Economy recovery depends on ravaged oil sector

With severely damaged infrastructure and a banking system without enough liquidity, Libya's national economy is on the edge of breakdown.

Some analysts and experts expect that Libyan frozen assets in the foreign countries could contribute to its economic recovery.

And in fact, some western countries are preparing to unfreeze the frozen Libyan assets.

But even with those money, Libya's economic recovery would be neither easy nor rapid. Its oil sector could take a year or even longer to be restarted and reforms are needed in many sectors.

"Libya's economy under Gaddafi's rule was characterized by corruption, mismatches in the labor market, and a poor business environment," analyst Mahmoud told Xinhua.

"Under that circumstance, the private sector which should be the main engine of the economy is in fact a sample of crony capitalism, which means the success of businessmen depends on nothing but their links to Gaddafi or others in his regime," said Mahmoud, adding that the interim government had no other choice but to rely on the oil export in the coming years, just like what Gaddafi did.

Libya holds the largest oil reserves in Africa which is listed the ninth in the world. Oil production reached 1.6 million barrels per day before the civil war. Libya's "sweet crude oil" is popular in the world market due to its low cost of production and good quality.

The fighting in Libya led to a steep fall in oil production to 45,000 barrels a day in August, as oil installations were damaged and foreign workers had fled the violence.

In a report issued on December 13, the Paris-based International Energy Agency said that the recovery in Libyan oil output had exceeded expectations so far in 2011, but it couldn't return to its pre-conflict levels of 1.6 million barrels a day before 2014.

Chairman of the National Oil Corporation of Libya Nuri Berruien told reporters during the first summit of Gas Exporting Countries Forum held in Doha last month that the main challenge of Libyan oil production was the damages to the facilities.

But he said that Libya's oil industry will recover more quickly than the International Energy Agency predicted. It will produce as much as 800,000 barrels of crude oil per day by the end of this year, he added.

Meanwhile, Egyptian local newspaper Gazette reported that the head of the Organization of Petroleum Exporting Countries, Abdullah el-Badri, was optimistic about the Libyan oil industry and described its recovery as "fast and surprising."

Badri said the war-wrecked North African nation will return to its pre-war production level "at the end of the second quarter" next year.