, zF tER~fi 3 X. X F LE COPY I 3 ( Report No. :111 36 lype: (PUB) -' , Title: THE ECONOMTI DEVELOPMENT OF LI '< :1 jAuthor: WORLD BANK .Z- . /;^@4 Ext.: 0 Room: Dept.: OLD PUBLICATION 9 yN~~~~~~~~~ THE ECONOMIC ~ r ?XX DEVELOPMENT OFX LIB YA REPORT OF A MISSION ORGANIZED BY THE ~~ <,~utrnational Bank for Reconstruction and Development . ,, N J C '_______A__________ \? '!t~~~~- Vrroperty oF the Interrnai'nal lanI tOv ReconstruGtion and DevelopmenO h iI ?Ak.x~f THE ECONOMIC DEVELOPMENT OF Libya Report of a Mission Organized by the International Bank for Reconstruction and Development at the Request of the Government of Libya THE ECONOMIC DEVELOPMENT OF LIBYA PUBLISHED FOR The International Bank for Reconstruction and Development BY The Johns Hopkins Press, Baltimore © 1960, The Johns Hopkins Press, Baltimore 18, Md. Distributed in Great Britain by Oxford University Press, London Printed in the U.S.A. by the William Byrd Press, Richmond Library of Congress Catalog Card Number 60-12910 THE MISSION P. S. Narayan Prasad, Chief of Mission T. D. Ahmad, Adviser on Public Health D. S. Ferguson, Adviser on Water Resources Kurt Krapf, Adviser on Tourism Habib A. Kurani, Adviser on Education Warren H. Leonard, Adviser on Agricultural Production Franz Luitolf, Economist W. Sidney McCann, Mineralogist G. M. McKelvie, Adviser on Transport and Public Utilities Zuhayr Mikdashi, Research Assistant and Interpreter G. C. W. Chr. Tergast, Agricultural Economist Wybold van Warmelo, Adviser on Industry and Handicrafts E. Peter Wright, Chief Economist Mrs. Liselotte Boesch, Secretary Miss Mary Sfeir, Secretary PREFA CE This is the report of an economic survey mission to Libya, which was organized by the International Bank for Reconstruction and De- velopment at the request of the Libyan Government, and with the help of other international agencies. The main task assigned to the mission was to appraise the progress of Libya's economic development since Independence and to propose, in a form as specific and as prac- tical as possible, appropriate targets for further development over the next five to ten years. The mission consisted of thirteen members representing nine dif- ferent nationalities. The Mission Chief and the Chief Economist, both members of the Bank's regular staff, paid a preliminary visit to Libya in November-December 1958, and the main mission arrived in the country in January 1959, remaining there until early in April. After leaving Libya the mission reassembled at the Bank's headquarters in Washington to prepare its report. During their stay in Libya the members traveled extensively in the three provinces, visited all the important development projects and had many discussions with ministers and officials of the federal and provincial governments, with the National Bank of Libya, with private bankers, businessmen and farmers, and with representatives of the foreign aid agencies. The Mission Chief had the honor of being re- ceived by His Majesty the King on two occasions. The present report, after reviewing the progress made in recent years and discussing the new long-term possibilities opened up by the discovery of oil, puts forward specific recommendations for a develop- ment program to be undertaken during the next five years and dis- cusses the steps which will have to be taken if this and subsequent programs are to be carried through successfully. In drawing up this program the mission proceeded on the assump- tion that, while the discovery of oil, a potentially rich new natural resource, holds out the long-term prospect of establishing a prosperous economy, the petroleum industry is unlikely in itself, either directly or indirectly, to provide employment and wages for more than a small vii Viii PREFACE fraction of the Libyan people. The majority must therefore look to other occupations for their livelihood. At present, agriculture and the processing of agricultural products appear to be the activities for which Libya is best adapted, given the small size of the population, the location of the country, the compara- tive underutilization of available land and the lack of industrial re- sources. Fisheries and tourism also hold out potentialities for develop- ment and, over the longer period, probably some petrochemical industries. To build up this more prosperous and balanced economy it is necessary during the next five years to advance the abilities and skills of the Libyan people; to secure to the agriculturists individual rights in land; to provide improved government services to agriculture; to extend water and soil conservation work; to use the available water resources wisely; to provide better facilities for credit, marketing, cold storage and transport. If these promising possibilities are to become a reality, education and technical training have to be accorded a high priority and government must be better organized. The mission has felt it necessary to say a good deal in the report about the problems involved in adapting the present organization of government in Libya to the requirements of efficient and rapid eco- nomic growth. The suggestions made for strengthening the authority of the federal government and for securing better coordination between the center and the provinces in the planning and execution of develop- ment programs spring from the conviction that major changes in gov- ernment organization are absolutely vital if Libya is to take full ad- vantage of the great opportunities opened up by the discovery of oil. The main report contains all the mission's principal conclusions and recommendations. Supplementary information is included in a series of annexes. In transmitting the report to the Government of Libya, the Presi- dent of the Bank noted that since the Executive Directors and man- agement customarily do not review the recommendations of missions in detail, the report as transmitted represented the views of the mis- sion rather than positive recommendations of the Bank. The letter added, however, that the Bank believed that the findings of the report deserved the most careful consideration and discussion. Similarly, while other international agencies were given an opportunity to com- ment on the portions of the report of particular interest to them, re- sponsibility for the recommendations of the report is to be regarded as that of the mission alone. A CKNO WLEDGEMENT The mission wishes to acknowledge the generous cooperation ex- tended to it in all aspects of its work by officials of the federal and provincial governments, by members of the various foreign missions in Libya, in particular by the Resident Representative of the United Nations, and by the many private citizens with whom the mission had occasion to consult. Among the officials, the mission wishes specifically to acknowledge the assistance of Dr. A. N. Aneizi, and of Mr. R. J. Cunnell, Governor and Deputy Governor respectively of the National Bank of Libya, who together with their staffs acted as liaison officers with unfailing effort. POLITICAL TERMS A provincial governor in Libya, who is the direct representative of His Majesty the King, is known as the Wali. The federal Cabinet is known as the Council of Ministers, and the equivalent in the provincial government is the Executive Council. Provincial Ministers are known as Nazirs and their departments as Nazirates. CURRENCY EQUIVALENT The currency unit in Libya is the Libyan pound which is exchange- able at par with the pound sterling and is thus equivalent to 2.80 U. S. dollars. All conversions have been made at this rate in the report. The Libyan pound is divided into piasters (100 piasters =£L 1) and milliemes (1,000 milliemes = £L 1). UNITS OF MEASUREMENT The metric system is in use in Libya and has generally been used in this report for measuring weights, distances and dimensions. All refer- ences to tons are to metric tons, except where otherwise stated. The Libyan financial year runs from April to March, the agricultural year from October to September. PRICES All figures of past expenditures in this report are in terms of the actual prices that prevailed at the time. Estimates and projections of future expenditures are notionally in terms of constant 1958/59 prices, i.e., no allowance has been made for possible increases in Libyan or world prices above the levels ruling at the time of the mission's visit. x TABLE OF CONTENTS The Mission ........................... v Preface . ............................. vii Acknowledgement ......................... ix THE MAIN REPORT 1. AN ASSESSMENT OF THE PROBLEM .................. 3 The Mission's Task ........ ................ 3 A Dual Economy ......... ................ 3 Impact of Oil Discoveries ...... .............. 5 Human Resources for Development .... .......... 6 Education and Training ...... ............... 8 Popular Attitudes and Institutions ..... .......... 9 Government Organization .................... 11 Economic and Financial Policies ..... ........... 12 Investment Priorities ....................... 14 Agriculture and Forestry ...... ............... 18 Special Needs of the Fezzan ...... ............. 19 The Italian Community ...... ............... 21 Conclusions . ........................... 22 2. CHARACTERISTICS OF THE LIBYAN ECONOMY .. . ....... . . 25 Historical Background ....... ............... 25 Population ............................. 28 Land and Water ........ ................. 29 Oil and Other Minerals ...... ............... 32 Fisheries and Tourism ....... ............... 32 Industry ......... ..................... 33 Existing Pattern of Economic Activity .... ......... 33 Use of Resources ........ ................. 36 Public Finance . ......................... 38 Currency and Banking ....... ............... 40 Costs and Prices ......... ................. 41 Summary .............................. 42 3. FOREIGN AID AND ECONOMIC DEVELOPMENT .... .. ....... 44 Libya and the United Nations ..... ............ 44 xi Xii CONTENTS Special Treaties with United Kingdom and United States . .......................... 45 Organization of Foreign Aid ..... ............. 46 Previous Development Programs .... ......... 47 The Development Council .... ............. 50 The Libyan Public Development Stabilization Agency ....... .. . . . . . . . . . . 50 The Libyan-American Reconstruction Commission . . 51 The United Nations ......... .. .. .. . .. . . 53 The Results Achieved .......... . .. .. . .. . . 55 4. IMPACT OF OIL DISCOVERIES ..... . . . . . . . . . . . . 59 Prospects for Oil Production .59 Impact on the Economy .61 Industrial Implications of Oil .63 The Petroleum Commission .65 5. OUTLINE OF A FIVE-YEAR DEVELOPMENT PROGRAM .66 Guiding Principles .66 The Main Program .68 Sources of Finance .73 Supplementary Program .74 6. GOVERNMENT ORGANIZATION .75 The Structure of Government: The Present System .75 Strengthening the Federal Government .78 Management of Public Enterprises .83 Provincial Administration .84 Consultative Bodies .85 Machinery for Economic Planning: A Central Planning Staff .86 Statistical and Economic Services .89 Financial Control .92 The Civil Service .94 Government Contracts .98 7. WATER RESOURCES .100 Geology and Hydrology .100 Water Sources and Conservation .102 Federal Department of Geology and Hydrology . . .. 104 Provincial Water Resources Branches .105 A Water Law .106 Development Proposals .108 Development Works in Cyrenaica .109 Development Works in Tripolitania .112 CONTENTS Xiii Development Works in the Fezzan .... ........ 117 Flood Prevention in the Wadi Megenin ..... . . . 119 Flood Prevention at Wadi Gattara .... ........ 122 Flood Water Storage ..... ............... 122 Irrigation Practice and Research .... ......... 123 Summary of Proposed Expenditures ..... . . . . . . 124 8. AGRICULTURE, LIVESTOCK AND FORESTRY ..... . . . . . . . . . 127 Conditions of Development: Land Rights .......... .. .. .. . .. .. .. . . 130 Agricultural Credit ........ . . .. . . . . . .. . . 132 Cooperative Societies ........ . . . . . . . . . . . . 135 Marketing Arrangements ....... . . . . . . . . . . . 136 Education and Extension Services ..... . . . . . . . . 140 Agricultural Administration ..... . . . . ....... . 141 Pattern of Development: Existing Land Use ......... . .. . .. . . .. . . 142 Guiding Principles for Development ..... . . . . . . 144 Recommendations on Particular Crops ..... . . . . . 147 Regional Aspects . . . . . . . . . . . . . . . . . . . . . . 156 Technical Support for Agriculture: Experimentation and Research ...... . . . . . . . . 161 Land Classification .......... . .. .. . .. .. . 164 Soil Conservation ........... .. . .. .. .. . . 164 Plant Protection ........... ... .. .. .. .. . 165 Farm Supplies ............. .. ... .. ... . 166 Mechanization ....................... . 167 Livestock: Problems of Management ....... . . . . . . . . . . 167 Livestock Improvement ................. . 169 Processing and Marketing ................ . 170 Forestry: Objectives and Priorities ........ . . . . . .. . . . 171 A Program for Tripolitania ....... . . . . . . . . . 174 A Program for Cyrenaica ........ . . . . . .. . . . 176 Summary of Proposed Expenditures ...... . . . . . . . . 177 9. INDUSTRY, HANDICRAFTS AND FISHERIES . . . . . . . . . . . . . . . 179 Industry: Present Position of Industry ....... . . . . . . . . . 179 The Scope for Industrial Expansion ..... . . . . . . 182 Government and Industry ....... . . . . . . . . . . 185 Administration of Industrial Policy ..... . . . . . . 187 Registration and Licensing of Industry ..... . . . . 189 XiV CONTENTS Law for the Development of National Industries . . . . 190 Foreign Capital Investment ...... .......... 191 Protection of Industry . . . . . . . . .....................,192 Financial and Technical Assistance ..... . . . . . . . 194 Other Promotional Measures ...... . . . . . . . . . 196 Handicrafts .............. ... ... ... ... . . 198 Fisheries .................. ..... .... .. . 201 Summary of Proposed Expenditures ...... . . . . . . . . 206 10. THE TOURIST TRADE ............ .. .. ... .. .. .. . 208 Libya's Attractions for the Tourist ..... . . . . . . . 208 Present Pattern of Libyan Tourism ..... . . . . . . . 209 Objectives of Libyan Tourist Policy ...... . . . . . 210 Difficulties to be Overcome ....... . . . . . . . . . 210 Expansion of Hotel Accommodation ..... . . . . . . 212 Transport Facilities .......... . .. .. . .. .. . 216 Other Amenities ........... ... .. .. .. .. . 217 Simplification of Formalities ....... . . . . . . . . . 218 Organization of Tourism ........ . . . . .. . . . . 218 Summary of Proposed Expenditures ..... . . . . . . 219 11. ELECTRRIC POWER ............................ 222 Organization of Power Supplies in Libya ..... . . . 222 Tripoli Power ........ . . .. . . . . .. . . . .. . 223 Other Power Stations ....... . . . . . . . . . . . . . 227 Summary of Proposed Expenditures ..... . . . . . . 228 12. TRANSPORT AND COMMUNICATIONS .................. 229 Existing Transport Facilities ...... . . . . . . . . . 229 The Railways ......... .. .. . .. .. . .. .. . .. . 229 Roads and Road Transport: The Road System ....... . . . . . . . . . . . . . . . 231 Road Maintenance ....... . . . . . . . . . . . . . . 232 New Construction and Improvements ..... . . . . . 233 Road Administration ....... . . . . . . . . . . . . . 235 Road Transport ........ . . . . . . . . .. . . . . . 235 Government Transport ....... . . . . . . . . . . . . 236 Ports and Coastal Shipping: Tripoli .......... .. .. .. . .. .. .. .. .. . 237 Benghazi Harbor ....... . . . . . . . . . . . . . . . 238 Minor Ports and Coastal Shipping ..... . . . . . . . 244 Civil Aviation ......... .. .. .. . .. . .. .. .. . . 245 Telecommunications and Broadcasting ..... . . . . . . . 247 Postal Services ....... . . . . . ...... . ........ . 249 Transport Administration. . ... ....... . 249 CONTENTS XV Summary of Proposed Expenditures .... .......... 250 13. EDUCATION ............................... 252 The Priorities ...... .................. 252 Long-Term Planning ..... ............... 255 The Primary School System ...... . . . . . . . . . . 256 After the Primary School .................. 259 Institute of Higher Technology .... .......... 264 University of Libya ..... ................ 266 Adult and Fundamental Education .... ........ 268 Foreign Study ...... .................. 270 Administration ........................ 271 Summary of Proposed Expenditures .... ....... 274 14. HEALTH AND COMMUNITY SERVICES ................. 276 Public Health: Present Health Conditions .... ............. 276 Hospital Services ...... ................ 277 Ambulance Transport ..... .............. 278 Medical Supplies and Equipment ..... . . . . . . . . 279 Port Health Control and Quarantine .... ....... 279 Preventive Services ..... ................ 280 Doctors . ............................ 282 Nurses, Midwives, Health Visitors ..... . . . . . . . 284 Other Health Workers ..... .............. 285 Registration and Licensing .... ............ 286 Reorganization of Health Services .... ........ 286 Nutrition ........ ................... 287 Town and Village Water Supplies .... ........... 288 Sanitation: Sewerage ........ ................... 290 Refuse Collection ........ .. . . .. . . .. . . . . 291 Control of Pests ...................... . 292 Food Hygiene ......... .. .. . .. .. . .. . . . 292 Industrial Hygiene ........ . . .. . . . . . .. . . 293 Housing ................ .... ... .... .. . 293 Community Development ........ . . . . . . . . . . . . 297 Summary of Proposed Expenditures ...... . . . . . . . . 297 15. GENERAL FINANCIAL AND ECONOMIC POLICIES ... ......... 300 The Problem of Inflation ....... . .. . . . . . . . . . . 301 Fiscal Policy: Broad Objectives ........ .. . . . .. . . .. . . . 304 Public Expenditures ....... . .. . . . . . . . . . . 305 The Budgetary System ....... . . . . . . . . . . . . 306 XVi CONTENTS Taxation ........................... 308 Charges for Public Services ..... . . . . . . . . . . . 313 Government Borrowing ...... . . . . . . . . . . . . 314 Social Security Legislation: Statutory Minimum Wages ...... . . . . . . . . . . . 316 Social Insurance . . . . . . . . . . . . . . . . . . . . . . . 317 Money and Banking ...... . . . . . . . . . . . . . . . . . 317 Foreign Trade and Payments: Import and Export Policies ..... . . . . . . . . . . . 322 Exchange Control ...... . . . . . . . . . . . . . . . . 324 International Trade Relations ..... . . . . . . . . . . 325 Prospects for the Libyan Economy ..... . . . . . . . . . . 326 LIST OF PRINCIPAL RECOMMENDATIONS ..... . . . . . . . . . . 330 STATISTICAL APPENDIX S. 1 Public Revenues and Expenditures in Libya .... . . 347 S. 2 Analysis of Domestic Revenues ... ........... 348 S. 3 Public Expenditures by Main Categories ... ..... 349 S. 4 Public Expenditures on Agriculture, Water Resources and Forestry ....................... 350 S. 5 Public Expenditures on Industries, Fisheries and Minerals ......................... 351 S. 6 Public Expenditures on Electric Power and Water Supplies .......................... 352 S. 7 Public Expenditures on Transport and Communications ...... . . . . . . . . . . . . . . 353 S. 8 Public Expenditures on Education ..... . . . . . . 354 S. 9 Public Expenditures on Health ..... . . . . . . . . 355 S. 10 Analysis of Expenditures by Agencies ..... . . . . . 356 S. 11 Libya's Balance of Payments ..... . . . . . . . . . . 358 S. 12 Foreign Exchange Holdings of the National Bank . . 359 S. 13 Composition of Exports ...... . . . . . . . . . . . . 360 S. 14 Destination of Exports ...... . . . . . . . . . . . . 360 S. 15 Composition of Civil Imports ..... . . . . . . . . . 361 S. 16 Source of Civil Imports ...... . . . . . . . . . . . . 363 S. 17 Quantities of Selected Imports ..... . . . . . . . . . 364 S. 18 Money Supply ....... . . . . . . . . . . . . . . . . 365 S. 19 Consolidated Statements of National Bank .... . . . 366 S. 20 Combined Balance Sheet of Private Commercial Banks 367 CONTENTS XVii ANNEXES I National Income and Expenditure .... ....... 371 II Money and Banking in Libya .... .......... 377 iii Proposal for a Finance Commission .... ....... 384 iv Mineral Resources ..................... 387 v Geology and Hydrology .................. 396 vi Proposals for a Water Law ................ 398 vii Administration and Costs of Water Resources Development ....................... 403 viii Water Resources Projects Requiring Further Investigation ....................... 407 ix Review of Selected Crops .... ............. 415 x The Former Italian Farm Settlements ..... . . . . 427 xi The Gebel Akhdar Development Project ..... . . . 432 xii Appraisal of Industrial Conditions ..... . . . . . . 437 xiii Review of Selected Industries .... .......... 448 xiv Handicrafts in the Desert Oases .... ......... 474 xv Sponge Fishing and Tunny Fishing .... ....... 476 xvi Electric Power ....................... 478 xvii Railways ...... .................... 485 xviii Roads and Road Transport ... ........... 489 xix Benghazi Harbor ...................... 496 xx Minor Ports and Coastal Shipping ..... . . . . . . . 498 xxi Civil Aviation ....................... 501 xxii Improvements in Hospital Services ..... . . . . . . 503 xxiii Urban Water Supplies ...... . . . . . . . . . . . . 508 INDEX ............. ... 511 LIST OF MAPS Libya ........................... . facing 26 Petroleum Concessions in Libya ." 60 Land Use and Rainfall in Tripolitania ." 100 Land Use and Rainfall in Cyrenaica ." 104 Water Conservancy Proposals in the Tripoli Area ." 120 Libyan Transport.. 230 Plan of Benghazi Harbor.. 242 THE MAIN REPORT CHAPTER 1 AN ASSESSMENT OF THE PROBLEM The Mission's Task The main task assigned to the mission was to appraise the progress achieved in Libya's economic development since Independence and to propose, in a form as specific and practical as possible, appropriate tar- gets for Libyan economic development over the next five to ten years. In carrying out this task the mission was asked to indicate not merely the investments needed to achieve the targets suggested, but also the legal and institutional changes required. A Dual Economy Libya is a good example of what is sometimes called a "dual econ- omy." Most Libyans still lead a very simple life, their diet is plain, their wants are limited, they have little knowledge of twentieth-century technology, tribal traditions are strong. This section of the Libyan population has been little touched by all the development that has taken place in the past fifty years. The majority (perhaps 200,000 work- ers) till the land or graze their livestock on the fringes of the desert, largely consuming what they produce, supplying most of their own needs. For shelter they have a low one or two-roomed house, a tent, a tin-shack or a cave; for clothes home-spun woollen barracanes; for transport a camel, horse or donkey. The property of a family or a kabila may be considerable, but their living standards generally remain austere. Such amenities as electricity and running water are practically unknown. Increasingly men from the country are drifting to towns, sometimes taking their families with them, sometimes leaving them behind. Here they earn money and buy more goods, but they do not necessarily eat better, and housing conditions are frequently worse than in the coun- try, particularly in the shanty towns of Tripoli and Benghazi. There is much underemployment on the land and in the towns, where many occupations are seasonal. But there is little involuntary unemployment, and for many jobs labor is hard to get. The other face of the economy is to be seen in the city of Tripoli, 3 4 THE MAIN REPORT and to a lesser extent in Benghazi, Sebha and some of the other towns, with their modern villas, brightly lit streets, shops, cinemas, restaurants and gas stations. It is to be seen in the large and prosperous farms in Tripolitania owned and managed mostly by Italians and by a few foreign firms, but some also by Libyans, who are usually merchants as well. It is to be seen in the large number of government offices and other public buildings, fine new schools and hospitals, modern roads and other public works. This modern sector of the economy is not a new thing. It was de- veloped by the Italians before World War II and since the war it has been revived and supported by foreign aid and foreign military ex- penditures, which are presently equal to over one-third of the Libyan national product. A relatively large number of foreigners are still to be seen in Libya, some of them permanent residents like the 40,000 Italians in Tripolitania, others living there on a more temporary basis-foreign troops, technical assistance personnel working under the United Na- tions and United States aid programs, oil company employees and so forth. These people enjoy a much higher standard of living than the average Libyan, and a sizeable part of the Libyan economy is geared to serving their needs. An estimated 20,000-25,000 Libyans are directly employed by foreign governments (working mainly at the military bases) and oil companies. Many others work in industries and service trades which depend largely on foreign demand, or on demand financed by foreign aid-building and construction, for example, road haulage, the catering trade, car hire firms and important segments of wholesale and retail distribution. The growth of a comparatively advanced and prosperous element on the edges of what is still predominantly a primitive rural com- munity has inevitably created difficult problems of adjustment. Op- portunities have been provided for a minority, albeit a rapidly increas- ing minority, of Libyans to enjoy a much higher standard of consump- tion. By no means all who have had the opportunity have wanted to take it-a fact which helps to explain the apparently high level of domestic savings in Libya today. But some have, and the results are to be seen in the rising Libyan demand for imported foods, western- style clothes, wrist watches, cameras, bicycles, radio sets, factory-made furniture, motor cars, modem houses and apartments and so forth. Quite a number of Libyans are now earning salaries and wages com- parable with those earned by their counterparts in European countries, and more and more people are dissatisfied with the jobs they have got and are looking for something better. Many are leaving the countryside AN ASSESSMENT OF THE PROBLEM 5 in search of work in the towns or in the desert with the oil companies, and land is going out of cultivation for lack of labor (particularly in the Fezzan). A new middle class is growing up in the cities of Tripoli and Benghazi composed of office workers, government officials, teachers and the like; and an increasing number of young people are going to secondary schools and universities. There is a restlessness amongst this younger generation of Libyans and a need to canalize their energies into constructive work. The process of change is being hastened by the discovery of oil. Plans are already being made for the exploitation of the oilfields lo- cated in the Sirte desert both in Cyrenaica and in Tripolitania. A pipe- line has been ordered, surveys are being conducted to determine the best points for the shipment of the oil, and one company has under- taken to construct a refinery in Libya. Meanwhile large sums continue to be spent on exploration by the 16 companies which have secured concessions in the country, and barely a month passes without news of fresh discoveries. Clearly big new developments lie ahead. The mission is keenly aware of what this can mean to a nation which has hitherto participated only on a small scale in the material benefits resulting from modern technology, and which is naturally anxious to free itself from its present dependence on foreign support. Many of the changes that are taking place are healthy. More Libyans are traveling about inside and outside the country than ever before. New tastes are being developed and new wants are being dis- covered, particularly by those who work in close contact with people from other countries and those who have been abroad to study. All this is good for economic growth. Up to a point it may also be good that people are drifting away from unremunerative rural occupations to better paid jobs in oil development, industry and the service trades. But there are great disadvantages in too uneven a distribution of in- come and wealth; in a minority of Libyans getting rich while the mass of the population remains very poor; in too sharp a division between the modern and the traditional sectors of the economy; in more people leaving the land than there is any hope of finding jobs for in the towns; in the sense of frustration that will be engendered if the results of development fail to match up to expectations. Impact of Oil Discoveries These considerations have weighed heavily with the mission in drawing up the recommendations for economic development that are 6 THE MAIN REPORT set out in this report. Oil revenues may now enable Libya to become economically self-supporting within the foreseeable future and at the same time to enjoy a steadily increasing income. Nevertheless, as the experience of other countries has shown, the discovery of oil does not provide an easy or a complete solution to the problem of economic de- velopment. It is particularly important that the wave of optimism which naturally accompanies an oil boom should not be allowed to divert attention from the pressing need to improve the lot of the rural population, who will not necessarily share in the new prosperity any more than they have shared in the rise in national income which has taken place during the past five years. It is much too early yet to say exactly what the eventual impact of oil development on the Libyan economy will be. Clearly it will mean more money for the government, although it is likely to be several years yet before there is any large increase in oil revenues. It will also mean new jobs for Libyans, some of them with high salaries, on the payrolls of oil companies or in other operations associated with oil. But for the reasons given in Chapter 4 we doubt whether, even allow- ing for the construction of a refinery and possibly the establishment later on of new industries based on oil, the direct employment given by the companies and their contractors will be equal to more than about 5 percent of Libya's total labor force. As for indirect employment, the expenditures of the oil companies in Libya will have a "multiplier" effect in stimulating demand and creating jobs in industries and trades which can cater to the needs of the companies and their employees (the construction and transport industries and the hotel trade, for example). This effect is being felt already, and it is likely to be most pronounced during the next few years when exploration and development are pro- ceeding simultaneously. Thereafter both the direct and indirect em- ployment created by the oil industry could well decline somewhat, creating difficult problems of adjustment. The scale of any such adjust- ment would depend in part on the level of foreign military expendi- tures in Libya, which in recent years have contributed a great deal to the expansion of the economy. Human Resources for Development This report is concerned primarily with the next five years-the period, that is, before we expect any big flow of oil revenues to the government. During this period, as the mission sees it, attention should AN ASSESSMENT OF THE PROBLEM 7 be concentrated on the problems that have to be tackled in developing the other sectors of the economy-problems which existed prior to the discovery of oil, and which may not be any easier to solve now than they were before. These problems can be grouped under two main headings. First, there are the problems connected with the physical character of the country-the sparse and irregular rainfall, the shortage of water and soils impoverished by centuries of neglect; the paucity of known mineral resources apart from oil; and the dispersal of a small population over a very large area, which calls for exceptionally heavy per capita expenditure on transport and communications and greatly complicates the business of distribution and marketing. Second, and more difficult to resolve quickly, there are the human problems arising out of Libya's past history and the lack of opportunities given to the Libyan people to acquire education and experience in self-government and in modern techniques of production. It cannot be too strongly emphasized that economic development does not depend simply on how much money is invested in farms, factories, roads, harbors, schools, hospitals, public buildings and so forth. It depends also on the kind of social and political institutions a country has, on the aims and policies of the government, on the educa- tion and training of the people and on the value attached by all classes of society to the benefits accruing from increased production. That is why we have felt it necessary to comment at some length on the human, institutional and administrative problems involved before entering into a detailed discussion of economic programs and policies. Already, as the mission sees it, Libya's capacity to invest money fruitfully in productive schemes is being limited by lack of experience in administration and planning, by weaknesses in government organi- zation and by shortages of trained personnel. Very few Libyans have yet had time to acquire advanced technical and professional skills or training in administration; there is an acute shortage of skilled crafts- men, artisans and intermediate technicians; and Libyan farmers are generally without the knowledge and experience needed to make good use of the capital placed at their disposal. The immediate need is there- fore to accord the highest priority to a well-conceived program of edu- cation and training at all levels, while at the same time creating a more effective organization for the planning and execution of economic proj- ects and policies. Much will be said in this report on both these subjects. 8 THE MAIN REPORT Education and Training At the time of Independence, more than 90 percent of the popula- tion were illiterate and only a handful of Libyans had been given an opportunity to study at a university or to qualify for a recognized pro- fession. Although facilities for education in Libya have since been greatly expanded, and in addition some hundreds of young Libyans have been sent abroad for training, there has not yet been sufficient time to produce more than a tiny fraction of the skills required. Educa- tion must therefore occupy a prominent place in any plans for the fu- ture development of the country's resources. The justification for giv- ing the highest priority now to this aspect of development is greatly strengthened by the prospect of large oil revenues materializing within five to ten years. An educational program cannot, however, be contained within a period of five or ten years, and its full results will not be seen for decades. A long-term assessment has to be made of the prospective de- mand for different types of trained manpower and definite goals set, to be reached in stages. A proper balance has to be maintained between primary, secondary and higher education, between the education of children and the education of adults and between general education and vocational training. The mission has some comments to offer on priorities in Chapter 13. Generally speaking, now that a fairly broad base has been created by the rapid expansion of primary school en- rollment in the past few years, we feel that the emphasis should be in- creasingly shifted to vocational training and adult education, including agricultural extension services. Learning comes with experience and responsibility, and more and more Libyans are picking up knowledge on the job, whether it be in government or in private employment. Indeed, the mission was greatly impressed with the keenness and administrative ability displayed by a number of the senior officials it met. There are certain types of skill, however, which can only be acquired after long study and practice. Doctors, lawyers, economists, accountants, engineers, architects, agron- omists, foresters, veterinarians, chemists-professions such as these de- mand many years of general education and specialized training before a person is qualified to practice, and he requires further years of prac- tice before he is able to assume high responsibility. The mission has no doubts about the capacity of Libyans eventually to acquire these and other skills. But it will inevitably be a long time before enough Libyans have been trained to replace the foreigners who at present occupy all AN ASSESSMENT OF THE PROBLEM 9 but a very few of the posts requiring higher technical qualifications. The mission strongly urges that Libya should continue in the mean- time to take full advantage of the technical assistance provided by the United Nations and its specialized agencies, by the United States and by other friendly countries. The need for these programs will remain for many years to come, as will also the need for the Libyan Govern- ment to employ a considerable number of expatriate officials in key posts in the government service. In saying this we are well aware of the disadvantages of Libya having to depend on foreign experts for advice and we are strongly in favor of Libyans progressively taking over more posts of responsibility as and when they are suitably qualified to do so. But much harm can be done to Libya's interests by too rapid a dis- placement of foreigners, and it is hoped that the United Nations and its specialized agencies in particular will be ready to maintain, and in some cases extend, their technical assistance programs. At the same time, when a post in the Libyan Government service has to be filled by an expatriate, the salary and terms of service offered should be such as will attract a good man and encourage him to remain in Libya for a reasonable period of time. Short-term assignments (e.g., for one year or less) are seldom satisfactory. Popular Attitudes and Institutions Certain attitudes and institutions are naturally more conducive to economic growth than others. Libya is no different from other coun- tries in having a number of traditions and customs which stand in the way of such growth, and which will have to be changed if a rapid rate of development is to be achieved. A conspicuous example is the system of tribal ownership of land and water rights, which does not allow the individual cultivator the security or incentive he needs to improve his land and increase his output. This system was developed in response to the needs of a nomadic people dependent for their livelihood on animal husbandry and shifting cultivation. With its emphasis on collective rights and obligations, it is unsuited to the requirements of settled farming. Many of the Libyans and foreign experts with whom the mission discussed the question claimed that tribal ownership of land and water rights was the biggest single obstacle to the development of agricultural production and forestry in Cyrenaica, as well as in parts of Tripolitania, and that until the system was changed there was little hope of real progress. We find it difficult to dispute this view, and we have accordingly recommended that urgent consideration should be 10 THE MAIN REPORT given to the enactment of land and water laws securing individual rights of ownership or tenure (see Chapters 7 and 8). Another factor retarding economic progress in Libya is the pre- vailing attitude towards appointments to government jobs, which are frequently made on the basis of personal friendship or family con- nections rather than merit. Political patronage of this kind is by no means confined to Libya; indeed, it is a conspicuous feature of some highly developed countries. Nevertheless, it is a practice which is in- compatible with efficient public administration, not only because it is wasteful of money and manpower, but also because it is extremely bad for the morale of the regular officials, who are trying conscien- tiously to do an honest job of work. Manual labor is commonly regarded in Libya as undignified, and most boys who go to secondary school or university consider it beneath them to work with their hands. This attitude accords ill with the tre- mendous need for more skilled workers in agriculture and industry and for people capable of giving practical demonstrations to farmers of modern techniques of cultivation. The status of women in society also has an important bearing on economic development. As one of the best known authorities on the subject has said, "Restrictions on the work women may do are also everywhere a barrier to economic growth . . ."1 There are a number of reasons why this should be so. If women are allowed to work outside the home, the supply of labor is increased, and there are more oppor- tunities for specialization, which tends to raise both the quantity and quality of output. At the same time the money the women earn stimu- lates demand and helps to enlarge the market for consumer goods. One of the most serious handicaps to economic and social development in Libya is the difficulty of finding people for jobs which in most other countries are filled mainly or in part by women-for example, nurses, teachers and stenographers. The mission found many Libyans who were anxious to see women play a more prominent role in the life of the country, and the fact that a number of secondary schools for girls have been opened in the past few years is an indication that attitudes are changing. These points are mentioned as an illustration of the kind of changes which must take place in any country that is seeking economic devel- opment. Some Libyans may well feel that the price of development is too high and that it would be better to stick to traditional ways of life, 1W. Lewis, The Theory of Economic Growth, George Allen and Unwin, 1955, page 116. AN ASSESSMENT OF THE PROBLEM 11 at whatever sacrifice in terms of material progress. Such feelings are fully entitled to respect, but they may not be very realistic. Great changes are bound to come now that oil has been found, and the mis- sion noted many signs in Libya of an awakening interest in the possi- bilities of economic growth, coupled sometimes with a sense of frustra- tion among the younger generation at the maintenance of what they considered to be out-moded customs. Government Organization Economic development demands unity of purpose and action. No development program can succeed in Libya unless the federal and provincial governments are ready to put their full weight behind it and join together in a common endeavor to raise the standard of living of the nation as a whole. The discovery of oil presents the Libyan peo- ple with great opportunities. It can also help to weld the three provinces together and to create a new sense of national unity. While recognizing that each of the three provinces has its own dis- tinctive traditions, characteristics and problems, the mission has tried throughout its work to think in terms of Libya as a whole and to pro- duce a program for economic development that is truly national in scope. The present organization of government, for quite understand- able reasons, places much emphasis on the rights and powers of the provinces, and though it was apparently the intention of the Constitu- tion (Articles 36-38) that the federal government should be responsible for making economic policy and supervising its execution, the federal authorities have been hesitant and irresolute in asserting their rights, and the provinces have been jealous of surrendering their privileges. The mission is convinced that, if the economic development of Libya is to be carried out with speed and efficiency, it is necessary to avoid the confusion caused by having three or four different policies or proce- dures in respect of such vital matters as trade, income tax, banking and audit arrangements. The confusion of functions and responsibilities, particularly in respect of the subjects listed in Article 38 of the Con- stitution, and the delays that take place because the center and the provinces are unable to agree on action are not conducive to rapid economic progress. There were good reasons for the creation of a federal system of government for Libya at the time it gained its Independence. This does not, however, alter the fact that from a strictly economic point of view there are serious drawbacks in so poor a country with a population of 12 THE MAIN REPORT little over one million having to maintain four separate governments, each with its own head of state, its own parliament, its own cabinet and an extensive range of departments. Quite apart from anything else, it is an extremely costly system for the Libyan taxpayer to support-and it is he who in the last resort must foot the bill. The mission recom- mends therefore that everything practicable should be done, within the framework of the Constitution, to streamline the organization of gov- ernment and to eliminate unnecessary duplication of functions as be- tween the center and the provinces. We also believe that the authority of the federal government should be strengthened in certain directions. Our specific recommendations are set out in Chapter 6. They include an extension of the powers of the federal government in respect of taxation (notably income tax and excise duties), the creation of better coordinating machinery at the center for the preparation and execution of development programs, the establishment of a Federal Ministry of Agriculture and Natural Re- sources, arrangements for securing a more rational distribution of fed- eral grants-in-aid to the provinces and the gradual unification of the federal and provincial civil services. Various changes and innovations in the machinery of government are suggested in this report with a view to improving the administra- tion of economic affairs and tackling some of the institutional obstacles which stand in the way of more rapid development, particularly in agri- culture. We have recommended, for example, stricter controls over government expenditure, the separation of the accounts of revenue- earning public enterprises from those of general government, the crea- tion of an independent authority to run the port of Tripoli, new insti- tutions for the provision of credit to agriculture and industry and more positive government action to assist in the marketing of agricultural produce. Economic and Financial Policies We have also discussed in Chapter 15 the general economic and financial policies that should be followed in mobilizing Libya's re- sources for development and guarding against some of the dangers that every country encounters in a phase of rapid economic growth. One of the most pressing problems is how to deal with the shortages and price increases resulting from the rapid expansion of demand for many types of goods and services which is associated with the operation of the oil companies. Office space, houses and apartments in the main towns are AN ASSESSMENT OF THE PROBLEM 13 hard to get, and rents have soared. Prices of many imported goods have risen sharply-furniture, for example, office equipment, electric gadgets and other household goods. In some cases the higher prices are attribut- able in part to increases in customs duties, but traders and contractors have also taken advantage of the buoyant state of the market to in- crease their profits. Nor have price rises been confined to goods pur- chased mainly by the foreign community. The cost of living of the ordinary Libyan family in Tripoli or Benghazi is undoubtedly higher now than it was a year ago; meat prices in particular are much higher, though this may be partly due to special factors affecting meat supplies. A conspicuous effect of the oil boom has been to aggravate the scarcity of skilled and semi-skilled labor and to give a sharp upward push to wages and salaries. This in turn adds to the costs and prices of locally produced goods and services and gives a fresh twist to the inflationary spiral. At the same time it creates serious difficulties for the federal and provincial governments, which are losing some of their best employees to the oil companies and which will sooner or later be forced to raise civil service pay scales. Moreover, building costs have risen steeply, and government is having to pay more for its own capital works-roads, schools, hospitals and so forth. There is no simple or complete solution to this problem, but there are various things which the Libyan Government could do to moderate the inflationary impact of oil development. The obvious answer to shortages and rising prices is an increase in supplies, and government action could help in a number of ways to bring this about. Imports should be permitted to come in freely. Encouragement should be given to the immigration of skilled workers from abroad, including particu- larly Libyans who left the country under the Italian occupation and settled in Tunisia, Egypt and other neighboring countries. All major building and construction projects should be open to tender from foreign firms so as to encourage competition, and these firms should be encouraged to establish branches in Libya, possibly in conjunction with private Libyan capital. While the main accent in the present situation should be laid on measures to increase supplies of goods and services, restraint must also be exercised over demand, especially over consumption. Here govern- ment fiscal policy has an important role to play. Private savings should be encouraged, and those who benefit from the oil boom, including traders and the higher paid workers, should be required to pay more in taxes. The mission attaches great importance in this connection to the institution of a federal income tax and to improvements in the ma- 14 THE MAIN REPORT chinery for assessment and collection of tax. So far as the government's own expenditures are concerned, it may be desirable to defer certain capital projects for a time until the present upsurge of private demand has slackened off and until pressures on the building industry have been eased. Taxation can be used to restrict private demand and thereby com- bat inflationary pressures; it can be used to mobilize resources for private development; and it can be used as a means of redistributing income in favor of the poorer sections of the community. All three aspects are considered in Chapter 15, where we have more to say about fiscal policy. In recent years, when the funds for public investment have mainly been provided from abroad, no serious efforts have been made to mobilize Libya's own resources for development, nor does there ap- pear to have been any real appreciation of the true cost of capital. A different approach is needed now that Libya has a good prospect of soon becoming financially independent. The mission has therefore recommended that the government should in future raise more money through taxation and internal borrowing, and that a number of changes should be made in the present system of taxation. We have also recommended that increased charges should be levied for public utility services and water provided for irrigation at public expense, so that the costs of supplying these services can be recovered from the beneficiaries. Investment Priorities One of the main purposes of this report is to put forward a five- year program of public investment for the consideration of the Libyan Government. The outline of such a program is contained in Chapter 5, and the details are elaborated in the chapters that follow. It is not, of course, a matter of starting with a clean slate. Development is a con- tinuous process. Many projects are already in progress, and others are planned. The pattern of investment cannot be suddenly altered over- night, and much of the expenditure to be carried out during the next year or two is already committed. The mission's program thus in large part represents a continuation of existing lines of development rather than any radically new departure. We have, however, suggested that in places the emphasis should be shifted, that less should be spent on some things, more on others; and where we have felt that there are mistakes and omissions to be rectified, we have recommended changes in policies and the manner of their execution. AN ASSESSMENT OF THE PROBLEM 15 Libya has made real progress since Independence in developing its resources, and the national income has risen considerably. This progress has been facilitated by the financial and technical assistance received from the United Nations, the United Kingdom, the United States and other friendly countries. Altogether, from the beginning of 1952 to the end of 1958, about £L 30 million was allocated for expenditure by the foreign aid agencies on schemes of economic development and social betterment.2 Much of this effort was directed to repairing the physical damage caused by the war to roads, harbors and other installations and to providing some of the basic economic and social services which had been neglected under previous administrations, most notably in the fields of education and health. Considerable amounts were invested in long overdue measures of soil and water conservation, which are made necessary by the sparsity and irregularity of the rainfall. The country has also been equipped with many new roads, public buildings and other capital assets. The results of this development have not always been spectacular, and in certain respects they have been disappointing, especially in agri- culture, upon which well over half the population directly depend for their livelihood. Dissatisfaction with what has so far been achieved has understandably led to criticism of the foreign experts and the foreign aid agencies who have been largely responsible for the preparation and execution of development projects. While some of this criticism may be justified (see Chapter 3), the mission feels that the critics often tend to underestimate the time it takes to build up an economy from such modest beginnings, and in the face of the obstacles to which we have referred earlier. A broad distinction can be made between investment in economic projects and investment in social projects. The first is aimed directly at increasing production through the provision of more capital for agriculture, industry, mining, fisheries, tourism and supporting facilities such as power, transport and communications. The second is aimed at improving the condition of the people through the provision of better facilities for education, health, housing, sanitation and so forth. The maintenance of a reasonable balance between these two types of in- vestment is one of the major problems facing the government of every 2 The term "foreign aid agencies," as used in this report, refers to the Libyan Public Development and Stabilization Agency (LPDSA), the Libyan-American Rec construction Commission (LARC), the Libyan-American Joint Services (LAJS) and the United Nations Technical Assistance Mission. The origins and activities of these agencies are described in Chapter 3. 16 THE MAIN REPORT underdeveloped country. The value of good social services is obvious. But if too much emphasis is placed on social investment at the expense of economic investment, a country may find itself unable to produce enough to pay for the social services it has created. The danger of this happening in Libya has been much reduced by the prospect of oil revenues accruing in the not too distant future, and the mission be- lieves that there is ample justification in these circumstances for con- siderable further investment in education, health and community serv- ices. We attach particular importance both to education and training and to better housing for workers in the towns, where we recommend that the government should give high priority to schemes for the con- struction of low-cost housing (see Chapter 14). Oil production now clearly offers the best prospect for the long- term expansion of Libya's national income. But, as indicated above, it is hardly likely to offer employment for more than a small proportion of the present population, still less for the additional numbers to be expected as the population grows.3 Libya's other principal natural re- source is in agriculture and the raising of livestock. The mission be- lieves that there is considerable scope for developing settled agriculture. Moreover, it can see no other way of providing a satisfactory way of life for the majority of the people who now depend on the land for their livelihood, particularly since agriculture provides the basis for much of Libya's manufacturing industry and trade. The paramount need to concentrate on improving farming condi- tions and raising agricultural output remains unaffected by the dis- covery of oil, and the mission regards this as the most important of all the tasks to be undertaken in the field of economic development. We have also given special attention in the report to the exploitation of two other natural resources which have been neglected in the past, namely fisheries and tourism. Clearly neither is of comparable impor- tance to agriculture, but we believe that both could be developed as valuable supplementary sources of income and employment (see Chap- ters 9 and 10). The prospects for tourism have been considerably bright- ened by the discovery of oil which should result in increased demand from oil company employees for holidays and recreational facilities in Libya. Oil apart, present conditions in Libya do not favor the develop- ment of industry on a large scale. The home market is small and scattered, most industrial materials have to be imported (apart from 3 It is generally supposed that the Libyan population is growing at the rate of about ls,4 percent a year, but this could well be an underestimate (see Chapter 2). AN ASSESSMENT OF THE PROBLEM 17 agricultural processing), and industrial skills have still to be cultivated. However, the operations of the oil companies may open up some new opportunities for investment in manufacturing industries. Various pos- sibilities are mentioned in Chapter 9, among them cement. It is under- stood that two private projects to establish cement factories, one in Tripolitania and one in Cyrenaica, have been put forward since the mission's visit, but the mission does not have enough detailed informa- tion to judge their merits. In present conditions Libya should rely mainly on private initiative and private capital to promote the development of manufacturing in- dustries. Considerable interest in such development is now being dis- played by foreign firms, some of which are seeking the collaboration of Libyan businessmen in establishing joint ventures. Provided the gov- ernment is not expected to assist either by putting up money itself or by giving promises of protection against imports, private investment in industry should be given every encouragement. On the other hand if assurances of government assistance or participation are sought, the proposals should be scrutinized very carefully, and the government should insist on a thorough investigation being made by independent consultants into the technical and economic aspects of the project be- fore giving any commitment to support it. Firms which are primarily interested in selling plant and machinery for a new factory are seldom to be relied upon to offer impartial advice in such matters. Minerals other than oil appear to hold out little immediate prospect for development, although the potash deposits at Marada might be suitable for commercial exploitation now that natural gas has been discovered in the vicinity. The possibility of new discoveries of minerals should not, of course, be entirely ruled out, and the mission is recom- mending the establishment of a federal department of hydrology and geology, which among other things would be responsible for carrying on the work of minerals investigation. The mission recognizes that at the present stage of Libya's develop- ment there are comparatively few projects in the public sector where one can count with any assurance on much immediate and tangible return on the capital invested. Some economic projects, therefore, have to be justified as much by social and political considerations as by any assessment of their capacity to pay their way. The construction of new roads to outlying desert oases is an example. This is not to say, how- ever, that economic criteria should be disregarded, or that Libya should squander the money it receives on extravagant public works which can neither pay for themselves nor contribute to the long-term improve- 18 THE MAIN REPORT ment of the social environment. On the contrary, the prospective eco- nomic benefits to be obtained from every project should be carefully assessed and compared with the costs to make sure that the return will be adequate to justify the investment. All investments in government buildings, schools, hospitals and roads involve continuing costs for their upkeep, and too little regard has been paid in the past to this aspect of investment. The mission cannot emphasize too strongly that maintenance of existing assets should, as a general rule, receive priority over new construction-that is, sufficient funds should be set aside for the upkeep of existing roads, schools, hospitals and so forth before anything is allotted for building new ones. Before additional investments are undertaken their mainte- nance costs should be carefully assessed to make sure that the country can afford to support them. Traveling around Libya the mission found many roads and public buildings that were not being properly main- tained, or not being maintained at all, while large sums were being spent on new works, often in the same districts. In future, much larger provision should be made for maintenance in the revenue budgets of the federal and provincial governments, and we have allowed for this in our program. Agriculture and Forestry Agricultural development in Libya presents a number of chal- lenging problems. Given the sparsity and irregularity of the rainfall and the impoverishment of the soil through many centuries of neglect, large investments are needed in measures of soil and water conserva- tion simply to preserve the existing assets and to prevent a further deterioration in farming conditions. Much of the money allotted to agriculture by the foreign aid agencies has in fact been spent, and rightly spent, on schemes of afforestation and dune fixation, flood con- trol, surface water conservation, ground water investigations and so forth, which cannot be expected to yield a quick return on the capital invested. Indeed, even in the long run the return is often incalculable. One can only say that, if the investment had not been undertaken, the state of agriculture would be considerably worse than it is. The Libyans themselves have little tradition of settled farming, and this alone makes it difficult to achieve rapid progress in agriculture. The problem is further complicated by the fact that in present circumstances small farming is one of the least remunerative of occupations, and that earn- AN ASSESSMENT OF THE PROBLEM 19 ings in trade, manufacturing, building and construction, service in- dustries and government employment are generally higher. The over-all rate of return on capital invested in Libyan agriculture is likely in present circumstances to be small by comparison with most other countries. But in the absence of alternative opportunities for creating enough employment in the other sectors of the economy, every effort must be made to improve the lot of the farmer and pastoralist and to help him to make better use of the resources at his disposal. At present the small farmer labors under a number of serious handicaps. His methods are primitive and his knowledge of modern farming tech- niques almost non-existent. He has great difficulty in obtaining credit, except at exorbitant rates of interest. He has no organization for marketing. He has little or no protection against imports. Unless and until the agricultural community is better rewarded for its efforts, it will be extremely difficult to stimulate the growth of agri- cultural production. The mission believes that a combination of meas- ures will be needed to produce this result, including changes in the present system of land ownership, the restriction of certain imports, improvements in the marketing of domestic agricultural produce, di- rect financial assistance to the farmer and the dissemination of knowl- edge through the agricultural training and extension services. The problem is discussed at greater length in Chapter 8. Afforestation deserves more attention than it has received in the past. Afore trees are badly needed in Libya for soil and water conserva- tion, and as a source of timber supplies. The main difficulties in the way of forestry development lie in the grazing practices of the nomads, the uncontrolled ravages of the goat, unrestricted collection of fire- wood, tribal ownership of land and inadequately staffed forestry serv- ices. Until a really determined effort is made to tackle these problems, little is to be gained by stepping up the programs of planting. But if the necessary conditions can be created for successful afforestation, the mission recommends that this should be accorded a high priority in the allocation of the additional funds that will become available for development out of oil revenues. Special Needs of the Fezzan The mission has tried throughout its work to think in terns of Libya as a whole and to view the claims of each of the three provinces with complete impartiality. The economic characteristics of the Fezzan, 20 THE MAIN REPORT however, are so distinct from those of the other provinces that a rather special approach to its problems is called for. Detailed proposals for dealing with these problems will be included in the appropriate chap- ters, but we would like to say something first about the thinking behind them. The Fezzan has always been predominantly a subsistence economy. In past centuries it used to derive a subsidiary income from the caravan trade, and when the caravan trade declined around the end of the nineteenth century, foreign garrisons moved in and provided the desert oases with a new source of income and employment. Now the caravan trade is dead and the foreign garrisons have left. But two new sources of external income have appeared in the form of federal subsidies and oil exploration. Total government expenditures in the Fezzan, includ- ing the expenditures of the aid agencies, have risen from little over £L 400,000 in 1954/55 to about £L 750,000 in 1957/58, while the revenue collected in the Fezzan was only £L 40,000 in 1954/55 and less than £L 100,000 in 1957/58. A completely new town has been built in Sebha, complete with a royal rest-house, parliament buildings, govern- ment offices and a residential section for Nazirs and officials. Many Fezzanese have been employed on construction work or taken onto the regular government payroll as officials, clerks, drivers, mechanics, post office workers, workshop employees, watchmen or the like. Others have left the land to work for the oil companies, either in the Fezzan itself or in other parts of Libya. These developments have brought about important changes in the economic life and social structure of the province. The traditional feudal system is being undermined. An acute shortage of agricultural labor has resulted in large tracts of land going out of cultivation, and an increasing proportion of the food consumed in the Fezzan is being imported from outside. The use of money is being extended as more and more of the people work for wages. Meanwhile, the population is gradually declining as young people go away to live and work in Tripoli. The population recorded in the 1954 census (just under 60,000) was smaller than in Turkish times, and it may have decreased further since. The mission believes that, isolated though it is, the Fezzan con- stitutes a unique and valuable element in the life of the country, not least because of the rare quality of its people, who have shown them- selves more than usually capable of mastering new skills and adapting themselves to changing conditions. Those who wish to look for em- ployment outside the Fezzan should not be discouraged from doing so. AN ASSESSMENT OF THE PROBLEM 21 But life is likely to continue in the desert oases for decades to come and it might be reinvigorated by the discovery of new sources of oil or other minerals or even by unforeseen technological changes (e.g., in surface transportation). The right line of development in the meantime, as we see it, should be to make the Fezzan more self-reliant and to provide better economic opportunities for the people who remain there. In more concrete tenns, this means concentrating on making better use of the dates which constitute the province's most important agricul- tural resource; stimulating production of cereals, vegetables and fruit for local consumption, and in the case of early vegetables possibly also for export; experimenting with new crops such as linseed and castor beans that might be grown in the oases for export; improving the quality of livestock and livestock products; continuing a program of geological research; and developing the handicrafts industries, which have already achieved a modest reputation for products of distinction. The mission has considerable doubts about the feasibility of growing cotton on a large scale in the Fezzan for export. We attach the highest priority in the Fezzan to the construction of more public wells for the supply of water to small farmers and village cooperatives (see Chapter 7). Agriculture cannot be expected to make much progress so long as the control over water is vested in the hands of a minority of wealthy well-owners. On the other hand, we do not favor large investments in new roads, apart from the main Fezzan road, which is already under construction. Distances in the Fezzan are too great, and the potential traffic at present in sight too small, to justify the construction of additional hardtop highways. There appears to be scope, however, for more use to be made of air transport for administra- tive and other purposes, and we have recommended the establishment of a regular service of light aircraft based on Sebha (see Chapter 12). Such a service would, of course, have to be subsidized by the federal government, but this is the kind of subsidy which we feel can be justi- fied by the special circumstances of the Fezzan, especially insofar as it helps to facilitate communication and consultation between the provin- cial and federal governments. The Italian Community The Italian community occupies a rather special position in the Libyan economy. According to the 1954 census, there were then 38,000 Italians still living in the country, practically all in Tripolitania. These Italians retain their right of Italian citizenship. Two-thirds of them 22 THE MAIN REPORT live in and around the city of Tripoli and most of the rest in the "demographic" colonies established by the Italian Government before the war at the places then known as Bianchi, Preveglieri, Garibaldi, Oliveti, Micca, Crispi, Gioda and elsewhere. One-third of the farms in these colonies have been returned to the Libyan Government, but about 1,400 remain in Italian hands, and their future is governed by a Libyan-Italian agreement signed in October 1956. Under this agree- ment the Italian Government is continuing to provide the present oc- cupants of the farms with financial assistance until 1960, and there- after the occupants obtain full rights of ownership. There are also a number of private Italian farms in Tripolitania, some of them large and prosperous. Italian farms are on the average considerably more developed than farms owned by Libyans and make a major contribution to Libyan ex- ports. The management of industry in Tripolitania is almost entirely in Italian hands, and Italians play an important role in the operation of public utilities, the staffing of the medical services, agricultural re- search, banking and commerce, the management of hotels and many other branches of economic activity. The skills which the Italians can offer, and their experience of modern farming techniques, are valuable assets for the Libyan economy. It is only natural, in the light of past history, that there should be difficulties on both sides in establishing a satisfactory and enduring basis for Libyan-Italian relations in Libya. The mission believes, never- theless, that it is very much in the economic interests of both com- munities that such a basis should be found, and that the Italian community should be more closely integrated into the social and economic life of the country. Conclusions The present rate of gross investment in Libya (excluding oil invest- ment) is perhaps equal to about 15-20 percent of the national product -a much higher proportion than in most other underdeveloped coun- tries.4 There does not, however, appear to be any close relationship be- tween this investment and the growth of national income. Income has certainly risen substantially in the past five years, but the rise is attrib- utable more to increased expenditures by foreign governments and oil companies than to domestic capital formation. There are in any case 4 For the basis of this calculation see Annex I. AN ASSESSMENT OF THE PROBLEM 23 a number of reasons why the ratio of the increase in income to the increase in capital in Libya might be expected in present conditions to be unusually low (except, of course, in the oil industry). Shortage of skills; the heavy concentration on social investment which takes a long time to yield fruit; the need in agriculture to make good heavy arrears of investment in measures of soil and water conservation; the high costs of government and investment in government buildings; the dispersal of a small population over a huge area necessitating abnormal investment in transport and communications-all these factors, and particularly the first, help to explain wlhy economic development pro- grams have so far yielded only limited dividends in terms of increased output. Oil production appears likely to result in further large increases in national income over the next five to ten years. Most of the additional income will consist of revenues accruing directly to the federal and provincial governments, and it has been decided in advance that 70 percent of the revenues left after payment of concession fees, royalties and income tax should be earmarked for financing economic develop- ment. This is a wise decision. The main problem of development in the circumstances will be how best to use the large sums of money avail- able to promote the well-being of the nation as a whole. Only a minority of the population can expect to earn their living by working in the oil industry or in the other industries and trades that will be most immediately affected by the impact of oil operations. Other sources of livelihood must be developed to provide employment and income for the majority, whose needs will not automatically be taken care of by the growth of oil production. Apart from oil, Libya's principal natural resource is in agriculture and the raising of livestock, and the mission believes that, with good administration, better education and training and an adequate supply of capital, much larger production can be obtained from the land than is being obtained at present. It also believes that good opportunities exist for the development of fisheries and tourism. However, two prior conditions must be fulfilled before all these opportunities can be properly exploited. The supply of hunman skills must be greatly aug- mented and enriched; and important changes must be effected in popular attitudes and institutions. The Libyan Governiment is about to take into its own hands the administration of economic development, which has hitherto been largely planned and executed by various foreign aid agencies. This change is to be welcomed in that it will place the responsibility for de- 24 THE MAIN REPORT velopment where it belongs and will provide an opportunity for better coordination of development activities within the framework of a single over-all program-instead of the separate and rather disjointed programs which have existed hitherto. At the same time the impeding changeover adds urgency to the need for strengthening the authority of the federal government, streamlining the machinery of federal and provincial administration and securing closer day-to-day cooperation between the center and the provinces. The mission recommends that the size of the public development program should be increased gradually, rather than in one big jump, and that the main emphasis during the next three or four years should be placed on improving education and training, strengthening the organization of government and bringing about the institutional changes that are needed, particularly in agriculture, to ensure that capital can be used more fruitfully. This is because we believe that a fairly modest program, well conceived and well executed, will be of greater benefit to Libya at this stage than a larger program which can- not be carried out effectively because of shortage of skills and lack of experience in administration. The groundwork will then have been laid for a more rapid advance to be undertaken later on when large oil revenues begin to flow in. The longer-term outlook for the economy is promising. Libya is more fortunate than some oil-producing countries in that it has other natural resources to exploit and no problem of over-population to con- tend with. Shortage of water for agriculture and soil erosion are the main physical obstacles to economic development, and these can in time be overcome by the application of more capital to the land, par- ticularly if means can eventually be found for desalting sea water for irrigation at a reasonable cost-a possibility that may well be brought within reach of a country with abundant supplies of cheap power in the course of the next ten or twenty years. Great opportunities lie ahead. Wisdom, energy and enterprise will be needed to take full advantage of them. CHAPTER 2 CHARACTERISTICS OF THE LIBYAN ECONOMY Historical Background The United Kingdom of Libya came into being on December 24, 1951 following a decision taken by the United Nations in November 1949 that the three territories of Tripolitania, Cyrenaica and the Fezzan should be constituted a fully sovereign and independent coun- try. Before the war these territories had been under Italian rule, and after Italy's defeat they were occupied by the Allied powers-Cyrenaica and Tripolitania by Britain and the Fezzan by France. The present state is a constitutional monarchy with a federal system of government, under which each of the three provinces enjoys a large measure of autonomy. Although Libya is the third or fourth largest country in Africa with an area well over half the size of India, its present population is only about 1.2 million. Approximately 95 percent of these are Moslems of Arabian and North African descent. The principal minority com- munity consists of Italians, of whom some 30,000-40,000 are still living in Tripolitania and retain their Italian citizenship. There are also several thousand Jews who are Libyan citizens, together with small minorities of Maltese, Greeks and other nationalities. The population is heavily concentrated near the Mediterranean coast, two-thirds living within a radius of 200 kilometers from Tripoli and one-quarter in the coastal zone of Cyrenaica between Agedabia and Tobruk. The rest of Libya consists almost entirely of desert, and habitation is confined to widely scattered oases, which support a population of about 100,000 in all. The settled areas of Tripolitania and Cyrenaica are divided by hundreds of miles of desert, and in early times the two provinces had very different histories. Tripolitania was first colonized by the Phoeni- cians, Cyrenaica by the Greeks, and though both subsequently became part of the Roman Empire during the first century B.C., they continued to live separate existences throughout the Roman period, which lasted until the middle of the fifth century A.D. During this period the 25 26 THE MAIN REPORT coastal areas of Libya are believed to have supported two or three times as many people as they do today-thanks in the main to a highly developed system of settled agriculture, which was made possible by the careful organization of water resources. The collapse of the Roman Empire in North Africa was marked, first, by repeated incursions of Berber tribes from the south and later by the invasion of the Vandals from Spain. Roman influence was briefly reasserted by the Emperor Justinian, and Libya was ruled for a time from Byzantium. The Arabs first invaded the country in the middle of the seventh century, and a more permanent Arab settlement took place 400 years later. As time went on, settled agriculture dwindled in im- portance, and the country was increasingly given over to a nomadic way of life. However, the coastal towns and the caravan centers in the Sahara retained commercial links with Europe and other parts of Africa and the Middle East. Tripoli itself was occupied at different times by the Arabs, the Sicilians, the Spaniards, the Knights of Malta and the Turks, and under the Karamanli dynasty, who ruled the city from 1711 to 1835, it became a stronghold of the Barbary pirates. It was not until the middle of the nineteenth century that the Turkish Government in Constantinople made a serious attempt to bring the whole of Libya, including the Fezzan, under its administra- tion. The latter years of Turkish rule were marked by a general im- provement in the economic condition of the country and by the estab- lishment of a more orderly system of government. The country appears to have been more or less self-supporting in cereals, importing in bad years and exporting in good ones; trade was developed with foreign countries through the export of livestock, hides and skins, wool, esparto grass, sponges, citrus fruit, dates and other products; a fairly flourish- ing handloom industry existed in the coastal towns; and Tripoli re- mained an important terminus of the caravan routes from the Sudan and West Africa, although the caravan trade began to decline from about 1880 onwards. Italy began her occupation of the country in 1911-12. The Italians met with strong resistance from the Libyans in their efforts to colonize the country and to develop it as a military base, and the first 20 years of the Italian occupation were marked by continuous unrest, particu- larly in Cyrenaica and the Fezzan. As a result Italian settlement pro- ceeded slowly, only getting under way in Tripolitania in the 1920's and in Cyrenaica in the 1930's. Initially Tripolitania (with the Fezzan) and Cyrenaica were separately administered, but they were formally unified at the beginning of 1934 as the Italian colony of Libya. l Mediterroneon Sec ( ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~om~ Ced ACyE ,'ei liie, Aziza !Cus obR ot Te d ac ra r o n *tGodome,s;*l * Z iln t~~~~I *G--.orcDlo5En GoabD ;e Gi ,.,,,,,,, ..... , ,,,,, ,.^' tMarodo aefren .................. Tolr.a ..in . '! ./No Iu t (Hrn) E N ulf ' .f~ S irte .S.I.u....r... ( (htt 'PyBeniUl6Gd . *1 Tmesst * 'Agi Med/rerrneob: 58 t i. \ ~~~~~~~~~Murzt' eroglen ,mss Meditr,anenSe GhaFt t q*\ " /doO' r . Gorio Gotnrun _i__ _ _ _Ma0h 1960 Go _ --r-nNIGER ) C H Aufr! - INTERNATIONAL BOUNDARIES A ANCIENT SITES 0 50 100 150 200 MlIes PROVINCIAL BOUNDARtIES * PRINCIPAL TOWNS and VILLAGES 0 50 [00 150 200 K,0, PO1A FOR WADI MEGENIN , n hi AfEN (First Stage)OO'Hears TO TRIPOLI A 0 o 2 K.T N~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Sidi Abu Arku,b 6K Dm AziR A I~~~PO Se drin oto -g 5 Ozore e wGleft to, details 19P DAM vril erAE FOREST RESERVE (K ~~~~~~~~~~odFlo oe N(SECOND STAGE)~ S hehob KK CDAM K £C Flaod Waler lake Amiot ' ~ Garion POPOSED ~/ WAIEL HUELFA / 'FORE~~ST RESERVE / ~ ~ ~ (FI~~RST STAGE) ->~w 7 ~~~WADf MEGENIN V-9 60 ~~~~~~~~~~~~~~~~~~~~DeceBbe, 1959J t i I i I i WATER RESOURCES 121 out by a committee composed of officials from the Nazirates concerned and under the chairmanship of a government officer experienced in this type of work; the irrigation works should be executed by the Water Resources Branch. The capital cost of this resettlement program is esti- mated at £L 175,000 over the five years. After resettlement of the present inhabitants, the Forest Reserve would be demarcated and animals would be prevented from grazing there. The reserve would be developed by the Forest Department and controlled by that department under the Forest Law. In addition, such dikes, dams and terraces as are considered necessary to control erosion would be constructed under the supervision of the Water Resources Branch. Finally, trees would be planted in suitable locations designated by the Forest Department. It may be added that trees are at present being distributed for planting in the catchment area, but the mission has considerable doubt about the value of such planting so long as the area is occupied by nomads. The mission also proposes certain channel improvements and road protection works in the vicinity of Tripoli (costing £L 50,000) designed to ensure a quick run-off for any flood water reaching the neighborhood of the city and to reduce interruption to road traffic. This will bring the total capital cost of the first stage of the Wadi Megenin flood relief scheme to LL 400,000 (including an allowance for contingencies). Of this £L 100,000 would be for establishing the forest reserve and has been included in the forestry program in Chapter 8. Annual recurrent expenditures on maintaining the proposed flood control works are esti- mated at £L 20,000. The adjacent Wadi Hamman area is also in the high rainfall belt and erosion is active there, though not yet of the intensity reached in the Wadi Huelfa area. After the Wadi Huelfa Forest Reserve area has been established, the mission recommends that erosion in the Wadi Hamman area (115 square kilometers) be tackled in a similar way by the removal of the inhabitants and the establishment of the Wadi Ham- man Forest Reserve. In this case the mission suggests that the inhabi- tants of the Wadi Hamman area (probably under 200 families) should be moved out and resettled in the Bir Ghnem area, and that this should be the responsibility of the committee already established to deal with the earlier resettlement. While it may not be possible to extend active work to the Wadi Hamman area during the first five years (and therefore financial provision for such work is not included here), the mission urges that the Wadi Hamman proposal be regarded as an integral part of the total Wadi Megenin project, and that early plans be laid for its implementation. 