Proceedings of 26th International Business Research Conference
7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7
Estimating the Function of the Agricultural Investment in
Libya during the Period (1970 – 2007)
Usama Ben-Hamed
Libya has sought to expand its agricultural sector since the early 1970s. Its
success in this sector has been limited despite heavy investments that
equaled 30 percent of government expenditures in the 1970s. However, Libya
has remained dependent on large agricultural imports, estimated at about 75
percent of its annual needs.The agricultural investment is an important tool for
agricultural development, and raising its efficiency is one of the important
factors to achieve higher rates of economic growth and social development.
Plus, the increase of the agricultural investment efficiency would contribute in
increasing and developing the production in the agricultural sector. The main
aim of this study is to estimate the agricultural investment function in Libya
during the period (1970 – 2007) and to point out the most important factors
that affect the agricultural investment in Libya. The study results showed that
the volume of agricultural investment in Libyan economy during the study
period has reached 7.121 billion dinars, and through equations that have been
assessed and calculated showed that the investment allocations has taken the
first place, followed by interest rates, followed by gross domestic product
(GDP). In addition, there was a negative relationship between the interest rate
and the agricultural investment, and a positive relationship between the
agricultural investment allocations and the agricultural investment, and also
there was a positive relationship between GDP and agricultural investment.
Keywords: Agricultural Investment, Function, Economy, Agricultural imports.
Field of research: Economies
1. Introduction
Most of the population of developing countries interested in agriculture, with high rates of
growth of the population of these countries and the increased demand for food becomes
necessary to consider economic policies to the agricultural sector as one of the most
important sectors of the national economy.
Investment in agricultural projects is an important element for the success of agricultural
development as it leads to bring and use the modern technology in agriculture, such as
protected agriculture, drip irrigation, and the use of productive inputs that raise the
productivity of the agricultural sector. In addition, the increasing of the importance of the
agricultural investment is from its ability to change the economic structure by increasing
the development of production capacities and exploit the available potential, whether
natural or human.
During the past decades, the agriculture, livestock and marine sector in Libya has made
in many of the vital achievements in many different areas as a result of intensive
programs for agricultural development such as achieving rates and significant levels of
food security in the provision of fruit, vegetables, meat, poultry and fish.
Dr. Usama Ben-Hamed, Department of Agricultural Economic, Azzaytuna University, Tarhuna, Libya,
Usama_benhamed@yahoo.com
Proceedings of 26th International Business Research Conference
7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7
The sector is still making tremendous efforts to improve rates of food security in the areas
of cereals, meat and dairy products. As a result of agricultural development programs, the
sector enabled to raise the levels of the infrastructure of the sector.
The changes that have occurred in the volume of agricultural investment in Libya have led
to the effects of many of the economic indicators of the national economy, and some of
these the changes that have occurred on the GDP and agricultural GDP. Periods in which
saw the huge investments of the establishment of new projects or improving the existing
projects led to GDP growth, as well as agricultural GDP in the economy. While periods
which saw a decline in investment also saw declines in GDP and agricultural GDP , and
from this point we conclude that the changes that have occurred to the Libyan economy
has reflected the changes that have occurred investment policies and development
strategies .
2.
Research problem
The increase in population, continuing food shortages and dependence on imports of the
most important components of basic food are serious concerns. Therefore, we must find
different approaches for the development of production capacities through policies that
encourage public and private investment in the agricultural sector to achieve Agricultural
development goals.
In Libya, although the amounts that have been invested in the agricultural sector to
achieve the desired objectives in bringing economic development in this sector and
increase its contribution to the GDP, however, the agricultural sector did not respond to
these investment flows and then did not achieve the development goals desired such as a
high proportion of self-sufficiency, achieving efficient use of economic resources and
diversifying the sources of agricultural income. The agricultural sector faced many
problems, especially the insufficiency of these investments against this sector, rising
prices of production inputs and lack of water resources, which caused a negative impact
on the performance of this sector.
