Energy Capital & Power

Libya’s Potential for Economic Diversification via Strategic Sectors

Connect with us:

agriculture. bigstock

Despite the political instability experienced over the past few decades, Libya’s economy has seen periods of significant growth, and the 2021/2022 period is expected to be no different. During 2021 the country saw the formation of a unity government, putting an end to years of conflict and triggering a strong economic rebound. In addition to the resumption of activities in the energy sector, Libya is focusing on stimulating socio-economic development through the revitalization of its economic sub-sectors.

While the country relies primarily on revenues from the petroleum sector – the sector represents 95% of export earnings and 60% of Gross Domestic Profit – Libya’s potential for economic diversification hinges on the role that other strategic sub-sectors, including agriculture, and industry, will play. Accordingly, by reinjecting critical capital earned from petroleum exports into other emerging sectors, Libya could position itself as an economic powerhouse.


Libya’s agriculture sector represents the second largest in the country and despite activities being limited to ‘green areas’ in the north, investment in and development of large-scale projects in the country have significantly expanded the sector. In addition to ensuring the development of large-scale projects – such as the Al-Kufrah oasis, Tāwurghāʾ, and Sarīr developments – the sector demonstrates how countries can use revenues from one sector to scale up others, and in turn, boost economic diversification.

One of the best examples of petroleum capital reinjection is Libya’s Great Manmade River (GMMR) – the world’s largest network of underground pipelines and largest irrigation project. Crude oil drilling campaigns in the 1950s led to the discovery of significant quantities of potable fossil water and with the country’s immense water shortages – rain only falls on approximately 5% of the country’s land surface – new opportunities emerged for both the general population and the agriculture sector. Incredibly, Libya financed the entire GMMR project without any international assistance or loans from the World bank. By utilizing petroleum revenues, the government developed the $36 billion pipeline network. Through the irrigation system, Libya has managed to expand agriculture from green coastal regions to the entire country, enhancing desertification and accelerating production.

Additionally, new hydroponic farms in the country aim to scale up production and economic diversification. Built in Qouwea in 2020, the first hydroponic farm grows plants without soil, using only mineral nutrients. Innovative farms such as this will not only provide the much-needed solution for domestic food security, but will enhance an entire sector by creating agriculture opportunities across the entire country. Accordingly, by increasing investment in projects within the agriculture sector, Libya can boost economic diversification and overall economic growth.


Meanwhile, opportunities are emerging within the industry and manufacturing sectors, with the country pursuing the reduction on the reliance on oil. Despite conflict across the country delaying progress, industrial developments are beginning to expand. Currently, industrial factories are in Tripoli and Benghazi, with production primarily comprising of food, cement, and textiles. With the resumption in oilfield activities and refineries across the country in 2021, the industrial sector is expected to see an upward trend, with petrochemical production and oil-related industries taking off. Accordingly, by prioritizing sectoral integration across the country, Libya can essentially diversify its economy while accelerating economic growth.

Tourism and Services

Finally, Libya’s tourism sector can be used to further diversify the economy. Years of conflict and sanctions have left the sector largely untapped, however, with a redirected focus on infrastructure developments – including hotels and tourist complexes – as well as the development of coastal areas, the country is bound to see a resurgence in the high potential sector. Strategically located, Libya could potentially be a prime tourism destination if political stability continues. Accordingly, the tourism and services sector could be a key driver in economic diversification and socio-economic upliftment across the country.

Share This Article

Charné Hollands

Charné Hollands

Charné Hollands is the Deputy Editor at Energy Capital & Power. She holds a Higher Certificate in Professional Photography and Masters in Media Studies from the University of Cape Town. Charné writes content for ECP's website and events as well as co-authored African Energy Chamber: Road to Recovery.