According to the BBC, the Porter report is part of a concerted effort on the part of Libya to liberalize its economy and bring about greater prosperity:

Dr Mahamud Al-Ftise, head of the Privatisation Agency, ... is very clear about the advantages (of privatization)..."The first thing is to increase productivity, second is to widen ownership, third thing is to introduce competitiveness so Libyan people will be competitive in their own country and outside," he said. There are signs the government is getting serious about competitiveness now, and the Gadhafi Foundation commissioned the eminent economist Professor Michael Porter of Harvard Business School to set out the priorities for restructuring. Last month, he presented a surprisingly frank report, and although it has not yet been published, the BBC has seen a copy. It's considered by many to be the first realistic assessment of Libya's problems, a country where viscous bureaucracy has meant the vast majority of proposed foreign investment deals have fallen through, while exports from countries like Britain are actually falling. One sign of progress is that company shares are now being traded. The Libyan Stock Market opened two years ago and now has five stocks. It's an unsophisticated set-up; there are no market makers, no brokers, and it's not yet computerised.

An article in the Economist entitled "Change is in the air but happens slowly on the ground" noted that while Libya is still very much an authoritarian state and economic basket case, a discernible shift is underway, a shift taking place amid the back drop of political and foregin policy changes:

From 2003 until his removal this week, a respected American-trained economist, Shukri Ghanem strove, as prime minister, to shift policy towards free trade, privatisation and greater openness. As a result of all this, shoppers in Tripoli, the capital, no longer queue for rations in state-owned stores, but choose what they like from well-stocked private markets.

Draconian laws still bar Libyans from speaking openly with foreigners, criticising the leader or setting up political parties. All foreign publications are effectively banned. But the isolation that lasted for two decades has begun to crack. Satellite dishes and the internet open windows on the world. Mr Qaddafi's second-eldest son, Seif-ul-Islam, provides a further impetus for change. Among other liberalising moves, he has hired a team of international consultants, led by Michael Porter, an economist from America's Harvard University, to detect symptoms and suggest cures. The group's hard-hitting preliminary report, out last month, got an encouragingly warm welcome.

The article continues noting that one of the biggest stumbling blocks on the path of reform is Qaddafi's infamous "Green Book" :

In fact, it is hard to identify any institution that works well, aside from the ubiquitous security services, which have handily blocked at least a dozen coup attempts. The peculiar structure of the state lends itself to bumbling. Officials declare that their form of government is unique, reflecting the theory of direct but non-representative democracy expressed in Mr Qaddafi's 120-page “Green Book”. Every citizen is expected to join in taking decisions via “popular committees” at local, regional and national level, with powers over such things as business and building permits. But these compete with a raft of other bodies, such as “revolutionary committees” and multiple shadowy security agencies.

Commentary

Of all of the unsettled questions in the social sciences, none is perhaps more hotly debated or more desperately in need of definitive resolution than this one: What is (or ought to be) the relationship between the state and the economy. While empirical evidence continues to mount in favor of less centralized control of the economy as the best way for creating wealth and accelerating economic growth, just how much or how little state planning is optimal remains open to speculation.

Also open to speculation is the motivation for Colonel Qadaffi's new found embrace of capitalism. Could it be the years of diplomatic isolation coming "as a result of Gaddafi's refusal to allow the extradition to the United States or Britain of two Libyans accused of planting a bomb on Pan Am Flight 103 over Lockerbie, Scotland?"

Could the Colonel been brought to his senses by these remarks made by Britain's Libyan ambassador in the run-up to the March 2004 state visit by Prime Minister Tony Blair?

"35 years of total state control of the economy has left them in a situation where they're simply not generating enough economic activity to give employment to the young people who are streaming through their successful education system. I think this dilemma goes to the heart of Colonel Gaddafi's decision that he needed a radical change of direction."

Perhaps we will never know the reasons for Qadaffi's change of heart. One thing is for certain, however: it is extremely ironic that the man helping to effect the Colonel's conversion, the man spreading the good news of the economic gospel is a former Reagan economic advisor. Anyone over 30 years old probably remembers that there was no love lost between the late President Reagan and Colonel Qadaffi.

Reagan once called the Qadaffi "The Mad Dog of the Middle East" and tried in 1986 to kill the Colonel by bombing the Bedouin tent where he frequently slept, entertained guests, and which he used as a command post. The attack was precipitated by Libya's alleged involvement in the bombing ten days earlier of a West Berlin disco frequented by US servicemen.

The Mad Dog outlived The Gipper, about this there is no denying. But when you hear people like Captain Mohamed Bubeide, the Libyan entrepreneur who founded that nation's first private airline extol the virtues of privatization, when see people like Michael Porter advising the government on link between privatization and competitiveness, when you find a Dr Mahamud Al-Ftise as the head of the Privatisation Agency and he isn't accorded an honorific like "Guide of the First of September Great Revolution of the Privatized People's Libyan Arab Jamahiriya", then you know Qadaffi didn't outlive Reagan's legacy.

Update: Historian Victor Hanson has a fascinating and informative post entitled "Libya Awake Again." Here's an excerpt:

International commerce, instant global communications and high technology have created a thin veneer of sameness that has spread among millions across the world. Yet, so far, the Middle East has been largely immune to the accompanying liberalization of politics and freedom that has slowly followed open trade and free markets elsewhere.

In Libya, however, something small is awakening. Cell phones are everywhere. Unlimited access to the internet and unrestricted satellite television are taken for granted. A once isolated and stagnant country is scrambling to provide private hotels and facilities to lure in an international business class. After the U.S. invasion of Iraq, Libya gave up its program of weapons of mass destruction.

Indeed, after Saddam Hussein was deposed, the United States was supposedly disliked worldwide, its efforts at democratization stalled in the bloodshed of the Sunni Triangle. Yet here in Libya at least, people have been friendly to me and the Americans I'm traveling with — and seem ready to resume relations and surprise Westerners with their newfound access to the outside world.