For the Investment allocated to the agricultural sector in Libya, the overall strategy for
economic and social development in Libya has characterized during the period (19711985) of trying to find an alternative source of income to liberalize the economy of the
dominance of the oil sector, this strategy has targeted sectors of agriculture and industry
to play a major role in the growth process and to provide an alternative source of income,
and considered the agriculture sector and agricultural activity as an essential base for
economic construction, and considered the industrial activity essential for achieving
sustained growth for the economy. In addition, it depended on transform the economic
development in Libya in its dependence on oil as the main source of financing
investments in all economic sectors, particularly agriculture and agricultural reclamation.
As a result of the high cost of agricultural development, the investments in the agriculture
sector have grown during the period (1970-2003) as shown in Table 1, and it can be seen
from data in Table 1 that the actual investment declined during the period (1981-1985)
compared to the period (1976-1980), and this decline in investments in the agriculture
sector, which coincided with the oil crisis in the early eighties was due to decline in oil
revenues, which constitute the main source of finance, this decline has continued and
achieved the lowest value in the period (1996-1999), and then the value of investments
Proceedings of 26th International Business Research Conference
7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7
returned to increase in the period (2000 - 2003), which amounted to about 581.1 million
dinars, While a decline in the value of investments can be seen in 2004 amounted to
262.7 million dinars. In 2005, investments have increased and reached 367.3 million
dinars; however, in 2006 investments have decreased to reach about 175.3 million dinars,
and noted that in 2007 investments amounted to about 330.14 million dinars.
There are many obstacles that face agricultural investments in Libya, including: (Lack of
actual allocations to the agricultural sector, the lack of public facilities and the reclamation
process in recent years, declining farmland due to desert encroachment and increasing of
risk element. lack of private and foreign investment, the high cost of agricultural inputs,
especially after the amendment of the dinar exchange rate against foreign currencies, and
collection efficiency of agricultural loans is low).
3.
Research aims
This research aims to estimate the function of agricultural investment in Libya during the
period (1970-2007) and also identify the most important variables that affect the
agricultural investment in Libya. In addition, suggest some appropriate solutions to raise
the level of agricultural investment in Libya and its contribution through the total
investment to increase the level of GDP and inventory of agricultural resources and the
size of the food gap with the proportion of self-sufficiency in food commodities, which
include requirements for agricultural investment and goals of its development, its motives
and its economic development determinants.
Table 1
Actual investment (in the agricultural sector at current prices
For the period (1970-2007)
Years
The value of investments in million dinars
1970-1972
135.9
1973-1975
557.1
1976-1980
1702.3
1981-1985
1494.1
1986-1990
688.9
1991-1995
480.2
1996-1999
346.1
2000-2003
581.1
2004
262.7
2005
367.3
2006
175.3
2007
330.14
Total
7,121.14
Average
187.3984
Proceedings of 26th International Business Research Conference
7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7
4.
Method
The Investment is that part of the gross national product, which takes various forms, such
as new construction, production machinery and an increase in inventory, and many
theories have discussed the determinants of the investment, which led to the formulation
of different models represent a function of investment based on these theories. By
economies that have been formulated which these models making it do not fit in the
economy of developing countries, including Libya, so the need arise to take advantage of
these theories in the formulation of a function of investment in the agricultural sector and
that are commensurate with the Libyan economy was as follows:
I = F(R, II, Y) ------------ (1)
Where:
I: agricultural investment in Million dinars.
R: Interest rate.
II: Allocation of agricultural investment in million dinars.
Y: Gross national product (GDP) in million dinars.
Function 1 indicates that agricultural investment is a function depends on the interest rate,
investment allocation and GDP. In this function, the investment is a dependent variable,
and the rest of the variables in the function are independent variables.
5.
