Abstract
The three months to the end of December 2008 brought a number of issues
relevant to the Libyan defence
industry to the fore. One is Libya' s
current membership of the UN Security Council, which should allow
it to
play a leading role among Arab and African states in diplomatic efforts to
block the arrest and trial of
Sudan' s president, Omar al-Bashir. The
International Criminal Court (ICC)' s chief prosecutor, Luis
Moreno-Ocampo,
has called on judges to issue a warrant for the arrest of al-Bashir, who is
accused of
personally ordering genocide and other war crimes. However, the
Arab League and the African Union
(AU) have both called for the case to be
suspended, arguing that it could hinder ongoing efforts to achieve
a
negotiated peace in Darfur.
Another key theme is that the Libyan defence
industry is practically non-existent, and what does survive
is almost
entirely state owned. Multinational involvement has been legalised only
relatively recently, with
the lifting of the UN and EU arms embargoes in
September 2003 and October 2004 respectively, and
foreign companies are
now beginning to penetrate the market. The authorities in Tripoli have been
in
talks with several European defence companies, eager to establish
themselves in what should become a
significant market, now that the arms
sales restrictions have been lifted. As larger foreign companies
move into
Libya, its domestic defence sector is likely to experience a large expansion.
Libya’s extensive
array of military equipment is in desperate need
of modernisation. Precise details of the modernisation
path to be taken
are not yet known.
The prospects for Libya’s defence industry look
reasonably good. Defence expenditure was estimated to
remain at about
US$670mn in 2007, and is forecast to rise to some US$730mn by 2010, as the
defence
industry opens to foreign investors and new technology and
hardware becomes available to the country.
The signing of new defence
contracts and the trading of Libya’s valuable oil reserves will provide
further
funds for military expenditure. Import figures will rise
substantially over the coming years, as Libya
updates and replaces its
ageing Soviet equipment.
For the time being, we continue to expect that
the Libyan government will increase defence spending by
5% annually, in
real terms, over the coming years. Absolute increases will depend in part on
how the
country’s economy fares in the face of the global financial
crisis. Thus far, the economy has avoided
recession, but our oil price
forecast for 2009 at US$75.00/bbl implies a significant but not disastrous
downturn for the Libyan economy.
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