Insecurity Could Derail Transition

The 200-member GNC, an interim legislative body that convened following elections in July 2012, formally took the reins of government from the Transitional National Council in August. Mohammed al-Magariaf was elected president of the GNC, and will serve as head of state through the process of drafting a new constitution and holding fresh elections sometime in early 2014. Mustafa Abushagur, a veteran political figure who reputedly has ties to Libya’s Muslim Brotherhoods, narrowly defeated Mahmoud Jibril, a former rebel and leader of the mainly secular NFA bloc, in a parliamentary vote to choose a prime minister in mid-September.

Each of these events marks an important advance on the road to democracy. However, both the July voting and the election of Abushagur were accompanied by controversies that highlight the presence of multiple threats to political stability, including regional tensions, ideological differences, and a general state of insecurity, all of which pose obstacles to forming a stable majority government and any one of which might yet derail the transition before it reaches the next major milestones: the approval of a new constitution and the holding of fresh elections.

A majority coalition will of necessity be diverse and unwieldy, owing to the large number of independent lawmakers and tiny parties with only one or two representatives. Consequently, there is a high probability that negotiations over policy will be time-consuming and difficult, a prospect that does not inspire confidence that the government will act with appropriate urgency to address the many problems it inherits, chief among them a devastated economy and a high degree of social disorder.

The vote for prime minister came amid an eruption of anti-US protests triggered by Muslim outrage over a low-budget US-made film that satirizes the life of the Prophet Mohammed, and was held one day after a deadly attack that killed US Ambassador Christopher Stevens and two diplomatic aides. The numerous competing theories surrounding the deaths of Stevens and his aides highlight the complexity of the security challenges inherited by the new government.

Forecast Summary

SUMMARY OF 18-MONTH FORECAST

 

REGIMES & PROBABILITIES

*Reformist Coalition 45% Prolonged Transition 40% Divided State
15%
RISK FACTORS CURRENT  
Turmoil Very High SLIGHTLY LESS Same SLIGHTLY MORE
Investment
  Equity High LESS Same SLIGHTLY MORE
  Operations Very High LESS SLIGHTLY LESS Same
  Taxation High Same Same SLIGHTLY MORE
  Repatriation High SLIGHTLY LESS SLIGHTLY MORE MORE
  Exchange High SLIGHTLY LESS Same MORE
Trade
  Tariffs Moderate Same SLIGHTLY MORE MORE
  Other Barriers High SLIGHTLY LESS Same SLIGHTLY MORE
  Payment Delays High SLIGHTLY LESS SLIGHTLY MORE MORE
Economic Policy
  Expansion Low MORE MORE MORE
  Labor Costs Low SLIGHTLY MORE SLIGHTLY MORE Same
  Foreign Debt High LESS Same SLIGHTLY MORE

SUMMARY OF FIVE-YEAR FORECAST

 

REGIMES & PROBABILITIES

*Reformist Coalition 45% Military-Civilian 35% Divided State
20%
RISK FACTORS BASE  
Turmoil High LESS Same SLIGHTLY MORE
Restrictions
   Investment High LESS SLIGHTLY LESS MORE
   Trade Moderate Same SLIGHTLY MORE SLIGHTLY MORE
Economic Problems
   Domestic High LESS Same MUCH MORE
   International Moderate Same SLIGHTLY MORE MORE
   * When present, indicates forecast of a new regime

For more information, check out the Libya Full Report!