Corruption in Libya

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Prior to the revolution in 2010 Libya ranked 146 out of 178 countries on the Corruption Perceptions list compiled by Transparency International. In 2011 it fell to 148th place, and in 2012 fell several places to rank 168th. However in 2012 the country made a modest improvement, rising to 160th place.[1]

In early 2012 Libya's post-revolutionary leader Mustafa Abdul-Jalil warned that LIbya would take years to overcome its "heavy heritage" of corruption, to combat a culture of mistrust and to build state institutions and the rule of law.[2] In particular, in an August 2012 interview, Libyan Health Minister Fatima Hamroush raised concerns about a type of "new corruption" arising in the Libyan health sector. This related to a fund established parallel to the Health Ministry, reporting directly to the Prime Minister, which was reportedly misusing funds designed to secure medical treatment abroad for those injured during the 2011 war.[3]

Corruption in Gaddafi era

According to a leaked US diplomatic cable from 2009, regulations in Libya were opaque and arbitrary[4] and corruption was widespread under Colonel Muammar Gaddafi, who was intimately involved in the regime's most critical and sensitive portfolios. The cable describes how, as de facto head of state, Gaddafi was subject to few formal decision making structures and Libya was effectively a kleptocracy in which the Gaddafi family or its close political allies had a direct stake in anything worth buying, selling or owning. Gaddafi personally reviewed any transactions worth US $200 million or more and was involved in many contracts of lesser value,[5] and he and his loyalists often sought to extract millions of dollars from contracts with international companies operating in the Libyan market, according to the New York Times.[6] By February 2011, Gaddafi had accumulated a multi-billion dollar fortune that he had hidden in financial safe havens across the globe.[7]

Beyond Gaddafi himself, the cables note that Libya's bureaucratic inefficiency and low salaries for government employees combined to create an environment in which rent-seeking and payoffs were common and even viewed as necessary to ensure the best service and pricing. Personal connections and insider knowledge played a significant role in business dealings with operators in Libya.[8]

Libya was a signatory to the UN Convention Against Corruption,[9] which came into effect in 2005,[10] but there were no international, regional or NGO "watchdog" organisations present in Libya to help facilitate regulatory transparency as of early 2010 and opposition websites critical of government corruption were operated by groups situated outside of the country.[11]

Overtures to reform

As of early 2010 there had been some movement on the part of the government to curb corruption. It established the "Administration and Oversight Board" as an agency to prevent corruption and oversee government activities, and in a series of speeches in late 2006, Gaddafi had called for all senior government officials to declare their complete assets and earnings within four months. Out of 4,600 files of senior government officials that were eventually reviewed, 150 were singled out for corruption, according to US diplomatic cables, and of those 20 were referred to the courts for judicial action. It was unclear, however, if these actions were directly related to Gaddafi's ultimatum.[12]

According to Shukri Ghanem, former Prime Minister and then-Chairman of Libya's National Oil Corporation (NOC) and Ibrahim el-Meyet, a prominent Tripoli-based attourney and business consultant, Gaddafi was willing to accept superficial economic reforms mainly to reintegrate with the West, but substantial economic and political reform could not occur as long as Gaddafi was alive.[13]

Gaddafi family economic ties

During his time in power, Gaddhafi appointed his sons to run various sectors of Libya's economy.[14] Cables from diplomats at the US embassy in Tripoli describe how Muhammad, the oldest son, dominated the telecommunications sector and Muatassim Gaddhafi was National Security Adviser.[15] Hannibal was influential in maritime shipping,[16] and Khamis commanded a top military unit. Saadi was involved in setting up an Export Free Trade Zone in western Libya,[17] and another son, Saif al-Islam, also benefited from government financing and political backing in his business endeavors.[18]

Compensation Fund controversy

In 2009, according to US diplomatic cables, the Libyan NOC brought together major international oil companies (IOCs) operating in Libya and presented a new law pressuring them into contributing to a charitable fund to support social and humanitarian aid programs. NOC officials, including then-Chair Shukhri Ghanem, admitted that the law was a thinly veiled attempt to make the IOCs contribute to a fund established under the U.S.-Libya Comprehensive Claims Compensation Agreement, which existed to compensate the victims of terrorism and their families. According to NOC officials chairing the meeting, if the companies declined to contribute to the fund, it was suggested they could be find for environmental violations or have their employees stopped by police for alleged traffic violations.

The issue reached the highest levels of the Libyan regime and went beyond the NOC, according to Ghanem, and senior British Gas executives with close ties to Ghanem said he was under pressure from Gaddhafi himself and Prime Minister al-Baghdad al-Mahmoudi.[19] According to the New York Times, while some companies resisted contributing to the US $1.5 billion fund, others appeared willing to make the payments in order to continue doing business in Libya.[20]

References

  1. "Corruption Perceptions Index", Transparency International, retrieved 21 January 2011.
  2. Libya: Corruption 'will last years'", Independent, 22 February 2012.
  3. Libyan Health Minister criticises ‘new corruption’", Euronews, 29 August 2012.
  4. "2011 Index of Economic Freedom - Libya" Heritage Foundation, retrieved 20 October 2011.
  5. "Al-qadhafi: The Philosopher-king Keeps His Hand In" Wikileaks, 29 January 2009.
  6. "Shady Dealings Helped Qaddafi Build Fortune and Regime" New York Times, 24 March 2011.
  7. "Gadhafi's stolen billions stashed in London" Montreal Gazette, 25 February 2011.
  8. "Libya: Investment Climate Statement" Wikileaks 14 January 2010.
  9. "Libya: Investment Climate Statement" Wikileaks, 14 January 2010.
  10. "Background of the United Nations Convention against Corruption" United Nations Office on Drugs and Crime, retrieved 20 October 2011.
  11. "Libya: Investment Climate Statement" Wikileaks, 14 January 2010.
  12. "Libya: Investment Climate Statement" Wikileaks, 14 January 2010.
  13. "National Oil Corporation Chairman Shukri Ghanem May Seek To Resign Soon" Wikileaks 13 July 2008.
  14. "Shady Dealings Helped Qaddafi Build Fortune and Regime" New York Times, 24 March 2011.
  15. "Wikileaks exposes corruption of Gaddafi off-spring" Scotsman, retrieved 23 February 2011.
  16. "Hannibal Goes To Sea: Insights Into Another Al-qadhafi Family Business" Wikileaks, 12 August 2008.
  17. "Wikileaks exposes corruption of Gaddafi off-spring" Scotsman, etrieved 23 February 2011.
  18. "Hannibal Goes To Sea: Insights Into Another Al-qadhafi Family Business" Wikileaks, 12 August 2008.
  19. "Lipstick On A Pig: Libya Renames Claims Compensation Fund" Wikileaks, 21 May 2009.
  20. "Shady Dealings Helped Qaddafi Build Fortune and Regime" New York Times 24 March 2011.