about two-thirds of Libya's total oil production.
Since 1974 no new concessions have been granted, although the Libyan government has negotiated production-sharing agreements with existing concession holders to induce them to search for new deposits, particularly in the offshore region bordering Tunisia where the large Bouri field is located. These agreements have called for NOC to receive 81 percent of production if the discovery is offshore and 85 percent if it is onshore.
Libyan price policy has largely been settled in meetings of OPEC, which it joined in 1962. Both the prerevolutionary and postrevolutionary governments have remained committed to OPEC as an instrument for maximizing their total oil revenues. Petroleum production (almost all of which was exported) declined during the first half of the 1970s, as a result of both the OPEC and Libyan policy of cutting production to influence price. During the late 1970s, production rose slightly, only to fall again in the 1980s when OPEC reduced its members' production quotas in an attempt to halt the oil price slide. In March 1983, Libya accepted its OPEC quota of 1.1 million barrels per day (bpd). This figure was revised downward again in November 1984, when it was set at 990,000 bpd. Libyan oil production in 1986 averaged 1,137 thousand bpd, having regained the same production it had in 1981. Generally, Libya has adhered to its OPEC quota.
In 1986 Libyan oil fields were served by a complicated network of oil pipelines leading to the five principal export terminals at Marsa al Burayqah, As Sidra, Ras al Unuf, Marsa al Hariqah, and Az Zuwaytinah. The Sidra terminal exported the largest volume of oil, about 30 percent of the total in 1981. A future sixth terminal was planned at Zuwarah in western Libya. Pipelines to these terminals served more than one company, thus mixing different oil blends that were standardized for export. The share that an individual company received from exports was determined by the amount and quality or the oil that entered the common pipeline. The share of the oil belonging to NOC was either sold directly on the open market or sold back to its producing partner. Libyan refining capacity increased dramatically in 1985, when the export refinery at Ras al Unuf came on stream with a 220,000-bpd capacity. Other refineries existed at Tobruk (20, 000 bpd), Marsa al Burayqah (11,000 bpd), and Az Zawiyah (116,000 bpd), giving Libya an overall refining capacity in 1985 of 367,000 bdp.
Production of natural gas in Libya received a major boost in 1971, when a law was passed requiring the oil companies to store and liquify the natural gas condensate from their wells, rather than burning it off as many had previously done. However, natural gas production has lagged far behind oil because the high costs of transport and liquefaction have made it a less attractive alternative. A large liquefaction plant was built at Marsa al Burayqah in 1968, but its export performance has been spotty. About 70 percent of Libya's natural gas production is consumed domestically. Production stood at 12.35 billion cubic meters in 1984, down from 20.38 billion cubic meters in 1980. Total reserves of natural gas were estimated at 600 billion cubic meters in 1985.
According to information available in 1987, Libya's commercially usable mineral resources--apart from its hydrocarbons- -were limited to a large iron-ore deposit in the Wadi ash Shati near Sabha in Fezzan, and scattered, deposits of gypsum, limestone, cement rock, salt, and building stone. There also were small, widely scattered and currently noncommercial deposits of phosphate rock, manganese, barite-celestite, sodium carbonate, sulfur, and alum. Although much of the country had been photographed by the petroleum companies and large portions of it had been mapped by the Italians, by British and American military personnel, and by the United States Geological Survey (from 1954 to 1962) in search of water and minerals, the country is so large that in early 1987 much of it still had not been mapped at scales suitable for definitive mineral inventory.
The Wadi ash Shati iron-ore deposit is apparently one of the largest in the world. Suitable in considerable part for strip mining, it outcrops in or underlies roughly eighty square kilometers of the valley. According to information in the mid- 1980s, none of it was high-grade ore. Preliminary estimates suggest that the amount of 30 to 40 percent iron-content ore in the deposits totals anywhere between 700 million and 2 billion tons. Because of the distances and technical problems involved, profitable exploitation of the deposits would depend on the construction of a proposed railroad to the coast. Development of the deposits would allow Libya self-sufficiency in iron and steel, although probably at costs appreciably above those available on an import basis. In 1974 a state-owned company, the General Iron and Steel Corporation, was formed to exploit the deposits. The government hoped that the planned iron and steel manufacturing plant at Misratah, scheduled for completion in 1986, eventually would be able to exploit the Wadi ash Shati deposits. But the commercial viability of using these deposits was not assumed, since initial plans called for the Misratah works to be fed with imported iron-ore pellets.
Other scattered iron ore deposits in northwestern Tripolitania and northern Fezzan were apparently insufficient to be commercially exploitable under current conditions. Manganese was known to occur in northwestern Tripolitania and, in combination with the iron-ore deposits, at several locations in the Wadi ash Shati. Known deposits, however, were not considered commercially exploitable.
