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Disarming the streets to rebuild Libya

By John Defterios, CNN
October 1, 2012 -- Updated 1536 GMT (2336 HKT)
STORY HIGHLIGHTS
  • Libya's Prime Minister Mustafa Abu Shagour has called for militias to disband, and they are doing so in droves
  • Libyans are turning in rifles, pistols, and rocket propelled grenade launchers
  • It sends a strong message to the world as the government tries to normalize the economy
  • Libya has 6.7M people, $120B in cash reserves and sits on top of the largest oil reserves in Africa

Editor's note: John Defterios is CNN's emerging markets editor and anchor of Global Exchange, CNN's business show focused on the emerging and BRIC markets. Watch it at 0300 pm GMT and 0500 pm CET, Sunday to Thursday.

Abu Dhabi (CNN) -- At first glance of the television screen, it looks to me like a normal scene from a Middle Eastern open air market or souk.

But I pause, look more closely and it is anything but normal. You see Libyans lining up from Benghazi to Tripoli to turn in rifles, pistols, and rocket propelled grenade launchers. There are reports that the keys of a tank were handed back as well.

One week after a call from the new prime minister Mustafa Abu Shagour for militias to disband, they are doing so in droves. The North African country is trying to stabilize after the attacks on the U.S. consulate compound in Benghazi that killed ambassador J. Christopher Stevens and three other U.S. embassy staffers.

U.S. intelligence now believes consulate attack was terror assault

The situation is so precarious that U.S. investigators have not been guaranteed their safety to review evidence of their murders at the consulate. This call to clean up the streets is coming from the grass root level. Libyans seem fed up and are calling on the government to do even more.

The future of Libya's oil

Florence Eid, the CEO of London based Arabia Monitor, says disarming the militias was essential. "It is quite impressive that the prime minister, having hardly formed his cabinet, decided to make amongst his first big decisions the most difficult decision."

MENA struggles with youth unemployment

The move also sends a strong message to the outside world as the government tries to normalize the economy.

Libya is working from a flush economic base. The country of just 6.7 million people has $120 billion in cash reserves and sits on top of the largest oil reserves in Africa, at 47 billion barrels, according to BP's Statistical Review of World Energy.

Analysis: Libyan militias wait for another day

The new government has set a goal of increasing oil production from the current 1.4 million barrels a day to just below 2 million by 2015.

While the government moves to rid the streets of arms, experts say it now needs to move with alacrity to amend terms for energy sector contracts.

Fereidun Fesharaki, Chairman of FACTS Global Energy, says "Gadhafi rules" still apply in the oil fields with international energy companies getting a maximum of 10% on production sharing agreements.

"If they want to see more production all the laws need to be changed," said Fesharaki.

That is a position echoed by Eid, of Arabia Monitor, for overall commercial and investment laws. Investors are eager to jump back in to fill what she says is a $200 billion infrastructure deficit for power stations, roads, sewage systems and the like.

A general's warning about militants in Libya

Prior to the overthrow of the Moammar Gadhafi, Libya offered regional investors a high growth opportunity. After over four decades in power, Gadhafi was just starting to build the infrastructure worthy of a country flush with record oil revenues.

While it amends energy sector and investment laws, outside investors are also eager to see how the constitution writing process will unfold as well. How much autonomy will be afforded to certain tribal regions and how the Libyan Investment Authority -- the country's sovereign fund very much in the tight grip of Gadhafi and his sons -- will be managed in the future are essential questions still to be answered.

After seeing the economy collapse by 60% of GDP during the overthrow and the ensuing chaos, Arabia Monitor is earmarking growth of 116% this year and a still rapid 16.5% in 2013.

That is if the security situation stabilizes and Libyans continue to rid their own streets of what can be called weapons of self destruction.

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