Encouraging Libyan jobs in the private sector

In Libya there are too many people who work in the public sector. It is relatively easy to attain employment with a seemingly uncapped amount of positions that public institutions encourage.

Public sector jobs provide a relativly guaranteed source of income and in many cases only require minimum input from the employee. Some employees are allowed to just sign an attendance sheet once per week and leave. Yes this is possible.

So the government employs many people which is a great burden on public finances. To reduce this burden the Government will ultimately need to reduce the amount of people it employs. One way to do this is to encourage more people to transition to the private sector.

This is all very well known, but furthermore we identified something else. In large cities most businesses – small and large are officially registered as a legal business. This is a good thing. We understand there are two possible reasons for this:

1. Enforcement: We saw on the ground in Libya that local government in both Tripoli and Benghazi were physically visiting many businesses throughout the city and checking registration documents. If the business is found to not be registered, then the business was closed temporarily by authorities until the owner completed their registration. There was a large scale inspection by authorities that was well known and shared in social circles and across social media. Thus, businesses that were not registered quickly moved to register.

2. Electronic payment registration: Due to the liquidity crisis since 2011, there have been successful moves by banks and private firms to establish electronic payment techniques using mobile phones and card systems. These methods can increase sales for businesses as many customers find these payment methods viable as their money is stuck in their bank accounts. In most cases to register for such services, the payment provider would request the official registration documents from the business. In turn this encouraged more businesses to officially register.

So what we see in Libya is that: businesses can officially register, and authorities can enforce registration.

This opens up a new opportunity: contracts for employees. Most private businesses in Libya do not provide employment contracts.

This unfortunately means:

1. Government does not pick up any taxes on salary

2. Staff have no social protection at all 

3. No specific addition to social insurance, pension funds

4. Staff are employed without contract and thus with no legal protection from unfair dismissal etc.

4. This all means no job security for employees

In Libya, as a large proportion of nationals see that public sector jobs are a form of protection of regular monthly payments (even if payments can be delayed by months) and that work in the private sector tops up their base salary that they receive from the public sector. Citizens see that the public sector contract is their access card to a guaranteed income once they retire. Private sector, in general, does not provide this protection.

The opportunity here is that as it is relatively straightforward to register a business and generally viable for legal enforcement, the government can take further steps and enforce job contracts for all staff based on Libyan law. This may make the private sector more attractive, and in the long-term may be one tool (of many) that could be used to start moving, slowly, more people into the private sector.

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