By Vivienne Russell | 11 September 2013
Libya needs to decentralise its public services and cut at least 400,000 people from its public sector workforce, an economic analysis by the African Development Bank has said.
The report, From inherited wealth to productive economy: planning for development in post-civil war Libya, concluded the country faces a ‘dual challenge’. It has to both improve the efficiency and productivity of its public sector while also reducing its overall size and contribution to the national economy in favour of greater private sector involvement.
‘Both are formidable challenges, and are at the core of meaningful reform of Libya’s economy,’ the report, published yesterday, stated.
Under the Gaddafi regime, the country was highly reliant on oil revenues, while its state structures contained little power or regulatory capacity. The government controlled the majority of enterprises and assets, and amassed a large number of badly performing industries, financial institutions and real estate.
These problems have persisted following the 2011 revolution, the bank said, but the country now needed to improve economic governance and streamline the public sector.
Around 70% of Libya’s workforce is employed in the public sector despite public services contributing only around 9% to gross domestic product. ‘The public sector needs to shed at least 400,000 workers to achieve a modicum of efficiency,’ the report said.
‘In addition, the public sector workforce is not well allocated and focuses on low-value activities.’
The report stated that more that 50% of the formal workforce is employed in healthcare, with education is among other areas of public services ‘marked by high levels of overemployment’.
It also recommended greater decentralisation of services, something that was important both politically and economically to increase local accountability and greater local involvement in decision-making.
‘Decentralisation would also allow for more efficient and more transparent transfers of revenues from the central government to local administrations and bureaucracies,’ the report said.
‘The central government obviously must retain overall power to set development priorities and to ensure that assets for public spending are allocated equitably across different regions. This, however, leaves much space for the kind of efficiencies decentralisation can achieve, empowering local and regional groups in the process.’
There was also praise for Libya’s leadership in the post-civil war period. The country’s political leaders both understand the country’s economic challenged and have ‘eagerly’ embraced international advice and expertise, the bank said.