122 THE MAIN REPORT After the Wadi Huelfa and Wadi Hamman Forest Reserves have both been established and the conservancy and grazing improvements in other parts of the catchment take effect, the possibility of construc- tion of water storage dams in the wadi can be reconsidered. This possi- bility has been investigated in the past by Italian engineers and by the LPDSA, but the uncertainty of the incidence of floods and their annual volume in drought years and the increasingly heavy silt loads being brought down from the areas of rapid erosion were held to rule out such a possibility, at least until erosion in the catchment had been controlled. Flood Prevention at Wadi Gattara The Wadi Gattara drains the western end of the Gebel Akhdar and its flood waters have been known to cause damage at Berca on the out- skirts of Benghazi. This is reported to have happened in 1938, and again in 1954, but only slight damage and minor inconvenience were caused. A flood prevention scheme for the Wadi Gattara seems there- fore to be of doubtful necessity, and while the mission does not wish to anticipate the findings of the committee now investigating this flood problem, it has not included in the program for water conservancy any specific provision for it. However, the mission suggests that some con- servancy works are desirable in the middle reaches of the wadi in the Gebel country and suggests that this can be done as part of the water conservancy works outlined on pages 109-112. In 1954 the flood flow was estimated at 135 cubic meters per second at the Wadi Rugbuleh Naga (halfway down the main wadi) and 200 cubic meters per second at the delta where the wadi debouches onto the coastal plain. It appears that the upper half of the wadi produces two-thirds of the flood flow and that, by construction of dikes and terraces and by tree planting there, the flood intensity can be greatly reduced. The LARC has already built dikes in some of the wadi branches, and these have stopped the flood flows from them. The com- mittee will no doubt consider the possibility of continuing this work, and as there is no silt problem associated with the floods in this wadi, of building a low flood flow retention reservoir at Raghut el Naga. Flood Water Storage There are several wadis in Tripolitania which on occasion discharge some of their flood waters into the sea. The mission recommends that WATER RESOURCES 123 these wadis be the subject of hydrologic and geologic investigation with a view to ascertaining the possibilities of flood retention dams and water spreading diversions. The importance of retaining the Gebel rainfall water for agriculture by all economically feasible means is so great that the possibility of preventing flood losses to the sea must be fully ex- plored. The mission's development program for water resources there- fore includes provision for expert investigation of this subject. However, the mission stresses the unlikelihood of there being any economic scheme for the storage of flood water behind high dams con- structed in the Gebel wadis. Once irrigated agriculture is established below a high dam, the water supply must be guaranteed. A three years' supply is generally considered the desirable amount of storage required to ensure the supply over drought and rainfall deficiency years: in Libya it is a minimum amount. The mission therefore does no more than recommend the investigation of any site in the Tripolitania Gebel where the geology, run-off and soil conditions indicate the likelihood of there being an economic high dam project with an associated agri- cultural development scheme. The less costly water-spreading projects are a possibility on the Gefara below the Gebel, where the wadis dis- charge flood water to the sea, and should be investigated. Irrigation Practice and Research The traditional system of irrigation in Libya is to lead the water from the wells to small plots called gedula, generally about two meters by three meters in size. Each plot is surrounded by a low earth bank to hold the water in it until it disappears by both infiltration into the soil and evaporation losses. When the ground water table is high, as in most coastal fringe areas, this method of irrigation has the disadvantage of inducing the precipitation and concentration of any salts present in the water in the upper soil, with the result that increasing amounts of water are lost through evaporation and so proportionately greater amounts of salts are precipitated. The development of a more efficient method of irrigation and the provision of drainage systems in the coastal areas is a subject for investigation by the departments con- cerned. The water requirements of the various crops have received some attention in the research station at Sidi Mesri, but the farmers have little knowledge of the subject of water application to crops beyond the thought that, the more water applied, the better the crops. The mission noted that, when water was raised by mechanical means, it was often 124 THE MAIN REPORT used more lavishly than when it was raised by human and animal power. The agricultural departments have a duty to disseminate more knowledge to smallholders about the water requirements of the various crops grown. In this connection the mission suggests that more use could be made of related research information from other Mediter- ranean countries. The agricultural extension services could organize an intensive campaign in the Tripoli Quadrangle to educate the farm- ers there in the water economies they can practice. This service could be extended to all the coastal areas. Not only are the farmers in the Quadrangle faced with increased charges for the electrical power they use, but they must, as the water table drops, use more power to lift the water they require. Another economy in the use of water can be achieved by lining the canals leading water from the wells to the crops. Field trials should be carried out by the departments concerned, with the object of evolving a cheap method of manufacturing canal lining. In the meantime, the extension services in each of these provinces should develop a self-help program for lining canals with a clay-cement mix and so reduce seepage losses, which are often 50 percent or more of the water raised. Spray irrigation is practiced extensively in Tripolitania by large-scale farm- ers, but the capital cost of the fittings required is high and some tech- nical ability is required for its operation; it does not seem therefore to be a suitable method for smallholders. The level of the ground water table is generally low enough in Libya to prevent drainage troubles leading to soil alkalinity, but this is not so in the coastal fringe areas and in the Fezzan oases. Agricultural experimentation should be carried out to establish good drainage prac- tices for these areas with regard to both depth and lining of ditches. If some low-cost technique can be devised for restoring the fertility of the alkaline soils in the coastal strip of higher rainfall, much valuable land might be available adjacent to populous areas where agricultural land is in demand. Drainage experiments should be started which, in conjunction with the flushing action of the periodic rainfall and plow- ing, might make reclamation possible at reasonable cost. Summary of Proposed Expenditures The recommendations which we have made in this chapter would entail total expenditures, by both federal and provincial authorities, of £L 4,325,000 over the five years 1960/61-1964/65. This total would be distributed as follows: WATER RESOURCES 125 (EL '000) Mainte- Plant and Capital Staff nance equipment works Totals Federal Department of Geology and Hydrology 100 270 15 - 385 Cyrenaica 125 225 100 1,330 1,780 Tripolitania (i) Works excluding Wadi Megenin 125 175 60 830 1,190 (ii) Wadi Megenin scheme - 100 - 300 400 Fezzan 55 100 5 410 570 Totals 405 870 180 2,870 4,325 As can be seen from the above table, capital outlays in the public sector would amount to £L 3,050,000 over the five years 1960/61- 1964/65. Expenditure on constructional works would be allocated as follows: (EL '000) Cyrenaica Constructing 80 wells with lining, pumps and motors, pump-houses or windmills, well heads and storage tanks at £L 8,000 per well 640 Construction of new and reconstruction of existing irrigation sys- tems with headworks, storage reservoirs, lined canals, etc. Fifteen in number at average cost of £L 10,000 per system 150 Repairs and renovation of 1,000 cisterns at £L 300 per cistern 300 Self-help program for terracing and diking for soil and water conservancy 240 Total 1,330 Tripolitania Wells and well fittings for public purposes 200 Irrigation schemes (number and details not specified) 300 Repairs and renovation of 1,500 cisterns on a self-help basis at £L 100 per cistern 150 Self-help program for terracing and diking for soil and water conservancy 180 Wadi Megenin flood relief scheme 300, Total 1,130 126 THE MAIN REPORT Fezzan Well fittings, including well lining, caps, aprons, windmills, pumps, motors, pump-houses, tanks and canal lining. Forty wells at £L 10,000 per well 400 Self-help program of well repairs and improvements 10 Total 410 aAn additional £L 100,000 for establishing the Wadi Huelfa Forest Reserve, which is connected with this scheme, is provided in the forestry program set out in Chapter 8. No estimates can be given of the costs of additional works that might be undertaken as part of the Supplementary Program, since these costs can only be assessed after further detailed investigations. As it is, our minimum proposals for development will make heavy demands upon the administrative and technical resources available and will call for important institutional, legislative and organizational changes. We con- sider therefore that, until these proposals have been implemented, little is to be gained by attempting to define the scope of possible supple- mentary projects. The mission has no detailed information about the sums at present being spent on staff and maintenance by the government departments and agencies concerned with geology and water resources. We have estimated that the recurrent expenditures on staff and maintenance required to carry out the program outlined in this chapter would amount to £L 1,275,000 over the five years or an average of £L 255,000 a year. Perhaps about 40 percent of this (say £L 500,000 or £L 100,000 a year) might be additional to what it being spent at present on com- parable work by the Ministry of National Economy, the Nazirate of Agriculture in Tripolitania, the LARC and the other foreign aid agencies. CHAPTER 8 AGRICULTURE, LIVESTOCK AND FORESTRY Traditionally the Bedouin of Libya have been pastoralists first, cultivators second. For centuries the nomadic way of life has prevailed over most of the country away from the coastal towns, and it has been argued that this manner of living is well adapted to the physical con- ditions.1 But while the Bedouin society has shown a great capacity for survival, neither its values nor its organization equip it to take advan- tage of the opportunities for economic growth opened up by the revolu- tion in technology which has taken place during the last 150 years. There are already signs that nomadism in Libya is gradually giving way to settled farming, and it is the mission's belief that this trend must be encouraged if there is to be any hope of major progress in agricul- ture. For all the drawbacks of arid soil and uncertain rainfall, the mis- sion believes that Libya has the physical resources needed to develop a moderately prosperous settled agriculture. Moreover, these appear to be the only natural resources in Libya at present capable of providing a livelihood for the majority of the existing population, and for the additional members to be expected as the population grows. Oil pro- duction may soon become more important as a source of income, but hardly as a means of employment. Indeed, we consider it would be unwise to rely on the oil industry providing direct employment for more than 15,000-20,000 workers, as against the 200,000 or so who are now engaged in agriculture and animal husbandry. The physical potentialities of Libyan agriculture are demonstrated by what was achieved in Roman times through the methodical organiza- tion of the country's limited supplies of water. There is evidence that settled farming was then well established on the coasts of Tripolitania and Cyrenaica, supporting a population between two and three times as large as does Libya today. Olives and cereals appear to have been the principal crops, and many farms kept livestock as well, including cattle. Soil erosion in the intervening centuries has resulted in the destruction 1 For a statement of this view see E. E. Evans-Pritchard, The San usi of Cyrenaica, Oxford University Press, 1949, pages 34-39. 127 128 THE MAIN REPORT of much good agricultural land, and the desert has encroached in many places. But where capital, organizing ability and technical know-how are available, it has been shown that farming in Libya can still be made to pay well today. In Tripolitania particularly, but also in Cyrenaica, there are a num- ber of large commercial farms and plantations employing hired labor, equipped with tractors and other machinery and irrigated from wells, sometimes with their own powerhouses to supply electricity for pump- ing. Many of these farms are owned and managed by Italians, a few by foreign businesses and some by Libyans. Crops include groundnuts, castor seed, olives, tomatoes, citrus fruit, vines, new potatoes, asparagus and other winter vegetables. There are also hundreds of smaller family farms and gardens run by Libyans and Italians which have wells for irrigation, animals for plowing and drawing water and facilities for marketing their produce in the towns. Some of the products of these family holdings are of excellent quality and command a ready market at home and abroad-for example, olives, groundnuts, and citrus fruit in Tripolitania, grapes in the Gebel Akhdar in Cyrenaica, bananas in Derna, tomatoes in the Jalo oasis and certain types of dates in the Fezzan. The excellent results achieved by the main agricultural experi- mental stations (e.g., in growing citrus fruit at Sidi Mesri) leave no doubt that physical conditions in Libya are well suited to the produc- tion of a wide variety of crops, and that in some of these crops Libya has special advantages over most other countries catering to the Euro- pean market. Many vegetables can be grown in Libya during the winter months when they are scarce in Europe. A British firm, for example, which recently acquired a large farm near Tripoli, has had great suc- cess with the cultivation of new potatoes for sale in the United King- dom; and it has started production of asparagus, which is marketed by air. Libya also appears to be particularly well suited for the cultiva- tion of groundnuts, which have been introduced into the country since the war and are now the largest single export (over £L 1 million in 1958). The Libyan product is of the edible variety and is mainly con- sumed as nuts rather than used for the extraction of oil. The success of some of the larger commercial farms is in striking contrast to the picture of poverty, waste and frustration presented by the typical small farmer who uses primitive tools and methods to scratch a miserable living from the land. Ignorant as he is of modern farming techniques, and 'with little capital at his disposal, his fate is in the hands of the landowner and merchant on the one hand and the weather on AGRICULTURE, LIVESTOCK AND FORESTRY 129 the other. He usually cultivates his land on a share-cropping basis, or on a communal basis with other members of his tribe. The quality of his produce (mainly cereals, fruit and vegetables) is generally poor. He is seldom able to obtain credit, except what the merchant extends him (usually on exorbitant terms), and a bad drought or a ghibli can prac- tically wipe out his whole crop. When he has a surplus, he must take it to the local market himself or accept what the middleman offers; either way the price he gets is uncertain, and he may get no price at all. In many places the mission observed perishable commodities going to waste for lack of a buyer. The most serious physical difficulties that have to be overcome in the development of Libyan agriculture are the shortage of water and the erosion of the soil. The scope for the better organization of water resources has been discussed already, and the problem of soil erosion is examined later in this chapter. But, as a broad judgment, the mission is convinced that the limitations on the expansion of agricultural pro- duction derive more from human than from physical factors. Five major problems have to be tackled: 1. land ownership and tenure, with particular reference to the sys- tem of tribal ownership which still prevails over much of Cyre- naica and parts of Tripolitania; 2. the supply of adequate credit to small farmers; 3. the wider dissemination of knowledge of modern farming and livestock practices-essentially a matter of agricultural training and extension services; 4. marketing facilities and the related questions of agricultural prices and protection against imports; and 5. government organization for the administration of agriculture. The mission believes that a concerted effort by the government to tackle these problems is an essential condition of satisfactory agricul- tural progress in Libya, and each is discussed in the following section. Thereafter the report goes on to consider the pattern which agricul- tural development should follow, the prospects for particular crops, technical support for agriculture and the special problems arising in connection with animal husbandry and forestry.2 2 General references to "agriculture" in this report should be assumed to include animal husbandry. Likewise, for the sake of brevity, the term "farmer" is frequently used to denote the pastoralist as well as the cultivator. 130 THE MAIN REPORT CONDITIONS OF DEVELOPMENT Land Rights "There can be no doubt as to the superiority of individual over communal tenure. This shows itself in its effects both on investment and on innovation. If large numbers of people are free to use the same piece of land, each for his own purposes, each has an incentive to take what he can out of the land without putting anything back. In these conditions, as soon as land begins to be scarce, it begins also to deteri- orate through overcropping, or excessive pasturage, or failure to take appropriate measures for soil conservation. It pays no individual to invest in improving the land, in fertilizers, in drainage, or in improved grasses. Trees will be planted if the right of individuals to their fruit is recognized, as it usually is, but trees will not be planted for general purposes, such as for shade or for afforestation. Communal tenures worked passably in Africa so long as populations were very small in relation to land, but population pressure everywhere causes such ten- ures to destroy the land. Investment apart, communal tenure is a handi- cap to innovation. Livestock cannot be bred selectively unless they are segregated and their mating controlled; neither is it convenient to experiment with new agricultural methods in circumstances where com- munal activity imposes its own routines. These are the reasons why communal tenures are disappearing rapidly in places where they flourished fifty years ago. Many people regret their passing for senti- mental reasons, but there is no reason to doubt their incompatibility with economic development."3 These observations, made in the context of a general discussion of the organization of agricultural development, are very relevant to the system of tribal ownership of land which prevails over much of Cyre- naica and parts of the Gefara and Gebel in Tripolitania. Under this system the different members of a tribe or kabila use the same piece of land for grazing their animals or cutting firewood, and though the individual may be allowed to cultivate part of the land for his own use, he is not free to sell it or to mortgage it for credit, and he may always be asked to vacate it by the head of the tribe. The tribal lands in Libya manifest all the weaknesses inherent in communal ownership. Large tracts in zones of high rainfall, which are 3 W. Arthur Lewis, The Theory of Economic Growth, George Allen and Unwin, 1959, page 121. AGRICULTURE, LIVESTOCK AND FORESTRY 131 well suited to the cultivation of crops, are used instead for grazing and have often been overgrazed to the point where the most palatable grasses have been replaced by unpalatable shrubs or bare ground. Little or nothing is invested in productive improvements. Where crops are cultivated, yields are low. Afforestation and soil conservation practices are neglected. Overexploitation of the soil leads to denudation of vege- table cover, which causes soil erosion and loss of fertility until finally the land is abandoned and its occupants move elsewhere. In the mission's judgment, the first and most essential reform needed to promote the extension of settled agriculture in Libya is the enact- ment of a land law securing permanent individual rights in land. Such laws exist in most other parts of the world, including the more progres- sive Arab countries. In Libya land tenure is in theory still regulated by a former Italian law (Royal Decree No. 1207 of 1921), which has never been repealed and is therefore still supposed to be in operation (in accordance with Article 210 of the Constitution). In actual practice, however, this law seems to be applied only where individual rights were already established and registered at the time of Independence. The mission is aware that tribal customs and conventions are deep rooted, and that any proposals for changing the present situation will inevitably meet with considerable resistance. We are convinced, how- ever, that changes must be made, and made soon, if the Libyan people wish to establish a reasonably prosperous instead of a languishing agri- culture. We propose therefore that a commission should be established without delay by royal decree to examine the whole question of land rights, to formulate a land policy promoting the permanent settlement of the tribal population and to prepare a draft land law for the govern- ment's consideration. The chairman of the commission should be an eminent Libyan with wide experience of public affairs, and the mem- bers should include at least one lawyer and one economist or admin- istrator with experience of systems of land ownership and tenure in other countries. The new land law should be designed to promote security of indi- vidual tenure in all areas of Libya suitable for settled cultivation-say, those with average annual rainfall of 250 mm., or more, or with ground water available for irrigation. In other areas, the law might recognize the existing rights of tribes to use the land for grazing and shifting cultivation. All forests not individually owned should be designated as government domain, and provision should be made for the extension of state forests on land not suitable for settled cultivation. At present, many of the small holdings in the coastal areas of Libya, 132 THE MAIN REPORT as well as in the Fezzan, are cultivated, on a share-cropping basis. Often the tenant has little or no protection against eviction, and he receives no special compensation for any improvements he undertakes. One of the principal objectives of a land law should be to give reasonable security of tenure to existing tenants on privately-owned land and to ensure that rents are fixed in such a way that the farmer has an incen- tive to invest in long-term improvements. There are no proper land records in Libya, and it is most important that a cadastral survey of all agricultural land should be started as soon as possible. The mission therefore recommends that a federal Land Sur- vey Department be established to undertake this task, as part either of the Ministry of Justice or of the proposed Ministry of Agriculture. The initial capital expenditure required for the purchase of vehicles and equipment might be about £L 35,000, and we estimate recurrent ex- penditures on the operations of the department at about £L 75,000 a year. A cadastral survey usually takes many years to complete, but there are various ways in which the work can be speeded up. Aerial photo- graphs, for example, can sometimes be used in place of ground surveys for demarcating properties, and the resources of the Land Survey De- partment can be supplemented by engaging private firms to carry out some of the ground survey work. The mission believes that the need for a land survey in Libya is so urgent that extra costs will frequently be justified if they enable the work to be completed more quickly. We have therefore included an additional sum of £L 25,000 a year in our pro- gram of recurrent expenditures to provide for some of the work to be contracted out by the department. Agricultural Credit Present facilities for agricultural credit in Libya appear to be quite inadequate to the need. The big farms with established titles of owner- ship can obtain advances from the commercial banks, and over one- tenth of all commercial bank lending in 1958 was to the agricultural sector (see Annex II). But the only source from which the average small farmer can get credit is usually from the local merchant, through whom he buys his occasional supplies of consumer goods, seeds, implements and other requisites, and to whom he sells part of his crop. The odds in transactions of this kind are heavily weighted against a farmer. He usually pays a good deal more than the regular price for what he buys and he receives a poor price for what he sells. There is a National Agricultural Bank, with headquarters in Trip- AGRICULTURE, LIVESTOCK AND FORESTRY 133 oli, which started operations in 1957 for the purpose of developing and raising the standards of agriculture, pasture and forestry. The bank has a capital of £L 1 million, though its authorized capital was set at £L 5 million. Its lending to date has been entirely on a short seasonal basis with interest at 61/2 percent. The enlargement of the bank's capital by another £L 2 million is contemplated at an early date, and it has so far been envisaged that the additional funds will be obtained by bor- rowing abroad. Located in Tripoli, with one or two branches in other places, the institution as now constituted is not in the mission's view able to cater adequately to the needs of the widely scattered farming community and its procedures for credit assessment are too slow to be effective. The bank's record in providing credit facilities for the newly formed cooperative movement has been particularly disappointing. Further, in a community with a little over a million people, it is open to question whether it is necessary to maintain two or three major national banking institutions with high overhead costs of organization and management. Considerable economies would be achieved if the functions of central banking, agricultural credit and industrial finance could be combined in a single institution, as they used to be, for example, in Australia. The mission therefore recommends that the National Agricultural Bank should be wound up and merged with the National Bank of Libya and be designated as its Agricultural Credit Department. There would also be established, as proposed in Chapter 9, an Industrial Fi- nance Department for the provision of credit to industrial establish- ments. Such a step should promote both economy in manpower and organizational efficiency. The Agricultural Credit Department should be separate from other departments of the National Bank and headed by a director with considerable experience in the operation of agri- cultural credit, preferably in an underdeveloped country. This director would report directly to the Governor, and the accounts of the depart- ment should be kept separate from the rest of the bank's operations, so that the department's activities as such would be open to public scrutiny. An advisory council should be set up to keep the operations of the Agricultural Credit Department under review and make suggestions for policy. This council should include representatives of the govern- ment departments concerned, together with farmers and traders, and it should meet at least twice a year. The Board of the National Bank might be suitably enlarged to include a member with special knowledge of agricultural problems. Apart from having branches at each of the places where the National Bank is already established, the Agricultural 134 THE MAIN REPORT Credit Department should establish its own separate branches in areas where conditions call for such a step. Capital for the Agricultural Credit Department should initially be provided by the government, together, of course, with the assets that would be taken over from the National Agricultural Bank. Later on it might be possible for the National Bank to raise additional funds for agricultural credit by floating its own bonds on the market with a guarantee from the government. We suggest that the Agricultural Credit Department should be started with a capital of £L 21/2 million, including the £L 1 million taken over from the Agricultural Bank, and that this should be augmented by a further £L I million in the course of the next five years. We have therefore included provisions of £L 2½2 million for agricultural credit in our five-year program. We would not, however, rule out the possibility of further funds being provided under the Supplementary Program if the activities of the department progress satisfactorily. The mission advises against the Agricultural Credit Department being given the privilege of borrowing from the Central Banking De- partment, at any rate for the time being. Its initial capital should pro- vide the limit of operations, and any profits arising from its operations should be carried into separate earmarked reserves and should not be merged with those of the National Bank of Libya. Likewise any losses should be shown separately and written off against capital or should be reimbursed by government. At a later stage, when agricultural credit operations take a firm root, limited provision for discounting the paper of the Agricultural Credit Department by the Central Banking Depart- ment might be considered. While seasonal crop finance would inevitably constitute the largest section of the work of the Agricultural Credit Department, it would also have to develop facilities for medium-term and long-term lending for such purposes as the construction of wells and irrigation channels, the planting of orchards, the leveling or terracing of lands and the purchase of machinery and equipment. The mission feels that, having regard to the backward conditions of the Libyan agricultural economy and the need for offering a stimulus in as many different ways as are consistent with prudent management, the agricultural credit agency should consider making loans at rates of interest somewhat lower than 61/2 percent, at least in the initial stages. Lending policies must, of course, be related to the cost at which the department itself is able to borrow. The department will have to frame its policies with a fair measure of flexibility. It should adhere to principles of prudent financial man- AGRICULTURE, LIVESTOCK AND FORESTRY 135 agement in such matters as wide distribution of credit risks and careful selection of persons and projects, and it should also seek to establish in its relations with its borrowers respect for careful and sound financial attitudes, especially with respect to repayment of debts. Nevertheless, agricultural credit in Libya is surrounded by many factors of risk, in- cluding those which arise from the vagaries of climate, and no agri- cultural credit institution can cater adequately to the needs of the small farmer unless it is prepared to insist on somewhat less rigorous security requirements than may be appropriate in other countries. Provision of credit must be closely linked with the work of the agricultural extension services and the development of rural coopera- tive societies. The mission is well aware that very little progress has yet been made in either of these two fields and recognizes that for the time being the agricultural credit agency will itself have to assume more widespread and onerous responsibilities with respect to the distribution and supervision of credit than would noirmally be desirable. At the same time we consider it to be of the utmost importance that a con- certed effort should be made by the federal and provincial governments, with the help of foreign advisers, to overcome the present deficiences in agricultural education and to encourage cooperation amongst the farm- ers. To say, as some do, that Libyan farmers cannot be persuaded to enter into cooperative credit and marketing arrangements is a counsel of despair, which the mission feels unable to accept. It will no doubt be a slow process, and there are strong resistances to be overcome. But much will depend on the quality of leadership offered by government and on the energy and single-mindedness with which the objective of agricultural development is pursued. Cooperative Societies Rural cooperative societies have a key role to play in any program for raising agricultural production in Libya. We do not think that it would be advisable to try to organize cooperative production societies, in which the members jointly own and cultivate the land and share the proceeds. Such societies have seldom proved successful elsewhere. But cooperation in the distribution of credit and marketing, in the purchase of seeds and implements, and possibly in the operation of farm machin- ery, is an essential element in any scheme for developing the small farming sector. A Cooperative Law was enacted in Libya in 1956, and regulations for the registration of cooperative societies were published in 1958. The FAO has been playing an active part in this work and maintains an 136 THE MAIN REPORT agricultural credit and cooperatives expert on its field staff in Libya. By November 1959 over thirty general agricultural cooperative societies were established, eighteen in Tripolitania, nine in Cyrenaica and six in the Fezzan; their total membership was about 6,000 and their share capital £L 21,000. These cooperatives have so far functioned mainly as thrift and credit societies, but some are beginning to branch out into wider activities such as the procurement of agricultural supplies for their members and the marketing of produce. Some cooperatives have already distributed improved seeds, fertilizers, insecticides, cement and small implements, while a few also own tractors. The figures quoted show that the rural cooperative movement in Libya is still in its infancy. A major educational effort is required to create a wider understanding amongst farmers of the proper functions and methods of operation of cooperative societies, to train managerial staff of the cooperatives and to build up an adequate government super- visory service. Libya should learn from the experience of other coun- tries in which cooperation has already made some progress, and we suggest that brief visits to such countries might be arranged for groups of tribal leaders and farmers from the three provinces. We also recom- mend that two or three of the senior officials concerned with coopera- tives in the federal and provincial governments should be selected for courses of overseas training in cooperative methods. A few junior offi- cials in the agricultural service should be given opportunities to gain experience abroad later on, after an initial period of work with the cooperative movement in Libya. The primary responsibility for fostering the development of coop- eratives should rest with the proposed federal Ministry of Agriculture and with the Nazirates of Agriculture in the provinces. These depart- ments should work in close relationship with the Agricultural Credit Department of the National Bank, which should seek to channel as much of its credit as possible through cooperative societies, making the societies responsible for the supervision and collection of loans. Like- wise, wherever marketing societies are set up and they have surplus produce for storage, credits against the warehouse receipts for such produce might be given either by the commercial banks or as a part of the agricultural credit system. Marketing Arrangements Between one-third and one-quarter (by value) of Libya's agricultural produce is exported and the remainder is consumed at home. The principal commodities exported are groundnuts, olive oil, livestock, AGRICULTURE, LIVESTOCK AND FORESTRY 137 hides and skins and other animal products, esparto grass, almonds and castor seed. Minor agricultural exports include citrus fruit, potatoes, tobacco and (in good crop years) cereals. All these exports are handled by private trade except for esparto grass and tobacco. Esparto grass is collected, baled and shipped by a government-owned corporation and tobacco exports are organized by the government monopoly in Tripoli- tania. Olive oil and livestock products have to go through various stages of processing before they are exported, but most of the other agricul- tural exports are shipped more or less in their raw state. Exports of livestock consist mainly of animals driven across the border for sale in Egypt; some are also shipped to Malta, Greece and other Mediterranean countries. Apart from livestock, livestock products and esparto grass, most agricultural exports are accounted for by the organized sector of Libyan agriculture, which is located mainly in Tripolitania, and in which the Italian farmers play a leading role. Production for the home market consists predominantly of animal products (meat, milk, wool, hides, etc.), cereals, dates, olives, tobacco, citrus fruit, grapes, tomatoes and other fruits and vegetables. A large, but indeterminate proportion of animal products, cereals and dates is consumed by those who produce them and thus never enters the market at all. On the other hand, the greater part of the production of olives, citrus fruit, grapes, tomatoes and other fruit and vegetables is sold, in some cases directly by farmer to consumer (notably in the small town and village markets), but more often by farmer to merchant or man- ufacturer. Many of the large farms in Tripolitania have their own marketing organizations. Some are run by merchants or trading firms; some have their own processing facilities (e.g., plants for the manufacture of olive oil). The Consorzio Agrario della Tripolitania, a multi-purpose asso- ciation founded by Italian farmers in 1915 and now including more Libyan members than Italian, carries out certain marketing functions, but these do not appear to have been particularly successful, and the organization has never got down to the level of the small farmer. To- bacco growers in Tripolitania have an assured market in the monopoly, which is obliged to take all the tobacco for which licenses have been issued at prices fixed in advance. The marketing of esparto grass is also handled by a government organization which fixes prices and employs agents to take delivery of the grass at collecting points in the Tripoli- tanian Gebel. None of these marketing arrangements really covers the needs of the mass of small farmers and market gardeners who have to take their chance in the local town or village markets or entrust the marketing of 138 THE MAIN REPORT their surplus produce to local merchants and accept whatever prices the latter offer. These small producers usually know next to nothing about the market possibilities outside their own neighborhood; they have no transport of their own other than a camel or a donkey; they have few facilities for storage; their products are ungraded and often of poor quality; and no one seems particularly interested in helping them. One of the main troubles is that, with imports freely available, the domestic producer is almost invariably confronted with a buyers' market, and his chances of competing successfully with imports are limited not only by his own inefficiency, but by the high costs of internal transport and by the difficulties of preserving perishable produce in Libyan condi- tions. Clearly, there is no simple solution to this marketing problem. No organization for marketing can overcome basic deficiencies in the prod- uct, and much effort has got to be devoted to raising standards of pro- duction and securing better quality goods-a subject on which we have more to say later on. Equally, however, steps to raise agricultural effi- ciency will fail in their object unless they are accompanied by adequate incentives and marketing facilities. The mission considers it essential that the Libyan Government should play a more active role in assisting the unorganized section of the farming conmmunity to find markets for its produce. We recommend specific action along the following lines: 1. Creation of an Agricultural Marketing Department as part of a federal Ministry of Agriculture, headed by a director with prac- tical experience of agricultural marketing problems and prefer- ably also with specialized knowledge of markets in the Mediter- ranean area. 2. Fixing of minimum support prices for wheat, to be announced in advance of each season, coupled with an undertaking by the government to buy up at these prices wheat delivered to specified grain storage points. 3. Increases in tariffs on selected agricultural imports, combined with measures to restrict imports of wheat and flour. The main functions of an Agricultural Marketing Department, as we see it, should be to give continuous study to the problems involved in marketing produce at home and abroad and to advise government, farmers and industry on measures for overcoming these problems; to give information and advice to farmers (through the extension service, and in other ways) about market possibilities and the conditions re- AGRICULTURE, LIVESTOCK AND FORESTRY 139 quired to exploit them; to encourage better grading of agricultural produce and the adoption of measures designed to improve quality and raise sanitary standards (especially for livestock products); to assist in the organization of internal transport services and the timely procure- ment of shipping for exports; and more generally to establish closer links between the agricultural producer and potential buyers at home, including particularly domestic processing industries, the oil companies and foreign military establishments in Libya. This last function we con- sider to be of prime importance because the new oil centers in the desert will constitute a major concentration of purchasing power and a large potential market for such products as fresh fruit and vegetables, meat, eggs and poultry. In the past both the British and American forces have been ready to buy local agricultural produce,4 subject to the limitations imposed by their health regulations, but they have only too often found their suppliers undependable and the quality of the goods sub-standard. So far as the mission is aware, little has been done to remedy these deficiencies, and we believe that a properly organized and energetic marketing department could make a valuable contribu- tion in this field. Since a substantial proportion of Libyan agricultural produce is sold to local factories (e.g., flour mills, tanneries, olive and sansa oil factories, the tomato paste factory, the government date-packing plant) close liaison must be established between the marketing department of the Ministry of Agriculture and the Ministry of Finance and Economics. The latter moreover, as the Ministry responsible for Libya's overseas trade, will be in a better position to seek out new markets abroad and generally to take care of export problems. The main initiative in the promotion of Libya's agricultural exports has hitherto been taken by the Tripolitanian Administration, and we would not wish to see this arrangement disturbed until the Ministry of Finance and Economics is properly equipped for the task. Eventually, however, it is our belief that export promotion should become a federal responsibility, and that the sector of the Ministry of Finance and Economics concerned with export problems should be suitably reinforced. Issues arising in connection with the marketing of specific agri- cultural commodities are discussed separately on pages 147-156 and in Annex IX. Marketing problems are also discussed later in this chapter 4 Purchases of Libyan produce by the U. S. Air Force at Wheelus Field amounted to about $220,000 (nearly £L 80,000) in 1958. Eggs were the main item, accounting for over half the total value. Also included were small quantities of potatoes, to- matoes and other vegetables and some non-agricultural items. 140 THE MAIN REPORT in connection with the mission's proposals for the development of former Italian farms in Cyrenaica (see pages 156-161). Education and Extension Services The education of boys for work on the land is discussed in Chapter 13, where proposals are made for imparting more of a rural bias to primary school education and for establishing new training schools for agricultural demonstrators. The two existing agricultural schools at el Aweila in Cyrenaica and Sidi Mesri in Tripolitania, and the new school being established at Sebha, will continue to be the main sources of Libyan staff for the government agricultural services, and the stand- ards of entrance to these schools should be progressively raised as the general educational system is developed. Better training is needed at the schools, and the boys must be taught to work with their hands. For more advanced training in agriculture and forestry selected employees of the federal and provincial services should be sent to universities abroad, since the number of higher professional staff required would be too small to justify the establishment of a permanent agricultural college in Libya (see Chapter 13). Programs for the training of extension workers have recently been started in each of the three provinces under the guidance of USOM personnel, and sums totalling £L 156,000 had been allocated for this purpose by LARC up to the end of March 1959. A further £L 137,500 has been provided in the U. S. aid program for the Libyan fiscal year 1959/60. Some progress has been made, but the development of exten- sion work is being held back by the lack of Libyan supervisory staff. The programs are mainly concentrated at present on raising produc- tion of barley and wool through the use of better seeds and implements, improved shearing methods and other means. Greater emphasis should in our view be placed on this branch of the agricultural service, and we believe that, at this stage of Libya's development, extension work should generally be accorded at least equal priority with experimentation or research in the allocation of funds and trained personnel. There is much knowledge available about techniques of farming in Libyan conditions which can be usefully passed on to the farmer without further trials, and the scope for raising agricultural production through the extension of existing knowledge, with little additional capital investment, is amply demonstrated by the great differences in efficiency between the best Libyan farms and the worst. Good salaries should be offered to attract the best graduates from AGRICULTURE, LIVESTOCK AND FORESTRY 141 the agricultural schools to the extension services, where the right sort of person can usually contribute more to the development of agricul- ture than by working in a headquarters office. It is no use, however, recruiting young men for extension work unless they are prepared to work with their hands and fully capable themselves of doing the things in which they are supposed to be instructing the farmer. An extension worker who is unable to plow a straight furrow, for example, is un- likely to command much respect. Demonstrations should wherever possible be conducted on the farm- er's own land or on tribal grazing areas rather than on model farms. However, courses of instruction should be held at the agricultural schools and research stations when there is a demand for them, and farmers should be given every encouragement to visit these schools and learn about what is going on there. In Tripolitania many of the Italian farmers offer practical demonstration of the value of improved cultural methods, and any steps which can be taken to foster closer relations between Italian and Libyan farmers would help in spreading knowl- edge. Agricultural extension is as much a psychological as a technical problem, and the mission is not qualified to advise in any detail on the best ways of engaging the interest of the small cultivators and nomads in a campaign for the adoption of improved practices. Clearly, such a campaign will only succeed if it receives full support from the leaders of the farming community, tribal and religious authorities and local government officials. Anything that can be done in the ordinary schools to arouse the childrens' interest in farming, gardening and animals will contribute to the spread of knowledge. Agricultural shows, the offer of prizes and awards for outstanding achievements, the display of films and posters-all these have a role to play. Initially, the mission suggests that the main effort should be directed towards the former Italian farms in the Barce Plain and the Cyrenaican Gebel, since it is here, in our view, that both the need and the opportunities for fruitful exten- sion work are greatest. We are proposing later in this chapter that a special organization should be set up to promote agricultural develop- ment in the area, and one of its main functions would be to help in building up an extension service. Agricultural Administration As pointed out earlier in this report, the mission believes that the absence of a federal Ministry of Agriculture is a serious weakness in 142 THE MAIN REPORT the present system of public administration and recommends that such a ministry should be created as a matter of urgency. We also recom- mend regular consultation between the Minister and the three Nazirs and the establishment of an inter-departmental committee of officials to help in coordinating agricultural administration in the three prov- inces. Our proposals on this subject are outlined in Chapter 6 (page 78), and we suggest that the government's agricultural advisers in Libya should be invited to work out in detail the organization of the new ministry. Close working relationships should be established between the agricultural departments and the Development Council, and both the Development Council and the National Bank of Libya should be represented on the official committee on agricultural development. Much of what is said in Chapter 6 about government organization in general applies to the administration of agricultural policy. We see considerable need for a fuller and speedier interchange of information on agricultural matters between the federal and provincial govern- ments; for more regular tours around the country by ministers, nazirs and senior officials in order to keep in touch at the ground level with the problems of the ordinary farmer, who often has difficulty in obtain- ing access to the ear of authority; for the vigorous pruning of the head- quarters staffs of the provincial Nazirates of Agriculture; and for the collection of better agricultural statistics. We also recommend the establishment of a national advisory council on agriculture, through which prominent farmers and tribal leaders can be associated with the formulation of agricultural policy and give the government the benefit of their special knowledge and advice. PATTERN OF DEVELOPMENT Existing Land Ugse Only about one percent of the total land area of Libya is suitable for settled agriculture. Elsewhere there is too little rainfall, the ground is too rough or soil conditions are unfavorable. While large tracts of land are being overexploited as a result of uncontrolled grazing, much good agricultural land (from the standpoint of soil and water resources) has been abandoned or never exploited at all. In the Fezzan oases, for example, the area under cultivation is believed to have been reduced by about 50 percent within living memory. Many of the former Italian farms in Tripolitania and Cyrenaica have been abandoned (see Annex X). Some of the agricultural land that is used is used inefficiently. AGRICULTURE, LIVESTOCK AND FORESTRY 143 Wheat and barley, for example, are sometimes planted on irrigated land which should be able to yield a higher return from fruit, vege- tables or other crops. Marginal land in low rainfall areas is often planted to barley when it is suitable only for grazing. Rocky or eroded land in steep catchments with an annual rainfall of 300 mm. or more is inadequately developed as forest reserves. The present patterns of land use in Tripolitania and Cyrenaica are illustrated in the maps facing pages 100 and 104. Settled agriculture in Tripolitania is largely concentrated in the coastal plain between Zuara and Misurata and in the region of the Gebel stretching from Giado through Jefren, Garian and Tarhuna to Cussabat. A high proportion of the largest and most prosperous farms are situated in the immediate vicinity of Tripoli which is far and away the largest market for agri- cultural produce in Libya and also the principal port of shipment for exports. Much of the land in the coastal area is irrigated from wells (see Chapter 7); only at the Wadi Caam between Homs and Zliten is there a perrenial flow of surface water suitable for irrigation. The farming colonies established by the Italian Government are located at various points close to the coast and in the Gebel around Tarhuna. Tripolitania has a few scattered areas of forest and scrub, and esparto grass grows wild over parts of the Gebel. Most of the Gefara and large areas of the Gebel are used for grazing livestock. There is very little irrigated land in Cyrenaica apart from market gardens scattered along the coast, particularly in the vicinity of Ben- ghazi and Derna; and the scope for the extension of irrigation is very limited (see Chapter 7). Some of the best land for cereal cultivation in Cyrenaica, and indeed in all Libya, is situated on the Barce Plain, where the Italians launched a wheat-growing scheme just before World War II. This scheme was abandoned during the war, and attempts made by the British military administration to revive it afterwards proved unsuccessful. Settled farming is also established in parts of the Gebel Akhdar lying near the main coast road from Barce to Derna. Altogether nearly 1,800 Italian farms with a combined area of about 65,000 hectares were established in Cyrenaica before the war by the Ente per la Colonizzione della Libia; of these about 1,100 were in the Barce district and the rest in districts of Beida and Derna. Much of the Gebel Akhdar is covered with forest and scrub, and the area is used extensively for shifting cultivation. The other main agricultural areas near the coast of Cyrenaica are south of Benghazi around Solluk and Agedabia where the principal crop is barley. The land in these areas is generally poor and the rainfall low. The outlying desert oases in the Fezzan, at Jalo and Kufra in Cyre- 144 THE MAIN REPORT naica and at Gadames in Tripolitania, used to grow practically all their own food, but they are coming to depend increasingly on supplies from outside, including flour, sugar, canned fish and other prepared foods. Dates are the principal crop in the desert oases. Cereals, fodder, toma- toes, vegetables and fruit are also grown, together with small quantities of tobacco and oilseeds. Livestock are reared in small numbers. Guiding Principles for Development One of the paradoxes of postwar economic development in Libya is that, while foreign aid has helped to finance schemes of agricultural development, it has at the same time made it more difficult for the small farmer to sell his produce because of the encouragement given to imports. Barley and dates, traditionally Libya's staple foods, have in- creasingly been displaced by imports of wheat and flour, including gift wheat from the United States and subsidized flour from Italy. The con- sumers' preference that has now been created for wheat bread and pasta will be difficult to change, and it may not be desirable to change it. But there is little point in trying to stimulate production of barley and dates for human consumption when the market for them is declining. Instead, the emphasis has to be shifted towards promoting greater use of barley and dates as a feed for livestock, concentrating production on the superior varieties for which there may be a market abroad and, whenever conditions are favorable, encouraging the cultivation of wheat in place of barley. The adverse impact which the rapid growth of imports has had on the marketing of domestic foods is not confined to cereals and dates. Canned orange juice is consumed in the hotels of Benghazi while good oranges rot on the ground in Tripolitania. Considerable quantities of imported fruit and vegetables (fresh apples, onions and potatoes and various canned products) are sold in the coastal towns and reduce the incentive which the merchants have to buy from local producers. The quality of the imported foods is, of course, frequently better than that of the Libyan products which they replace; and some imports will always be needed when the corresponding Libyan products are out of season. But efforts to improve the domestic product are unlikely to succeed unless the Libyan farmer is afforded a greater measure of protection against imports. It is not easy in these circumstances to prescribe a set pattern for the development of Libyan agriculture. There is little doubt that, where irrigation is possible, physical conditions in Libya tend to favor AGRICULTURE, LIVESTOCK AND FORESTRY 145 vegetables and tree crops rather than cereals-a conclusion supported by the good progress made in recent years by the larger capitalist farms in the cultivation of groundnuts, olives, castor seed, citrus fruit, al- monds, carrots and new potatoes. Such crops as these, together with dates and vines, appear to offer the most promising possibilities for development on the production side. Not all of them look equally promising from the marketing standpoint. Certainly not dates, since there is already too much production for the home market to absorb, and the Libyan product is unlikely to be able to compete successfully on a large scale in foreign markets with dates from Iraq, Algeria and Tunisia-except possibly in Italy, where Libya enjoys a tariff preference (see pages 150-151). Prospects for increasing exports of citrus fruit must also be considered rather doubtful in view of the keen competition from other producing countries in the Mediterranean area. By and large, however, the mission believes that, where adequate capital, water and technical know-how are available, the most profitable lines of agricul- tural development in Libya will be found in specializing in production of oilseeds, vegetables, fruits and nuts for the foreign market and for the growing market that will be built up in Libya itself around the operations of the oil companies. The more advanced farming sector is already developing on these lines, and it should be encouraged to do so. Government can help through its technical and marketing services (experimental work, pest control, enforcement of quality standards, etc.), through measures to secure the most advantageous use of scarce water resources (especially controlling the overexploitation of ground water in the Tripoli area), through general policies for encouraging private foreign investment in Libya and through the provision of public services such as approach roads, piped water and electricity, especially in opening up new areas for development, such as the Bir Ghnem area south-west of Tripoli (see Chapter 7). There need be no immediate fear in Libya, as there is in over- populated countries, that the extension of large-scale commerdal farm- ing will be at the expense of the small farmer. Land as such is not scarce, only the capital and technical know-how required for its devel- opment. When private enterprise, Libyan or foreign, is ready and able to supply these two factors of production, the economy as a whole will benefit from their being allowed to do so. The large-scale farming sectors should be regarded as mutually complementary, not antagonis- tic. As one example, a number of the larger farms in Tripolitania provide seasonal employment for small farmers and their families and 146 THE MAIN REPORT thus enable them to supplement the incomes they obtain from their own holdings. In short, and disregarding the human element, physical conditions in the agricultural areas of Libya appear to be well suited to capital- intensive farming and to favor fairly large holdings and a relatively high degree of mechanization, particularly where irrigation is not pos- sible. It is worth noting in this connection that the typical size of the Ente farms established by the Italians in Cyrenaica was 25-30 hectares. Yields per hectare were expected to be low, and this has been the general experience where dry farming is practiced in Libya. The development of the small farming sector presents different problems and calls for more active intervention by the government. The typical small cultivator has at present neither the capital nor the organizing ability nor the technical know-how to engage in specialized production for the export market. He must be able to grow something which produces a crop straight away and cannot plant all his land with olives, vines, citrus fruit or other tree crops, which take years to reach economic production. The crops chosen moreover must be such as require comparatively modest skills for their cultivation. In these circumstances the mission considers that the balance of advantage lies in concentrating initially in the small farming sector on production for the home market. The acreage under wheat should be extended wherever possible, particularly in the Barce Plain, where the mission believes that conditions are suitable, notwithstanding the contrary views expressed by some experts. Production of barley should be encouraged in other areas with average rainfall of over 250 mm. with special emphasis on improving quality and ultimately re-establishing the export trade in this commodity which Libya once had. Cereal culti- vation should, wherever possible, be integrated with the growing of pasture and fodder crops to meet the feed requirements of livestock. Provided that adequate credit is available, olive, almond and other fruit trees can also be cultivated in the Barce Plain, in the Gebel Akhdar and in some other dry farming areas in the coastal provinces. Citrus fruit may also have limited possibilities, but on the whole this is a crop which appears to require more care and skill in cultivation than the more inexperienced Libyan farmers can be expected to pro- vide. Vegetables, oilseeds, poultry and livestock in our view constitute the other main lines of development for small-scale Libyan farming, and efforts should be directed towards developing a market for these commodities in the oil centers and to raising standards of production and marketing to the levels required to satisfy the demands of the foreign community. The cultivation of grapes for making wine might AGRICULTURE, LIVESTOCK AND FORESTRY 147 be extended in the Gebel Akhdar in Cyrenaica if an export market can be found for Libyan wine (e.g., in Germany). At the same time something can be done to provide a better market for dates and the inferior qualities of barley-for example, through government purchases of dates for the school-feeding program and the creation of a livestock feed reserve. Tobacco cultivation, which is largely confined to Tripolitania, raises special problems of its own. The present system of permitting cultivation only under license and of guaranteeing a market for all the tobacco grown, regardless of type or quality, has had many undesirable results, and we recommend other arrangements should be made (see page 153). Proposals have been put forward in Libya for the establishment of a sugar beet factory in Tripolitania and for growing cotton on a com- mercial basis in the Fezzan. The mission has considerable doubts about both these proposals and strongly advises against precipitate action. Complex problems are involved, and much further study is required before either line of development should be encouraged. Some of the factors to be considered are discussed on pages 154-155. Meanwhile, there may well be good opportunities for extending the cultivation of well-tried crops like groundnuts and castor seed, both of which might be found suited to small holdings in the Fezzan as well as in Tripoli- tania. The mission recognized that no program for the development of the small farming sector of Libyan agriculture can be expected to achieve spectacular results in a matter of two or three years, or even five. Progress will inevitably be slow, particularly in the initial stages, and much patient effort will be called for on the part of the government. But we are convinced that this effort is worth making-indeed, that it must be made if the wealth that will come from oil is to be used wisely and well for the benefit of the Libyan population as a whole. We recommend that top priority in agricultural development should be given to the promotion of settled cultivation on the former Italian farms in the Barce-Beida area of Cyrenaica. We also have specific pro- posals to make for raising production in the small farming sector in Tripolitania and the Fezzan. First, however, some recommendations are offered with respect to particular crops. The present position and pros- pects of these and other crops are described in Annex IX. Recommendations on Particular Crops Cereals. Barley is the principal cereal crop in Libya; some wheat is also grown, and small quantities of millet. Production of cereals 148 THE MAIN REPORT varies greatly from year to year according to the rainfall; during the five years ending in September 1958, for example, the range has ex- tended from an estimated 60,000 tons in 1955/56 (crop year beginning in October) to over 150,000 tons in 1956/57. Average annual produc- tion during this period may be very roughly estimated at around 60,000-70,000 tons of barley and 20,000 tons of wheat. Libya appears to have been more or less self-sufficient in food- grains in late Turkish times, exporting in good years, importing in bad ones. In recent years, however, imports have regularly exceeded exports. This is partly ]because consumption has risen without any correspond- ing rise in production. But a more important factor has been the shift in the pattern of consumption in the towns from barley to wheat. Over the three years 1955/56-1957/58 apparent consumption of wheat and flour averaged about 100,000 tons a year (in terms of wheat equivalent). Little over one-quarter of this consumption was supplied from home production, and the remaining three-quarters were imported, mostly in the form of gift wheat from the U. S. and flour from Italy, which is sold at well below current world prices. Bags of Italian flour are nowadays a common sight in most Libyan towns, even in the Fezzan. Thus, while Libya is still producing practically all the barley it requires for human consumption, there is a large and growing deficit in wheat. The expansion of domestic wheat production to cover at least part of this deficit should, in the mission's view, be adopted as one of the principal aims of agricultural policy. This can be done by extend- ing the area under production, particularly in the Barce Plain, by better methods of cultivation and by improvements in handling and storage designed to reduce wastage (see Annex IX). Wheat can also be grown more extensively under irrigation in Tripolitania as a winter crop in rotation with various summer crops. Particular attention should be given to increasing production of durum (hard wheat used for making pasta) in the Barce Plain and other areas where soil and climate are favorable. This at present fetches a better price in world markets than softer wheats, and there is a substantial demand for it in Libya, par- ticularly in Tripolitania. Durum grown in Cyrenaica is already trans- ported in small quantities to Tripolitania and there should be room for the expansion of this trade. There may also be opportunities for Libya to export to other countries, as it did before the war to Italy. In advocating the expansion of wheat production in Libya at a time when there is a world surplus, and wheat and flour can be obtained on advantageous terms from the United States and other countries, the mission has been strongly influenced by two considerations. First, AGRICULTURE, LIVESTOCK AND FORESTRY 149 wheat appears to be one of the crops best suited for cultivation by small farmers in many of the dry farming areas of Libya, particularly in Cyrenaica; it can also be grown in rotation with other crops on irriga- ted land in Tripolitania and the Fezzan. Second, an assured market can be found in Libya itself for all wheat that is produced locally, provided that the government is prepared to adapt its policies to this purpose. It seems to us advisable that plans for the development of the unor- ganized sector of Libyan agriculture should initially be based in large part on the cultivation of crops which do not involve a long period of waiting, which do not require irrigation, which make comparatively modest demands on the farmer's skill, which do not perish easily and which are not dependent on uncertain export markets. Wheat fulfills these requirements better than most other commodities. It might with advantage be rotated with mixtures of legumes and oats for fodder. There will still be room for the expansion of barley production in areas where the rainfall is too low or soil conditions unfavorable for cultivation of wheat. More barley can be fed to livestock and used to build up an emergency feed reserve against drought years such as 1959, when large quantities of animal feedingstuffs were supplied to Libya by the United States as an emergency measure. At the same time, if quality can be improved through better methods of cultivation, more barley can be exported to Europe.5 Belgium, Denmark, Western Ger- many and the United Kingdom all import substantial quantities of barley from the Middle East (notably from Iraq), and Libya should be able to compete in this trade, particularly in view of the fact that it is nearer than Middle Eastern countries to the markets in Northern Europe. The mission recommends the adoption of the following policies to stimulate cereal production: 1. Institution of a wheat-growing scheme on the Barce Plain as part of a scheme for the development of that area (see pages 156-160), coupled with an intensive campaign to raise wheat yields all over Libya through better cultural practices (e.g., row planting with drills), the use of improved varieties of seed and the provision of better credit facilities. 2. Introduction of a price support scheme for wheat under which 5 In pre-Italian times Libya exported substantial quantities of barley to the United Kingdom for use in the brewing industry. This trade was briefly revived during the period of British military administration after World War II, but has since almost entirely disappeared. 150 THE MAIN REPORT minimum prices for the various qualities would be announced and widely publicized by the government in advance of each season, and the government (or millers and merchants acting as its agents) would purchase at these prices any wheat delivered at specified collecting points in the growing areas. This scheme should be operated by the proposed Marketing Department of the Ministry of Agriculture, and use should be made, where necessary, of the existing government-owned grain storage facili- ties, which include 15,000 tons of bulk storage capacity in mod- ern silos at Tripoli, Suani ben Adem, Benghazi, Barce and Beida (see Annex IX). 3. Continued regulation of wheat imports coupled with quantita- tive restrictions on imports of flour. Libya has milling capacity sufficient to cover the bulk of its flour requirements (see Annex XIII), and flour imports should be limited to special grades which cannot be produced locally. 4. Maintenance of existing controls over the retail price of bread, the price being fixed at a level which will allow reasonable mar- gins for transport, storage, processing and distribution. In effect, through its control over imports, the government can re- quire the mills to accept all the locally produced wheat that is offered for sale. Support prices have to be fixed high enough to offer an ade- quate incentive to the grower, but not so high as to make necessary sharp increases in prices of flour and bread (or a large government sub- sidy in lieu). Information about present costs of wheat production in Libya is sketchy and unreliable. The mission is, however, satisfied that, if assistance is extended to the small farmer along the lines suggested earlier in this chapter, it could be made profitable for him to take up wheat cultivation in areas where conditions are suitable by fixing sup- port prices not very much higher than the present prices at which im- ports of milling wheat can be landed in Libya (around £L 25-30 a ton). An expert with experience of grain marketing problems in other countries should be appointed to draw up a detailed scheme and sub- sequently to take charge of its operation as an official of the Agricul- tural Marketing Department. The department would take over the existing grain storage organization of the Ministry of National Econ- omy. Its main functions would be to set prices, supervise the operations of private traders and to issue licenses for imports. It would only inter- vene itself in the domestic market as a buyer of last resort. Dates. Production of dates in Libya is variously estimated at be- AGRICULTURE, LIVESTOCK AND FORESTRY 151 tween 30,000 and 70,000 tons a year. If a figure is taken midway be- tween the two extremes, and if a price of one piaster per kilogram is imputed to the crop, the annual value of date production might be guessed at around £L 500,000 or one percent of the gross domestic product. Practically the whole crop is consumed at home, exports amounting to only 286 tons in 1958. Dates are mostly eaten by the poorer families in the growing areas; some are fed to livestock. The quality of Libyan dates is generally poor, though a few areas produce good commercial dates-notably Hon, Brak and Traghen in the Fezzan, Zliten in Tripolitania and Kufra in Cyrenaica. Cultural methods are mostly primitive, and the practice in many oases of throwing the dates on the ground when cut and then burying them results in their getting contaminated with sand. Although date palms constitute one of Libya's principal natural resources, the mission is not very optimistic about the prospects of expanding date production, particularly as much of the existing crop goes to waste. We attach considerable importance, however, to making better use of the dates that are grown and to improving the quality of the product. With these objects in view the following recommendations are put forward for government action (see Annexes IX and XIII for further details): 1. The agricultural extension services should be used to propagate information about improved methods of cultivation and har- vesting. 2. Research work should be concentrated mainly on developing by-products such as syrup, paste and alcohol. On the production side the government should rely mainly on research work done in other countries. Use of improved varieties of palm should be encouraged in the natural process of replanting, but no special replanting program should be undertaken. 3. Dates should continue to be bought and packed by the govern- ment for the school-feeding program (see Annex XIII). In addi- tion, the use of dates as a concentrated livestock feed should be encouraged, and consideration should be given by the Ministry of Agriculture to building up reserve stocks for use as an emer- gency feed in periods of draught. 4. The possibilities should be investigated for developing a market for packaged Libyan dates in Italy, where up to 5,000 tons a year may be shipped free of duty. If the results of this investigation are negative, the effort should be abandoned (see Annex XIII). 152 THE MAIN REPORT Olives. Olive trees, mostly planted by Italians in Tripolitania before and since the war, are Libya's largest single agricultural asset. In 1957/ 58 the number of cultivated olive trees in Tripolitania was estimated at around 3V2 million, of which approximately 750,000 had not yet reached the stage of production. The area in the province planted with olives was about 180,000 hectares, and output in the peak year 1957/58 amounted to about 70,000 tons of olives, from which 14,400 tons of oil were produced. In Cyrenaica the number of cultivated olive trees is much smaller (probably about half a million), though there are con- siderable numbers of wild olives scattered over the Gebel. As in other countries, production is subject to a two-year cycle. In good years sub- stantial amounts of olive and sansa oil are exported (over £L 1.3 million in 1957), but when the crop is bad, exports decline sharply (e.g., only £L 61,000 in 1956 and £L 261,000 in 1954). On average during the last few years exports have accounted for just under one-fifth of tetal pro- duction. The trees generally start to produce olives about ten years after planting, but they take something like thirty years to attain full pro- duction. One of the most serious problems in olive culture is the olive fly, which causes heavy losses in Libya where control measures are seldom applied. In view of the important role of olive cultivation in the Libyan economy the mission recommends that government research and extension services should give high priority in their programs to the adoption of improved methods of cultivation and harvesting, for which there is considerable scope, and to the control of the olive fly. At the same time new planting should be encouraged on dry land in Tripolitania and Cyrenaica where the average annual rainfall is be- tween 200 mm. and 300 mm., seedlings being provided by government at nominal charge and credit extended in appropriate cases for the planting of new orchards, particularly in connection with the develop- ment of the Barce Plain and the Gebel Akhdar. Olives respond well to irrigation, but in Libyan conditions other crops such as winter vege- tables may give a better return on newly irrigated land-a matter which calls for closer study on research stations in Libya. The mission suggests the planting of 30,000 new olive trees a year for the next five years as a tentative goal for Tripolitania, and 10,000 trees a year for Cyrenaica. Larger plantings would be justified in Cyrenaica if good progress is made in extending individual land rights. The Nazirate of Agriculture in Cyrenaica has a program costing about £L 5,000 a year for rehabilitation of wild olives, so that these can be picked by nomads and provide them with additional cash income. The effort will be largely wasted unless steps are also taken to maintain the AGRICULTURE, LIVESTOCK AND FORESTRY 153 rehabilitated trees. It will be difficult to make satisfactory arrangements for this in the absence of a proper system of individual ownership and tenure. The mission recommends therefore that the project should be abandoned, except to the extent that the trees are established as be- longing to particular tribes or individual farmers, who assume responsi- bility for maintaining them. Tobacco. Cultivation of tobacco in Libya is supervised by the State Tobacco Monopoly in Tripolitania, which issues licenses to growers, fixes prices and is obliged to buy the entire crop of all grades, regardless of requirements. This system has resulted in overproduction of poor quality tobacco, and large stocks now held by the Monopoly, amount- ing in the case of the Perustitza type to ten years' supply. The crop is naturally popular with farmers because of the assured market and the good prices paid, and this has resulted in the overissue of licenses in Tripolitania. (Soil conditions in Cyrenaica are not generally suitable for tobacco cultivation, and no licenses have been issued there.) While the average quality of the tobacco grown has improved in recent years, much of it is still inferior, and about 20 percent of the tobacco used for the manufacture of cigarettes is now imported, particularly Oriental Turkish, flue-cured Indian and Italian Kentucky types. Small quanti- ties of Libyan tobacco have been exported in recent years to Algeria. The mission believes that perpetuation of the existing monopoly system, as applied to cultivation, would be contrary to sound principles of economics in that it encourages wasteful overproduction at the gov- ernment's expense and results in the misuse of good land. Nor does there appear to be any justification for subsidizing a small privileged minority of tobacco growers at the expense of the rest of the com- munity. We therefore recommend that: 1. Present subsidies on all types of tobacco should be reduced in stages, and should be granted only on leaf that meets reasonable quality standards. 2. A date should be announced two or three years ahead for the termination of the present licensing system, and with it of the Monopoly's obligation to buy all tobacco offered. No new areas should be licensed for tobacco cultivation in the meantime, and the areas licensed for production of the Perustitza type should be gradually reduced. 3. The Monopoly should continue its work of educating farmers in methods of improving cultivation and should explore possi- bilities of increasing exports, though these appear to be very doubtful. 154 THE MAIN REPORT Sugar Beets. Sugar beets have attracted much attention in Tripoli- tania as a possible base for a local sugar industry, and they have been grown for several years under irrigation as an experimental crop. The results of these experiments have not, in the mission's view, been very encouraging (see Annex IX), and on the basis of available information we would advise against trying to develop a sugar beet industry in Libya at this stage. This conclusion is founded on the following con- siderations: 1. Agronomic experiments on sugar beets in Libya to date indicate that the yields of roots and sugar per hectare would often be too low for economic production, especially when grown by small farmers. This is partly because the sandy soils in the coastal belt are unsuited to beet cultivation and partly because of the presence of nematodes (worms). It should be noted in this con- text that the yields to be expected from ordinary cultivation would be much below those achieved on experimental plots. 2. A minimum of about 4,000 hectares of sugar beets per year, in a rather compact block, is desirable to support a factory capable of producing about 10,000 tons of refined sugar a year (as com- pared with imports of nearly 18,000 tons in 1958). Since the presence of nematodes precludes sugar beets from being grown on the same field for more than one year in four, a block of about 16,000 hectares would be necessary. It would be difficult to find so large an area in Libya with suitable soils and water supplies. (The whole of the irrigated area in Tripolitania is esti- mated at around 100,000 hectares.) 3. A sugar factory with a capacity of approximately 10,000 tons of refined sugar would cost an estimated £L 2 to 2I2 million to construct and equip. Sugar manufacture from beets involves highly technical and precise processes, and it would be necessary to employ foreign engineers, chemists and mechanics for many years to operate such a factory. Since it would operate only three or four months a year, labor costs would be high. 4. Sugar can be imported into Libya much cheaper than it can be produced in the country through a local sugar industry. The cost of imported sugar in April 1959 was £L 3712 per ton. Against this the mission reckons that the cost of producing sugar in Libya would be at least £L 60-65 per ton and possibly more. Replacement of imports by local production would either mean foregoing the revenue at present obtained by the federal and AGRICULTURE, LIVESTOCK AND FORESTRY 155 provincial governments from sugar trading (about £L 1 million in 1958/59) or substantially raising the price to the consumer. If the Government of Libya is still interested in the prospects for a beet sugar industry, in spite of the facts listed above, the mission suggests: (a) that experimental work on sugar beets be continued, with special emphasis on varieties, cultural methods, water requirements, fertilizers, diseases, insect pests and costs of production; (b) that more demonstration plots of sugar beets be grown by Libyan farmers; and (c) that the government obtain a consultant to advise on the production and economic aspects of sugar beets, as well as on factory requirements and costs. It is important that the consultant chosen should be inde- pendent, and not in any way connected with the business of selling machinery for a sugar beet factory. Cotton. Proposals have been put forward in Libya for the commer- cial cultivation of cotton in the Fezzan. While the mission has not studied the problem in great detail, its preliminary conclusions are that such cultivation would not be anywhere near an economic proposition. The present market for raw cotton in Libya is a very small one, im- ports amounting in 1958 to only 56 tons; and although we see scope for the expansion of cloth manufacture in Libya through the develop- ment of the power loom industry (see Annex XIII), this will inevitably be a slow process. Even when the Fezzan road is completed, costs of transport from the Fezzan to the coast will be high (probably at least £L 8 per ton), and this alone would appear to rule out the possibility of Fezzanese cotton competing in export markets, especially at a time when neighboring countries are finding it difficult to dispose of their crops. According to rough calculations made by the mission, there might be enough water available in the Shatti Valley (apparently the most promising area for cultivation) for annual production of about 1,000 tons of cotton. But cotton is a labor-intensive crop, and a growing shortage of agricultural labor is one of the characteristics of the Fezzan economy. Indeed, some of the cotton grown there experimentally has not been picked for lack of labor. If there is considered to be scope for growing cotton for consumption in the Fezzan in conjunction with the development of the skills required to establish small spinning and weaving units to meet local requirements, experiments in cotton cul- tivation might be continued. Otherwise we suggest they should be abandoned. Forage Crops. Supplementary forage crops to feed livestock during periods of drought, and to relieve the pressure of overgrazing on 156 THE MAIN REPORT marginal lands, have so far received far too little attention from Libyan farmers. Alfalfa produces high fodder yields per hectare under irrigated conditions in Tripolitania and the Fezzan, while experiments in Cyrenaica indicate that oats or barley, harvested before maturity, are the most suitable feed crops for livestock in that province. Mixtures of fall-sown oats and vetch or field peas show promise as dry-land forage crops in the Barce Plain, and Sudan grass planted in March appears to have possibilities as a summer forage crop. The mission recommends therefore that supplementary forage production should be included in plans for the development of the small-scale farming sector, particu- larly in Cyrenaica, and that the Nazirate of Agriculture in Cyrenaica should conduct a pilot scheme to demonstrate methods of forage pro- duction to farmers on the lines already suggested by the FAO. Other Crops. As already indicated, the mission sees a promising future in Libya for the cultivation of groundnuts, castor seed, almonds and winter vegetables such as new potatoes, carrots and asparagus for export. A few minor recommendations with regard to the production and marketing of these and other crops are set out in Annex IX. Ex- port prospects for citrus fruit and other deciduous fruits are more un- certain, but every effort should be made to develop sales of fruit to the foreign community and the oil companies in Libya. The possibilities of producing high-grade canned fruit juices and canned fruits and vege- tables should also be vigorously explored by the agricultural depart- ments in conjunction with private industry (see Annex XIII). The cold storage facilities planned for Tripoli and Benghazi should help in the marketing of perishable commodities. Search should meanwhile be continued for new crops, and every encouragement should be given to private firms, local or foreign, who may be interested in acquiring land in Libya for commercial farming. Judgments on the prospects for particular crops are notoriously fallible, particularly where, as in Libya, there is such a short and disconnected history of research and experimentation. But the success achieved within a few years in the cultivation of groundnuts is a hopeful augury for the discovery of other crops that can be profitably grown in Libya. Regional Aspects Gebel Akhdar Development Project. The mission recommends that first priority in the program for developing small-scale farming in Libya should be given to the former Italian farm settlements in Cyrenaica, AGRICULTURE, LIVESTOCK AND FORESTRY 157 and that a special Agricultural Development Board should be created to undertake this task. It might be called the Gebel Akhdar Develop- ment Board and should be set up as an autonomous public authority with its own funds. Its chairman should be a Cyrenaican with experi- ence of farming problems in the province, and the other members (not more than four) should be selected from persons qualified in such fields as farm management, land settlement, agronomy, farm machinery operations and agricultural economics. At least one of the members should be an engineer. On broad policy matters the board would be guided by an advisory committee under the chairmanship of the Nazir of Agriculture for Cyrenaica and including representatives of the Ministry of Agriculture, the Ministry of Finance and Economics, tribal leaders, local farmers and cooperatives. The mission's reasons for singling out the development of the Italian farms in Cyrenaica as a special project are threefold. First, this is a fairly compact area with good soil and better than average rainfall, which is at present seriously underutilized. Second, the small farmers in Cyrenaica are amongst the poorest and most backward sections of the Libyan population, and very little has so far been done to help them to improve their position. Third, considerable sums have already been invested by the Italians in clearing the fields, marking out farms, building houses and cisterns and providing access roads, and this in- vestment is being allowed to go largely to waste. Many of the buildings and cisterns have fallen into disrepair and much of the land is over- grown with weeds or overrun with livestock. But a good part of the initial investment can still be salvaged and used as a basis for a new scheme of settlement and development. Additional investment in these farms is likely therefore, in the mission's view, to be more rapidly productive than investment in small-scale farming in other parts of Libya. The mission's reasons for suggesting the creation of a special De- velopment Board to handle the project are that an operation of this kind is unlikely to be carried out efficiently and energetically by an ordinary department of government, which is subject to direct political control and bound by civil service rules in matters of procedure, au- thorization of expenditure, wage and salary scales and so forth. An independent body, provided that the right people are chosen to run it, seems to us a better instrument for planning and executing what is in many ways a business venture. The board should set up its headquarters at Barce, where it will be able to maintain close liaison with the research station at Zorda, the 158 THE MAIN REPORT livestock center at Marzotti and the agricultural school at el Aweila. It should take over, extend and operate the farm machinery unit which has been established with UN assistance at Barce, and tractor services should be provided for farmers against payment of a fee. Those farmers in the area who are already being helped by the machinery unit should continue to receive the same service as at present. The board should cooperate with the Nazirate of Agriculture in building up extension services in the area and promoting farmers' credit and marketing co- operatives; and it should cooperate with the Water Resources Branch of the provincial government in planning the development of water resources. Initially the board itself should assume responsibility for the rehabilitation of farm buildings, the cost of which should be recovered from the tenants over a period of years. Credit should be extended to the farmers through the Agricultural Credit Department of the Na- tional Bank, which should open an office in the area, and the Develop- ment Board should act as a central supply agency for seeds, fruit trees, tools and other equipment. The board should instruct farmers in cropping patterns and methods of cultivation and should assist them in selling their produce by arranging the necessary facilities for storage and transport and by distributing market information. Between one and two years will be required to set up the necessary organization and to plan the project in detail. We recommend there- fore that the Cyrenaican Government, with the support and guidance of the federal government, the Development Council and the UN and U. S. technical assistance missions, should start the preparatory work without delay. Some suggestions as to how the project might be or- ganized are set out in Annex XI. Resettlement and rehabilitation of the 1,772 Ente farms in Cyrenaica should be undertaken in stages and might be spread over five years, starting with 225 farms in the first year of the scheme (say 1962/63) and increasing to about 470 farms in the fifth year (1966/67). In selecting farmers for assistance under the scheme preference should be given in the first instance to those who are al- ready in occupation and have demonstrated a capacity for settled agriculture. These farmers should be given the opportunity eventually to acquire full possession of the land, subject to satisfactory perform- ance and subject to the fulfillment of their obligation to reimburse the board for the costs of rehabilitating the properties by means of annual payments spread over a reasonable period of years. The mission, on the basis of some very tentative calculations, has estimated the average cost of repairing farm buildings at £L 300 per farm and the credits required for planting trees and providing initial AGRICULTURE, LIVESTOCK AND FORESTRY 159 working capital at about £L 320 per farm. For purposes of this calcula- tion it has been assumed that the farms would average 25 hectares in extent, and that wheat, barley, grass and legumes would be the prin- cipal annual crops in the Barce Plain, supplemented by linseed, olives, almonds and other fruit trees. Perhaps one-quarter of each farm might be kept permanently under pasture. In the Gebel fewer cereals would be grown and more fruit, including pears, early varieties of apples and table grapes. Vines might be cultivated on a larger scale for making wine if overseas markets can be developed. Vegetables can be grown in the Gebel Akhdar-and in years when flood conditions prevail in the Barce Plain as well. Total public investment in the project over the five years 1962/63 -1966/67 would work out on these figures at around fL 1,100,000. On the assumption that roughly half the farms are resettled during the first three years, investment in the period covered by the mission's pro- gram (1960/61-1964/65) would amount to £L 550,000, of which about £L 265,000 would have to be provided by the Development Board and £L 285,000 by the Agricultural Credit Department. In addition to the £L 265,000 required by the Board for the rehabilitation of farm buildings, it would need capital to establish its own offices, workshops and stores, to acquire more farm machinery and to purchase vehicles and other equipment. In all, we estimate its capital requirements over the five-year period at around £L 500,000 and its annual recurrent ex- penses at £L 35,000. Small-Scale Farming in Tripolitania. Tripolitania has many ad- vantages over the other two provinces in Libya from the point of view of agricultural production. It has a bigger and better organized local market, particularly in Tripoli itself; it has simpler internal transport problems and better facilities for export; and its supplies of ground water are more easily accessible than in most parts of Cyrenaica. A sizable sector in Tripolitanian agriculture has already been devel- oped on more advanced lines by the Italian community, and a number of Libyans have also succeeded in establishing quite large and pros- perous farms. The condition of the majority of Libyan farmers in Tripolitania is nonetheless rather depressed, and they need full support from gov- ernment along the lines suggested earlier in this chapter-through better credit and marketing facilities, training and extension services and so forth. The only land resettlement which we suggest should be undertaken by the Tripolitanian Government during the next five years is the movement of 200 families from the Gebel to the Gefara as 160 THE MAIN REPORT part of the first stage of our scheme for flood prevention in the Wadi Megenin (see Chapter 7). In addition, we have recommended that preparatory surveys should be carried out by the government in the Bir Ghnem area and at the Taorga oasis with a view to the possible development of settled agriculture at a later stage (see Chapter 7). Most of the Ente farms abandoned by Italians in Tripolitania are at present occupied by Libyan farmers; some are deserted. The Nazirate of Agriculture, in consultation with the agricultural credit agency, should give particular attention to providing farmers with the means to develop these properties, in which money has already been invested. One of the main obstacles to effective action in this matter apparently lies in the continued uncertainties surrounding ownership of the land in question. It has not even been clearly established whether it belongs in law to the federal or to the provincial government, and so long as this issue remains unresolved, no individual ownership or tenancy rights are being granted. A decision on the legal issues involved is long overdue, and the mission urges that both governments should collab- orate in gettinig the present conflict of claims settled as quickly as possible. The Desert Oases. The mission's proposals for the development of agriculture in the Fezzan were summarized in Chapter 1 (pages 19-21), and some of them have been elaborated in the present chapter with reference to particular crops. These proposals apply also to the out- lying oases in Tripolitania and Cyrenaica. Stress has been laid in Chap- ter 7 on the importance of constructing more public wells in the desert oases so as to provide the small cultivator with access to water for irriga- tion and thereby reduce his dependence on the large proprietors of water and land. The oases should clearly be able to meet their own requirements of cereals, fodder and livestock products. There appears to be something basically unsound from an economic point of view in substantial quantities of flour being imported over huge distances to remote centers of population which are adequately supplied both with water and soils suitable for cereal cultivation, and where small cultivators have difficulty in earning a living. The sight of an abandoned flour mill in one of the Fezzan oases, full of rusting equipment, served the mission as a further reminder of the strange distortions in patterns of production and trade which have occurred in Libya in recent years. Conditions in a number of the oases are well suited to the cultiva- tion of vegetables and oilseeds. It may even be economic to grow certain kinds of early vegetables for export-onions and carrots, for example. AGRICULTURE, LIVESTOCK AND FORESTRY 161 Production of tomatoes in Jalo could be increased if demand is ade- quate, and the mission has suggested in Chapter 9 the possibility of establishing an additional tomato paste factory in Cyrenaica. TECHNICAL SUPPORT FOR AGRICULTURE Experimentation and Research Considerable sums are being spent in Libya on agricultural experi- mentation and research (see Statistical Appendix, Table S.4), and valu- able results have been achieved, particularly at the principal stations at Zorda in Cyrenaica and Sidi Mesri in Tripolitania where the pro- grams have been in charge of FAO experts acting as advisers to the provincial governments. The highlights have been the research work on cereals and a seed multiplication program through which improved varieties of wheat and barley have been distributed to farmers; studies of cultural practices for various crops, including the use of commercial fertilizers; the first-class animal breeding work under way at the Marzotti livestock center in Cyrenaica; and investigations into crop diseases and pests, with particular reference to olives and groundnuts. Notwithstanding these achievements, it is the mission's feeling that more could have been achieved for the money that has been spent. Too many experimental stations have been established, and there has been too little coordination between them. Many of the stations officially classified as experimental stations do not maintain recorded data on their work. There is a certain laxness in making findings freely avail- able to government agencies, and in getting information down to the farmer through the extension services. Moreover, research has not been related closely enough to existing social and economic conditions, and too little attention has been given to the most important problem of establishing the sizes of holdings and the cropping patterns best adapted in present circumstances to the limitations of the small farner. Other critical areas of research which have tended to be neglected in- clude tillage practices, irrigation methods and costs and the compara- tive benefits to be obtained from irrigation of different crops. The mission recommends the appointment in the proposed federal Ministry of Agriculture of a Director of Agricultural Research with broad responsibilities for the coordination of research work in the three provinces. One of his first tasks should be to make a survey of all agricultural experimental stations and farms, nurseries and labora- 162 THE MAIN REPORT tories to assess their effectiveness in solving Libya's practical problems in agriculture, animal husbandry and forestry. The survey should give special consideration to the enlargement, consolidation, relocation or abandonment of specific establishments in the interests of efficient work. Occasionally, a new station may be found necessary for studies under special conditions. The objective should be to reduce the num- ber of stations to 10 or 12 well-located establishments. The survey should include an assessment of the needs for personnel, equipment, buildings and other facilities to carry out essential research projects. Special consideration should be given to the employment of college- trained Libyans, when they become available, for assignment to each foreign agricultural research specialist as a counterpart. Each experimental station should be required to prepare an annual progress report of all experimental work done during the year. It should include pertinent summary data, together with conclusions drawn from the experiments to date. This information should be pub- lished and generally distributed both in Libya and in neighboring countries. Research workers in Libya should take full advantage of ex- perimental results obtained in nearby countries in North Africa and the Near East in order to avoid unnecessary duplication of effort. The mission considers it particularly important that the results of past Italian research work for Libya should be systematically assembled in a central reference library; where necessary copies should be made available in translation. Future agricultural research work in Tripolitania should be di- rected particularly towards crop rotations, water requirements of crops and their response to irrigation, plant protection (especially olives and citrus fruits) and agronomic work on wheat, barley, forage crops, groundnuts, potatoes and castor beans. An improvement in the quality of vegetables is most important, attention being given to the discovery of better varieties as well as to the control of diseases and insect pests. Forestry research should include experiments on simpler methods of dune fixation than those at present employed. Grazing experiments should feature prominently in the program of livestock research. Ex- perimental work that should be stressed in Cyrenaica includes methods of cultivating cereals, forage crops, vegetables and vines, range vegeta- tion, plant protection and livestock improvement. In the Fezzan the mission recommends the establishment of a single experimental station to conduct all field experiments. The present demonstration farm at Traghen might be used for this purpose, with the farm at Brak retained as a sub-station. None of the other experi- mental stations or demonstration farms appear to serve any useful AGRICULTURE, LIVESTOCK AND FORESTRY 163 purpose. The research program should place special emphasis on im- proving cultural practices for dates and conducting experiments on pro- posed new crops such as cotton, linseed and castor beans to determine their suitability for conditions in the Fezzan. Work should also be done on irrigation practices and reclamation of alkaline land. The level of public expenditure on research in recent years (about EL 125,000 in 1957/58, exclusive of personnel and equipment pro- vided by FAO) is equivalent to about one percent of Libya's net agri- cultural output and appears to be reasonably adequate in the circum- stances, given the shortage of trained personnel and the fairly extensive research work carried out under the Italian administration. Once again, however, the mission would like to stress the importance of making full use of the results obtained from relevant research work carried out previously in Libya or in other countries; of establishing better com- munications between the various research institutions themselves and between these institutions and the farmer; and of relating research work more closely to the practical use that can be made of it in present circumstances in Libya. In this latter connection the mission suggests that investigations should be carried out on three or four small-holdings in an attempt to establish what size and layout of farm, cropping patterns and farm management procedures are best adapted to the needs of the typical family unit in present-day Libyan conditions. Three or four small- holdings might be selected, including at least one in the Barce Plain, and a family unit would be settled on each and equipped with the manual implements and work animals that the average small farmer might be expected to have. The families would be paid regular wages, with any profits or losses on operations being borne by government (subject to the payment of bonuses to the workers for good results). Cropping patterns would be laid down for the first year and changed from year to year to compare results obtained from different combina- tions of crops. Continuous study would be made of the labor require- ments of each crop and the returns obtained. The experiments should continue over a period of five to ten years and should be extended to include the operation of tractor-drawn machinery. The conduct of such research would require neither elaborate equipment nor highly specialized personnel. It could best be under- taken centrally under the supervision of the Ministry of Agriculture, working in close cooperation with the provincial Nazirates and with the Agricultural Development Board in Cyrenaica. One agricultural econ- omist and two or three agricultural technicians should be sufficient to carry out the field work, and the accounting could be done by the ordi- 164 THE MAIN REPORT nary departmental staff. Heavy outlays on a large number of specialized personnel and numerous different types of farms should be avoided. The research should help to throw light on problems of marketing, but this would not be the primary objective of the program. It should be possible to obtain significant results in three to four years, but the program should be set up on a longer-term basis. Land Classification There is urgent need for the systematic classification of agricultural land in Libya. The mission understands that such a classification has already been carried out for Tripolitania by USOM, and it is hoped that the results will be published shortly. A similar study in Cyrenaica would be of great value as a guide to agricultural development in the province. As the next step, a general soil survey should be made of all agri- cultural land in Libya, using existing soil maps where these are avail- able. The purpose of the survey should be to locate areas for possible new development and to serve as a guide for changes in patterns of land use in areas that are already cultivated-for example, a change from dry farming to irrigated agriculture. The survey should be super- vised by the Director of Research in the new Ministry of Agriculture and might be carried out on a contract basis by a commercial firm. The soil analyses could be made at the chemical laboratory at Sidi Mesri. A detailed report should be published on conclusion of the survey, to- gether with a general soil map. We estimate that the work might take three years to complete and cost about £L 25,000. Soil Conservation One of the main responsibilities of government in the field of agri- cultural development is to take proper measures for soil conservation. Soil erosion by wind and water is a major problem in Libya. It has been accelerated by widespread destruction of the vegetative cover by mis- management of range lands, by the use of inappropriate techniques and tools in cultivation and by the lack of adequate windbreaks. The tractor-drawn, one-way disc plows and moldboard plows widely used on sandy soils in Tripolitania leave the land pulverized and exposed to wind action. Clean cultivation by such implements operated down slopes has already led to the formation of sand dunes in many orchards, particularly between Cussabat and Tarhuna, and south of Castel Benito. Unless drastic measures are taken, much of this land will re- AGRICULTURE, LIVESTOCK AND FORESTRY 165 turn to sand dunes, possibly within five to ten years. A similar threat exists in the Fezzan where sand has started to drift on to abandoned farms for lack of adequate windbreaks. Direct action by government to deal with this problem falls mainly under such headings as flood control, forestry and dune fixation, which are considered separately in another section of this report. But much also needs to be done to educate the farmer in the use of proper tillage methods and to encourage contouring and planting windbreaks, par- ticularly on the Italian farms in Tripolitania. Tillage on dryland farms, especially on sandy soils, should be prac- ticed with implements that leave the crop residues on the soil surface (e.g., the blade or duckfoot type of plows that operate at a shallow depth). Crops like barley may be planted on alternate strips (rotating with fallow) between trees in olive or almond orchards to provide some vegetative cover for the land; this may reduce fruit yields, but the ad- ditional grain crop should largely compensate for the reduction. New orchards should be planted on the contour in order to reduce possible water erosion. Broad-base contour terraces might be considered on large farms. Finally, trees such as acacia horrida should be planted as wind- breaks along the boundaries of orchards, about one meter apart, and tamarisks might be planted through orchards after every five to ten rows of olive trees in order to reduce the wind sweep. Where farmers are ready to undertake planting, the trees should be provided by the Forestry Department free of charge. Plant Protection The need for plant protection has been recognized by governmental agencies in recent years, and damage caused by insects and diseases is being tackled with the help of the FAO and the LAJS. Plant protec- tion is one of the most important agricultural tasks in Libya because plant diseases and insect pests cause heavy losses in crop yields, reduce the quality of crops and jeopardize export markets. The ravages of the olive fly and the Mediterranean fruit fly are particularly devastating. In 1959 the federal government passed a phytosanitary law providing for the inspection of cultivated land and plants and for the necessary steps to be taken to prevent or control diseases and pests. The new law is an important forward step. As further measures for plant protection, the mission offers the following suggestions: 1. Farmers and cooperatives should be provided with credit for the purchase of motor sprayers, atomizers or wheelbarrow sprayers. 166 THE MAIN REPORT An estimate given to the mission indicates a need for at least 60 additional motor sprayers for citrus trees, 140 more atomizers for olive trees and a large number of wheelbarrow sprayers for vege- table crops. 2. The current extension program in Tripolitania to demonstrate to farmers the use of chemicals for the control of plant diseases and insect pests is an important means for training farmers in the techniques involved and should be continued. A similar program should be initiated elsewhere in Libya. Farmers should pay for the chemicals used on their farms. 3. Plant protection cooperatives should be formed wherever feasi- ble. Farm Supplies Farmers in Libya generally obtain their supplies of machinery, implements, fertilizers, seeds and so forth through the normal chan- nels of private trade. Most of these goods are imported. In Tripolitania the Consorzio Agrario plays an important role in the acquisition and distribution of supplies, and some of the newly formed cooperatives in Tripolitania and Cyrenaica have been serving effectively as channels of distribution for improved seeds, motor pumps, small tools, fertilizers, insecticides and spare parts for farm machinery. Plants and seeds are provided on a limited scale by the research stations and experimental farms for distribution to farmers through the extension services and in other ways. It should be the function of the government agricultural services to educate the farmer in the use of improved implements, seeds and fertilizers and to ensure that supplies of these things can readily be obtained on demand. This is mainly a question of providing adequate credit facilities and of encouraging the formation of farmers' coopera- tives. Sometimes a government department or agency will need to take a direct hand in procurement and distribution, as we have suggested that the proposed Agricultural Development Board in Cyrenaica should do. Among improved hand tools or animal-drawn implements that the small farmer might be encouraged to use are the new breaker- ridged plow (Feist type), small cultivators and seed drills, and small threshers such as the Japanese treadle thresher. The hand sickle, scythe and cradle should be considered for the harvesting of wheat, barley and perhaps other crops. AGRICULTURE, LIVESTOCK AND FORESTRY 167 Mechanization Large tractor-drawn farm implements have become increasingly popular in Libya in recent years. An estimated 100,000 hectares of farm land are now mechanically cultivated, and there are over 1,000 farm tractors in the country, of which about 100 are owned and operated by the three provincial governments. Power-driven machinery is well suited for wheat and barley cultivation on heavy soils, and the Cyre- naican Government has subsidized the use of tractors in the Barce Plain as part of a project organized with the help of FAO. One of the main obstacles to farm mechanization has been shortage of Libyan per- sonnel to operate and maintain the equipment, and wages paid by the provincial governments are too low to retain competent men in the work. The mission believes that mechanization has an important role to play in the development of Libyan agriculture, and that while this is mainly a matter for private enterprise on the larger farms, the existing government farm machinery projects should be continued for the time being, tractor services being provided to small farmers on payment. As already suggested, the project in Cyrenaica should be taken over by the new Development Board, and particular attention should be given to proper maintenance of the equipment and to the training of drivers and mechanics. Higher wages should be offered to those who qualify in these trades, and they should be assured of regular employment. Even- tually, the aim should be to hand over all heavy machinery operations to private contractors and farmers or to farmers' cooperatives organized for this purpose. LIVESTOCK Problems of Management The raising of livestock is the most important rural occupation in Cyrenaica, as well as in the Gefara and parts of the Gebel in Tripoli- tania. In terms of output, annual sales of livestock and livestock prod- ucts in Cyrenaica are probably worth more than sales of all other agricultural commodities combined. In Tripolitania, on the other hand, sales of agricultural commodities proper may be about three times as large as sales of livestock and livestock products. In total, there are rather more livestock in Cyrenaica than in Tripolitania. Sheep and 168 THE MAIN REPORT goats predominate in both provinces. Camels, cattle, donkeys and horses are also important. Some rough estimates of output, and of livestock numbers, will be found in Annex I. Most livestock in Libya are owned by nomadic or semi-nomadic tribesmen and are reared on communal grazing lands. Some wealthy townspeople also own large herds and hire nomads to graze them on tribal land. The range lands are mostly seriously mismanaged so that palatable perennial grasses have almost disappeared, and very little grazing feed is available between June and October. In some areas the numbers of animals may be as much as 50 percent larger than the grazing lands can support even in good years under present manage- ment conditions. Herds are relatively free from serious diseases, but they suffer badly from parasites and are extremely vulnerable to varia- tions in rainfall. Losses in drought years have been estimated at be- tween 30 percent and 60 percent of total numbers. There is a general lack of supplementary fodder crops or concentrated feeds, and mainly to meet an emergency created in Cyrenaica by lack of rainfall in the winter of 1958/59 some 40,000 tons of feed grains were given to Libya during 1959 by the United States. The raising of livestock is an integral part of the nomadic way of life, and there are many deeply-rooted customs and attitudes associated with it which are very difficult to change. The pastoralist regards his herds not merely as a source of income, but as a store of wealth and a mark of social prestige. Traditionally, it is usually the numbers of ani- mals a family has, and not their quality, that counts. As a result, herds increase far beyond the capacity of the land to support them in good condition, mortality rates are very high, and the commercial value of the animals brought to market is lowered. There is a danger in these circumstances that measures to provide the herdsmen with easier access to supplies of fodder and water will simply result in the multiplication of numbers without making any contribution to economic output. In the mission's view, measures to encourage the development of settled agriculture in Libya will do more to reduce livestock numbers and raise the quality of the animals that remain than will any educa- tional campaigns or range management schemes. There should be some place nevertheless in a Libyan development program for further modest experiments designed to secure better grazing practices. A number of small demonstration schemes are already being carried out by the LAJS, and a sum of just over £L 15,000 was allocated for this purpose out of U.S. aid for the Libyan fiscal year 1959/60. The mission recom- mends that these schemes should be continued. Libya's natural pastures are an important economic asset, and eco- AGRICULTURE, LIVESTOCK AND FORESTRY 169 logical studies should be undertaken to provide the basic information required for a pasture improvement program. Teams of ecologists have been working in Morocco, Algeria and Tunisia, and similar work is in progress in Portugal and Turkey, with the object of obtaining essential data for determining the location and boundaries of pasture areas, their carrying capacity and the most suitable time and duration for stocking. A similar approach should be followed in Libya, and tech- nical assistance should be sought from abroad for carrying out a study on these lines. When the study has been completed, the government will be in a better position to plan a long-range campaign for the gradual control of grazing. Meanwhile, the economic and social changes already in progress should tend of their own accord to create a more favorable environment for such a campaign. Measures to improve supplies of forage should be associated with, and used to encourage, the conversion of nomads to settled farming and the adoption of better range management practices. The former Italian farms in Cyrenaica are mostly large enough to permit the graz- ing of small numbers of livestock in addition to the cultivation of crops, and the proposed Agricultural Development Board, with the assistance of the livestock experts, should take all possible steps to inculcate in the settlers a more commercial approach to livestock breeding. A campaign should be instituted to banish the goat from the settled farming areas and to concentrate resources on the raising of improved breeds of sheep. The scope for growing more fodder crops in Libya has been out- lined on page 156 above. The mission has also proposed that study should be given to the possibilties of making greater use of dates as a concentrated feed for livestock. If the results of such study are encour- aging, a further study should be undertaken of the feasibility of storing at least 25,000 tons of dates at various points in Libya for use as an emergency feed reserve. Estimates should be made of the costs of buying the dates, transporting the dates to the storage points and keeping them in store. Both studies should be made jointly by the staff of the Marzotti livestock center and the FAO horticultural expert. Livestock Improvement Livestock improvement is under way at the Marzotti livestock cen- ter on the Barce Plain in Cyrenaica and at Garabulli in Tripolitania. Attempts are being made to improve the local fat-tail Barbary sheep through selection in order to improve the quality of the fleece. Cross- breeding has been tried between this and the Karaman breed imported 170 THE MAIN REPORT from Turkey. An improved sire program for cattle and horses is also being conducted at the Marzotti center. The mission was impressed by what it saw of this work and recommends that it be continued. There is urgent need in Libya for the enactment of a veterinary law to provide for (a) the prevention, control and eradication of ani- mal diseases; (b) quarantine for imported animals to guard against the introduction of new diseases and parasites; (c) a proper system of meat inspection; (d) mobile veterinary units dealing with external and internal parasites; and (e) vaccination campaigns. Action along these lines is an essential prerequisite to developing an export trade in meat. Processing and Marketing The export of live animals to Egypt has traditionally been one of the principal means of livelihood for the Bedouin in Cyrenaica. Before the outbreak of the Italo-Sanusi war in 1923 this trade used to be con- siderably larger than it is now, and Cyrenaica also supplied Egypt with considerable quantities of clarified butter.6 The value of the trade in 1958 (a fairly good year) was £L 636,000. Sheep, camels and cattle are the principal animals traded. The continuance of this trade, and of the smaller export of live animals by sea to other Mediterranean countries, is clearly of great importance to the Cyrenaican economy. Government might help by establishing fodder stations on the Libyan side of the Egyptian border to enable animals to be fattened up before they are sold. At the same time more attention should be given to providing for the growing meat requirements of the foreign community in Libya, and to the possibili- ties of exporting meat. The institution of proper veterinary inspection and improvements in the quantity and quality of the meat produced are the essential first steps. Both will take time to bring about. But if these matters can be taken care of, there should be good prospects of developing sales of mutton and beef to countries in Southern Europe. The proposed cold storage plant in Benghazi could then make its full contribution to the growth of the Cyrenaican economy. Further com- ments on the cold storage project and on meat marketing will be found in Annex XIII. Poultry farming should be encouraged in Libya with a view par- ticularly to meeting the increased demands for eggs and poultry that will result from the expansion of oil operations. The experience of the Americans at Wheelus Air Base in buying Libyan eggs has not been encouraging. A special effort was made to help the local pro- 6 E. E. Evans-Pritchard, op. cit., page 37. AGRICULTURE, LIVESTOCK AND FORESTRY 171 ducer, and eggs to the value of about £L 40,000 were purchased by the base in 1958. Generally, however, the quality was poor and packaging was defective, while the price paid was nearly 40 percent higher than the price of Danish eggs delivered to Italy. Efforts should be made to interest private firms in establishing poultry farms in Libya. As an example of what can be done to develop efficient poultry farning under difficult conditions, the mission suggests that the agricultural authorities in Libya might study the results achieved in Jordan at the Arab Development Society near Jericho. This is essentially a matter for private enterprise, but government could assist in various ways, includ- ing the provision of credit. Considerable quantities of milk and milk products are consumed by those engaged in raising livestock in Libya. Most of this milk comes from sheep, goats and camels. Cows produce some milk, particularly on the Italian farms in Tripolitania, but most of the urban demand is met out of imports of processed milk (LL 156,000 in 1958) and milk products (LL 180,000 in 1958). A pilot dairy project has been started by the Nazirate of Agriculture in Benghazi to test the feasibility of producing economically for the local market, and the mission recom- mends that this project should be continued for another two years, with particular attention to costs. Possibilities of eventually developing a local dairy industry will depend on assurances of adequate fodder, enclosed pastures and concentrated feedingstuffs for dairy cows. Safe- guards will be needed to ensure that the milk is produced under sanitary conditions. The other principal livestock products in Libya are wool, hides and skins. Comments on the processing and marketing of hides and skins are included in Annex XIII. Improvements in the quality of wool production should be accorded a high priority in the work of the agri- cultural research and extension services, and demand for wool should be stimulated by the development of Libyan handicrafts and weaving on the lines suggested in the industrial sections of this report. FORESTRY Objectives and Priorities Forestry presents great potential scope for fruitful long-term invest- ment in Libya, and at a time when the opportunities for more immedi- ately productive investment are limited by shortages of skills, afforesta- tion should be accorded an important place in any program of eco- 172 THE MAIN REPORT nomic development. The erosion of the land by wind and water poses a serious threat to agriculture in many parts of the Mediterranean area, and in no country is this threat more real than in Libya, where fierce desert winds blow frequently from the Sahara and sand dunes are steadily encroaching on farming land in the coastal provinces. The planting of more trees is essential for the conservation of soil resources, for the retention of water in the soil and in some cases for the control of flooding (notably in the Wadi Megenin-see Chapter 7). It is also needed to provide Libya with domestic supplies of timber. At present practically all the wood used in the building industry, furniture man- ufacture and other trades has to be obtained from abroad, imports in 1958 amounting to nearly £L 450,000 (including plywood and other semi-manufactures, but excluding furniture). Libya is at present very poorly provided with forests, to some extent because of its unfavorable climate, but primarily because of the destruc- tion of trees by men and animals which has continued unchecked for centuries. There are about 400,000 hectares of so-called forest land in the country, mostly in Cyrenaica, but much of it consists of low scrub and bushes. Mluch of the wood that is grown is cut prematurely for firewood or the manufacture of charcoal, scrub is uprooted for the same purposes, and goats wander more or less unchecked through most of the state forest areas. Some of the best trees are to be found on private farms. Forestry programs have been initiated in both coastal provinces with the assistance of the foreign aid agencies, and there has been a steady increase in expenditure on afforestation and dune fixation from about £L 90,000 in 1954/55 to £L 229,000 in 1957/58 (see Statistical Appendix, Table S.5). These programs have helped to prevent the situ- ation from getting worse, but little real progress will be possible until grazing and cutting of wood in forest areas is brought under proper control and until individual rights in land and state domain have been clearly established. In forestry, as in settled agriculture, the mission regards the enactment of a land law as a matter of great urgency (see page 131). In addition, the mission recommends that a federal forest law should be enacted, and that a federal Department of Forestry should be established under a technically qualified Chief Conservator of Forests as part of the proposed Ministry of Agriculture to lay down the policies to be followed in forestry development in Libya and to supervise their execution by the provincial governments. The forestry departments in the coastal provinces are seriously understaffed, particularly in the higher grades, and the mission recom- AGRICULTURE, LIVESTOCK AND FORESTRY 173 mends that £L 10,000 a year should be added to the budgets of each department to provide for an increase in the number of senior posts (Assistant Conservators, Divisional Forest Officers, District Forest Officers) and the higher subordinate posts (Forest Rangers), and for overseas courses for Libyan forestry officers (e.g., in Cyprus and Syria). Higher priority should be given to strengthening the forestry pro- tection services in order to save the trees from despoliation and to guard against fire. We suggest an additional allocation of £L 5,000 a year for this purpose in the budgets of each of the provincial forestry departments. The existing forest guard training center, which is being operated by the Tripolitania Forestry Department at Hescian, is doing excellent work. The mission recommends that the standard of training at the center should be gradually raised and the period of training lengthened. The center should be used as a central forest training establishment for junior forest subordinates in all parts of Libya. A single forestry experimental station should be established for all of Libya. Problems for investigation include costs of forestry opera- tions, trials with indigenous and exotic tree species, spacing tests, experiments on various silvicultural operations, uses of local forest products and dune fixation. The cost of the facilities, equipment and staff might be in the region of £L 50,000 for the five-year period, and this should be accommodated within the existing budgets for agricul- tural experimentation and research (see page 163). The forestry station would come under the federal Ministry of Agriculture. The mission recognizes that it will take time to create the institu- tional conditions necessary for the effective development of forestry and to build up staffs in the two provinces capable of executing greatly enlarged forestry programs. These appear to us to be the two main factors that must govern the rate of investment. Forests cannot be planted unless there is someone to plant them, and they should not be planted unless they have a good chance of growing to maturity. Sub- ject, however, to these overriding limitations, the mission recommends that high priority be given to afforestation and dune fixation in the allocaton of funds available for investment in both coastal provinces. A proper balance must be maintained in programs of planting between quick-yielding and slow-yielding varieties, the former (e.g., eucalyptus) providing a resource for commercial exploitation within nine to twelve years and the latter (e.g., pine) representing a long-term asset. The collection of firewood and the burning of charcoal in forest areas should be controlled by the forest departments. Now that oil has been discovered in Libya, cheap and plentiful supplies of kerosene 174 THE MAIN REPORT should soon become available, and the mission has recommended else- where in this report (Chapter 4) that the use of kerosene should be actively encouraged as a substitute for firewood and charcoal in the towns. A Program for Tripolitania The forest area of Tripolitania in April 1959 was approximately 19,000 hectares. Most of this had been planted since 1952, government forest reserves accounting for 15,000 hectares and private plantings for about 4,000 hectares. The most successful results in afforestation have been achieved with various species of eucalyptus and acacia. About 6,000 hectares of eucalyptus are grown for lumber on the coastal plain. The remaining 13,000 hectares of forest land are mainly used to grow wood for fuel and other household uses. The mission recommends that forest reserves in Tripolitania should be extended by planting an additional 16,000 hectares during the next five years. The main emphasis in this program should be placed on soil and water conservation, with production of commercial lumber as a secondary but nonetheless important objective. The most successful results have been obtained in the past with eucalyptus and acacia, but these species have their limitations, and other species, including pine, should be introduced wherever possible so as to secure diversification. Experiments with new species should be continued. Planting costs are estimated at EL 22-25 per hectare (excluding seedlings), and the total cost of the program might be about £L 380,000. This includes the establishment of a forest reserve in the Wadi Huelfa area as part of the scheme for flood control in the Wadi Megenin (see Chapter 7). As soon as the necessary steps have been taken to establish this reserve, it should receive priority in the planting of trees and might account for about one-quarter of the expenditures included in the five-year planting program. The program of sand dune fixation should be continued in the coastal areas. The present practice of "dissing"7 and planting trees in rows throughout the dunes should be continued for the time being in areas where dunes threaten to engulf adjacent agricultural land. However, this mnethod is too slow and costly for the long-term rehabili- tation of all the dune areas, and the provincial Forestry Department 7 "Dissing" is the term applied to the planting of diss grass as a hedge to protect young trees in sand dune areas. AGRICULTURE, LIVESTOCK AND FORESTRY 175 should investigate the possibilities of limiting dissing and planting to the perimeters of the dunes and to a few strips across them spaced at wide intervals. The present search for species of trees or shrubs that can be seeded from the air on dune areas should be continued. Under the system in use at present dissing is estimated to cost £L 30 per hectare and tree planting an additional £L 8 per hectare. As a tentative target for the five-year period, the mission suggests the fixation of 9,000 hectares at a total cost of around £L 340,000. If a cheaper method of fixation can be found, a larger area can be covered for the same ex- penditure. The mission recommends that the Sand Sea south of Tripolitania should be dealt with as a special problem within the over-all program for dune fixation. This sea has an area of 60,000 hectares with a perim- eter of approximately 176 kilometers, and there is some support for the belief that it collects a significant proportion of the ground water used by wells in the Tripoli area. It is accordingly suggested (a) that further evidence should be sought on the role of the Sand Sea as a ground water recharge area; (b) that estimates should be made of the amount of water transpired by different kinds of trees; and (c) that present dissing activities should be confined to the stabilization of the Sand Sea within its present perimeter. For this purpose perimeter planting with a continuous belt of forest, say one kilometer wide, might be supplemented with 250-meter wide strips across the dunes at intervals of one kilometer or more apart. Eucalyptus could be used on the perimeter, but the strips planted in the dunes should be confined to acacia. Public programs of afforestation should be supported by encourag- ing private planting as much as possible. Trees should be supplied to farmers at a nominal cost, with credit where necessary. In particular, farmers should be required to plant windbreaks and shelter belts in order to reduce soil erosion. In addition to supplying seedlings, the Forestry Department should give advice on suitable species and cul- tural practices. The present nurseries of the provincial Forestry Department can produce about 6 million trees a year, after allowance for seasonal losses. The average cost per seedling is about one piaster, excluding the cost of machinery and equipment. The cost of providing 30 million trees over the five years is thus estimated at about £L 300,000, with a further sum of £L 40,000 for the purchase and maintenance of equipment. This would bring the total investment recommended for Tripolitania to £L 1,060,000 over the five years. 176 THE MAIN REPORT A Program for Cyrenaica The situation in Cyrenaica differs radically from that in Tripoli- tania in that there are approximately 385,000 hectares of indigenous macchia forests in the Gebel Akhdar, most of them in very poor con- dition. The main emphasis in forestry operations in the province should be placed for a number of years to come on the reservation, management and improvement of these indigenous forest areas. The mission suggests that, as a start, 40,000-50,000 hectares should be placed under irrevocable reservation by the government and converted by accepted silvicultural methods into high coniferous forests. Owing to the compact soils of much of the mountain area mechanized strip cultivation should be employed for reforestation. Pine should be the main species used, but consideration should also be given to the in- digenous cypress and other coniferous species such as juniper, which, although of slower growth, may be more suitable for use on selected sites. Investigation should be continued into the possibilities of intro- ducing exotic species. No livestock grazing or cutting of wood should be permitted in forest reserves, and every effort should be made to secure the cooperation of the tribes in enforcing the necessary controls. The mission was unable to obtain any reliable estimates of the costs of forestry operations in Cyrenaica, but they appear to have been a good deal higher than in Tripolitania, in part because of heavier reliance on manual labor. Greater use of machinery should reduce the costs of planting. Bearing in mind the limitations of staff and the time that will be needed to establish suitable conditions for reforestation, the mission suggests that £L 400,000 should be provisionally allocated for capital expenditure over the five years on the conversion and im- provement of the degraded macchia forests in the areas selected for reservation in the Gebel Akhdar. Under existing conditions the skeletal soils of the coastal plain offer few possibilities for afforestation, but preliminary operations might be undertaken to stabilize and reclaim these almost barren areas, particularly between Benghazi and Tocra. The first step in such oper- ations should consist of establishing long windbreaks of cactus, and the mission suggests that a sum of £L 35,000 (;L 7,000 a year) should be provisionally allocated for cactus windbreaks. Roadside planting of eucalyptus (in the lowland areas) and other suitable species (conifers in the upland areas) should continue, and we suggest a target of 3,500 kilometers for the next five years at an estimated cost of £L 10 per kilometer, of £L 35,000 in all. This would raise total capital expendi- AGRICULTURE, LIVESTOCK AND FORESTRY 177 ture on forestry operations in Cyrenaica over the five years to £L 470,000. At the time of the mission's visit about 300 hectares in the Agedabia-el Ageila area had been dissed for dune fixation. The mis- sion sees very little purpose in the continuation of dune fixation in this area since the dunes are not encroaching on agricultural land of any value. It should be the function of the Public Works Department to keep the coastal road clear of sand. SUMMARY OF PROPOSED EXPENDITURES We envisage that the recommendations made in this chapter in respect of agriculture, livestock and forestry might entail a total capital outlay in the public sector of the order of £L 5,130,000 over the five years 1960/61-1964/65. Details are as follows: Capital Expenditures on Agriculture, Livestock and Forestry (EL '000) Five-Year Annual Total Average Agriculture and Livestock Agricultural credit 2,500 500 Agricultural Development Board (Cyrenaica) 500 100 Commodity stocksa 500 100 Miscellaneousb 100 20 Sub-total 3,600 720 Forestry and Dune Fixation Program for Tripolitania 1,060 212 Program for Cyrenaica 470 94 Sub-total 1,530 306 Total agriculture, livestock and forestry 5,130 1,026 a National provision for acquisition of stocks by the Ministry of Agriculture in connection with the wheat marketing scheme and the scheme for creation of an emergency feed reserve. b Including the initial capital cost of establishing a Land Survey Department, the total cost of conducting a soil survey, and provision of £L 40,000 for contin- gencies (e.g., for providing buildings and equipment for the agricultural services). 178 THE MAIN REPORT The following estimates are tentatively suggested for the additional recurrent expenditures that will be involved in setting up the new institutions which the mission has proposed for the administration of agriculture and in expanding the forestry services: (SL '000) Five-Year Annual Total Average Federal Ministry of Agriculture 250 50 Agricultural Development Board 175 35 Land Survey Department 500 100 Provincial Forestry Services 150 30 1,075 215 The provision indicated here for the Ministry of Agriculture would include the costs of staffing and operating the agricultural marketing services and also allow for some increases in other agricultural services (e.g., extension work and assistance to cooperatives). In such fields as research and experimentation and plant protection the mission does not envisage the need for increased recurrent expenditures in total, but there may have to be some shifts as between the budgets of the federal and provincial governments. Schemes of afforestation and other measures of soil and water con- servation are considered particularly suitable for inclusion in the Supplementary Program if the administrative and technical problems involved can be satisfactorily resolved. The need and the scope for such additional schemes appears to be rather greater in Tripolitania than in other parts of Libya. In Cyrenaica any Supplementary Program for agriculture should place main emphasis on additional credit and other facilities fEor developing settled agriculture in the Barce-Beida area. Marketing schemes and the creation of feed reserves may also merit larger allocations if the conditions necessary for their success are established more quickly than the mission has assumed. CHAPTER 9 INDUSTRY, HANDICRAFTS AND FISHERIES INDUSTRY Present Position of Industry The Italian occupation largely reserved entrepreneurship and man- agement to its own nationals, with the result that up to the present day the great majority of the factory undertakings remain under for- eign control. The only significant exception is Cyrenaica, where the evacuation of the Italian population in 1942 created industrial op- portunities which Libyan entrepreneurs were quick to take advantage of. Further, Italian workers before the war supplied most of the skilled labor in Libya, and this situation has tended to perpetuate itself. With such labor relatively scarce and more costly, labor-saving techniques had been introduced on a rather more intensive scale than in many other countries in a similar stage of economic development. At the same time, wage rates have tended to be adjusted to Italian standards. The backward state of agriculture, fisheries and animal husbandry, and the limited and extremely variable marketable surpluses, have restricted the development of agricultural processing industries, which are now mainly confined to olive oil and fish processing, the manu- facture of tobacco and wine, the curing of hides and skins, and flour milling. Lack of known minerals, apart from oil, has been another factor inhibiting the growth of industry, and mineral-based industries are confined to the manufacture of building materials. A considerable part of Libyan industry accordingly consists of trades which convert imported materials into consumer goods; they include various food products, beverages, textiles, footwear, furniture, printing and light engineering (mainly maintenance and repair shops to service transport and agricultural equipment). It is the size of the domestic market which has basically shaped the industrial structure. This market is small, not only because of Libya's limited population, but even more because of the uneven dis- tribution of the people among the main settled regions, divided from 179 180 THE MAIN REPORT each other by large uninhabited areas. Social and economic differences between the nomadic, the settled rural and the urban populations and the considerable differences in their purchasing power and patterns of consumption have further split up the market, restricting the scope for large industrial units and narrowing down the range of products for which local manufacture is economic. Estimates indicate that, in terms of the value of output, about 50 percent of industrial production refers to food, beverages and tobacco products, 10 percent to textiles, clothing and footwear, another 10 per- cent to housing materials and furniture and 30 percent to a variety of products and services which are largely based on imported materials. The average unit size of Libyan industry, as measured in terms of em- ployment, is only five workers per establishment.' Of the 3,121 enter- prises registered under the 1956 census of employment and produc- tion, 87 percent employed less than five workers per unit, whereas only 114 units employed more than 10 workers and 25 units more than 50 on an all-the-year-round basis. Recent developments have not changed this over-all picture, although it would appear that there are now more of the larger factory establishments. Living standards in urban areas have improved considerably dur- ing the postwar years (see Chapter 2), and this, together with the large number of foreigners in the country, has resulted in an increase in domestic industrial output. It is extremely difficult to express this in- crease in statistical terms. Available statistics, which have only re- cently been collected, are limited in range, incomplete and not always reliable. By way of indication, and to place industrial growth in some perspective, an attempt has been made to present a broad picture in Table 5. These data should, however, be regarded with due reserva- tion. In particular, it is important to remember that a substantial pro- portion of the increase in imports of consumer goods must be ac- counted for by the purchases of the growing foreign community, who tend to prefer foreign products to those manufactured locally. As a rough guess, it might be said that Libyan industrial output has increased by something like 50 percent since 1952. Factory enter- prises have contributed to increased output by expanding plant and equipment rather than through the establishment of new undertak- ings; on the other hand, the smaller enterprises, including craftshops, have responded to rising demand mainly by increasing in numbers rather than by growing into larger units. In general, it would appear ' Industry, as defined in this chapter, includes all manufacturing, processing and servicing activities, irrespective of the number of workers employed per establishment. INDUSTRY, HANDICRAFTS AND FISHERIES 181 that, with a few exceptions and within the limits of the present social and economic structure, the strategic points in manufacture and processing are being covered by existing industries. However, few of these industries appear to have been altogether successful in standing up to foreign competition. TABLE 5 Domestic Industrial Growth as Compared with Import Trends of Selected Commodities (1954 = 100) Domestic output index Import index Commodity (1957/58) (1957) Tomato products 3300 240 Wrapping paper and cardboard 2500 300 Light engineering, repair and servicing shops 250b Footwear of leather 250b 120 Printing 200b Olive oil 1750 n.a.d Soft drinks 170 230 Fish products 160b 180 Salt 1500 - Textile piece goods 150b 200 Tobacco products 1500 220 Leather 145b 180 Beer 1100 190 Alcohol 1100 - Rugs and carpets lOOb 490 Laundry soap 25b 230 Wooden and metal furniture n.a. 400 Bakery products n.a. 220 Ready-made clothing nil' 185 Rubber footwear nil 500 Cement nil 260 Fruit juices nil 240 Toilet soap nil 220 Jams and fruit preserves nil 200 0 Based on statistical information collected from public and private sources. b Based on certain growth indicators, derived from import statistics and other sources. I Based on the average output during 1956-59 as compared with 1950-53. d Not available for the comparable period. 0 Based on actual sales of the Tripolitanian Salt Monopoly. A small semi-mechanized plant has recently started operation. 182 THE MAIN REPORT The Scope for Industrial Expansion The future of industry in Libya will be greatly influenced by two factors-the progress of oil operations and the development of Libyan agriculture. Local oil and natural gas production will provide a cheaper source of fuel for industry as a whole and a potential source of raw materials for the manufacture of chemicals and fertilizers. The oil companies themselves moreover constitute an important new market in Libya for certain types of producer and consumer goods. Agricultural expansion likewise is important both because it is needed to supply raw materials for the processing industries and because in- creased farm income will provide a larger market for manufactured goods. Apart from oil production itself and its derivatives the growth of Libyan industry must be directed mainly toward meeting the require- ments of the domestic market, at any rate for the time being. The scope for developing exports of manufactured goods will be severely limited since, by and large, Libyan industry does not seem to possess the comparative cost advantages which would enable it to compete successfully in nearby foreign markets. Later on, there may be possi- bilities of producing petrochemical products for export to other parts of Africa and the Middle East, but this is probably a rather distant prospect. Labor costs per unit of output in Libyan industry are rather high, and they are continuing to rise in response to the upward pull exerted on wages and salaries by the operations of the oil companies. This and the scarcity of traditional industrial skills in Libya are factors tending to favor the growth of capital-intensive rather than labor-intensive in- dustries. The amount of capital per person employed in factory industries in Libya already looks high by comparison with most un- derdeveloped countries, and this tendency may well be accentuated in future. The nature of the local market favors an industrial structure con- sisting mainly of small units. This has certain disadvantages. For ex- ample, it limits the scope for specialized management, it restricts industry's bargaining power in buying and selling and it narrows pos- sibilities for government contracts. On the other hand, a small industry structure is well suited to the mobilization of small savings and makes less exacting demands on managerial skills. Faulty investment decisions resulting in loss of capital will have less serious repercussions on the economy as a whole if the undertakings are small. Further, small in- INDUSTRY, HANDICRAFTS AND FISHERIES 183 dustry contributes to the growth of a business middle class which is a valuable element in society. All in all, there appears to be no reason to expect any very striking change in the pattern of manufacturing industry in Libya as a result of the discovery of oil. It is quite illusory to suppose that Libya can suddenly be turned into a highly industrialized country, or that large- scale industrial undertakings can now be profitably established in the country. We have already mentioned the establishment of a small oil refinery as one of the more immediate possibilities. More significant from the employment point of view will be the boost given by oil ex- ploration and development to the building and civil engineering trades and to the road transport industry. Servicing facilities for auto- motive equipment will have to be expanded, and it might eventually be economic to assemble certain types of such equipment locally. There may also be certain other types of producers goods for which demand will now be large enough to justify local assembly or manufacture- items of office equipment, for example, furniture and metal containers. The manufacture of cement is one industry for which the prospects have certainly been improved by the discovery of oil, both because cheaper fuel will now be available and because there is likely to be a considerable demand for cement in connection with oil company op- erations. At least two private projects for establishing cement plants were being considered at the beginning of 1960, one in Tripolitania, the other in Cyrenaica, but it is not clear to the mission whether suffi- ciently detailed surveys have yet been made of local raw material sup- plies to enable firm plans to be drawn up. Deposits of limestone and clay are known to exist together at Homs in Tripolitania and near Benghazi in Cyrenaica, but at the time of the mission's visit in 1959 it was not known whether these would be suitable for the manufacture of quality cement at reasonable cost. Trial borings at Homs have shown the limestone there to be covered by a heavy overburden of clay which might make them extremely expensive to work. The problem of internal transport also requires careful investigation, since the cost of transporting cement from factory to consumer in Libya might well exceed the freight cost of imports. As to the demand for cement, imports amounted to over 60,000 tons in 1958, and a fairly rapid increase can be expected over the next few years in connection with the development of oil production. There- after the higher level of consumption should be sustained for some time ahead. It is doubtful whether Libya can produce the special qualities of cement used in the construction of oil wells, but there will 184 THE MAIN REPORT be large new requirements for shipping terminals, pumping stations, buildings and other installations. Provided that other conditions are favorable, the prospective vol- ume of demand would appear to be sufficient to justify the establish- ment of at least one small cement factory and possibly two. The cen- tral question therefore is whether cement could be produced and transported to the main points of consumption at costs comparable with imports. Preliminary cost calculations made by the mission cast some doubts on this, but the matter is one that needs careful and ex- pert examination before a definite conclusion can be reached. Before supporting any private ventures the government should satisfy itself that such an examination has been carried out, and that the industry will be able to maintain itself without an excessive measure of protec- tion. Government itself, as a major consumer of cement, has a direct interest in ensuring that domestic production does not result in a large increase in prices. Study might also be given to the possibilities of niaking more ex- tensive use of gypsum as a building material, particularly for construc- tion of low-cost housing (see Chapter 14). Considerable deposits of gypsum are located in the Gefara between Azizia and Jefren, and this is a natural asset which might be worth exploiting in view of the shortage of other building materials in Libya. Crushing and processing are comparatively simple, and the initial investment required for the production of, say, 25 tons of gypsum a day would not be very large- possibly in the region of £L 50,000. The mission believes that there is ample room in present circum- stances for the further expansion of the agricultural processing and other light consumer goods industries, and various possibilities are discussed in Annex XIII. Among other things we have suggested con- tinued research into the manufacture of date syrup, the expansion of vegetable canning and the establishment of a tomato paste factory in Cyrenaica. A good case can be made out for the construction of cold storage plants in Tripoli and Benghazi, though the mission has some reservations about the way in which the Benghazi project is being handled (see Annex XIII). On the other hand, for reasons stated in Chapter 8, the mission strongly advises against establishment of a sugar beet factory and it has considerable doubts about the alternative proposal for setting up a factory simply to refine imported sugar. The scale of operations would almost certainly be too small to make such a factory economic, and it is doubtful if there would be any profitable outlets for the INDUSTRY, HANDICRAFTS AND FISHERIES 185 molasses, which would be left over as a by-product. The main uses of molasses are in the manufacture of cattle food, rum and industrial alcohol. Only small numbers of cattle are raised in Libya, there would be little demand for rum, and industrial alcohol can now be more cheaply manufactured from petroleum. Both the leather and printing industries can be further expanded and we have recommended that they should receive special assistance from the government (pages 197-198). Opportunities for expansion also appear to exist in textiles, soap manufacture and the brewing of beer and soft drinks. The comments made here and in Annex XII on the possibilities of industrial expansion are by no means exhaustive. They serve rather to indicate the mission's general line of thinking on industrial develop- ment and to substantiate its proposals regarding government policies to promote industrial growth, to which we now turn. Government and Industry The Libyan Government, in the mission's view very wisely, has left the development of industry almost entirely to private enterprise. Exceptions are the tobacco factory and salt monopoly in Tripolitania, the government printing presses in Tripoli, Benghazi and Sebha and a date-packing plant in Tripolitania, all of which belong to the provin- cial administrations. Much the largest of these government enterprises is the tobacco factory, which is operated under a management contract with a foreign company. It produces over 600 million cigarettes a year and at the time of the mission's visit employed about 450 workers. The mission sees no reason to depart from the general policy of relying mainly on private initiative and capital to exploit the oppor- tunities which exist for the further expansion of industry. Government has plenty of other things to do, and other uses for its money, with- out venturing into industrial operations for which it is seldom well equipped. It is true that in the past Libyan businessmen have usually preferred to invest their money in trade and real estate, which offer safe, quick and high earnings, rather than in agriculture or industry, where returns are slower and often lower. But so far as industry is con- cerned, the mission found little evidence that sound investment op- portunities had been neglected, and the growth of industry under Libyan control in Cyrenaica (and to a lesser extent in Tripolitania) shows that Libyan capital stands ready to participate in industrial ventures if prospective profits are sufficiently attractive. Moreover, 186 THE MAIN REPORT since the discovery of oil there has been a noticeable quickening of interest on the part of both Libyan and foreign businessmen in the establishment of new industries in the country. The immediate danger is probably rather the other way-namely, that the oil boom will encourage hasty and ill-considered private ven- tures, which will find themselves unable to survive without govern- ment support. A number of these ventures are being promoted by foreign firms which are primarily interested in selling plant and ma- chinery for new factories, and proposals from such firms should be viewed with a good deal of suspicion. The government should be ex- tremely cautious about giving any sort of support to projects of this kind unless they are based on thorough investigations carried out by independent consultants. We suggest that it should be one of the func- tions of the Development Council to examine and advise the Ministry of Finance and the other appropriate authorities on all projects for private industrial investment on which government action is called for. It is in any case essential that the council should be kept fully in- formed about private investment if it is to draw up sensible develop- ment plans for the public sector. This is not to say that government should play no part in pro- moting industrial expansion. On the contrary, the mission believes that the Libyan Government should be considerably more active in this field than it has been in the past. Libyan industry has in fact received very little special assistance from government since the war, and it is only lately that positive steps have been taken to improve the condi- tions under which industry operates. The role of government in promoting industrial growth requires action on two broad and closely interrelated fronts: the creation of a favorable investment climate for existing and potential entrepreneurs so as to stimulate the exploitation of all available industrial resources; and the removal of physical and other obstacles which stand in the way of the establishment, enlargement and operation of industrial enterprises. Such action should take into account the need to en- courage Libyan talent wherever possible with a view to reducing the present state of dependence on non-Libyan entrepreneurship, man- agement and advanced technical skills. More specifically, the mission recommends that the government should pay particular attention to the following matters: 1. improvements in the machinery for government administration and in the coordination of industrial policies at the federal and provincial levels; INDUSTRY, HANDICRAFTS AND FISHERIES 187 2. simplification of procedures for licensing and registration; 3. more positive measures for industrial promotion, including the provision of technical and financial assistance to industry and the sponsoring of schemes for the training of labor and man- agement; and 4. use of tariffs in place of import restrictions to afford limited protection to selected industries. Administration of Industrial Policy The administration of industry is largely vested in the provincial Nazirates of Finance and Economics. The Tripolitanian Administra- tion, which had by and large displayed initiative in taking measures to assist industry, maintains a Department of Marketing and Industries, staffed by an expatriate director and three other officials. This depart- ment is also responsible for trade and export promotion, but with such a limited staff and such a variety of duties it is not easy to pursue a consistent and progressive industrial policy. The same applies more strongly to Cyrenaica and to the Fezzan. Moreover, no department of industry at present exists within the federal government, although a few officials are engaged in the administration of federal industrial legislation such as the 1956 law for the promotion of national indus- tries. Consequently, public expenditure for industry (including min- erals) during the period 1954/55 to 1957/58 has been extremely limited, amounting in total to only £L 273,000 or approximately 0.5 percent of all public expenditure during this period. The mission considers it important to strengthen the government administration, both at the federal and at the provincial levels. This will be necessarily a slow process since it will take time to develop the experience required to administer industrial development. The hiring of such administrators from abroad is not a satisfactory substi- tute, and the mission therefore strongly recommends that a systematic training program be adopted to create a cadre of Libyan officials who will be able to assume in due time responsibility for guiding the in- dustrial development of the country. The mission accordingly suggests that five young Libyan university graduates should be sent abroad for training during the next five years, preferably in an underdeveloped country like Turkey or India with considerable experience in indus- trial development measures. These trainees should spend at least two years abroad and should receive in-service training in agencies respon- sible for industrial development. Further, a high-level foreign indus- 188 THE MAIN REPORT trial adviser should be engaged to assume for at least five years re- sponsibility for the industrial development of Libya; he should be located in the Ministry of Finance and Economics and maintain close contacts with the provincial authorities. We have included £L 30,000 in our program of recurrent development expenditures to cover the cost of these two proposals. The roles of the federal and provincial governments in the ad- ministration of industry should be clarified. The present situation in this respect is unsatisfactory insofar as the formulation of policies and their implementation, as well as the execution of specific projects, are carried out both on the federal and on the provincial levels without sufficient consultation or coordination between them. This results in a confusion of objectives, in excessive red tape and duplication of efforts. As a general principle of government administration in this field, the federal government should concern itself primarily with the formulation of policies and with the coordination of programs, in- cluding in certain cases the preparation of plans for specific projects. The federal government, in formulating policy, should act in con- tinuous consultation with the provincial authorities, and to this end it is recommended that a consultative committee on industry should be established in conjunction with the new Development Council. This committee should consist of federal and provincial officials and of private citizens conversant with problems of Libyan industry, with UN experts and other foreign advisers included as necessary. It should meet regularly and should operate mainly as an advisory body and as a forum in which to reach agreement on the guiding principles af- fecting industrial development in the country. The mission considers that all technical assistance (including the technical services to be provided by foreign specialists in specific trades) should be linked with measures to provide financial assistance to industry. Technical assistance supplied to industry without taking into account economic and financial requirements and repercussions is liable to be wasted whereas, conversely, financial assistance to in- dustry is likely to be most fruitful if it is preceded by careful techno- economic investigations as to the soundness of a project. Further, since Libyan industry is too small to warrant the establishment of a separate industrial extension service, it would seem necessary to concentrate all technical assistance within the proposed industrial development agency as mentioned in the following paragraphs. In fact, this agency should function as the main technical arm of the federal and provincial au- thorities in their endeavor to promote industrial growth. INDUSTRY, HANDICRAFTS AND FISHERIES 189 Registration and Licensing of Industry Both in Tripolitania and Cyrenaica a businessman who wishes to establish a factory has to apply to the provincial government for a license, and the issue of licenses is governed in each province by a com- plicated set of rules and procedures. The federal government has for some time had under consideration a law for the registration and protection of industry which would replace the existing provincial licensing systems, and which would lay down uniform conditions for the granting of industrial licenses throughout Libya. The mission considers neither the existing systems nor the pro- posed new licensing law to be well adapted to Libya's needs. As already stated, we believe that government industrial policy should be di- rected toward the creation of a favorable industrial investment cli- mate, and that government controls and restrictions should be kept to a minimum, so as to give private initiative free scope to participate in the industrial process. It is extremely difficult to administer such controls effectively in a situation in which basic statistical information is as incomplete as it is in Libya, and in which there is such a scarcity of experienced government administrators. Moreover, controls always carry with them the danger that pressure groups may exert an un- wholesome influence on government policy, which is detrimental to sound industrial development. It is argued in support of the proposed law that private investors are inclined to overinvest in a certain trade when a pioneer has dem- onstrated its profitability, and the establishment of a second tomato paste factory in Tripoli is sometimes cited as an example. The mission, however, did not come across any conspicuous example in which private industry has made basically wrong investment decisions, and private enterprise will usually be in a better position than government to assess the viability of a project in which it has financial stake. Fur- ther, we are convinced that industry would strongly resent the power which government would assume under the proposed law to review all documents concerning the operation of the enterprise; such meas- ures are decidedly not conducive to creating a favorable investment climate. The mission therefore recommends that the licensing of industrial undertakings should be undertaken only when this is considered strictly necessary to implement an important area of government policy-for example, as a means of reserving for Libyan entrepreneurs a larger share in the ownership of industry. It would be sufficient for this pur- 190 THE MAIN REPORT pose to enact an enabling law, which would give the government pow- ers to institute a licensing system for a specific trade or trades if and when the occasion arose. At the same time a simple system of indus- trial registration should be introduced on a uniform basis for the whole country, with the main objective of assisting the official statisti- cians to collect, digest and publish statistical information for the use of both the government and private enterprise. Law for the Development of National Industries The Law for the Development of National Industries, which was enacted in 1956 and has been applied since 1957, enables the govern- ment to grant, under certain conditions, financial and other facilities to existing and to newly established industries with an installed power of not less than ten horsepower and employing at least ten workers. These facilities include (a) exemption from property tax for a period of ten years, (b) exemption from income tax for a period of five years, (c) exemption from customs duties on machinery, equipment and ma- terials for a period not exceeding five years, and (d) payment in in- stalments over a period of ten years of the purchase price of govern- ment-owned land to be used as the site for the establishment of the factory. The mission was informed that, up to the end of March 1959, eleven enterprises had been granted exemptions under the law; nine of these were controlled by Libyans and two by Italians. In principle, the law appears to be a suitable legal instrument to promote the establishment of new and the expansion of existing enterprises. We would suggest, however, that the administration of the law be simplified and liberal- ized in intent so as to provide for general instead of selective exemp- tions. This would cut out a lot of red tape and reduce the time taken between the filing of an application and the announcement of the gov- ernment's decision-two matters on which the mission heard frequent complaint in Libya, both from the provincial authorities and from private businessmen. We would also suggest that the law should be extended to cover the smallest enterprises. This could be achieved by interpreting Article 2 of the law in such a way that associations of small enterprises which together employ a certain minimum number of workers, and irrespec- tive of the installation of power-driven equipment, are considered as an industrial enterprise within the terms of the law. Such an extension of the scope of the law would have the additional advantage of pro- INDUSTRY, HANDICRAFTS AND FISHERIES 191 moting the formation of industrial associations of small firms, which would extend their activities into joint raw material supply, collective marketing and other areas where small businesses may be able to benefit from common action. Further, the mission questions the wisdom of regulating the em- ployment ratio between Libyan and foreign (Italian) workers. It should be recognized that the Italian workers are making a useful contribu- tion to Libyan industry, and that to limit their employment oppor- tunities would be detrimental to the creation of a favorable investment climate. We fully appreciate the government's desire to increase the participation of Libyan workers in industry, but this should be achieved by increasing the relative productivity of Libyan as com- pared with Italian workers rather than through legislative action. Foreign Capital Investment A Law for the Investment of Foreign Capital was promulgated early in 1958. It does not apply to petroleum exploration and exploita- tion, which is covered by separate legislation. According to this law, a foreign enterprise is considered as such if not less than 51 percent of the total invested capital has been obtained from outside the coun- try. Such enterprises may at the government's discretion be exempted from customs duties, income tax and other federal taxes for such period as the government may decide. Exemption from provincial taxes may also be granted subject to the approval of the provincial govern- ment concerned. The law provides further for the free repatriation to the country of origin of the invested foreign capital, of profits and of salaries of the foreign employees. In the event of expropriation, ap- propriate compensation is assured in accordance with the provisions of the Expropriation Law. An advisory committee consisting of repre- sentatives of the federal government, the relevant provincial govern- ment and the foreign aid agencies advises the government on the application of the law. The government may impose on an enterprise which benefits under the law various conditions relating to the em- ployment and training of a certain proportion of Libyan personnel, to the participation of Libyan investors in the enterprise and their representation on the board of directors, and to the submission of re- ports regarding the development of the enterprise. Foreign enterprises established after January 1, 1952, but before the enactment of the law, may qualify for benefits, although not retroactively. The mission was given to understand that at the time of its visit 192 THE MAIN REPORT no foreign firms had been granted facilities under the law. In general, the provisions of the law appear to be soundly conceived, but every- thing depends on how they are applied, since the act confers wide discretionary powers upon the government. Fears of arbitrary action were expressed to the mission by a number of foreign businessmen, and while we have no reason to endorse these fears, we would strongly urge the government to do everything possible to clarify its intentions with regard to foreign investment and to clear up any prevailing doubts or misunderstanding. Nothing does more to discourage private invest- ment than an atmosphere of uncertainty. Protection of Industry Important changes were made in the Libyan customs tariff in 1958 with a view to securing a greater diversification in the rates for various commodities and affording more protection to local industry. As a result, imports of finished products, which are being or can be pro- duced in the country, are subject to rates (specific and ad valorem) varying between 20 percent and 40 percent, whereas imports of in- dustrial raw materials are now free of duty or subjected to modest rates and imports of plant and machinery are taxed at a nominal rate of only 2 percent. The mission welcomes these changes and has no general recommendations to offer on the customs tariff except for a few instances mentioned elsewhere in this report where a further tariff adjustment should contribute to the development of specific trades. Besides the modest measure of protection provided by the customs tariff, selected industries are shielded against foreign competition through a system of restrictions on imports. The provincial adminis- trations are empowered to impose such restrictions on items listed by the federal government as subject to export and import licensing regu- lations. The Tripolitanian Administration has restricted imports of a few industrial products, including tomato paste, wrapping paper and, until recently, itiles; the import of shoes in both coastal provinces is subjected to a quota system; and the import of barracanes is prohibited so as to protect the handloom industry in Tripoli and the textile factory in Benghazi. There are no general restrictions on exports ex- cept for olive oil in years when the olive crop is insufficient to meet domestic demand. Since each of the provincial administrations follows a different policy, special measures are required to restrict interprovincial trade in commodities which are subjected to import restrictions in one province, but not in the other. For example, the Tripolitanian Admin- INDUSTRY, HANDICRAFTS AND FISHERIES 193 istration has prohibited the import of tomato paste from Cyrenaica where the import of this commodity from abroad is not restricted; on the other hand, the mission understands that the import of sweets from Tripolitania into Cyrenaica is controlled by license in order to pro- tect candy manufacture in the latter province. Apparently there is no legal basis for such restrictions on interprovincial trade. The mission shares with the government the view that in selected cases the protection of domestic industry against foreign competi- tion is justified, particularly where infant industries require a "run- ning-in period" before they are able to face up to foreign compe- tition. On the other hand, all measures designed to insulate domestic industry from outside market forces are liable, sooner or later, to have an adverse effect on efficiency because incentives are lacking to raise productivity, increase quality, reduce costs and pursue an aggressive sales policy. Such measures are particularly dangerous under condi- tions such as in Libya where many industrial trades are represented by one or two factories only.2 The consumer will suffer from higher prices and lower quality which in turn will restrict industrial growth, since domestic consumers will show an increasing preference for substitute foreign products. Moreover, it is extremely difficult to administer such a policy sensibly under Libyan conditions because of the lack of sta- tistical information about the size of the local market and the prospects for its expansion. Finally, the present system of applying restrictions on a provincial instead of on a national basis is liable to be self-defeating since imports banned in one coastal province may be imported through the other (as has happened in the case of soap). This can be, and has been, prevented by restrictions on interprovincial trade, but such re- strictions are undesirable in principle since they tend to delay the social and economic integration of the country. The mission strongly recommends that sole responsibility for the regulation of imports should be vested in the Ministry of Finance and Economics in the federal government; in exercising this responsibility the Ministry should act in close consultation with the provinces. At the same time we suggest that, generally speaking, industries requiring special protection against foreign competition should be assisted by import duties rather than by quantitative restrictions. Tariffs should seldom reach prohibitive levels, and they should be reduced if and when it becomes evident that the protected industry can stand on its own feet. 2Examples are the beer, footwear, packing paper, power loom weaving, ready- made clothing and tomato paste industries. 194 THE MAIN REPORT Financial and Technical Assistance Many Libyan industrialists have interests in trade, real estate and agriculture, and they usually find most of the capital they require for industrial investment out of their own resources, supplemented by funds put up by members of their families and friends. They may also turn to the commercial banks to finance working capital. The banks provide only short-term credit, but successive renewals of overdrafts in practice result in the extension of a limited amount of medium-term credit to industry at rates varying between 7 percent and 10 percent. While the mission found no clear case in which lack of capital as such had prevented the establishment of an enterprise with reasonably good earning prospects, the lack of an organized capital market in Libya is someithing of a handicap to industrial development. More- over, there is no institution to which the prospective entrepreneur can turn for technical advice in establishing a new industry. To remedy these deficiencies the mission recommends that the government should set up an agency to provide both credit and technical assistance for industry. The mission has considered whether an industrial development bank could be successfully established in Libya. Eventually this might be possible, but we see no justification for such an agency at the mo- ment, and we recommend instead a simpler organizational setup. As indicated earlier in this chapter, the prospects for the establishment of new factory undertakings appear to be rather limited, and industry will probably develop mainly through the expansion of existing in- dustries, including the growth of small workshops into factories. Under these conditions an initial capital outlay of £L 500,000 should be sufli- cient to provicde the financial assistance needed. This would be too small a sum to justify setting up a fully-fledged banking institution with its own independent management, and the mission feels that it would be better to start in a more modest way by establishing an In- dustrial Credit Department within the framework of the National Bank of Libya--with the proviso that later on, when it is firmly estab- lished, the department might be converted into an autonomous agency. The accounts and operations of the department should be kept en- tirely separate from the rest of the National Bank, and the manager of the department should report directly to the Governor. The functions of the Industrial Credit Department would be to provide financial assistance to industry and at the same time to serve as the channel through which industrialists could obtain technical INDUSTRY, HANDICRAFTS AND FISHERIES 195 advice. The mission attaches great importance to the combination of these dual functions within a single agency. Two highly competent specialists should be employed to manage the department, one an in- dustrial economist with experience in banking and industrial account- ing practices, the other an industrial engineer capable of making a general appraisal of industrial projects from the technical angle. In addition, and according to the need for specialized technical services for particular industries, consulting specialists should from time to time be sought from the United Nations or USOM or be engaged di- rectly by the department on a short-term basis to investigate new de- velopment possibilities and prepare well worked out projects for pros- pective entrepreneurs who want to interest themselves in industry. In this way the department would form the nucleus of, and assume prime responsibility for, all technical assistance to industry. The department should approach its lending operations in a flexi- ble manner and should make available short-, medium- and long-term credit, including underwriting and participation in equity capital if and when sound projects cannot be financed out of private sources or by private banks. In no circumstances should the department put up more than 50 percent of the total capital required. In its financial transactions it should place emphasis not so much on collateral as on the long-term growth prospects of a project, with particular reference to the initiative and technical and managerial skill of prospective bor- rowers and the capacity of the market to absorb the product. The granting of a loan should be only the beginning of an association be- tween the department and the borrower. Continuous collaboration should be maintained between the two, so as to assist industry in im- proving the efficiency of its operations. The consulting services of the department should be available to enterprises which are not turning to it for financial assistance, fees being charged for these services when appropriate. In short, the department should in part operate as in- dustrial consultants, who are at present entirely lacking in Libya. The department should be advised by an investment committee under the chairmanship of the Governor of the National Bank, which would include representatives of the federal and provincial govern- ments, the Development Council and a number of private individuals with industrial experience. Loan operations should be conducted on strict business lines, but the federal government should meet the cost of consulting services. A sum of £L 45,000, or £L 9,000 a year, has been included in the mission's program of recurrent development ex- penditures for the latter purpose. 