Libya’s unelected interim government, in place since late 2011, finally stepped aside last week as the new cabinet led by prime minister Ali Zeidan moves into power.

The formation of a new government took longer than expected, with the first elected prime minister, Mustafa Abu Shagour, twice failing to have his cabinet proposals approved by the General National Congress (GNC) before being removed in a vote of no-confidence.

Zeidan, a former lawyer, then won another run-off to become prime minister and subsequently get the green light from the GNC for his proposed cabinet.

Even so, however, last week’s handover ceremonies only involved 20 ministers, with a further eight either barred from taking up their positions by the Integrity Commission, which was tasked with investigating their pre-2011 role under the Gaddafi regime, or still under scrutiny by the body.

A ninth minister, Sami Saadi, who had been placed in charge of martyrs' affairs, resigned in protest at the lack of former fighters represented in the new government.

Despite the delays and hiccups, the handover marks a significant step in Libya's post-conflict transition and one which many hope will pave the way for the resumption of public-sector capital spending, which has been largely frozen since last year. Many local and foreign businesses are keen to see the new government speed up the review of pre-2011 contracts, approve outstanding payments and resume half-finished infrastructure or transport projects. 

Perhaps the key challenge facing Zeidan's cabinet is exerting the power of the state over parts of the country which are still essentially self-governing. The security situation remains fragile in many areas, and developing a strong police force - as well as persuading militias to integrate into the armed forces or disband - will also be vital in improving both the business and security environment. 

Labour unrest has also picked up in recent months, especially in the oil and gas sector, with public-sector workers demanding improved pay, conditions and greater localisation of company management. In many cases, protests and sit-ins appear to have been successful in extracting concecssions from the government, which despite now collecting pre-war levels of oil revenue is heavily burdened with salary and subsidy payments.

And despite the relatively smooth transition to an elected body, Zeidan’s government is only expected to be in place for somewhere between a year and 18 months. During this time, it will also be charged with overseeing the drafting of a new Libyan constitution to set out the longer-term political structures governing the country and pave the way for a fresh round of legislative elections sometime in late 2013 or early 2014.

In terms of its political roadmap Libya is following in the footsteps of neighbouring Tunisia, which after overturning President Ben Ali in February 2011 went on to hold legislative elections in October last year. It is currently finalising a new constitution, and plans to hold a new round of elections next spring to elect a full-term government. 

Libya’s path will doubtless be bumpier and slower-moving than Tunisia's, but last week's transition to an elected body should certainly be seen as an encouraging step.