Michael Porter on Libya's Potential

The Harvard professor talks about the country's "dependency economy" and his work to promote reform

It's a most unusual partnership. For about three years, Harvard Business School professor Michael Porter and Saif al-Islam Qaddafi, the son of the Libyan leader, have been working together to revive the Libyan economy. Monitor Group, a consulting firm with which Porter is affiliated, has helped the Libyans devise an economic strategy based on tourism, construction, and energy. Monitor is also advising the Libyans on how to set up the Libyan Economic Development Board to spearhead the reform process and clear away the many bureaucratic hurdles to entrepreneurship.

Porter was in Tripoli on Feb. 22 for the board's inauguration. He was received by the Libyans with the fanfare associated with a head of state. He was joined at the launch ceremony at a Tripoli hotel by the younger Qaddafi, who arrived with a posse of edgy bodyguards.

Porter talked to BusinessWeek's Stanley Reed before heading off to tea with Libya's chief of security. Here are excerpts.

How did the relationship start?

More than five years ago, I was visited by Omran Bukhres [now the head of the Libyan Economic Development Board] who said: "The Qaddafi family needs your help." It wasn't legal for Americans to go to Libya, so I met Seif in London. After several dinners I became convinced he was really committed to the reform process.

What is wrong with Libya?

The system is designed not to do anything. It is a broken decision-making process. At first, Saif was one of the few people who backed [reform]. There are getting to be more and more believers. Most people believe in the diagnosis. But cutting through all the obstacles in decision-making is the problem.

How much support will you get from Muammar Qaddafi?

Qaddafi at some point decided the Libyan people could not live in a country isolated from the rest of the world. And opening up is more in line with his objectives and values.

Qaddafi's Green Book talks about self-reliance and a bottoms-up society. Instead, Libya has grown into a dependency economy. Most people have jobs given by the government. The typical Libyan is paid twice as much in subsidies as salary. Qaddafi made the decision to move in a different direction.

What is Saif, Muammar Qaddafi's son, like?

I have gotten to know Saif quite well. He was a doctoral candidate at the London School of Economics, where he studied with some of the best professors. He's very much oriented toward making Libya a member of the modern world community.

Why are you working with Libya?

I didn't take this on because this is a big economy. It was very important, very symbolic. If this can be successful, then other countries will be able to change.

One of the greatest challenges is not coming up with the right strategy but coming up with the process that allows you to do things. This is a test case of how to create action. We are learning a lot that we could use in other parts of the world—in the Middle East and in other countries with a history of socialist practices.

Is having family control of Libya an obstacle?

[Despite the fact we are talking] about a ruler and his son, in a sense, decision-making is widely distributed in this country. People [consider Libya] a dictatorship, but it really doesn't work that way. That is another reason for optimism.

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