196 THE MAIN REPORT Other Promotional Measures Industrial Estates. The majority of existing factories in Libya are located in unsatisfactory premises, and few are housed in buildings specially designed for the purpose. The mission suggests that the gov- ernment might consider the establishment of an industrial estate in Tripoli on lines similar to those tried out with success in many other countries. The main purpose of such estates is to provide suitable factory accommodation for small enterprises, sometimes at conces- sional rates. The estates are equipped with modern amenities, such as electricity, water, sewerage and storage facilities; they also offer a variety of services (e.g., for the maintenance and repair of equipment) which the individual enterprise cannot afford to provide for itself, but which can be profitably supplied to groups of small plants. The creation of an industrial estate in Tripoli would encourage the transfer of existing plants from overcrowded areas in the center of the city, and this in itself would act as an inducement to the installa- tion of new and modern equipment. At the same time management and labor would obtain a more suitable working environment. A pos- sible site for the estate would be in the compound of the railway sta- tion and yards (assuming that the government adopts the mission's recommendation that the Tripolitanian railway should be closed down). This railway complex extends over an area of approximately 30 hectares and has ample accommodation which could in part be easily rebuilt into factory premises. The cost of establishing an indus- trial estate in this area with accommodation for 30 to 40 plants with a combined labor force of about 500 workers should not exceed £L 20,000. The cost might be increased to about £L 50,000 if the estate were to be located in the newly designated industrial zone in Tripoli. If the Tripoli experiment proves successful, a similar estate could be established later on in Benghazi, and possibly also in Misurata where the former Italian army barracks could provide suitable accommoda- tion. Management Training Programs. The mission has drawn attention to the low productivity of the Libyan worker. Raising productivity is primarily the responsibility of management, and the mission believes that there is urgent need for better-trained management, especially in the smaller undertakings. The government should help to provide suitable training facilities. At the present stage, it would be much too costly to provide such training in Libya itself, and the mission there- fore recommends that funds be made available to enable government INDUSTRY, HANDICRAFTS AND FISHERIES 197 officials and small plant managers to receive such training abroad. A sum of £L 15,000 has been earmarked for this purpose in our program of recurrent expenditures. Among the centers providing the type of training required are the Technological University at Delft in the Netherlands, which runs an International Course on Small-Scale In- dustries, and Stanford University in California, where there is an International Program in Small Industry Management. Workers Education. In addition to vocational training, attention should be paid to the education of workers in a more general sense. Improvements in labor productivity depend in large measure on the outlook of labor, its aspirations for social and economic progress and its interest in the enterprise in which it is engaged. In this respect there is considerable room for improvement in Libya. Workers often appear to be uninterested in their jobs, there is noticeable lack of pride in workmanship, and absenteeism rates are rather high. The labor movement, developed only since Independence, is still in its infancy. Because of the absence of well-trained and educated leadership and the lack of funds, the trade unions have no programs of education for their members. The Tripolitanian Government provided £L 5,000 in its budget for 1958/59 to support the labor movement, but this money had not been disbursed at the time the mission visited Libya. Considering that the future development of industry depends in large measure on the creation of an intelligent labor force, it is recommended that the government should increase and extend its aid to the movement so as to enable it to make its full contribution to the social and economic progress of the country. Such assistance might include grants to trade union leaders for study abroad and financial and organizational assist- ance in starting educational programs for the workers. We suggest an allocation of £L 30,000 for this purpose over the five years 1960/61 to 1964/65. The ILO may be able to help in providing advisory services on the planning and organization of workers' education programs, and on techniques of workers' education. Leather and Printing Industries. The mission considers that there are two industries to which the government should give special assist- ance in improving skills and introducing modern techniques. These are the leather and printing industries. In respect of the former we recommend that £L 20,000 be spent on measures to promote better curing of hides and skins, £L 35,000 on establishing a pilot tannery in Tripolitania and £L 25,000 on operating the tannery as a production and training center (including the cost of sending two workers abroad for training). To assist the development of printing we recommend 198 THE MAIN REPORT that £L 40,000 be spent on an apprentice training scheme in Libya and on a program of overseas training for young Libyan workers. These proposals are discussed more fully in Annex XIII. Government Patronage of Industry. Considering the limited range of industrial products manufactured domestically, only very few of the government's requirements can be met by local industry. There are, however, two industries which could benefit to an appreciable extent from government patronage, namely textiles and footwear. Annual re- quirements of shoes and uniforms for the armed forces, including the police forces, are substantial, especially if projected against the limited domestic market. But so far this demand has been exclusively satisfied through import from abroad. There is no reason why the local shoe industry should not be able, with technical assistance, to manufacture boots and shoes for the government that are competitive with imported products, and the same applies to uniforms which could be supplied locally if measures are taken to develop the textile weaving and ready- made clothing industries. The mission therefore recommends that as a matter of policy both the federal and provincial governments should patronize domestic industry in preference to imports, provided that the quality of the local product is satisfactory and its price not more than 10 percent above that of comparable import products. HANDICRAFTS Handicrafts in Libya have received a good deal of encouragement from government. Late in the nineteenth century the Turkish admin- istration established in Tripoli the Moslem Arts and Crafts School, which is still doing excellent work to train young boys in a variety of crafts. A few years ago the federal government, assisted by USOM, established a handicrafts center in Tripoli for graduates of primary schools, a small carpetry center for girls was recently set up in Ben- ghazi, and a new project has just been launched (also with the help of USOM) for starting training centers for rug production in Cyrenaica. A crafts development project for the Fezzan was initiated in Sebha in 1957 with the assistance of the ILO, and this is progressing well. Some facilities have been made available by the Tripoli municipality for handicraft shops to be opened in the Suk el Mushir, which has become an attractive tourist shopping center. The Tripolitanian Administra- tion is trying to promote the export of Libyan craft products by par- ticipating in various exhibitions abroad; it has also recently organized INDUSTRY, HANDICRAFTS AND FISHERIES 199 a handicrafts survey in the province, which should provide useful background information for the formulation of a consistent handi- crafts policy. Traditional handicrafts, as distinct from modern crafts which are the by-products of an advanced industrial economy, have in the past played a relatively minor role in Libya. One reason for this is that, under the Italian occupation, domestic production was unable to com- pete with cheap machine-made goods, and consumers' preference in- creasingly inclined toward the modern instead of the traditional product-a trend evidenced today in the sharp rise in imports of ma- chine-made carpets from £L 19,000 in 1954 to £L 59,000 in 1957. A few handicrafts have nevertheless been developed in the coastal towns, including weaving and the working of copper, brass, silver and gold. At the same time the nomadic and semi-nomadic sections of the popu- lation have always supplied the bulk of their own simple needs by using wool, hides and skins, date palms and other local materials for the manufacture of clothing, footwear, tents, rugs, carpets, basketware and some pottery. The large influx of foreigners before and since the war and the rise in local living standards have provided a fresh stimulus to the develop- ment of artistic crafts such as hand-woven rugs and carpets, fancy fabrics, leather goods, copper and brassware. It is to the improvement and expansion of handicrafts such as these that the government should now mainly direct its attention with a view to increasing sales to tour- ists and foreign residents in Libya and possibly exports as well. A number of obstacles have to be overcome. Techniques are fre- quently obsolete, raw materials defective and marketing operations in- efficient. The mission therefore recommends that, as a first step, the government should send two Libyans abroad for training in the de- velopment of artistic crafts, with particular reference to the introduc- tion of improved techniques, design and marketing. Such training should be sought in an underdeveloped country with long-standing ex- perience in this field. When the Libyans return home after completing their training, a specialist should be engaged for about two years to assist them in improving design and finishing and in adjusting Libyan handicraft products to the peculiar requirements of buyers at home and abroad. The mission further recommends that handicraft emporia should be established in Tripoli, and possibly also in Benghazi, to serve as sales outlets. These emporia would have to be established and operated by the government, and it would be among their functions to fix stand- 200 THE MAIN REPORT ards, control quality and fix prices. They might also provide credit to the craftsman by supplying him with materials and tools against pay- ment in kind. As the opening of such emporia is likely to meet with considerable opposition from local merchants, they should operate strictly as commercial undertakings, and their profits should be spent exclusively on measures for promoting handicrafts. They might be assisted by advisory boards consisting of merchants and others inter- ested in the development of handicrafts. A sum of £L 25,000 has been included in the mission's program for the capitalization of the Tripoli emporium and £L 10,000 for the one in Benghazi, which should operate initially as a branch of the Tripoli establishment. The Government of Tripolitania is planning to set up a center in Misurata to promote the development of carpet making and artistic leather work. This center would combine training with production, marketing and the provision of common facilities for local craftsmen. The eastern province of Tripolitania is the only area in Libya, apart from Tripoli itself, where there appears to be a good basis of tradi- tional skill for building up artistic crafts production. The mission therefore supports this project and has included £L 50,000 in its in- vestment program for its initial capitalization, with an additional £L 15,000 in the program of recurrent expenditures for the employ- ment of a specialist in carpet making to take charge of the work for the first five years.:3 For technical assistance in leather work the center could draw upon the services of the specialist whom we have proposed should be recruited for the development of the leather industry. If the Misurata center could be accommodated in one of the former Italian barracks, initial capital costs could be substantially reduced. Encouragement should be given to the formation of cooperative societies of craftsmen for the joint supply of raw materials and for the establishment of common production facilities. In this way groups of craftsmen could purchase their raw materials at lower prices and could also take advantage of the facilities available to larger industrial units under the law for the promotion of national industries. No indus- trial cooperatives have yet been established in Libya, and we suggest that a start might be made by organizing two such societies, possibly 3 The mission is not familiar with the details of the scheme for starting training centers for rug production in Cyrenaica and has accordingly not made any provision for it in its program. The scheme has been launched since the mission's visit and is being financed by USOM. It is understood to include the use of new carpet designs, the supply of modem equipment (which it is hoped that the artisans will subse- quently be able to purchase) and the creation of centralized marketing facilities. INDUSTRY, HANDICRAFTS AND FISHERIES 201 one for weavers and the other for brass and copper workers in Tripoli. As modern industry expands, a group of craftsmen is gradually developing to meet the demand for such servicing activities as the re- pair of bicycles, cars, radios and other electrical equipment. Their main problem is a lack of technical skill and of modern power-driven tools. Craftsmen of this kind can be expected to play an increasingly important role in the national economy, and they should be given every assistance in improving their efficiency. Such assistance might in- clude special courses of instruction provided by the technical schools in Tripoli and Benghazi and hire-purchase facilities for obtaining modern equipment. We have included a sum of £L 30,000 for a hire- purchase scheme in our investment program, and we suggest that its implementation should be entrusted to the proposed Industrial Credit Department of the National Bank. The promotion of handicrafts is particularly important for the Fezzan, where opportunities for establishing factory industries scarcely exist. We have devoted a special section in Annex XIV to a discussion of the problems involved in improving and expanding the existing Fezzanese handicrafts and in developing new ones. FISHERIES Fisheries is one of the least developed economic pursuits of the country, and its contribution to the national economy is negligible. Since no inland fishing is possible, all fishing is done at sea and takes one of three forms: inshore fishing operated by small boats; tunny fish- ing with traps; and sponge fishing by various methods such as diving and dredging. An appreciable number of foreign fishing boats of Italian, Maltese and Greek origin are exploiting the fishing grounds over the continental shelf off the Libyan coast; their catch, however, is not landed in Libyan ports but is sold in their respective home coun- tries. Foreign companies, predominantly Greek, are licensed to fish sponges in Libyan territorial waters. The only contribution which these foreign enterprises make to the national economy is the payment of license fees to the government and the expenses incurred when their boats and crews use shore facilities in Libyan harbors, mainly Ben- ghazi and Tripoli. The total Libyan catch is estimated at 2,000-2,500 tons of fish a year, consisting half of sardinella and some quantities of high quality fish (e.g., red mullet and stone bass) and half of tunny. Approximately 202 THE MAIN REPORT one-third of the catch is sold fresh, mainly in Tripoli, where the for- eign community provides a good market for this product. The other two-thirds are processed in a number of small and primitively equipped plants located along the Tripolitanian coast, which produce salted and canned fish for domestic consumption and export. There are no fish processing plants in Cyrenaica. Only very limited quantities of sponges, varying between 10 tons and 20 tons a year, are landed in the country and processed for export abroad. The yearly value of the fish catch may be roughly estimated at £L 200,000-250,000 and of the sponge catch at £L 30,000 or about 0.5 percent of the present national prod- uct in total. The labor force engaged in the industry is currently esti- mated at around 1,000, but most of these are employed on a seasonal basis. This applies particularly to the tunny fish industry where some 500 workers find employment for two or three months of the year only. There are probably only about 200 fishermen who derive their main livelihood from fishing, the others being largely part-time workers. Since earnings are low (probably not more than 40 piasters per work- ing day), there is a tendency for fishermen to seek other more re- munerative and stable employment. A large proportion of the skilled workers in the industry, including the skippers of the boats, are foreign residents of Italian or Maltese origin. The administration of fisheries is a responsibility of the provincial governments, whose main concerns are the collection of statistical material and ithe issuing of licenses for fishing boats. The only active step taken at present to help the industry is the distribution of salt at concessional rates to the fish processing industry in Tripolitania. The port manager in Tripoli, who has been made responsible for the fish- eries administration in that province, is operating on the basis of fishery legislation dating from the Italian occupation, which was partly amended during the British military administration; no legislation has been enacted since Independence. These Italian regulations were re- voked in Cyrenaica during the war and have not been replaced by more up-to-date legislation. As early as 1952, the Libyan Government tried to find ways of ex- ploiting the maritime resources of the Mediterranean, and with the as- sistance of the FAO two surveys have been made of the position of Libyan fisheries, their potential for development and the measures to be taken to promote their growth.4 The government now has a project 4 C. D. Serbetis, The Fisheries of Libya, FAO Report No. 18, Rome, 1952; Francois Bourgois, The Present Situation of Libyan Fisheries, FAO Report No. 817, Rome, 1958. INDUSTRY, HANDICRAFTS AND FISHERIES 203 under consideration for developing trawler fishing on an enlarged scale. Although the Mediterranean cannot be considered to be as rich in fish as the highly productive fishing grounds in the North Atlantic and the North Pacific, Libyan fisheries could certainly participate on a much larger scale than at present in operations on the continental shelf along the Libyan coast. In any case, this is a resource within reach of the Libyan economy that is not being fully utilized and that could, moreover, be used to improve the nutrition and health of the Libyan people, whose diet is currently unduly concentrated on a few items such as cereals, vegetables and a little meat. The mission therefore gives full support to the government's policy of developing the fishing in- dustry. It must be recognized, however, that Libyans are not by inclina- tion or tradition a seafaring nation, nor at present do they eat much fish. Unlike industry, where people can be trained in a comparatively short time into skilled operators, fishing is a way of life as well as an occupation, and its development will require considerable, concen- trated and prolonged efforts on the part of the government. When embarking on a policy for fishery development, the government should be prepared to pursue a long-term promotional program in respect of training, the provision of fishery services, marketing and measures to popularize fish as a part of the Libyan diet. In the latter connection, it is most important that prices be reduced. The present price of fish, while somewhat lower than that of meat, is extremely high in relation to the earnings of the Libyan workers.5 As a preliminary to the institution of a program for the promotion of Libyan fisheries, the mission recommends the creation within the proposed Ministry of Agriculture and Natural Resources, of a Depart- ment of Fisheries, which would be responsible for formulating policies and projects. Since the success of a fisheries program will depend in large measure on the development of ancillary facilities to handle, process and market the catch (e.g., cold storage, fish canning and waste processing plants), the Fisheries Department will need to establish close liaison with the Ministry of Finance and Economics. For the same reason we recommend that responsibility for fisheries administra- tion in the provinces should be transferred from the Nazirates of Com- munications to the Nazirates of Finance and Economics. In the ad- ministration of fisheries, the federal government should confine itself 5 The average price of fish on the Tripoli market in 1958 was 20 piasters a kilo- gram against 34 piasters a kilogram for mutton and 32 piasters a kilogram for beef. Prices of both commodities are subject to wide seasonal variations. 204 THE MAIN REPORT strictly to the formulation of policies, including the drafting of special projects in cooperation with the provincial authorities, whereas the provincial governments should be made fully responsible for their execution. A high-level fishery specialist should be appointed by the federal government for at least five years to take charge of the over-all de- velopment of fisheries in the country; he should maintain close con- tacts with the provincial authorities in the execution of any develop- ment program. Further, to create a cadre of qualified staff, four young Libyans should be sent abroad for two years' training in the adminis- tration of fishery development policies and programs. The total cost of this program is estimated at £L 40,000 for the period 1960/61 to 1964/65 inclusive. Various suggestions for the regulation of sponge fishing and for assistance to the tunny fishing industry are made in Annex XV. So far as the development of surface fishing is concerned, this requires a thorough reorganization of the present primitive fishing methods. In particular, the use of dynamite for catching fish must be stopped since this is not only inefficient, but also destructive. The catch achieved by present methods is probably as low as 10 kilograms per man-fishing day, as compared with about 100 kilograms per man-fishing day in other Mediterranean countries where more modern techniques are em- ployed. Only if productivity in the Libyan industry can be greatly in- creased will it be possible to boost sales by lowering prices and thereby make fishing a sufficiently attractive occupation for the workers. As the mission sees it, the main objectives of a Libyan fisheries policy should be: 1. to teach the fisherman his trade, including navigation, the opera- tion of motor trawlers, use of modern gear and methods of pre- serving the catch; 2. to provide the wherewithal for the establishment of small Libyan fishing enterprises, whether organized on an individual or a cooperative basis; 3. to build up a bigger market for fish in Libya both by ensuring larger, more regular and cheaper supplies and by stimulating demand through a sales promotion campaign; and 4. to encourage the participation of foreign firms in developing a Libyan trawler fishing industry. The Libyan Government is considering a scheme for equipping and training a fisherman's cooperative in Benghazi, starting with the pur- INDUSTRY, HANDICRAFTS AND FISHE-RIES 205 chase of a motor trawler in 1960 and building up the venture step by step into a self-supporting enterprise. FAO is understood to be willing to provide technical assistance in establishing a vocational training center for Libyan fishermen, complete with demonstration equipment. The mission believes that it should not be difficult to reconcile these two approaches, and that an attempt should be made gradually to build up in each of the two coastal provinces a small fleet of Libyan trawlers under private or cooperative ownership, with the initial capi- tal provided by government on a loan basis, with skilled instructors acting as skippers of the boats and with the crews consisting of young Libyans. Government should assist the operators to develop their own marketing organization or to make suitable arrangements with private traders for the sale of the catch. The details of the scheme would have to be worked out between the government and FAO. Alternatively technical assistance might be obtained directly from one of the western countries with long experi- ence of the fishing industry, possibly on the lines of the Norwegian fisheries training project in India. The scale of the project must de- pend essentially on the availability of technical assistance and on the response of Libyan fishermen. There is at present no body of skilled labor to draw on, and it may well be that better results will be ob- tained by the training of young men who have little previous experi- ence of fishing than by the retraining of those already used to primitive methods of inshore fishing. The spread of education since Independ- ence has resulted in much higher rates of literacy amongst the young than amongst those in the middle and older age groups, and this is a very important consideration when it comes to imparting skills in such fields as engineering and navigation. While the mission does not underestimate the difficulties involved in introducing modern techniques of fishing in Libya, it sees no reason why the experiment should not be successful so long as fishing can be shown to pay. Close attention will therefore have to be given by gov- ernment to improving the present arrangements for marketing, storage and processing of fish as well as to developing a taste for fish amongst the Libyan population. One of the principal reasons for the high price of fish in Libya at present is that the market is controlled by a small number of mer- chants, who are able to keep the prices paid to the fisherman down and the prices paid by the consumer up. One or two foreign firms have tried to enter the market by developing their own trawler business in Libya, but their efforts have received no support from government, and 206 THE MAIN REPORT they have been abandoned. The mission strongly recommends that the government should reconsider its policy in this matter. More competi- tion in the supply of fish will help to bring prices down and encourage consumption of fish, thereby in the long run serving the interests of the Libyan fishermen as well as of the Libyan consumers. Moreover, foreign firms can provide employment for Libyans and help to train them in modern fishing techniques. As we see it, the best prospect for the development of a Libyan fishing industry lies in combining a gov- ernment-sponsored training and production project with the maxi- mum encouragement of private fishing enterprises. The suggested fisheries project will have to be worked out in detail before its financial cost can be assessed. Tentatively the mission sug- gests that capital expenditures on the project over the next five years might amount to about LL 100,000, and that the net costs of operation, after taking into account proceeds from the sale of the catch, might average about LL 10,000 a year, excluding the cost of technical assist- ance, which we have assumed would be granted under one of the UN or other aid programs. The figure suggested for capital expenditures assumes the p:rovision of four trawlers at a cost of LL 20,000 each, plus ancillary equipment and buildings costing another LL 20,000. SUMMARY OF PROPOSED EXPENDITURES The recommendations made in this chapter in respect of industry, handicrafts and fisheries would entail a total capital outlay in the public sector of about LL 800,000 over the five years 1960/61-1964/65. Further, additional recurrent expenditures would have to be carried on the budgets of the federal and provincial governments to the ex- tent of another LL 71,000 a year, or a total of CL 355,000 over the five years. Details are as follows: INDUSTRY, HANDICRAFTS AND FISHERIES 207 (EL '000) Five-Year Annual Total Average Capital expenditures Industry Industrial credit 500 100 Industrial estates 50 10 Pilot tanning plant 35 7 Handicrafts Tripoli and Benghazi emporia 35 7 Misurata training-cum-production center 50 10 Hire-purchase scheme for modern crafts 30 6 Fisheries Purchase of trawlers and other equipment 100 20 Total capital expenditure 800 160 Additional recurrent expenditures Industry Government administration' 75 15 Management training 15 3 Labor training 30 6 Curing and tanning 50 10 Printing 40 8 Contingent reserve for overseas trainingb 15 3 Handicrafts Government administration 25 5 Misurata center 15 3 Fislteries Government administration' 40 8 Operation of development projectd 50 10 Total additional recurrent expenditures 355 71 Includes LL 30,000 for the training of Libyan officials and the employment of an industrial adviser; also EL 45,000 for the consulting services to be provided by the Industrial Credit Department of the National Bank. b Suggested as a reserve fund for training Libyans abroad in various industrial techniques according to need; should cover one-year training for 10 persons. c Includes LL 15,000 for the employment of a trawler fishing expert to take charge of fisheries administration and £L 25,000 for the training of Libyans abroad. d Allowance for initial losses that may be incurred during the five years in the operation of a trial fisheries project. CHAPTER 10 THE TOURIST TRADE Libya's Attractions for the Tourist Libya has three different types of attraction for visitors from Eu- rope and North America, who are the mainstay of the international tourist trade. First, nature has endowed it with a sunny climate, mild in winter and seldom excessively hot on the coast even in mid-summer; with a long Mediterranean coast line and numerous sandy beaches; and with a variety of landscapes, including desert, oases and moun- tains. Second, history has left behind a legacy of interesting monuments ranging from Greek and Roman antiquities through Islamic archi- tecture to the battlefields of World War II. Third, Libya's life has a distinct mixture of African and oriental flavors which are reflected in the customs and dress of the people, in the town and village market places, in the mosques and in the Bedouin encampments in the desert. The factors in Libya's favor as a tourist center are strengthened by the current trend for European tourists and Americans traveling in Europe to move south in search of the sun, a trend which has made the Mediterranean more and more the main center of international travel. Traditional holiday resorts in Italy, France, Spain, Yugoslavia, Greece and other Mediterranean countries are becoming increasingly over- crowded during the summer season and are generally too well known. Tourists are therefore looking for somewhere different to go, prefer- ably "off the beaten track," and Libya could well satisfy this new pio- neering spirit. Air transport, moreover, is bringing distant countries within easier reach than before of European and American tourists. The wide-spread use of charter flights, organized by travel agents or specialized companies, is making long-distance travel cheaper than it used to be and more accessible to middle-income groups. In 1958, for example, German air charter companies alone carried 58,000 tourists to the Mediterranean area. Tourists from Germany, Scandinavia, Holland, Belgium, Switzer- land, the United Kingdom, other countries in Northern Europe and Italy probably constitute the most promising tourist market for Libya to tap in the near future. The obvious line for the development of the tourist trade in Libya is to concentrate in the first place on attractive 208 THE TOURIST TRADE 209 beach resorts equipped with modem hotels for visitors arriving by air or sea and to provide good facilities for local excursions to places of historical, scenic or cultural interest, especially the classical sites at Leptis Magna and Sabratha in Tripolitania, and at Cyrene, Apollonia and Tolmeta in Cyrenaica. Air trips to the Fezzan and other desert oases might be fitted gradually into this pattern. At present few genuine tourists bring their cars to Libya, partly because vacations are seldom long enough for extended road travel, partly because of the high cost of transporting cars overseas and partly because of the political difficulties in the way of road travel along parts of the North African coast. Ultimately private motoring may become a more important element in Libya's tourist trade, but for the time being it is largely confined to foreigners who are residents in the coun- try for fairly long periods. Present Pattern of Libyan Tourism Libya's actual tourist business is not very large. Statistics based on frontier checks indicate that about 38,000 nonresidents entered and left the country in 1958, and that a further 32,500 passed through in transit. About half the total traveled by air and most of the rest by sea. The great majority originated from countries in Europe and North America, but visitors from Tunisia and Egypt were also im- portant. Libya's figures are very slightly higher than those of neighboring Tunisia, but very small in comparison with the millions of tourists who visit countries on the European side of the Mediterranean every year. In fact, given the boom in Mediterranean tourism, neither Libya nor Tunisia has succeeded as yet in gaining more than a very small share of the trade. Moreover, most of the nonresident visitors to Libya are not genuine tourists or holiday makers, but air crew, diplomats, businessmen, oil company staff, members of visiting missions, archaeologists, relatives of military personnel and so forth.' Indeed, on the basis of some 1 In accordance with usual United Nations practice, the tourist is defined in this report as any person traveling for a period of twenty-four hours or more in a country other than that in which he usually resides (subject to the exception mentioned be- low). Persons who stay there for more than twelve months should be considered as immigrants and not as tourists. The same applies to members of the armed forces stationed in the country. However, visitors ashore from a sea cruise or a cruise by land are considered as tourists, even when they stay less than twenty-four hours. 210 THE MAIN REPORT statistics for 1955, it would appear that less than one-third of the non- resident visitors fall into the tourist category. This is not to say that the other categories of visitors are unimportant from the point of view of developing the tourist industry in Libya. On the contrary, they pro- vide a continuous flow of visitors throughout the year, thereby reduc- ing seasonal fluctuations and helping to support the hotel trade in the off-season. In addition, the large numbers of foreign troops, diplomatic personnel and oil company employees stationed in Libya for longer periods constitute a valuable basis on which to build up hotel and catering facilities and other amenities. Objectives of Libyan Tourist Policy The main purpose of developing tourism is to provide additional income and employment for the Libyan people. Tourism benefits not only the hotel, catering and transport trades, but also shopkeepers, wholesale merchants, local industries and handicrafts. The tourist trade can also become an important source of foreign exchange earnings. No reliable statistics are available of either the gross or the net foreign exchange earnings of Libyan tourism in recent years, but there is no doubt that Libya has been spending more on foreign travel than it has been earning from it. If full advantages are taken of the opportunities for attracting more tourists to the country, the balance should be reversed. There are too many uncertainties involved to attempt to forecast what contribution the tourist trade might make to Libya's economy in future years. The mission believes that the potential for the develop- ment of tourism in Libya is considerable. But many things have got to be done by government and private individuals if this potential is to be fully and rapidly exploited. Difficulties to be Overcome Present hotel accommodation in Libya is lacking both in quantity and quality. Few of the existing hotels are well maintained or have properly trained staff, and not a single hotel is located on a beach. Public transport facilities within the country are rather limited, and the absence of rest-houses and good eating places makes road transport over long distances uncomfortable. Notwithstanding these deficiencies, prices for rooms and meals in the best Libyan hotels are generally well up to the levels of first-class hotels in European tourist resorts, and none but the best hotels in THE TOURIST TRADE 211 Libya can offer the foreign tourist the comforts and conveniences he expects. Charges for car hire in Libya are likewise high. Libya is not therefore a cheap country for the foreign tourist, and he has no special incentive to go there on this account. This seems to be the main reason why cruise travel predominates. It is at present not a paying proposi- tion for European travel agents and tour operators to convey regular groups of tourists to Libya by charter plane and keep them in the country for one or two weeks. Both Tunisia and Egypt offer cheaper rates and hence a more remunerative field for activity. One of the main things that Libya has to do to become competitive in the Mediter- ranean travel market is to grant substantial price reductions for the accommodation of parties. Numerous and complicated entry and exit formalities are a serious handicap to the promotion of the tourist trade. Rapid progress has been made in Europe in recent years with the removal of restrictions on international travel, including the need for visas, and European tourists are frequently irked by the more exacting passports and cus- toms formalities in Libya. Nor can they understand why it should be necessary to undergo passport and customs examination while travel- ing inside Libya from one province to another, as at present between Tripolitania and Cyrenaica. Foreign travel agents also complain about the difficulties of organ- izing excursions to the main places of interest in Libya, especially to the Roman and Greek antiquities. In particular, they feel the need for more trained guides speaking several languages. Arrangements for welcoming foreign tourists in Libya therefore have to be improved. A proper organization should be built up to take charge of all activities connected with travel in Libya such as renting of cars, buses and planes, provision of meals, entertainments, guided tours and so forth. Existing travel agencies might be entrusted with this job, but it should be carried out under the supervision of the provincial tourist offices. Finally, there is not as yet any real awareness in Libya of the value of tourism to the country, either among federal and provincial au- thorities or among the public at large, which is still far from being "tourist-minded." If Libya wants to develop tourism, it must spare no efforts to make the country as attractive as possible to foreign visitors. The truth must be faced that international tourism is a highly com- petitive business. The tourist normally has many countries to choose from, and he will only go to Libya if he finds what Libya has to offer more attractive in the circumstances than what is offered by other countries. The mission believes that all the difficulties and shortcomings men- 212 THE MAIN REPORT tioned can in time be overcome by the joint efforts of the Libyan authorities and those engaged in the tourist trade. Some of the things which might be done in Libya to encourage tourism are indicated in the following paragraphs. Expansion of Hotel Accommodation Priority should be given to the expansion of hotel accommodation. At the time of the mission's visit there were only about 1,160 beds available in hotels suitable for foreign tourists, and many of these were more or less permanently reserved for the use of air crews, oil company employees and official visitors. Indeed, the mission itself was made very much aware of the shortage of hotel accommodation by the difficulty it had in obtaining rooms in Tripoli at short notice. It is true that accommodation in neighboring Tunisia is not very much greater, but three new hotels are already under construction, and plans are being carried out for adding 2,000 new beds to existing ac- commodation. Another North African country, Morocco, already offers between 7,000 and 8,000 beds in first-class and good second-class hotels. Accommodation in such countries as Italy and Spain is, of course, on a vastly larger scale. A few new hotels, all rather small, have been completed in Tripoli and Benghazi since the mission's visit, but accommodation is still far from adequate to meet the demand in Tripoli. Discussions have now been going on for well over a year with various foreign hoteliers inter- ested in building a modern hotel outside the city, and the idea is ap- parently supported in principle by both the federal and provincial governments. Yet all sorts of difficulties have been allowed to delay the successful conclusion of negotiations, and nothing had been de- cided when the mission was last informed of the position in February 1960. This is most discouraging, particularly as an International Fair is due to be held in Tripoli in 1962. As the trend of Mediterranean tourism shows an increasing prefer- ence for group travel, new hotels must be built large enough to cater for parties. A capacity of at least 100 beds, and sometimes more, is in- dicated for the main tourist centers. Such hotels should be designed to meet all the requirements of the international traveler. There should normally be a sufficient number of rooms with bath, spacious public rooms, a restaurant and bar, heating in winter, air-conditioning in summer and a swimming pool. Well-trained staff speaking several lan- guages is essential. THE TOURIST TRADE 213 With the exception of some newly-built establishments, all the existing hotels in Libya are publicly owned-mostly by the munici- palities, which put their hotels out to tender at regular intervals (usually every 10 years). This is a very unsatisfactory system. The highest bid tends to be accepted regardless of the professional qualifica- tions of the bidder, while the experienced hoteliers at present running some of Libya's best hotels hesitate to invest more money without a guarantee of continuing the management after expiration of the limited lease. The mission therefore recommends the institution of new arrangements for tender under which offers should only be ac- cepted when made by professionally trained hoteliers, and manage- ment should be unlimited in time so long as the hotel is operated successfully. Every effort should be made to reduce the cost of hotel operation and to improve the quality of service offered. In this connection the mission strongly advises that the hotel trade should be exempted from the regulations of the labor law of 1957 relating to hours of work, un- der which the working day is limited to eight hours and overtime is payable for extra duty. As experience in a number of other countries has clearly shown, such restrictions on hours worked add greatly to the cost of running hotels and lower the quality of service (e.g., by limiting the hours at which visitors can get meals). Some tourist countries, in- cluding Switzerland, have special regulations for working hours in the hotel business. Another matter requiring attention is the training of Libyans in catering schools and hotels abroad, for which use might be made of UN fellowships and bilateral aid from foreign governments. For a long time ahead, however, it will be necessary to employ foreigners in key posts in hotels, and the mission considers that it would be to Libya's advantage to adopt a more liberal policy in granting permits for the employment of foreign hotel staff. If suitable encouragement is given by the government along the lines indicated above, the existing Libyan hotel interests should be ready and able to provide most of the capital needed for the modern- ization of the leading hotels in Tripoli and Benghazi. Additional capi- tal might be provided by the government in appropriate cases through the proposed Industrial Credit Department of the National Bank (see Chapter 9). Some of the hotels need to be made more luxurious and brought up to Riviera standards with swimming pools and other amenities; standards of cooking could also be improved to great ad- vantage in some cases. 214 THE MAIN REPORT For the construction of the new hotels required, every effort should be made to attract foreign investment. Foreign hotel and transporta- tion interests would be particularly welcome as investors because they are well placed to secure part of their own clientele. To attract foreign investment the mission recommends that the Libyan Government should be ready to offer special tax concessions on the lines of those offered to industry under the law for the investment of foreign capital. If difficulty is experienced in getting foreigners to invest capital in hotels in Libya, the government should try as an alternative to find qualified foreign hotel concerns which might be interested in operating hotels under a management contract on lines tried out successfully in some other Mediterranean countries. In such cases the capital has to be put up either by the government or by private local interests. We have made no specific provision for this in our program, but we have assumed that funds will be available to finance such investment if a suitable arrangement can be worked out. After detailed study of a proposition put forward to the Libyan Government recently by a group of foreign businessmen, the mission is satisfied that a well-run first-class beach hotel outside Tripoli, possibly costing somewhere in the region of £L 350,000, could be made into a paying proposition. Of course, this judgment holds good regardless of who puts up the capital, but experienced foreign management is necessary at this stage. The most urgent need for new hotels is in Tripoli, and at least one beach hotel of the type mentioned above should be built close to the city, possibly with as many as 300-400 beds. Consideration might also be given to construction of a second beach hotel, which would be rather smaller and less expensive. Meanwhile, as a first step toward increasing hotel accommodation in the city, the mission suggests recon- version to its or iginal use of the "Melograno," which was built in 1938 as an annex to the Grand Hotel and is used today as a residence for government officials and their families. Benghazi is the only other center in Libya besides Tripoli where there is steady demand for hotel accommodation throughout the year from visiting officials, foreign missions, oil companies, air crews and so forth. The hotel situation there at the time of the mission's visit was far from satisfactory, but three new hotels were under construction as a result of private initiative, and these have since added, or will add shortly, between 250 and 300 new beds. Even so, there may still be room eventually for a beach hotel outside the town catering especially to holiday makers and to the employees of oil companies operating in Cyrenaica. THE TOURIST TRADE 215 Opportunities for the profitable operation of hotels outside Tripoli and Benghazi are very much more limited in present conditions, and direct action by government will probably be necessary in the first in- stance to develop the facilities required to encourage tourism. A net- work of nine small hotels was established by the Italians in Tripoli- tania at Homs, Zliten, Misurata, Cussabat, Zuara, Garian, Jefren, Nalut and Gadames. The majority of these establishments have since been closed down, and the few still in operation are in poor condition. Only the hotels at Homs and Gadames would be suitable as holiday centers, and the mission suggests that the federal government should provide funds for these to be renovated and reopened. Management might be entrusted to existing hotel interest in Tripoli on a contract basis. The federal government might also provide capital for renova- tion of some of the other country hotels to serve as rest-houses for tour- ists traveling around Libya. Initially, most of these country hotels and rest-houses could be expected to operate at a loss, and this would have to be covered out of public funds. The country hotels in Cyrenaica (at Cyrene, Apollonia, Derna, Tobruk and Beida) are in a rather less run-down condition than those in Tripolitania, but there is still need for better maintenance. Oc- cupancy of existing hotels in Cyrene, Derna and Tobruk is very low, and efforts should be made to attract more patrons from amongst for- eigners resident in Libya by improving the amenities. The mission has suggested elsewhere in this report (Chapter 12) that the deep-water anchorage at Ras el Hilal between Apollonia and Derna might be de- veloped as a landing place for cruise ships. If this project turns out on closer examination to be feasible, the possibility of building a medium- sized beach hotel nearby would also be worth consideration. However, no immediate action is suggested since it will inevitably take several years to open up this area to the tourist trade, and existing hotel ac- commodation is more than adequate in quantity to meet present needs. The desert oases of Libya, most of which lie in the Fezzan, offer a potential tourist attraction. Travel to the oases, especially to the more colorful ones like Gadames and Murzuk, would have a special fascina- tion because so few countries in the world are able to offer similar at- tractions. If these can be coupled with rapid transport and reasonably good accommodation, they might become a useful addition to the other attractions that Libya has to offer. As for accommodation, the fortresses left behind in a number of these oases by the former Italian and French administrations might be converted into tolerably good rest-houses or hotels. Travel during the fall and the spring, and also 216 THE MAIN REPORT perhaps during winter, could be organized on the basis of round-trip tours for groups and parties if the air companies will cooperate in such a venture. The government might be able to encourage this type of tourist trade by offering inducements in the form of low rentals on public buildings used as hotels, duty-free import for hotel supplies, special income tax concessions and improved maintenance of landing strips. The mission, however, would suggest implementation of this project at a somewhat later stage after facilities for the promotion of tourist traffic in the coastal areas are better established. Transport Facilities Improvements in facilities for getting to Libya and for traveling around inside the country will naturally be of assistance to tourism. Existing air services from Europe to Libya and within Libya between Tripoli and Benghazi appear to be adequate, and there is no reason to doubt that the airlines will be ready to provide additional services to meet any nmajor increase in demand for travel over these routes. Private enterprise should also be given every encouragement to pro- mote internal air travel. Special charter flights organized by one tour- ist agency at Easter 1959 to take parties from Tripoli to Gadames and back were apparently successful, and more desert trips of this kind can be visualized in future, especially if the hotel at Gadames is renovated and put back into use. Cruise ships are another potentially important source of tourist traffic. In 1958 transit cruises brought approximately 4,000 tourists to Tripoli, and although the stay is generally limited to one day, ap- preciable sums of money are spent on handicrafts and souvenirs and on visits to Leptis Magna and Sabratha. Brief visits of this kind are of considerable value in making Libya better known to tourists, and con- tacts with the foreign companies running cruises should be actively promoted. One travel agency organized a series of cruises in 1959 which allowed passengers to stop over in Tripoli for one or two weeks, and arrangements of this kind might well be extended in future. Tourist travel by road within Libya is essentially a matter for pri- vate enterprise. It is most important, however, that the authorities should allow tourists free choice in making use of the means of trans- port available, and that public interference should be limited to cases where action is needed to protect the tourist's interests (e.g., the regula- tion of taxi fares). An example of inappropriate government interven- tion was provided while the mission was in Tripoli in March 1959, when an edict was issued by the provincial government that buses THE TOURIST TRADE 217 would not in future be allowed to enter the port area to meet tourist ships. The idea behind this edict was understandable, namely to help the local taxi and horse-carriage drivers to secure more custom. But the right way to do this is to attract more tourists to the country and not to impose irksome restrictions which are liable to keep them away by causing inconveniences and adding unnecessarily to the costs of their visit. Road traffic between Libya and Egypt and between Libya and Tunisia is very light. Few European tourists are likely to be interested at present in motoring from Libya to Egypt because of the distances in- volved, but something might be done to encourage motoring between Libya and Tunisia, which would be in the interests of the tourist in- dustries in both countries. As one step in this direction, we suggest the construction of a small government rest-house with facilities for eating on the Libyan side of the Tunisian border. Use could also be found for a good rest-house at Marble Arch which lies on the coast road approximately midway between Tripoli and Benghazi. The capital cost of such rest-houses should not exceed £L 10,000 each. Other Amenities In addition to hotels, good restaurants or cafes serving Libyan as well as European food are required at all the principal places of tourist interest and at intervals on the main roads. A number of cafes have been established by the tourist authorities (e.g., between Barce and Derna in Cyrenaica), but they are poorly kept and have little but packaged and canned goods to sell. Tourists also want varied facilities for sports (swimming, sailing, fishing, tennis, golf, horse-riding, hunt- ing and pigeon shooting) and amusements (cinemas, night-clubs, ca- sinos, displays of Libyan music and dancing). Only Tripoli and Ben- ghazi can hope to offer a comprehensive range of sporting activities and entertainments, but some variety is required in the smaller tourist centers such as Cyrene. The two existing casinos in Tripoli and Benghazi attract a good deal of custom from foreign residents and visitors and provide a valu- able source of income for the municipalities and the provincial depart- ments of tourism. Provincial and municipal taxes on the gambling proceeds, at present 50 percent, might with advantage be raised to 60 percent, which would not be out of line with European practice and would yield additional revenues for the promotion of tourism. Antiquities and museums are an essential feature of Libyan tour- ism, and by helping to maintain the classical sites and to continue ex- 218 THE MAIN REPORT cavations the federal and provincial governments are contributing to the promotion of tourism. Public expenditures on antiquities and mu- seums have been running at the rate of around £L 45,000 a year. This amount might well be increased to enable more rapid progress to be made with the excavations at Leptis Magna, Sabratha, Cyrene, Apol- lonia, Tolmeta and other sites where considerable areas of great potential interest are still unexplored. The mission therefore recom- mends that an additional allocation of £L 15,000 a year be made for this purpose by the federal government. At the same time entrance fees to antiquities and museums (commonly only two or three piasters) should be considerably increased. This is a very small item in the budget of the foreign resident or tourist, and having come all the way to Libya he can easily pay at least 10 to 20 piasters for admission to such unique attractions as the ruins at Leptis Magna and Cyrene. (Con- cessionary rates could be charged for special groups, including Libyan students.) Additional revenues raised in this way should be reserved for the use of the provincial departments of antiquities. Simplification of Formalities Simplification of present immigration formalities is one of the most important steps that has to be taken to develop tourism. Following the example of Tunisia, the mission suggests that visa requirements should be abolished for tourists coming from Western Europe and North America, wherever possible on a reciprocal basis. Visas for other na- tionals should be granted without charge at the frontier or airports. At present the visitor has to make a written declaration for customs in respect of his personal effects, and the same procedure is required for import and export of currencies. We would suggest that in both cases examination be confined to personal questioning, with written declara- tions only asked for in special cases. It is a great advantage if customs officers, police officials and other staff at frontier posts can speak for- eign languages, thus making visitors from abroad feel welcome, and language training for these officials could be arranged by the respective government departments. Organization of Tourism The promotion of tourism is at present mainly the responsibility of the provincial governments in Tripoli and Benghazi, while there is also a federal Director of Tourism and Fairs in the Ministry of Na- THE TOURIST TRADE 219 tional Economy. As in many other fields of government action, there is no clear division of function between the federal and provincial au- thorities and little coordination of their activities. None of the depart- ments concerned appears to be equipped with adequately trained staff, and publicity is poorly handled. In the mission's view, a radical re- organization of the whole machinery is essential if real progress is to be made with promotion of the tourist trade. Both the federal and provincial governments might consider engaging advisers with expert knowledge of the travel business. As the mission sees it, the federal government should concentrate on four main tasks: 1. Laying down general policies for tourist development in Libya covering such matters as entry and exit formalities, concessions to foreign investors and financial assistance to private hotel operators. 2. Providing capital assistance to the provinces for the construction or renovation of government hotels and rest-houses and for im- proving amenities (especially antiquities), such assistance carry- ing with it the responsibility for ensuring that the sums allocated to the provinces are spent in the ways intended. 3. Representing Libyan tourism abroad by giving information to potential visitors, and at a later stage by engaging agents to undertake publicity campaigns in selected countries. 4. Cooperation with other Mediterranean and Middle Eastern countries in reviewing common travel problems, eliminating frontier restrictions and organizing joint publicity campaigns. The proposal to hold an International Fair in Tripoli in 1962 lends urgency to the tasks of improving the amenities for tourists in Libya and of overhauling the administration of tourism. Timely prepara- tions have to be made for the reception and accommodation of visitors, careful thought must be given to the selection of exhibitors, much work has to be undertaken on the site and so forth. The success of the Fair could do much to enhance Libya's reputation as a tourist center; equally, any shortcomings in the organization of the Fair itself, or of the amenities provided for visitors, could have the opposite effect. Summary of Proposed Expenditures It is difficult to estimate with any precision the public expenditures that would be entailed in carrying out the recommendations in this 220 THE MAIN REPORT chapter because much will depend on the type of arrangements made for financing construction of the new hotels proposed. The aim should be to induce private enterprise, Libyan and foreign, to put up as much as possible of the capital required for hotels, transport and other tourist facilities. On the assumption that the government will not have to finance the building of large new hotels, and that any public money required for improvement of existing hotels in Tripoli and Benghazi will be provided through the proposed Industrial Credit Department of the National Bank, we suggest the following program of govern- ment expenditures on tourism and antiquities for the five-year period 1960/61 to 1964/65: (£L '000) Five-year Annual total average Capital expenditures Restoration of country hotels and rest-houses 130 26 Construction of new rest-houses on coast road 20 4 Additional recurrent expenditures Increased allocation for antiquities and museums 75 15 Initial losses on operating country hotels and rest-houses 50 10 Organization and publicity 125 25 Total Development Expenditures 400 80 First priority should be given to the expansion and improvement of hotel accommodation in Tripoli and Benghazi. The suggested pro- gram for the renovation and reopening of country hotels and rest- houses in Tripolitania and for improvements to existing publicly owned hotels in Cyrenaica should be carried out in stages over a period of five to ten years, priority being given to putting the hotels at Homs, Misurata, Jefren, Gadames, Cyrene and Derna into better shape. The allocation of £L 130,000 contained in the above capital budget should be sufficient for this purpose. At a later stage, work might be undertaken on renovation of other hotels in Tripolitania and possibly on the construction of desert rest-houses in the Fezzan. THE TOURIST TRADE 221 We have suggested elsewhere in this report certain other expendi- tures which are primarily designed to encourage tourism. In particular, money has been included in the programs for roads and ports to finance a possible scheme for the development of Ras el Hilal as a calling place for tourist ships. This scheme, if it proves feasible, should make the main tourist attraction of Cyrenaica much more easily accessible to foreign visitors. CHAPTER 11 ELECTRIC POWER Organization of Power Supplies in Libya The supply of electric power is the most important public utility in Libya. Gas is at present of minor importance; a private company provides a piped supply in Tripoli and also produces bottle gas for cooking and heating. Considerable sums have been involved in recent years in the expansion of electricity supplies (see Chapter 3), and de- tails of the existing facilities are set out in Annex XVI. Very little electric power is consumed in Libya in comparison with other Middle Eastern countries. There are no big industrial under- takings, and the total power sold by public utilities in 1958 amounted to less than 67 million KWH. The mission was not able to obtain a complete record of the output of existing private power plants, but has evidence that it amounts to less than a third of that of public utilities. By far the largest public utility is that known locally as Tripoli Power, which sold 42 million KWH of electricity in 1958, or roughly two-thirds of the total for the whole of Libya. This undertaking was formerly owned by an Italian company, Societa Electrica Commerciale Industriale (SECI), but in 1956 the federal government purchased roughly 70 percent of the shares with funds provided as a grant by the LARC, SECI retaining the other 30 percent. The price paid was about £L 1,120,000 ($3.14 million). The LARC also lent about £L 300,000 ($928,000) to the undertaking for working capital, including the pur- chase of stocks of fuel and spare parts from SECI. The undertaking has two power stations in Tripoli, as well as small units at Homs and Misurata. An independent public corporation has now been set up to run Tripoli Power. The chairman of the board is a senior official of the federal government, and there are six other members, two nominated by the federal government, two by the provincial government and two by SECI. The first meeting of the board was scheduled to take place early in 1960. The other public power plants in Tripolitania are owned and op- erated by the municipalities (except that at Jefren, which is owned 222 ELECTRIC POWER 223 and operated by the State Property Department), but they are main- tained by the Nazirate of Public Works. Electricity supply undertak- ings in Cyrenaica and the Fezzan are owned and operated by the provincial Nazirates of Public Works. Except for Tripoli Power, which has been operating at a small profit, none of these undertakings keeps commercial accounts or is run on strict business lines. Electricity in Cyrenaica covers its operation costs, though not its capital charges. All the smaller plants in Tripolitania and the Fezzan are heavily subsidized. Tripoli Power Tripoli Power has two generating stations (one steam and one diesel) with a combined installed capacity of a little over 18,000 KW, but the "firm" capacity is at present somewhat less than 12,000 KW as some units are old and some of the boilers are being rehabilitated. Output and sales have both risen rapidly in recent years. From 1953 to 1958 the annual average rate of growth was over 10 percent, and the peak load in summer has reached nearly 9,500 KW. About 44 percent of the power sold in 1958 was for lighting and domestic power, 39 percent for agricultural and other pumping and the rest for industrial purposes. Demand, however, greatly exceeds present capacity, and the undertaking has had to refuse connections and to resort to load-shedding. The tariff structure is complex, the charges for agricultural pumping being below the cost of supply, while those for industrial power are disproportionately high. This and the load- shedding explain why many factories, and even farms, have installed their own diesel plants. Plans for the expansion of the undertaking were put forward five or six years ago, but the federal government had difficulty in securing a loan to finance the work. As an interim measure, the LPDSA placed orders in the United Kingdom for a 1,350 KW diesel generator and a 5,000 KW turbo-generator. The cost of these two units, including in- stallation charges and consultants' fees, was about £L 200,000, and both are now in operation. An offer by an American firm to supply two new 10,000 KW turbo- generators and miscellaneous ancillary electrical equipment was made to the Libyan Government in 1956, and early in 1957 the government signed a contract with this firm for $3.65 million on a deferred pay- ment basis. No provision was made for the purchase of boilers to sup- ply steam to the new generators. The U. S. Government subsequently agreed to finance the project, and early in 1958 the LARC engaged a 224 THE MAIN REPORT firm of American consultants to design the plant, order much of the equipment and supervise construction and installation. Orders for boilers and certain other equipment were placed by these consultants in 1958 with American suppliers. At no stage does it appear that the Italian management responsible for operating the undertaking was fully consulted about the details of the expansion scheme. The generators and some of the other equipment manufactured in the United States were ready for delivery in 1958, but at that time no decision had been made on the construction of a new power house. As a result, the equipment remained in the United States, where sub- stantial expenses were incurred for storage and insurance. It was not until the summer of 1959 that agreement was reached between the Libyan Government and the U. S. Development Loan Fund on a fur- ther loan to finance the construction part of the project. The contract for the power house and installation of the plant was then let to another American firm, and the work is now proceeding. It is due to be completed some time in 1961. In 1956 consultants to the firm supplying the generators estimated the total cost of the expansion scheme, including transmission and distribution facilities, at £L 3.7 million. More recently, early in 1959, the consulting engineers to the LARC re-examined the scheme and, allowing for the provision of much additional equipment and further consultants' fees, revised estimates of total costs upwards to £L 4.9 million or just under $14 million. Some of the work to which this latter figure relates has already been carried out by the management and financed out of the earnings of the undertaking, and it is impos- sible to say at this stage exactly what the final cost will be. It is clear, however, that costs have been greatly increased by the confusion and delays in planning and replanning of the project. U. S. funds have so far been made available for the project as fol- lows (amounts in U. S. dollars): Private U.S. suppliers credit being repaid by LARC 3,648,550 Loans made in 1957 under U.S. Mutual Security Act 3,500,000 Loans made in 1959 by U.S. Develop- ment Loan Fund 5,000,000 Total 12,148,550 ELECTRIC POWER 225 For the purpose of estimating investment in electric power facilities during the five years covered by its program, the mission has assumed that about £L 2.75 million (just under U. S. $8 million) of the expendi- tures on Tripoli Power will be incurred after March 1960. In view of the fact that the costs of the expansion scheme have been so high (probably not much less than U. S. $700 per KW installed, trans- mitted and distributed), it seems unreasonable that the resulting capi- tal charges should be passed on in full to the new corporation. The mission therefore recommends that part of the capital invested in the scheme should be written off by the government. The expansion now in hand should, when completed, take care of the power needs of the area served by the undertaking until 1966 or later, though severe shortages may be experienced during the next two years pending installation of the new units. It is difficult to forecast the rate of growth of demand once supplies are fully available, as much will depend on the reliability of supplies and the schedule of charges. Agriculture is now making the greatest demand on power for electric pumping, but the cultivated area around Tripoli is being overex- ploited, and the water table is falling in places at an alarming rate (see Chapter 7). New areas in the vicinity are available for cultivation, and the demand for power will depend in part on how quickly these are developed. The demand for domestic lighting and power may slow down after a brief spurt to meet the recent pent-up demand, but if the foreign community in Tripoli should continue to grow as a result of oil operations or for other reasons, domestic and office consumption of electricity might well continue to rise quite fast with the extended use of air-conditioning and other electrical appliances. Once regular supplies are assured and the tariffs for industrial power adjusted, there is likely to be a big increase in the demand for industrial power as factories switch over from private plants to the public supply. Costs of generating and distributing power in Tripoli (22 milliemes or 6.2 U. S. cents per unit sold in 1956-58) are very high in comparison with costs in other countries. This appears to be mainly due to the antiquated and ineffecient generation, transmission and distribution facilities, and a marked improvement should be looked for when the new plant comes into operation. Costs must certainly be reduced if Tripoli Power is to put its own finances on a sound footing and at the same time play its proper role in the development of the economy. A great deal of essential work has already been done on the dis- tribution system to reduce line and other losses and, in the power house, to reduce power consumption by the station auxiliaries, so that 226 THE MAIN REPORT the total percentage loss was reduced from 24.75 percent in 1951 to 17.74 percent in 1958 and from 9.01 percent to 5.93 percent in these two sources respectively. Similarly the thermal efficiency at the Marconi steam station was improved from 10.75 percent in 1951 to 15.49 per- cent in 1958 and at Miani from 28.41 percent (for the diesel units) to 32.96 percent. Fuel costs for these stations fell in the same period from 9.373 milliemes per KWH generated to 5.206. All this reflects credit on the management. The mission recommends that, as one of its first tasks, the new corporation should arrange for a full investigation to be made into the future financial position of the undertaking in the light of the most recent development, including the discovery of oil in Libya. This investigation should provide material for, and be followed by, a re-examination of existing tariffs with a view to devising a tariff struc- ture that is adapted both to the development needs of the area and to the financial interests of the corporation. This re-examination should be undertaken in consultation with the federal and provincial governments and should have regard particularly to the urgent need to restrict the exploitation of groundwater in the Tripoli Quadrangle (see Chapter 7). If it is the government's policy to subsidize agricul- turalists or any other class of users, the subsidy should be clearly identi- fied, and government should reimburse the corporation to the same extent as it would reimburse a private company required to sell goods at subsidized prices. The mission welcomes the decision to set up an independent cor- poration to administer the affairs of Tripoli Power. The responsi- bilities of the corporation should be confined for the time being to Tripoli Power, but the mission believes that it should in due course take over the management of all other public electricity undertakings in Tripolitania and, ultimately, in Cyrenaica and the Fezzan also. It is most important that appropriate arrangements should be made for the board to consult regularly with the main agricultural, industrial and other consumers. Efficient operation requires that the undertaking should continue to be run on commercial lines and kept clear of political influences. Management and senior technical posts will have to remain in the hands of foreigners until Libyans are trained to replace them; the manager himself should be a qualified engineer. The corporation should regard the institution of a training scheme for Libyans as one of its most urgent tasks. Even so, it is likely to be at least 10 years before any Libyan can be expected to gain the necessary technical ELECTRIC POWER 227 qualifications and practical experience to occupy any of the senior engineering posts. Finally, the mission considers it to be of the utmost importance that the management of Tripoli Power-and of other public utility undertakings-should be given full responsibility for day-to-day opera- tions and should be consulted on all proposals affecting future devel- opment of the undertaking. If consultants are employed to advise on particular problems, they should be employed by the corporation and not by any outside body or government department. Failure to observe these principles and the resulting confusion of responsibilities as be- tween consultants and management have largely contributed to the delays and excessive costs of the present expansion scheme. Other Power Stations Benghazi is the most important center of power supply in Libya after Tripoli. Its power station was commissioned in 1952, replacing a station damaged in the last war, and it ran until 1955 in parallel with the existing plant left by the British administration. It has now an installed capacity of 6,150 KW, which is all diesel-driven and has all been financed by one of the foreign aid agencies. Output has in- creased from nearly 10 million KWH in 1953/54 to 16.84 million in 1957/58 or at the rate of more than II percent a year. The undertak- ing is managed by the Cyrenaican Nazirate of Public Works, as are also all the 14 other public power plants in the province. The revenue from all these undertakings has increased from £L 135,030 in 1953/54 to £L 337,710 in 1958, but working profits (excluding depreciation, for which no allowance is made) have decreased from £L 38,140 to rL 22,900 in the same period. There are various reasons for this decrease, including failure to adjust tariffs, short collection of revenue, re- dundant staff and other administrative deficiencies connected with noncommercial management. The peak load of the Benghazi plant (4,020 KW in 1959) indicates the need for more installed capacity if growth in demand continues at anywhere near the present rate of 11 percent a year, and EL 180,000 has been provided for this in the mission's program of capital expendi- ture. The technical management is excellent, but too many staff are employed on maintenance and bill collection. There are 18 small publicly owned power stations in Tripolitania, 14 in Cyrenaica and 3 in the Fezzan, but none of these is under com- mercial management. Most of the larger towns in Tripolitania are 228 THE MAIN REPORT poorly served and improvements in policy direction are indicated al- most everywhere. Where the utilities are both owned and operated by the Public Works Department, a reasonably high standard of technical efficiency appears to be maintained, but where there is a dual control, conditions are generally unsatisfactory. As explained in Annex XVI, many of the installations in the existing power stations are old, the distribution systems are not always in good condition and hours of operation have not been fixed to meet the requirements of potential users. The mission has allowed in its program for the expenditures needed to put matters right, to replace obsolete plant and to provide for future expansion. Assuming replace- ment of 50 percent of the existing obsolescent plant and a growth of demand at the rate of 10 percent a year for half the installed capacity (other than Tripoli Power) and 5 percent a year for the rest, the capital investment required will be about £L 650,000 in the five-year period. This includes £L 180,000 for the Benghazi power station. Summary of Proposed Expenditures The recommendations which we have made in this chapter, to- gether with projects already being undertaken, would entail a total capital outlay in the public sector of £L 3,400,000 over the five years 1960/61 to 1964/65. This total would be distributed as follows: (£L '000) Five-year Annual Project total average Expansion of Tripoli power 2,750 550 Other power stations in Tripolitania 250 50 Benghazi electricity supply 180 36 Other power stations in Cyrenaica 220 44 'rotal 3,400 680 CHAPTER 12 TRANSPORT AND COMMUNICATIONS Existing Transport Facilities On the whole, the existing transport system serves the needs of the country adequately (see map facing next page). Internal transport is carried mainly by road, supplemented by air travel for passengers be- tween the three provincial capitals. The railways play a very minor role and are run at a loss, while coastal shipping traffic is negligible. Privately owned motor vehicles are responsible for the bulk of the road traffic, but government also owns and operates large fleets of motor vehicles. Many of the main roads carry little traffic. The bulk of Libya's foreign trade passes through the port of Tripoli, the only other harbor of significance being Benghazi which serves a much less densely populated hinterland and at present handles less than a fifth of the country's trade. There are a number of minor ports along the coast which were developed before the coming of road transport and were used in Italian times, especially for military pur- poses, but are now largely abandoned except by fishing vessels. The only natural harbor of any size in Libya is at Tobruk, but this is far from the main centers of population, industry and trade. There are two main international airports, Idris airport near Tripoli and Benina airport near Benghazi. Both are served by a num- ber of foreign airlines, with regular connections between the two on six days of the week. There is a landing strip at Sebha, which is con- nected with Tripoli by a weekly service. A number of other good land- ing strips exist in the desert at such places as Gadames, Hon, Brak and Ghat, and temporary strips have been laid out by the oil companies at many of the exploration sites. Important military airfields are lo- cated at Wheelus Base outside Tripoli (leased to the United States) and el Adem near Tobruk (leased to the United Kingdom). THE RAILWAYS Two small single-track narrow-gauge (95 centimeters) railways operate in Libya-the Tripolitanian railway (178 track kilometers 229 230 THE MAIN REPORT with 42 kilometers of sidings and branches) and the Cyrenaican rail- way (164 track kilometers with 20 kilometers of sidings and branches). Both railways operate at a considerable loss. The total loss in the six- year period 1952/53 to 1957/58 was £L 339,288, and revenue from goods transported in this period was only £L 60,908, or an average of £L 10,151 a year. Passenger revenue amounted to rather over two and a half times the goods revenue. The loss moreover has been increasing year by year, and in 1958/59 the deficit on the operations of the Tripolitanian railway alone amounted to over £L 50,000. In an endeavor to attract traffic to the railways, passenger fares and goods tariffs have been kept very low (well below cost), but the railways have still been unable to compete effectively with road services, which in most countries have proved to be more economical for carrying traffic over short distances. The most modern rolling stock consists of one diesel car, dated 1939, in Tripolitania and a diesel locomotive and a diesel car, both dated 1952, in Cyrenaica. Most of the rest of the rolling stock is said to date from 1890 to 1929. In these circumstances it is creditable that the railway administrations have managed to keep the railways operating at all. The mission has considered the possibility of rehabilitating and extending the railways, but this would cost a lot of money and in view of the very low volume of traffic offering, the limited area served by the railways (less than one-half percent of Libya or 10 percent of the settled area) and the deficit character of the railways operation, we have been forced to the conclusion that the railways, as such, should be closed down. The area served by the Libyan railways is for the most part served also by good roads, and as the roads will have to be main- tained anyhow, there is no need to have the railways as well. Abandon- ment of the Tripolitanian railways would not increase the truck traffic on the parallel roads by more than a few percent. In Cyrenaica, once el Abiar is linked by road with Barce, as recommended elsewhere in this report, the roads should have no difficulty in carrying all the passenger and goods traffic that is likely to be offered in the area at present served by the railway. The mission's detailed recommendations, and some of the facts on which they are based, are elaborated in Annex XVII. The existing sidings and branches in and around the port areas of Tripoli and Benghazi would be retained under our proposals, but they would be managed by the port authorities concerned. Valuable use can be made of railway lands in Tripoli, and to a lesser extent in Benghazi, if these are made parts of town improvement schemes. LIBYAN TRANSPORT MAP - S t g ° . . U~~~~~~~~~A E D9 /T E R / A At EA IV S E Aj .I sr seHo 6,> Gh,,r .~ ' CI> . ofro> ,, - Teorbo BENGHAZI *f c< r ~ ==-a 11 8eneUl Gulf of Sirte . \ > " \0/ / Sp j'*C I~~~ B CIo\ -t \ t 1O " ,__fl__. V ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~S Id 13. 8 /l G.bs C In, ", ,H- / ti \\\ \\ i7 1 A, 11 I 1-- L- - ----dobir - I I -4, eI G*elA 1 \ MrF N N-~~~~~~~~~~~~~~~B g *\' _' '(cas>al motrale ~-' m-- rIFr jl sGnpl __oz I Minor improvements and ) S i~~~~~S c,., E i 0013trun Fo0 better Aiena c r - fMed-usO | g g d 0 Railways n 5 Ir)() 15O 200 250 300llO AKg I j J. F E Z SI 101" *Teqerhl *1 MainAcivillarDorts e _ -1 1 1 GMdd,19 T--OSSO A,- n 0 N Surfaced roads S Tooc Z>,0 - Motorable tracks / Mec-k - Camel tracks o o, - - - - - -- - ~~~~~~~~~~~~~(occasionally motorable) --- N ~~~~New construction and major _________improvements in progress *0 ~ ~ ~ ~ ~ ~ ~ ~ ~~ // ~~~~~~~~or recommended IC0'G.t Minor improvemients and d ~~~~~~~~~~better maintenance required Togorn, * ~~~~~Main civil airports 50OCT5021 5 N K Mcrch 1960 I TRANSPORT AND COMMUNICATIONS 231 The total staff employed by the railways at the time of the mis- sion's visit numbered 265 in Tripolitania and 240 in Cyrenaica. Of these, 29 were salaried employees of government and could be trans- ferred to other departments. There should be no great difficulty in finding alternative employment for the remaining skilled (197) and unskilled (279) labor as there is strong demand for both types of labor in Libya at the present time. No major problems have arisen in the past when the labor force on the railways has been curtailed. However, some employees may suffer hardship if their services are suddenly terminated, and we suggest that appropriate compensation should be made to all on the basis of so much for every year of service, special consideration being given to exceptionally hard cases. ROADS AND ROAD TRANSPORT The Road System The most important road in Libya is the federal coast road, 1,822 kilometers in length, which runs the whole way from the Tunisian to the Egyptian border, passing through Tripoli, Benghazi and many of the smaller towns in Libya, including Zuara, Zawia, Tagiura, Homs, Zliten, Misurata, Sirte, Agedabia, Barce, Beida, Lamluda, Derna and Tobruk. It was constructed by the Italians between the wars and has a black-top surface throughout its length. There is a second link be- tween Barce and Lamluda known as the "south road," which is 141 kilometers long. The other federal road, at present little more than a desert track in some places, runs from a point on the coastal road 120 kilometers south of Misurata through Sebha, the capital of the Fezzan, to Ghat near the Algerian border. The total length of this Fezzan road is about 1,250 kilometers, and there is a branch 260 kilometers long running from Uaddan to Sirte. The first section from the coast to Sebha (620 kilometers) is being improved and provided with a black- top surface, and the work is scheduled to be completed by the end of 1961. In addition to the federal highways, Tripolitania has about 1,200 kilometers of black-top and macadamized roads and Cyrenaica about 500 kilometers (see map). The main groups of oases in the Fezzan are linked by rough roads and desert tracks. In fact, practically all the towns and villages of Libya, including the desert oases, are accessible by motor vehicle, but the going is sometimes extremely rough, and four-wheel drive is necessary in parts of the desert. 232 THE MAIN REPORT Road Maintenance During the six years 1954/55 to 1958/59, about £L 4.3 million was spent on rehabilitating Libya's road system, which deteriorated badly during and after the war. Some of this work, especially in Cyrenaica, consisted in repairing war damage, but the bulk of it was for expensive reconstruction of long lengths of road where maintenance had been neglected for years. The majority of the black-top roads are now in fairly good condition, and it may be taken that practically all war damage has been fully restored except that a few large bridges on the coast road are still in the process of being rebuilt. The mission urges that in future adequate budget provision be made for renewals of road surfaces, and that not less than 10 percent of the surfaces on all black-top roads in Libya be renewed every year for the next few years, the renewal of surfacing and upkeep of existing roads being given priority over new construction as a matter of gov- ernment policy. Provision for road maintenance and renewals should be included in the ordinary budgets of the federal and provincial gov- ernments, and not in the capital budget, and all the money voted by Parliament under this head should be used strictly for the purpose indicated and not diverted to new construction, as has sometimes hap- pened in the past. It should be the function of the Auditor General to draw the attention of Parliament to any cases in which this rule has been infringed. We would also suggest that, when Parliament is asked to approve expenditure on a new road, the consequent maintenance liability should be indicated for its information. Annual requirements for expenditure on maintenance and re- newals of surfacing during the next five years are estimated at about (L 900,000 divided as follows (amounts in £L): Federal roads 484,500 Tripolitania 252,700 Cyrenaica 148,900 Fezzan 15,200 Total 901,300 The basis of this estimate is explained in Annex XVIII. It does not in- clude any provision for maintenance and renewals to the new Fezzan TRANSPORT AND COMMUNICATIONS 233 road now under construction; this will fall due after 1965 and will add about £L 120,000 to the annual bill for maintenance and renewals. New Construction and Improvements At present there is very little traffic or potential traffic justification for new roads. Exceptions are a new road parallel to the railway from el Abiar to Barce (54 kilometers), some short lengths of new road near Tripoli (30 kilometers) and some local roads in Cyrenaica (40 kilo- meters). Short lengths of new agricultural feeder roads are also re- quired in all provinces. The Tocra-Tolmeta road now under con- struction should be completed, but the mission sees no justification, economic or other, for the proposed extension of this road to el Hania and Susa, especially as this would involve very costly engineering in places where the escarpment comes down close to the sea. As already noted, a decision has been taken by the Libyan Govern- ment to construct a new black-top road from the coast road south of Misurata through Hon to Sebha in the Fezzan. This decision cannot be justified on economic grounds, but the mission understands that important administrative and political considerations may be involved. A contract for the construction of this road has been let to a Libyan contractor, and work is already in hand. The value of the contract is understood to be £L 1.9 million, with a 10 percent allowance for escalation, although it is clear that the actual cost of completing the road to the agreed specifications would be well in excess of this figure. It was brought to the mission's attention that no instrument survey of the alignment was made before the contract was let, and for the rea- sons stated in Annex XVIII we feel that the procedures followed by the government in this matter are open to criticism. Costly roads built to remote oases might facilitate administration, but would be of little benefit to the majority of the inhabitants. The mission considers that, when the main demand is for passenger move- ment between remote points, the need would best be met in these modern days by an air service (discussed below). Interest has been shown by the Fezzan Government in the construction of a new hard- top road linking Hon and Uaddan directly with the port of Sirte. It is just possible that this might have been a better route for the Fezzan road than the more westerly one actually chosen from Hon to Bugren on the coast road, but now that work on the latter has begun, there can be no economic justification at present for the construction of a second main road between Hon and the coast. If more traffic between 234 THE MAIN REPORT the Fezzan and Cyrenaica should develop as a result of oil operations or for other reasons that cannot be foreseen, the question of improving the track linking Hon to Sirte might be reviewed later on. The mission has suggested elsewhere in this report investigation of the possibility of developing Ras el Hilal in Cyrenaica as a calling point for tourist ships. If such a scheme were undertaken, the Cyrene- Susa-Derna road and the branch to Lamluda should be widened and improved, as also the approach road to the Ras el Hilal jetty. Similarly, widening and improvement of the roads Tripoli-Azizia and Suani ben Adem-Bivio Ghiran in Tripolitania and the approach road to Solluk in Cyrenaica should be undertaken if the railways are closed down as recommended. The only improvements needed to the federal roads are the straightening of some bad curves, reconstruction of bridges damaged during the war, and the upgrading and surfacing of short stretches in difficult country, and near oases beyond Sebha. The cost of the new construction and improvements recommended above, including the road works connected with the Ras el Hilal scheme, is estimated at about £L 650,000 divided between the provinces as follows (amounts in £L): Federal roads 200,000 Tripolitania 250,000 Cyrenaica 150,000 Fezzan 50,000 Total 650,000 We recommend that this program should be spread over the five years 1960/61 to 1964/65. Financial provision will also have to be made dur- ing this period for completion of the worlk on the Fezzan road as far as Sebha. The contract cost of the project was about fL 2 million, but the mission does not know how much of this will have been spent by March 1960, or what additional allocations will be needed over and above the sum contracted for. We have therefore made a notional al- lowance of £L 2 million for expenditures during the next five years. If this amount is added to the program recommended by the mission, the five-year total for new construction and improvements comes to £L 2,650,000. TRANSPORT AND COMMUNICATIONS 235 Road Administration The mission found some lack of coordination in the road programs of Libya. Each province seemed to be going its own way to satisfy local needs, while the federal government concentrated its attention on fed- eral roads. No all-Libya policy direction exists on road widths, permis- sible vehicle weights and dimensions, road curves and gradients, traffic regulations or road maintenance standards. Nor are provincial and federal road projects always properly coordinated at the technical level (see Annex XVIII). Much could be said in favor of appointing one administration to take responsibility for road policy and road upkeep in the whole coun- try. By modern standards there is not enough road work at present, or in the foreseeable future, to employ fully four agencies with their technical staffs. In particular, there appears little justification for em- ploying a federal agency to construct and maintain federal roads in the provinces. We recommend therefore that the Federal Roads De- partment should in future concern itself only with matters of policy, including the preparation of projects, and that federal road works should be handed over to the provincial Nazirates of Public Works for execution under federal direction, with the federal government re- taining control over the use of funds. Road Transport Passenger and goods vehicles operated by private enterprise serve traffic needs at a not unreasonable cost. The number of civilian motor vehicles in the country increased by more than two-thirds between 1955 and 1959 and the consumption of motor fuel was more than doubled (see Annex XVIII). Traffic has expanded further during the past year with large fleets of trucks carrying supplies for the oil com- panies. Licenses to run buses in Tripolitania are auctioned, and the fares are moderate. So are the charges for the carriage of goods, owing to keen competition among operators induced by the present surplus trucking capacity. The standards of vehicle maintenance are, however, generally low and suggest the need for a re-examination of the motor vehicles act and better enforcement of suitable regulations. Statistical information on motor vehicles is not readily available in convenient form, and there was no evidence that traffic counts with estimates of tonnages were being taken by the road authorities to determine road improvement needs. 