Six years ago, Libya started contemplating the possibility
of opening up and promoting foreign capital investment
in Libya to establish small, medium and large investment
projects within the guidelines of the country's economic
and social development strategy. In order to implement
this policy, the Foreign Capital Investment Law no. 5
of 1997 and its further amendments were issued. The bulk
of the law provides a number of incentives, rights, and
guarantees solely aimed at encouraging and protecting
foreign investment entering the country. The Libyan Foreign
Investment Board was thus established, with the purpose
of facilitating foreign investment procedures. Unfortunately
this initiative was born during sanctions, and has rendered
few benefits until now. "We consider this investment
necessary to the correct development of the Libyan economy,
and the country is now open for it. In the last two or
three years we have taken the steps to help this investment.
In fact we have joint projects with foreign investors
worth several hundreds millions of dollars", says
Dr. Baghdadi Mahmudi, Assistant Secretary of the General
People's Congress for Production Affairs, a super Minister
that controls Agriculture, Industry, Fisheries, Livestock
and Water Resources.
The most active personalities promoting foreign investment
are the Secretary of the General People's Congress for
Economy and Trade, Dr. Shukri Ghanem, the chairman of
the National Oil Company, Dr. Abdulhafid Al Zlitnei,
and the Libyan Foreign Investment Board. Several investment
conferences were held in different European and Arab
countries at the end of 2001 and start of 2002, and
a growing stream of visiting foreign trade delegations,
ministers and heads of state has followed. New co-operation
agreements have been signed with China and Malaysia.
Negotiations are being held on establishing bilateral
investment agreements with France, Germany and the UK,
while agreements with Austria, Italy and Switzerland
are already in place.
But, where to invest? Until now, the oil sector has
overwhelmingly dominated the scene, either from both
the Government and the investors. This predominance,
though impossible to invert, is being readdressed by
the Government. As we said, one of the promoters of
this diversification process is Dr. Shukri Ghanem. He
defends that "Libya is a good place to invest in
producing goods for export, because Libya has a very
low tax system. It also offers cheap resources, land,
labour and energy, less straining pollution regulations,
etc. Therefore, many industries could be transferred
here to supply Europe. We are also trying to open free
trade areas and as I said before investing in infrastructure
that can be used by these investors for their industries.
Finally, Tourism can also offer a lot of potential if
the necessary investment in infrastructure is provided."
Other possibilities lie in the existing successful Libyan
companies, eager to find partners in order to strengthen
their finance, production capacity, technology and know-how.
This is the case of Libyan
Arab Airlines, one of the companies worst hit by the
embargo and who has begun to recover thanks to an extensive
reform plan, including the coming on board of investors
in the short term future. "Under the current circumstances
I think we have done a great job and we are making 92
million Libyan Dinar a month (US$ 62 million). By the
year 2003, if we acquire new aircraft, income will be
doubled, even surpassed by 20 million. We have a good
potential market in Libya, with a lot of travellers coming
in and out of the country and it looks very promising",
explains Cap.
Fathi Shatti, the new chairman of the national carrier.
Finally, the establishment of various free zones presents
a promising field of investment. These free zones hold
certain incentives for foreign investors and are meant
to attract as much FDI as possible. Some of the incentives
include the free repatriation of invested capital and
gained profits and the movement of capital and products
between the free zone and foreign countries would not
be subject to monitory regulations or restrictions.
The companies operating in these Free Zones are also
offered a five-year income tax exemption, which may
be extended by three years with an additional allowance
to transfer losses suffered during exemptions to the
following years. The legal protection of the investor
is also ensured in these zones. There are legal guarantees
against the nationalisation of projects established
in the free zones. Machinery, equipment and other necessities
for projects in the free zones may be imported without
being subject to customs duties.
