[lbo-talk] Consumer craze hits post-sanctions Libya

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Thu Mar 15 14:44:05 PDT 2007


Reuters.com

News > In Depth > Article

Consumer craze hits post-sanctions Libya http://www.reuters.com/article/inDepthNews/idUSL0635708620070312

Mon Mar 12, 2007

By William Maclean

TRIPOLI (Reuters) - Freed from sanctions, Libyans are rushing to the shops. Goods long denied are flying off the shelves as pro-market reforms and a petrodollar windfall combine to turn those with sufficient savings into compulsive consumers.

Shiny off-road vehicles and whining high-performance motorbikes clog once sleepy streets in the capital Tripoli, home of a dozen new private hotels and several new shopping malls.

In Tripoli's upmarket Gergaresh street, expatriates and the well-off visit designer boutiques to splurge on $80 jeans, $1,300 exercise machines and $250 bottles of perfume.

"The business climate was stagnant for years but now things are picking up," said Salah Ismail, enjoying an evening out at Ewan coffee shop in Tripoli's upscale Ben Ashour street.

The spending spree has been spurred by an end to sanctions after two key Libyan decisions in 2003: the north African state ended a bid to develop weapons of mass destruction, and it accepted civil responsibility for the 1988 bombing of a U.S. airliner over Lockerbie, Scotland, that killed 270 people.

Reforms aimed at diversifying the economy away from oil and boosting private enterprise have mainly benefited the well-off in this OPEC-member oil-exporting country of 6 million.

But poor Libyans also have more variety in their choice of food and household goods than five years ago -- a welcome change for people who vividly remember shortages of essentials in the 1980s. Private enterprise was once illegal in Libya.

"It's an exciting time," said Ismail, a graduate of a management training course run by the Monitor Group, a U.S. business consultancy advising the government on reform.

CHOCOLATE AND CHEESE

But brash displays of wealth are still frowned on, Libyans say, even as the availability of cheap Chinese electronic goods and modest luxuries like chocolate and cheese are welcomed.

Much of the money being spent in shops and on investment in property comes from politically influential Libyans who have developed successful businesses using links to the state.

Other Libyans have yet to join the consumer boom and must work two or three jobs in order to save.

"The wealthy enjoy the good life while most of us just survive," said one Libyan who runs a small business, who spoke on condition of anonymity. Libyan leader Muammar Gaddafi is watching the acquisitive trend and does not like everything he sees: to him, the retail boom is just an extension of an oil-dependent economy in which Libyans rely parasitically on their hydrocarbon inheritance.

"You are being deceived by the salaries, petrol salaries. Yesterday I went to Sebha (town). Oh, the shops, markets, cafes, restaurants and photo shops, it was glamorous! All the world's output you could ever need was in Sebha," he said last year.

"But who is buying these goods? No one but people with salaries coming from the Central Bank, the Treasury, or from petrol. This is a false prosperity."

He wants retail outlets to reinvest their profits in factories that provide lasting jobs by making things people want to buy.

Reformist businessmen and Gaddafi's own Western economic advisers agree with his vision, but argue investors need first to be sure pro-market reforms are here to stay.

Some recall earlier policy U-turns by a government with a record of impulsiveness and waste. Reformists complain their plans are blocked by influential people with profitable links to state monopolies.

IS REFORM HERE TO STAY?

Gaddafi, in undisputed power since 1969, has made clear that political reform is off the agenda.

Asked if he expected the government to continue to widen the freedoms enjoyed by the private sector, one businessman investing in the leisure sector replied: "We simply don't know." He also asked not to be identified. There is no doubt over the potential. Libya, which earns over $30 billion a year from oil, has set aside $19 billion for public works spending in 2007, triggering a race for contracts among foreign construction firms.

"We can be another Dubai," said Abullah Fellah, who runs a flour mill, referring to the Gulf trading entrepot that is successfully reducing its dependence on petroleum.

"No foreigner will invest if Libyans do not invest. We need know-how and management skills," he said, sipping a coffee in a hotel lobby packed with business people and European tourists.

Signs of change abound. At Al-Shatt east of Tripoli, Libyans tuck into evening meals at a new complex of fish restaurants. In the city center, new private hotels offer rooms with direct Internet connections.

On Tripoli's Green Square, an African airline pilot uses a laptop computer to hold a video telephone call with relatives thousands of miles away thanks to the free wireless Internet connection provided by the cafe where he sits.

Nasser Abdulkarim, who runs a jewelry shop in the narrow streets of Tripoli's old city, said the end of sanctions meant he could travel to Asia to trade. He said: "I'm happy we have that sort of freedom now. I think this trend will continue."

© Reuters 2007. All rights reserved.



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