Business in Libya: Don’t rip us off

Business in Libya: Don’t rip us off

AS THEY bounce around Tripoli in beat-up cars on potholed roads, past peeling colonial facades and breeze-block houses, Libyans often rue their country’s misspent wealth. “This should be like Dubai,” they say. Owing to decades of quixotic rule under Muammar Qaddafi, it is not.

And it won’t be soon, despite the lifting in December of a wartime UN freeze on an estimated $168 billion of the former regime’s funds held abroad. With the world’s eighth-largest oil reserves and the removal of Colonel Qaddafi’s stifling controls, Libyans hope that foreign investment will bring rapid economic development. They will have to be patient.

The physical damage from seven months of fighting is mostly slight, but it will take time to build the administrative capacity as well as the political skill to contain the exuberance of an estimated 250,000 militiamen who took up arms, and still often brandish them in public. The interim government, the National Transitional Council, says it hopes to have a functioning national army and police force by the spring.

“If there’s no security, there will be no law, no development and no elections,” says Mustafa Abdel Jalil, the council’s head, complaining that too many Libyans are taking the law into their own hands. Authorities in the capital, Tripoli, have demanded that militias from other towns withdraw, leaving the city under sole command of its own, Islamist-dominated force.

But this has not yet happened: in a serious incident on January 3rd, militiamen from Misrata, a town 200km (125 miles) to the east, which suffered the bitterest fighting of the war, clashed with local gunmen in central Tripoli, leaving four people dead. The militia in Zintan, south-west of the capital, still refuses to hand Saif al-Islam Qaddafi, a surviving son of the fallen dictator, whom they captured in November, to the central government. Human Rights Watch, a New York-based lobby that chastised the old regime, now inveighs against the new regime for failing to give the younger Qaddafi his basic rights.

Public impatience is growing, and not only because of the lingering presence of armed men. Bound by regional and tribal loyalties, many Libyans accuse the council of favouring particular tribes and regions, of failing to act decisively or purge Qaddafi loyalists thoroughly enough, and of excessive secrecy. The council has struggled to respond, saying that some decisions must wait for an elected government, but promising greater openness. It says it will decentralise government away from Tripoli towards cities such as Benghazi and Misrata, which demand recompense for years of neglect and greater wartime sacrifice. Yet some Libyans say that shifting ministries far from the capital would be a sop to regionalism that may prove costly and inefficient in the future.

Still, life is easier since the fighting stopped in October. Scheduled commercial flights leave from Libya’s main airports. Telephone links between east and west, severed since the start of uprising in February, have been reconnected. Internet providers are coming back online. It is still tricky to get cash; exchange rates fluctuate. But ministers note that in the capital they have restored electricity, water, sewerage and—most of the time—security.

Yet more-entrenched obstacles to foreign investment persist. Libyans prickle at the notion of their country being treated like Iraq or Afghanistan, where the foreign powers who intervened militarily won fat reconstruction and security contracts in the ensuing chaos. Keen to ensure that Libyan businesses do well, that the government gets value for money and that dealings are seen as legitimate by a people weary of corruption, officials say that large contracts will not be awarded until after elections later this year. For the time being they are rationing business visas. Private security companies are also unlikely to make big money here, having been all but outlawed: non-Arab, non-Muslim mercenaries with guns are not what Libya needs or wants.

Some sectors need investment so urgently that contracts can be won straightaway, though foreigners are encouraged to invest or team up with Libyan firms rather than operate alone. Some foreign companies have signed short-term deals to rebuild roads, hospitals and schools. Libya Insurance companies and banks willing to work without paying huge risk-premiums and to give credit may also be welcomed with open arms. Big Western oil companies with an existing footprint are already back at work. Having plunged below 50,000 barrels a day (b/d) at the peak offighting, Libya’s crude production is already pushing 1m b/d, and is expected to return to the pre-war level of 1.7m by June or so.

Those who hope to win big construction, infrastructure and oil deals next year are quietly cultivating relations with the transitional government, though some oil companies are chafing because the new people at the head of the National Oil Company bargain just as hard as the old lot. The government strongly favours working with firms from countries that backed the uprising that toppled Colonel Qaddafi. So Qatari and Turkish business delegations have been feted; Russian and Chinese visitors have been greeted frostily.

The finance ministry is reviewing all contracts signed under the previous regime; the most corrupt will apparently not be honoured. Some construction companies may have to abandon half-finished projects. So will some oil and gas companies. Some energy giants close to the Colonel may find themselves shut out entirely.

(Source: The Economist)

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