In the wake of the Libyan Revolution that overthrew the autocratic government of Colonel Muammar Gaddafi in 2011, the country is still struggling to bring about political stability and maintain security. However, there is significant cause for optimism in Libya given its relatively small population and strong economic fundamentals which are underpinned by a young workforce and significant natural resource wealth.
However, the General National Council (GNC) that currently governs Libya has major challenges to overcome. Whilst the GNC, unlike the interim Transitional National Council, established in the midst of the uprising, enjoys a degree of popular legitimacy as a result of the July 2012 election which brought a coalition government to power issues of control still remain. Other issues that must be addressed include reigning in the power of the militias that continue to exert significant political pressure, establishing the rule of law throughout the country, reducing high levels of unemployment and stemming labour protests, improving institutional capacity, clarifying business legislation, reducing bureaucracy and improving domestic security.
UK- Libya Relations
Britain was a key ally to anti-Gaddafi forces during the armed uprising in 2011, and the historically difficult relationship with Libya whilst it was under the rule of Gaddafi has been transformed since the uprising. In addition to being a key ally to the rebel movement, since Gaddafi’s overthrow the UK has provided political, technical and financial support to Libya’s interim administration. Following the visit of UK Prime Minister David Cameron to Libya in February 2013 agreements to cooperate and increase trade were signed in relation to health, education and ICT. Official statistics show that exports from the UK to Libya between January and February 2012 were £187m, up 117% from 2011 when they were £86m. Imports from Libya during 2012 were £1.6bn, up 293% from £419m in 2011.
The Middle East Association has been at the forefront of supporting the UK government’s ambitions to grow trade between the two nations, with MEA Director General Matthew Smith and Melusine de Chazal (Head of Projects & Government Relations at the MEA) taking one of the first trade missions to Libya in December 2012. The mission leader was Ken Clarke MP, Minister without Portfolio, reflecting the strong priority which the British government attaches to developing business relations with the country. It comprised 26 delegates representing 22 companies and organisations from sectors including healthcare, education, defence, design and engineering, aviation services and oil and gas equipment. The MEA has since taken two missions to Libya and organised a series of briefings and workshops highlighting routes to market and opportunities in the country. Future events and missions are scheduled.
The security, contacts and market expertise which MEA trade missions provide were greatly appreciated by delegates, with feedback corroborating this:
“The Mission has been a resounding success and I would not hesitate to recommend future MEA Missions to others,” said Robin Brown, Managing Director of WS Atkins & Partners Overseas. “Doors were opened and access granted to senior decision makers.”
“The trip was very worthwhile – we look forward to a further trip out to consolidate and extend our contacts,” said Tom Coates, Technical Director, Engineering at HR Wallingford. “We feel well placed and well informed, and we found the new Libyan officials to be very eager to meet us and discuss future opportunities.” A very positive sign for the development of future business relations between the two countries.
As a result of 42 years of Colonel Gaddafi’s despotic rule, businesses looking to operate and invest in Libya are likely to face a variety of challenges and should be prepared to be patient and play the ‘long game’. The World Economic Forum’s (WEF) 2012-13 report on Global Competitiveness ranks Libya 113th out of 144 countries considered, with ‘inefficient government bureaucracy’ being the biggest obstacle to doing business in Libya. ‘Corruption’, ‘access to financing’, an ‘inadequately educated workforce’, ‘inadequate supply of infrastructure’ and ‘policy instability’ were also listed as the most problematic factors for doing business. Libya scored particularly poorly on indicators such as ‘health and primary education’ where it was ranked 121st /144 and in areas such as general business innovation and sophistication (127th / 144).
Despite the challenges facing Libya as it rebuilds and begins to establish a private sector that was non-existent prior to the uprising, the scale of the opportunities for firms willing to invest time, effort and money are significant. Visiting the country and forging relationships ‘on the ground’ is a must. Libya is the only country in the world considered a single ‘high value opportunity’ by UKTI who estimate that Libya will eventually spend up to £125bn on reconstruction.
Due to Libya being a post-conflict frontier market, the current business environment favours companies with a higher appetite for risk and who provide essential services, with sectors such as oil and gas, IT, power and utilities, telecoms and healthcare being of particular relevance. Firms that can provide education and training are also in demand. British firms are likely to face competition from regional MENA businesses who speak the same language and enjoy proximity to Libya, as well as from other EU countries (notably France and Germany) in addition to Korea and Turkey – the latter being a major investor in Libya.
Libya has Africa’s largest proven reserves of oil (47.1bn barrels) and is an important exporter of gas, with reserves of 52.8 trillion cubic feet (Tcf). Whilst the uprising led to Real GDP shrinking by 62% in 2011, the restoration of oil production in 2012 led to growth surging to 104% in 2012 and the budget recording a surplus of 20.8% of GDP. In their latest May 2013 Article IV Consultation, the IMF predicts that Real GDP growth for Libya in 2013 will be 20.2%.
Please contact the Middle East Association directly for contact information.