Opinion: The Battle to Recover Libya's Looted Wealth

It was corruption at the fruit market, where a fruit vendor set himself ablaze after being exploited by police, that ignited the revolution that overthrew Tunisia’s Ben Ali and started what became to be known as the “Arab Spring “.

In Libya, corruption pervaded and distorted society and impeded economic growth. University graduates who could not get a job without some connection to the Gaddafi cabal were among the first to pick up arms against the regime. The outrage caused by years of pervasive corruption was uncontrollable and was a major factor in spurring the Libyans to revolt.

Bribery infected everything from access to government jobs to the creation of private wealth for public officials. The impact of sleaze on the economic and political scene in Libya was more glaring than almost anywhere else in North Africa. Even a casual onlooker of the Libyan scene was able to observe the major negative consequences of the kleptocracy that reigned supreme under the old regime.

Corruption had enticed government officials to allocate public resources according to opportunities for extorting payoffs rather than on the basis of social welfare. Large projects, whose performance is difficult to monitor, provided lucrative opportunities for rent-seeking and different types of inducements. It was much easier to collect large bribes on large infrastructure projects or defence contracts than on textbooks or teachers' salaries.

Corruption also affected the composition of government expenditure. As venality became more rampant, there was much less government expenditure on education and health than on large infrastructure and defence projects. Naturally, corruption also lowered the quality of infrastructure projects and public services.

In the presence of corruption, businessmen became aware that an “enticement” was required before any enterprise could be started. In addition, corrupt officials laid claim to part of the proceeds from the investment so this helped to multiply the costs of projects. There was also the uncertainty that the official who acted as facilitator might be removed from his job or would not be able to fulfil his part of the bargain. All this worked to diminish incentives to invest for the long term.

Furthermore corruption distorted manpower development in Libya. Since rent-seeking is often more lucrative than productive work, talents were misallocated. Financial incentives lured the more talented and better educated Libyans to engage in rent-seeking rather than productive work which in turn resulted in adverse consequences for Libya’s economic growth.

Post revolution Libya must forever close this shameful chapter in the country’s history .We need to take a robust approach to combating this endemic corruption. The private sector, civil society and the media all have a role to play in building a coalition for transparency. However, the most important element will be the commitment, dedication and the tenacity of the government at all levels and the judiciary.

One of the priorities of the soon to be elected National Assembly must be to enact adequate anti-corruption legislation and appoint an anti-corruption agency which is effective and empowered to enforce the legislation. This agency should be able to co-opt any individual whose expertise it needs. It must have the power to pursue corrupt officials of whatever rank and bring them to heel without fear or favour.

Libya also needs to implement financial regulations of the highest standard. The efficient regulation of financial institutions especially in properly managing risk when lending money is equally important. Many forms of corruption in the past involved the collusion of corrupt officials within the public banking sector often manipulating “vague” regulations.

Libya cannot fight corruption or hope to recover its looted wealth or entertain visions of a more prosperous future without the rule of law prevailing in the country. Most economists will agree that the single most important factor in explaining the wealth of nations is the rule of law. Capital and private funds will flow to where it serves the entrepreneur best; that is to countries where the rule of law applies with the least corruption and greatest transparency.

The precise content of the law is probably less important than having a transparent functioning legal system to begin with. This is yet another reason why it is crucial for the conspicuously absent judiciary in Libya to resume its role.

We also need to fight to get our looted wealth back and we need our friends to help us do this. In the past, Libya’s major trading partners have, to a great extent, abetted the corrupt practices of the former regime.

Despite ratifying an Organisation for Economic Cooperation and Development (OECD) anti-bribery convention and enacting anti-corruption laws, many OECD countries eager for trade and jobs at home failed to act on their anti-bribery commitments under the OECD convention and in fact looked the other way at the illicit practices of their corporations in Libya.

We need to hammer in the point to these countries that helping Libya’s new leaders fight corruption is not only their moral duty, but should also be considered “good politics “. Widespread outrage at corruption was a major motivator for the revolution in Libya, and this should be considered as an opportunity for these powers to connect with aspirations of a Libyan population seeking change.

Libya needs also to liaise closely with the international community in devising and implementing a comprehensive, robust and credible anti-corruption policy. The United States, which in the past has been by far the most active nation under the convention through vigorous enforcement of the Foreign and Corrupt Practices Act, has now raised the bar further.

The US Justice Department has launched an unprecedented campaign against international bribery and corruption. Its new, and aptly named, “Kleptocracy Asset Recovery Initiative” may prove of benefit to Libya. It has been set up to target and recover proceeds of foreign official corruption that have been laundered into or through the U.S. Once fully implemented, this initiative is expected to allow the US Justice Department to recover assets on behalf of countries victimized by high-level corruption.

More energetic enforcement by Libya’s other trading partners is needed. They need to eschew their pernicious protectionism and pressure their multinational corporations to create an effective internal anti-bribery culture. Libya should measure the suitability of a trading partner by the effectiveness of the home country’s anti-corruption laws and restrict the awarding of its major public contracts to those companies whose home countries score highest on the anti-corruption law enforcement scale.

Libya also needs to study the example of Indonesia, where the US Justice Department recently worked with Indonesia’s attorney general’s office to set up a 50 strong anti-corruption task force.

The evil of corruption can never be overstated. In the words of the former US Vice President Al Gore, corruption is “a serious crime with devastating consequences, a cold, vicious, often violent sacrifice of citizen security, for a narrow, greedy, private, personal profit on the part of a crooked official."

(Source: Tripoli Post)

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