To gain a better understanding of the impact of recent events in Libya, I spoke with Arezki Daoud who is editor of The North Africa Journal.

In a post-Gaddafi Libya, what issues will the government need to focus on through next year for a successful transition?

This weekend’s events were predicted. We forecasted a protracted conflict, one that would end with the slow extinguishing of the regime in the manner that we have been witnessing. In essence, despite the bloody outcome, the terrible loss of life and wholesale destruction of the country, what’s coming could potentially be a more difficult period for the Libyans. Their fight against Gaddafi was a unifying factor. Now that that factor is gone, differences are likely to emerge on a host of issues, starting with drafting a constitution, establishing institutions, empowering political leaders to take proper action within a new framework of a proper rule of law, etc. But more importantly, the challenge for the Libyans would be to avoid falling into the trap of tribalism. In this conflict, many won, a few have lost and those who have lost could pay dearly if the spirit of revenge takes over.

In addition, we are assuming in the short term that rogue elements will operate under the radar to undermine any progress on the political front. They will work hard to pit tribes against other tribes. The use of shadowy agents is common practice in the Arab world. We have seen it in Tunisia, Egypt, Syria, etc and we believe Muammar Gaddafi has developed some of the strongest underground destabilization networks in the Arab world.

So in terms of what to do, it is critical that security be under the control of a single authority and that a process starts quickly to establish a constitution.

Do you expect the transition timeframe to last longer than in Egypt or Tunisia due to Libya’s lack of government institutions?

The likely scenario is one that looks at a much longer transition period for all the reasons mentioned above. But in a virgin territory where there has been no supreme law, there is also a slim likelihood of a faster political transition. We should assume that political stabilization could take more than one year.

What does this mean for regional stability? Do you think this will lead to a significant decrease in global oil prices?

The market may respond positively purely on the news of the end of Gaddafi, but the impact of Libyan oil in the world’s supply system will be limited given the economic crises affecting consuming markets. Even without Libya, oil prices have been dropping with the weakening global economy, therefore we expect the end of this crisis will have limited impact on the oil sector.

What types of challenges do you see for foreign businesses in a post-Gaddafi Libya?

Corporate executives hate uncertainty and so the lack of clarity around the existence of central authority could be a major inhibitor to foreign investments at this stage. Executives we talk to often say they will take a wait-and-see approach and will move into the country as soon as a strong authority is in place, which would create the right conditions for operating in the country. Libya has many experts that could help shape up future business legislation, but this is too premature to speak of such business environment as the political environment remains volatile.

What types of opportunities do you see for foreign businesses in a post-Gaddafi Libya?

Business opportunities are likely to arise within 6 months after the official end of the hostilities. Given the Western support to the insurgents, Western companies are likely to be the first to take advantage of the reconstruction, modernization that the country will undergo. This would positively impact the obvious sectors, namely infrastructure, oil and gas but also services as tens of thousands of foreign workers left the country and now a foreign workforce will be required to bring services back. Other industries, from consumer goods to pharmaceuticals will have to wait yet the country will likely resort to import, providing opportunities as well.

Muammar Gaddafi’s 42-year grip on power is slipping away as rebel forces fight to gain control of Libya’s capital Tripoli. This bloody conflict has taken a heavy toll on Libya’s economy and its people, but more challenges lie ahead as the country will soon focus on rebuilding and a political transition.

While it is too early for most foreign companies to return to Libya, firms should start to assess major players in the National Transitional Council (NTC) for a future government relations strategy. A transitional leadership already exists and new political players will emerge as prospective candidates start to jockey for position ahead of elections that will take place within the next year.

The NTC is speaking in a conciliatory tone regarding how former regime associates will be treated during the transition. This is not surprising considering the number of officials that have defected in recent months. However, foreign MNCs should still evaluate local partner ties to the past regime, especially if there are tribal connections to Gaddafi. As we are seeing in Egypt, Tunisia, and around the region, companies can experience a significant slowdown in business if the government targets their local partners for corruption investigations. There are serious reputational issues to consider as well.

Because many government institutions will need to be built from scratch, companies should keep a close eye on efforts to write a new constitution. This will likely mean significant changes to a post-Gaddafi business environment, which could lead to much greater transparency in the long term.

The hydrocarbon sector is still critical to Libya’s development, but there is already talk that it will take 18 to 24 months to return oil production to pre-February 2011 levels. Libya will continue plans to diversify its economy away from hydrocarbons and there will be a need to (re)build infrastructure- both physical and institutional- which will provide long-term opportunities to B2B companies in the construction, IT, cement, and transportation sectors.

GDP per capita is among the highest in Africa due to Libya’s oil and gas resources and a small population though little of this money has flowed to the majority of the population in the past. If the government implements new policies to address this critical flaw, then it could lead to a plethora of new opportunities for B2C companies.