Results
The agricultural investment function has been estimated by using multiple regression in
four forms which are exponential and logarithmic and linear and half- logarithmic in the
independent variables, it was found that the best equation was in exponential form as
follows:Ln I = 1.497 – 46.169 R + 0.0899 AG + 0.00295 GDP ---------------------- (2)
(2.587)
(-3.329)
(3.789)
(3.083)
R² = 0.791
D.W = 1.541
F= 42.822
N = 38
Where:
Ln I : The natural logarithm of agricultural investment in million dinars
R
: The interest rate
AG :The current allocations for the agriculture sector in million dinars
GDP :Gross Domestic Product in million dinars
Data from equation (2) indicate that the variables R, II , Y are significant at the level of
0.01, as well as the results indicated that equation for the model as a whole as spirits F
reached 42.822 calculated at 0.01, ie indicate the influence of the independent variables
in the function on the dependent variable. When a test Durban Watson (D.W) through the
calculated value equation (1.541) and comparing its value lower and upper tabular (dl =
1.07 , du = 1.52 ) shows that there is no autocorrelation problem .
Estimate the marginal impact of the response of the change in investment equation
independent factors No. 2, showing that the investment elasticity in response to the
Proceedings of 26th International Business Research Conference
7 - 8 April 2014, Imperial College, London, UK, ISBN: 978-1-922069-46-7
change in the interest rate has reached about - 1.725, and this means that the interest
rate increase by 10% leads to a decrease in real investment rate of 17.2% in the average,
assuming other variables constant. As also shown that elastic response of investment to a
change in the allocation for the sector in real terms was estimated at 0.690 and where it is
positive and less than one correct They reflect the investment alone decreasing in the
sense that the increase in financial allocations by 10% leads to increase agricultural
investment in real terms to about 6.9% on average, assuming all other variables held
constant.
As for the elastic response of investment to GDP has turned out to be estimated at 0.725,
and where it is positive and less than one correct it if it reflects the state investment alone
decreasing, in the sense that the leadership GDP by 10% leads to increase agricultural
investment in real terms to about 7.25%, assuming other variables constant.
As for the marginal effect of the independent variables equation 2 on the dependent
variable , it became clear that the marginal effect of the interest rate on agricultural
investment has been estimated at about - 151.31 This means that the decreasing the
interest rate by one unit leads to increase the investment by 151.31 with all other
variables held constant. For the marginal impact of the financial allocations.
The study results and through equation 2 showed that it estimated at about 0.29 this
means that the increase in financial allocations one unit leads to increase the agricultural
investment by 0.29 with the stability of the two other variables, while the marginal effect of
GDP the study results showed that it was estimated at 0.0096 and this means that the
increase in gross domestic product ( GDP ) one unit leads to increase the agricultural
investment by 0.0096 with all other variables held constant in the equation.
6.
CONCLUSION
One of the main requirements of agricultural investment in Libya is that the agricultural
sector compared to other sectors needs a sophisticated and integrated investment
environment to decrease degrees of risk to that may face the agricultural investment
compared to investments in other sectors in order to ensure the continuity and growth.
7.
References
Abu-Kthere B. and Rbaia A.,1998 , Introduction to Economics, Cairo, Academy Library.
Al-Kodari S.,1985, Economics of investment, Port Said, Galaa Library.
, Volume XVIII, Amani Ali, third edition, 2008.
Mohamed A A.,2008, “a study of the efficiency of investment in the Egyptian agricultural
sector”, Egyptian Journal of Agricultural Economics, Volume 18.
The Ministry of Planning, 2007, the report of the implementation of the transition budget
for the year 2006, Part I and II of Tripoli, Libya.