Salt flats, formed by evaporation at lagoonal deposits near the coast and in closed depressions in the desert interior, are widely scattered through the northern part of the country. In some cases, especially along the Gulf of Sidra, they cover large areas. In the 1980s, about 11,000 tons of salt were produced annually. Evidences of sulfur have been reported at scattered points in the salt flats of the Sirtica Basin and in various parts of Fezzan; sulfur occurs in pure form in Fezzan and is associated with sulfur springs in the Sirtica Basin.
Sodium carbonate (trona) is formed as a crust at the edges and bottoms of a number of dry lakes in Fezzan. Traditionally, about 100 metric tons a year were harvested and sent to market at Sabha. Because sodium carbonate is used in petroleum refining, as well as traditionally in soapmaking and water refining, production may be increased as part of the government's development effort in Fezzan.
Because of the government's interest in social welfare and its financial ability to support it, construction is bound to be a major area of future economic development. Except for wood, the raw materials needed for construction--stone, gravel, clay, limestone, gypsum, and cheap fuel--are found in abundant quantities and suitable commercial qualities adjacent to the major population and production centers in both northern Tripolitania and Cyrenaica. In 1986 plans were announced for a new gypsum mine with a planned output of 200,000 to 300,000 tons a year. Several thousand tons of gypsum are mined annually and indicated reserves of gypsum total about 200 million tons.
<>Manufacturing and Construction
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. 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. 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.
The history of Libya's agricultural development has been closely related, although inversely, to the development of its oil industry. In 1958, before the era of oil wealth, agriculture supplied over 26 percent of GDP, and Libya actually exported food. Although gross levels of agricultural production have remained relatively constant, increasing oil revenues have resulted in a decline in agriculture's overall share of national income. Thus, by 1962 agriculture was only responsible for 9 percent of GDP, and by 1978 this figure had tumbled to a mere 2 percent. Even more striking than the downward trend in agriculture's share of GDP was the rise in food imports. In 1977 the value of food imports was more than 37 times greater than it had been in 1958. Therefore, a large part of the rising oil wealth between 1960 and 1979 was spent on imported food products.
To some extent, these trends were neither surprising nor disturbing. Libya's comparatively strong agricultural position in 1958 masked an even greater level of general poverty. Agriculture during the 1950s was characterized by low levels of productivity and income. The advent of oil wealth provided many peasants with opportunities to engage in less exacting and more remunerative work in the urban areas, resulting in a huge rural migration to the cities. In addition, Libya is not well endowed with agricultural resources; over 94 percent of the land consists of agriculturally useless wasteland. The large number of people engaged in agriculture prior to 1960 reflected, therefore, not a thriving agricultural economy but merely the absence of attractive alternatives.
The number of peasants who gave up farming to look for jobs in the oil industry and in urban areas rose dramatically throughout the 1955-62 period. Another adverse effect on agricultural production occurred during the 1961-63 period, when the government offered its citizens long-term loans to purchase land from Italian settlers. This encouraged urban dwellers to purchase rural lands for recreational purposes rather than as productive farms, thereby inflating land values and contributing to a decline in production.
Since 1962 Libyan governments have paid more attention to agricultural development. The government has given inducements to absentee landlords to encourage them to put their lands to productive use and initiated high agricultural wage policies to stem the rural-to-urban flow of labor. These policies met with some success. Production levels began to rise slightly, and many foreign workers were attracted to the agricultural sector. Agricultural development became the cornerstone of the 1981-85 development plan, which attached high priority to funding the GMMR project, designed to bring water from the large desert oasis aquifers of Sarir and Al Kufrah. Agricultural credit was provided by the National Agricultural Bank, which in 1981 made almost 10,000 loans to farmers at an average of nearly LD1,500 each. The substantial amounts of funds made available by this bank may have been a major reason why so many Libyans--nearly 20 percent of the labor force in 1984--chose to remain in the agricultural sector.
Despite the greater attention to agriculture, however, in 1984 this sector only accounted for about 3.5 percent of GDP, and Libya still imported over 1 million metric tons of cereals (up from 612,000 metric tons in 1974). Also in 1984, the average index of food production per capita indicated a decline of 6 percent from the period 1974 to 1976. On the average, about 70 percent of Libya's food needs were met by imports during the mid-1980s.
