The Productivity and Technical Efficiency Investigation of the Libyan Iron and Steel Company

by Alhadi Basher Alhadi

Abstract

This is a study of the Libyan iron and steel industrial sector represented by the only company operating in the country under the name of Libyan Iron and Steel Company (LISCO). The study focused on the technical efficiencies and productivity performances of the industry during a period of 16 years, taking into account the period of economic sanctions and the liberalised economy.

The main objective of the study was to observe differences in efficiency and productivity levels during the two periods with a view to identifying the underlying characters and features of the industry. The main approach adopted was a quantitative method in which secondary data relating to production and financial performances were collected. This was supplemented with a qualitative approach using case study methods that included interviewing important personalities and holding focus groups sessions.

The Data Envelopment Analysis (DEA) method was used in the data analysis. This was supplemented with regression analysis using SPSS. The objective was to explain the effect of productivity and efficiencies on the performance of this industrial sector. Overall, the quantitative and qualitative research findings showed that there were distinctly different levels of performance during the two periods, as well as an overall improvement in the technical efficiency and productivity growth during the period of the study as a whole. It can be concluded, therefore, that the source of total factor productivity growth for the steel company over the study period was contributed by technical change (TC) with new technology employed rather than efficiency change (TEC).

The qualitative study indicated that human capital played an important role in contributing towards productivity and efficiency improvement especially during the period of closed economy. However, even though all plants experienced an increase in productivity, not all of them were equally efficient. The study suggests that changes in government policy towards an open market have resulted in an increase in the company’s efficiency. Therefore, several useful policy implications involving the LISCO were deliberated. In particular, some policies were suggested to improve the efficiency of the company.

It is suggested that future research could include a more robust study of efficiency and productivity, as well as a study tracking the continuing impact of market liberalization on the future direction of the iron and steel company in Libya.

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