THE Brother Guide of Libya has had plenty to celebrate of late. Since the death of Gabon’s president, Omar Bongo, last June, Muammar Qaddafi (pictured above) has held the title of the world’s longest-serving non-hereditary ruler. In September he marked the 40th anniversary of the coup that brought him to power. As a sign of his confidence, he has been freeing political prisoners and inviting exiled dissidents, once hunted by his feared secret police, to return home. Not only has Libya emerged from diplomatic isolation. A surge in wealth brought by high oil prices has prompted a rush of foreign businessmen to Libya’s capital, Tripoli.
Mr Qaddafi may even claim a recent victory as a holy warrior. A month ago he called for a jihad against Switzerland to punish it for banning the building of new minarets following a referendum. Many Qaddafi-watchers, however, thought his warlike words merely heralded a new round in a festering diplomatic tiff that began in 2008 when Swiss police called in the unruliest of Mr Qaddafi’s seven sons, Hannibal, after two of his staff complained that he had beaten them in the Geneva hotel where he was staying.
Those charges were eventually dropped but the Libyans responded to the perceived slight by detaining two Swiss businessmen for allegedly overstaying their visas. This in turn prompted the Swiss last December to ban 188 senior Libyan officials from visiting the country. Because Switzerland is within the Schengen zone of the European Union (EU) and thus abides by the same immigration rules, the Libyans were in effect prevented from visiting any of the 25 countries (including France, Germany and Spain) in that club. The furious Libyans then abruptly barred entry to all Schengen-area citizens (some 400m of them) and slapped a trade boycott on Switzerland.
At the end of last month, the EU hastily scrapped its travel ban and apologised for any offence. Libya’s foreign ministry declared victory. Its glee was understandable. The European retreat marked a stark triumph of self-interest over principle. Moreover, it followed an abject apology squeezed out of America after a State Department spokesman had sniggered at Mr Qaddafi. In both cases, the Libyans merely had to hint that contracts with American or European firms might be reviewed or torn up. Abandoned by its Schengen partners, Switzerland, which is not in the EU, remains ostracised. One of its citizens, who represents a Swiss engineering giant, ABB, is still stuck in a Libyan jail.
Ordinary Libyans seem to enjoy such shows of patriotic toughness and savoured Switzerland’s defeat. Yet, as with many of Mr Qaddafi’s apparent successes, this one carried heavy hidden costs. Tripoli bristles with cranes and its markets are full. But considering that Libya has produced oceans of oil since 1961 and that its output and reserves per head come close to Saudi Arabia’s, it has dismally failed to improve the livelihood of its 6m people as much as it should have. Libya’s physical and institutional infrastructure is still shoddy. Most Libyans live comfortably enough, relying on free public services to compensate for low salaries. But only a tiny few are rich. And no one is truly free.
The chief cause of Libya’s poor performance is the capricious nature of its government. It says it is keen to promote tourism and private investment, for instance. Yet the sudden travel ban on Europeans struck at its biggest source of both. Libya has grown fashionable as a high-end tourist destination and had expected a bumper winter season. But its smattering of boutique hotels and passable restaurants stayed largely empty. Several much-promoted investment conferences, where ministers were to showcase proposed reforms and tout Libya’s potential, went largely unattended. Libyans susceptible to populist slogans may have chuckled over the visa fight, but its biggest effect was to reinforce the impression that Libya is a risky place for tourists or businesspeople alike.
Such self-inflicted damage is neither occasional nor restricted to higher policy. Consider the case of an Egyptian grocer who spent years building a thriving business in Libya, then made the mistake of going home on holiday. Abrupt changes to visa rules mean he can no longer return. Earlier this year, the new manager of a hotel in Tripoli, an expatriate, fired some staff and switched suppliers. This prompted someone to make a telephone call. A sudden snap health inspection of the hotel larder revealed a few tins past their sell-by date. The manager is now in prison.
Or take the case of Verenex, a small Canadian oil firm that joined the rush into Libya in 2005 and struck an exciting find. Early last year, a Chinese company offered to buy Verenex, nearly all of whose assets are in Libya, for close to $450m. The Libyans blocked that sale on technical grounds, but promised to match the price. After months of wrangling in the oil ministry, Libya’s sovereign wealth fund slashed its offer to barely $300m. Faced with more trouble in Libya if they refused to sell, Verenex shareholders reluctantly agreed.
Not even the closest intimates of Libya’s regime appear to be spared such hazards. Mr Qaddafi’s most visible son, Seif, has long and loudly championed the cause of reform. A few years ago he set up a media firm which launched Libya’s first two mildly critical newspapers and later started a satellite television station. All have since been silenced.
The younger Mr Qaddafi still carries influence, however. He was instrumental, recently, in securing the release of 214 jailed Islamist radicals, most of whom had spent a decade or more behind bars. His allies inside government, who include a rising generation of younger technocrats, still press for reform. In some fields they can point to real progress. Revised codes, for instance, have slashed corporate tax in half, to 20%, and income tax to 10%. The nascent stock exchange is set to oversee two big initial public offerings this year, including those of Libya’s two wildly successful mobile-phone services. Libyan investment laws are, on paper, as attractive as anywhere.
Still the trickiest of places
Yet the reformers are struggling to make headway. At unpredictable turns, they rub up against the entrenched interests of a pampered and unaccountable security elite, which includes army and intelligence officers, as well as tribal and revolutionary leaders with close links to the senior Mr Qaddafi. “It happens again and again,” says an Arab investment manager. “You get all the ingredients into the pipeline here, but suddenly it stops and you have no idea why. There is no transparency at all.” With four decades of experience across the region, he says this is the most difficult place he has ever worked.
This is a shame, enthuses the same manager, because Libya has the potential to become as big an investment hub as Dubai. Given its accumulated hoard of close to $140 billion in net foreign assets and plans to sink $150 billion into infrastructure over the next five years, this does not sound implausible. Perhaps what is needed is for Mr Qaddafi, now 69, to feel even more secure. Maybe then he would relax, stop playing the mercurial demagogue, and allow for a little boring predictability, as in Switzerland.