 Foreign Trade
and Private sector development |
During the sanctions, Libya was isolated from foreign
trade and its population was not able to enjoy foreign
goods, but through the black market. At the same time,
the Government implemented several trade barriers to protect
local industries and its products from foreign competition. |
This is still
true in certain areas that the Government consider of
strategic importance, such as oil, petrochemicals, iron
and steel, etc. But during the last year an impressive
turnaround was made in the sense that most trade barriers
were lifted and the Libyan economy started to benefit
(and suffer) from a free trade policy. The consequence
of this were the waves of foreign products flooding the
Libyan markets. Libyan authorities combined these measures
with an impulse of the until now neglected private sector.
The most important Libyan businessmen are now involved
in the import/export business, which is bringing to a
virgin market products and brands that the relatively
wealthy Libyans are eager to buy and for which they would
pay any price. One good example of this new trend is the
shopping mall dedicated to sportswear, perfumes and furniture
that shows proudly the Adidas brand in its façade,
in a country were brands were completely forbidden just
a couple of years ago.
The Secretary of the General People's Congress for Economy
and Trade,
Dr. Shukri Ghanem, explains this incipient private
sector as a healthy sign of the Libyan entrepreneurship:
"Libya has traditionally been a country of traders,
merchants, and entrepreneurs. We have the cultural heritage
of the Mediterranean traders and the caravan traders.
More recently, prominent Libyan businessmen have carried
out very important projects that have produced very good
profits in few years. Now it is starting to flourish again.
How to help this movement? This is what we are discussing
now."
For this purpose, several initiatives have been taken
between the Economy and Trade Ministry, the Libyan Union
of Chambers of Commerce, Trade and Industry and the
Libyan Foreign Investment Board, one of them being the
creation of the Association of Libyan Businessmen. "Our
aim is first to draw the attention of the executive
organs of the State for what should be done to ease
the export procedures and secondly to keep in touch
with their counterparts in trade transactions,"
explains Mr. Abdurrahman Shatter, chairman of the Union
of Chambers and one of the supporters of the initiative.
The ambitions of the increasingly influential Union
do not stop there: "The Union has a new vision
for the bilateral relations and commercial exchange
with the friendly countries. It is working to enhance
cooperation with other countries up to a level where
the there will be a positive trade balance for Libya.
In other words, we do not have to be just receivers,
importers, and a consuming market. We would like to
concentrate in the future on the areas of high technology
and advanced industry, agricultural production enhancement,
education and professional training, know how transfer
and management modernization," asserts proudly
Mr. Shatter. This will prove to be a very difficult
challenge for the Libyan industry, because as Dr. Ghanem,
the Minister of Economy and Trade acknowledge, "We
have a public sector that has delayed the Libyan economy
and the Libyan investor and the performance of it is
very sluggish. It has always been protected behind the
walls of trade barriers, it is not cost-effective and
it is not competitive. Even those who have the possibility
to be competitive they have not taken advantage of it.
Now let's see what happens when the trade barriers are
lifted. It would make no sense giving subsidies to not
competitive companies. We need competition because we
need the testing of our industries, our products. Anyway,
I don't believe in a fierce competition that will waste
too much money and efforts in a price war, for example.
The competition should be let's not say regulated, but
scrutinized, controlled."
The final aim is to connect the Libyan economy to the
world's trade and investment flows, to the globalisation
stream. And one very important step in this direction
will be the accession to the World Trade Organization,
ambitioned by the Libyan Government. Although they have
not even entered the pre-negotiations phase, in part
due to some political pressures from other countries,
the goal is clear, they are moving towards it and they
are confident of the final positive result. "We
are working very hard in order to prepare the country
for this organization," explains Dr. Ghanem, in
charge of the issue. "There have been a lot of
changes in the legislation, we have created a number
of committees that look very closely to our regulations
and laws to make sure that they comply with the requirements
of the WTO and propose the changes needed. We are preparing
ourselves "a priori". For example we have
regularised our exchange rate and this was a big step.
We have removed all the import and export licenses and
some of the restrictions. We are also trying to promote
the involvement of the private sector in the economy,
and all these measures will facilitate our membership,"
concludes.
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