TRIPOLI (AFP) -Thirty years after officially proclaiming itself socialist, Libya is gradually opening up its banking system with a string of privatisations in the works and the establishment of foreign banks.
After mending its ties with the West and shaking off sanctions that made it a pariah state for the best part of three decades, Moamer Kadhafi’s “Jamahiriya” is jumping on the bandwagon of economic reform and globalisation.
Neither he nor Seif al-Islam — Kadhafi’s London-educated son and heir apparent — have publicly announced liberalism as the regime’s new doctrine, but the first privatisation is already under way.
In late January, the Central Bank of Libya announced its intention to sell a minority stake in one of the north African country’s five state-owned commercial banks — Sahara Bank — to a “leading international financial institution.”
And last week Seif al-Islam announced plans to privatise the country’s mobile phone sector as part of a programme of wider economic reforms.
For the banking privatisations, the central bank said that the move was part of “a comprehensive strategy to modernise the financial sector” which “calls for a progressive opening of the Libyan financial market to both domestic and foreign investors.”
Experts say banking giants such as Britain’s HSBC, France’s BNP Paribas, Citibank of the United States and Bahrain’s Arab Banking Corporation could be in the running for the estimated 20 percent stake, although none of them has yet confirmed an interest.
Sahara Bank, which has 44 branches nationwide, “isn’t exactly the most prized gem in world banking, considering the state it’s in, but whoever clinches the deal will retain the first-comer’s edge,” a Tripoli-based foreign banking expert told AFP.
The central bank launched its modernisation programme in partnership with McKinsey, a US management consultancy, and appointed French investment bank Rothschild to supervise the first privatisation.
It said the sell-off of the four other commercial banks — Wahda Bank, Gumhouria Bank, Umma Bank and National Commercial Bank of Libya — would also be considered.
Together with the Sahel-Saharan Bank of Investment and Trade — partly owned by the Sahel states — the group of five together control around 90 percent of banking assets, forming a highly concentrated sector.
France’s Calyon corporate and investment bank last year became the only international heavyweight to formally establish itself in Libya. It has since financed a major maritime project.
“The country doesn’t need money, it has plenty,” according to Calyon’s representative in Libya.
“Rather, what it needs is advice on its many development projects in order to speed them up and increase their efficiency.”
BNP Paribas and HSBC — which has already entered the Libyan market with its subsidiary British Arab Commercial Bank — are expected to open formal representative offices in Tripoli soon.
To justify abandoning the strict policy of state control, Kadhafi drew a comparison last year with Malaysia, which he said had successfully become a tiger economy while remaining a conservative Muslim state.
After years of embargo, the liberalising of imports has generated a retail surge and brought with it a new taste for consumption which require new financing and payment methods.
Credit cards appeared in the country of 5.7-million people two years ago, following a partnership deal between Visa and the Bank of Commerce and Development, which now has 22 cash machines nationwide.
Gargaresh Avenue, Tripoli’s most exclusive street, is flanked with a string of shops packed with modern globalised goods that were unavailable until very recently.
But the International Monetary Fund stressed in a recent report that Libya’s transition to a market economy was in its very early stages.
“While progress has been made in recent years to liberalise the economy, it remains largely state controlled and not diversified,” said the report published in April 2006.
“Three quarters of employment is still in the public sector, private investment is minuscule (two percent of gross domestic product), and the oil sector remains dominant.”