London, Asharq Al-Awsat – I have not commented on Libya for a long time but it is back in the minds of many; this time for the wrong reasons. So maybe this is a good time to take a look again. My company, Altra Capital, used to undertake complex consultancy commission to help Libyan organisations to improve the management of businesses and the operation of infrastructure in Libya. We keep a close eye on the country’s progress and will re-enter at the right time. We have been discussing investment in Libya with a London-based team of bankers and experts. That team plans to invest again – but not until the circumstances improve.
UK Trade and Investment now has a full team in place in Tripoli which focuses its efforts on engaging with the new Libyan authorities and other key decision makers. UKTI is seeking to identify business opportunities for British companies. UKTI is the British Government’s department that works with British businesses to ensure their success in international markets, and encourage the best overseas companies to come to Britain to invest.
British Expertise, the leading UK private sector organisation for British companies offering professional services internationally, is taking its third trade mission in 12 months to Libya in the New Year. UK Export Finance (the British Export Credit Agency) was the first major ECA to resume cover for Libya with $250m in support available. This support will help British businesses play their role in assisting the people of Libya build the future they want and richly deserve. It is extremely good news to see a major government provide its Export Insurance Policy to promote investment into Libya.
That however is the positive side. When I hear people saying that Libya needs everything and the market is there, but you have to be quick, that everyone is competing to do business, I think “What rubbish!” Entering contracts without proper due diligence and thorough investigation is usually not such a good opportunity as it might seem. Of course there are those who want to make a quick buck, but most companies want a long and mutually beneficial relationship. The real situation is that there are long-term opportunities but they will stay long-term until short-term volatility stops.
Much of the world needs a massive scale of investment in infrastructure over the next few years. The IFC has indicated that the Middle East and North Africa region has the lowest amount of private infrastructure investment in the world.
But all countries are in competition for a limited international pool of advisors, capital and operators. In amongst this agenda is Libya’s reconstruction, which is estimated to require between US$200bn and US$480bn over ten years. This is creating huge potential opportunities for construction companies. Reconstruction priorities will include public and social infrastructure that provide crucial services, such as healthcare, education, electricity and water supply. Many are looking to get a head start and curry favour with the new leaders, but investment will not automatically follow.
Repairing transport infrastructure will be crucial to getting the economy back on track, especially to serve oil exports. Over the long-term, an overhaul of Libya’s infrastructure sector will be required. The country’s infrastructure was already in a bad state prior to the civil war, following years of underinvestment and international sanctions. Work to rehabilitate existing infrastructure and expand its scope is therefore necessary. However, the government has no structure in place through which to procure projects; therefore, institutions and regulations will need to be established. Developing a Cabinet is essential, but last week Libya’s ruling congress threatened to dismiss the new prime minister if he fails to name his new Cabinet by October 8. It is expected that he will.
Benghazi is a major oil port but many foreigners working there were evacuated after the recent attack on the US Ambassador. Even before that, the city had seen several attacks on Western missions and organisations. That is not conducive to people investing.
The main concern about short-term volatility comes in the form of the on-going security concerns which have greatly affected investor confidence in Libya, but the new government has prioritised immediate security concerns and arms control, which is encouraging for the long-term. Establishing security in the country is proving elusive with the proliferation of weapons and the presence of rival militias. The security forces under the state’s direct control are very limited.
International investors need reliable access to and from the country so recent events have not been a great advertisement for Libyan aviation. A power cut shut down Tripoli International Airport for more than 12 hours in early September, an unannounced strike by air traffic controllers a week later caused long delays to flights, forcing cancellations and diversions. The two state-owned carriers, Libyan Airlines and Afriqiyah Airways (which I have used many times in the past and found excellent), are banned from flying their own aircraft to EU destinations until late November, meaning that many pre-war routes to and from Libya are still not operational. Afriqiyah has resumed a three times-weekly Tripoli-London Gatwick service using leased planes and crew, although it is still impossible to book flights online.
On the positive side Libya had been making progress in trying to attract foreign investment and stimulate its private sector: officials have been working to update a 2005 banking law which first allowed foreign banks into the country and have plans to introduce Islamic banking. The Libyan Stock Market has wanted to attract more foreign investors to trade shares since it reopened in March after closing during the war; but says rules on bringing funds into the country need to be relaxed.
These are real and important issues. For real investment confidence there must be a prolonged period of stability and sustainable evidence that these problems have been addressed and will remain in the past.
International oil companies were the first to return to the country after the uprising, helping oil production return to almost pre-war levels of 1.6 million barrels per day. But recovery has been prone to setbacks: in July around half of Libya’s oil-exporting capacity was temporarily shut down after protests by groups demanding more autonomy for eastern Libya. Libya is aiming on raising that to 1.8 bpd in the coming year and is targeting 2 million bpd by 2015. When completed, export capacity is expected to rise by 100,000 bpd.
The International Monetary Fund forecast in July that Libya’s gross domestic product would double this year after shrinking 60 percent last year, helped by rebuilding and the release of pent-up private demand.
The country is home to an educated population and a considerable oil and petrochemicals industry.
The general conclusion reached is that while Libya has a clear potential to emerge as a peaceful, democratic and prosperous member of the international community much work remains to be done in stabilising the current security situation. The most pressing priority for Libya’s new government is to stabilise the security situation by disarming the militias and providing them with the opportunity to either join the emerging Libyan armed forces, or to be assisted in their search for productive work.