236 THE MAIN REPORT An examination of road and rail traffic statistics showed that even an unsurfaced road running parallel with a section of the railway did compete successfully because of the limitations of the railway under "short haul" traffic conditions. Judging by past experience, when no difficulty was experienced in moving large quantities of imported food-grains in time of drought, and judging by the present keen com- petition in the trucking industry, the mission has no doubt that the existing trucking capacity in the country is ample, and that no diffi- culty will be experienced in transporting goods by road if the railways are abolished. For both Tripoli town and Tripolitania, the rights to run buses are auctioned once every nine or ten years. The competition induced by such auctions is claimed to make for good service and low fares, but the argument cannot be accepted as valid in view of the long period between auctions. The mission recommends that auctions should be abolished, as they introduce an element of uncertainty which is detri- mental to the growth of transport. Experience in the more developed countries indicates that bus and road haulage operations can best be controlled by rules and regulations issued under a comprehensive motor vehicles act. Under such an act, applications can be made to operate on specified routes at specified fares or rates, and licenses are granted in accordance with the needs of the route in question. Once an operator has been granted a license, his rights are safeguarded so long as he fulfills the conditions laid down. If a dispute arises over the granting of licenses, appeal can be made to an Appeal Tribunal. This system, if properly administered, allows scope for competition in the initial bidding for licenses, and also, where more than one carrier is licensed to operate over the same route, in the quality of service pro- vided. On the other hand, it guards against the dangers of unregulated competition. Government Transport As a legacy from the times of the Italian occupation and the British army administration after World War II, the federal and provincial governments still own and operate fairly large fleets of private cars, landrovers and trucks. It was difficult to ascertain the total numbers of such vehicles as they are owned by many different departments and by the police, but the number owned and maintained by the Nazirates of Communications alone is over 770, and total expenditure by these departments on the purchase and operation of vehicles is more than £L 500,000 a year. TRANSPORT AND COMMUNICATIONS 237 Operations are not conducted on commercial lines, and manage- ment is frequently subject to day-to-day political interference, particu- larly with regard to employment of staff. In Cyrenaica, for example, almost three workers are employed by the Transport Department of the Nazirate of Communications for every vehicle on the road. This is two and a half times as many as in Tripolitania. The proportions of new vehicles ordered each year and of vehicles scrapped are abnor- mally high, even allowing for the extremely adverse conditions under which many of them operate on desert tracks. In the Fezzan, for exam- ple, the life of a landrover is seldom more than a year and frequently very much less. All in all, the present system appears to the mission to be very wasteful and inefficient, and we recommend that urgent attention be given to reorganizing the provision of government transport on a more economical basis. Where practicable, private enterprise might be invited to supply transport for the government on a contract basis. There appears to be ample capital available in the country for invest- ment in the transport industry, as is evidenced by the surplus truck capacity on the roads. Insofar as operations remain in the hands of the government, workshops should be run on a strictly commercial basis, and sufficient foreign managers and technicians should be em- ployed, as in the private bus undertakings, to ensure high standards of maintenance. PORTS AND COASTAL SHIPPING Tripoli The port of Tripoli handles more than three-quarters of all the country's foreign trade and operates at a substantial profit. Its com- mercial cargo turnover has more than trebled since 1954, although there has been a decline in military cargoes. It is now handling over 400,000 tons of commercial dry cargo annually (see Table 6), and there is every indication that under present conditions its trade will con- tinue to increase. About £L 500,000 has been spent on rehabilitation and improvements since 1952, and a further expenditure of about £L 325,000 is indicated on rehabilitation, deferred maintenance, build- ings and equipment to bring the ports up to standard. The mission endorses the scheme to create a "free zone" in the port as an experi- ment since the initial cost (CL 65,000) will be relatively small and the prospects for increased trade appear favorable. 238 THE MAIN REPORT The port is run departmentally by the Nazirate of Communica- tions. Its accounts are merged in the Tripolitanian budget and are not kept on a proper commercial basis; operating profits accrue to the provincial government and are not available for financing develop- ment of the port. The responsibilities carried by the manager and his assistant (both loaned from the Port of London Authority) are ex- cessive, and there exists no proper machinery for consultation between the management and commercial interests. Efficiency is hampered by the inflexible procedures of governmental control and the difficulty in obtaining authority for expenditures. At the time of the mission's visit, for example, there was no port engineer because of the government's inability under its rules to offer the salary necessary to attract a com- petent man. With the growth of the port, the existing difficulties of handling cargoes (entailing much overtime employment) will be in- tensified, and labor problems will increase unless the present rigid rules restricting the freedom of management are relaxed. The mission is satisfied that a strong case exists for the creation of an autonomous federal authority to run the port on a proper com- mercial basis with responsibility for financing its own expansion and with appropriate borrowing powers. The mission appreciates that there are constitutional difficulties in creating an autonomous port au- thority, but considers that, as in the case of the electricity authority, these difficulties can be overcome and suitable arrangements made to compensate the Tripolitanian Administration for its vested interest in the port. We also recommend a change in the present arrangements under which certain privileged users of the port, including the U. S. Government, receive specified facilities free of charge and in return render services to the port for which no charge is made. In order to facilitate good accounting, all services rendered to or by third parties should be charged for, if only by special vouchers which will show the details of the transactions for record purposes. Benghazi Harbor The port of Benghazi at present handles rather under one-fifth of Libya's foreign trade. It serves a hinterland with a population of about 300,000, and the amount of commercial cargo passing through the port in the years 1954-58 never exceeded 105,000 tons in any one year. In 1958 it was about 81,000 tons. About 30,000 tons of petroleum prod- ucts are discharged annually by means of a special pipeline to storage tanks adjacent to the harbor, and varying quantities of military cargo TRANSPORT AND COMMUNICATIONS 239 enter and leave the port in accordance with the requirements of the British forces in Cyrenaica (see Table 6). Port revenues are about £L 50,000 a year. Before the war the Italians developed Benghazi as a naval and military port, and a deepwater harbor was constructed for this purpose (the Outer Harbor on the plan facing page 242). As explained in more detail in Annex XIX, the Outer Mole has since been largely destroyed by the action of the sea and by naval and air action during the war, a process accelerated by defects in the original design, and only the Mid- dle Harbor is now in use. This has two main drawbacks. It is some- times inaccessible to shipping in stormy weather and it is limited at all times to vessels with a draft of 141/2 feet or less, though many ships of much greater registered draft use the port when they are lightly laden. TABLE 6 Statistics on Tripoli and Benghazi Ports, 1954-1958 (In Metric Tons and £L) Imports Exports Total L Com- Com- Mili- Pe- Com- Mili- mercial Reve- Expendi- Year mercial tary troleum mercial tary Cargo nue ture Tripoli Port 1954 158,801 52,484 154,603 75,286 16,897 234,087 212,599 108,406 1955 223,513 71,901 163,106 77,867 29,241 301,380 263,681 111,188 1956 253,342 47,239 165,227 74,898 18,051 328,240 344,233 145,733 1957 269,517 36,989 201,379 73,289 20,932 342,801 376,000 182,000 1958 308,591 28,488 173,656 95,823 18,373 404,414 392,184 190,000 Benghazi Port 1954 48,517 46,639 19,907 20,578 27,359 69,095 27,310 40,860 1955 60,613 43,240 18,716 15,918 16,607 76,531 34,705 40,768 1956 87,343 37,606 18,062 16,287 20,808 103,630 40,527 38,751 1957 88,257 9,841 29,943 16,720 24,178 104,977 48,197 42,249 1958 71,447 3,133 28,430 9,244 17,176 80,691 61,770 49,550 To overcome these limitations, a number of schemes have been put forward in recent years for the reconstruction of a deepwater port at costs ranging from about £L 4.5 million to fL 7 million. The earlier postwar schemes envisaged abandonment of the Outer Mole and the Outer Harbor, but the Libyan Government specifically requested the 240 THE MAIN REPORT restoration of the harbor to its prewar dimensions, and this is pro- vided for in the latest specifications submitted by the consulting engi- neers. The rebuilding of the Outer Mole alone is estimated to cost over £L 4 million. The mission has been aware of the keenness of the Cyrenaican Gov- ernment to develop the facilities of the port and to render it accessible to large ships in all weather. The fact that Benghazi is one of the capitals of Libya, and also the capital of Cyrenaica, invests this proj- ect with a special importance: and there are other political and psy- chological considerations that were brought to the mission's attention in this connection. We have borne all this in mind in studying the project, and while our own examination has properly been confined to the economic, financial and technical aspects, we recognize that these are not the only criteria that have to be applied in a case of this kind. Some action is needed immediately, in any case, to prevent further deterioration of the existing harbor installations, and any reconstruc- tion or development of the harbor that is undertaken should have re- gard to the likely growth of trade in future as the Cyrenaican economy expands. The main issue for consideration, however, is whether there is justification, in present circumstances, for undertaking the large ex- pense of rebuilding the Outer Mole and providing an all-weather har- bor for ships drawing as much as 30 feet and more, or whether the funds likely to be used up by this large project, less whatever is needed to develop the existing Middle Harbor, could be better employed on more immediately productive investments. In examining this issue the mission's primary objective has been to decide whether the economic benefits to be derived from the construction of a deepwater harbor at present would be commensurate with the cost. It must be left to others to assess the noneconomic benefits. In support of the case for a deepwater harbor, it is pointed out, first, that, because of the limitations of the existing harbor, certain cargoes destined for Benghazi have to be transshipped to smaller ves- sels at Tripoli, Malta or other ports, and that this adds to the cost of Cyrenaica's imports. Second, there is the danger of ships being unable to enter the port in bad weather, which gives Benghazi a bad name and tends to discourage even the smaller vessels from calling there. Third, most Mediterranean cruise ships are too big to enter the present harbor at all, and it is claimed that this deprives Cyrenaica of valuable tourist traffic. Fourth, since the discovery of oil in Cyrenaica, a port able to admit larger vessels might be useful for bringing in heavy equipment and other supplies for the oil companies. There is an element of truth in all these points, but the following TRANSPORT AND COMMUNICATIONS 241 facts must also be considered. First, regular services to Benghazi in vessels up to 4,000 tons dead weight, some of them built specially for this trade, are at present provided by five shipping lines (two British, two Italian and one German) ensuring on the average seven or eight calls a month. In addition, there are many calls from small tramps or freighters belonging to Italian and Levantine countries. These ships now carry most of Benghazi's bulkier imports (cereals, sugar, cement, machinery, steel, transport equipment) direct from ports in Northern Europe, Italy and other Mediterranean countries. At least one of the lines concerned charges the same rates from the United Kingdom and Rotterdam to Benghazi as it does to Tripoli (fL 6 per freight ton in each case in 1959), while for the other lines the differential ranges from £ I to £ 1.10.Od. per freight ton. These services appear to be adequate to handle the cargo at present offering; indeed, some of the ships visit- ing the port have difficulty in finding cargo, particularly in the out- ward direction. There is seldom any serious congestion in the port. A few cargoes are still transshipped en route, but these are mainly goods coming from United States and Asia such as emergency supplies of grains, oil equipment and tea.' The most common place of trans- shipment is presumably Tripoli, and the total amount of cargo for- warded from Tripoli to Benghazi on transshipment bills of lading amounted to 4,437 tons in 1957 and 2,365 tons in 1958. Some foreign merchandise is no doubt unloaded at Tripoli and sent to Benghazi by road. No statistical data are available on this, but the quantity can hardly be large, as it would normally be much simpler and cheaper to use sea transport in such cases. So far as cruise ships are concerned, plans to land tourists at Ben- ghazi have had to be abandoned on several occasions in recent years because of rough seas. Difficulties have also been experienced in bad weather in embarking Libyan pilgrims on ships going to Arabia. But the additional income to be obtained from tourists passing through the port would cover only a tiny fraction of the costs of a development scheme. In any case, Benghazi lies over 150 kilometers from the main places of interest to foreign tourists in Cyrenaica, and it is for con- sideration whether, as suggested elsewhere in this report, it might not be better to develop an alternative calling place for cruise ships at Ras el Hilal, which is on the coast between Cyrene and Derna. While Benghazi is hardly likely to be used as a port for the ship- , Ships carrying tea from Asia normally off-load their cargoes by lighter outside Benghazi, but sometimes in bad weather they by-pass the port, and the cargoes have to be transshipped elsewhere. Even in such cases, however, the transshipment charges amount to less than one-half of one percent of the retail price of tea in Benghazi. 242 THE MAIN REPORT ment of oil produced in Libya, it is the nearest commercial port of any size to the recently discovered oilfields in the Sirte desert and could be useful for the movement of supplies for the oil companies. The com- panies will have the choice between bringing in their equipment and other supplies through the existing ports of Tripoli and Benghazi and building special facilities for this purpose in the Gulf of Sirte. In view of the fact that Tripoli and the Gulf of Sirte are both accessible to large ocean-going freighters, the lack of a deepwater harbor at Ben- ghazi is unlikely to present major difficulties. On the other hand, if there were such a harbor, the companies would probably make some use of it. In short, the mission can see no economic justification for the recon- struction of a deepwater harbor at Benghazi at present in view of the very heavy costs involved. Supposing that, in line with the consultants' latest estimates, the actual cost of such a scheme worked out at about £L 7 million, and that this money had to be borrowed at rates of interest in line with those now prevailing in most capital-exporting countries, with repayment spread over, say, 25 years, annual debt serv- ice payments alone would be equivalent to about ten times the present annual revenues of the port. Another way of looking at the problem is to consider what might be done with the £L 7 million if it was spent in other ways--say, on improving rural conditions in Cyrenaica, on building and equipping more schools or on providing better houses for the poorer people in the towns. While the scope for additional expenditures in these directions may be limited at the moment, the long-term need is great, and it will be evident from the other chapters in this report that much could eventually be done with a sum of this magnitude. It would suffice, for instance, to build houses for over one- quarter of the population of Cyrenaica. The mission is satisfied nevertheless that some improvements to the existing harbor are needed both to prevent further deterioration of the structures and to provide for the expansion of trade which is to be expected as the economy develops. It is difficult to say how rapid this expansion will be. For one thing, if the measures suggested in this re- port for the development of agricultural production in Cyrenaica are successful, there might actually be some reduction in the imports of cereals, which in volume could more than outweight any likely increase in exports of other agricultural and livestock products. The trend of other imports will depend in part on the general level of incomes and in part on the amount of construction work undertaken in Cyrenaica. All in all, and leaving aside the imports and exports of the oil com- MIDDLE HARBOR DEVELOPMENT BENGHAZI HARBOR (Work to be done) OUTLINE PLAN 1. Rehabilitation of the Central Mole 2. Dredging Middle Harbor to 20 feet 3. Extension of Italia Mole 4. Building new breakwater INSET PLAN 5. Extending Rasif Libya No. . (new qnay) 6. Providing 650 H.P. tug, light buoy, Haler Ak'rbor crane (t2-15 ton), sheds, etc. anid I-\\Lr resurfacing portions of existing quays -C .,. a r d, .',.'''MOLEi K BENGHAZI , . -- Concrete superstructure ' L- exfensively damaged ., Superstructure shuttered ORM/D)7E., //ARBOR I and undermined Cusrsu ' '30 ., ' . '., . ~ ~~~~Rock boulders ound 12 and g =\., -50 2 ' ' 16 ton concrete blocks i . INR HARBO0R Soundings In feet ........ Area to be dredged W within,_.- lines NE ;,; 07 X ,, .> X v~~~~~~Hrbor / Curhedrot ni 6 '-. Z . '- i-A tA'ernotl ve ,E| In~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~' 200 0 200 400 600 t00 l00OFeet Rneefs 1!0 M- ch 1960 \_1 TRANSPORT AND COMMUNICATIONS 243 panies and foreign military forces in Cyrenaica, it might be reasonable to expect Benghazi's commercial trade to grow at a rate of around 5-10 percent per annum. If anything, this estimate may be rather on the high side. It would be consistent with the trend over the past five years, but exceptional factors have operated during this period to raise the volume of imports (e.g., construction of the administrative center at Beida and the need for emergency imports of animal feed). We accordingly recommend that consideration should be given to a modified scheme for the development of the Middle Harbor on the lines indicated in the plan facing page 242. Our proposal, which would require further technical examination to confirm its feasibility, is to limit the working area of the port to that portion only where the exist- ing quays are situated. The extension of Rasif Libya No. I (item 5 in the plan) by 450 feet or so will permit three of the largest vessels now using the port to discharge their cargoes simultaneously. Other ships could use the existing quays or discharge by lighter. In this way, and because ships of 18 feet draft will be able to use the port under our scheme, we estimate its handling capacity will be increased to at least three times the present figure. Provision is also made (as shown in the plan) for constructing new quays on the northwest side of the harbor, but we do not anticipate that these will be required for many years. Wave action in the harbor should be reduced to reasonable limits by the extension of the Italian Mole and the construction of a new break- water (items 3 and 4 in the plan). Before the position of the breakwater is finally determined, the records of the hydraulic model tests carried out by the consulting engi- neers responsible for the original plans should be studied. The actual lengths of the mole extension and of the breakwater can only be decided after further detailed study of site conditions, but we do not anticipate that the final design will differ appreciably from that shown in our plan. The new breakwater, wherever sited, will have a section for most of its length very similar to that of the existing Cathedral Mole shown in the plan, as it will not traverse deep water except near its outer end. When the depths are greater than 10 feet or so, the breakwater and the Italian Mole extension will have sections similar to those proposed by the consulting engineers for similar work under their scheme. We consider the work requiring most urgent attention is the reha- bilitation of the Central Mole (item No. 1 in the plan) which is fast disintegrating. If this mole fails (as may happen at any time in the near future), there will be little shelter for vessels approaching the 244 THE MAIN REPORT port itself. We recommend therefore that work on repairing the Cen- tral Mole be taken in hand at once pending consideration of our other proposals. We also suggest that the consulting engineers responsible for the previous plans should be asked to comment on our scheme. If they agree that it is technically sound, they should be asked to fill in details, draw up bills of quantities and prepare the project for world-wide tender. We tentatively estimate the cost of the scheme at around £L 1 l2 million, and we have made appropriate provision in our capital investment program. Adoption of the scheme suggested here would not preclude con- sideration of the project for a deepwater harbor at a later stage. With the opening up of oilfields in Cyrenaica there are too many unpre- dictable factors in the situation for any final judgment to be passed now on the likely growth of trade in the area served by Benghazi, and as we have observed already, economic factors may not be the only ones that have to be considered by the Libyan Government in relation to this project. The port of Benghazi and other ports in Cyrenaica are run by the Nazirate of Communications, and their accounts are merged in the provincial budget. While we do not consider that the operations of these ports are large enough to justify the appointment of an inde- pendent port a-uthority, we would urge that their accounts be sepa- rated from those of general government and maintained on a com- mercial basis. Minor Ports and Coastal Shipping At present, some dozen minor ports exist along the coast of Libya (see Annex XX). Many of these were built by the ancient Greeks and Romans and were further developed by the Turkish and Italian rulers of the country before the advent of motor transport. The Italians used some of the larger ports for military purposes before the coastal road was built. Tobruk is the only port with a natural harbor. Derna and Zuara have artificial harbors, while most of the others have some pro- tection afforded by natural reefs on which the remains of small ancient moles can generally be seen. Cargo handled by these ports is very small apart from military cargoes entering and leaving Tobruk. With the exceptions of Derna and Tobruk, very little has been spent during the last five years on the upkeep of minor ports. Exten- sive repairs to the moles were carried out at Derna, and much dredging has been done, but the harbor silted up again within a year after dredg- TRANSPORT AND COMMUNICATIONS 245 ing. It has been estimated that it would cost £L 125,000 to eradicate this trouble. Very large sums would also be required to restore the other ports. The mission does not recommend incurring any large expenditures during the next few years on these ports. The Zuara mole should, however, be repaired and the harbor dredged (estimated cost £L 20,000), and more attention should be paid to minimum essen- tial maintenance of useful structures in the other ports against the possibility of a revival of the coastal shipping trade. For example, if the breach in the mole at Zuara had been attended to when the first signs of failure were noticed in 1950, the repair bill might have been a few hundred pounds instead of the £L 20,000 now required, and the harbor would not have silted up. The mission recommends that £L 12,000 be earmarked every year for essential maintenance of the minor ports, including dredging. As recommended in Chapter 10, Ras el Hilal might be developed as a calling place for tourist ships; the anchorage is sheltered by a headland, and deep water runs close into the shore. The cost of repairing the concrete jetty and making a turning place for buses is estimated at £L 30,000, and we have tentatively in- cluded financial provision for this in our program of capital expendi- tures. The mission found it difficult to assess with any exactitude the comparative costs of coastal shipping and road transport. It noted that traders at present preferred to send their goods by road (even when the cost was slightly higher) because of the convenience of road transport (ensuring door-to-door delivery) and the inconvenience of coastal ship- ping, the liability to damage and breakage of goods, the delays and paperwork arising from customs proceedings and formalities, and the difficulty of finding shipping to take the small consignments usually offered. An attempt made recently to operate a coaster under the Libyan flag collapsed for lack of patronage. In fact, the main obstacle to the development of coastal shipping at present is the small amount of traffic offered. We would not rule out the possibility that coastal shipping might revive as the Libyan economy develops, but we see no immediate likelihood of this happening. CIVIL AVIATION Idris airport outside Tripoli is the largest civil airport in Libya. Traffic "movements" are fairly heavy (42,000 a year), but civil aircraft movements total only about 14,000 a year (5,948 in 1955), and many of 246 THE MAIN REPORT these are accounted for by oil company planes. Passengers now number about 80,000 a year (23,000 in 1955). Benina handles much less traffic, the number of passengers in 1958/59 being about 10,300 (7,000 in 1955), and is losing its importance as a refueling station for transit aircraft with the introduction of the modern long-range jets. Since Independence, about £L 800,000 has been spent on the devel- opment of Idris and Benina. The mission estimates that, if there is no abnormal growth of traffic at these airports, about £L 280,000 will be required for further development and equipment during the period 1960/61-1964/65 and roughly another £L 500,000 for resurfacing the runways when they begin to show signs of wear. Since much of the cost of traffic control at Idris arises from the large number of movements of foreign military aircraft in the vicinity, contributions toward the cost of this control should be sought under the existing foreign treaties. Sebha will require about £L 20,000 for fire fighting and other equip- ment. Very little need be spent on the other airports until the traffic begins to develop (see Annex XXI). Idris and Benina airports are undoubtedly beneficial to the econ- omy, especially as they benefit the tourist industry. They are at present operated (at a loss) directly under the provincial governments, as indeed are all the civil airports in Libya, with the help of foreign tech- nical personnel. No change in the present organization appears nec- essary. Internal air services are operated at present by foreign airlines, which provide about nine services each way a week between Tripoli and Benghazi and one between Tripoli and Sebha. With the excep- tion of the flight to Sebha these services require no subsidy from the government, and there does not appear for the moment to be any economic justification for creating a Libyan national airline. Such an airline could at present find traffic for only three or four services a week on the Tripoli-Benghazi route and for only occasional calls at other airports, and the mission recommends against the creation of a "pres- tige route network," which would have to be heavily subsidized. This question might be reconsidered later if air traffic grows rapidly. On the other hand, the mission considers that light aircraft facili- ties should be provided for carrying passengers between Sebha and the desert oases in the Fezzan, with connections from Sebha to Tripoli and Benghazi. Outlying oases in Tripolitania and Cyrenaica (e.g., Gadames, Jalo and Kufra) could also be served in this way. The best method of supplying these facilities might be to employ a private company to organize and operate regular services between the more important centers, with provision for ambulance facilities as necessary. TRANSPORT AND COMMUNICATIONS 247 Although these services will almost certainly be run at a loss in the beginning, the cost to the economy will probably be very much less than that of constructing new roads over long distances to remote oases, as is apparently at present contemplated. Moreover, if the in- habited areas of Libya are seen as a large number of islands in a vast sand sea, the passenger transport-communication problem must be solved, as the economy of the country develops, either by road or by air transport, and air transport will require much less capital invest- ment and be more quickly established. Goods traffic could use the pres- ent desert tracks which serve the economy adequately at a not unrea- sonable cost. The mission believes that, as in other countries, the existence of air facilities will rapidly make people more air-minded, and the expansion of air travel seems to us in keeping with the more modern and progressive spirit that is developing in Libya. An allow- ance of £L 50,000 a year has been included in our program of current development expenditures for running the proposed services and main- taining the landing strips. TELECOMMUNICATIONS AND BROADCASTING Telecommunications and broadcasting services are now being devel- oped on modern lines under schemes financed by the Government of the United States. The schemes have been radically modified on sev- eral occasions. Tripoli and Benghazi are now linked by radiotelephone. Telephone exchanges in both towns are being modernized, broadcast- ing services have been started, and two new studios are in the course of construction. The telecommunications project was designed to form part of a new international circuit linking Europe and the East by way of Italy, Tunisia, Libya and Egypt. As yet, however, neither the Tunis- ian nor the Egyptian links have been constructed, and the Libyan sys- tem will thus be left without connections at either end. This is a most unsatisfactory situation, and one that calls for urgent discussions be- tween Libya and its two neighbors. Approximately £L 2.35 million has been made available out of U. S. funds for the telecommunications project and £L 1 million for the broadcasting project. By the end of March 1960 all the money allo- cated for broadcasting will have been spent, and it is estimated that approximately £L 500,000 will remain to be spent on telecommunica- tions. This sum has been included in our program of capital expendi- tures. 248 THE MAIN REPORT The telecommunications system is an expensive one to maintain since very highly qualified-and highly paid-foreign personnel have to be employed to operate it, and will have to be so employed for some time to come. Operating costs for personnel alone are currently in the region of £L 250,000 a year, and on top of this provision has to be made for spare parts and fuel, raising total operating costs to well above £L 300,000 a year. Costs of depreciation for the entire system have been estimated at about kL 160,000 annually on the basis of a twenty- year amortization schedule. It is difficult to see how a system of this kind can be run at a profit without substantial international traffic, and there is little prospect of such traffic materializing within the next few years. The broadcasting services will also impose an increasing burden on the public exchequer. We have assumed that recurrent expenditures on telecommunications and broadcasting together during the next five years (net of additional revenues, but including depreciation) might average about £L 300,000 a year above the present level, and provision for this increase has been included in our program. The contract for the telecommunications scheme provides for train- ing of Libyans in telecommunications and broadcasting techniques and operation. The mission would urge that this training be put in hand as early as possible since effective training will take a long time. The UNESCO experts have already set up a school (with government funds) to train technicians for the broadcasting service, and this school is doing very good work. Since the mission's visit the Libyan Government has submitted to the UN Special Fund a request for assistance in establishing a radio and telecommunications training school in Libya. This would cater for training in those telecommunications techniques which are not covered by "on-thejob" and other training provided in the contract; it could also train operators and mechanics in the police and army. It is suggested that the school should enroll 25-30 students a year in courses lasting from 12 months to 27 months. The cost of establishing the school and operating it for the first five years is estimated by the Libyan Government at just under £L 500,000. The mission has not had an opportunity to study the project and is therefore unable to express any judgment on it. However, we believe that some additional training facilities are urgently needed in this field. The present intention is apparently that the new telecommunica- tions service should take over responsibility, under the Post and Tele- communications Department, for all telephone and telegraph services in Libya. It is essential, in the mission's view, that all these services TRANSPORT AND COMMUNICATIONS 249 should be run on a commercial basis, with their accounts kept separate from those of general government. Management should be reasonably unfettered, and the existing civil service law should not apply to the staff. For the management of the broadcasting services, the mission suggests that advice be obtained from the UNESCO experts in Libya. This is a very specialized business, and it is inadvisable to try to organ- ize it on hit-and-miss lines. POSTAL SERVICES When the new telecommunications service begins to operate, the Post, Telephone and Telegraph Department of the Ministry of Com- munications will be faced with many difficult problems. The mission advises that the opportunity should now be taken to reorganize the postal services, as there is considerable scope for improvement. Action is indicated on the general lines suggested in the "Report on Survey of Libyan Posts" by Dr. J. C. Russell and Mr. Sabri Husseni, especially in the matter of introducing reasonably unfettered management and a proper cost accounting system. A post office is essentially a business enterprise, and the rigid procedures and rules and regulations govern- ing the running of an administrative government office, as set forth in the Civil Service Law of Libya, should not be applied without radical modifications. TRANSPORT ADMINISTRATION We have made a number of specific proposals earlier in this chap- ter for the organization and management of roads and road transport, ports, civil aviation, telecommunications and broadcasting. If these proposals are accepted, there should be no need for separate Nazirates of Public Works and Communications in the provinces, and we rec- ommend that these two departments should in each case be amalga- mated. At the federal level we recommend that the existing Ministry of Communications should be renamed the Ministry of Transport and Communications and made responsible for the formulation of national policies in this field. We further recommend that a standing ministerial committee on transport and communications should be established to secure better coordination between the activities of the federal and provincial governments and to ensure that the provinces are fully consulted at the policy-making stage. This committee would be pre- 250 THE MAIN REPORT sided over by the Minister and would include the three Nazirs of Public Works and Communications. The ministerial committee would in its turn receive advice from a committee of technical officials which would include the Directors of the Nazirates of Public Works and Communications, the Directors of the federal Roads and Telecommunications Departments, the Director of Civil Aviation and such additional technical advisers as may be required. This committee, on which the Development Council should be represented, would deal with problems of transport and communi- cations at the technical level. Room should be found in sub-committees or otherwise for representation at this level of the private transport and commercial interests concerned with road construction, road- making machinery, port construction plant, materials and other supplies. SUMMARY OF PROPOSED EXPENDITURES The recommendations which we have made in this chapter, to- gether with projects already being undertaken, would entail a total capital outlay in the public sector of £L 5,805,000 over the five years 1960/61 to 1964/65. The breakdown of this total would be as follows: (£L '000) Five-year Annual total average Fezzan road 2,000 400 Other road construction and improvements 650 130 Tripoli port- 300 60 Benghazi harbor 1,500 300 Ras el Hilal 30 6 Minor ports 25 5 Civil airports 800 160 Telecommunications 500 100 Total 5,805 1,161 a Includes £L 235,000 for capital works in the main port and £L 65,000 for the creation of a free trade zone, The remaining £L 90,000 required to bring the port up to standard (see page 237) has been treated as deferred maintenance chargeable to revenue. TRANSPORT AND COMMUNICATIONS 251 So far as recurrent government expenditures are concerned, we envisage savings of about £L 75,000 a year from the closing down of the provincial railways and a substantial reduction in the costs of operat- ing government road transport. On the other hand, the proposed desert air services might cost £L 50,000 a year, and we have recommended budgetary provision of £L 900,000 a year for road maintenance and renewals, which we estimate would represent an increase of £L 360,000 a year over actual expenditures in 1957/58 (the latest year for which we have a breakdown between capital and recurrent expenditures). Account has also to be taken of the heavy costs of operating the new telecommunications and broadcasting systems which might amount to as much as £L 300,000 a year (net of any increase in revenues likely to be achieved during the next five years). Allowing for all items, the combined budgets of the Ministry of Transport and Communications and the provincial Nazirates of Communications may show an increase of £L 600,000-700,000 a year. The port of Tripoli will be able to finance the suggested expenditures on deferred maintenance out of its own revenues. CHAPTER 13 EDUCATION The Priorities Education is desired for its own sake, and not simply as an invest- ment which will contribute toward raising the national output. Some types of education may not help to raise output at all, at any rate in the short run. On the other hand, a country's whole development effort may be held back by shortages of the more advanced skills, which can only be acquired through a long process of education and training. This is outstandingly true of Libya where the neglect of education prior to Independence has resulted in an acute lack of technicians, professional people and administrators in every field of economic activ- ity. No matter how much money is available-be it foreign aid, oil revenues or domestic savings-development can usefully be pushed no faster than the supply of properly trained personnel to administer and execute it. That is why the mission places so much importance on the expansion of facilities for technical and vocational training and on programs of adult education. In giving first priority to vocational training and adult education, we do not underestimate the value of general education or the desira- bility of achieving the objective of free compulsory primary education for all, which is laid down in the Libyan Constitution. At the time of Independence, when fewer than 10 percent of the adult population had ever been to school, it was entirely right to concentrate on laying down the foundations for a proper school system and opening the doors of education to a large number of children in the shortest possible time. The success of this effort is reflected in the rapid growth of school enrollment in the past six years. In 1952/53 there were 45,000 pupils in 234 schools, 42,000 of them in primary schools; by 1958/59 the num- ber of pupils had been raised to 106,000 (of whom just under 100,000 were in primary schools) and the number of schools to 524. This is a very considerable achievement. So far as the mission can judge from the available statistics, between 60 percent and 70 percent of all Libyan children in the primary school age groups (6-12) are now in school, a proportion which stands up well to comparison with other under- 252 EDUCATION 253 developed countries.' In India, for example, the target for the end of the present Second Five-Year Plan in 1961 is 63 percent. Now that a fairly broad base has been created, we believe that the emphasis in primary education should be shifted from the expansion of numbers to the improvement of the quality of the education offered. This is not to say that children seeking access to school should be denied admission, but that priority should now be given to measures to ease overcrowding, to provide better teaching equipment, to improve the curriculum, to secure better supervision of teaching and above all to increase the supply of trained Libyan teachers. Numbers in primary school will tend in any case to grow further, and we envisage that enroll- ment may rise to about 125,000 by 1964/65 (probably representing about 75 percent of all children of primary school age at that date). This would be a satisfactory advance. Further advances should be envisaged for succeeding years, and the ultimate goal of primary edu- cation for all might be realizable within 15 years from now. But the mission holds strongly to the view that during the next five years expansion of enrollment should be paced so that it does not run ahead of necessary improvements in standards of education. Public school education in Libya is currently being reorganized on a twelve-year basis, in place of the eleven-year system followed hitherto. The primary school provides the first six years of instruction (nominally from the ages of 6 to 12), the preparatory school the next three (from 12 to 15) and the secondary school the last three (from 15 to 18). In 1958/59, as against 99,545 pupils in primary school, there were 4,368 in preparatory school (then a two-year course) and 2,165 in secondary school. In addition, about 1,000 children in the post-primary age groups were receiving vocational training at the two agricultural schools at el Aweila in Cyrenaica and Sidi Mesri in Tripolitania, at the Technical and Clerical Training Center and the School of Applied Engineering in Tripoli, at the Health Assistants and Sanitarians Insti- tute in Benghazi and at various other institutions. A further 1,426 children were attending teachers' training schools. The mission attaches high priority to strengthening and broaden- ing the facilities for both general and technical education beyond the 1 The percentage quoted is arrived at by comparing the numbers enrolled in pri- mary school in 1958/59 with the total of all children of primary school age, which is estimated at around 160,000. However, this is not a true basis for comparison since some of the children in primary school are above the age of 12. On the other hand, it should be borne in mind that by no means all the children who enter primary school stay for the full six years. 254 THE MAIN REPORT primary stage. As a rough guide to the planning of post-primary edu- cation during the next 20 years, we suggest that about one child in every three or four entering primary school should go on to prepara- tory school or to a vocational school at the preparatory level, and that about half those who study at the preparatory level should continue with some sort of formal education at the post-preparatory stage, either at a general secondary school or at a technical or vocational training institution. On this basis, and allowing for the fact that the preparatory and secondary school course are only three years each as against six years for primary school, we estimate that enrollment in preparatory schools, together with vocational and technical training institutions at the pre- paratory level, should rise to about 15,000 by 1964/65 and enrollment in post-preparatory schools (general, technical and vocational) to about 7,500 by 1967/68 (i.e., to 15 percent and 7.5 percent of the present enrollment in primary schools). This expansion should proceed gradu- ally, and special efforts must be made to ensure that the technical and vocational schools receive an appropriate share of the children leaving primary and preparatory schools, so as to combat the traditional bias in favor of a general education. The supply of suitable teachers is likely to be the principal factor limiting the expansion of the school system at all levels, and while a large proportion of secondary school teachers must continue to be recruited abroad for the time being, the highest priority should be given to expanding the facilities for the training of Libyan teachers. The training of teachers for primary and preparatory schools will be mainly undertaken through teachers training colleges (pp. 258-259). The training of teachers for general secondary, technical and voca- tional schools will be one of the most important functions of the Libyan University, of the existing technical schools and ultimately of the proposed Higher Institute of Technology (pp. 264-266). Taking a long view, the mission urges that special efforts should be made to attract good people to the teaching profession and to raise the stand- ards of teacher training. In so many countries the teacher is underpaid by comparison with other occupations and he does not enjoy the status that should properly be accorded to men and women who have such an important role to play in shaping a nation's destiny. When oil revenues materialize, the Libyan Government will have the money to ensure that its teachers are adequately equipped for their job and so rewarded for their service that it makes it attractive for men of ability to remain as teachers. We hope that it will do so. Education of the child and adolescent is not enough. An attempt EDUCATION 255 must be made to compensate for the lack of education amongst a large part of the adult population in whose hands the economic welfare of the country currently rests. Indeed, an effective adult education cam- paign, including agricultural extension, should yield quicker and surer economic benefits in terms of increased production than any program for the education of the young. The mission feels therefore that even greater stress should be placed on this aspect of education during the next five years. Obviously no one branch of education can be given absolute prior- ity over all the others; it is a question of striking the right balance be- tween them. The recommendations put forward in this chapter are intended to help in achieving such a balance. It must, however, be remembered that the mission is looking at education in its relation to economic development rather than in the wider context of human and spiritual values. In other words, this is not a report on Libyan education, but a chapter on education in a report on Libya's economic development. From the point of view of such development we feel that the education authorities, while they have made remarkable progress in a short time, have tended to place too much emphasis on numbers in primary education rather than on quality, on general edu- cation at the post-primary levels rather than on technical and voca- tional trining, on the education of children rather than on the educa- tion of adults and on education for urban life rather than on rural needs. Our program accordingly strikes a somewhat different balance. Long-Term Planning In the field of education a five-year program should be regarded as only the first phase in a longer-term plan. Sound educational expan- sion requires a forward look of at least 20 or 30 years. For example, the quantity and quality of first-year primary education today will have an impact on the type and scope of specialized and higher education possible more than 15 years from now. The proper way to plan educa- tional development is to establish ultimate objectives and then make sure that in the shorter term each phase contributes to attaining those objectives. We have suggested above some very broad aims for educational de- velopment, but these need to be worked out in details, and the different parts of the program have to be carefully coordinated, so that expan- sion at all levels of the educational pyramid keeps in step. More pri- mary schools, for example, mean that more primary school teachers 256 THE MAIN REPORT must be trained at the preparatory and secondary levels. This in turn means that more teachers are needed for preparatory and secondary schools and teachers' training colleges which again means an increasing demand for university graduates. In Libya, where the numbers in- volved are comparatively small, it would be particularly valuable to have a comprehensive survey made of the likely demands over the next 20 to 30 years for the various types of professional skills-doctors, nurses, medical assistants, architects, surveyors, agronomists, veteri- narians, foresters, engineers, scientists, school teachers and so forth- so that the educational system can be geared to supply them. This could be done by the Development Council, working in close consulta- tion with the Ministry of Education and other departments concerned. The mission recommends that the task of drawing up a long-range educational program should be entrusted to an experienced technical adviser, who should be recruited to work with the Ministry of Educa- tion. He should be assisted by the establishment of a Bureau of Re- search and Records. The first task of such an adviser should be to make a careful survey of educational facilities in relation to the distribution and growth of population and national needs, and to recommend long- term plans to take care of these needs. The Primary School System It will inevitably take time to reach the goal of universal primary education, particularly where social customs still tend to keep girls away from school. The expansion of primary schools has therefore to be undertaken gradually, and attention concentrated in the meantime on measures for improving the quality of the facilities provided. More emphasis must be given in the curriculum to practical training for everyday life. The number of adequately trained teachers must be in- creased. More and better school equipment, textbooks and teaching aids should be provided. There is undoubtedly need also in certain cases for better and more hygienic school buildings, but the mission re- gards this as a lower order of priority. Simple accommodation, pro- vided it is clean, will often be adequate in rural areas, where there appears to be little justification for having school buildings which are much superior in standards of construction and cost to the ordinary dwellings. The Curriculum. The program of primary studies is prescribed by the Ministry of Education, and every primary school in the land must adhere to it. This common program is looked upon as an effective means for welding the nation together through offering all children EDUJCATION 257 common knowledge and ideas. Government authorities believe that the great distances which separate the centers of population from one another and the short experience of the people with independence render such a uniform program essential. The mission noted, however, some dissatisfaction with the rigidity of the school program and its emphasis on words rather than understanding and experience. The mission also noted heavy migration from village to city among primary school graduates, an inclination to seek white-collar jobs and a disdain for manual work. The mission's view is that the primary school should educate the whole child, helping to shape his physical, moral and intellectual char- acter and emphasizing good habits of thought, work and conduct. The primary school, particularly in rural communities, should become a community center serving both children and adults. The principle of learning by doing should be practiced, with projects, field trips, man- ual work, plays and club activity supplementing learning from books. In such a school the teacher assumes a heavy responsibility. He is both an educator and community leader. Thus the primary school teacher should be carefully selected and well prepared for his work. Once he is well-trained, he should be given the opportunity of making some adjustment in his program in order to fit the needs of his pupils and the community which the school serves. At present primary schools in rural areas follow exactly the same curriculum as schools in urban areas, and the teachers frequently have no background in rural matters. We would like to see this situation changed. The primary school can do much to stimulate an interest in agriculture and to encourage a proper appreciation of the advantages of rural life, and this is particularly important in Libya because of the absence of a tradition of settled agriculture and the consequent short- age of elementary skills which in other countries could be taken for granted. The program in rural schools should therefore be modified with this end in view. Wherever practicable, schools should have small gardens, and special arrangements should be made for the practical study of nature, animals and agriculture. At the same time a system of specialized training should be instituted for rural school teachers (see page 259). Education of the Tribes. The education of the tribes presents a difficult problem, especially in Cyrenaica where a sizeable proportion of the population are nomads or semi-nomads. In attempting to solve this problem, the Nazirate of Education in Cyrenaica has opened boarding primary schools for the tribal children. It is estimated that the cost of maintaining a boarding student is approximately £L 100 258 THE MAIN REPORT per school year, while the cost of an outside or day pupil is approxi- mately LL 10. Thus, because of the limited facilities for primary edu- cation and the great demand for it, the boarding of one child is basically at the expense of 10 day children. The mission recommends that, wherever tribal groupings are large enough to provide sufficient pupils, the school be brought to the tribal children and not vice versa. The first four years of the primary schools should be taught in day schools attached to the tribes, and boarding facilities should be restricted to pupils of the fifth and sixth grades. Suitably qualified members of the various tribes should be attached to their respective tribes as teachers. Such tribal teachers should receive in-service training and careful supervision. The migratory habits of the tribes in Cyrenaica and some other parts of Libya are such that we are convinced that the school-within-a- tribe concept can in part be adapted to the requirements of Libyan tribal living, as it has already been so adapted in Syria, Iraq and parts of Jordan. It may be added that schools traveling around with tribes have also worked successfully amongst the Touaregs in Libya. When tribal concentrations are small and scattered over large distances, the school-within-a-tribe concept may not be operative, but this should not discourage the attempt at such methods where relevant. As a long- range measure, we recommend the appointment in the Ministry of Education or in the Nazirate of Education in Cyrenaica of a special well-trained inspector who will concern himself solely with super- vising and studying the problems of tribal education. Capital Expenditures on Buildings and Equipment. Many of our recommendations with respect to the primary school system could be put into effect with little or no capital cost. Some of them indeed (e.g., the proposals for tribal education) should result in economies in capital expenditures. Nevertheless, increased enrollment will entail the build- ing of some new schools and the enlargement or rehabilitation of exist- ing ones. There will also be need for more furniture, equipment and teaching aids. Our estimate is that about 25,000 additional places will have to be made available in primary schools over the next five years, and that the average capital cost per place works out at just over LL 28 for buildings (assuming CL 1,000 per classroom holding 35 pupils) and about fL 21/2 for furniture. We have therefore provided a total of EL 770,000 in our five-year investment program for the expansion of the primary school system. Training of Primary School Teachers. Most of the primary school teachers are Libyans. They are trained in five training colleges, which they enter immediately after leaving primary school. Courses at these EDUCATION 259 colleges, which normally last three or four years, are thus more or less on the same level as courses at the ordinary preparatory schools. Two of the colleges are in Tripoli, two in Benghazi and one, newly founded, in Sebha. Three branches of the Tripoli colleges have been established in Giado, Misurata and Zawia. The number of teachers graduating from the existing colleges ap- pears to be adequate to meet the needs of the primary schools, but standards of training leave much to be desired. Six years of primary school is clearly not an adequate preparation for admission to a teach- ers' training college, and however necessary it may have been initially to set the admission requirements so low, it is essential that they should be raised as rapidly as circumstances permit. Normally a prospective teacher should be expected to have had at least nine years in ordinary schooling before he enters a training college, and this should be the objective for the existing colleges in Libya, to be achieved in stages. Instruction at the colleges would then in effect be on the secondary rather than on the preparatory level. Such instruction must continue for the time being to be entrusted mainly to expatriates pending the graduation of more Libyans from the university. Programs of rural teacher training should be separated from those of urban teachers and be transferred to the agricultural schools at el Aweila in Cyrenaica, at the Agricultural and Vocational Training Center at Sidi Mesri outside Tripoli, and at the projected agricultural college at Sebha. Admission requirements at these rural teacher train- ing colleges should likewise rise gradually from six-year graduates to nine-year graduates, and candidates should be selected mainly from those who are themselves from rural areas. Although the course of study in rural teachers' training would follow the general three-year curriculum for other primary school teachers, special emphasis should be given to agricultural and other rural subjects. There should be a program of in-service training, augmented by special summer teachers' institutes at the agricultural schools, attendance at which would be rewarded by promotions and salary increases. Finally, in order to main- tain standards of teaching, a selected number of rural school inspectors should be appointed and given one year of intensive training in an agricultural school. After the Primary School Under the twelve-year school system the six years at primary school, which are compulsory, are followed by an optional three years at preparatory school and another optional three years at secondary 260 THE: MAIN REPORT school. However, preparatory and secondary schools provide only a general education, and there are parallel institutions for techni- cal and vocational training at both levels. Thus the Clerical and Technical Training Center in Tripoli offers three-year junior and senior courses for boys of 16 and upwards. Likewise the two agricul- tural schools recruit students both from those leaving primary school and those leaving preparatory school. The five training colleges for primary school teachers recruit students direct from primary schools and are thus broadly parallel with the preparatory schools. As already noted, there were 4,368 pupils in preparatory schools and 2,165 in secondary schools in 1958/59. To arrive at the total num- ber of children receiving formal education or training at the prepara- tory and secondary levels it is necessary to add in the 1,426 students at teachers' training colleges (mostly at the preparatory level) and the 1,000 or so students at other technical or vocational schools (most of them at the preparatory level, but some at the secondary level). On this basis it might be very roughly estimated that total enrollment at the preparatory level was about 6,500 and at the secondary level about 2,500. We have suggested that the numbers in the first group might be raised to 15,000 by 1964/65 and the numbers in the second group to 7,500 by 1967/68 (say, to 5,000 by 1964/65). These figures have been used for the purpose of estimating recurrent and capital expenditures on education over the next five years, but we have not attempted to specify exactly how the additional students should be split up as be- tween the general preparatory and secondary schools on the one hand and schools with a technical or vocational bias on the other. It is, however, in the latter field that we see the most urgent need for ex- pansion. One of Libya's most pressing needs is for qualified artisans (me- chanics, fitters, electricians, plumbers, carpenters, bricklayers, etc.), skilled agricultural workers and demonstrators and intermediate tech- nicians (assistant engineers, surveyors, draftsmen, etc.). Such persons are of much greater value to the economy at the present time, and are required in larger numbers, than white-collar workers. They are wanted to staff the government's technical services, to participate in agricul- tural extension work and to take jobs on farms, in factories and work- shops; and there will be a ready and continuing demand for them to work for the oil companies. Good wages and salaries await young peo- ple who are qualified in these fields, and there will be no lack of jobs for them. Such people should normally receive six to nine years of general education, followed by two to four years of specialized train- EDUCATION 261 ing, before they enter employment. Their training will then continue on the job, and outstanding workers can be given opportunities for more advanced study later on (e.g., for an engineering degree). The mission considers that the present facilities for vocational training at the preparatory and secondary levels should be strength- ened. There should not, of course, be too sharp a dichotomy between academic and vocational education: the curricula of the general preparatory and secondary schools should include some practical sub- jects (e.g., gardening, carpentry, bookkeeping) and the curricula of the vocational schools should develop knowledge in academic subjects. But we believe that the emphasis, particularly at the secondary level, should be increasingly placed on the technical and vocational aspects. Agricultural Schools. A program of agricultural development such as we have proposed will call for a considerable number of trained staff to administer it and to operate the various government research and extension services. At present, there are two agricultural schools in Libya, one in temporary headquarters at Sidi Mesri outside Tripoli and the other at el Aweila in Cyrenaica. A third school is being estab- lished at Sebha. In principle, pupils at these schools have previously completed nine years of general education and have thus graduated from preparatory school; in practice, however, the educational back- ground of some of the students is more limited. Twenty-two students graduated from Sidi Mesri in 1958/59 and nine from el Aweila. There is otherwise no source in Libya of persons trained in agricultural skills. Current agricultural education thus fails to provide for training either above or below the intermediate level. While about 30 tech- nicians a year might be sufficient to meet annual replacement require- ments at the vocational agricultural school level, there is at present no prospect of obtaining replacements at the university level. Since the latter would be required at the rate of less than 10 a year, the mission feels that it would be unrealistic to establish an agricultural college at the University of Libya and recommends that suitable employees of the agricultural services should be sent abroad for agricultural training at the university level. There also seems to be a need for a third group of agricultural technicians at a practical level, somewhat below that of the present vocational schools. A considerable number of practical demonstrators in agriculture, horticulture, animal husbandry and forestry will be re- quired for the proposed extension services. This class of agricultural technician could well be trained in special centers of a temporary na- ture. The mission proposes that three such centers be established forth- 262 THE MAIN REPORT with, each capable of accommodating 30 students a year for a two-year course. It is estimated that some 300 agricultural assistants will be re- quired by the government services. Thus the temporary training centers will be able to produce the main corps of agricultural assistants in four or five years, after which the three centers could be consolidated into one continuing center which would thereafter be able to supply a sufficient number of annual replacements, and in addition begin to supply agricultural technicians of this level to the larger private farm- ing enterprises. In our five-year program of capital expenditures we have allocated EL 30,000 for the establishment of such centers for agricultural assistants. Agricultural schools, if they are to contribute effectively to the development of Libyan agriculture, must succeed in inculcating in their students a practical knowledge of farming and a readiness to ap- ply this knowledge by working themselves in the fields. More emphasis should therefore be placed in the curriculum on field work and less on class work. We also suggest that the schools should aim to support themselves out of the proceeds from the sales of their own agricultural produce. Other Technical and Vocational Training. As already noted, a number of institutions already provide facilities for technical and voca- tional training at the pre-university level. The Technical and Clerical Training Center in Tripoli has made a most effective contribution in this field, and the trainees have easily found jobs in government and private business. Eventually, there might be advantages in separating the clerical and technical sections into district centers serving the two coastal provinces. For the time being, however, we recommend that the present Center in Tripoli should be kept together as one unit and enlarged. Graduation from preparatory school should normally be regarded as a necessary entrance qualification. The mission's second main recommendation relates to the School of Applied Engineering in Tripoli. This school was designed to train assistant engineers, but admission requirements are too low for this purpose, and the syllabus is inadequate. We suggest therefore that the school should be converted into a more widely based technical high school combining education in academic subjects with practical train- ing in such fields as mechanics, carpentry, draftsmanship, surveying, building design and so forth. Courses would last three or four years, and students would have the option of specializing in a particular trade during their last year. We envisage that most of the graduates would take up jobs on leaving school, but a few might go on to the EDUCATION 263 Institute of Higher Technology (see page 264). The present school is housed in a large new building with some modern equipment, and this could be taken over and adapted to the needs of a technical high school. Preparatory and Secondary Schools. Plans for general preparatory and secondary education have to take account of two considerations which point to the desirability of moderating the rate of expansion. The first is the shortage of teachers. At present over 90 percent of the preparatory and secondary school teachers are non-Libyans, mostly Egyptians, and it will be some years before the flow of Libyan gradu- ates from the university will be large enough even to meet the demand for additional teachers, let alone replace expatriates. Second, while most young people in Libya exhibit a marked preference for white- collar jobs and tend to look down on manual labor, it is vital that this prejudice should be counteracted, and that a larger proportion of teen- age children should be selected for technical and vocational training. The primary, preparatory and secondary schools themselves can do much to disseminate vocational skills and create a public opinion more favorable to manual activities. We have already referred to the need for an agricultural bias in rural schools. Other schools should also include in their curriculum instruction in manual arts. This type of education requires well-trained teachers, and an in-service program for training teachers in practical handicrafts should be instituted im- mediately. In short, the mission urges that the values of practical train- ing be emphasized throughout the general academic education system and not be left to the specialized schools alone. Attention should be given to enriching the program of the prepara- tory and secondary schools. The present curriculum of both types of school is overcrowded. Thirteen subjects are taught during the first year of each school, thirteen in the succeeding years of the preparatory school and eleven in the last two years of the secondary school. As a measure for encouraging good habits of independent work, the num- ber of subjects taught should be reduced and greater emphasis placed on thoroughness. Library work should be encouraged and library facilities improved. The secondary schools have to take care of the education of the intellectually more gifted children, who will eventu- ally fill many of the higher administrative and professional posts in the government service, agriculture and industry, who will provide the teaching staff for the preparatory and secondary schools them- selves and who will constitute most of the "leadership groups" in future Libyan society. There will naturally be a very strong demand for places in these schools. High standards should therefore be set for 264 THE MAIN REPORT admission, and great care must be exercised in the selection of students so as to ensure the right type of student body. Buildings and Equipment. Altogether we have envisaged the crea- tion during the next five years of about 11,000 additional places in schools and training centers lying in the intermediate range between primary education at the bottom and university education at the top.2 As a rough guide to the capital expenditures required to create these places, we have assumed that the average cost of buildings will be about £L 1,200 for a class of 25 students and the average cost of equip- ment about £L 4 per student. On this basis, and allowing a margin for contingencies, we arrive at a round figure of £L 600,000 for capital expenditure on buildings and equipment during the five-year period. Supply of Teachers. The recruitment and training of teachers for preparatory and secondary schools and parallel technical and voca- tional schools is one of the most difficult problems Libya has to face. If an extra 11,000 pupils are to be enrolled over the next five years, at least another 400 teachers will be required, or an increase of 80 a year. This is more than the total numbers that will be graduating from the Libyan University during this period, and only a proportion of the university graduates will want to become teachers, though every encouragement should be given to them to do so. There is as yet no other institution in the country capable of turning out properly quali- fied teachers for schools at the preparatory and secondary levels, and though we envisage this as an important function of the proposed Higher Institute of Technology, the institute can hardly make any significant contribution during the next five years. Teachers must therefore continue to be recruited from abroad to fill the gap. Institute of Higher Technology Proposals for establishing an Institute of Higher Technology in Tripoli have been put forward by the Libyan Government, and the United Nations Special Fund has agreed to contribute £1 million (EL 357,000) to the project to provide equipment and to pay for the services of some of the foreign teaching staff, along with the grant of fellowships to train Libyan counterparts, who will eventually take 2 Some of these additional places will already have been created in 1959/60, espe- cially in view of the reorganization of the preparatory school system on a three-year instead of a two-year basis. The expenditure figures given here should therefore be regarded not as precise estimates, but as indications of the orders of magnitude in- volved. EDUCATION 265 over from the foreign teachers. The Libyan Government's contribution for the first five years of the institute's operations will be about $2 million, of which rather over half will consist of recurrent expendi- tures (including the provision of furniture) and rather under half of capital expenditure on land and buildings. The project is to be executed by UNESCO, and the details have still to be worked out in consultation with the Libyan Government. The stated objective of the institute is to provide technical training at university level for students now graduating in mathematics and sci- ence from secondary schools (estimated at over 200 in 1960). It is intended that the institute should accept between 50 and 60 students a year, aiming at a total enrollment of 200 after four years. Four courses of up to five years each are proposed, one in civil engineering (to start in October 1962), one in electrical engineering (October 1963), one in mechanical engineering (October 1963) and one in food technology (October 1964). The Libyan Government will provide the site, build- ings and furniture and will progressively take over financial responsi- bility for running the institute. In principle, the mission strongly supports the idea of establishing an institute of technology. Its main functions, as we see them, should be to produce the many technicians required by government and private industry, particularly in the engineering and constructional fields, and at the same time to train Libyan teachers for technical and vocational schools. Technicians trained at the institute should be regarded as potential recruits to the ranks of senior technical admin- istration. After several years in government service promising men should be sent abroad for advanced training in engineering and other applied sciences. The oil companies can also be expected to offer good opportunities for Libyans to acquire higher professional skills. The mission's main doubt about the scheme concerns the level at which students are admitted to the institute and the length of the courses proposed. It might well have been better in our view to estab- lish a polytechnic at the senior high school level, so that graduates could enter industry at an earlier age and develop their knowledge and skills on the job, where they could at the same time be making an effec- tive contribution to the economy. As it is, we recommend that con- sideration be given to offering more shorter courses at the institute- that is, courses of two or three years duration rather than four or five. Assuming that the institute is established at the university level, as now proposed, it should rank as equal in status to the University of Libya and be accorded the right to award diplomas or degrees com- 266 THE MAIN REPORT parable with those granted by the university. Otherwise it is likely to have difficulty in attracting a high caliber of students. Suitably quali- fied graduates of the institute should be guaranteed jobs in the govern- ment service unless they enter private employment. The mission has included a sum of £L 300,000 in its investment program for the pur- chase of land and construction of buildings to house the institute. The government's share of the costs of running the institute over the next five years should be covered by the general increase which we have allowed for in recurrent expenditures on education (see page 274). University of Libya The Libyan University was formally established in 1955 under the direct supervision of the Ministry of Education. The University opened in 1956. It is composed of three tuition-free colleges: College of Arts, Letters and Education (Benghazi); College of Science (Tripoli); College of Commerce and Economics (Benghazi). The numbers enrolled in the three colleges in 1958/59 were 151, 53 and 77 respectively, and there has been a big increase in enrollment in 1959/60. Four years of study are required for the B.A. or B.Sc. degree. A specialized B.A. degree may be attained by one additional year of study. Almost all teachers and professors of the university are non-Libyans. In view of the decision to establish an Institute of Higher Tech- nology the mission advises against adding other colleges and faculties to the university at this time. In too many fields the number of gradu- ates required is too small for the establishment of a course of studies to be economical. The objective should be to make the University of Libya a medium-sized, well-organized, well-taught college of liberal arts and sciences, with particular attention given to strengthening the faculties of chemistry and geology in the College of Science at Tripoli now that oil apparently will play such an important role in the econ- omy. Graduates should be qualified to enter classes in professional schools abroad, if they so desire, and reliance should be placed on over- seas training to equip Libyans with the most advanced professional and technical skills. Those who terminate their studies at the University of Libya should be equipped to enter the economic life of the country with a potential for leadership, both intellectual and material. Many graduates will enter the nontechnical ranks of the government's administration, while others will become teachers, particularly at the secondary schools. Since our economic development plans call for educated administrators in EDUCATION 267 increasing numbers, and since our education proposals envisage an expansion, both proportionately and absolutely, of the latter years of the twelve-year school system, we recommend an eventual expansion in the university's enrollment to 700 or 800. On the other hand, we strongly advise against too rapid an expan- sion in numbers. There appears to be a widespread belief in Libya that the majority of students attending secondary schools should go on to the university as a matter of course. This does not happen in other countries, and it would be a mistake to let it happen in Libya. The result, only too evident in some underdeveloped countries, is liable to be a surplus of arts graduates, who cannot find employment that measures up to their expectations, and a shortage of people with tech- nical training capable of performing practical jobs in agriculture, industry and other sectors of the economy. Budgetary provision for the upkeep of the university has risen from fL 42,000 in 1956/57 to £L 176,000 in 1957/58 and £L 342,000 in 1958/59. Such a rate of growth in expenditures obviously cannot be maintained indefinitely, and a more selective approach to university education is needed. The mission would further suggest that the Ministry of Education reconsider its present policy of granting free tuition, maintenance, books and special allowances to every university student. This is a wasteful use of public funds, and one that cannot be justified by con- siderations either of economy or of equity. In our judgment exemption from tuition fees should be the most that the university should offer all its students indiscriminately. A university scholarship board should be established to grant aid for maintenance to needy students on the basis of demonstrated special capacity and genuine need. There should be greater emphasis on regular attendance and par- ticipation in the life of the university by its students. Of particular importance is the cultivation of habits of independent study and think- ing through more emphasis on library work and on seminars where a stimulating exchange of views between teacher and students is carried on. The university is already moving in this direction and making efforts to achieve higher standards of intellectual attainment, but these still leave a good deal to be desired. While the university program and standards are being built up, it might be helpful if an examining com- mission of distinguished university professors from abroad were invited periodically to assist in the final examinations for degrees. The university is in need of some new accommodation, particularly in Benghazi, and we suggest that £L 500,000 should be devoted to capital expenditure on buildings and equipment over the next five 268 THE MAIN REPORT years. We have not made any specific recommendation with regard to recurrent expenditures on running the university. These would have to be accommodated within the increase of 10 percent a year for total budgetary expenditures on education suggested on page 275. Adult and Fundamental Education In Tripolitania a government program in adult education was started in 1957. Enrollment for 1958/59 was 11,000. Classes are held in 150 schools. This program is limited to evening classes which teach the curriculum of the first three years of the primary school. No adult vocational training has been undertaken so far. No women are enrolled. UNESCO has not undertaken any adult education program in this province. In Cyrenaica the government program of adult education is less developed than in Tripolitania. It enrolls 5,000-6,000 adults. The pro- gram is mainly focused on combating illiteracy. There are evening vocational courses given to adults at the Trade School in Benghazi. There is also an adult program on the secondary level sponsored by a private benevolent organization. In 1958 UNESCO helped in starting a Fundamental Education Center near Benghazi. Twenty-one students are enrolled, all of whom are boarders. Candidates must have com- pleted primary education. The center aims to assist in the preparation of rural teachers and village workers and to experiment with teaching materials appropriate for Libya. The program has four divisions: fundamental and adult education; women's education; rural educa- tion; and physical education and recreation. There is no government-sponsored adult education program in the Fezzan, but the Fezzan Government operates a number of adult edu- cation and fundamental education centers with the help of UNESCO. The centers are located in some of the larger oases. The UNESCO team consists of three specialists with a mobile cinema unit. This is a small unit for the range of activities undertaken by it. Their program con- sists of teaching reading, hygiene and what might be called "social education." In 1958, 20 adult education centers were opened in the Fezzan. Enrollment in 1958/59 was 884 students. The Fezzan has an excellent program for women's fundamental education, in which UNESCO is collaborating. This project trains women community leaders, village workers and potential primary school teachers. For all this work, there is only one teacher at present, who is also expected to travel widely to enroll the pupils. The school offers day and evening EDUCATION 269 classes. The program covers two years at present; it may be extended one more year shortly. In spite of these inadequacies, the efforts in adult education have been highly productive. The mission feels, therefore, that even greater stress might be placed on this aspect of education in the next few years. Adult and fundamental education is essentially an attempt to bridge the gap between the past and the future: to ameliorate the lack of education among today's adults until the education of today's children can make itself felt in the future. Thus, adult education is an immedi- ate priority since its need will eventually tend to disappear. As a matter of urgency, then, the mission recommends that the following steps be taken: 1. A special directorate for adult education should be created within the Federal Ministry of Education in order to study the problems of adult education in the country, advise the Nazirates on these problems and coordinate plans for the expansion of adult education in the country as a whole. 2. The Center for Fundamental Education near Benghazi should be strengthened. The staff, program, classrooms, equipment and boarding facilities of the center should be developed so as to render it a truly national center for the training of community leaders for the country as a whole. Both the women's and men's sections of this project should be developed, and it should be closely linked with the scheme for agricultural development in the Gebel Akhdar. 3. Short courses should be established for the teachers who are engaged in adult education. 4. The women's center for fundamental education in Sebha should be strengthened by the addition of at least two more staff mem- bers. The two aspects of its program should be developed: the women's fundamental education program and the women's teacher training program. 5. An adult education program should be established as an integral part of the programs of the various vocational training centers in Tripolitania and Cyrenaica. 6. A campaign against illiteracy should be conducted by establish- ing more adult education centers in preparatory and secondary schools, and by seeking the volunteer services of secondary school students and student teachers to join in the campaign. 7. Lecturers and students at the university should be encouraged 270 THE MAIN REPORT to participate in the adult education campaign by helping with night classes, extension lectures and summer courses. 