Libya breaks out of international isolation

TRIPOLI, Libya, Dec. 31 (UPI) -- Libya, accused for decades of being a rogue state, broke out of its international isolation in 2004 after giving up its program for developing weapons of mass destruction and settling on the Lockerbie and UTA air disasters.

The year, however, ended in a new dispute with Saudi Arabia after Riyadh accused Libya of conspiring to assassinate Saudi Crown Prince Abdullah.

Saudi Arabia recalled its ambassador in Tripoli in mid-December and expelled the Libyan envoy in Riyadh to protest against the alleged conspiracy. A bitter war of words between the two Arab countries ensued and is still reverberating despite efforts by the Arab League and Egypt to mediate a settlement and contain the dispute.

Libya's opening on the West this year was coupled with a bid to shift to an open-market economy by encouraging foreign investments and boosting the private sector after several decades of a closed socialist economy.

Returning to the international fold remains the main landmark for Libya in 2004, according to political analysts.

After three decades of tense international relations, especially with the West, Tripoli adopted a new foreign policy dubbed "war against the diplomacy of death" under which it opened a new page with the outside world and set its inner house in order.

Relations with the West, notably with the United States, improved significantly after Tripoli dropped its program for developing non-conventional weapons and paid compensation to the families of the victims of the bombing of Pam Am 103 over the Scottish town of Lockerbie on Dec. 21, 1988, and the bombing of the French UTA airliner Flight 772 over the Sahara Desert in southern Niger on Sept. 19, 1989.

Tripoli also cooperated enthusiastically with the international community in combating global terrorism.

Libyan overtures paid off quickly, as several world leaders visited Tripoli this year -- including French President Jacques Chirac, British Prime Minister Tony Blair, Italian Premier Silvio Berlusconi and U.S. Assistant Secretary of State William Burns -- in addition to the foreign ministers of France, Britain and Russia.

On his part, Libyan Foreign Minister Abdel Rahman Shalqam paid an official visit to Britain for the first time in more than a quarter-century, as Libyan-British relations warmed at all levels.

A breakthrough in relations with Washington also occurred, and full-fledged diplomatic relations are expected to be restored next year.

Libya's decision to show greater flexibility in dealing with a number of international issues and its bid to initiate direct negotiations with international parties is largely credited for the breakthrough in its international relations.

Political analysts argue that the sudden shift in Libya's foreign policy is largely due to Libyan leader Moammar Gadhafi's disappointment and poor faith in Arab collective action and solidarity, which prompted him to turn toward Africa.

"Tripoli felt the urge to improve its standing in the international community after suffering many years from an international embargo and Arab indifference," said one analyst.

The economic change, in the meantime, was ushered in at the People's General Congress, the highest legislative authority in the country, which formed a new government at the beginning of 2004 under the premiership of Shukri Ghanem, a leading economist known for his support of an open-market economy.

The new government was entrusted with the mission of introducing drastic economic reforms, including the privatization of the economy, notably the oil sector, banks and airports.

The public sector employed more than 800,000 people who have been draining the state budget and providing poor services at a time when unemployment increased alarmingly, affecting more than 270,000 Libyans.

Among the first steps taken by Ghanem's government to free the economy was putting more than 375 government companies up for sale to the private sector and foreign investors as partners.

The government also pumped 7 billion dinars ($5.3 billion) into the economy in the form of soft loans and monetary incentives to encourage private enterprise in real estate, industry, agriculture and tourism.

Ghanem described the government's economic measures as "daring and advanced steps to deal with the country's economic problems."

"Opening up the economy is a priority for the government, which is introducing new laws to make all jobs within the reach of Libyans and expand private property and enterprise," Ghanem told UPI.

He said "this year was a difficult one, and we sill have many steps ahead to improve economic performance and deal with rampant unemployment."

"We need to create new economic activities in order to reduce the size of the public sector in which employment was taking place haphazardly," Ghanem added.

A senior official in the government's Investment Department, who spoke on condition of anonymity, stressed that Tripoli "is determined to introduce a liberal economy and has in fact given the green light to foreign investment companies to carry out industrial, health and tourism projects worth more than $700 million."

But Foreign Minister Abdel Rahman Shalqam contends that the volume of foreign investment "is still way below aspirations."

Libya is eyeing membership in the World Trade Organization and has lifted government subsidy on basic commodities, including sugar, wheat and rice.

Libyan officials are confident that economic reforms and Libya's opening up to the world is bound to make it the gateway to North and South Africa, especially because Tripoli is the founder of the 50-state African Union Organization and a dominant member.