<>Land Use and
<>Crops and Livestock
<>Fishing and Forestry
Although statistics vary, only a very small percentage of Libyan land is arable--probably under 2 percent of total land area. About 4 percent is suitable for grazing livestock and the rest is agriculturally useless desert. Most arable land lies in two places: the Jabal al Akhdar region around Benghazi, and the Jifarah Plain near Tripoli. The highest parts of the Jabal al Akhdar receive between 400 and 600 millimeters of rain annually, whereas the immediately adjacent area, sloping north to the Marj Plain, receives between 200 and f400 millimeters. The central and eastern parts of the Jifarash Plain and the nearby Jabal Nafusah also average between 200 and 400 millimeters of rain annually. The remaining Libyan coastal strip and the areas just to the south of the sectors described average 100 to 200 millimeters of rain yearly. In addition, the Jifarah Plain is endowed with an underground aquifer that has made intensive well-driven irrigation possible. Between these two areas and for a distance of about 50 kilometers south, there is a narrow strip of land that has enough scrub vegetation to support livestock. Desert predominates south of this strip, with only occasional oasis cultivation, such as at Al Kufrah, Sabha, and Marzuq.
Studies published in the late 1970s indicated that at any given time, about one-third of the total arable land remained fallow and that as many as 45 percent of the farms were under 10 hectares. The average farm size was about 11 hectares, although many were fragmented into small, noncontiguous plots. Most farms in the Jifarah Plain were irrigated by individual wells and electric pumps, although in 1985 only about 1 percent of the arable land was irrigated.
Since coming to power in 1969, the Qadhafi government has been very concerned with land reform. Shortly after the revolution, the government confiscated all Italian-owned farms (about 38,000 hectares) and redistributed much of this land in smaller plots to Libyans. The state retained some of the confiscated lands for state farming ventures, but in general the government has not sought to eliminate the private sector from agriculture as it has with commerce. It did, however, take the further step in 1971 of declaring all uncultivated land to be state property. This measure was aimed mainly at certain powerful conservative tribal groups in the Jabal al Akhdar, who had laid claim to large tracts of land. Another law passed in 1977 placed further restriction on tribal systems of land ownership, emphasizing actual use as the deciding factor in determining land ownership. Since 1977 an individual family has been allotted only enough land to satisfy its own requirements; this policy was designed to prevent the development of large-scale private sector farms and to end the practice of using fertile "tribal" lands for grazing rather than cultivation.
Partly as a result of these policies as well as the dictates of Islamic rules of inheritance, which stipulate that each son should receive an equal share of family land upon the father's death, in 1986 Libyan farms tended to be fragmented and too small to make efficient use of water. This problem was especially severe in the long-settled Jifarah Plain, which has been Libya's single most productive agricultural region.
The falling water tables in Libya's best agricultural lands caused by overirrigation posed a severe long-term ecological threat to agriculture. The government began to recognize this in 1976, and took measures to discourage citrus and tomato cultivation, both of which required large amounts of water. However, the more stringent steps required to save the coastal water resources--principally the regulation of irrigation and changing the land tenure system to make it more water-efficient--conflicted with Qadhafi's concept of economic equity, which favored intensive irrigated cultivation of small plots for family use.
The government's overall strategy for dealing with the impending ecological crisis has not been to reform the practices that brought it about. Rather, the cornerstone of agricultural policy since 1983 has been to avert disaster by pumping large quantities of water to the coast from the fossil reserves of the southern desert. This project, the GMMR, was expected to cost US$5 billion for the first two stages and has largely been spared from the cuts in development spending that have delayed many other projects in the 1980s.
The first phase of the GMMR, on which construction began in 1984, called for the construction of a 1,895-kilometer pipeline to carry water from the Sarir and Tazirbu regions to a holding tank at Ajdabiya. From there the water will be pumped to Surt and Benghazi for both agricultural and urban consumption. Planners anticipated a total cost of about US$3.29 billion for this first phase and a completion date sometime in 1989. The first stage is projected to irrigate an area of 20,000 hectares for vegetables, and 50,000 hectares for cereals, and to enable the raising of some 100 head of cattle. A second stage will connect the fossil reserves at Al Kufrah to the system. It will also extend the pipelines from Ajdabiya to Tobruk. Planning for a possible third stage, which would link Tripoli to the underground reserves of the western Fezzan region, and would extend the western coastal terminus from Surt to Tripoli was also under way in 1987.
After completion of the second stage, the GMMR will be capable of delivering up to 5 million cubic meters of water a day. According to estimates, this amount would be sufficient to irrigate 180,000 hectares in the Surt area, to provide pasture for 2 million sheep and 200,000 cattle, and to supply industrial and domestic needs in Benghazi and Tripoli. According to the project's American designers, the Al Kufrah and Sarir aquifers could sustain pumping at this rate for 50 to 100 years without depletion.
Despite planners' optimistic predictions about the benefits of the GMMR, foreign observers doubt that it will resolve the difficulties facing agriculture. Whatever the size of the desert aquifers, they are finite fossil reserves and will not last indefinitely. Furthermore, the major agricultural developments planned for the Surt region will do nothing to stop the declining levels of productivity in the Jifarah Plain. In fact, the choice of Surt as a site for massive agricultural development may have been prompted more by Qadhafi's family roots being there than its suitability for intensive agricultural development. In addition, urban and industrial demand for water from the south is likely to increase as the population continues to grow and as various industrial projects begin operations.
