Libya risks extremism if war drags on: World Bank

TUNIS Thu Jun 30, 2011 2:36pm EDT

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TUNIS (Reuters) - A protracted struggle for Libya could leave it in the hands of extremists instead of the liberal economic technocrats who now lead its rebel movement, the World Bank's representative for Libya said on Thursday.

"If this civil war goes on, it would be a new Somalia, which I don't say lightly," said Marouane Abassi, World Bank country manager for Libya who has been in Tunisia since February.

"In three months we could be dealing with extremists. That's why time is very important in this conflict, before we face problems in managing it."

Abassi, who is Tunisian, said the World Bank had been working with Libya since 2006 on plans for economic reforms led by leader Muammar Gaddafi's son Saif al-Islam, although many of those reform plans were scuppered by Gaddafi.

He described some of the leaders of the rebel Transitional National Council as among those most strongly associated with economic reform plans.

"...We know them, we did good work with them," Abassi said, citing Ali Issawi, a former economy minister and ambassador, and Mahmoud Jebril, who resigned from a state economic think-tank after Gaddafi overruled his suggestions for liberalizing the economy.

"These guys tried inside (Gaddafi's government). In 2009 Gaddafi stopped the connection between us and them," said Abassi. Nevertheless, parts of Gaddafi's government and local councils were still seeking World Bank advice up to February, when pro-democracy protests broke out, he said.

"In the last two years it was a battle between reformists and the old guard. But even the last minister of economy who was against us ... accepted the rules of the game," he said.

The rebellion, which began with an uprising in February and has been backed by Western air strikes since March, has so far failed to dislodge Gaddafi, raising pressure on Western countries to take more decisive action.

France said on Wednesday it had sent arms to the rebels, which some countries believe violates an arms embargo. Gaddafi says the Western intervention is a plot to steal Libya's oil.

Abassi said he left the World Bank's Tripoli office on February 20 after government forces began suppressing protesters.

"Now we are trying to understand how we can help Libya after the conflict," he said.

Tunisia, where he is now based, is also suffering financially, losing some $200 million a month in remittances and other revenue from Tunisian expatriates who have returned.

"Over 65,000 Tunisians have returned out of 125,000 who were living in Libya. They are like refugees in Tunisia without revenue. Tunisia gave them some cash handouts and we are trying to provide funds and grants," Abassi said.

"Over 1.7 million Libyans come each year to Tunisia and for the Tunisian economy it's very important. They spend a lot of money on health -- maybe 50 percent of the revenue in clinics in the south is from Libyans," Abassi said.

(Editing by Peter Graff)

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