8. Extensive use should be made of radio for adult education pur- poses. Special programs should be directed to urban and rural audiences and there should also be special programs for women. Most of these measures can be undertaken with the use of existing buildings, but additional equipment will be required. In our five-year program we have suggested that £L 50,000 should be earmarked for this purpose. In all fields of education, but particularly in adult education, there is considerable scope for coordination of effort between UNESCO, and the other agencies concerned with such matters in Libya. At present such agencies appear to work without sufficient reference to the activ- ities of others. The mission urges that attempts be made to improve methods of liaison and consultation with respect to educational pro- graming. Foreign Study A number of Libyans will continue to go abroad for some phases of their education, both because of the limited requirements for certain types of professional men and other specialists and because of the lack of certain types of educational resources within Libya. In order to maximize the advantages accruing to Libya from such foreign study and in order to get the best possible value for the money so expended, there ought to be a considered policy on selection of scholarship recipi- ents, their fields of specialization, numbers and conditions of appoint- ment. The mission therefore welcomes the establishment of the Com- mission on Foreign Study. During 1958/59 there were 255 students studying abroad on govern- ment or agency grants and about 50 studying at their own expense. In all over LL 300,000 had been allocated by the LARC for this purpose up to the end of March 1959, though less than £L 100,000 had actually been spent at that date. United Nations agencies have contributed extensively, and provision has also been made in the budgets of the Federal Ministry of Education (kL 77,500 in 1957/58 and £L 66,500 in 1958/59). Continuation of federal grants at around the current levels, together with the substantial carry-over of U.S. aid funds, should be adequate to meet requirements for overseas study during the next few years. EDUCATION 271 As the mission sees it, there are two types of suitable recipients of foreign study grants: the potential professional who has advanced as far up the Libyan education ladder as is possible, and the government administrator or technician who has advanced far enough in his practi- cal functioning so as to warrant further training abroad. In both cases the requirements should be that the candidate be mature enough to be able to define the purposes of his course of foreign studies, that he has every intention of continuing to work in Libya and that his prior train- ing and experience be such that the time spent abroad may be limited to obtaining instruction and orientation which could not have been obtained in Libya. The other important criterion for making a foreign study grant should be that the end-use of such study, namely the poten- tial employment of the candidate, be assured. Students should thus be selected on the basis of posts to be occupied on return to Libya. Administration Central Ministry of Education. There are four educational authori- ties in Libya-the Central Ministry and the three Nazirates of Educa- tion in Tripolitania, Cyrenaica and Fezzan. The Ministry of Education is responsible for supervising the following aspects of education through- out Libya: formulation and modification of the programs of instruc- tion; determining the duration of the academic year; examinations; standards and certificates; textbooks; qualifications of teachers; super- vision of private schools and of the University of Libya. Other duties pertaining to education are in the hands of the provincial education authorities. Each Nazirate decides upon the number, location and kinds of schools which should be established in the province; the funds to be used and their allocation; salaries of teachers; regulations for the con- struction of school buildings and the provision of equipment. The pattern of organization of each Nazirate follows the central pattern rather closely. The cost of the administrative organization is very high in relation to the number of people served. The total school population served does not justify the existence of four such elaborate administrative organizations, each with its complete cadre of personnel. Furthermore, the dual control of education by the federal ministry and provincial Nazirates of Education, without a clear-cut division of responsibility, tends to cause duplication of effort and to lower efficiency. Another weakness of the present system is that educational facilities are un- evenly distributed. Some towns and cities are adequately supplied with 272 THE MAIN REPORT schools-e.g., Benghazi, Derna, Tripoli-whereas large areas, especially rural areas, are without any schools at all. In a country where educa- tional resources are limited and the need great, it is essential that schools be built where the need is greatest. There is no central bureau of records in the Ministry of Education which would make it possible to conduct continuing studies of the educational system on a national scale. It was suggested earlier in this chapter that a high-level technical adviser should be appointed to the Ministry of Education, and that a Bureau of Research and Records should be established under his direc- tion. In addition to the task of preparing a long-term program for education, this adviser should be asked to advise on the distribution of functions between the Ministry of Education and the Nazirates with a view to securing a rational division of responsibilities between the center and the provinces which would permit a streamlining of admin- istration and substantial economies in headquarters staff. A possible solution might lie in the creation of interprovincial boards working alongside the Ministry of Education to administer the various branches of post-primary education-preparatory and secondary educations; technical and vocational training; and adult and fundamental educa- tion. There would then be no need to have separate staffs to deal with these subjects in each of the three provinces, and the three Nazirates of Education would be able to concentrate on looking after the primary schools, which is a big job in itself. The review of functions should include an examination of the existing educational records with the object of determining what types of records should in future be kept centrally. The technical adviser and his staff might also be made responsible for publishing a regular bulletin dealing with educational problems, which could be distributed to all schools in the country. Selected officials of the Ministry and Nazirates of Education should undergo a course of training designed to equip them for the work of carrying on the administration and implementing long-range develop- ment plans. The mission also recommends that the Higher Council on Education be strengthened through the addition of representatives from the Ministries of Finance and Agriculture. The main function of this enlarged advisory council would be to review policy changes sug- gested by the technical expert and make recommendations to the minister concerning their implementation. Provincial Education Authorities. One of the most important ad- ministrative measures which could be adopted on the provincial level is the strengthening of the provincial Executive Education Committee EDUCATION 273 by adding to its membership several leading educators in the province, such as representatives from the university and training colleges, and one or two of the more experienced inspectors and representatives from the Nazirates of Health and Agriculture. The major task of this com- mittee is to see to it that education in the province really meets the needs of the province, and that high standards and quality of education are maintained. Some of the specific tasks which should be assigned to the Executive Education Committee are the following: coordination of health, agriculture and education in the school program; changes and modifications in the program that may be deemed necessary to meet special needs of different areas; and evaluating the significance of new educational experiments and policies. In order to secure greater cooperation between home and school it is recommended that the government make every effort to establish local citizens' committees to work with local schools. Such matters as improving attendance, keeping the school buildings and equipment in a state of repair, securing the cooperation of parents in providing a more healthy life for the child-these are matters which even in the simplest of communities can be accomplished through such local school boards. If it is possible to secure the services of the more energetic citizens in the village for this purpose, the local committee could become an effective force for making the school a center for the social improvement of the community, and this would contribute to social development purposes even beyond immediate education objectives. The establishment of such local committees will, of course, require the leadership of capable teachers and inspectors to make them successful. Inspection and Supervision. The inspector and school principal are in a particularly strategic position to help in the improvement of education in Libya. They are the link between the teachers and pupils, on the one hand, and the provincial and federal administration on the other. Traditionally the school principal and inspector have viewed their duties as those of an academic watch-dog, i.e., to see to it that the teacher attends his classes regularly, keeps records properly and teaches his classes in accordance with the dictates of the official syllabus. Modern education assigns a more positive role to the inspector and principal in the belief that the primary function of the inspector and principal is to help the teacher improve his methods and his knowledge. He is a teacher's guide. The mission is of the opinion that the number of supervisors should be increased, and that special in-service institutes concerned with modern methods of inspection and supervision should be organized. 274 THE MAIN REPORT Summary of Proposed Expenditures The recommendations made in this chapter would entail a total capital outlay in the public sector of £L 2,250,000 over the five years 1960/61-1964/65. The total would be made up as follows: (£L '000) Five-year Annual total average Primary schools 770 154 Preparatory and secondary schoolsa 600 120 Agricultural training centers 30 6 Higher Institute of Technology 300 60 University of Libya 500 100 Adult education 50 10 Total 2,250 450 Including technical and vocational schools other than those specifically men- tioned in this table. The annual average level of capital expenditures proposed would be nearly double the estimated average for the three years 1955/56- 1957/58 (see Statistical Appendix, Table S.8), but slightly below the level for 1957/58 alone and well below the level for 1958/59 when a large program of school building was financed by the LARC. It is not, however, in capital expenditures, but in recurrent expenditures that the main impact of the rapid expansion of educational facilities will be reflected. The mission does not have complete figures of expenditures on edu- cation for any year later than 1957/58. This makes it extremely difficult to make even a rough forecast of the recurrent expenditures likely to be involved in implementing the program we have outlined. Total recurrent expenditures on education in 1957/58, excluding contri- butions from the United Nations, are estimated at about £L 2 million, and it would appear that they have since been increased to about £L 3 million a year. During the next five years, we envisage a further 25 percent increase in enrollment in primary schools, as compared with 1958/59, while EDUCATION 275 enrollment in schools at the preparatory and secondary levels will be more than doubled. Provision must also be made for the growth of the university, for increased expenditures on adult education and for improvements of standards in all branches of education and training. We feel that in these circumstances recurrent expenditures on educa- tion (mainly on teachers' salaries) must be expected to grow by at least 10 percent a year, or by about 60 percent over the five-year period as a whole. This would raise these expenditures from an estimated £L 3 million a year now to over £L 4.8 million in 1964/65 and would entail additional expenditures over the five-year period as a whole of about £L 5 million. Total public expenditures on education at the end of the period would then be equal to about 10 percent of the present gross domestic product. Even when due allowance is made for the possible growth of national income over the next five years, the percentage of total resources going into education would still be very high. There are few other countries in the world, developed or underdeveloped, in which the proportion exceeds 4 percent, and it appears to be more commonly in the region of 2-3 percent. The mission has doubts about the advisability of attempting to raise numbers in school any faster than suggested in this chapter, even if the administrative problems attendant on the expansion of the edu- cational system can be successfully handled. Nor do we favor overlavish expenditures on school buildings, particularly at a time when the resources of the local building industry are heavily engaged. On the other hand, a strong case can be made out for raising the salaries of Libyan teachers. The mission believes that measures to improve the teacher's lot and make the profession a more attractive one deserves a high place in any list of claims for additional funds, and we recom- mend that higher pay for teachers should be one of the items included in the Supplementary Program. CHAPTER 14 HEALTH AND COMMUNITY SERVICES PUBLIC HEALTH Present Health Conditions General health conditions in Libya have not given rise to any serious alarm during the last ten years. Although the rate of popula- tion growth is relatively low, this is apparently due more to the unusu- ally high infant mortality rate than it is to any particularly heavy morbidity among the adult population. There have been no major epidemics, and the people have not seriously suffered from the endemic and debilitating diseases which cause so much illness in many countries of the Orient. No study has been made of the measurement of levels of health of the Libyan people, and in the absence of accurate health records in all areas, an assessment of the health of the people cannot be supported by statistics. However, general observation made it clear to us that relatively adequate curative services are available. Current sickness rates can therefore be primarily attributed to the lack of appropriate health education and insufficient stress on the other aspects of preventive medicine. The three most important preventable diseases in Libya are in- fantile gastro-enteritis, eye infections-chiefly trachoma-and tuber- culosis. The infant mortality rate in Libya, though it is showing some decline in recent years, is believed to be still three or four times the rate in neighboring countries. Something like one infant out of every two born alive in Libya dies during its first year. Gastro-enteritis and tetanus are by far the most important factors in producing this very high death rate among infants. It is estimated that at least three-quarters of the population show signs of active or past inflammatory disease of the eyes. The complaint is particularly severe in lower age groups among school children. Tra- choma causes serious late complications which often result in partial loss of sight and sometimes in total blindness. No survey of the total and partial blind in the country has been made, but most observers 276 HEALTH AND COMMUNITY SERVICES 277 consider that the number must be not less than one percent of the population. From the observations of WHO and other experts who have visited the country since 1951 and from the yearly increase in the number of hospital admissions for pulmonary tuberculosis, it appears that the incidence of tuberculosis is increasing. Total admissions for pulmonary tuberculosis during 1958 in Cyrenaican hospitals numbered 1,194 (about 0.4 percent of the population). Poor nutrition, overcrowding and bad housing conditions-which exist all over the country, espe- cially in the poor areas of Tripoli and Benghazi-are considered to be major factors in the spread of the disease. The incidence of pulmonary tuberculosis in the Fezzan is relatively low. Hospital Services The country is well covered by a network of dispensaries and hos- pitals. There are large central hospitals in Tripoli and Benghazi and one is being developed in Sebha. There has been an appreciable increase in the number of hospitals, beds and dispensaries during the last five years. Great stress has been placed on the construction of new hospitals and the expansion and improvement of existing ones, and a sizeable proportion of the foreign aid funds has gone toward this end. There is no doubt that this was necessary in the initial stages of devel- opment of Libya's health services, and some hospital units still need a good deal of rehabilitation and some expansion. The stage has now been reached, however, when there should be a shift of emphasis from new construction to the consolidation of existing services. In Cyrenaica there are ten government hospitals in all-the central hospital in Benghazi, four large general hospitals at Barce, Messa, Derna and Tobruk, three smaller hospitals in Agedabia, el Abiar and Kufra, a tuberculosis hospital near Barce and a mental hospital also at Barce. There are no hospitals for infectious diseases or isolation hospitals, but all general hospitals have some isolation beds and the larger hospitals also have some beds for TB and psychiatric cases. Ben- ghazi and Derna hospitals have large TB wings. We recommend a number of improvements in existing hospitals (see Annex XXII) and, in addition, suggest that a new isolation hospital be established in Ben- ghazi. The estimated capital cost of this program over five years is £L 310,000. A tuberculosis sanatorium of 120 beds has been built by the LPDSA near Cyrene (Shahat). The main building was completed two years ago, but work is still proceeding on construction of staff quarters. The esti- 278 THE MAIN REPORT mate of total cost when completed and equipped is about £L 300,000. Although the project was undertaken on expert medical advice, the mission considers that the sanatorium's location is such that the cost of running and maintaining it is likely to be extremely high. The money could in our view have been better used for rehabilitation and expansion of the TB hospital at Barce and the TB wings of Derna and Benghazi hospitals. However, if the sanatorium is to be operated as the main center for the treatment of tuberculosis, economies should be effected in the facilities for treatment elsewhere. In Tripolitania there is a great deal of centralization at Tripoli town. The Tripoli government hospital (1,267 beds) is really a hospital group in magnificent buildings, and the main blocks are well equipped with modern hospital apparatus and furniture. There are district hospitals at Misurata, Zawia and Jefran and a TB hospital at Busetta. Proposals for expanded facilities, costing an estimated £L 300,000, will be found in Annex XXII. A hospital building was started at Gadames by the LPDSA three years ago and has since been left unfin- ished. We recommend its completion forthwith. The present dispen- sary-hospital unit is quite inadequate in view of the size of the local population and the potential influx of tourists. The mental hospital in the suburb of Feshlum is located in unsuit- able old barrack buildings and is very overcrowded. A new site has been found for this hospital a few kilometers outside Tripoli in a group of old police buildings. Funds are required for modifications, alterations and additions to this building to make it a proper mental hospital of 450 beds. We also recommend that leprosy patients be removed to a leprosarium of 50 beds which should be constructed outside Tripoli with facilities for outdoor employment of the patients, e.g., gardening, basketmaking and so forth. This leprosarium should only be used for isolation of severe and complicated cases of leprosy. Non-infectious and uncomplicated cases of leprosy should be treated on an ambulatory basis. In the Fezzan there is room for improvement in all four existing hospitals (see Annex XXII), while at Murzuk a new 20-bed hospital should be built and equipped with facilities for surgery. The capital outlay involved in these improvements is estimated at £L 90,000. Ambulance Transport Every hospital and many large dispensaries have at least one motor ambulance car attached for the transport of patients and medical staff. The larger institutions have two to four ambulance cars and some utility HEALTH AND COMMUNITY SERVICES 279 vehicles for stores and personnel. But all transport is under the control of the Communications Departments which also provide maintenance. This procedure of control by one department and usage by another sometimes creates operational difficulties and holdups. The mission recommends that the Health Department in each province should have full jurisdiction and control over its own ambulance service. There appears to be an over-all shortage of ambulance transport, especially in the Fezzan, and we have set aside £L 75,000 in our capital invest- ment program for the purchase of vehicles. There is some justification for the Fezzan-where road transport is costly and unreliable-to maintain a light aircraft service for the transport of serious and emer- gency cases from distant areas like Ghat to the central hospital at Sebha (see Chapter 12). Provision is made for this in the suggested allo- cation of funds for transport. Medical Supplies and Equipment The three provinces maintain separate provincial medical stores, at Tripoli, Benghazi and Sebha. Methods of procurement differ in each case, and there is no uniformity in hospital pharmacopoeias. Tripoli obtains most of its drugs and medical supplies from Italy, Fezzan from Tunis or Algeria and Cyrenaica from England. There appears to be a strong predilection for proprietory drugs and expensive formulations under brand names. The Federal Ministry, with the help of the three provincial Direc- tors of Health, should make a standard list of drugs and medicines for use in hospitals throughout the country, basing this on the Interna- tional Pharmacopoeia. A central medical stores depot in Tripoli should be organized under the federal government. Procurement should be on the basis of international tender and supplies should be obtained direct from the manufacturers or their representatives. The estimated cost of establishing a central store is £L 50,000. The provincial stores should receive their supplies by indenting on the central medical stores. This procedure could be expected to produce a very appreciable saving (10-15 percent) in the expenditure on drugs and medical stores, includ- ing all hospital equipment; this expenditure is currently believed to be in the region of £L 200,000 a year. Port Health Control and Quarantine The sanitation of seaports is fairly satisfactory, and there are dis- pensaries at Tripoli and Benghazi seaports for dock workers and pas- 280 THE MAIN REPORT sengers needing medical aid. There are no arrangements for isolation or quarantine at the ports or airports, and this has to be carried out, when necessary, on board or in hospital. With the development of the two major seaports and the two international airports, suitable quaran- tine arrangements must be provided for all, and the mission has sug- gested that £L 40,000 should be allowed for this in the five-year invest- ment program. Preventive Services An appreciation of the importance of a preventive health service by the government and leaders of the country is the first prerequisite for the building up of that service. But even if the necessary institu- tions and the trained staff are available, nothing substantial can be achieved unless health education reaches every home in the country. Emphasis is now gradually shifting toward strengthening the preven- tive services and more attention is being paid to this need. There is a growing realization that better health conditions and economic devel- opment are interrelated. WHO, UNICEF and LAJS have done much toward development of community health programs in the country. WHO is currently helping in the development of health training insti- tutions and maternal and child health development, while LAJS is providing the necessary funds for expanding activities in the field of basic public health and sanitation. Ante-natal work is of special importance in a country where many women are anemic and undernourished and frequent pregnancies impose a period of severe strain during which extra nourishment and rest is needed. Special food supplements are being provided. The mission hopes this program will be continued. Infant welfare needs special attention as most of the newborn are weak and underweight and require much care during the first year of life if they are to survive. To reduce the very high infant mortality rate, a concerted effort has to be made to improve and expand ante- natal care, infant welfare and health education of the mother in infant feeding and general hygiene. The value of proper midwifery services in this connection cannot be overstressed. Care of children during the weaning period is equally important because of diarrhoeal diseases and other hazards. LAJS has established four Maternity and Child Health Centers (MCH)-three in Tripolitania at Misurata, Garian and Zavia, and one in Cyrenaica at Barce. These are model institutions with respect HEALTH AND COMMUNITY SERVICES 281 to buildings, equipment and staffing, but the scarcity of suitably quali- fied personnel is an ever-recurring problem. These centers provide ante-natal and post-natal care, infant welfare, public health nursing and public health education. WHO, with the help of UNICEF and in cooperation with the Ministry of Health, has established two MCH centers at Benghazi and Suk el Giuma near Tripoli, which, though essentially training and demonstration projects, are assisting the exist- ing public health services in this field. Tripoli has also one center in the old town which is managed entirely by local staff and is doing useful work. A center is being planned for Benghazi by the provincial Health Department, with the help of UNICEF, and is expected to start functioning in the near future. In the opening of new MCH and public health centers and in the placement of trained MCH auxiliaries, better coordination should be attained between the federal and provincial governments and the various aid agencies. We recommend that these MCH centers should be merged into an integrated system of general health centers and sub-centers serving all towns and the larger villages in the country (see page 287). Children who survive the first five years of life are fairly healthy, though rather undernourished and subject to skin diseases and, during summer, inflammatory diseases of the eyes. A school health service as an entity exists in Tripoli and Benghazi where school medical officers have been appointed and regular medical examinations of school chil- dren are carried out and advice and treatment provided. In other areas the local medical officers and, in some cases, the sanitary inspec- tors visit schools, though not regularly. The development of a good school health service throughout the country should be an important item in the long-term health program for Libya. This service should be adapted to the conditions existing in Libya, and particular attention should be given to school sanitation, to control of endemic diseases such as communicable eye diseases and to the dissemination of simple rules of personal hygiene. A school feeding program is essential, and the mission recommends that the present program be continued for at least the next five years, with as much use as possible being made of locally grown foods like barley and dates. Health education, though mainly the responsibility of the health services, must also be carried out in the home, in schools and in pub- lic places not only by health educators, midwives, nurses and doctors, but also by schoolteachers, employers and public men and women. The international agencies have done a great deal of work in teacher training in public health education, and simple hygiene is now taught 282 THE MAIN REPORT in most of the schools. Training courses have also been conducted for health educators and home visitors. All MCH centers are providing health education for mothers and children both at the centers and during home visits. LAJS includes health education activity in its health development program and provides in-service training courses in this field to overcome the restriction imposed by lack of adequately educated personnel for regular training. Health education activities should be continued and expanded, depending on the availability of trained staff, and health information dissemination among the general public should be intensified by audio-visual methods, films in the cinemas, broadcasting and holding of health weeks, baby shows and the like. Use should be made of the great stress laid in the Moslem scriptures and sayings of the Prophet on personal cleanliness and community hygiene. Doctors Out of a total of 152 doctors employed by the three provinces at the time of the mission's visit there were only five Libyans. There were five women doctors, all foreigners. Until full Libvanization can be effected, recruitment of foreign doctors should be the responsibility of the federal government operating on a nation-wide basis, and without undue consideration of any nationals in specific areas. The intake of specialists should be adjusted to the actual needs of the country for the different categories instead of being determined on a haphazard basis as at present. The mission found, for example, that although there was no specialist in medicine or general surgery in Tripolitania (apart from two in orthopedia), there were five specialists in V.D. and dermatology, four in tropical diseases, four in chest diseases and three in pediatrics. All foreigners seeking employment should undertake to start learn- ing colloquial Arabic early after arriving in the country, and extra emoluments should be allowed to those who reach a reasonable stand- ard of proficiency. Pay scales should also be uniform throughout the country, and apart from consultants and specialists, doctors should be employed on a whole-time basis and should be debarred from private practice and given a suitable non-practicing allowance. If this were done, the number of doctors in government service could be reduced, while maintaining efficiency and increasing scales of pay. At present there is a distinction in Tripolitania between locally recruited doctors and those recruited abroad, with the former receiving HEALTH AND COMMUNITY SERVICES 283 as little as £L 67 a month, while the latter receive a minimum of £L 100 a month, a minimum which is applicable to all government doctors in Cyrenaica and the Fezzan irrespective of where they are re- cruited. We suggest that the minimum of £L 100 be extended to all government doctors in Libya. The rise in the pay scale in Tripolitania could be effected without any increase in the total payroll, since the number of government doctors there would be reduced. Furthermore, we recommend that there should be some provision for periodic in- crements in pay in order to reward long service. In addition to basic pay, all government doctors should receive a flat non-practicing allow- ance of, say, £L 300 a year. Specialists should further receive an extra allowance, ranging perhaps from £L 300 to £L 500 a year, in accord- ance with seniority. We feel that doctors who have professional qualifi- cations in public health should be regarded as specialists and re- munerated accordingly. At the time of the mission's visit there were 47 Libyans undergoing medical training abroad-31 in the three medical faculties of Egypt, 8 in the United Kingdom, 2 each in Turkey and Spain, 3 in Poland and 1 in Italy. Most of these were on fellowships or scholarships and all of them were in their first three years of training. As six years are required to graduate in medicine and at least another three to special- ize, Libya will be dependent on foreign doctors for many years. It is recommended that in future Libyans should preferably be sent for medical training to those countries which have social conditions and environment similar to Libya. On graduation they should return to their country and spend at least two years in government service under qualified supervision before they proceed for specialization, which may be undertaken in advanced countries such as the United Kingdom and the United States. In a country where the seclusion of women exists, it is essential to have a good proportion of women doctors, preferably from Arabic- speaking countries. As far as possible, the central hospitals at Ben- ghazi and Tripoli should have at least two women doctors each, and all MCH centers should be staffed with woman doctors. These women doctors, apart from their professional value, would be an example to the Libyan women of the part women can and should play in the social services of the country. As there will not be a large enough demand for doctors in the fore- seeable future to justify the establishment of a medical school in Libya, we recommend that the scheme of medical training abroad of Libyan men and women should be a continuous one. With economic progress 284 THE MAIN REPORT some young people may eventually be expected to be going abroad for medical training at their own initiative and expense. Nurses, Midwivues, Health Visitors At present there are no female Libyan nurses, midwives or health visitors. The few qualified women working in hospitals and health centers or training institutions are all foreigners. Nursing in hospitals is mainly carried out by Italian nuns and Libyan male and female nursing attendants. Although there are three training institutions in the country for women, the response for enrollment has not been en- couraging. This is due not only to the strict seclusion of women, but also to the traditional attitude of the middle class toward employment of females. This attitude may be modified with the passage of time and the spread of education, but in the meantime there will have to be continued reliance on non-Libyan nurses. While full use of the school of nursing should be made, we also recommend that four Libyan girls with secondary education-two each from Tripolitania and Cyrenaica-be sent abroad for a full diploma course in nursing and midwifery. Preference for overseas training would be a factor in at- tracting girls to undergo nursing training in the first instance. On their return, the pioneer trainees would be able to help in establishing train- ing institutes in Libya, and in influencing others to enter the profession. In the meantime, it is essential that there should be a balanced quota of foreign women to fill posts in the health services. The central hospitals in Benghazi and Tripoli should have at least a small propor- tion of qualified professional nurses-one matron and three ward sisters in Benghazi and one matron, one assistant matron and six ward sisters in Tripoli. This would form the nucleus of a good nursing service, with the help of Italian nuns and local available staff, and would also contribute to raising the standard of work of the semi- trained personnel. As trained Libyan girls become available from the school of nursing, they should be absorbed in the service. We strongly recommend that, in addition to the Tripoli school for female nurses, a school for male nurses should be established at Ben- ghazi, and WHO should again be requested for advice and help both in assessing the recruitment possibilities for such a school and in its establishment. Both schools should admit candidates from all three provinces and no provincial quotas should be prescribed. The need for properly qualified male nurses is obvious in Libya, and even when fe- male nurses in sufficient numbers become available, male nurses will HEALTH AND COMMUNITY SERVICES 285 still have a place in the health services of the country. The school for male nurses should be of the graduate standard, and the in-take could be so phased as to keep pace with the expansion of secondary education. Other Health Workers There is a small number of Libyans who have been trained as pharmacists, radiographers and laboratory technicians, but there is need for many more. In-service training is the best means of filling present gaps, and suitable candidates should be sent abroad for ad- vanced courses, preferably to other Middle Eastern countries. Quali- fied physiotherapists and dieticians are needed for the central hospitals in Tripoli and Benghazi. At the time of the mission's visit five Libyans were undergoing courses in pharmacy abroad-two in Egypt and three in the United Kingdom. Cyrenaica has a Chief Sanitary Inspector who assists the Director in public health work. LAJS in its health and sanitation program had by the beginning of 1959 trained 32 Libyan health and sanitation per- sonnel abroad, mostly at the American University of Beirut and some in the United States. This is a continuing program, and the only limit- ing factor is the availability of suitable candidates with basic education and knowledge of the English language. Short training courses have also been organized in Benghazi and Tripoli for Libyan sanitary inspectors. A small corps of trained Libyan sanitarians now exists, distributed over the country. Twenty-two sanitarians, after completing one year's training at the Health Assistants and Sanitarians Institute in Ben- ghazi, received their certificates in October 1958. Of these, nine each were from Cyrenaica and Tripolitania and four from Fezzan. A further 18 sanitarians graduated in 1959. The first class of health assistants will be graduating in 1960 and should constitute a valuable addition to the medical services, particularly in rural areas. It is estimated that the requirements of the country for health as- sistants and sanitarians will be satisfied after three to four classes of each have passed out of the institute. It is suggested that the institute be used for training of other categories of medical auxiliaries, e.g., lab- oratory and x-ray technicians. This will require some additional equip- ment and staff and close cooperation with the Benghazi general hospital. The institute should arrange refresher courses for working personnel. 286 THE MAIN REPORT Registration and Licensing There is no federal council of medical registration. Registration of doctors and dentists is carried out by the provincial Nazirates of Health who issue annual licenses for professional practice. An all-Libya Council of Medical Registration should be established, with the Di- rector General of the Ministry of Health as chairman and with repre- sentatives of all three provinces as members. This council should be the registering authority for doctors, dentists, nurses, midwives, medical technicians, pharmacists and all qualified technical personnel con- nected with the medical profession. Reorganization of Health Services We feel that the medical administrative set-up could be made more effective by delegating responsibility for the routine day-to-day admin- istration of the health services entirely to the medical administrators, with only questions of policy, finance and coordination to be dealt with at the ministerial (or Nazirate) level. To give due emphasis to preven- tive health measures, we recommend that the designation of "Director of Medical Services" be changed to "Director of Health Services." In the provinces of Tripolitania and Cyrenaica the director should have only one assistant director, who should be qualified in public health and who should be responsible for coordinating and supervising all community health work in the province. In the Fezzan the Medical Officer of Health at Sebha should act as assistant director of public health in addition to his other duties. It would be an advantage to have nonmedical Libyan administrative assistants for all nontechnical routine matters in the two major provinces, as is now the case in Tripoli town. The matrons of the general hospitals at Benghazi and Tripoli should also act as advisers to the directors in all matters con- nected with the nursing organization, pending the appointment of a well-qualified public health nurse administrator on a full-time basis with the central health administration. Health services should be reorganized on the basis of integrated health centers in all sizeable urban communities, supported by dis- trict hospitals and the central hospital, and with integrated subcen- ters in rural areas. The health center should combine public health services with dispensary facilities and coordinate preventive and cura- tive medicine in one organization. It should provide the following services: maternal and child health, hygiene and environmental sani- tation, public health education and public health nursing, school HEALTH AND COMMUNITY SERVICES 287 health, immunization and BCG vaccination and a dispensary to pro- vide routine out-patient treatment. It should be under the supervision of a medical officer of health who should also be responsible for all sub-centers, dispensaries and ambulatoria in the area. He should be assisted at the health center by a team of suitable medical and auxiliary personnel as they become available. The inclusion of a woman doctor would be ideal, but a beginning could be made by a team of at least one, and preferably two, nurse-midwives, a health assistant, a sani- tarian and medical orderly or male nurse. The sub-centers should have a health assistant and a sanitarian and, if possible, an auxiliary nurse- midwife. Each health center should have an ambulance and a utility car attached to it, and sub-centers in sparsely populated desert areas should each be equipped with a sturdy cross-country vehicle. The locations of these sub-centers should be widely publicized amongst the nomads of the area. The object of developing the health center system is to prevent disease, promote health and afford early treatment. It would reduce the necessity for people to be hospitalized and thus reduce the need for expanding hospital services. We thus recommend the conversion of existing MCH centers into integrated health centers. A beginning has been made at Suk el Giuma, and a center has also been built at Zawia which is expected to start functioning in the near future. In addition, there are plans for conversion of the MCH centers at Barce, Misurata, Tagiura and Garian into fully integrated health centers or sub-centers. We recommend the allocation of £L 200,000 for the further develop- ment of health centers in the next five years and of £L 90,000 to estab- lish a network of rural dispensaries. Nutrition Little reliable information is available about food consumption and nutrition in Libya. In general, the typical Libyan diet is monotonous and is heavily concentrated on a few items of vegetable origin, par- ticularly cereals, consumption of which in the coastal provinces is esti- mated at nearly 400 grams per head a day. Consumption of meat, eggs and fish is generally very low. Milk consumption is high among the pastoral tribes, but quite inadequate so far as the rest of the population is concerned. Sugar consumption is much higher than in most other countries with comparable income levels, being closely related to the consumption of tea. Fresh fruits are eaten only in small amounts, apart from dates, which are an important article of consumption in the areas where they are grown (but not elsewhere). 288 THE MAIN REPORT Clinical signs of malnutrition among adults appear to be rare ex- cept for some cases of calorie deficiency due to poor economic condi- tions. Among children, however, signs of malnutrition are found very frequently and are believed to be due to incorrect feeding and weaning practices. Young children usually look thin and underdeveloped, which suggests a low calorie intake and an inadequate supply of proteins. In order to correct some of these deficiencies particular attention should be given to encouraging consumption of fish, milk and other foods rich in proteins. Education in nutrition can go a long way to- ward helping to solve the problems created by poor feeding and weaning habits, and the school feeding program is helping to make good some of the most serious deficiencies in the diet of children. From a nutritional point of view it is highly desirable that Libyans should spend a smaller proportion of their income on sugar and tea and a higher proportion on other foods, and this is a point that should be borne in mind in connection with taxation policy. TOWN AND VILLAGE WATER SUPPLIES In most towns water supplies are piped and are derived from bacteriologically protected wells and springs. The only treatment car- ried out in most towns, including Tripoli and Benghazi, is chlorina- tion. Some of these chlorination plants were originally installed by the military authorities. The rural population obtain their water mainly from shallow wells which are subject to pollution. In some cases, espe- cially in the Gebel and in the Fezzan, the source is artesian wells or springs, while in other areas the only source is rainwater collected from roof-tops and stored in cisterns. The town of Tobruk presents one of the more difficult water supply problems as the available supply is very saline and inadequate for its growing needs (see Annex XXIII). Tripoli and Benghazi, together with about forty small towns and villages in Tripolitania, ten in Cyrenaica and three in the Fezzan, have piped water supplies. The pumping capacity of the municipal water- works in Tripoli is about 36,000 cubic meters in 24 hours. A shortage of water is known to exist in certain parts of the city, and several big industries were found to have bored wells and pumped their own water. Most of the other drinking water utilities in Tripolitania are owned and operated by municipalities, but maintained by the Nazirate of Public Works. In Cyrenaica and the Fezzan all utilities are owned and operated by the corresponding Nazirates. The reservoir capacity in no town seen was found to be adequate. None of the utilities keeps HEALTH AND COMMUNITY SERVICES 289 commercial accounts, and except for Tripoli, where revenue is only a little less than operating costs, all are heavily subsidized by government because water rates are everywhere very low. The government has spent over £L 1 million since Independence in developing town water supplies in Libya and a great deal more on hydrological surveys and investigations. There are no perennial rivers in the country, and few places where shallow wells can be dug to sup- ply villages with drinking water. Reliance has therefore to be placed on supplies from occasional springs and rain water collected in cisterns fed from roofs of houses and from paved areas in the towns. These sources of supply are unsatisfactory, and considerable efforts have been made in recent years to tap deep underground water. For capital development in the period 1960-65, the mission recom- mends that £L 700,000 should be set aside to augment existing in- stallations and provide new ones. Of this £L 300,000 would be for Tripolitania, £L 350,000 for Cyrenaica and £L 50,000 for the Fezzan. We attach particularly high priority to the scheme for boring three new wells to supply water to Tripoli, as the present source of Tripoli's water shows signs of overexploitation, and there has been a marked rise in its salt content in recent years (see Annex XXIII). The Nazirate of Public Works and the Municipality of Tripoli should work in close association in this matter with the proposed Geological and Hydro- logical Department recommended in Chapter 7 of this report. In Cyrenaica the mission attaches particular importance to the schemes for increasing the reservoir's capacity at Benghazi at an estimated cost of £L 80,000, for providing better water supplies at Barce, Cyrene and Derna (fL 100,000) and for drilling wells in villages (LL 80,000). The mission suggests that the present arrangement in Tripolitania, whereby one authority is responsible for the operation and another for the maintenance of waterworks, is unsatisfactory and recommends that all town waterworks (except at Tripoli, where the municipality employs its own maintenance staff) should in future be vested in the provincial Nazirates of Public Works, which should also collect the revenue as in Cyrenaica and the Fezzan. Any subsidy that is necessary would then appear in the accounts of the Nazirates. The existing rates charged for water piped to private premises appear too low. The use of piped water for gardens should be forbidden where supplies are short, and charged for at commercial rates where permitted. The revenue losses (at present more than £L 100,000 a year) should be kept constantly under review and an endeavor made to reduce them by raising rates in appropriate cases, by imposing charges where no charge is at present levied and above all by better collection of monies due. 290 THE MAIN REPORT We do not, however, suggest imposing any charge for water obtained from public fountains and standpipes, which for some rural com- munities is the principal source of supply. The mission considers that there is a good case on welfare grounds for including the supply of water to towns and villages amongst the projects for which additional provision should be made in the Sup- plementary Program. Great hardship is often experienced, particularly during hot weather, by people living in places where drinking water is scarce. It was noticed, for example, that in Zliten drinking water brought into the town on donkeys sold at about 1 millieme a liter; and at Hon even the hospital had to be supplied with drinking water by animal transport. A Supplementary Program should not, however, be considered until steps have been taken to establish a better organiza- tion for the construction and operation of waterworks in line with the recommendations outlined above. For the Supplementary Program we suggest that capital expendi- tures on the provision of piped water supplies might be increased by anything up to £L 250,000 over the five years. This additional expendi- ture should be distributed over all three provinces, with an allocation of not less than LL 50,000 to the Fezzan. We do not envisage the need to make additional financial pro- vision in our program for losses incurred in the operation of water undertakings in Libya. As already noted, these losses are currently in excess of £L 100,000 a year. The federal government should as a mat- ter of policy require the provincial governments to raise charges to the public at least to the extent necessary to cover any increase in oper- ating costs resulting from further expansion of facilities. SANITATION The general standard of cleanliness in towns and even in villages, both large and small, is good. Abundance of sunshine and the dryness of the environment are important factors in the maintenance of such cleanliness and the prevention of water-borne disease. Flies, however, constitute a serious hazard to health during the summer months. Sewerage Tripoli and Benghazi have water-carriage sewerage systems, both discharging into the sea without treatment of any kind. Substantial HEALTH AND COMMUNITY SERVICES 291 improvements were carried out in the Benghazi sewerage system after a UN expert in 1952 reported it to be inadequate and in poor condi- tion. The most urgent need now is to construct treatment plants at both capital cities, and we suggest that consulting engineers should be engaged to carry out surveys to determine the most economical meth- ods of handling the problem. Sludge from the plants should be sold as manure, possibly composted with refuse, and it may be practicable to use the effluent for irrigation. As a tentative estimate of costs, we suggest that a total sum of £L 800,000 should be included in the capi- tal investment program for this purpose, of which £L 450,000 would be for Tripoli and £L 350,000 for Benghazi. In the majority of towns and larger villages, where water supplies permit, a limited water-carriage system exists with cesspits for each building or group of buildings. These cesspits are emptied periodically by municipalities, and this method appears to work fairly satisfactorily. However, further studies are needed to ensure disposal of sewage in a way that would avoid the contamination of ground or surface water, as well as the contamination of the ground surface. If these handicaps can be overcome, the present system might be extended to other local- ities. Its advantages are that the water consumption is low, the pits can be constructed by semi-skilled labor, little or no imported ma- terial is required and generally plenty of space is available for new pits when necessary. The problem of latrines remains an urgent one. Priority should be given to the construction of individual family latrines. This would need governmental aid, and we recommend a self-help program be instituted, supported by the provision of construction equipment and of superstructures at low cost, for which £L 25,000 has been included in our five-year investment program. Refuse Collection Garbage and trash collection is carried out by the municipalities in the towns, either by their own staff or on contract, and disposal is by means of dumping outside the inhabited area or by the controlled- tipping method, as in the case of Benghazi. The cost of refuse collec- tion results in substantial deficits as the charges levied by the munici- palities, even if fully collected, do not cover the costs. As part of its sanitation project, LAJS has recently provided refuse receptacles and subsidized the purchase of refuse carts in some municipalities. We recommend the continuation of this program, but we see no reason 292 TIlE MAIN REPORT why the municipalities themselves should not bear a larger share of the cost. We have not therefore made any specific financial provision for this item in our program. Control of Pests Rodent infestation is not a serious health hazard, though the eco- nomic loss due to infestation of granaries, flour mills, bakeries and food markets must be considerable. This can be kept down by periodic poisoning campaigns, construction of rat-proof storage godowns and general clean-up measures. The only insect of special importance to health authorities all over the country is the housefly. Flies breed abundantly during the summer months, almost disappearing during the winter. It is probable that flies play some role in the transmission of all the three most prevalent diseases in Libya. Primative latrines and aggregations of large numbers of animals in towns and villages are re- sponsible for most of the breeding. Fly control measures and clean-up campaigns are necessary and should be scientifically organized and continuous to be effective. An example of accomplishment in this re- spect is provided by the LAJS fly control campaign conducted in the Suk el Giuma area for three successive summers in support of the Wheelus Base sanitation, resulting in a drop of 75 percent in the dysen- tery admission rate in the Base hospital. There was also a considerable reduction in the incidence of gastro-intestinal disease treated at the Suk el Giuma government dispensary, although accurate records are not available. We strongly urge that such fly control campaigns be extended to other parts of the country. Food Hygiene In all towns food vendors are registered and fairly regular sanitary inspection by inspectors and overseers is carried out, though it is not always effective. Fresh milk is not very popular with the town dwellers, but a good deal of butter-milk (laban) is consumed and a certain amount of homemade cheese. There is sanitary supervision of milk vendors in towns, but there is no control of milk producers and there is no bottling or pasteurization either in Tripoli or Benghazi. Boiling of all milk is necessary. There are municipal slaughterhouses in all large towns and slaughtering is usually carried out under some sort of veterinary and medical supervision. In towns meat is taken to retailers in closed vans. LAJS has recently taken up the project of slaughter- HEALTH AND COMMUNITY SERVICES 293 house rehabilitation in the larger towns as part of its community health activities, and a chilling plant is currently under construction at the municipal abattoir in Benghazi. Standards of markets for fresh food range from the open village market with vendors squatting on the ground among their produce to the central market in Tripoli where the level of hygiene is very satisfactory. Market places are usually cleaned up after the day's business and are generally fairly well main- tained, but much improvement could be effected by the provision of an ample supply of water where possible and the construction of pub- lic latrines. More generally, there is plenty of room for improvement in enforcing proper standards of food hygiene. Industrial Hygiene There are no factory laws in operation, possibly because until now there have been few large industrial plants in the country. Standards of hygiene in food-processing establishments are not high, and there is considerable room for all-round improvement to bring these up to the level of modern requirements. Any outlay for this purpose would be economically productive, since foods processed under acceptable hygienic standards would find bigger markets in Libya and possibly abroad. Working conditions in most of the smaller industries are often unsatisfactory, and the provision of wash places and latrines for work- ers is often inadequate. We recommend that consideration be given to the enactment of appropriate legislation, and that provision be made for its subsequent enforcement. HOUSING A feature of the recent history of Libya is the considerable move- ment of landless labor toward the towns, and this trend may well continue for some years to come. Large "shanty towns" can be seen on the outskirts of Tripoli and Benghazi where people live under de- pressing slum conditions. Similar conditions were observed in and near several other towns. A few years ago the problem created by migration into the city of Tripoli got out of hand, and large numbers of migrants had to be forcibly returned to their places of origin. A slum clearance scheme was initiated by government in 1954, and a shanty-town settlement to the west of Tripoli was rehoused on a more suitable site (Porta Azizia) and the shanties dismantled. However, 294 THE MAIN REPORT the layout of the settlement (in the form of a grid) and the design of the 464 housing units (each consisting of two rooms and a courtyard built up in blocks of four units) leaves something to be desired. No trees were planted, and the only redeeming feature in the layout is a small mosque which makes an attractive central focus point. Later, 262 similar housing units were built in five towns in Cyrenaica (in this case there were eight units in a series of open-ended blocks) and 120 in Wadi Caam. In Tripoli the average cost per unit, including outside water standards and latrines, roads and other ancillary services, was £L 130; in Cyrenaica, where the units had interior sanitation and septic tanks, average cost per unit was £L 343; and in the Wadi Caam the cost was £L 333. The traditional Italian colonial methods of buildings were adopted in all these settlements, the walls being made of local stone blocks plastered over with cement and the roofs of cement concrete or pre- cast beams with hollow clay tiles. All the units were of the same size, with no provision being made for large families, windows were placed in the outside walls (now often seen blocked up by the inhabitants), and the layouts made no attempt to provide privacy or to conform to the social habits of the people. In several of these settlements the in- habitants have been "improving" them by adding palm-leaf and clay lean-tos and enclosures. Nevertheless, these houses are very popular and are occupied immediately they are completed, so great is the demand for housing among people in the low-income groups. The scheme is now known as the "Popular Housing Scheme," and in most cases the occupants are not people from the shanty towns but those much higher up in the social scale. A nominal rent is charged, but the mission understands that it is not always enforced. In the Tripoli settlement a "Sheikh" has been appointed as community leader, and his discipline has been well accepted and the settlement is clean and tidy. The 1954 census shows that 3,591 families were homeless in Tripoli city alone (the number is probably much greater today), and one of the five-year plans of Cyrenaica provided for 5,000 housing units as a first requirement. However, the attention so far given to popular housing by the provincial authorities falls far short of the need. It is sometimes argued that the provision of better houses in the towns will merely encourage people to move there from rural areas and thus aggravate the problems of urban concentration. We do not consider this a convincing argument against popular housing schemes, though it reinforces the case for financial assistance to be given by the federal HEALTH AND COMMUNITY SERVICES 295 government to the local housing authorities. A properly balanced hous- ing program should anyhow include provision for new units in rural as well as urban areas. The mission places the construction of low-cost housing very high on its list of priorities, and it suggests that the following principles should be observed in planning and executing a public housing pro- gram for Libya as a whole: 1. Before construction is started careful plans should be drawn up for community settlements that accord with the social customs of the people, including a community center, a mosque, shops, roads and trees. 2. Maximum use of local materials should be encouraged, and in rural areas construction should be organized wherever possible on a self-help basis. 3. Rent rules should be drawn up and strictly enforced. Rents should be fixed at levels which will enable capital costs, includ- ing interest, to be recovered over a reasonable period-say twenty years-with provision for special remissions to meet cases of hardship. Rents should never exceed a maximum of, say, one- tenth of a family's income. The subject has been studied by UN experts under the technical assistance program, and they have drawn up schemes which provide for the greater use of local materials, including gypsum, of which there are large deposits in Tripolitania. They hope to be able to house people at from £L 33.5 to £L 55 per person in dwelling units without septic tanks. It is claimed that gypsum concrete walls are about 45 per- cent cheaper than walls made of local stone, and that methods of gypsum construction tried out with success in other countries could be adapted for use in Libya, where the dry climate is a favorable factor. The mission recommends that a few experimental houses should be built of gypsum without any further delay with a view to determin- ing whether the suggested methods of construction would be economic and practical. If the results are encouraging, the government should invite tenders from private firms for the supply of quantities of gypsum required for a housing program and should be ready, if necessary, to provide financial assistance for setting up the necessary plant. Whatever methods of construction are employed, we recommend that the federal government should prepare plans in consultation with the provincial and local authorities for the housing of 2,000 families in Tripolitania and 1,000 families in Cyrenaica over the next five years. 296 THE MAIN REPORT The preparation of plans should be supervised by the technical adviser to the Development Council, and an experienced housing development officer should be appointed to assist him. The execution of the program should be entrusted to the provincial governments and the municipali- ties, but the federal government should retain strict control over the use of the funds allotted. In view of the interest currently displayed by foreign building contractors in taking on work in Libya, these con- tractors might be invited to tender for the construction of some of the larger urban housing settlements. Competition would be an important factor in keeping costs down. The mission suggests that a sum of £L I million should initially be earmarked for the housing program suggested above, and we have included this in our list of proposed capital expenditures. We attach the greatest importance to low-cost housing projects as a means of pro- moting community welfare and ensuring that all sections of the popula- tion benefit from the increased income accruing from foreign aid and oil revenues. If the program already outlined is carried out success- fully and further funds become available, the mission would be in favor of additional allocations for housing under the Supplementary Program. There is little hope that private enterprise will be able to provide enough houses for the middle and lower income groups so long as the building boom, at present in evidence in all the large towns, con- tinues. This boom is due to the rapid growth in trade and the large influx of foreigners into the country, including employees of the oil companies. Also many Libyans employed by foreign companies are now much better off than before and are demanding better houses. In addition, many public buildings have been erected, and the building industry is fully occupied and making such large profits that no attempt is being made ito develop new and more economic designs or to make better use of local materials. If the government pioneers with a low- cost housing scheme, as here proposed, there is every prospect of private enterprise coming in to help at a later date when the present building boom subsides. Low-cost public housing can only be provided for a small section of the population. Most of the better-paid artisans, clerks, government officials and other town-dwellers will continue to live in private houses or apartments. To assist such people to raise the money to buy their own houses, the mission suggests that consideration might be given to the institution of a government housing fund or mortgage bank. Finance for such an institution could be raised by local borrowing HEALTH AND COMMUNITY SERVICES 297 (see Chapter 15), and we have made no specific provision for it in our program of public expenditure. COMMUNITY DEVELOPMENT The concept of communal effort directed toward the achievement of communal objectives is one that fits in well with the traditional pattern of tribal society in Libya, but it is only recently that an organ- ized community development program has been introduced as a fea- ture of the current drive for economic development. Such a program was inaugurated in Cyrenaica in February 1958 with the help of USOM, and in the first two years of its existence it has achieved en- couraging results. Not far short of a hundred small projects have been initiated, ranging from the building and repair of schools and mosques to the digging of wells and the construction of irrigation channels. Much of the work has been contributed voluntarily by local farmers and villagers. The mission believes that there is considerable scope for wider use of this approach to the improvement of social and economic con- ditions in rural areas. The success of a community development pro- gram depends essentially on the quality of local leadership and on the ability of local authorities to organize practical schemes and arouse enthusiasm for them. Wherever the right spirit can be created, com- munity development projects can make a valuable contribution in a variety of fields, including the improvement of village amenities, im- provement and construction of rural roads, building of schools, health education and the expansion of agricultural production. Substantial investment can often be achieved from the expenditure of compara- tively small sums of money. We recommend therefore that the federal and provincial governments should give full support to the existing program in Cyrenaica, and that the introduction of similar programs in the other provinces should be considered. SUMMARY OF PROPOSED EXPENDITURES The proposals made in this chapter in respect of public health, town and village water supplies, sanitation and housing would call for an estimated capital expenditure of £L 3,700,000 over the five years 1960/61-1964/65. The total would be divided as follows: 298 THE MAIN REPORT (£L '000) Five-year Annual total average Public Health Hospital buildings and equipment 700 140 School of nursing (male), Benghazi 20 4 Central medical store, Tripoli 50 10 Health centers and rural dispensaries 290 58 Ambulances 75 15 Port and airport quarantine stations 40 8 Total public health 1,175 235 Town and Village Water Supplies Cyrenaica 350 70 Tripolitania 300 60 Fezzan 50 10 Total water supplies 700 140 Sanitation Tripoli sewerage scheme 450 90 Benghazi sewerage scheme 350 70 Rural sanitation 25 5 Total sanitation 825 165 Housing Low-cost housing construction 1,000 200 Total housing 1,000 200 Grand Total 3,700 740 A number of the mission's recommendations, if adopted, will in- volve an increase in the present running costs of the health services. We have proposed, for example, that all doctors should be employed and paid on a -whole-time basis, instead of on a part-time basis as many are at present (particularly in Tripoli), and that they should receive additional allowances in certain cases. The programs for new hospital construction and the establishment of a system of health centers and sub-centers throughout the country will involve a steady increase in expenditures on staffing and on the maintenance of the new buildings. Provision has also to be made for the administration of port health HEALTH AND COMMUNITY SERVICES 299 control and quarantine facilities (page 279), for the recruitment of more foreign women doctors and nurses (pages 283 and 284), and possibly for some initial increase in expenditures on medical training abroad (page 283). On the other hand, centralized purchase of medical stores might result in a saving of £L 20,000-30,000 a year (page 279). The mission was unable to obtain sufficiently detailed information about the present costs of the health services to make any reliable esti- mates of the additional recurrent expenditures involved in carrying out each of these recommendations, but on the assumption that the health services are at present costing approximately £L 1V2 million a year to run (Statistical Appendix, Table S.9), we consider it would be reasonable to allow for these to rise in total over the next five years at the rate of 5 percent a year. This would raise recurrent expendi- tures to around £L 1,900,000 by 1964/65 and would entail additional expenditures of about £L 1,200,000 over the five-year period as a whole. The level of recurrent expenditures on health envisaged for 1964/65, combined with the investment expenditures proposed by the mission, would account for 7 or 8 percent of all the public expendi- tures envisaged for that year and possibly for about 2 or 3 percent of the total real resources available for use in Libya. This latter percentage would be rather higher than in most other underdeveloped countries, where it appears that expenditures on health seldom exceed 1 percent of gross national product. The mission has recommended that, as a matter of government policy, the losses incurred by public authorities in the supply of water to towns and villages should not be allowed to increase beyond their present level. No provision is therefore made in our program for addi- tional recurrent expenditures under this head. The additional running costs of sanitation and other municipal services should likewise be met out of local rates and taxes. Additional provision for investment in town and village water sup- plies and low-cost housing is recommended as part of the Supple- mentary Program. CHAPTER 15 GENERAL FINANCIAL AND ECONOMIC POLICIES The financing of the program of public expenditures recommended in this report has been discussed in Chapter 5. With foreign aid run- ning at about £L 12 million a year, with the possibility of oil revenues materializing within the next few years and with the cash reserves held by the federal and provincial governments, we have assumed that no major difficulties will be encountered in raising enough money to cover total public expenditures ranging from £L 22 million to £L 27 million a year over the next five years, which is the level implied by the mis- sion's programs of capital expenditures and additional current expendi- tures related to development. It has been argued earlier in the report that, in the mission's view, the limits to the pace of economic development are more likely to be set by shortages of trained personnel and by organizational and admin- istrative problems than by lack of money as such. However, to the extent that these limitations can be successfully overcome by the energy and ingenuity of government and private enterprise, the mission has suggested that there may be room for supplementary expenditures in such sectors as the development of water resources, afforestation, edu- cation and training, popular housing and agricultural credit. This makes it all the more important for the government to concentrate its efforts on raising the efficiency of public administration and eliminating wasteful expenditures and superfluous controls which impede economic development. At the same time, in anticipation of the day when the country's capacity to execute useful economic projects is greater than at present, attention should be given to possible ways of mobilizing additional internal resources for development through taxation and voluntary savings. Quite apart from these considerations, changes in the present tax system are needed to ensure that increases in income are more equitably distributed among the different sections of the population. It is now widely recognized that the government of a country has a responsibility for trying to ensure not only that the national income grows, but that: the strains and stresses of growth are kept to a mini- 300 GENERAL FINANCIAL AND ECONOMIC POLICIES 301 mum, and that employment is provided for all who are able and willing to work. The Libyan Government has many dangers to contend with in the new era which has been opened up since Independence, first, by large-scale foreign aid and military expenditures and, more recently, by the discovery of oil. There is the danger that a few people will become very rich while the mass of the population remain very poor. There is the danger that prices will go on rising in an inflationary spiral, causing hardship and discontent among such classes as govern- ment officials and small farmers who constitute the most stable ele- ments in society. There is the danger that the gulf between town and country will be widened, with the main benefits from the increase in external income accruing to trade and industry and passing by most of the rural population. There is the danger of a steady drift of popu- lation from the rural areas to the major cities in search of jobs, result- ing in the creation of a depressed and uprooted urban proletariat, which could become a source of social and political instability. The government can do much to guard against these dangers by pursuing wise financial and economic policies. This is not simply a matter of how the resources available for development are distributed between the different sectors of the economy, which has been the main theme of the preceding chapters of this report. It is also a matter of budgetary management in the widest sense, covering all aspects of public revenue and expenditure; a matter of social policies in such fields as minimum wage provisions and social security legislation; a matter of monetary policy involving control over the currency in cir- culation and the credit created by the banking system; and a matter of import and export policy, customs administration, exchange control and trade and financial relations with other countries. Each of these areas of policy is briefly reviewed in this chapter. THE PROBLEM OF INFLATION The present economic situation in Libya is characterized by wide- spread shortages and rising prices resulting from the sudden increase in demand for goods and services required in connection with oil oper- ations. Where additional supplies can be freely imported, or where local production can be readily increased to meet the demand, the situation should be largely self-correcting, especially as there is a fair amount of competition in the wholesale and retail business. Neverthe- less, traders take time to adjust themselves to the increased tempo of 302 THE MAIN REPORT activity and to get used to handling a larger volume of business, and they have a strong incentive in the meantime to charge what the traffic will bear. This time-lag probably helps to explain why prices even of many imported goods have risen sharply during the past 12 months; if so, some of the price increases that have occurred may prove to be only temporary. However, there are some shortages which cannot be easily overcome by increasing imports or local production. For example, the demand in Tripoli for offices, houses and apartments has been sharply increased not only by the oil boom, but also by the return of the federal govern- ment from Benghazi. New building is proceeding apace, but it may be quite a long time before supply catches up with demand. A similar situ- ation has arisen in the case of hotel accommodation and many types of personal services. The resulting price increases mainly affect the foreign community and the upper Libyan income groups, but the rest of the Libyan population must also be feeling the effects in certain directions, and there is evidence that the general cost of living in Tripoli rose appreciably during 1959 (see Chapter 2). The interaction of "demand inflation" and "cost inflation" is seen in the strong upward pressure exerted on wages and salaries by the oil boom. This pressure and the inflation of profit margins have raised costs of production and prices in the manufacturing, building and serv- ice trades. No reliable information is available about movements in wages and salaries, and the experiences of different groups must have varied greatly. But outside the civil service and agriculture there has clearly been a considerable rise in average wage and salary rates during the past two years. There are limits to what the government can do to control an infla- tionary process of this kind in which the initiating factor has been increased expenditures by foreign governments and oil companies. This is no argument, however, for standing aside and doing nothing. The first essential is a liberal import policy, and we recommend later in this chapter that most of the remaining restrictions on imports should be removed. With substantial foreign exchange reserves and every prospect of a sharp increase in foreign exchange income in a few years' time, Libya can well afford to allow both consumer goods and capital goods to enter the country freely. Elsewhere in the report we have recommended various limited measures of tariff protection to assist the development of agriculture and local industries, but with the exception of wheat and flour (and possibly gold) we can see no good economic reason for retaining quantitative restrictions on imports. GENERAL FINANCIAL AND ECONOMIC POLICIES 303 Following the example of other oil-producing countries which have been faced with a similar situation in the past, the Libyan Government should encourage the immigration of skilled workers from abroad to fill jobs for which there is a shortage of qualified Libyans. Many people left Libya during the Italian occupation to live in Tunisia, Egypt, the southern Sahara and other neighboring countries, and it is understood that some of these would now like to return to Libya. We believe it to be in Libya's interests that they should be given every facility to do so, particularly if they have special skills to contribute to the develop- ment of the economy. For broadly similar reasons we recommend that Libya should en- courage foreign building contractors to establish branches and bid for contracts in the country. If a major program of public investment is to be carried out simultaneously with oil exploration and development, it is essential that the limited resources of the Libyan building industry should be supplemented by the import of organization and technical skills from abroad. As much competition as possible is desirable in this field to keep building costs down and expedite work. Cheaper and quicker private building will do more than anything else to bring down the present extortionate rents in Tripoli and Benghazi and to alleviate the shortage of housing accommodation for Libyans living in these towns. The gap between earnings in the oil industry and earnings in other industries is already large enough to be a matter of serious concern, especially to the government, which is under increasing pressure to raise the pay of its own employees. In these circumstances the govern- ment should refrain from lending its support to claims for an all-round increase in the minimum wage in the oil industry. Such an increase, if granted, would ultimately be at the expense of the rest of the com- munity, both because it would reduce the profits accruing to the gov- ernment from oil production and because it would give an added stimulus to cost inflation in other sectors of the economy. One of the government's principal aims in dealing with inflation should be to restrain excessive demands for private consumption by channeling a substantial proportion of the increased incomes gener- ated by the oil boom into the public exchequer and by taking steps to encourage private saving. The government should also exerdse re- straint over its own expenditures to avoid adding fuel to the flames and accentuating existing shortages. These aspects of fiscal policy are discussed in more detail in the following section. General monetary and credit restrictions are unlikely to be of 304 THE MAIN REPORT much avail in dealing with the present situation. The expansion of money supply in Libya is in any case more an effect than a cause of the boom in oil activity. It may be appropriate for the National Bank to urge the commercial banks to exercise restraint in extending credit for certain purposes such as hire purchase. However, a more effective way of controlling hire purchase is for the government to impose re- strictions on the terms of hire purchase agreements, and we recommend that consideration be given to the introduction of suitable legislation for this purpose. Direct controls over prices and distributive margins may be neces- sary in some cases to check profiteering and to protect the poorer sec- tions of the community against increases in the cost of basic commodi- ties such as foodgrains and clothing. In fact, prices of some commodities such as bread and pharmaceuticals are already subject to control.. It must be recognized, however, that direct controls of this kind, and especially controls over rents, are notoriously difficult to enforce on any wide scale, and they should only be employed in exceptional cases. Particular care is necessary to ensure that prices are not fixed too low or too rigidly to discourage domestic production. Experience in other countries has shown this to be a very real danger. Inflationary pressures are likely to continue in Libya for some time, and it would be unrealistic to imagine that they can be eliminated altogether when activity is expanding so rapidly. It should be the spe- cial responsibility of the National Bank to keep a watch on develop- ments and to advise the government on appropriate action. The com- pilation of reliable and up-to-date indices of the cost of living in the main towns should be regarded as an essential guide to the formulation of policy. FISCAL POLICY Broad Objectives Sound management of public finances is essential to the success of any well-directed economic development program. The main objectives of fiscal policy should be to raise the funds needed to finance projects in the public sector, to eliminate wasteful expenditures which impede development, to preserve a reasonable measure of internal financial stability and to ensure that all classes of the people have opportunities to share in the additional income generated in the process of economic growth. In a private enterprise economy these objectives have to be pur- GENERAL FINANCIAL AND ECONOMIC POLICIES 305 sued in such a way that the best use is made of private capital, initia- tive and skills in promoting the expansion of the country's production and wealth. Particularly taxation policies may have an important bear- ing on the results achieved, and when tax changes are contemplated, account has to be taken of their likely economic impact as well as of their effects on government revenues. In Libya this is particularly necessary in the case of customs duties which constitute the principal source of domestic revenues. Public Expenditures The mission was disturbed by the apparent lack of appreciation in Libya of the importance of economizing in government expenditures. This can no doubt be explained in part by the fact that a large part of these expenditures has hitherto been financed out of foreign grants and loans, and a greater sense of financial responsibility is to be looked for in future as Libya becomes increasingly self-dependent. Certainly, an entirely different approach to public spending will be required if a program of the dimensions indicated in this report is to be carried out successfully during the next five years when oil revenues will probably not be very large. As can be seen from Table S.3 of the Statistical Appendix, the rate of growth of government expenditures in recent years has been phe- nomenal. Thus between 1954/55 and 1958/59 public expenditures on defense and education were roughly trebled and expenditures on health, transport and communications and public buildings were more than doubled, while expenditures on law and order rose by about 80 percent. In some cases the growth of expenditure has slowed down in the last two or three years, but in others it has continued at a rate that obviously cannot be sustained, even on the most optimistic assump- tions about oil revenues. For example, in one year alone (1957/58 to 1958/59) expenditures on law and order rose by about 25 percent and expenditures on education by over 30 percent. We have pointed out in Chapter 5 that recurrent expenditures in some fields must be expected to go on rising, but limits have to be set to the rate of growth. In education, for example, we have suggested a growth rate of 10 percent a year over the next five years and in health of 5 percent a year. The Ministry of Finance should be very reluctant to allow these limits to be exceeded unless and until really large oil revenues are assured-a contingency which has been provided for in our Supplementary Pro- gram. 306 THE MAIN REPORT The Budgetayy System Details of public expenditures in recent years, insofar as the mission was able to ascertain them, are set out in the Statistical Appendix, and the salient features have been described in Chapter 2. The need to strengthen the machinery for controlling expenditures at all levels has been stressed in Chapter 6. Attention was also drawn in Chapter 6 to the lack of reliable information about the financial operations of gov- ernment and ithe failure to make a proper distinction in the govern- ment accounts between current and capital items. Secrecy in public finance is wrong in principle, and both Parliament and public should be kept informed of what is going on. The mission strongly recommends that in future all transactions of the federal government, including the agencies or agency responsi- ble for development, should be brought together into a single compre- hensive budget. Expenditures should be grouped into three main categories: (a) current expenditure, including grants-in-aid to the prov- inces and to nongovernment bodies (e.g., the Libyan University) and subsidies to revenue-earning government enterprises; (b) capital ex- penditures for economic development and other purposes, including grants to the provinces for investment projects approved by the Devel- opment Council; and (c) loans and capital subscriptions (e.g., to the Agricultural and Industrial Credit Departments of the National Bank of Libya). We envisage that, with some exceptions, the items under (b) and (c) will comprise the capital budget, which should correspond broadly in coverage with the five-year program of capital expenditures recom- mended in this report, and the money for which should be provided by the Ministry of Finance in accordance with the recommendations of the new Development Council as approved by ministers. Some of the investment projects in this capital budget will be for execution by the federal government, some by the provincial governments and some by autonomous public bodies such as the Tripoli Electricity Authority. The federal projects will be shown in detail in the federal budget. In the case of projects to be carried out by the provinces, which we assume will normally be financed out of special federal grants, the federal budgets should show the allocations of funds by the Ministry of Finance to each of the provinces under broad headings (e.g., roads, electric power, health, education, etc.), and only the larger projects need be itemized (say, those costing £L 100,000 or more). It would then be for the provincial Nazirates of Finance to show in detail in their budgets how they were proposing to spend the money allocated to them for GENERAL FINANCIAL AND ECONOMIC POLICIES 307 investment in education, health and so forth. Loans made to inde- pendent public authorities and special agencies under item (c) above should be separately listed in the federal budget. The capital budget will not, of course, include recurrent expenditures related to develop- ment (e.g., routine road maintenance or the pay of school teachers), which should be carried on the revenue budgets of the federal and provincial governments. Ideally, expenditures should be classified in two ways in the budg- ets of the federal and provincial governments, in addition to the usual classification under the heads of the different spending departments. First, there is the functional classification under which expenditures are grouped in accordance with the different functions of government such as defense, foreign affairs, police, agriculture, education and health. This is the classification we have followed in the tables of the Statistical Appendix. Second, there is the economic classification which distinguishes between the various categories of current expenditure on goods and services, transfer payments and capital expenditures.' With the present acute shortage of trained accountants and economists it would be premature at this stage for the Libyan authorities to go into all the refinements of an economic classification, but the attempt should eventually be made as experience in budgetary analysis is developed. On the revenue side the general budget of the federal government should embrace three main groups of transactions: (a) current revenues, including foreign grants, oil revenues and the profits of government enterprises; (b) proceeds from the sale of state property; and (c) receipts from long-term borrowing by the government, including foreign loans, and from the repayment of loans to the government. It is not, of course, suggested that capital expenditures should be financed solely through borrowing. On the contrary, it is to be anticipated that there will nor- mally be a substantial surplus of current revenues over current expen- ditures available for financing investment. All oil revenues accruing to the federal government, including those reserved under existing legislation for projects approved by the Development Council, should be included in the general budget under item (a). The arrangement under which 70 percent of oil revenues are earmarked for allocation by the Development Council appears sensible. The accounts of the posts and telecommunications services and of the Libyan broadcasting system should be set out under separate heads, which enable them to be distinguished from the general transactions IFor a full treatment of this subject reference should be made to A Manual for Economic and Functional Classification of Government Transactions, UN Depart- ment of Economic and Social Affairs, New York, 1958. 