Proceedings of 26th International Business Research Conference
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Table 2
Agricultural investment and agricultural domestic product in Libya during the period
(19770-2007)
years
Agricultural
Investment
Agricultural
Domestic
Product
Price Index
Changes in
agricultural
investment
Changes in
agricultural
GDP
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Total
Average
2.08
4.33
5.71
7.13
17.01
16.60
18.30
16.23
12.80
19.95
25.70
25.62
11.78
8.73
8.31
5.14
3.28
2.75
2.46
3.51
4.86
4.71
0.53
3.23
0.20
0.08
0.65
1.74
0.55
0.42
1.14
1.33
1.64
1.24
3.34
4.58
2.11
3.87
253.64
6.67
2.91
2.97
3.86
4.75
4.89
5.68
6.33
5.53
5.54
7.37
12.43
14.37
10.90
10.45
10.23
9.62
10.47
10.72
10.40
10.65
10.78
10.83
11.50
11.74
11.85
12.04
12.25
12.67
12.45
11.40
11.64
12.37
13.29
13.85
16.88
18.04
19.79
22.35
405.79
10.67
11.36
11.09
11.27
12.62
13.22
14.59
15.74
16.25
22.02
19.03
19.03
19.03
26.20
28.97
31.56
35.57
36.74
38.34
40.67
41.29
44.78
50.10
54.79
60.36
69.83
77.49
87.71
100.00
111.93
127.14
123.46
112.53
101.46
99.30
78.68
80.23
83.00
85.23
2002.6
52.70
2.25
1.38
1.42
9.88
-0.41
1.70
-2.07
-3.43
7.15
5.75
-0.08
-13.84
3-3.05
-0.42
-3.17
-1.86
-0.53
-0.29
1.05
1.35
-0.15
-4.18
2.70
-3.03
-0.12
0.57
1.09
-1.19
-0.13
0.72
0.19
0.31
-0.40
2.10
1.24
-2.47
1.76
6.73
0.17
0.06
0.89
0.89
0.14
0.79
0.65
-0.80
0.01
1.83
5.06
1.94
-3.47
-0.45
0.22
-0.61
0.85
0.25
-0.32
0.25
0.13
0.05
0.67
0.24
0.11
0.19
0.21
0.42
-0.22
-1.05
0.24
0.73
0.92
0.56
3.03
1.16
1.75
2.56
19.44
0.51
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Table 3
Investment rate, Return on Investment and Investment multiplier on the level of the
agriculture sector in Libya during the period (1970-2007) in millions dinars
Years
Investment rate
Return on Investment
Investment multiplier
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Total
Average
0.71
1.45
1.47
1.50
3.47
2.92
2.89
2.93
2.31
2.70
2.06
1.78
1.08
0.83
0.81
0.53
0.31
0.25
0.23
0.32
0.45
0.43
0.04
0.27
0.01
0.006
0.053
0.13
0.04
0.036
0.097
0.107
0.12
0.089
0.19
0.25
0.106
0.17
33.14
0.87
1.39
0.68
0.67
0.66
0.28
0.34
0.34
0.34
0.43
0.36
0.48
0.56
0.92
1.19
1.23
1.87
3.19
3.89
4.22
3.03
2.21
2.29
21.69
3.63
59.25
125.5
18.84
7.28
22.63
27.14
10.21
9.30
8.10
11.16
5.05
3.93
9.37
5.77
379.4
9.98
0.026
0.64
0.62
0.014
-1.92
0.38
0.38
-0.002
0.25
0.88
-24.25
0.25
0.14
0.52
0.19
-0.45
-0.47
1.10
0.23
0.09
-0.33
0.16
0.08
-0.03
-1.58
0.36
0.38
0.18
8.07
0.33
3.84
2.96
-1.40
1.44
0.93
-0.70
1.45
-5.56
-0.14
Proceedings of 26th International Business Research Conference
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Table 4
% agricultural investment to % total investments and % Agricultural GDP to % GDP in
Libya during the period
(1970-2007)
years
Agricultural
investment
Investment
of all sectors
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Total
Avg.
