"people's capitalism" which means "you don't have a few tycoons and the rest of the people are just poor"

TO BE NOTED: From the FT:

"Reform in Gaddafi's Libya is still shrouded in ambiguity

By Heba Saleh in Tripoli

Published: April 28 2009 03:00 | Last updated: April 28 2009 03:00

The western part of the waterfront in downtown Tripoli looks like a massive construction site. Cranes tower over the landscape, while armies of labourers, many of them migrants from sub-Saharan Africa, scurry around doing the heavy menial work.

Some 20 major building projects, including international luxury hotels and swish office blocks, are to be completed in the area in the next few years transforming the appearance of the city and confirming Libya's emergence from four decades of isolation.

Residents say the scale of the new construction is a response to soaring demand for office space, hotel rooms and housing as more foreign companies turn their attention to opportunities in the oil rich North African state.

The demand increased after the last remaining problems between Washington and Tripoli were resolved in November.

No longer an international pariah, Libya has been knitting closer ties with the outside world, but there is still uncertainty about how much real change will be allowed internally.

"In the last few years there have been more foreign companies coming and more Libyans travelling, creating a slow change," said a western diplomat. "There will be no going back, because people see the benefits that resulted from opening up the economy and from opening up to the west."

But shaped by the views and whims of Muammar Gaddafi, its maverick leader for the last 39 years, Libya remains a quasi-socialist state where political parties are banned and no dissent is tolerated.

Libya's heavily centralised economy remains dominated by the public sector, even if in recent years foreign banks have been allowed into the country and the private sector has been given a bigger role. Mr Gaddafi is understood to be wary of businessmen becoming influential enough to pose a challenge to his rule.

Now, however, Farhat Bengdara, governor of the central bank, says: "We will start working on preparing a comprehensive reform programme, aiming at reforming the economy, from a state-controlled economy to a more private and co-operative sector economy."

But in a sign of the ambiguity that still surrounds reform, he cautions that privatisation in Libya may not follow the same models as elsewhere. Libya, he explains, wants "people's capitalism" which means "you don't have a few tycoons and the rest of the people are just poor". His expectation is that limits would be placed on how many shares an individual could own in a company.

Political reform, too, appears to be off the agenda despite plans to introduce a constitution - an initiative of Seif al-Islam, the son of the leader who played an instrumental role in improving Libya's relations with the west and in pushing for greater participation by the private sector.

Like much else in Libyan politics, Seif al-Islam's role remains shrouded in opacity. He does not have an official position, yet he has been able to wield enormous influence over sensitive issues. Many believed he was being groomed to succeed his father but, in a surprise move last year, he announced he was stepping back from politics.

"The struggle is between opening up and conservatism," said another Tripoli-based diplomat. "I think Seif went too far for his father's taste in terms of political rights, freedoms and human rights. The leader thinks there are enough economic problems now that they can't address political ones too."

The diplomat argues that a plan last year by Mr Gaddafi to abolish ministries and distribute the oil proceeds directly to the people was meant to address popular resentment over the widening income gap in society. But while some Libyans have benefited from the increased presence of foreign companies, the majority have seen their incomes eroded because of inflation.

The foreign influx has brought good jobs to a narrow class of well-educated Libyans. It has also benefited the politically connected who acquired land in the suburbs and built houses, renting them out to the expanding expatriate community.

Inequalities are rising, says the diplomat, even if there are still few public signs of wealthy lifestyles.

"Consumption is not conspicuous yet," he said. "Here you don't want to appear too much. You are in limbo still. People are getting their BMW's, but the revolutionary committees still exist. As a Libyan you want to keep a low profile."