Libya: Waste, Fraud Erase Billions in National Wealth – Businessweek

28 Sep

http://www.bloomberg.com/bw/articles/2014-08-07/libya-waste-fraud-erase-billions-in-national-wealth

They have no idea what they have, and what they have, they steal.” The game of wildly overstating the personal wealth of Middle Eastern dictators, and then stealing national assets under cover of civil conflict and social chaos, Rashid suggests, is one that Western governments and financial institutions and their co-conspirators in Arab countries play hand-in-glove. “They said Hosni Mubarak and his family were worth over $20 billion,” Rashid says. “The real number turned out to be a few tens of millions. Meanwhile, when Mubarak was removed from office, the foreign currency reserves and national investments of Egypt were $54 billion. Now they are below zero. You tell me where that money went.”

In a way, it might be lucky for Libyans that 95 percent of the country’s assets in the West—including the money being managed by some of the same big-name companies who lost so much the last time around—has been frozen. Abdulmagid Breish, the latest head of the LIA, recently announced plans to hire companies to manage billions of dollars of assets, which from one perspective might help the Libyans get a handle on fees—or open up further opportunities for catastrophic losses. As for history, so many people have now left the LIA that it may be impossible for anyone to figure out what those assets were and where they went.
 
 
Sitting in a modest hotel in Qawra, a district in Tripoli favored by visitors from the Middle East, Fatima Hamroush provides a firsthand account of watching money disappear while working for Libya’s nominal government. After spending most of her adult life as a physician in Ireland, Hamroush returned to her native country after Qaddafi’s fall to become health minister. The experience appears to have done little to squelch the sparkle in her eyes or the laughter with which she punctuates her stories about the armed fighters who came to her office demanding money that was intended to heal the sick. Tales of Qaddafi’s secret fortune also make her laugh. “The man was the state,” she says in her Arabic-accented brogue. “He didn’t have to hide money from himself.” What makes her angry, she says, are the treasure hunters who sign contracts with Libyan officials to locate Qaddafi’s assets, such as the accounts in Malta. “They are a plague,” she pronounces. “I hear them on TV, in the newspaper, some are getting letters signed by government ministers, or the GNC [General National Congress, Libya’s Parliament], and it’s all illegal. It’s part of a scam.”

When asked to provide an example of how this scam works, Hamroush says Ireland has $2 billion in Libyan assets. She knows the exact sum, she says, because Irish officials made a point of telling her how much money they had and where it was located. She took the information to Mustafa Jalil, head of the National Transitional Council, at which point at least one group of asset hunters applied to receive 10 percent of the total, she says. “Somebody in the NTC is either a complete idiot or an evil genius,” she concludes. “Money is being squandered everywhere like mad.”

Giveaways to individuals and militias from Libyan state coffers during her time in office from November 2011 to August 2012 amounted to $20 billion, according to her own estimate. In addition, the government, to buy loyalty, pays 40 percent of the adult population a salary at a cost of about $6 billion a month. While that figure could have easily been covered by oil revenue during Qaddafi’s time, the country’s production is now less than a quarter of what it was. Today, the practice of loading up the budget with public salaries in order to buy public loyalty has continued—but with a difference. “Now there are two or three times as many salaries as before,” Hamroush says, and they are being paid out of the state’s foreign reserves. At the rate that they are being used, the reserves will be entirely depleted in two years.

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