308 THE MAIN REPORT of the federal government. The same procedure should be followed in the provinces for revenue-earning undertakings such as civil airports, ports, urban water supplies and government newspapers, which are run directly by departments of government. Where the undertakings are run at a loss, the extent of the loss should be clearly indicated in annual financial statements to Parliament and provision made in the budgets for the necessary subsidies. All these undertakings, together with autonomous authorities such as the Tripoli Electricity Authority and the suggested Tripoli Port Trust, should submit to the federal government annual statements of capital expenditures proposed for the coming year, indicating how far these can be financed out of their own funds. This information is needed to enable the Development Council to prepare a comprehensive program of capital expenditures and to advise ministers on the allocation of funds set aside in the budget for development. Taxation Over 70 percent of the domestic revenues of the federal and pro- vincial governments in 1958/59 were derived from indirect taxes, in- cluding customs duties, the profits of the tobacco and salt monopolies and government trading in sugar. Direct taxes, mainly provincial income taxes, contributed about 15 percent, and rather over 10 percent was made up of motor vehicle taxation, miscellaneous fees and dues and the surpluses of revenue-earning public enterprises, notably Tripoli port and the government press in Tripoli (see Statistical Appendix, Table S.2). Domestic tax and non-tax revenues, including the profits of the monopolies and state trading in sugar, are now probably equal to over 20 percent of the gross domestic product, which is a high figure for a country at Libya's stage of economic development. A significant proportion of these revenues, however, is paid by the resident foreign community and foreign companies. Heavy reliance on indirect taxes, and especially customs duties, is a normal feature of the revenue systems of underdeveloped countries. This is primarily because indirect taxes are generally simpler to collect and administer than income tax. Indirect taxes have the disadvantage that they tend to be "regressive" in their impact-that is to say, they absorb a larger proportion of the incomes of the poor than of the rich. This is probably less true in Libya, however, than in some other coun- tries. Import duties are much the most important form of indirect taxation in Libya, and comparatively few imports apart from wheat and flour, tea and sugar enter largely into the consumption of the rural GENERAL FINANCIAL AND ECONOMIC POLICIES 309 population. The imports which make the largest contributions to cus- toms revenues, between them accounting for well over half the total yield from this source, are petroleum, sugar, textiles and clothing, tea, motor cars, flour, electrical equipment, iron and steel manufactures and alcoholic beverages. By and large, with the exceptions of sugar, tea and flour, these commodities are consumed mainly by the foreign community and by comparatively well-to-do Libyans in the towns. The same applies with even greater force to luxury items such as cameras, films, watches and cosmetics which collectively account for a significant proportion of customs revenues. The duties on certain of these items (e.g., cosmetics, wines and spirits) were sharply increased in the summer of 1959, and this has further reduced the regressive bias of the tax system. In general, and apart from a few items mentioned elsewhere in this report, the mission feels that the structure of the tariff is well adapted to Libya's needs. A notable deficiency at the time of the mission's visit was the absence of any duty on gold, which was being imported in sub- stantial amounts (over £L 500,000 in 1958) partly for use in handicrafts, but mainly for other reasons, including re-export to neighboring coun- tries. A duty of 15 percent has since been imposed, and import controls have been tightened up. As a result, gold imports have declined. The mission considers, however, that a considerably higher duty would be justified (say, 50 percent at least). The mission has suggested in Chapter 4 that the import duty on kerosene should be reduced to encourage the use of kerosene as a fuel in place of firewood and charcoal. When oil is produced and refined in Libya, the wider use of kerosene could be a significant factor in checking despoliation of the country's limited forest resources. The revenue from import duties has risen rapidly in recent years along with the growth of imports, which has been made possible by the increase in income from foreign aid, foreign military expenditures and oil exploration. Details are as follows: (£L '000) 1954/55 1955/56 1956/57 1957/58 1958/59 Imports, c.i.f.a 11,333 14,338 16,601 23,069 24,422 Receipts from customs dutiesb 2,455 3,381 3,873 4,899 6,400 & Figures refer to calendar years and exclude equipment and supplies imported directly by oil companies, some of which are liable to duty. b Including minor receipts from export duties (about £L 50,000 a year). 310 THE MAIN REPORT Some further increase in imports may be expected as the local ex- penditures of the oil companies reach a peak,2 and government receipts from customs duties should average at least £L 6-7 million a year dur- ing the period covered by our program and quite possibly more. Excise duties as such are of minor importance at present, but if oil is pro- duced and refined in Libya, the existing customs duties on petroleum products will have to be converted into excise duties. With this pros- pect in view the mission considers it to be of the utmost importance that excise duties should be made a federal subject. The present posi- tion under which customs duties are a matter for the federal govern- ment and excise duties a matter for the provinces is in any case anom- alous and out of line with the usual practice in other countries. The operations of the tobacco and salt monopolies have been re- viewed in Annex XIII. Demand for cigarettes can be expected to grow with the continued rise in incomes, and if the mission's recommenda- tions for the better management of the monopolies are accepted, reve- nues obtained by the provincial governments from these two sources (over £L 1 million in 1958/59) should be appreciably increased. Under the present system of government trading in sugar, the price charged to the consumer (11 piasters per kilogram in Tripoli) is nearly three times the landed import price, and after deducting distribution costs the government derives a revenue equivalent to nearly 6 piasters per kilogram, of which rather under half accrues to the federal government in the form of customs duty and rather over half to the provincial gov- ernments as a itrading profit. The revenue obtained by the provincial governments from sugar amounted in 1958/59 to about £L 500,000, and this figure can be expected to rise in line with the general growth of personal incomes since the income elasticity of demand for sugar appears to be fairly high. Recommendations for the reform of the existing systems of income tax and agricultural taxes were put forward in the report of a UN adviser in 1954.3 At present each of the coastal provinces has its own income tax law, although a draft federal law has been under consider- ation by the government for a number of years. As mentioned in Chapter 6, the mission strongly recommends that income tax should 2 Machinery and equipment imported directly by the companies for use in oil exploration and development are exempt from customs duties. On the other hand, other supplies obtained from abroad, whether directly or through local contractors, are normally liable to duty. sProblems and Recommendations on Taxation in Libya, S. H. Ahmed, United Nations, New York, 1957. GENERAL FINANCIAL AND ECONOMIC POLICIES 311 be made a federal subject. As a first step, immediate action should be taken to implement the present draft law, which lays down a sound basis for a uniform system of income tax throughout Libya. The second step would be to make the federal government responsible for the col- lection and distribution of income tax and the tax on businesses. Use should be made of the existing machinery for tax administration in the provinces, and the revenue obtained should be allocated between the center and the provinces in accordance with the recommendations of a Finance Commission. The standard rates of tax should be higher than the present 10 percent for companies and 8 percent for individuals (4 percent for those earning less than CL 15 a month), but we suggest that the exemption limits should be raised to exclude from the scope of the tax all persons earning less than, say, EL 180 a year (instead of EL 80 a year as at present). Tax moreover should be applicable only to that part of the income which exceeds the exemption limit and not to the whole income as at present. This recommendation would be in line with that made in the 1954 UN report. Ultimately the objective should be to introduce a progressive scale under which liability to income tax would be related to ability to pay. A graduated income tax is, however, more difficult to administer than a flat rate, and it will be better to concentrate first on improving the machinery for collecting taxes and on extending the scope of income tax. At present the provincial income taxes apply to registered com- panies and traders, professional people and employed persons. In prac- tice, it would appear that incorporated enterprises and employed persons bear the brunt of the tax, while many unincorporated traders and merchants manage to avoid it altogether. Vigorous efforts should therefore be made to tighten up the administration and to extend the list of registered taxpayers. Greater use should be made in Libya of property taxes, particu- larly on houses and other forms of real estate. There is a house tax in Tripolitania and a miscellany of taxes on property in the principal Tripolitanian and Cyrenaican municipalities, but their yield is ex- tremely small. Property taxes are comparatively easy to assess and collect, and we suggest that, as a first step, they should be more widely adopted in urban areas for the purpose of raising municipal revenues. Agricultural taxes in Libya are levied by the provincial govern- ments on cereals, animals, trees and irrigated land. These taxes were conceived as tithes on production. Their total yield is very small, gen- erally averaging between EL 100,000 and EL 300,000 a year according to variations in rainfall, and it is clear that there is widespread evasion. 312 THE MAIN REPORT Exemptions are frequently granted; as an extreme example, the Cyre- naican Administration has remitted all taxation of agriculturists throughout the entire province for the past two years. The present system of agricultural taxation in Libya is both com- plex and inefficient, and a strong case can be made out in principle for replacing the existing taxes in each province by some simpler form of land tax. The mission does not favor increased taxation of the small farmers or pastoralists who are eking out a meager subsistence on mar- ginal land. On the other hand, the larger and more prosperous farmers and landowners in the more fertile districts can well afford to pay higher taxes than at present and should be required to do so. The main problem, and it is certainly not an easy one, is to find some way of assessing capacity to pay.4 An agricultural income tax would prob- ably be too difficult to administer in Libya under existing conditions. But it should be possible to make a rough and ready distinction be- tween fertile and nonfertile land and to levy a tax on the former, either at a uniform rate per hectare throughout the country or at rates varying from one district to another according to the average productivity of the land in the district concerned. A further distinction could be made, within the category of fertile land, between irrigated and nonirrigated land. Selective remission might be allowed in case of drought, flood or other special circumstances. If a solution is sought along these lines, the existing agricultural taxes might be retained for the time being, but the aim should be eventually to get rid of them altogether. The experience of other countries has shown that the absence of a complete cadastral survey is no insuperable bar to the introduction of land tax, nor would it be necessary to wait for the enactment of a land law, since individual rights to the more productive land which would be initially subject to tax are in most areas already quite well known. Indeed, it could be laid down that failure to register land for taxation would jeopardize subsequent claims to ownership at the time when a cadastral survey is undertaken. Revenue is collected by the federal and provincial governments from a variety of minor taxes and fees, including stamp duties, motor vehicle licenses, court fees and so forth. In addition, the municipalities in Tripolitania and Cyrenaica raise revenues from taxes on industry and commerce and from numerous miscellaneous levies-and in the case of Tripoli and Benghazi from the proceeds of the municipal 4 For a useful discussion of this problem see Haskell P. Wald, Taxation of Agri- cultural Land in Underdeveloped Economies, Harvard University Press, 1959. GENERAL FINANCIAL AND ECONOMIC POLICIES 313 casinos. The mission has not examined these taxes in detail and has no special comments to offer. By and large, they appear reasonable. As a matter of general financial policy, however, the municipalities should be discouraged from relying too heavily on subventions from the provincial governments, and where improvements are made in municipal services, the costs should generally be met by the municipali- ties themselves. We have made no special provision for municipal serv- ices other than electricity and water in this report on the principle that the additional expenditures required (e.g., on refuse collection, street lighting, public playgrounds) should be financed through increases in local taxes, for which we believe that there is ample scope. Charges for Public Services There appears to be little recognition in Libya of the principle that revenue-earning public enterprises, like private firms, should gen- erally aim at least to cover their own costs, including capital charges and depreciation, and further that, wherever possible, they should earn a profit which can either be reinvested in the enterprise itself or used to finance other forms of public investment. The mission, in its travels around the country, found a widespread expectation amongst mem- bers of the public that economic services should normally be provided by government without charge or at any rate at well below cost, and it encountered many instances where, for instance, piped water or water for irrigation newly made available as a result of a development proj- ect was being supplied free to householders or farmers. Indeed, the levying of a charge for services of this kind appeared to be the excep- tion rather than the rule. Even with long-established public enterprises such as railways and municipal power stations it is accepted as quite natural that they should be run at a loss, and in fact, with the notable exception of Tripoli port, the great majority are. Such attitudes are easily understandable in view of Libya's history. The Italian settlements in Libya were supported by large subsidies from Italy before the war, and the economy has depended heavily on foreign assistance since. Nevertheless, losses incurred by public enter- prises are in the last resort a charge on the purse not of the foreigner, but of the Libyan taxpayer, and it is in the public interest to eliminate such losses except where there are special reasons for subsidizing a particular group at the expense of the rest of the community. The mission believes that subsidies may occasionally be justified-for exam- ple, for the supply of drinking water to outlying towns and villages, 314 THE MAIN REPORT where living conditions are austere. These cases, however, should be the exceptions and not the rule. As normal practice, economic services provided at the public expense such as water piped to houses, water for irrigation, electricity, transport and communications should be charged at commercial rates, and the costs of development projects should be recovered over a period of time from the beneficiaries. Indeed, it will often be advisable for a public utility enterprise to go further than this and charge rates designed to realize a profit or surplus which can be used for reinvestment. More specifically, the mission urges the federal and provincial gov- ernments and the Tripoli Electricity Authority to re-examine the charges made for water and electricity, posts and telecommunications with these considerations in mind. We have also suggested at various places in the report that subsidies to the provincial railways should be discontinued and the railways closed down, that stricter measures should be taken to enforce payments of rent by tenants of houses built at public expense, and that entrance fees to museums and antiquities should be increased. All these proposals, if adopted, will have the effect of mobilizing more capital for development or alternatively of making possible a reduction in indirect taxes for the benefit of the lower income groups and thereby distributing the costs of development more fairly. Government Borrowing The mobililzation of voluntary savings can be viewed in one sense as an alternative to taxation as a means of raising money to finance public development projects. The savings habit is in any case one that may well be considered worth encouraging for its own sake. In Libya, as in other Moslem countries, religious attitudes toward usury have tended to discourage the formation of an organized savings movement. The mission nevertheless gained the impression from talks with lead- ers of opinion in the country that these attitudes are becoming more flexible, and that there would be no strong opposition to the introduc- tion of a small savings scheme. The National Bank of Libya recently put forward proposals for a scheme to be operated through the post office, and we understand that this is at present under consideration by the government. While we are not familiar with the details of the pro- posals, we consider that the idea is worth pursuing in principle, and we commend it to the government's attention. Care must be taken, before a savings scheme is introduced, to ensure that adequate ma- GENERAL FINANCIAL AND ECONOMIC POLICIES 315 chinery exists for its administration, and that it can be operated effi- ciently without making excessive demands on already overburdened public servants. The absence of an organized capital market in Libya, lack of experi- ence in public finance and the relatively comfortable financial position of the government have hitherto discouraged the issue of government securities. As a result, Libya at present has no internal public debt. The mission has carefully considered the pros and cons of trying to institute in Libya a scheme for the sale of government securities to financial institutions and members of the public. On the one hand, borrowing from the banking system could in certain circumstances encourage extravagant expenditures and add to the inflationary pres- sures in the economy. On the other hand, there is the point that, al- though the government does not really need to borrow from the public at present, it may do so in future when the present technical and administrative limitations on the preparation and execution of devel- opment programs have been overcome. It takes time to create the nec- essary institutional framework for mobilizing private savings. Pro- cedures will have to be tried out, advance publicity may be required, and confidence will have to be built up gradually. It may be desirable therefore that the ground should be prepared now. On balance, the mission inclines to the view that a strictly limited measure of public borrowing would be justified over the next five years, particularly to the extent that this takes the place of further borrowing abroad and is linked with provision of finance for specific purposes. As a general principle, there appears to be little justification for Libya to borrow abroad to meet local currency expenditures (e.g., for agri- cultural credit) if the money can be raised at home. Local borrowing by the government would help to encourage voluntary savings, and it would also provide the commercial banks and insurance companies with a local outlet for surplus funds. From its talks with commercial banks the mission gained the impression that the banks would welcome the opportunity of investing part of their funds in sound interest- bearing federal issues instead of keeping substantial sums lying idle as they sometimes do at present. This would not in itself, of course, justify the issue of government securities, but it is an indication that, if such securities are issued, a market could be found for them. Initially the banks might hesitate to commit large sums for any long periods, and for this reason the government would be well advised to concen- trate first on the issue of comparatively small amounts of short-term and medium-term certificates, interest on which should be free of tax. 316 THE MAIN REPORT The mission accordingly recommends that the National Bank of Libya and the Ministry of Finance should work out detailed proposals for the issue of certificates of this kind. Consideration might be given to the possibility of linking government borrowing with the institution of a government housing fund which would make loans to private individuals for building or purchasing houses (see Chapter 14). No building society or mortgage institution exists in Libya at the present time, and although some of the commercial banks do finance private building for selected customers, it is often difficult for prospective house-owners to borrow money privately except at exorbitant rates of interest. The creation of a public institution to fill this gap would, in the mission's view, meet a real need. Such an institution would need a small staff to administer the funds, scrutinize applications for loans and give advice to borrowers. SOCIAL SECURITY LEGISLATION Statutory Minimum Wages A statutory minimum wage of 25 piasters a day is laid down for employees of government and industry under the Labor Law, which also provides for one day's paid holiday a week and two weeks' paid holiday a year. Workers in the oil industry are guaranteed a minimum of 35 piasters a day under a separate agreement between the govern- ment and the companies. There is no statutory minimum wage for agri- cultural workers. The mission fully sympathizes with the desire of the government to protect workers against possible exploitation by employers, and the absence of a well-organized trade union movement admittedly adds to the risk of such exploitation. Even so, we are doubtful that a statutory minimum wage is appropriate in Libyan conditions, especially if applied to industry and not to agriculture. Care must be taken to guard against the danger of inflating industrial costs to the point where Libyan industries are unable to compete with imports, and even less able to compete in export markets. At the same time, by increasing the attraction of employment in government service and industry relative to agriculture, the minimum wage regulation is liable to hamper agri- cultural development and to encourage the drift of labor from the rural areas to the towns. We do not suggest that the existing legislation should be changed, GENERAL FINANCIAL AND ECONOMIC POLICIES 317 but we strongly recommend that there should be no increase in the minimum wage for the time being. There is keen competition for labor in Libya, especially for skilled and semi-skilled workers, and most of those employed in industry are already earning more than the statutory minimum. In these circumstances there is no pressing need for wage regulations, least of all for any upward revision of the minimum in the oil industry (see page 303). Social Insurance A Social Insurance Act, drafted with the assistance of an ILO expert, was introduced in 1957 and was brought into force in Tripoli toward the end of 1958. It is to be extended later to other parts of Libya. All persons gainfully employed under a written or oral contract of employment are to be compulsorily insured in accordance with the provisions of the act. The object of the act is "to establish a National Social Insurance scheme for the purpose of protecting employed per- sons in the event of sickness, employment injury, maternity, death, invalidity, old age and unemployment." The scheme is to be financed out of weekly contributions from the insured person and his employer, generally in the ratio of two to three; the employer is responsible for deducting the employee's contribution from his wages. Benefits include medical care in case of sickness or industrial injury, funeral expenses, unemployment pay and retirement pensions. The mission has no comments to offer on the individual provisions of the act, which have been adapted from pre-war Italian legislation and follow the pattern of similar legislation in other countries. The scheme is understood to have been well received by the workers so far eligible. It is an essential principle of the scheme that the benefits received by the insured person are directly related to the contribution he makes, and the principle should be firmly adhered to. MONEY AND BANKING The functions and present position of the National Bank of Libya are described in Annex II. The bank was established in 1956 with an authorized capital of £L 1 million in order to "regulate the issue of bank notes and coins, to keep reserves with a view to maintaining monetary stability in Libya and the external value of the Libyan pound, to influence the credit situation to the Kingdom's advantage 318 THE MAIN REPORT and to act as banker to the Government, and to the Provincial Admin- istrations" (Article 6 of the National Bank Law). The National Bank now has three branches, and in addition to acting as a central bank, it has established a commercial department, which represents the first Libyan venture in this field, since all the private commercial banks in the country are under foreign ownership and control. The Governor of the Bank is a Libyan, while the Deputy Governor and many of the senior officials are expatriates with experience of banking in other countries. Of the authorized capital of £L I million, only £L 700,000 has so far been subscribed. The mission recommends that the remaining £L 300,000 should be subscribed by the federal government in order to strengthen the basis of the National Bank's operations, and we have in- cluded provision for this in our program of capital expenditures. The National Bank's ability to regulate the issue of bank notes and coins in Libya has been governed by a provision in the National Bank Act requiring that the currency should be backed up to 100 per- cent by foreign exchange. In actual practice, therefore, the expansion or contraction of currency becomes self-regulatory, in accordance with variations in thLe balance of payments, and the question of independent action by the National Bank to regulate the flow of currency does not arise. Such a system can be disadvantageous if the country wishes to pursue an independent monetary policy and regulate changes in the supply of currency to suit the requirements of domestic economic activity. While this argument has force in it and would suggest the need for a revision of the Act, it does not appear to the mission that in the particular context of Libya's economic circumstances the matter is of great urgency. The levels of activity and incomes in Libya at present are largely dependent on foreign aid, foreign military expenditures and the expenditures of the oil companies. At the same time any increase in internal demand is liable to have a direct and immediate impact on imports because the import content of most investment and consumption expenditures is high. There is in these circumstances little scope for the pursuit of independent monetary or credit policies designed to insulate the domestic economy from movements in the external balance of payments. The government can do something to restrict the inflationary pressures resulting from a large inflow of in- come from abroad. But in the event of a sharp and prolonged decline in external income the scope for the exercise of independent regulatory powers would be extremely limited, since measures for maintaining demand and employment at home would tend to put added pressure on GENERAL FINANCIAL AND ECONOMIC POLICIES 319 the balance of payments and increase the loss of foreign exchange re- serves. Fortunately, the latter situation is hardly likely to arise in the foreseeable future, as there is every prospect of a steadily rising income from oil. Furthermore, Libya's official holdings of foreign exchange (over £L 25 million at the end of January 1960) are well in excess of the amount required as currency cover (rL 9.8 million at the same date). The 100 percent currency provision does not therefore impose any effective restriction at present on the expansion of the money supply. While, therefore, the argument that 100 percent currency backing prevents the National Bank from playing an active role in monetary management is theoretically sound, it is rather academic in present circumstances. On the other hand, there is nothing sacrosanct in a 100 percent reserve system, and the Libyan authorities should certainly be free to substitute an alternative arrangement in future if the circum- stances warrant it. However, Article 4 of the 1953 Financial Agreement with the United Kingdom requires in effect that any change in the existing Libyan currency arrangements shall be subject to the agree- ment of both governments. We suggest, therefore, that the Libyan Government discuss this matter with the Government of the United Kingdom. Every country needs to maintain external reserves in the form of gold or foreign exchange, but there is no simple formula for deter- mining how large these reserves should be in any particular case. It will depend among other things on the magnitude of the country's im- ports and on the extent to which its external receipts are liable to fluctuate with changes in world trading conditions. Libya's imports are high in relation to its national income, and this is an argument in favor of holding relatively large reserves. On the other hand, once oil revenues are assured, Libya should be less exposed than most countries to the vicissitudes of international trade. If it should be felt desirable at a later date to change the present reserve arrangements, there are various alternatives that might be con- sidered. The minimum reserve could be set either at a certain fraction (say, 50 percent or 75 percent) of the currency in circulation or at an absolute figure. Some countries have no fixed foreign exchange reserve requirement at all, but the mission would strongly advise Libya to adhere to the principle of a statutory minimum, which is often an important factor in maintaining confidence in the currency. As to the composition of official foreign exchange holdings, the National Bank Act requires that 75 percent of the foreign exchange holdings of the Issue Department should be invested in sterling assets. 320 THE MAIN REPORT It was suggested to the mission that this imposed undue restriction on the Bank's freedom of action in investing its reserves in the most ad- vantageous way. Against this, it must be borne in mind that the bulk of Libya's trade is conducted in sterling, and that this makes it in certain respects advantageous for a high proportion of reserves to be held in sterling rather than in other currencies. The whole question is closely tied up with Libya's membership of the sterling area and, as such, is essentially a subject for discussion between Libya and the United Kingdom. We suggest therefore that it might be examined by the two governments in the context of the discussions on Article 4 of the 1953 Financial Agreement mentioned above. The Banking Law of 1958 raises issues of a different kind relating to the control of commercial banking. Under this law the Minister of Finance is given the power to prescribe minimum cash reserves to be held by commercial banks (over and above the statutory liquid re- serves amounting to 20 percent of their deposit liabilities), and he is also responsible for considering applications for examination of bank affairs and various other functions. The exercise of these functions calls for considerable technical knowledge and experience, and in many other countries they are entrusted to the central bank as the agency primarily responsible for the regulation of currency and banking. We recommend that the same practice should be adopted in Libya. At present the commercial banks, which are all branches of foreign banks, are under no obligation to hold any of their capital in Libya, and only three of them in fact do. The Banking Law of 1958 states that no bank with a head office abroad shall be granted a license to operate in Libya unless the issued and paid-up capital is at least the equivalent of £L 500,000, but this does not require any of the capital to be assigned specifically to the Libyan branch. Moreover, most of the commercial banks hold the greater part of their liquid assets outside Libya for lack of local investment opportunities. In time, if a market for Libyan gov- ernment securities is developed, the attractions of holding funds in Libya should be increased. Meanwhile we suggest that, in line with the arrangements in most other underdeveloped countries, 20 percent of the liquid reserves which the commercial banks have to maintain under the present banking legislation should be kept within the coun- try, in the form either of currency or of deposits with the National Bank of Libya.5 The mission considers such action as a first step in the 5 This would be equivalent to 4 percent of the total time and sight liabilities of the commercial banks, since the present liquidity reserve requirement is set at 20 percent of these liabilities. GENERAL FINANCIAL AND ECONOMIC POLICIES 321 direction of a system under which all, or at least the bulk, of the statu- tory liquid reserves should be maintained with the National Bank. In order to prevent the National Bank from using funds so deposited as a basis for additional commercial business, we suggest that the compul- sory deposits made by commercial banks should be kept in a special account entirely separate from the general banking division of the National Bank. The National Bank is empowered under existing legislation to ex- tend credit to the federal government by means of temporary advances and the purchase of government securities, but limits are imposed on the amount of credit that may be granted.6 In the mission's view it is desirable that the National Bank should be protected in this way against excessive demands for lending directly to government, and we do not in any case consider that substantial lending of this kind would be justified at the moment. More generally, the mission urges that the greatest caution should be observed with respect to government borrow- ing from the banking system. The mission considers it highly desirable that the National Bank of Libya should in time play a more active role in the management of the economy, with particular reference to the maintenance of the sta- bility of the currency. Experience in other countries underlines the value of having an independent central bank, which is free to offer advice and criticism to the government and which can also help to foster better public understanding of economic, fiscal and monetary problems. To do this effectively the National Bank of Libya needs a reliable statistical and research department. It has already made a beginning in this direction by establishing a small research department staffed with young Libyan graduates and supervised by an expatriate economic adviser. As recommended in Chapter 6, this work should be developed with particular attention to monetary and banking matters, the balance of payments, industrial finance and agricultural credit. Economic studies and forecasts should be prepared for the information and guidance of the board in determining the bank's policy, and the research staff should be granted access by government departments to all records and data required to carry out this function. Prompt and regular publication of results of research should be provided through the issue of a monthly or quarterly statistical bulletin. 6 For example, temporary advances may not exceed 10 percent of the total revenue approved by Parliament in the budget law of the year. If any such advance remains unpaid after the end of the financial year in which it is made, the bank cannot make any further advances until the amounts due have been repaid. 322 THE MAIN REPORT FOREIGN TRADE AND PAYMENTS Import and Export Policies Libya's merchandise exports at present earn less than one-quarter of the foreign exchange needed to pay for its imports. The rest is ob- tained from receipts of foreign aid and from payments made by foreign governments for goods and services procured in Libya. In some ways the picture presented by the figures is rather deceptive. A sizeable but indeterminate proportion of Libya's imports is consumed by the "for- eign sector," i.e., by foreign governments and oil companies and their non-Libyan employees.7 It can thus be said that these governments and companies have helped to create the "gap" in the balance of payments as well as to fill it. Even so, the present situation is a rather precarious one, and the Libyans would naturally like to see their economy become self-supporting as soon as possible. Until recently the possibility of any such development appeared remote, but the discovery of oil has entirely changed the picture, and there is a good chance that within five to ten years oil revenues will provide a basis for viability. If this happens, the arguments in favor of special policies to pro- mote exports and save imports will carry less weight in the determina- tion of national economic policy than would otherwise have been necessary. The mission believes nevertheless that export promotion should continue to receive close attention from the government, and it also advocates a determined effort to develop certain types of domestic agricultural and industrial production to replace goods at present imported. The growth of production in agriculture and industry is needed to provide local employment and to secure better utilization of existing capacity, and this growth can in some cases only be achieved at the expense of imports. We have indicated in earlier chapters a number of fields in which we consider that producers will require protection against imports, at any rate in the initial stages of development. Except for one or two special cases such as imported wheat and flour, quantitative restric- 7 Supplies imported into Libya directly by the United States and United Kingdom forces, together with machinery and equipment for oil operations, are exempt from customs duties and do not appear in the import figures quoted in this report. On the other hand, substantial quantities of imported goods are bought by foreign governments and oil companies through local contractors and merchants, and these are included in the returns of commercial imports. GENERAL FINANCIAL AND ECONOMIC POLICIES 323 tions on imports should be avoided, nor should tariffs be raised to pro- hibitive levels. Foreign competition provides a valuable stimulus to increased efficiency and lower costs, and the interests of the consumer have to be safeguarded as well as those of the producer. It is ulti- mately the consumer who has to pay the price for tariff protection, and there is a real danger in present circumstances that protection will be granted too readily to industries which are being promoted by influ- ential groups, even though there may be no sound economic justifica- tion for them. The present trend toward greater liberalization of imports is to be welcomed. A big step forward was taken early in 1959, when a wide range of imported commodities was placed on open general license. Imports still subject to control include cereals, sugar, alcoholic drinks, salt, fresh fruit and vegetables, tobacco, petroleum, hides and skins, private cars, boots and shoes, fresh fish, meat, carpets and rugs, radio sets, refrigerators and cameras. Most of these restrictions could prob- ably now be safely dispensed with. We recommend therefore that a study be undertaken by the Ministry of Finance, in consultation with the Customs Department and the provincial Nazirates of Finance and Trade, with a view to further narrowing down the list of items under control. This study should include a detailed examination of the pos- sibilities of substituting increased tariffs for quantitative restrictions as a means of protecting domestic producers. Exports from Libya are at present subject to license, and although licenses are seldom refused, the filing and approval of applications takes up the time of businessmen and officials. An export license is even required for the dispatch by sea freight or mail of goods bought in Libya by tourists and visiting businessmen, and this can be a real deterrent to making such purchases. Export controls were defended to the mission in Tripolitania on the grounds that they were necessary, first, to ensure the maintenance of adequate standards, particularly in respect of the grading of agricultural products, and second, to prevent under-invoicing of exports, which is sometimes resorted to as a means of evading exchange controls. Political and strategic arguments are also sometimes advanced in this context. The mission was not con- vinced that there is any good economic or commercial reason for re- taining export controls, and it strongly recommends that they should be abolished, subject possibly to one or two exceptions justified on noneconomic grounds. This is not to say that the efforts being made in Tripolitania to enforce proper quality standards should be abandoned, but the necessary inspection can be carried out without the elaborate 324 THE MAIN REPORT paperwork involved in the present system of export licensing. The regular export documents provide all the information needed to keep a watch on under-invoicing. Foreign trade policies in Libya, as in other federal states, should be laid down at the national and not at the provincial level. The present arrangements under which each of the coastal provinces has its own system of import licensing are anomalous and have the undesirable result that restrictions are imposed on trade between the two provinces. This is a case where policy finds expression not in the law, but in the regulations issued under the law. We strongly recommend therefore that in future all regulations relating to the control of imports and exports should be issued by the federal government, after consultation with the provinces. This will help to promote trade between Tripoli- tania and Cyrenaica, which is desirable in the long-term interests of integrating the economies of the two provinces and achieving a more unified national economy. As Libya moves into the new phase of economic expansion heralded by the discovery of oil, an increasing number of foreign businessmen and tourists will be visiting the country and an increasing number of Libyans will be traveling abroad. At the same time more goods will be moving in and out of the country, including supplies required for oil development. It is in Libya's economic interest that everything possi- ble should be done to facilitate these movements of trade and people. All restrictions and controls that are not absolutely necessary should be removed, customs procedures should be speeded up and made more flexible, and visas for foreign visitors should either be abolished or else made very much easier to get. These arguments apply with even greater force to traffic within Libya between one province and another. Present controls on the movement of goods and passengers between Tripoli and Cyrenaica, while the reasons for their introduction are understandable, are entirely out of place in a modern and growing economy and are a source of amazement and sometimes of frustration to foreigners who are traveling or doing business in Libya. Their removal is particularly de- sirable from the point of view of encouraging the tourist trade. Exchange Cont-ol Libya has a system of exchange control modeled on the usual sterling area pattern, with, however, no significant discrimination be- tween one foreign currency and another. Since the beginning of 1958 the regulations have been administered by the National Bank. This is GENERAL FINANCIAL AND ECONOMIC POLICIES 325 a considerable improvement over the previous arrangements under which each coastal province had its own system of exchange control, and the mission gained the impression that the present administration is reasonably efficient, though inevitably subjected to political pres- sures, which it may find it difficult to resist. Restrictions on the use of foreign exchange have been considerably relaxed in recent years in line with similar trends in the rest of the sterling area, and the main purpose of the controls now is to keep some check on the export of private capital. Even in countries with long experience of administering exchange controls, it has proved very difficult to exercise efficient control over capital movements. In Libya, too, it is the mission's impression that substantial amounts of private capital are evading the control and finding their way abroad. When large oil revenues materialize, which we do not expect to happen for some years, the remaining arguments in favor of exchange control in Libya may lose a good deal of their force, and consideration might then be given to abolishing the controls altogether. We recommend, however, that the present system be kept in operation for the time being, and that efforts of the National Bank to prevent the illicit export of capital should be fully supported by the federal and provincial authorities. International Trade Relations Libya's foreign trade is mainly oriented toward European markets, with Italy and the United Kingdom between them supplying over 50 percent of Libya's civil imports (excluding oil equipment) and taking over 50 percent of its exports. Italy is much the largest single market for Libyan exports and has traditionally granted special duty-free quotas for selected Libyan produce, including olive oil, dates, oilseeds, fresh and canned fish. This arrangement has necessitated a waiver under the rules of the General Agreement on Tariffs and Trade. Dur- ing the annual meeting of GATT in 1959 the waiver was extended until December 31, 1961. The tariff concessions granted by Italy are of considerable value to Libya, and it is important to Libya that they should not be affected by the establishment of the European Common Market. The Libyan Government is understandably concerned about this point, and we would hope that suitable arrangements can be negotiated between Italy and other Common Market countries to safeguard Libya's interests. Libya has close trading and financial relations with the United 326 THE MAIN REPORT Arab Republic, but its trade with the rest of the Arab world is com- paratively small, and it is Europe rather than the Middle East which offers the most promising markets for its exports. There may never- theless be some opportunities for increasing exports to the United Arab Republic and to Lebanon (e.g., in meat), and these should be energetically explored. There are also certain spheres of economic ac- tivity such as tourism in which Libya stands to benefit from closer co- operation on a multilateral basis with other Mediterranean and Mid- dle East countries. Italy and the United Arab Republic are the only two countries with which Libya has special bilateral trading arrangements. Libya has accumulated a large credit balance under its payments agreement with the United Arab Republic, and difficulties are apparently being experienced in liquidating this credit. The mission can see little scope for the conclusion of further bilateral trade and payments agreements, and in general it believes that Libya's economic interests are best served by conducting its external transactions on a multilateral basis without discrimination between one country and another. Maximum diversification of export markets is desirable so as to avoid undue de- pendence on any one country. PROSPECTS ]FOR THE LIBYAN ECONOMY The program set out in this report is intended to serve as a guide to the planning of economic development activities during the next five years. We see this period essentially as one of training and prepara- tion for the time after 1965 when large oil revenues may permit a marked acceleration in the process of economic development. The most urgent task is to build up the administrative machinery and to train the people that will be needed to execute a much larger program of capital formation than any that should be contemplated at the present time. Investment in people through better education, medical services, nutrition and housing will at this stage often be more rewarding, though also more difficult, than investment in construction of such things as public buildings and transport facilities. The rate at which the economy grows will be powerfully influenced by the supply of skilled professional and technical personnel. The investment program should be tailored to the talent available. Here the Libyan people have a choice in deciding how many foreign technicians and adminis- GENERAL FINANCIAL AND ECONOMIC POLICIES 327 trators they wish to employ. The mission is fully conscious that there are disadvantages to Libya in having to depend heavily on outsiders. On the other hand, if a faster rate of progress is desired in the short run, extensive use will have to be made of the services of foreigners in the preparation and execution of programs. The matters discussed earlier in this chapter illustrate the impor- tant, often indeed the decisive, role which government action can play in stimulating economic growth. Perhaps the most important task of government is to foster the kind of economic and social climate in which private enterprise can function most effectively in the national interest. No hard and fast rules can be laid down with regard to the division of functions between public and private enterprise. The rela- tive inexperience of the Libyan Government in the administration of economic affairs provides a strong argument for leaving as much as possible to private enterprise, with government stepping in only where private enterprise is unable or unwilling to act. The mission was im- pressed by the apparent determination of the Libyan authorities to rely mainly on private capital and private initiative for the promotion of activity in industry, trade and agriculture, and it believes that this approach is sound. However, as indicated elsewhere in this report, we believe that government should play a more active role in the develop- ment of certain branches of economic activity which have tended to be neglected by private enterprise, notably agriculture, fisheries and tourism. We have also recommended that, where private enterprise is given a job to do, it should not be hampered by unnecessary regulations and controls. The process of economic development in Libya can best be assisted through continuous cooperation and consultation between govern- ment and the private sector and by measures to encourage the partici- pation of foreign capital and technical assistance on mutually advan- tageous terms. Government can give a lead to public opinion in setting out clearly the objectives of economic planning and explaining the means by which these objectives are to be attained. The mission at- taches considerable importance in this context to the dissemination of economic information through the radio, newspapers and other chan- nels. At the same time wise leadership will oppose strong resistance to pressures from sectional interests, who seek special privileges at the expense of the wider interests of the nation as a whole. Several in- stances of such pressures have been mentioned in this report. One of the most difficult problems facing any country in an early stage of economic development is to strike the right balance between 328 THE MAIN REPORT considerations of equity on the one hand and the need to provide in- centives for increased output on the other. In Libya at the moment the main danger appears to be that increases in the national income will be too unevenly distributed, and that savings will be concentrated in the hands of those who do not wish to use them for purposes of pro- ductive investment. For this reason special emphasis in our report has been placed on the need for a more equitable distribution of income and for government assistance to small producers in agriculture and industry who lack capital for development. Economic development will in time bring great changes in Libya. We have not attempted in this report to assess in any detail the impact which the program we have recommended might have on foreign trade, national income, employment and prices because there are so many unknowns in the equation, and the discovery of oil has intro- duced a new dynamic and unpredictable element into the situation. Oil production and exploration will almost certainly be much the biggest single factor contributing to the rise in national income over the next five or ten years, and the possibilities range within very wide limits. We do not, however, foresee long-term employment in the oil industry absorbing more than about 5 percent of the present labor force (say, 15,000-20,000 people), and the proportion might well be significantly smaller. Moreover, it should not be overlooked that much of this employment has already been created by the initial work of exploration. A peak may be reached during the next five years when exploration and development activities are proceeding simultaneously, and there is always the risk of some decline in employment thereafter as the construction of major pipelines and terminal facilities is com- pleted. Production and employment in manufacturing, distribution and other service trades should be stimulated by the expansion of incomes associated with oil development. These sectors would also be affected by any change in either direction in the level of foreign military ex- penditures in Libya. On balance, the rise in output is likely to be greater than the rise in employment, especially as a number of in- dustries and trades are at present working at well below their full capacity (e.g., flour-milling and road goods transport). Demand for building is certain to remain high, and the amount of work done will depend on how fast the capacity of the building and civil engineering industries can lbe expanded by the import of organizational talent and skilled manpowver from abroad. One of the main conclusions of this report is that there will not be GENERAL FINANCIAL AND ECONOMIC POLICIES 329 enough jobs available in the towns (or in the oil industry) to provide employment for more than a small fraction of the 200,000 people at present engaged in agriculture and animal husbandry. This will not prevent workers from continuing to leave the rural areas in search of better opportunities elsewhere, nor will it prevent wages in non- agricultural occupations from rising. But it is liable to result in the growth of unemployment and underemployment in and around the towns and in the fostering of social discontent and unrest. That is one reason why so much emphasis has been placed in the mission's program on measures to improve the lot of the small farmer and pastoralist. This will be a slow process, and any increase in output in this sector may initially be dwarfed by more striking developments in oil production and trading activities. But progress in agriculture will not be the less important because it is unspectacular, and though it may take a long time to achieve major results, the mission is con- vinced that agriculture, forestry and water resources must be accorded high priority in planning for the longer-term development of the Libyan economy. This conviction is reinforced by the consideration that, although the present rate of growth of the Libyan population appears to be comparatively small, it could easily be doubled by im- provements in education and health leading to a sharp decline in infant mortality. A growth rate of between 2 percent and 3 percent a year, which would not be out of line with trends in other North African and Mid- dle Eastern countries, would result in a doubling of the existing popu- lation in 25-35 years. The present territory of Libya almost certainly supported a population of at least 21/2 million in Roman times, and there is no reason why it should not do so again. LIST OF PRINCIPAL RECOMMENDATIONS The most important of the Mission's recommendations are listed together in this appendix for convenience of reference. They are grouped under subjects corresponding broadly to Chapters 6-15 of the main report, where the details of the recommendations and the rea- sons for them are elaborated. The list does not include recommenda- tions for possible increases in expenditure under the Supplementary Program. GOVERNMENT ORGANIZATION 1. Strengthening of the federal government through the creation of a federal Ministry of Agriculture and Natural Resources in place of the existing Ministry of National Economy, reorganization of the Min- istry of Finance as a Ministry of Finance and Economics with a much stronger staff, and the enactment of a law to govern the allocation of federal grants-in-aid to the provinces, with a Finance Commission to review the principles on which such allocations should be made. 2. Transfer of responsibility for income tax and excise duties from the provincial administrations to the federal government. 3. Gradual unification of the federal and provincial civil services and establishment of a single system of civil service recruitment for Libya as a whole, together with regular interchange of officials between the center and the provinces. 4. Arrangements for closer day-to-day consultation between the federal and provincial governments and for more regular consultation between government and private interests. 5. Streamlining of the organization of the provincial governments and a reduction in the numbers of their departments and staffs. 6. Creation of an independent authority to administer the affairs of Tripoli porl. 7. Reorganization of the Development Council along the lines at present proposed, with a technical wing and a strong permanent staff of administrators and economists to take charge of the planning and coordination of economic development programs in place of the for- eign aid agencies. 330 LIST OF PRINCIPAL RECOMMENDATIONS 331 8. Measures to strengthen the government statistical and economic services and to improve existing knowledge of the economy, including the unification of statistical services on an all-Libya basis, recruitment of more trained statisticians, transfer of the Central Statistics Office to the Prime Minister's Office and enlargement of the statistical and re- search staff of the National Bank of Libya. 9. Stricter control over public expenditures at all levels, involving the strengthening of the staff of the Ministry of Finance and improve- ments in the arrangements for auditing government accounts. 10. Measures to improve the efficiency of the civil service, including an immediate review of pay scales, adoption of a 40-hour work week, rearrangement of working hours and the institution of special schemes for the training of Libyan officials. 11. Continued reliance on technical assistance from the United Nations and foreign countries, and on the recruitment of expatriate officials, where necessary to ensure the effective administration of economic development programs. 12. Observance of standard rules and procedures in the award of government contracts. 13. Strengthening of the staff of the Petroleum Commission and re- cruitment on a part-time basis of a high-level petroleum consultant to advise the goverument on future dealings with the oil companies. GEOLOGY AND WATER RESOURCES 14. Establishment within the Ministry of Agricultural and Natural Resources of a federal Department of Geology and Hydrology to study and extend knowledge of the geological, mineral and ground water resources of Libya. 15. Enactment of a federal law, supported by provincial regulations, for the proper control of water resources. 16. Establishment of Water Resources Branches in the provinces to take over from the foreign aid agencies the execution of water de- velopment projects and to control the use of water in areas where there is danger of overexploitation. 17. Urgent measures to restrict the use of ground water for agricul- tural purposes in the "Tripoli Quadrangle," coupled with investiga- tions into the possibilities of opening up new areas for farming in the Bir Ghnem area southwest of Tripoli. 18. Establishment of sentinel wells along the coast of Tripolitania 332 THE MAIN REPORT to guard against salt water intrusion and enforcement of rigid restric- tions on pumping in areas where signs of such intrusion are discovered. 19. A five-year program in Cyrenaica for the construction of wells, renovation of cisterns, terracing and diking and provision of irrigation facilities at an estimated cost of £L 1,780,000, including recurrent ex- penditures. 20. A similar program in Tripolitania estimated to cost £L 1,190,000. 21. A special five-year program for the provision of wells and irriga- tion facilities to serve the needs of small farmers in the Fezzan at an estimated cost of £L 570,000. 22. Execution of a new project for the control of floods and soil erosion in the Wadi Megenin in Tripolitania involving soil and water conservancy works, flood protection works, afforestation of part of the catchment area and the removal and resettlement by stages of the present inhabitants in this area. (The cost of the first stage of this proj- ect is estimated at £L 500,000, including £L 100,000 for afforestation). 23. Preliminary investigations into the possibilities of developing water resources for irrigation at Ain Mara and Ain Zeiana in Cyrenaica and at Taorga and the Wadi Tareglat in Tripolitania. 24. Research into the water requirements of different crops and into more efficient methods of irrigation and drainage in the coastal areas and the desert oases, coupled with education of farmers in the economical use of water. AGRICULTURE, LIVESTOCK AND FORESTRY Agriculture 25. Appointment by royal decree of a Commission on Land Rights to formulate a land policy promoting the permanent settlement of the tribal population and to prepare a draft land law for the government's consideration. 26. Creation of a federal Land Survey Department to undertake a cadastral survey of all agricultural land in Libya. 27. Establishment of an Agricultural Credit Department within the National Bank of Libya to take over the work of the National Agri- cultural Bank, with an immediate enlargement of the funds available from £L 1 million to £L 2 million and a further increase to £L 3 mil- lion in the course of the next five years; the additional funds for agri- cultural credit to be provided by the Libyan Government. LIST OF PRINCIPAL RECOMMENDATIONS 333 28. Measures to foster the development of credit and marketing cooperatives of small farmers. 29. Creation of an Agricultural Marketing Department as part of the proposed Ministry of Agriculture to assist in the marketing of agri- cultural produce at home and abroad, including sales to the oil com- panies and foreign government establishments in Libya. 30. Improved facilities for agricultural training and greater em- phasis on the development of agricultural extension services. 31. A project for the development of the former Italian farms in Cyrenaica at a total estimated capital cost of around £L 1,100,000 (including credit), the project to be undertaken in stages by a specially appointed Gebel Akhdar Development Board and to be spread over five years starting in 1962. 32. An intensive campaign to raise wheat yields, combined with measures to encourage the cultivation of wheat in the Barce Plain and other suitable areas, including the introduction of a price support scheme, continued regulation of wheat imports, restriction of flour im- ports and maintenance of controls over bread prices. 33. More extensive use of barley as a feed for livestock coupled with measures to increase production of high quality barley for export to Europe. 34. Integration of cereal cultivation, wherever possible, with the growing of pastures and fodder crops to meet the feed requirements of livestock. 35. Continued purchase of dates for the school-feeding program; investigation of the possibilities of making greater use of dates as a concentrated feed for livestock and building up reserve stocks for use in times of drought; concentration of date research on developing by- products such as syrup, paste and alcohol; study of the Italian market for packaged dates. 36. Programs for the planting of 30,000 new olive trees a year in Tripolitania and 10,000 trees a year in Cyrenaica; abandonment of the scheme for rehabilitation of wild olives in Cyrenaica. 37. Changes in the arrangements for growing tobacco in Tripoli- tania, including progressive reduction of subsidies and termination (after two or three years) of the present licensing system. 38. Deferment of the proposals for growing sugar beet in Tripoli- tania pending more careful study of the technical and economic factors involved. 39. Abandonment of the scheme for large-scale cultivation of cotton in the Fezzan. 334 THE MAIN REPORT 40. Efforts to stimulate output of cereals, fodder and livestock prod- ucts in desert oases for local consumption; more attention to cultiva- tion of early vegetables and oilseeds for local consumption and export. 41. A survey of agricultural experimental stations and farms in Libya with a view to securing better coordination of research work and a reduction in the number of research centers; wider and more prompt distribution of the results of research; collection of the results of pre- vious research work in a central reference library, including transla- tions of pre-war Italian studies; more emphasis in future research work on practical investigations bearing on actual farming conditions in Libya, with particular reference to the problems of the small farmer. 42. Systematic classification of agricultural land in Libya, followed by a general soil survey to be carried out on a contract basis by a com- mercial firm under the supervision of the Ministry of Agriculture. 43. Measures to combat soil erosion by encouraging the use of bet- ter tillage methods, contouring and the planting of windbreaks, espe- cially on Italian farms in Tripolitania. 44. Measures to promote the further mechanization of agriculture. 45. Research and extension activities directed toward the control of plant diseases and insect pests, with particular attention to the olive fly and the Mlediterranean fruit fly; stricter enforcement of control measures. Livestock 46. Concentration on raising the quality of livestock through the closer association of livestock farming with settled agriculture; ecologi- cal studies to provide basic information required for a long-term pasture improvement program. 47. Government action to build up emergency reserves of feeding- stuffs and to establish fodder stations on the Libyan side of the Egyp- tian border. 48. Enactment of a veterinary law and related measures of livestock improvement, which are necessary preconditions to the development of an export trade in meat. 49. Encouragement of poultry farming with a view particularly to increasing sales of eggs and poultry to the foreign community in Libya. 50. Continuation of the pilot dairy project in Benghazi with a view to determining the feasibility of producing economically for the local market. LIST OF PRINCIPAL RECOMMENDATIONS 335 Forestry 51. Creation of a federal Department of Forestry as part of the Ministry of Agriculture and Natural Resources; enactment of a federal forest law; allocation of an additional £L 30,000 a year for strengthen- ing the staffs of the provincial forestry services; establishment of an all-Libya forestry experimental station. 52. A five-year program for Tripolitania covering the afforestation of an additional 16,000 hectares for soil and water conservation and the production of fuels and timber, the fixation of 9,000 hectares of sand dunes and the supply of 6 million seedlings at an estimated capital cost of £L 1,090,000 (including £L 100,000 for afforestation in the Wadi Megenin catchment area). 53. Allocation of £L 400,000 for a five-year program of forestry im- provement in Cyrenaica, with a further £L 70,000 to cover roadside planting and the planting of windbreaks. INDUSTRY, HANDICRAFTS AND FISHERIES Industry 54. Measures for strengthening the administration of industrial policy at both the federal and provincial levels, including the recruit- ment of a foreign industrial adviser and the training of Libyan uni- versity graduates abroad. 55. Reconsideration of the draft law for the registration and pro- tection of industries; introduction of a simple system of industrial registration; extension of the Law for the Development of National In- dustries to include associations of very small enterprises which do not at present qualify for government assistance. 56. Creation of an Industrial Credit Department in the National Bank of Libya with an initial capital of £L 500,000 to make loans to private industries and assume responsibility for technical assistance to industry; allocation of £L 45,000 out of public funds to cover the cost of consulting services provided by the department. 57. Various other steps to promote industrial development, includ- ing (a) the establishment of an industrial estate in Tripoli at an esti- mated cost of £L 50,000, (b) training schemes for industrial managers, workers and trade union leaders and (c) special assistance to the leather and printing industries through the establishment of a pilot tannery 336 THE MAIN REPORT training and demonstration center and the institution of an apprentice training program for the Government Printing Press in Tripoli. 58. Careful investigation of the economic and technical problems involved in manufacturing cement in Libya before government sup- port is given to private projects for establishing cement factories. 59. Further study, as a matter of urgency, of the organizational and supply problems involved in running the proposed cold storage plant in Benghazi and of the possibilities of finding overseas markets for Libyan meat, particularly in the Mediterranean area. 60. Examination of the scope for further developments in fruit and vegetable canning, the manufacture of date syrup and the establish- ment of a tomato paste factory in Cyrenaica. 61. Improved arrangements for running the tobacco factory in Tripoli directed primarily toward the earning of additional revenue for government; reorganization of the salt monopoly on commercial lines. Handicrafts 62. A five-year program costing about £L 150,000 for the develop- ment of Libyan handicraft industries, including the establishment of a training-cum-production center at Misurata, the opening of govern- ment emporia in Tripoli and Benghazi and the provision of technical advice and financial assistance to small operators in modern crafts such as bicycles and radio repairing. 63. Contin aed support of the small-scale industries center in the Fezzan. Fisheries 64. Creation of a federal Department of Fisheries in the Ministry of Agriculture and Natural Resources, with a trawler fishing expert to take charge of fisheries administration and a program for training a cadre of qualified Libyan staff. 65. An experimental project for the development of trawler fishing to be undertaken with foreign technical assistance at an estimated cost of £L 150,000 over the five-year period, coupled with measures to ex- pand the market for fish in Libya. LIST OF PRINCIPAL RECOMMENDATIONS 337 THE TOURIST TRADE 66. First priority to be given to the expansion and improvement of hotel accommodation in Tripoli and Benghazi, active efforts being made to interest foreign hotel operators in building and running mod- ern hotels (with or without capital assistance from the government) and better arrangements being devised for the management of existing hotels. 67. Application to the hotel trade of all concessions offered under the existing Law for the Investment of Foreign Capital, including ap- propriate tax remissions; exemption of the hotel trade from the pro- visions of the Labor Law regulating hours of work in industry and the adoption of more liberal policies in granting visas for the employment of foreign hotel staff. 68. A five-year program for the renovation, and where necessary, reopening of existing country hotels and construction of two new gov- ernment rest-houses on the coast road at a total estimated cost of £L 180,000. 69. Measures to encourage tourist air travel to the desert oases, pos- sibly coupled with the conversion into rest-houses of some of the old military forts. 70. Investigations with the help of competent consultants into the possibilities of constructing a deep-water jetty for tourist ships at Ras el Hilal in Cyrenaica, coupled possibly with the erection of a modern hotel nearby. 71. Additional federal allocations of £L 15,000 a year to the anti- quities departments of the provincial governments to enable more rapid progress to be made with excavations at the principal classical sites; raising of admission charges to antiquities and museums. 72. Simplification of present immigration formalities for tourists, including the abolition of the visa requirement for tourists from West- ern Europe and North America, easier customs clearance and removal of all formalities in the case of movement within Libya from one province to another. 73. Reorganization of government tourist administration at both federal and provincial levels. 338 THE MAIN REPORT ELECTRIC POWER 74. Full responsibility for the management of Tripoli Power to be undertaken immediately by the new electricity authority, and eventual extension of the responsibilities of the authority to cover all public power undertakings in Libya. 75. An investigation into the future financial position of Tripoli Power in the light of the latest developments, including the discovery of oil, to be followed by a review of existing electricity tariffs and other steps to ensure that the expanded power facilities are used to the best advantage for the development of industrial and agricultural pro- duction in the area (subject, however, to the overriding need to restrict water pumping in the immediate vicinity of Tripoli). 76. A five-year program for the development of electricity supply in other parts of Libya at an estimated capital cost of £L 650,000, includ- ing £L 180,000 for extensions to the Benghazi power station. TRANSPORT AND COMMUNICATIONS Railways 77. Closing down of the two provincial railways, both of which are running at a substantial loss, and transfer of rail traffic to the roads; suitable compensation to be provided for railway employees, although no difficulty is envisaged in finding alternative employment for them; railway properties in Tripoli and Benghazi to be adapted for use in connection with town improvement schemes. Roads and Road Transport 78. Closer attention to highway maintenance and the allocation of larger sums for the upkeep of existing roads, which in general should be given priority over new construction. (Annual requirements for maintenance and renewal of surfacing during the next five years are estimated at about £L 900,000.) 79. A five-year program costing £L 650,000 for minor new construc- tion and improvement of roads in all three provinces, including a new road from el Abiar to Barce in Cyrenaica to replace the railway, the widening of the coast road from Cyrene to Derna and improvements to LIST OF PRINCIPAL RECOMMENDATIONS 339 roads in the immediate vicinity of the more important oases in the Fezzan. 80. Uniform policies to be laid down at the federal level in respect of road standards and traffic regulations; transfer of executive respon- sibility for federal road works from the Ministry of Communications to the provincial Nazirates of Public Works. 81. Measures to improve efficiency and reduce costs in the manage- ment of government road transport. Ports 82. Creation of an autonomous federal authority to run the port of Tripoli on a proper commercial basis with responsibility for financing its own development and with appropriate borrowing powers, the Tripolitanian Administration being compensated for its vested interest in the port. 83. Further expenditure over the next five years of about £L 325,000 on the rehabilitation and improvement of Tripoli port and of £L 65,000 on the creation of a "free zone" in the port. 84. A scheme for the rehabilitation and development of Benghazi harbor involving deepening of the Middle Harbor, repair of the Cen- tral Mole and provision of additional quays and other facilities at an estimated cost of £L '1/2 million. 85. Improvements to the port of Zuara and minimum essential maintenance of other minor ports at an estimated cost over the five years of £L 85,000, including dredging. 86. Subject to preliminary studies of the engineering and tourist aspects, adoption of a project for the development of Ras el Hilal as a calling place for tourist ships involving estimated expenditure of £L 30,000 on repairing the jetty and providing a turning place for buses. Civil Aviation 87. A five-year program for the further development and equip- ment of the civil airports at Idris and Benina and for the resurfacing of runways at these airports, together with the provision of fire-fighting and other equipment for Sebha, at a total estimated cost of £L 800,000. 88. Postponement for the time being of the proposal to establish a Libyan national airline; development of light air services for the Fez- zan and other outlying oases on a charter basis with financial assistance from the federal government at an estimated cost of £L 50,000 a year. 340 THE MAIN REPORT Communications 89. Expansion of the programs for training Libyans in telecom- munications and broadcasting techniques; measures to ensure better management of postal services and introduction in the post office of a proper cost accounting system. Transport Administration 90. Amalgamation in each province of the Nazirates of Public Works and the Nazirates of Communications; conversion of the exist- ing Ministry of Communications into a Ministry of Transport and Communications responsible for formulation of national policies in this field; establishment of ministerial and technical committees on transport and communications to coordinate the activities of the fed- eral and provincial governments. EDUCATION 91. Concentration on improving the quality of primary school edu- cation, with particular attention to the supply of teachers, the provision of more and lbetter equipment, textbooks and teaching aids and re- orientation of the curriculum to give greater emphasis to practical training in everyday life. 92. A program costing £L 770,000 for the provision of primary school buildings and equipment needed to raise standards and to ac- commodate an additional 25,000 pupils over the next five years. 93. A five-year program costing £L 630,000 to expand facilities for education at the preparatory and secondary school levels, with special emphasis on vocational training, including the establishment of three new centers for training agricultural technicians and the conversion of the School of Applied Engineering in Tripoli into a comprehensive technical high school. 94. Endorsement of the proposal to establish an Institute of Higher Technology in Tripoli with assistance from the United Nations Special Fund, this institute to be accorded equal status with the University of Libya. 95. Gradual development of the University of Libya into a medium- sized college of liberal arts and sciences, construction of new buildings to house the University and measures to raise academic standards, in- cluding the appointment of an examining commission of university pro- fessors from abroad to assist in the final examinations for degrees. LIST OF PRINCIPAL RECOMMENDATIONS 341 96. Greater emphasis on adult and fundamental education; strengthening and extension of the present adult education program which is being carried out with the help of UNESCO; creation of a special directorate for adult education in the Ministry of Education. 97. Continuation of existing programs for foreign study with spe- cial care being given to the selection of students for scholarships. 98. Appointment of a high-level technical adviser to the Minister of Education to prepare a long-term program of educational develop- ment, to review the distribution of functions between the ministry and the Nazirates and to establish a proper system of educational records (with the help of a Bureau of Records and Research). 99. Recruitment of additional school inspectors; broadening the membership of the provincial executive education committees; en- couragement of local citizens' committees to assist in raising standards in primary schools. HEALTH AND COMMUNITY SERVICES Public Health 100. Shift of emphasis in public health policy from the curative services to preventive medicine, with special reference to maternity and child health. 101. A five-year program for improvements to existing hospitals, establishment of a new isolation hospital in Benghazi and the building of one or two new district hospitals (e.g., at Murzuk in the Fezzan) at an estimated cost of £L 700,000, of which £L 310,000 would be for Cyrenaica, £L 300,000 for Tripolitania and £L 90,000 for the Fezzan; purchase of additional ambulances for the three provinces at an esti- mated cost of £L 75,000. 102. Merging of the existing Maternity and Child Health Centers into an integrated system of health centers and sub-centers serving all towns and the larger villages in Libya at an estimated capital cost of £*L 290,000 over five years (including £L 90,000 to establish a network of rural dispensaries). 103. Centralization of arrangements for procurement of drugs and medicines, establishment of a central medical store and preparation of a standardized list of drugs and medicines for use in hospitals through- out Libya. 104. Establishment of suitable quarantine arrangements at the major ports and civil airports at an estimated capital cost of £L 40,000. 342 THE MAIN REPORT 105. Revision of existing scales of pay and allowances for doctors on a uniform all-Libya basis, with larger allowances for specialists; recruitment of additional women doctors for the main hospitals and health centers; continuation of medical training for Libyans abroad. 106. Measures to strengthen the nursing services and to encourage more Libyan girls to take up nursing and midwifery; establishment of a school for male nurses in Benghazi. 107. Various changes in the organization of the health services coupled with the establishment of an all-Libya Council of Medical Registration. Town and Village Water Supplies I08. A five-year program of further improvements and additions to town and village water supplies costing £L 700,000, of which £L 350,000 would be for Cyrenaica, £L 300,000 for Tripolitania and £L 50,000 for the Fezzan; high priority to be given within this program to boring new wells for Tripoli and increasing reservoir capacity at Ben- ghazi. 109. Re-examination of water rates and better collection of charges with a view to reducing the losses incurred by the water supply under- takings (currently in excess of £L 100,000 a year). 110. Municipal waterworks in Tripolitania, except in Tripoli itself, to be taken over by the Nazirates of Public Works, which is at present responsible for maintenance but not for operations. Sanitation 111. Allocation of £L 450,000 for the construction of a sewage treat- ment plant at Tripoli and £L 350,000 for a similar plant at Benghazi; government-aided program for construction of family latrines. 112. Measures to raise standards of environmental sanitation, in- cluding anti-fly campaigns, stricter food inspection and the insistence on higher standards of hygiene in food processing establishments. Housing 113. Organization of a low-cost housing scheme, a sum of £L I million being provided initially to cover the housing of some 2,000 families in Tripolitania and 1,000 families in Cyrenaica in properly planned communities; housing in rural areas to be carried out when- ever possible on a self-help basis; use of gypsum for construction. LIST OF PRINCIPAL RECOMMENDATIONS 343 114. Investigation of the possibilities of establishing a government- housing fund or mortgage bank, financed out of local borrowings, to provide financial assistance for private house purchase. Community Development 115. Support for the community development program in Cyrenaica and the introduction of similar programs in the other provinces. GENERAL FINANCIAL AND ECONOMIC POLICIES Public Finance 116. Strenuous efforts to achieve economies in public expenditures, particularly in the staffing of government departments; limits to be set to the growth of recurrent expenditures in education and other fields. 117. Maintenance of existing capital assets generally to be accorded priority over new construction in the allocation of funds; continuing costs of projects to be carefully assessed before additional investments are undertaken. 118. Better methods of budgetary accounting, distinguishing be- tween current and capital expenditures and separating the accounts of revenue-earning public undertakings from those of general government. 119. Implementation of the draft income tax law; higher standard rates of income tax and business profits tax; vigorous efforts to tighten up income tax administration and to extend the list of registered tax- payers. 120. Greater use of property taxes, particularly for the purpose of raising additional revenues for municipalities to cover the extra cost of local services. 121. Replacement of existing agricultural taxes by a land tax appli- cable to cultivable land in the more fertile districts. 122. Special tax remission for kerosene used for heating and cook- ing, coupled with action to ensure an adequate supply of cheap kero- sene stoves (with the object of reducing demand for fuel wood and thereby helping to preserve the country's forest resources). 123. A review of charges made for public utilities, irrigation and other economic services provided at the public expense with a view to mobilizing additional revenues for financing economic development. 124. Measures to mobilize voluntary savings through the institu- tion of a post office savings scheme; consideration to be given to a 344 THE MAIN REPORT limited issue of short-term and medium-term Libyan Government securities, coupled possibly with the establishment of a government housing fund or mortgage bank. Banking 125. Transfer of certain powers relating to the control of com- mercial banking from the Minister of Finance to the National Bank of Libya, the exercise of such powers remaining subject to the Minister's approval; measures to ensure that at least 20 percent of the liquid reserves maintained by the commercial banks under present banking legislation are kept within Libya in the form either of currency or of deposits with the National Bank. 126. The capital of the National Bank of Libya to be raised by government subscription to £L 1 million; measures to enable the Na- tional Bank to play a more active role in the management of the econ- omy, with particular reference to the maintenance of currency stability, such measures to include the strengthening of the Bank's statistical and research department. Economic Policy 127. A liberal import policy and removal of most remaining restric- tions on imports to help counter inflationary pressures; abolition of export controls; assumption by the federal government of sole responsi- bility for issuing regulations for the control of imports and exports; removal of all restrictions on interprovincial trade. 128. General reliance on tariffs rather than quantitative restrictions on imports to protect local producers, subject, however, to certain exceptions in the case of agriculture; specific changes in tariffs on selected items to assist local industry (e.g., vegetable oils, caustic soda and household utensils); a further increase in the tariff on imports of gold. 129. Encouragement of private foreign investment in Libya and liberal application of the provisions of the existing Law for the Invest- ment of Foreign Capital. 130. Measures to stimulate competition in the building and civil engineering industry in order to keep construction costs down and expedite work. 131. Encouragement of immigration of skilled workers from abroad, particularly Libyans who left the country during the Italian occupa- tion. STATISTICAL APPENDIX PUBLIC FINANCE TABLE S.I Public Revenues and Expenditures in Libya (£L '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59a Domestic Revenues Federal Government 2,561 3,565 4,100 5,090 6,532 Tripolitania 1,784 2,243 2,605 2,986 3,709 Cyrenaica 726 774 932 943 1,189 Fezzan 40 51 64 94 119 Municipalitiesb 438 428 446 482 500 Total domestic 5,549 7,061 8,147 9,595 12,049 External Assistance Grants from United Kingdom 3,750 3,750 4,000 4,250 3,250 Grants from United Statese 1,786 2,500 3,214 6,099 6,785 Loans from United States - - - 1,250 - Otherd 105 20 20 470 1,010 Total external 5,641 6,270 7,234 12,069 11,045 TOTAL REVENUES 11,190 13,331 15,381 21,664 23,094 Expenditures Federal Government, 1,501 2,120 2,719 3,589 4,948 Tripolitania 3,652 3,805 3,992 4,614 5,008 Cyrenaica 2,062 2,340 2,646 2,751 3,178 Fezzan 398 404 504 635 892 Municipalitiesb 431 408 452 464 500 LARC - 2,485 4,038 3,851 3,938 LPDSA 753 1,416 1,082 1,127 715 TOTAL EXPENDITURES 8,797 12,978 15,433 17,031 19,179 Surplus or deficit of revenues over expenditures +2,393 +353 -52 +4,633 +3,915 a Many of the figures for 1958/59 are budget estimates and as such are not com- parable with the figures for earlier years. b Includes all municipalities of Tripolitania and Cyrenaica, except Derna. e Technical cooperation grants and gift wheat and other commodities supplied under PL 480 are excluded. d Grants from France, Italy, Egypt, Pakistan and Turkey, the figures showing actual receipts (as distinct from the allocations shown in Table 1 of Chapter 3). UN technical assistance and U. S. technical cooperation assistance are excluded from both the revenue and expenditure sides of the account. o Including expenditures under the "Exceptional Budget." 347 348 STATISTICAL APPENDIX TABLE S.2 Analysis of Domestic Revenues (EL '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59a Federal Customs (gross) 2,455 3,381 3,873 4,899 6,400 Post and telecommunications (net) 40 50 82 54 - Miscellaneous 66 134 145 137 132 Total 2,561 3,565 4,100 5,090 6,532 Tripolitania Income tax 512 638 680 862 1,118 Other direct taxes 133 156 231 276 350 Indirect taxes 209 270 302 362 406 Tobacco and salt monopolies 315 443 576 584 714 Sugar trading 211 190 241 193 350 Miscellaneous 404 546 575 709 771 Total 1,784 2,243 2,605 2,986 3,709 Cyrenaica Income and property taxb 150 175 218 279 419 Indirect taxes 86 102 127 152 169 Tobacco monopoly 195 194 233 277 285 Sugar trading 218 212 235 118 192 Miscellaneous 77 91 119 117 124 Total 726 774 932 943 1,189 Fezzan Direct taxes 8 16 22 28 37 Indirect taxes 22 15 28 39 52 Public services 10 20 14 27 30 Total 40 51 64 94 ll9b Municipalities Tripolitania 246 274 291 301 n.a. Cyrenaica 192 154 155 181 n.a. Total 438 428 446 482 500b TOTAL DOMESTIC REVENUES 5,549 7,061 8,147 9,595 12,049b a Property tax varies around £L 15,000 a year. b Estimates, not actuals. STATISTICAL APPENDIX 349 TABLE S.3 Public Expenditures by Main Categories (EL '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59 General administration and defense Law and order 1,517 1,676 2,022 2,179 2,745 Tax collection 173 169 172 192 314 Development administration 40 70 106 271 303 Other civil administration 1,362 1,840 2,01J 2,006 2,060 Public buildings 555 533 739 1,314 1,576 Defense 313 352 464 629 1,033 Sub-total 3,960 4,640 5,514 6,591 8,031 Social services Health 630 968 1,508 1,392 1,480 Education 1,177 1,342 1,741 2,499 3,322 Popular housing and other relief expenditures 421 208 259 402 236 Municipal services 386 368 405 406 433 Sub-total 2,614 2,886 3,913 4,699 5,471 Economic services Agriculture and irrigation 608 1,944 2,165 1,796 1,371 Industries and minerals 20 120 70 58 72 Tourism and antiquities 50 56 90 49 77 Transport and communications 1,407 1,669 2,269 2,873 3,306 Electric power and water supply 138 963 1,412 965 851 Capitalization of National Bank of Libya - 700 - - - Sub-total 2,223 5,452 6,006 5,741 5,677 GRAND TOTAL 8,797 12,978 15,433 17,031 19,179 350 STATISTICAL APPENDIX TABLE S.4 Public Expenditures on Agriculture, Water Resources and Forestry (EL '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59 Federal Governmenta 5 234 267 204 182 Tripolitania 255 348 218 341 378 Cyrenaica 107 123 149 156 189 Fezzan 24 26 23 27 28 LARCb - 822 1,238 871 510 LPDSA 217 391 270 197 84 Total 608 1,944 2,165 1,796 1,371 Of which: General Administration 96 122 151 148 161 Soil and water conservation 83 366 454 377 146 Irrigation and wells 93 116 236 230 82 Water investigations 6 15 42 68 42 Forestry and dune fixation 90 119 176 228 196 Land settlement 32 49 48 61 92 Horticulture 5 40 91 40 64 Animal husbandry 66 191 201 129 130 Agricultural tools and machinery - 23 26 22 156 Agricultural credit - 500 500 - Assistance to cooperatives 7 45 6 15 18 Grain storage - - 12 28 48 Training and research 80 86 155 267 165 Extension services 5 14 19 41 25 Miscellaneouso 45 258 48 142 46 Total 608 1,944 2,165 1,796 1,371 Of which: Recurrent expenditured 342 803 697 932 900 Capital expenditured 266 1,141 1,468 864 471 Total 608 1,944 2,165 1,796 1,371 Includes expenditures out of the Exceptional Budget. The figures for 1955/56 and 1957/58 contain £L 211,000 and £L 89,000, respectively, for expenditures on locust campaigns. b Includes £L 500,000 in each of the years 1955/56 and 1956/57 for capitalization of the National Agricultural Bank. e The figures for 1955/56 and 1957/58 contain £L 211,000 and £L 89,000, re- spectively, for expenditures on locust campaigns. d The distinction between recurrent and capital expenditures, being largely based on the mission's own estimates, is subject to a considerable margin of error. STATISTICAL APPENDIX 351 TABLE S.5 Public Expenditures on Industries, Fisheries and Minerals (£L '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59 LARC - 64 47 53 70 LPDSA 20 56 23 5 2 Total 20 120 70 58 72 Of which: Vehicle workshops and equipment - 40 31 38 15 Agricultural processing 20 69 28 5 52 Fisheries - - I - - Minerals investigation - 11 tO 15 5 Total 20 120 70 58 72 Of which: Recurrent expendituresa - 7 - - - Capital expendituresa 20 113 70 58 72 & The distinction between recurrent and capital expenditures, being largely based on the mission's own estimates, is subject to a considerable margin of error. 