2.08
4.33
5.71
7.13
17.01
16.60
18.30
16.23
12.80
19.95
25.70
25.62
11.78
8.73
8.31
5.14
3.28
2.75
2.46
3.51
4.86
4.71
0.53
3.23
0.20
0.08
0.65
1.74
0.55
0.42
1.14
1.33
1.64
1.24
3.34
4.58
2.11
3.87
253.64
6.67
21.36
25.96
38.73
50.41
74.08
72.28
77.88
84.20
69.57
102.74
144.86
139.79
105.78
87.13
67.41
43.80
37.44
24.77
25.81
28.04
25.34
20.64
18.39
24.91
23.23
16.06
18.69
16.84
12.47
12.08
18.47
19.18
35.27
33.54
50.67
46.45
42.55
42.68
1799.5
47.35
% agricultural
investment to %
total investments
9.73
16.67
14.74
14.14
22.96
22.96
23.49
19.27
18.39
19.41
17.74
18.32
11.13
10.01
12.32
11.73
8.76
11.10
9.53
12.51
19.17
22.81
2.88
12.96
0.86
0.49
3.47
10.33
4.41
3.47
6.17
6.93
4.64
3.69
6.59
9.86
4.95
9.06
437.65
11.51
Agricultural
GDP
GDP
2.91
2.97
3.86
4.75
4.89
5.68
6.33
5.53
5.54
7.37
12.43
14.37
10.90
10.45
10.23
9.62
10.47
10.72
10.40
10.65
10.78
10.83
11.50
11.74
11.85
12.04
12.25
12.67
12.45
11.40
11.64
12.37
13.29
13.85
16.88
18.04
19.79
22.35
405.79
10.67
113.40
143.05
155.54
172.92
286.83
251.83
302.86
345.39
249.57
399.48
554.58
462.36
340.93
293.81
247.29
220.75
189.45
156.79
152.10
174.15
184.16
174.79
168.49
151.38
138.49
137.72
140.54
138.00
112.66
110.70
143.97
156.60
238.71
300.96
503.58
542.95
555.80
571.50
9684.0
245.84
% Agricultural
GDP
to % GDP
2.56
2.07
2.48
2.74
1.70
2.25
2.09
1.60
2.21
1.84
2.24
3.10
3.19
3.55
4.13
4.35
5.52
6.83
6.83
6.11
5.85
6.19
6.82
7.75
8.55
8.74
8.71
9.18
11.05
10.29
8.08
7.89
5.56
4.60
3.35
3.32
3.56
3.91
190.79
5.02
Proceedings of 26th International Business Research Conference
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Table 5
Endemism coefficient, Agricultural labour and capital intensification in Libya
Years
Endemism coefficient
Agricultural labour
Capital intensification
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Total
Avg.
3.80
8.05
5.94
5.16
13.50
10.20
11.23
12.04
8.32
10.54
7.91
5.90
3.48
2.81
2.98
2.69
1.58
1.62
1.39
2.04
3.27
3.68
0.42
1.67
0.10
0.05
0.39
1.12
0.39
0.33
0.76
0.87
0.83
0.80
1.96
2.96
1.39
2.31
144.48
3.80
126.00
127.00
127.00
129.00
131.4
133.4
141.2
144.9
149.9
150.1
153.4
157.6
163.1
162.00
173.00
177.00
179.00
180.00
186.90
191.60
188.90
189.60
196.60
201.20
206.00
212.70
219.50
219.20
225.10
231.15
232.20
234.25
235.60
238.40
240.51
242.3
245.5
248.3
7090.5
186.59
16.50
34.09
44.96
55.27
129.45
124.43
129.60
112.00
85.39
132.90
167.53
162.56
72.22
53.88
48.03
29.03
18.32
15.27
13.16
18.31
25.72
24.84
2.69
16.05
0.97
0.37
2.96
7.93
2.44
1.81
4.90
5.67
6.96
5.20
13.88
18.90
8.59
15.58
1628.36
42.85
Source: The Ministry of Planning, the report of the implementation of the transition budget for the year 2006, Part I
and II of Tripoli, Libya, 2007