WAGE AND PENSION REFORM UNFOLDING IN LIBYA'S OWN STYLE

C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 000647 SIPDIS DEPARTMENT FOR NEA/MAG; COMMERCE FOR NATE MASON E.O. 12958: DECL: 11/10/2016 TAGS: ECON EFIN PGOV LY SUBJECT: WAGE AND PENSION REFORM UNFOLDING IN LIBYA'S OWN STYLE CLASSIFIED BY: Elizabeth Fritschle, Pol/Econ Chief, United States Embassy, DOS. REASON: 1.4 (b),(d) ¶1. (C) Summary: The GOL sent mixed signals in recent months on wage and pension reform, raising expectations for a thaw in a long-standing freeze on government salaries and a substantial augmentation to state-provided pensions. These are hot-button issues in Libya, where the minimum monthly government salary has been fixed at 150 Libyan Dinars (L.D.) for twenty-five years under the terms of Law No. 15 of 1981 (Note: 150 L.D. is the equivalent of 115 USD at current exchange rates. End note). Wage stagnation affects a large number of Libyan families, since roughly a quarter of Libya's workforce is employed by the state. However, recent GOL moves have raised as many questions as incomes. End Summary. -------------- Seif Makes Big Promises Regarding Wages and Pensions -------------- ¶2. (C) During the course of his much-ballyhooed August 20 speech before the First Forum of the National Organization of Libyan Youth (popularly known as the "From tomorrow" speech), Seif al-Islam al-Qadafi addressed the issue of a minimum salary for all employees, as well as a government pension. In his remarks, Seif al-Islam said that: "From tomorrow, it is supposed to have a minimal rate for the people who work in the government and the private sector. It is prohibited to have less than 200 L.D. per month. This means that the salary of 200 L.D. will be a history from tomorrow...The amount of 200 L.D. is the minimal rate of any salary." Regarding the possibility of a pension, he said: "It is clear that one wants the continuity of the contribution of the state concerning his retirement. He wants the state to give him that pension in cash and he will make his own insurance. Thus, there will be funds for a special kind of insurance. The employee will have his salaries for 13 months, not only 12 months...Everyone, who does not want the state to contribute in his pension, will not have the contribution of the state. But he will have the salaries of 13 months instead of 12 months." -------------- In the State of the Masses (Libyan Jamahiriya) You Can Never Have Too Many Committees -------------- ¶3. (C) Post has been monitoring developments since Seif al-Islam's speech to see if there has been any GOL follow-through on his statements (Note: Although Seif does not have any formal role in the government structure, his statements are often viewed as having at least the tacit blessing of his father, and tangible results have sometimes resulted from his policy pronouncements. (End Note). GOL follow-up to the speech thus far has been a study in Libyan consensus-building/decision-making. In early September, the Secretariat of the General People's Committee announced the SIPDIS formation of three special committees, which would: -- Revise the legislation related to remuneration against work, prepare a legal paper on the issue and propose necessary amendments to relevant legislation; -- Study the economic affects of the amendment and movement of salaries; -- Prepare a paper on the accompanying procedures for amendment of minimum remuneration for work. Membership on the three committees was set at a high-level, to include the Secretaries of the General People's Committees for Justice, Planning, Economy, Finance, Tourism and Manpower, and the Governor of the Central Bank. All these committees were to submit a weekly progress reports to the Secretariat of the General People's Committee. ¶4. (C) To date, post has not seen any tangible outcomes stem from the formation of these committees, and there has been no official mention of addressing the issue of a government pension. However, the government did announce a bonus of between 200 and 280 L.D. for all government employees upon the occasion of Eid al-Fitr last month. Rumor has it that this one-time bonus represents the "13th month" of salary referred to in Seif al-Islam's speech, and is being touted in some circles as the fulfillment of his pledge to augment the national pension system. -------------- A Windfall That Wasn't -------------- ¶5. (C) Adding to the confusion is a September 24 official letter from the Secretary of the GPC for Finance to the Central Bank Governor which requests that 300 million L.D. be made immediately available for "financial renumeration." These funds were to be allocated to various GOL entities (e.g., Social Security Fund, Armed Forces) for the distribution of lump sum gratutities to individuals on their payrolls. A subsequent edict from the GPC Secretariat stated that payments were to range from 150-230 L.D., with the larger sums accruing to workers at the bottom of the salary pool. Stipends were also due to families "deprived of wealth," although these recipients would only be determined following the completion of a "social survey." Workers in "productive projects" and "national companies" were also due a bonus, a stipulation that caused great consternation among foreign companies, particularly in the energy sector. Local legal interpreation differed on the GPC ruling, resulting in some companies paying the gratuity and others refusing. In the end, the GPC appears to have quietly pulled-back from this initative, and GOL payments were never made. The rationale behind this reversal remains unclear, as does the intent of the initiative. ¶6. (U) In a sign that this issue will keep evolving in the near term, the Secretariat of GPC approved a resolution on November 4 on the salaries of national employees in public companies and establishments. The resolution provides for a review of the salaries of those employees without reference to the provisions of law (15) for 1981, authorizing general assemblies of different public companies, contracting and insurance companies to set their own salaries for these employees in accordance with their activities and financial positions. Post will continue to monitor these developments to gauge their applicability and impact on U.S. companies in particular. GOLDRICH