Diversification Prospects for Sustainable Libyan Econmoic Growth

The theory of resource dependence captures the extent to which a country’s economy relies on resource rents. It is usually measured in proportion to GDP, exports, or government revenues; hence, it is a function of absolute levels of resource extraction and rent capture in the context of other economic activity and sources of state revenue. This study has focused on the efforts to date by Libya to diversify its economic base. The resource dependence observed in Libya’s economy is driven mainly by the fact that there are relatively few alternative forms of economic activity, as evidenced by a per capita gap in GDP, or a low level of other exports. The state’s fiscal reliance on revenues from the extractive industries also depends on the size of other revenue streams. Yet, Libya has been unable to adequately distribute its GDP across a wide range of productive sectors. This concern highlights the earlier awareness to the risks of oil resource depletion which could compromise the future of the Libyan economy. In-depth interviews, and semi-structured questionnaire data analysis were carried out to obtain an actual view of the respondent’s perception. The study found that to achieve its objective of sustainability, Libya will need to ensure natural resources continue to be managed efficiently into the future. This may require some policy adjustments. First, diversifying the economy towards higher value-added tasks in manufacturing and services requires renewed emphasis on the structural reform agenda, as well as enhancements to public investment management. These will create the necessary conditions for accelerate productive investments in non-commodity sectors. The formation and the implementation of the policy were consistent with the analysis suggested by literature review. A series of recommendation to improve on the policy was made based on the analysis of the problems indicated and based on suggestions from respondents.