The GMMR's long-term impact on oasis cultivation in the south is also likely to be negative. Many of Libya's showcase agricultural projects are located in the southern oases that depend on the fossil aquifers that the GMMR will tap. Developments at Al Kufrah and Sarir have used advanced irrigation technology to grow wheat and fodder crops. The depletion of the fossil reserves on which these projects depend means that they have little long-term viability. Given the extremely high cost and low yields achieved as of the early 1980s, a re-evaluation of the economic viability of these projects may well occur.
In the 1980s, statistics on Libyan agricultural production continued to vary widely. For example, figures compiled by the Central Bank of Libya generally exceeded those published by the UN Food and Agriculture Organization by 10 to 100 percent. During the 1980s, wheat and barley were the principal cereal crops, although millet was also grown in the southern oases. Both crops were cultivated throughout the country, in the coastal regions as well as in the desert oases. The optimum yield for wheat cultivation in Libya was thought to be about 5 tons per hectare, but by the mid1980s yields were only averaging about 0.5 ton per hectare. Citrus production declined to insignificant levels following the government's water conservation measures of 1976. Other important crops were dates, olives, melons, onions, and potatoes. Vegetables were grown in specialized farms near Tripoli. Tree crops remained popular because many farmers combined olive, date, apple, or almond raising with cereal production.
In the 1980s, livestock represented the largest incomeproducing item in agricultural production, and the government has instituted numerous measures designed to make the country selfsufficient in meat, poultry, and dairy products. The numbers of sheep, cattle, and poultry were slowly increasing, while the herds of goats and camels were decreasing. Sheep constituted the largest percentage of livestock, numbering some 6.3 million head in 1985. Sheep and goats were used for meat, milk, and wool and were found all over the country. The largest flocks were in the Al Kufrah settlement project. Modern range-management practices and techniques were being used to prevent overgrazing of the land and to make optimal use of the pastures. Thousands of hectares of pastureland had been fenced along the coastal regions for use as cattle breeding stations as well as livestock-fattening pens.
Until the 1970s, cattle were used mainly for transport. During the 1970s, the number of cattle--particularly dairy cattle-- increased, as did milk and meat production. By 1985 there were nearly 209,000 head of cattle in the country, and several fodder plants were in various stages of completion as part of an effort to achieve self-sufficiency in animal feedstuffs. The General Dairy and Dairy Products Company was created in 1974 to take over most private dairies and to produce and market all dairy products. Private dairy farms were permitted to operate, but their milk had to be sold to the state company. The government also entered the poultry business on a large scale, and independent farmers found it difficult to compete against the large government poultry farms.
Although Libya possesses nearly 1,800 kilometers of coastline and the second largest continental shelf in the Mediterranean, its waters are not particularly rich in the plankton needed to sustain highly productive fishing waters. In 1977 Libya's fishing catch stood at 4,803 tons. By 1981 it had risen to 6,418 tons--still one of the smaller national catches in the Mediterranean. Most of Libya's fishing fleet was located on the western half of its coastline, especially around Tripoli, because the country's eastern and central coasts possessed less attractive fishing grounds. Estimates in 1979 put the number of fishing boats at 325, of which 13 were trawlers; the rest were small and medium-sized boats. Approximately 1,000 to 1,200 people were thought to be professional fishermen in 1981. The government has been encouraging fishing activities and attempting to stimulate a demand for fish. In 1986 a new fishing port was under construction at Zuwarah, and numerous ice plants have been built at several coastal sites. Agreements for joint development of fishing have been signed with several countries, including Tunisia and Spain.
Sponge fishing has been monopolized by Greek fishermen who have been licensed by the Libyan government. A tiny percentage of the harvest has been obtained by Libyans using small boats and skindiving equipment from the shallow waters inshore. The Greeks have used modern equipment to exploit the deepwater beds where the best sponges lie. In an experiment begun in 1977, the government has established freshwater fish farms in several inshore locations.
For commercial purposes, the country has no forests. Although the government designated more than 62,400 hectares as woodland or forest, of this land is covered with scrub and minor vegetation.
During the 1960s, the government actively pursued an afforestation program; these activities were accelerated in the 1970s. An estimated 213 million seedlings had been planted by 1977, about 33 million of which were fruit trees. Most of the reforestation has been in western Libya. During reforestation efforts, scientist have experimented with a petrochemical spray that is sufficiently porous to allow the occasional rain to trickle and seep through, yet sturdy enough to prevent the seedling from being blown away during one of the country's frequent and severe sandstorms. The government's long-term goals for the massive planting program include the growth of enough trees to meet its domestic lumber needs, which in the past had been met by imports. Short-term goals include soil conservation and reclamation, and the creation of windbreaks for crops and settlements.
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