352 STATISTICAL APPENDIX TABLE S.6 Public Expenditures on Electric Power and Water Supplies (£L '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59 LARC - 715 1,180 646 637 LPDSA 90 205 182 252 137 Municipalities 45 40 47 58 67 Fezzan 3 3 3 9 10 Total 138 963 1,412 965 851 Of which: Purchase of Tripoli power - 700 423 - - Tripoli power expansion - - 541 574 523 Other power stations 35 86 91 48 191 Water supplies and miscellaneous 103 177 357 343 137 Total 138 963 1,412 965 851 Of which: Recurrent expendituresa b n.a. 52 54 70 90 Capital expendituresb n.a. 911 1,358 895 761 A The only recurrent expenditures shown in this table are the government sub- ventions required to support municipal power and water undertakings in Tripoli- tania and public utilities in the Fezzan. b The distinction between recurrent and capital expenditures, being largely based on the mission's own estimates, is subject to a considerable margin of error. STATISTICAL APPENDIX 353 TABLE S.7 Public Expenditures on Transport and Communications (£L '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59 Federal Government 301 392 272 259 479 Tripolitania 530 470 427 510 548 Cyrenaica 330 305 312 328 381 Fezzan 50 60 65 48 66 LARC - 100 972 1,439 1,476 LPDSA 196 342 221 289 356 Total 1,407 1,669 2,269 2,873 3,306 Of which: General administration 105 84 95 110 153 Roads 487 615 1,227 1,161 810 Railwaysa 56 57 54 75 79 Ports and lights" 94 140 130 161 174 Civil aviation, 202 202 126 151 256 Telecommunicationsd - 18 60 336 724 Meteorological Department 38 43 41 47 102 Broadcasting - - 64 373 409 Road transport 378 378 427 451 557 Posts 47 132 45 8 42 Total 1,407 1,669 2,269 2,873 3,306 Of which: Recurrent expenditureso 1,054 1,035 923 1,105 1,225 Capital expenditurese 353 634 1,346 1,768 2,081 a Figures represent subsidies paid to railways by provincial governments to cover their operating losses and capital expenditures. b Capital expenditures only, financed by LARC and LPDSA. e Figures include operating losses covered by government subventions, plus capital expenditures which have been mainly financed by LARC and LPDSA. d Expenditures by LARC on the telecommunications project plus capital expendi- tures financed through the ordinary budget of the Ministry of Communications. e The distinction between recurrent and capital expenditures, being largely based on the mission's own estimates, is subject to a considerable margin of error. 354 STATISTICAL APPENDIX TABLE S.8 Public Expenditures on Education (£L '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59 Federal Government 49 68 224 376 549 Tripolitania 630 691 824 1,116 1,136 Cyrenaica 397 420 491 549 676 Fezzan 32 42 58 101 143 LARC - 18 97 331 790 LPDSA 69 103 47 26 28 Total 1,177 1,342 1,741 2,499 3,322 Of which: General administration 87 109 129 160 195 Teacher's salaries 620 755 900 1,034 1,353 Schools 385 362 375 699 890 Teacher and vocational training 42 59 95 142 213 Libyan University - 5 42 176 342 Higher Institute of Mahomed el-Senussi - - 110 130 160 Scholarships abroad 42 52 59 94 98 Adult education and miscel- laneous 1 - 31 64 71 Total 1,177 1,342 1,741 2,499 3,322 Of which: Recurrent expenditures, 1,070 1,216 1,637 2,034 2,779 Capital expendituresa 107 126 104 465 543 a The distinction between recurrent and capital expenditures, being largely based on the mission's own estimates, is subject to a considerable margin of error. STATISTICAL APPENDIX 355 TABLE S.9 Public Expenditures on Health (EL '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59 Federal Government 9 14 58 60 114 Tripolitania 329 415 568 635 596 Cyrenaica 242 287 300 349 394 Fezzan 29 41 47 76 101 LARC - 40 399 214 224 LPDSA 21 171 136 58 51 Total 630 968 1,508 1,392 1,480 Of which: Recurrent expendituress 609 781 1,120 1,276 1,328 Capital expendituresa 21 187 388 116 152 a The distinction between recurrent and capital expenditures, being largely based on the mission's own estimates, is subject to a considerable margin of error. 356 STATISTICAL APPENDIX TABLE S.10 Analysis of Expenditures by Agencies (£L '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59 Federal governments General administration and defense 1,128 1,388 1,761 1,992 2,525 Development administration 9 18 19 23 36 Agriculture, water resources and forestry 5 234 267 204 182 Education 49 68 224 376 549 Health 9 14 58 60 114 New Capital at Beida - - 96 630 1,008 Transport and communications 301 392 272 259 479 Tourism - 6 22 1 - Social welfare - - - 44 55 Total 1,501 2,120 2,719 3,589 4,948 Tripolitania Civil administration 1,572 1,769 1,825 1,908 2,133 Agriculture, water resources and forestry 255 348 218 341 378 Education 630 691 824 1,116 1,136 Health 329 415 568 635 596 Transport and communications 530 470 427 510 548 Relief and welfare 305 82 103 75 169 Tourism 31 30 27 29 48 Total 3,652 3,805 3,992 4,614 5,008 Cyrenaica Civil administration 960 1,181 1,366 1,344 1,509 Agriculture, water resources and forestry 107 123 149 156 189 Education 397 420 491 549 676 Health 242 287 300 349 394 Transport and communications 330 305 312 328 381 Relief and welfare 7 7 8 8 8 Tourism and antiquities 19 17 20 17 21 Total 2,062 2,340 2,646 2,751 3,178 Fezzan Civil administration 260 232 308 374 544 Agriculture 24 26 23 27 28 Education 32 42 58 101 143 Health 29 41 47 76 101 Transport and communications 50 60 65 48 66 Electric power 3 3 3 9 10 Total 398 404 504 635 892 a Including expenditures from Exceptional Budget. STATISTICAL APPENDIX 357 TABLE S.10 Continued (£L '000: fiscal years beginning April) 1954/55 1955/56 1956/57 1957/58 1958/59 Municipalities I. Tripoli 180 160 170 190 n.a. Other Tripolitania 100 95 93 95 n.a. Total 280 255 263 285 300 II. Benghazi 126 125 153 139 n.a. Other Cyrenaicab 25 28 36 40 n.a. Total 151 153 189 179 200 GRAND TOTAL 431 408 452 464 500c LARC Administration - 21 50 200 226 Agriculture, water resources and forestry - 822 1,238 871 510 Education - 18 97 331 790 Health - 40 399 214 224 Transport and communications - 100 972 1,439 1,476 Public buildings - - 38 37 3 Capitalization of National Bank of Libya - 700 - - - Electric power and water supplies - 715 1 ,180 646 637 Tourism - - 17 - - Popular housing - 5 - 60 2 Industries and minerals - 64 47 53 70 Total - 2,485 4,038 3,851 3,938 LPDSA Administration 31 31 37 48 47 Agriculture water resources and forestry 217 391 270 197 84 Education 69 103 47 26 28 Health 21 171 136 58 51 Transport and communications 196 342 221 289 356 Electric power and water supplies 90 205 182 252 137 Tourism and antiquities - 3 4 2 8 Relief and welfare 109 114 148 215 2 Public buildings - - 14 35 - Industries and minerals 20 56 23 5 2 Total 753 1,416 1,082 1,127 715 b Excluding Derna. e Estimates, not actuals. 358 STATISTICAL APPENDIX FOREIGN TRADE AND PAYMENTS TABLE S.11 Libya's Balance of Payments (EL million) 1954 1955 1956 1957 1958 Current Account Exports and re-exports, f.o.b. 3.5a 4.3 4.0 5.2 4.8 Imports, c.i.f. 11.3 14.3 16.5 22.8 23.9 Trade balance -7.8 -10.0 -12.5 -17.6 -19.1 Imports of non-monetary gold n.a. n.a. n.a. -0.5 -0.7 Foreign military expenditures +5.6 +6.2 +10.8 +9.8 +6.9 Other services (net)b -2.1 -1.3 -4.6 +4.4 +9.7 Balance of goods and services -4.3 -5.1 -6.3 -3.9 -3.2 Private donations and transfers (net)o -0.5 -0.6 -0.6 -0.8 -1.2 Official donationsd +5.1 +8.4 +10.1 +7.5 +9.4 Current account balance +0.3 +2.7 +3.2 +2.8 +5.0 Capital Account Private capital receipts (net) +1.2 +0.6 +1.3 +1.0 +0.3 Change in net foreign assets of official and banking institutions (increase -) -2.6 -3.9 -4.5 -4.6 -5.1 Capital account balance (improvement -) -1.4 -3.3 -3.2 -3.6 -4.8 Errors and Omissions 1.1 0.6 - 0.8 0.2 - Excludes net value of raw sponges. b Including oil company expenditures in Libya, which explain the marked im- provement in this item in 1957 and 1958. c Mainly outward remittances by Italians resident in Libya. d These figures differ from those given in Table 1 of Chapter 3 on account of two main factors: (i) they relate to calendar years, not fiscal years, and to receipts, not allocations; and (ii) they exclude surplus commodities supplied by the U. S. under PL 480. The first of these two factors largely explains the difference between this table and Table S.1. SOURCE: Government of Libya, Central Statistics Office. STATISTICAL APPENDIX 359 TABLE S.12 Foreign Exchange Holdings of the National Bank (EL '000, end of March) 1957 1958 1959 1960b Issue Department Foreign government securities 4,622 5,687 7,497 7,848 Deposits with foreign banks 1,495 1,500 545 1,944 Total (equivalent to currency in circulation) 6,117 7,187 8,042 9,792 Banking Department Foreign currency notes 3 14 9 19 Balances with overseas banks$ 724 2,176 5,223 8,165 Foreign government and other securities 4,614 7,947 6,400 7,393 Total 5,341 10,137 11,632 15,577 Total holdings of National Bank 11,458 17,324 19,674 25,369 a Including net claims on National Bank of Egypt under the bilateral trade and payments agreement-£ 756,887 at the end of March 1959 and £ 2,117,395 at the end of January 1960. b End of January 1960. SOuRCE: National Bank of Libya. 360 STATISTICAL APPENDIX TABLE S.13 Composition of Exports Percentage Value in £L '000 f.o.b. of domestic exports Commodity 1954 1955 1956 1957 1958 1954 1955 1956 1957 1958 Groundnuts 583 633 818 848 1,020 16 15 21 18 24 Live animals 567 749 744 500 838 15 17 19 11 19 Scrap metal 225 410 479 439 155 6 10 13 9 4 Esparto 610 532 403 348 272 17 12 11 7 6 Olive oil 261 513 61 1,171 447 7 12 2 25 10 Wool and animal hair 302 320 241 218 113 8 8 6 5 3 Hides and skins 223 237 225 222 219 6 5 6 5 5 Sponges 373 252 188 131 134 10 6 5 2 3 Others 524 637 646 876 1,115 15 15 17 18 26 Total domestic exports 3,668 4,283 3,805 4,753 4,313 100 100 100 100 100 SOURCE: Government of Libya, Central Statistics Office. TABLE S.14 Destination of Exports Percentage Value in £L '000 f.o.b. of domestic exports Country 1954 1955 1956 1957 1958 1954 1955 1956 1957 1958 Italy 1,093 1,683 1,452 2,772 1,596 30 39 38 58 37 United Kingdom 1,129 886 801 810 654 31 21 21 17 15 Egypt 197 466 515 438 722 5 11 14 9 17 Malta 251 267 291 173 240 7 6 8 4 6 Germany 138 368 283 168 327 4 9 7 4 8 Greece 636 333 155 93 157 17 8 4 2 3 Others 224 280 308 299 617 6 6 8 6 14 Total domestic: exports 3,668 4,283 3,805 4,753 4,313 100 100 100 100 100 SOURCE: Government of Libya, Central Statistics Office. TABLE S.15 Composition of Civil Importsa Value in £L '000 c.i.f. Percentage of total civil imports Commodity 1954 1955 1956 1957 1958 1954 1955 1956 1957 1958 Cereals 1,465 1,495 1,877 1,775 1,420 13 10 11t 8 6 Tea 1,048 1,248 865 1,317 1,001 9 9 5 6 4 Fruit and vegetables 671 430 615 680 730 6 3 4 3 3 Sugar and sweets 381 656 638 1,240 994 3 5 4 5 4 Dairy products 215 208 235 303 339 2 1 1 2 1 Wines, spirits, soft drinks 108 81 112 185 230 1 1 1 1 1 Other food and drink 189 224 309 156 620 2 2 2 1 3 Total food and drink 4,077 4,342 4,651 5,656 5,334 36 31 28 26 22 . Tobacco and cigarettes 102 151 85 211 138 1 1 1 1 1 c Vegetable oils 92 241 453 257 138 1 2 3 1 1 3 Perfumes and soap 130 141 168 206 300 1 1 1 1 1 n Pharmaceuticals 202 230 259 358 484 2 2 2 2 2 M Textileyarnsandfabrics 995 1,408 1,496 1,682 2,432 9 10 9 7 10 > Clothing 580 710 761 954 1,237 5 5 4 4 5 t Footwear 179 202 213 329 323 2 1 1 1 1 Totalfood,clothingetc.,asaboveb 6,357 7,425 8,086 9,653 10,386 57 53 49 43 43 X a Figures for 1957 and 1958 exclude goods directly imported by petroleum companies. b Sub-total broadly represents value of imports of food and finished consumer goods, excluding durables. TABLE S.15 Continued H Value in £L '000 c.i.f. Percentage of total civil imnports > Commodity 1954 1955 1956 1957 1958 1954 1955 1956 1957 1958 3 ---_________________________________________________________________________________________________ > Coal and coke 180 725 321 301 253 2 5 2 2 1 ' Petroleum 596 710 757 1,463 1,403 5 5 4 6 6 > Machinerye 946 1,123 1,690 2,408 2,873 8 8 10 10 12 M Transportequipment 832 1,027 1,265 2,883 3,426 7 7 8 12 14 Z Base metals and mfrs. 549 861 1,101 1,491 1,592 5 5 7 6 6 X Building materialsd 259 606 844 880 723 2 4 5 4 3 Fertilizers 136 134 228 234 258 1 1 1 1 1 Other chemicals 189 203 280 647 680 2 1 2 3 3 Rubber tires 114 142 156 259 299 1 1 1 1 1 Other materials and mfrs. 1,175 1,382 1,873 2,847 2,529 10 10 11 12 10 Total imports 11,333 14,338 16,601 23,066 24,422 100 100 100 100 100 Including radio sets and household electrical appliances. d Cement, bricks and tiles, timber, stone, natural asphalt, etc. SOURCE: Government of Libya, Central Statistics Office. STATISTICAL APPENDIX 363 TABLE S.16 Source of Civil Importsa Percentage Value in £L '000 c.i.f. of total civil imports Country 1954 1955 1956 1957 1958 1954 1955 1956 1957 1958 Italy 3,730 3,833 4,968 7,391 7,299 33 26 30 32 30 United Kingdom 2,478 3,594 3,662 5,177 6,130 22 25 22 22 25 Germany 579 1,462 1,732 2,039 2,326 5 10 10 9 10 France 305 801 996 1,154 1,467 3 6 6 5 6 Egypt 468 845 986 927 697 4 6 6 4 3 Holland 621 695 823 929 1,113 5 5 5 4 5 Ceylon 736 766 663 954 823 7 5 4 4 3 United States 256 244 599 1,335 1,281 2 2 4 6 5 Others 2,160 2,098 2,172 3,160 3,286 19 15 13 14 13 Total 11,333 14,338 16,601 23,066 24,422 100 100 100 100 100 Figures for 1957 and 1958 exclude goods directly imported by petroleum com- panies. 364 STATISTICAL APPENDIX TABLE S.17 Quantities of Selected Imports' (metric tons) 1954 1955 1956 1957 1958 Foodstuffs Wheat meal and flour 17,770 35,242 46,003 n.a. 41,518 Rice 3,418 4,658 6,042 n.a. 4,681 Barley 3,050 3,210 3,397 n.a. - Wheat and other cerealsb 18,151 1,545 1,279 n.a. - Total cereals 42,389 44,655 56,721 n.a. 46,199 Tomatoes (preserved) n.a. 930 2,125 n.a. 1,608 Apples n.a. 1,086 1,012 n.a. 1,045 Potatoes 3,957 4,579 5,057 n.a. 7,375 Sugar 7,058 14,176 13,676 n.a. 17,884 Tea 2,137 2,491 2,062 n.a. 2,770 Vegetable oils 483 2,024 3,171 n.a. 1,247 Building materials Tar and asphalt n.a. 4,206 5,649 n.a. 3,118 Stone n.a. 2,129 2,286 n.a. 2,835 Cement n.a. n.a. 51,170 n.a. 71,771 Bricks, tiles, pipes, etc. 5,057 n.a. 18,174 n.a. n.a. Other materials and fuel Coal and Coke 26,116 75,371 33,672 n.a. 36,242 Iron and steel 2,267 n.a. 7,527 n.a. 8,753 Fertilizers (manufactured) 6,965 7,474 9,232 n.a. 11,531 Vehicles (numbers) Railway locomotives, wagons, etc. n.a. n.a. 10 n.a. - Passenger cars 960 986 981 n.a. 2,417 Motor cycles n.a. 761 616 n.a. 879 Buses, trucks, lorries, etc. 191 371 398 n.a. 1,114 Bicycles n.a. 6,245 7,271 n.a. 6,294 a Figures for 1958 exclude goods directly imported by petroleum companies. b Excluding gift wheat and other cereals provided by the U. S. under PL 480. STATISTICAL APPENDIX 365 CURRENCY AND BANKING TABLE S.18 Money Supply (EL '000, end of December) 1956 1957 1958 1959 Total currency issued 5,927 7,182 7,842 9,552 Currency holdings of National Bank and commercial banks 927 959 652 596 Currency outside banks 5,000 6,223 7,190 8,956 Sight deposits (including government deposits with National Bank) 10,742 11,996 14,604 19,533 Money supply 15,742 18,219 21,794 28,489 Government deposits with National Bank 1,907 4,430 6,550 9,013 Total money supply, excluding govern- ment deposits 13,835 13,789 15,244 19,476 Percentage increase over previous year - -0.3% +10.6% +27.8% 366 STATISTICAL APPENDIX TABLE S.19 Consolidated Statements of National Bank (£L '000) 1957 1958 1959 1959 March 31 March31 March 31 December 31 ISSUE DEPARTMENT Assets Foreign government and other securities 4,622 5,687 7,497 6,856 Deposits with foreign banks 1,495 1,500 545 2,696 Total 6,117 7,187 8,042 9,552 Liabilities Notes issued 6,117 7,187 8,042 9,552 Total 6,117 7,187 8,042 9,552 BANKING DEPARTMENT Assets Cash 71 109 157 97 Bank balances 724 2,176 5,223 7,830 Foreign government and other securities 4,614 7,947 6,400 7,245 Advances and discounts 47 350 359 419 Other assets 894 264 285 287 Total 6,350 10,846 12,424 15,878 Liabilities Capital and reserves 700 1,194 1,366 1,356 Federal and provincial balances 1,123 4,840 6,334 9,013 Other customers balances 3,154 4,179 4,029 4,383 Other liabilities 1,373 633 695 1,126 Total 6,350 10,846 12,424 15,878 SOURCE: National Bank of Libya. STATISTICAL APPENDIX 367 TABLE S.20 Combined Balance Sheet of Private Commercial Banks (EL '000: end of month) December 1958 December 1959 Assets Cash on hand or in transit 507 517 Balances with National Bank 741 1,942 Foreign currency on hand and balances due from banks abroad 1,879 2,522 Total liquid assets 3,127 4,981 Total credit extension (advances, over- drafts, bills discounted and other loans) 8,374 10,766 Fixed and other assets 7,258 9,913 Total assets 18,759 25,660 Liabilities Capital and reserves 1,042 1,031 Demand deposits 6,080 8,510 Time and savings deposits 4,163 5,358 Total deposits 10,243 13,868 Borrowing from banks abroad 326 710 Other liabilities 7,148 10,051 Total liabilities 18,759 25,660 Note: Comparable statistics for earlier periods are not available. SOURCE: National Bank of Libya. ANNEXES ANNEX I NATIONAL INCOME AND EXPENDITURE Gross Domestic Product The Libyan Central Statistics Office in June 1959 published a pre- liminary estimate of the national income of Libya in 1958, following broadly the definitions recommended by the Statistical Office of the United Nations in its publications on "A System of National Accounts" and "Classification of Government Transactions." The gross domestic product at factor cost was estimated at £L 52.2 million, made up as in Table A.1. TABLE A.1 Industrial Origin of Gross Domestic Product at Factor Cost in 1958 Economic activity £L millions Percent 1. Agriculture, forestry and fishing 13.6 26.1 2. Petroleum prospecting and quarrying 3.6 6.9 3. Manufacturing and repairing 6.0 11.5 4. Construction 1.8 3.4 5. Electricity and gas 0.8 1.5 6. Transportation, storage and communication 2.9 5.6 7. Wholesale and retail trade 7.3 14.0 8. Banking, insurance, ownership of dwellings, other services 9.5 18.2 9. Public administration and defense 6.7 12.8 Gross domestic product at factor cost 52.2 tO0.0 The main sources used in compiling this estimate were as follows: Agriculture and forestry-Very rough estimates of production by quantity and value made by the provincial Nazirates of Agriculture and FAO statisticians. 371 372 ANNEXES Fishing-Numbers employed obtained from 1954 population census. Manufacturinig, repairing, construction, electricity and gas, trans- port and communications, wholesale and retail trade, banking and insurance and miscellaneous services-Census of Employment and Pro- duction taken by the C.S.O. in Tripoli, Benghazi and certain other urban areas in January-May 1959, except for domestic service, which was estimated on the basis of 1954 population census. Public administration and defense-Analysis of government ac- counts made by IBRD Survey Mission; relates to financial year 1957/58. For the purpose of these estimates of domestic product the boundary of the Libyan economy was drawn so as to include all Libyan nationals, the resident Italian community and foreigners more or less permanently resident in the country such as expatriate officials of the Libyan Gov- ernment, expatriate teaching and medical staff and the foreign busi- ness and banking communities. On the other hand, it excludes U.S. and British forces stationed in Libya, together with UN and USOM personnel, other employees of foreign governments and non-Libyans employed by the oil companies. Expenditures of foreign governments and oil companies in Libya are treated as "invisible exports"; these expenditures, however, exclude goods directly imported into Libya for their own use by foreign governments and oil companies. The mission believes, on the basis of some rough calculations of its own, that the official estimates represent a fair approximation to the size of the domestic product as a whole. On the individual components, however, we incline to the view that the official figures rather overesti- mate the contributions of manufacturing industry and petroleum prospecting and underestimate those of wholesale and retail trade and construction. Some rough estimates of national expenditures were made by the mission while in Libya. These relate, for the most part, to the calendar year 1957 and the fiscal year 1957/58 and are set out in Table A.2. The estimates do not include any allowance for changes in inventories on which the mission was unable to obtain any information. ANNEX I 373 TABLE A.2 Expenditures on Gross Domestic Product and Imports, 1957/58 (£L millions) 1. Private consumption expenditure (1957) 28.3 2. Government consumption expenditure (1957/58) 12.0 3. Fixed capital formation in public sector (1957/58) 5.0 4. Private fixed capital formation (1958) 3.5 5. Exports and re-exports of goods (1957) 5.2 6. Exports of services (1957): (a) foreign government expenditure in Libya 10.7 (b) oil company expenditure in Libya 4.1 (c) other 1.7 7. Total expenditure on gross domestic product and imports 70.5 8. Less imports of goods and services (1957) 25.5 9. Gross domestic product at factor cost 45.0 Notes to Table A.2 Item 1. Based on estimates of food production at market prices plus imports, less exports, less consumption of food by foreign governments, oil companies and the Libyan army and police forces. Other consumption has been arbitrarily assumed to be 50 percent of food consumption in line with the ratio commonly prevailing in other countries with a low per capita income. Items 2-3. Estimates derived from analysis of accounts of federal and provincial governments, foreign aid and municipalities. Item 4. Largely guesswork. The gross value of private building in Tripoli alone is offidally estimated at about £L IV2 million in 1958. In addition, allowance has to be made for private residential and industrial building in Benghazi and other towns and for private investment in agriculture (espedally on the larger foreign-run farms in Tripolitania). Exploration investment by the oil companies is excduded, being treated as an invisible export to the extent that it involves expenditures on goods and services bought in Libya. Items 5-6 and 8. Based on the offidal balance of payments estimates. No attempt is made here to reconcile the two sets of estimates, which in any case relate to different years. The mission considers, however, that it would be reasonable to conclude from the limited data available that the value of the domestic product in 1958 was in the region of £L 50 million. It will certainly have risen further in 1959. 374 ANNEXES Agricultural and Livestock Production Agriculture and animal husbandry are two of the sectors of the Libyan economy where statistical information is particularly unrelia- ble. The mission made the following very tentative estimates of output in these two sectors in the agricultural year 1957/58: TABLE A.3 Agricultural Output in Libya (EL millions) Tripolitanid Cereals (excluding fodder crops) 1.2 Olives (mainly used for oil) 2.3 Fruit and nuts 2.1 Vegetables 1 .2 Other agricultural production 0.8 Animal products 2.7 Total (excluding fodder) 10.3 Cyrenaica Cereals (excluding fodder crops) 0.9 Olives, fruit and nuts 0.4 Other agricultural production 0.4 Animal products 1.2 Exports of live animals 0.8 Total (excluding fodder) 3.7 Fezzan Agricultural and livestock production 0.5 All Libya Gross value of agricultural output 14.5 Less input of fertilizers, machinery, seed, etc., say 2.0 Net value of agricultural output, say 12.5 The breakdown of the estimate shows the large elements of guess- work entering into the calculations. Estimation of livestock production in Libya is wildly hazardous, since there is huge uncertainty about the numbers of animals in existence at any given time. A rough check of numbers made by the agricultural departments in May each year has produced the following figures: ANNEX I 375 TABLE A.4 Livestock Numbers (In '000; May each year) 1955 1956 1957 1958 Tripolitania Sheep 429 503 574 7 631 Goats 436 469 573 631 Cattle 49 45 47 52 Camels 70 74 81 89 Cyrenaica Sheep 1,032 815 545 785 Goats 691 586 524 661 Cattle 86 60 33 59 Camels 76 76 76 83 These figures look high when compared with estimates for previous periods made by the Italian authorities before the war and by a Four- Power Commission after the war. The U.S. Embassy in Libya has com- piled estimates of maximum and minimum numbers of livestock in Libya as a whole during the period 1950-56, and these are as follows: Minimum Numbers Maximum Numbers Sheep 300,000 1,236,000 Goats 667,000 1,232,000 Cattle 50,000 96,000 Camels 93,500 197,000 Horses, mules and asses 59,500 95,000 Pigs 2,000 3,000 The area of uncertainty covers not only the numbers of animals, but also the production derived from any given number. Widely differing conversion factors have been used at various times in calculating the amounts of meat and milk consumed in Libya per head of livestock. The estimates used by the mission give a per capita consumption of 7-8 kilograms of meat a year in Cyrenaica and 8-9 kilograms a year in Tripolitania. For milk and milk products the corresponding figures are 70 kilograms a year in Cyrenaica and 50 kilograms a year in Tripoli- tania. 376 ANNEXES The other main livestock products in Libya are hides and skins, wool and hair, poultry, eggs and honey. A considerable proportion of these products is consumed by the producer, particularly in the case of the nomadic and semi-nomadic population. A large element of guess- work therefore inevitably enters into the calculations, since no detailed survey has been made of consumption patterns. Changes in stocks (inventories) of animals must be an important element in the Libyan national income. In drought years the number of animals brought to market may actually increase, and output esti- mates may be seriously misleading unless they take account of slaugh- terings and losses due to natural causes. This is not so important when it is simply a question of calculating output in a single year, as has been done here. But it makes a lot of difference in measuring changes from one year to another, and serious study should be given to the problem as national income statistics in Libya are developed. Industrial Output The official estimates of value added in Libyan industry (see Table A.1) were based on the urban census of production. A breakdown is given in Table A.5. TABLE A.5 Value Added in Manufacturing and Repairing, 1958 Industry £L '000 Percent Food 1,584 26 Beverages 459 8 Tobacco 889& 15 Textiles 214 4 Footwear and clothing 440 7 Wood products, furniture and fixtures 283 5 Printing, publishing and paper 232 4 Nonmetallic minerals (excluding petroleum) 174 3 Metal manufacture, machinery and appliances 229 4 Transport equipment (mostly repair)b 921 15 Miscellaneous 563 9 Total 5,988 100 a Includes the monopoly profit accruing to government. If this is excluded, value added in tobacco manufacture is only about £L 200,000. b Includes repair workshops operated by British and American forces in Libya. ANNEX II MONEY AND BANKING IN LIBYA THE NATIONAL BANK Background Prior to Independence, a Preparatory Currency Committee dealt with monetary matters. This committee, composed of representatives from Libya, France, Italy and the United Kingdom, signed a financial agreement in 1951, whereby the British Government undertook to provide 100 percent sterling backing for the initial issue of Libyan currency. Subsequently, the Libyan Currency Commission was estab- lished and started in March 1952, to issue Libyan pounds in place of Egyptian pounds in Cyrenaica, British Military Authority lire in Tripolitania and Algerian francs in the Fezzan. The Libyan pound is now legal tender in all these provinces. It is officially at par with sterling, and there is a fixed exchange rate with the Egyptian pound of 97½2 Egyptian piasters to the Libyan pound for settlements under a bilateral payments agreement. Exchange rates for other currencies are based on London quotations or are negotiated. In April 1955 a law was passed setting up the National Bank of Libya, and the Bank opened its doors in Tripoli in April 1956. Subse- quently, two more offices were opened, one in Sebha (April 1957) and the other in Benghazi (August 1957). Organization and Objectives The National Bank is organized along the lines of the Bank of England with an Issue Department and a Banking Department. It also conducts commercial banking business on a small scale. The authorized capital is £L I million, of which £L 700,000 has been subscribed and paid in by the Libyan Government. All or part of the remaining £L 300,000 may be offered for public subscription if the Board of the Bank and the federal government deem it appropriate. Although the Bank maintains only three offices altogether, both the Tripoli and the Benghazi branches are designated as "joint chief 377 378 ANNEXES offices." The Bank's objectives are "to regulate the issue of bank notes and coins, to keep reserves with a view to maintaining monetary sta- bility in Libya and the external value of the Libyan pound, to influ- ence the credit situation to the Kingdom's advantage and to act as banker to the Government and to the Provincial Administrations" (Article 6 of the National Bank Law). To achieve these aims, the Bank is in theory armed with the following powers: (a) manipulation of the discount rate; (b) open-market operations; and (c) prescription of com- pulsory deposits for commercial banks. In practice the National Bank has not been able to exert any appre- ciable influence on the monetary situation by any of these means. The discount rate, initially 4 percent, was raised to 5 percent in Octo- ber 1957, when inflationary pressures began to threaten monetary stability. Because of the excess liquidity of the commercial banks, however, they generally had no need to discount paper with the Na- tional Bank, and this instrument was thus rendered ineffective. The raising of the interest rate in these circumstances was merely a "signal" to the banking system that inflation actually had become a problem. In fact, only two private banks have had recourse, on a limited scale, to National Bank credit as a source of funds. Effective open-market opera- tions are also out of the question as there are no Libyan government securities. Even if the government decided to issue securities, the Na- tional Bank appears to be restricted by law to operating only in bills that have already been sold by the government to the market.1 The power of prescribing cash reserves to be held by the commer- cial banks over and above the 20 percent liquid reserve required by the Banking Law of 1958 is potentially a more effective method of restricting private bank lending to the public. However, according to the present law, the executive power in regard to this provision is con- ferred on the Minister of Finance. The Minister also has the authority to grant bank licenses and to consider applications from shareholders and/or depositors for examination of bank affairs, together with a number of other executive functions (Articles 4-7, 9, 10, 11 and 17 of the Banking Law). In all these matters he is required to consult the National Bank before taking action. A more fundamental reason why the National Bank is not in a position under the present circumstances to regulate the money supply independently lies in the existing currency reserve system. Following the provisions of the former Currency Commission Law, the National ' The relevant artide of the National Bank Law (Article 24 (viii)) is vague on this point, and the above interpretation is open to question. ANNEX II 379 Bank Law stipulates a cent-per-cent foreign reserve for the Libyan cur- rency. These foreign assets may consist of (a) sterling balances, (b) sterling Treasury Bills of the British Government, (c) sterling securi- ties of, or guaranteed by, the British Government, (d) securities issued or guaranteed by other governments and (e) foreign exchange balances other than pounds sterling. However, non-sterling assets (items (d) and (e)) may not exceed 25 percent of the assets of the Issue Department of the National Bank. This system is in effect an automatic sterling ex- change standard. Consequently, the volume of Libyan currency cannot be determined at the discretion of the National Bank at all, as the law suggests, but is instead automatically regulated by the public's prefer- ence for and its capacity to tender or hold approved foreign assets or Libyan pounds. The foreign exchange holdings of the National Bank of Libya are given in Table S.12 of the Statistical Appendix to the main report. THE COMMERCIAL BANKS Origin and Location All private commercial banks operating in Libya are branches of foreign banking institutions. Three of the head offices are in Italy, two in Great Britain, one in Egypt, one in Jordan and one in France. All these banks operate in Tripoli, and five have also opened offices in Benghazi; one British bank maintains offices in a number of towns along the coast. None of the private banks is represented in the Fezzan. However, the National Bank provides commercial banking facilities in Sebha. Financial Characteristics A comprehensive balance sheet for all private banks in Libya is reproduced in Table S.20 of the Statistical Appendix and shows the positions at the end of 1958 and 1959. Comparable returns for earlier periods are not available because it was only toward the end of 1958 that the National Bank began to collect systematic and detailed infor- mation on the financial operations of the commercial banks. The balance sheet figures immediately point to one basic charac- teristic of Libyan banking, namely the caution private banks observe in their operations. Total liquid assets at the end of 1958 aggregated 380 ANNEXES £L 3.1 million, of which 60 percent consisted of foreign currency re- serves mostly in the form of balances with head offices abroad. Only three banks have their own capital and reserves in Libya, amounting to slightly over £L 1 million. A second characteristic of private banking practice in Libya is a high degree of liquidity compared to deposits, pointing to a lack of suitable investment opportunities as well as to the cautious attitudes TABLE A.6 Analysis of Customers' Liabilities to Private Banks 1958 1959 Credits out- Credits out- standing at Percent- standing at Percent- year end age dis- year end age dis- (£L '000) tribution (£L '000) tribution Agriculture Livestock and agricultural bodies 1,015 12.1 1,047 9.7 Industries Food, drink, tobacco 313 3.7 489 4.5 Textiles and clothing 130 1.6 186 1.7 Soapandoils 135 1.5 116 1.1 Metal products and machinery 100 1.2 181 1.7 Stone, cement, bricks 72 0.9 87 0.8 Other 199 2.4 294 2.7 Construction 400 4.8 347 3.2 Wholesale Merchants 3,527 42.1 4,512 41.9 Retail Merchants 863 10.3 805 7.5 Motor Vehicles and Transport Services 785 9.4 1,481 13.8 Professional and Prikate Individuals 117 1.4 201 1.9 M1ortgages 194 2.3 167 1.6 Miscellaneousg 524 6.3 853 7.9 Total 8,374 100.0 10,766 100.0 aThis item includes small loans extended to municipalities, public utilities, wood and paper firms, chemical firms, hotels and restaurants, insurance companies and credit cooperative societies. SOURCE: National Bank of Libya. ANNEX II 381 of the managements. According to the Banking Law (Article 9 (i)), "every bank shall maintain at all times a reserve of cash or money on short call not exceeding ten days equal to not less than 20 percent of the deposit liabilities of the bank in Libya." The actual cash/deposit ratio in December 1958, however, stood at 30.5 percent and in Decem- ber 1959 at 35.9 percent. This seems to be an unusually high liquidity ratio. On the one hand, the banks find it difficult to extend more loans and advances to the public on account of the risks involved; on the other, there are no local government securities to provide an outlet for excess funds. The excess liquidity of the commercial banks and the lack of in- vestment opportunities also explain the absence of any efforts on the part of the banks to recruit additional local savings. Out of the £L 13.9 million of deposit liabilities of the banking system at the end of 1959, only about 14 percent represent balances on savings accounts. Small- scale bank saving is restricted to a few areas predominantly populated by foreigners. The bulk of the banks' deposits are temporary surplus funds, primarily accumulated by trading firms. Commercial Bank Credit Commercial banking in Libya is characterized by the predominance of short-term advances, usually for periods of 3-12 months. Renewal of credits, however, is possible, and it appears that the commercial banks are compelled to adopt this procedure quite frequently. In general, advances are given without any tangible security, a natural response to local conditions and in particular to the shortage of suitable assets to serve as collateral for bank credits. As a result of these factors, banks tend to confine their lending operations to relatively few sectors, repre- sented by a small number of customers who are well-known to the management. Table A.6 shows that the bulk of the loans are extended to the tertiary sectors of the economy (distributive activities and service in- dustries). The largest single item, credits to wholesale merchants, accounted for over 40 percent of total credit extension both in 1958 and 1959; practically all of these funds were used to finance imports and exports. Another sizeable amount was granted for the purchase of motor vehicles and other transport equipment (13.8 percent at the end of 1959), some of which went to private individuals. Nevertheless, di- rectly productive loans in the strict sense of the word were not negligi- ble. The agricultural sector's share at the end of 1959 was about 10 382 ANNEXES percent, construction accounted for 3.2 percent, and all industrial firms together received another 12½2 percent. Thus directly productive sectors probably took a share of close to one-quarter of all credits granted. The extent to which commercial banks have financed the purchase of dur- able consumers' goods is not known, but there are indications that this field of activity is becoming increasingly important, at least to some banks. For the time being, installment buying is restricted to Tripoli and Benghazi. Interest Rates The information available on interest charges is necessarily re- stricted to bank loans. The rates charged by the noninstitutional money lenders are not known, but they are presumably well above the rates charged by the banks. On the liabilities side of the balance sheet, current accounts are by and large noninterest-bearing deposits. Some banks, however, do allow interest on a limited number of accounts held by favored customers, presumably to prevent them from dealing with other banks. Rates on savings accounts vary from 1 percent to 4V2 percent, with 2½2 percent to 3V2 percent being the usual range. Whether a particular bank pays a rate nearer the minimum or the maximum again appears to depend on the customer and the amount deposited. The rates offered by the National Bank vary according to the category of deposit: 21/2 percent for 7 days, 3 percent for 30 days and 3V2 percent for 90 days and longer. Rates charged for secured loans generally extend from 6 percent to 9 percent, with 6½2 percent to 7½2 percent being the usual range. For unsecured advances, which represent the bulk of the credits, the rates appear to be only slightly higher (7 percent to 10 percent, but mostly around 7 percent). The narrow spread between secured and unsecured loans is surprising. But some banks seem to charge additional commis- sion fees on unsecured advances. The practice of charging special com- mission fees varies from bank to bank, and within one bank from cus- tomer to custonmer. Nevertheless, to the extent that extra fees are charged, they represent a higher effective interest rate. No rediscount rates are quoted by the commercial banks as the majority of bills are being held to maturity. The National Bank, on the other hand, charges a minimum rate of 5 percent, though this has never really been effective for the reasons mentioned above. ANNEX II 383 MONEY SUPPLY Table S.18 in the Statistical Appendix contains the detailed com- ponents of the money supply over the period 1956-58. The amount of sight deposits, as compared to currency outside banks, is unusually large. At the end of 1959, for instance, notes and coins held by the pub- lic aggregated almost £L 9 million, while sight deposits totaled more than twice that amount. It is, of course, true that the federal and provincial governments held balances with the National Bank of £L 9 million (which are included under the item "sight deposits"). But even if these holdings are deduced the volume of sight deposits exceeded that of currency in each of the past four years. In 1957 and 1958 the money supply (currency outside banks plus total sight deposits) increased by £L 2.5 million and £L 3.6 million respectively. The increase in 1957 was entirely due to a sharp expan- sion of government deposits, and there was a slight reduction in the volume of private money. In 1958, government deposits and private sight deposits both increased considerably. A large increase in money supply took place in 1959, reflecting the general rise in public expendi- tures and the increased activity of the oil companies. Total money supply, excluding government deposits, rose during the year by £L 4.2 million (28 percent). ANNEX III PROPOSAL FOR A FINANCE COMMISSION The mission has recommended that a statutory finance commission be set up by the Government of Libya for the purpose of making rec- ommendations on the allocation of finance between the federal govern- ment and the provinces. It is proposed to outline here briefly some tentative suggestions on the composition of such a commission, its procedures and methods of work. These suggestions might serve as general guidelines. The detailed functioning of a finance commission would have to be adapted to the circumstances and needs in Libya as deemed appropriate by the government. The allocation of resources between the federation and the prov- inces is a challenging problem. Both the federation and the provinces have responsibilities for administration and development and both of them derive their revenues from the same public; however, the prov- inces are rarely alike in population, revenue, resources and needs. In such a situation differences arise as to who should bear how much of the burden and how much should be retained or received by each unit for the needs of its own administration and development in the area of its own responsibility. An effective way of resolving such differences is by the establishment of grants commissions or finance commissions, as has been done in Australia and India, for example. Such commis- sions are composed of representatives of the federal and provincial governments, together with economic and other experts, and recom- mend to the federal government the size of the various allocations of available revenues. They determine the specific principles on which allocations should be made and base such principles on criteria justi- fiable on grounds of economy and equity. We suggest, therefore, that a similar effort should be made in Libya, and that such a commission should be set up as soon as possible. It should be reconvened at least every five years. The commission should be established on the initiative of the fed- eral government and should consist of a chairman and four members, of whom at least one should be conversant with the problems of finances in the provinces, one with knowledge and training in the field of eco- nomics and one with the rank and experience of a judge in the Supreme Court. It would also be desirable to have a representative of the Devel- 384 ANNEX III 385 opment Council-possibly its senior economist-as an ex-officio mem- ber. The chairman should be selected from among persons who have had wide experience in public affairs and command a wide measure of approval as between the federal and provincial governments. As the work of the commission concerns relations between the central govern- ment and provincial governments, it is essential that the federal gov- ernment as well as the provinces should have confidence in the person- nel of the commission. To this end, prior consultations between the governments concerned as to the acceptability of the members of the commission is desirable. The commission should be charged with the responsibility of mak- ing suggestions for grants-in-aid to provinces out of funds derived from (a) customs and excise duties, (b) income tax revenues (which we have recommended in future be raised by the federal government) and (c) the funds derived from financial agreements with the United Kingdom, the United States and other countries, insofar as these are not ear- marked for financing specific development projects. Once appointed, the commission should generally determine its own procedures of work, but in the discharge of its functions it should have the powers of a civil court so that it can summon and enforce attend- ance of witnesses and require the production of any documents rele- vant to its work. The commission should hold both public and private sessions, and summary records should be kept of all of its discussions. The federal and provincial governments should furnish the finance commission with detailed information regarding the financial situation, with a forecast of revenues and expenditures for a period of years and with a statement justifying those expenditures. At an early stage, the commission should issue a notification to the press inviting suggestions from interested members of the public, experts and organized bodies such as Chambers of Commerce, labor unions, banking or other organ- ized bodies which have an interest in the commission's work, and asking for their views and suggestions on the problems with which the com- mission is charged. This will enable the commission to collate and sift public opinion as widely as possible. The finance commission should visit the three provinces as well as the federal capital to have discussions with ministers and officials of the respective governments. Discussions should also be carried on with other interested persons such as the commissioners of income tax, the Auditor General and the Develop- ment Council staff. The finance commission should proceed on the assumption that, although the federal and provincial governments prepare their budgets on an annual cash basis, planned programs extending over a period of years require some degree of continuity in budget expenditures. The 386 ANNEXES commission would be primarily concerned with advising on the alloca- tion of funds for financing current expenditures, but in doing this it would need to take into account the distribution of capital expendi- tures. It should nornally be sufficient to appoint a finance commission once every five years, although in special circumstances the interval might be reduced-for example, if a sudden increase in oil revenues should take place. The records of each commission's work should be preserved, since they will provide a useful basis for the work of the succeeding commissions. The commission would have to be assisted by an appropriate staff of experts and administrative personnel and, at least in the first instance, it would be advisable to try to obtain from abroad for this purpose people who have had experience of similar work elsewhere. The commission should normnally deliver its report to the government as early as possible, but never later than a year after its appointment. A finance commission of this kind is designed to serve as an instru- ment for a thorough discussion of federal and provincial financial relations on a systematic and expert basis, with a view to working out compromises on important points of difference. The commission, in other words, should be useful in establishing principles that embody the largest measure of agreement and harmonize principles of finance with public attitudes and political considerations. For this reason, the commission should endeavor to produce a unanimous report incorpo- rating all necessary compromises on important issues under its purview and not leave a host of divergent views for the government to settle afterwards. So long as the commission undertakes its task with this objective in mind, the federal and provincial governments should accept such recommendations with as little change as possible. In making allocations of funds as between the various units of gov- ernment, the finance commission will have to bear in mind the needs of the federal government for defense and national development and the need to raise the less developed provinces to a level approaching the more developed ones by planning for a more rapid growth of their resources. In such a process, it is natural that the economically ad- vanced provinces will feel that they are not getting their fair share of the resources subject to allocation. It is precisely for this reason that finance commissions are set up, so that their recommendations may be framed with a view to fulfilling national requirements and serving the collective good of the country as a whole. A disposition on the part of all concerned to accept such a judicial and expert adjudication is essential to a successful management of a federal union. ANNEX IV MINERAL RESOURCES Except for remote occurrences of the oldest Archaen formations, which might be prolific in mineral deposits of the heavy and more valu- able minerals, such as gold, silver, copper and uranium, the geological constitution of Libya is not favorable for the occurrence of minerals of great economic importance. It appears that promise of the develop- ment of mineral resources in the near future may be more or less con- fined to industries which are related to nonmetallic minerals, such as gypsum, potash, phosphate and natron, which are associated with sedimentary formations. The desert conditions and difficulties of transportation militate against detailed exploration and successful exploitation of mineral deposits which may be beyond easy access to the coast. Such obstacles, however, do not apply to the petroleum companies, whose large finan- cial reserves enable them to take risks commensurate with the promise of greater returns. Exploration-in addition to the search for oil- will also provide much valuable information regarding the general geology of Libya. Emphasis should thus be placed on the necessity for close liaison with the petroleum companies, and immediate and con- tinuous recording and correlation of such data at a central point. We feel that it should not be a function of a government service to undertake detailed investigations of mineral deposits, such as the "proving" of reserves and their value. It is important, however, that preliminary work should be done, as in the case of the Fezzan iron deposits and the gypsum deposits near Jefren. Prospecting programs on such a scale are justified by the information which is thus to be gained regarding the structure of the deposits and the nature of their mineralization. At present, the following mineral resources are known to exist. Iron Deposits Hematitic iron deposits occur in the neighborhood of Brak in the Fezzan. The region is, however, devoid of facilities for modern mining exploration, including transportation and power. The iron deposits 387 388 ANNEXES occur in the Tournasian series of carboniferous age, composed of len- ticular shallow-water deposits of light-red and brown sandstone, green- ish-grey and brown strata and clay stone. Most prominent in the series are the massive hematitic structures which lie near the base. No igneous rocks occur in the neighborhood, but not far north of Brak there are elevated outcrops of a black basic rock, which may be related to the volcanic rocks of Gebel Soda, south of Hon. The basal beds of the series contain small amounts of petroliferous or asphaltic materials. The general dip of the formation is about one to two degrees south. The ore is oolitic, composed of minute oolites of chamoisite and hematite, and contaminated with sand in varying amounts. In places it resembles a highly ferruginous sandstone. Unoxidized portions contain abundant finely-disseminated pyrite. It is believed that considerable petrographic research on thin and polished sections of the ore is required to deter- mine definitely the composition of the ore for the purpose of under- standing the metallurgical treatment which will be required. However, it is definitely a high-silica ore, which is costly to treat on account of the abnormal consumption of coke and flux in the blast furnaces. Other factors, which tend to lower the value of the ore, are the increased cost of freight due to impurities, and the large amount of slag to be re- moved, which greatly reduces the output of the furnaces. The phos- phorous content of the ore, although higher than other African ores, is considered to be reasonable. Exploratory drilling operations were completed in 1957, and infor- mation gained from 42 holes, for a total length of 950 meters, and over a distance of 82 kilometers. The drill holes have been carefully logged, and more than 400 samples were analyzed in the LAJS chemical labora- tory. However, it is still not possible to estimate the ore reserves. The appropriate investigations required to prove reserves as a prelude to mining development would require drilling on a regular pattern as well as detailed topographic mapping, and this should only be done if an industrial corporation can be found which would be interested in exploiting the deposits. The iron deposits are not comparable in grade and extent with those of North and South America or Sweden, nor with other deposits in North Africa, as in Algeria, Morocco and Tunisia, where ores contain more than 50 percent iron. It is apparent that they are comparable in grade with similar deposits in Western Europe. The latter, however, are usually situated in centers of large population, where such facilities as abundant labor, power and easy transportation are available. Circumstances for exploitation in the Fezzan are much less favorable. ANNEX IV 389 The value of iron may range from 5-10 U.S. cents per unit of iron (22.4 lbs.) for low-grade ores to 20-30 U.S. cents for high-grade ores or concentrates. Libyan ore, if its grade could be enhanced by benefication from 45 percent to 60 percent ferrous content, might be able to fetch from $6.75 to $9.35 per ton at the port of shipment. However, even if a black-top road is constructed to link the deposits with the coast, the cost of road transport from Brak to Tripoli alone would probably work out at around $20 per ton, and this would rule out any possibility of the ore finding a market abroad. In countries where there is the desire for a local iron and steel industry, but which lack a supply of coking coal, there is an increasing interest in "direct reduction" processes, using natural gas as fuel for the treatment of low-grade ores containing 25 percent to 45 percent iron. However, this is a process requiring much larger initial capital investment than could possibly be justified in Libya at the present time. For example, the capital cost of a plant to reduce 2,200 tons of ore per day is estimated at $23 million. Gypsum Deposits of gypsum occur in many parts of Tripolitania, and those which appear to be of greatest importance occur near Bir Ghnem on the Jefren road, 95 kilometers from Tripoli. The deposits are inter- calated with shale and limestone strata of Jurassic age and, of the 100 meters of gypsiferous formation measured, 5 meters to 10 meters of massive gypsum occur near the base. Many outcrops of gypsum occur in the wadis in the area and in deep cuts at the foot of the Gebel, indi- cating the extensive and impressive nature of the deposits. A program of exploration by core drilling is being carried out under the auspices of LARC. Analyses show that the deposits would yield gypsum of high quality. Beds of gypsum (CaSO4.2H20) occur in the same geological formation with beds of anhydrate (CaSO4). The latter usually occur below the gypsum and constitute the original rock formation. Near the surface, through contact with atmospheric influences, water has combined with the anhydrate to form gypsum. The principal use of gypsum is in the building trades. By calcining at a temperature of 7000F., plaster of paris is produced, which is employed in the manufacture of wallboard, lathes and molding. Care must be taken in heat control in the calcining (dehydration) of gypsum in order to obtain an evenly calcined product. Gypsum (uncalcined) is also used as a retarder for portland cement. High-grade natural gyp- 390 ANNEXES sum may be mixed with anhydrate in the proportion of 75:25. It is employed in the manufacture of ammonium sulfate, which is a valu- able fertilizer. and for making sulfuric acid, which gives sulfur as a by-product. It is recommended that publicity be given to the existence of these important deposits, in order to attract either foreign or local capital. We have suggested elsewhere in this report investigating the use of gypsum for construction of low-cost housing, and if this proves feasible, an assured market might be provided for about 1,000 tons of gypsum a year. This would provide a stimulus to the exploitation of gypsum deposits by private enterprise and capital assistance could be extended by the government under the industrial credit scheme recommended in Chapter 10. Potash (Carnallite) Potash deposits at Marada consist of carnallite, which is a hydrous combination of potassium chloride (KCI) and magnesium chloride (MgCl2) contaminated by admixture of ordinary salt (sodium chloride) in varying amounts. The Marada area lies in a topographic depression, of which the northern part is a desolate salt marsh. The oasis itself is occupied by some 1,000 inhabitants, and contains many fresh-water springs; potable water may also be obtained by drilling wells at the southern edge of the salt marsh. The geological formations of the region are of Lower Miocene and Oligocene ages, and the potash de- posits are believed to derive from saline residues presumably left by a receding Miocene sea. An attempt was made by the Italians to estimate the reserves of potassium salts, and preliminary results of drilling indicate the exist- ence of a stratum below the marsh bed, eight meters thick, containing chlorides and sulfates of potash and magnesium. On this basis, incon- clusive estimates were made pointing to the existence of 1,600,000 tons of potassium salts containing 40 percent to 42 percent K20, together with 7,500,000 tons of magnesium chloride. During the investigations by the Italians it was found that, over an area of some 15 square kilometers, a relatively high concentration of potassium salts exists; and a system of exploitation was established, comprising 20,000 pits, two meters square and 10 centimeters deep, into which the brine seeped from the sandy soil. Within a week, under normal summer conditions, the pits would contain about 80 kilograms of a mixture of salts consisting of magnesium sulfate, magnesium ANNEX IV 391 chloride, sodium chloride and potassium chloride. Labor was abun- dant and cheap. Of the 700 laborers who were employed 500 were Libyan prisoners. A refining process of resolution and fractional crystal- lization produced a potash salt containing 40 percent to 50 percent K20. During 1939, when operations by the Italians were begun, 21,000 tons, containing 40-42 percent K20 were produced and said to have been exported to Italy. Operations were terminated by the war, and insignificant amounts of potash were subsequently sent to Italy. Com- munications had been established by road from Marada to el Ageila, 125 kilometers over desert and thence by coastal highway to a small harbor 43 kilometers west of el Ageila. The shipping facilities there were destroyed during the war, and little remains of the road across the desert, which is exceptionally rough and partially covered with dune sand. The cost of transport of refined KCI from Marada to the coast is estimated to be £L 3.75 per ton ($10.50), and from there to Tripoli (by road) £L 3.5 ($9.80). Total transport cost would be $20.30 per ton. However, this cost might be appreciably reduced if improved road communications are developed to the oilfield south of Marada. The cost of potash is relatively small in proportion to the total cost of a mixed fertilizer. The grade or purity of potash as fertilizer is not vitally important because of its admixture with nitrates and phos- phates and other plant foods. However, pure potash has the advantage of the saving on freight charges. Potash is used principally as a component of a mixed fertilizer, and in the United States 90 percent of the production is thus employed. In Tripolitania it is used for such crops as potatoes, tomatoes, ground- nuts, vegetables and tobacco. Experiments by the FAO in Libya, on both dry land and irrigated farns of wheat and barley, suggest that little, if any, benefit results from such use. It is estimated that about 2,000 tons of potash might be consumed annually as fertilizer in Libya. A small amount of potash is used in the glass and chemical industries- also in the manufacture of liquid and soft soaps, dyes, disinfectants and matches. In 1938, a concession was granted to the Societa Anonima Indus- trial Libica, for 50 years, covering 700 hectares. No work has been done since 1941, nor has any application been made for the restoration of the concession. We consider the data which has already been ob- tained is sufficient, by way of basic information, to permit foreign interests to determine whether or not the deposits may have impor- 392 ANNEXES tance to the industry. Publicity in trade journals would direct atten- tion to the existence of the potash deposits, the future of which depends on exports rather than production for domestic consumption. Some publicity has been given in trade journals to the existence of the potash deposits, but only marginal interest has been evoked. It is possible, nevertheless, that the proximity of the recent petro- leum discoveries might stimulate renewed interest. A nearby potential source of natural gas enhances the prospects for the Marada deposits. Concentration of the salts through solar energy could now be supple- mented by a process of evaporation by fuel, and could be continuous throughout the year. It appears doubtful if such operations could be performed at the coast because of the problems connected with the pumping of solutions through pipelines, the interiors of which would soon become caked with salt liberated from solution. Any plan of operations would thus have to envisage the bulk transportation of the potash products to the coast from the Marada deposits. The salt flats (sebchas) of Posida, on the coast 145 kilometers west of Tripoli near the harbor of Zuara, are a possible source of potash. Deposits consist of a thin layer of evaporites 10 centimeters to 20 centi- meters thick, which has been tested in 19 holes. The analysis showed that the potassium chloride (KCI) content was between 5-10 percent. Samples of the brine gave 0.5 percent KCI, 8-9 percent MgCl, and a maximum of 35 percent NaC1. The cool and humid climate along the coast is not conducive to excessive evaporation and concentration of the saline content of percolating marine waters, which may explain the low concentration of potash and other valuable salts in the sebchas. However, there are indications of the presence of an appreciable amount of potassium and magnesium in the soil underlying the de- posits. The value of these deposits as a source of potash is currently being determined by a USOM investigation. If potash in sufficient amounts to satisfy domestic demands can be produced economically, it would appear that the Pisida deposits would have an advantage over the Marada deposits as a source of supply. The Idris deposits consist of sporadic sebchas scattered over an area of approximately 20 square kilometers, about 150 kilometers west of Brak in the Fezzan. The area is devoid of transportation facilities, which would confine distribution of the potash to local centers. Rain- water flowing over the Devonian rocks has dissolved their saline con- stituents, which have been concentrated in the lower parts of the closed depression. The crusts, resulting from evaporation, are relatively rich in potassium. Investigation, by means of 14 pits excavated below the ANNEX IV 393 water table into which the brine was allowed to seep and evaporate, has revealed that the saline crusts contain about 3.1 percent potassium, which is equivalent to about 6 percent potassium chloride (KCl). Ex- periments at Sidi Mesri laboratory indicate that fractional distillation will yield a high-potassium product. The desert climate is favorable for concentration of the salts. Alum Small alum (aluminum sulfate) deposits occur in the Fezzan near Serdeles in small evaporite basins. The salt is derived from the neigh- boring Devonian sandstones and forms a crust on the sebchas after evap- oration of the saline waters. Production is in small quantities and is shipped to Sebha and Tripoli where it is used in the tanning industry. Natron In the Fezzan, east of Ubari, there are several small saline lakes from which natron crystals are harvested during the hot season, when the degree of evaporation is highest. The best quality comes from Man- tan (Trona), and other localities are Fredga and Nashnush. The chem- ical composition of the salt is Na2CO3; 10H20, or sodium carbonate plus 10 water-of-crystallization. It is exported to Sebha by camel under the supervision of the provincial government. Production is about 200 tons per year. In 1957, 66 tons were sold for £L 12,234. It is used for making snuff, cosmetics and in the glass industry. Celestite (Strontium Sulfate) In the southwestern corner of Concession 59 of the Oasis Oil Com- pany in the el Haderiat area, celestite occurs at the surface. It occurs in a bright yellow marly limestone bed of Eocene (Tertiary) age as crystal masses or clusters of crystals in geodes, irregularly distributed throughout the parent rock. It has a bluish or smoky tinge and is trans- parent. It is believed to be associated with igneous basalt flows and "plugs" which lie to the west and south west of Concession 59. The area, over which crystals of celestite are abundant, is about three kilometers long and 500 meters wide. Celestite is employed in the man- ufacture of strontium nitrate for pyrotechnics, particularly for fire- works and tracer bullets. Strontium salts are also used in the recovery of sugar in beet-sugar refining and in medical preparations. Because 394 ANNEXES of its high specific gravity (3.89) it may possibly have a local use in oil-drilling operations, instead of barite, in the preparation of "heavy mud." Strontium minerals are, however, numerous and widespread throughout the world, and little or no export trade could be expected. Cement The principal raw materials used in the manufacture of portland cement are limestone and clay or shale, the latter to supply alumina and silica. The ideal material is an argillaceous (clayey) limestone (cement rock) which combines the essential ingredients, and may be obtained in a single mining operation. The limestone must be relatively pure, containing not more than five percent of magnesia. Gypsum is added, in the proportion of 9 to 12 pounds per barrel, as a retarder to control the setting of the cement. In Libya, where limestone formations are abundant, it is likely that good limestone will be readily available in many localities. The occurrence of clay or argillaceous shale, however, is believed to be rare, and has been reported in few instances. One such occurrence of what is believed to be a good combination of clay and limestone is in Tripoli- tania, about four kilometers west of Homs, north of the coastal high- way in the hills called Ras el Mergeb and Ras el Marhunia. Another occurrence of material suitable for cement is in Cyrenaica on the coast south of Barce, and occurrences have also been reported near Benghazi. The position with regard to the investigation of these various deposits is discussed in Chapter 9. Building Stone Limestone and marl beds have wide distribution in Libya and con- stitute convenient local sources of supply of building material in most parts of the northern regions. AWVhere limestone is absent, substitution may usually be made with sandstone. In Tripolitania the Muschelkalk limestone at Azizia has been used extensively as road metal and for other purposes. Softer, less compact limestone (marl), which is easily quarried and shaped, is extensively used in many localities. In Cyre- naica, the middle Eocene formation contains fine limestone beds which provided material for ancient monuments at Cyrene. ANNEX IV 395 Other Minerals Other minerals also occur in various parts of Libya, but in negligi- ble quantities without economic significance. Manganese, for example, is to be found in small quantities at Ulad Mahmud, near Nalut, in the Wadi Ubari and in the Shatti Valley. Phosphate is also found, but insignificantly concentrated, in the Wadi Sofeggin, east of Beni Ulid. Small amounts of sulfur are to be found in the Sirte desert. Low-grade lignite is found in scattered locations-in the regions of Giosh-Sheksut and Chicla at the foot of the Gebel, in the Cussabat region and near Ubari, in the Wadi Ajal and near Ghat in the Fezzan-but the amounts are considered negligible. The general geography, topography and geological structures of Libya suggest the possibility that bauxite, platinum, diamonds and uranium might also be found in the country, although no such deposits have been discovered to date. Once the federal Department of Geology and Hydrology has been established and further information on the geology of the country has been obtained, an investigatory search for these minerals could be considered. ANNEX V GEOLOGY AND HYDROLOGY Described briefly, the geological formation of Libya is sedimentary. The only exceptions are the large eruptive mountain mass of Gebel Soda, situated in the desert about half-way between the sea and Sebha in the Fezzan, and a few scattered eruptive dikes. Cyrenaica is largely composed of fractured and fissured calcarious rock systems of the Tertiary Period, and the most pronounced geologi- cal features there are the two great escarpments of the Gebel Akhdar which run from south-west to north-east. These escarpments divide most of the central part of Cyrenaica into four zones parallel with the coast: the coastal plain below the first escarpment, the plateau between the first and second escarpments (250 to 550 meters above sea level), the plateau above the second escarpment (400 to 600 meters above sea level), and the southern desert slopes of the Gebel. To the west of the Gebel toward Sirte and to the east toward the Egyptian border, desert and semi-desert conditions obtain, but on the coastal zone and plateaus on the top of the two escarpments preponderately heavy clay soils (terra rossa) are prevalent. Although the whole of the Gebel may be classed as fissured and porous limestones, there exist some impervious marly beds giving rise to springs which issue at various levels along the escarpments, and give progressively higher yields from west to east.' Hydrologically, the central or Gebel part of Cyrenaica is remark- ably complex, and although extensive exploratory work has been done in the past, much still remains to be done before its potential water resources are fully known. With the relatively high rainfall of the Gebel country and the porous nature of the limestone rock, the infiltration to ground water storage should be high, but so far it has been comparatively little used for agriculture. This is chiefly because the planes of water movement are irregular and difficult to define and are usually inaccessibly located. On the southern slopes of the Gebel and in the desert to the east, south and west, the water-bearing strata are seldom accessible, while I The Hydrology of Cyrenaica, Dr. Marco Marchetti, Italian Colonial Agricultural Institute, Florence, 1938. 396 ANNEX V 397 the wells are often of poor yielding capacity and the water from them is often highly saline. These conditions, combined with low rainfall, make settled agriculture impossible except in the wadi bottoms and in oases. In Tripolitania, the Gebel Nefusa and the formations to the south are sedimentary types of the Secondary Period. The Gebel escarpment is denuded and exposed to severe erosion. The few springs there and on the southern slopes are small and the wells yield meager supplies. The western coastal plain between the Gebel and the sea consists of water-saturated, consolidated and unconsolidated sedimentary for- mations, dipping gently seawards. The phreatic water table is relatively near the surface along the sea coast, but it may be 60 meters below the surface at the foot of the Gebel. Below this are artesian aquifers, the piezometric height of which is generally below ground level on the Gefara, but near the coast, where the land is lowest, the piezometric surface is above land surface and the wells will flow. The Fezzan occupies a large erosional basin which is underlain by a great thickness of sedimentary rocks, ranging in age from Cambrian to Quaternary, and which lie on gneisses and crystalline schists of the pre-Cambrian age. These sedimentary rocks make a large, nearly circular, basin forming a great artesian reservoir, the center of which may lie to the south of Murzuk. Recharge into the aquifers is from rare precipitation falling on the upturned edges of the strata which form the higher elevations of the region and generally make the perimeter of the basin. The areas of recharge are extensive and a large proportion of the rainfall is absorbed and moves downward into the underlying sandstone. The only dependable source of water in the Fezzan is the underground supplies in the unconsolidated alluvial de- posits and the artesian water in the deeper lying consolidated aquifers.2 2 A Reconnaissance Report on the Geology and Hydrology of the Western Part of the Province of Fezzan, H. A. Whitcomb, U. S. Department of the Interior, Geo- logical Survey, Washington, 1957. ANNEX VI PROPOSALS FOR A WATER LAW After a study of various Moslem law codes and the Italian water law for Libya' and after discussion with officials concerned with the use of water in Libya, the mission concludes that none of the previous laws will operate satisfactorily under the conditions now pertaining in those parts of the country where fixed agriculture has been or is likely to be developed. The mission therefore recommends that the government should take the actions outlined below in order to control and develop the use of water. An Interim Law Until a Libyan federal water law be drafted and passed, an interim law, based on the Italian water law for Libya of 1913 and the subse- quent supplementary edicts, should be enacted by the federal govern- ment as the present water law of the country. This interim law should then be operated on a provincial level to control the use of water in certain specified areas where overuse, wrongful use and wasteful use is occurring. The two basic principles of the Italian law are that all water in the ground or flowing from springs or in streams is the property of Libya and that the use of this water must be sanctioned by the govern- ment. The mission advises that the interim water law should contain the following clauses: 1. Reasons and Objects. The water resources of Libya are limited and their full exploitation, but without overexploitation, is necessary for the prosperity of the State. The object of the law is to ensure that the use of water drawn from underground sources, springs, streams, wells and reservoirs is controlled in specified zones by the provincial governments acting through 1 Water Laws in Moslem Countries, FAO Paper No. 43, Rome, 1954. Water Con- trol and Legislation in Ethiopia, FA0, Report No. 550, Rome, 1956. Emergency Water Law in Libya, J. L. M. Solignac, FAO, /57/7/5911, Rome, 1957. Italian Royal Decrees: No. 87 of February 6, 1913; No. 2433 of July 29, 1928; No. 374 of March 13, 1930; No. 1755 of April 3, 1937. 398 ANNEX VI 399 provincial water control boards so as to ensure full and equitable use of the resources available in these zones. 2. Definitions. These will include federal government, provincial government, provincial water control board, licensing author- ities, authorized officers, water resources, water (underground water, springs, streams, well water), well and spring fittings (water pumps, pump motors, windmills), access to water, specified zones, registers, licenses. 3. Ownership of TVater. All underground water, all water derived from springs, streams, reservoirs and wells shall belong to the State. 4. Enabling Clauses. (a) The enforcement of the law will rest with the provincial governments acting through their agents, the provincial water control boards and the authorized officers of the boards. (b) The provincial water control boards shall be legally con- stituted boards having powers to authorize and refuse to au- thorize the uses of water. These powers shall be valid only within the specified zones. 5. Rules and Regulations. The provincial governments shall sub- mit to the federal government for approval, drafts of such rules and regulations as are necessary to enforce the law. If the federal government approves these rules and regulations, they shall be enforced by the boards with the full authority of the law. These rules and regulations shall authorize license fees, lay down pro- cedures for prosecuting offenders against the law in the provin- cial law courts, fines, penalties, etc. They shall lay down the procedures for the appointment of members of the board and the appointment of chairman and secretary, board meeting procedure, quorum, keeping of registers, issue of licenses, court procedure, financial procedure, etc. 6. Specified Zones. The federal government shall approve from time to time an application submitted through the provincial governments for the establishment of specified zones and the law shall be operative only within these zones. The federal gov- ernment shall take cognizance of the objections of interested parties when considering these provincial applications, and the applications will be given due publicity in the press and else- where for a certified period before being approved or otherwise. The boundaries of the proposed specified zones will be clearly defined in the applications. 400 ANNEXES 7. Use of Water. (a) No water may be drawn from underground sources, springs, streams, wells or reservoirs within the specified zones without the consent of the board. (b) All present users of water in the specified zones must register a claim with the board to continue to enjoy this use. The board shall confirm this use in full or in part or may refuse to confirm it. There shall be a right of appeal against any de- cision of the board in respect of confirmation of claims to en- joyment of existing water rights. (c) All claims confirmed in full and in part shall be registered and licensed. The registers and licenses will state the ownership of the claim, the quantity of water which may be used, the method and place of extraction of the water. (d) All further use of water must be authorized by the board to whom an application for a license to use water must be sub- mitted. This shall apply to existing licensed users of water wish- ing to increase the quantity of water beyond the amount stated in their license. The applications for license to use water shall state the quantity required, the place and method of extraction and all other information required by the board. The board may approve any application in full or in part or may refuse it. There shall be a right of appeal to all decisions of the board in respect of applications to use water. 8. Inspection. The board's authorized officers shall have powers of inspection of wells and springs, well and spring fittings on pri- vately and publicly owned land in the specified zones. The in- spections may be made without notice by authorized officers producing a written authority from the board to do so. A New Federal Law The proposed new Libyan federal water law, while retaining the two basic principles of the Italian water law described above, should be an enabling law, and the application of the law should be entrusted to provincial water control boards, set up by the provincial govern- ments, with powers of enforcement under rules and regulations drafted by the provincial governments but approved by the federal government. There should be a right of appeal to the law courts against any decision of the provincial control boards under the water law. An ad hoc committee should be appointed by the federal govern- ANNEX VI 401 ment to draft the new federal water law; the committee chairman should be a law officer of the Ministry of Justice and the members of the committee should be agricultural and engineering representatives of the provincial governments, the UN agencies, the USOM and the federal Ministry of Agriculture. A senior technical officer of the De- partment of Geology and Hydrology should be secretary to the com- mittee. A standing provincial committee should also be established in each of the provinces to operate the interim water law and to prepare drafts of the rules and regulations for subsequent operation of the new fed- eral water law. The standing provincial committees should be under the chairmanship of the Director of Public Works and have official and unofficial members representing agricultural and forestry interests; an officer from the Water Resources Branch should be secretary. The mis- sion envisages that the standing provincial committees will be the forerunners of the provincial water control boards to be established when the federal water law is promulgated. Administration of the Law The mission recommends that inter alia the provincial control boards be assigned the duties enumerated below and that they be re- quired to execute these duties through the provincial Water Resources Branches: 1. The control boards, being established by law, should have pow- ers to authorize or refuse to authorize the use of water. They should also have powers to make inspections and to promulgate prosecutions in court for infringements of the water law. 2. They should have powers to ensure, where necessary, the full utilization of all water resources, irrespective of ownership or usage claims. This should include control of the distribution of water and the siting of canals and drains. 3. They should have powers to specify zones where further exploita- tion of water resources will be prohibited and to demand the registry of all existing claims within these zones. 4. They should have powers to regulate the siting of wells, and the water quantities drawn from wells, within specified areas. 5. They should have licensing authority and should charge fees for licensing and inspecting within the specified zones. 6. They should keep minutes of their board meetings and submit 402 ANNEXES copies to the Minister of Agriculture, keep records of their in- spections and prosecutions under the water law, and keep licens- ing registers. The Italian law permitted the licensing of applications for the use of water, but doubt has been expressed on whether it gave power to control the quantity of water taken by existing users. The proposed interim law and new federal law should be drafted to ensure that the power to control water quantities is given to the provincial water con- trol boards, but subject to the right to appeal from their decisions. ANNEX VII ADMINISTRATION AND COSTS OF WATER RESOURCES DEVELOPMENT THE FEDERAL DEPARTMENT OF GEOLOGY AND HYDROLOGY The federal department would be organized as an investigational research and advisory unit. Its basic duties would be to carry on the geological and hydrological studies now being made by the agencies, to obtain the detailed information required for application of the proposed water law and to advise the provincial governments on the location and dimensions of the ground water resources. Much of the time of the technical staff would have to be spent in the field. Adequate provision should therefore be allowed in the estimate for transport, equipment and field allowances. The library and the laboratory are integral parts of the depart- ment. In the library would be filed the records, reports and books con- cerning the work done previously in this field; where necessary, these would be translated. Records of all current field work would be sent to the library for study and filing. Text books and current literature on geology and hydrology should be available in the library. The labora- tory is required for the analysis of mineral samples, including water. Provision has been made in the estimates below for staffing, equipping and maintaining the department's office, library and laboratory, but no provision has been made for a building to house them. It has been assumed that suitable accommodation will be available in either Tripoli or Benghazi for the department and that the building main- tenance will be done by the P.W.D. The exploratory drilling which the department would require would be carried out by the provincial Water Resources Branches and provision has been made to reimburse the provincial governments for expenses incurred on this work. Summary Budget (1960/61 to 1964/65) (EL) Staff (at £L 20,000 annually) 100,000 Recurrent charges (at £L 54,000 annually) 270,000 Plant and equipment (nonrecurrent) t5,000 Federal total 385,000 403 404 ANNEXES PROVINCIAL WATER RESOURCES BRANCHES Cyrenaica The Cyrenaican estimates give details for staffing and financing adequate to undertake annually the construction and rehabilitation of 16 wells, 5 irrigation systems, 200 cisterns, 20 kilometers of terracing and an unspecified number of dikes across wadis. The well estimate is based on wells being provided with an average depth of 100 meters and 8 inches average casing diameter. It is assumed that the P.W.D. or Nazirate of Agriculture in Benghazi will provide office and store accommodation and workshop facilities. These estimates are based on a larger program of routine work being undertaken there than in Tripolitania where the water resources are much better developed than in Cyrenaica. A sum of EL 5,000 has been included to finance expert hydraulic study and planning required to assist the preparation of specific schemes for such unused resources as Ain Mara and the Ain Zeiana-el Coefia springs complex. Summary Budget (1960/61 to 1964/65) (£L) Staff: Headquarters (at £L 8,000 annually) 40,000 Drilling staff (at £L 10,000 annually) 50,000 Water resources development staff (at £L 7,000 annually) 35,000 125,000 Recurrent charges (at £L 45,000 annually) 225,000 Plant and equipment (nonrecurrent) 100,000 Capital works (at £L 266,000 annually) 1,330,000 Cyrenaica Branch Total 1,780,000 Tripolitania The Tripolitanian estimates are based on the staff and finance necessary to expand the existing well boring and irrigation branches of the Nazirate of Agriculture into a Water Resources Branch capable of undertaking the continuation of the program of work now under- taken by the Nazirate of Agriculture and by the aid agencies. The pro- ANNEX VII 405 gram envisaged includes funds for cistern repairs, terracing and diking on a self-help basis, for the exploitation of the unused water resources of the province, such as the unused artesian wells at Crispi near Misurata, and for the Wadi Megenin flood mitigation scheme. The first stage of the Wadi Megenin scheme, costing £L 300,000, appears as a separate financial item and is discussed separately. A sum of £L 10,000 has been included to finance studies of utilization of flows from the wadis between Tripoli and Homs. Staff for control of water use in coastal areas and the Tripoli Quadrangle has been provided. It is as- sumed that office, store and workshop facilities will be provided and maintained by the Nazirate of Agriculture, and that the Nazirate will take over the technicians and drilling equipment at present employed by the aid agencies. Summary Budget (1960/61 to 1964/65) (.L) Staff: Headquarters (at £L 8,000 annually) 40,000 Drilling staff (at £L 10,000 annually) 50,000 Water resources development staff (at £L 7,000 annually) 35,000 125,000 Recurrent charges (at £L 35,000 annually) 175,000 Plant and equipment (nonrecurrent) 60,000 Capital works (at £L 166,000 annually) 830,000 Tripolitania Branch Total 1,190,000 The Fezzan The Fezzan estimates are based on the staff and finance necessary to conserve, control and develop artesian water resources, to finance a self-help program of repairs and improvement of wells and to imple- ment the mission's general agricultural recommendations for the Fez- zan. It is presumed that office, store and workshop facilities will be provided by the P.W.D. or Nazirate of Agriculture, and that the drill- ing rigs and equipment of the agencies will be handed over in due course to the Water Resources Branch. The Libyan technicians trained by the agencies in ground water exploration and development should be taken over as required by the branch. Staff for enforcing rules and regulations under the water law has been provided for. 406 ANNEXES Summary Budget (1960/61 to 1964/65) (£L) Staff: Headquarters (at £L 3,500 annually) 17,500 Drilling staff (at £L 5,000 annually) 25,000 Water resources development staff (at £L 2,500 annually) 12,500 55,000 Recurnrent charges (at £L 20,000 annually) 100,000 Plant and equipment (nonrecurrent) 5,000 Capital works (at £L 82,000 annually) 410,000 Fezzan Branch Total 570,000 WADI MEGENIN FLOOD MITIGATION PROJECT-FIRST STAGE Capital Works (£L) Movement of 200 families from Wadi Huelfa Catchment to irri- gated resettlement area below Ras M'daur Dam with provision of irrigation works and low-cost housing accommodation. (i) Movement and resettlement, including housing, school, wells and access roads 150,000 (ii) Irrigation works for 200 families on 2,000 hectares of land. 25,000 Execution of soil and water conservancy works, terracing, contour ditching, retaining walls, check dams, dikes, etc. 60,000 Road improvement works in the vicinity of Tripoli to prevent flood damage and interruption of traffic 25,000 Improvement to the flood channel of Wadi Megenin in the neighborhood of Tripoli to ensure uninterrupted flow to the sea of flood water reaching the city. 25,000 Contingencies (5 percent) 15,000 Total for five years 300,000 Annually Recurrent Maintenance Charges Maintenance of Wadi Huelfa Forest Reserve 2,000 Maintenance of flood channel around Tripoli 2,500 Maintenance of flood water diversion schemes 15,000 Contingenci