Uncertainty hampers business in Libya

During a recent lunch at the upscale Lamma cafe along western Tripoli’s beachfront, two dozen European expatriates greeted each other as old friends, squealing in delight at seeing colleagues return to Libya for work after a year of tumult that sent many abroad.

“A lot of the previous foreign companies and employees are slowly but surely re-entering the market and are happy to be back,” said Louise Gatt, a Maltese national who runs a private school and a travel business. “For many, Libya is not only a work place but also a place called home.”

But while a smattering of foreign business people are trickling back, there’s been little discernible uptick in business except the oil industry, say diplomats, merchants and Libyan officials. And new deals are almost non-existent.

International businesses flooded Libya in recent years to take advantage of the oil-rich country’s commercial opportunities. A Nato-backed war to overthrow Col Muammer Gaddafi plunged the north African nation of 6m into chaos and sent foreigners fleeing.

In recent weeks business delegations from across the world have found their way to Libya. China is seeking to resume operations for 26 companies in 50 projects worth $19bn in the real estate, rail, oil and telecommunications industries. France’s one-day trade mission included representatives from oil giant Total and the Alstom engineering group. Canada’s team included representatives of companies such as Talisman oil and gas, Dessau engineering and construction, and Canadian Helicopter.

The UK’s Middle East Association has scheduled a trade mission in the coming weeks, coinciding with oil and gas and infrastructure expositions in Tripoli, to pursue potential multibillion dollar deals. More than a dozen small business delegations from the UK have already visited. Areas of interest include healthcare and education as well as oil and gas.

“There are some areas where they clearly need some new equipment urgently like healthcare,” said a senior western diplomat in Tripoli. “But for the most part, it is resuming suspended contracts.”

Libya’s energy sector alone needs an estimated $30bn in improvements to bring it to its full potential, according to the head of the French delegation. Its sea and airports, healthcare system and transport infrastructure need tens of billions of dollars in improvements. Its retail, telecommunications, education and tourism sectors are also badly outdated.

But for now the foreign delegations mostly sweep through town, filling up the city’s five-star Radisson Blu, Corinthia and Rixos hotels for short stretches, before departing. Frightened off by continued instability and a murky political course before elections in June, business activity remains moribund. And outside of the oil business, which is inching back up to pre-war production levels, few of those who were here before are doing more than minding the shop.Their bosses want skeleton presences in the country to keep an eye on their investments and tabs on competitors.

“There will be partial paralysis until there’s a legitimate elected government,” said an official of a western security and risk assessment company in Tripoli.

“It’s going to be very hard to get any of the reforms people are expecting to see: laws governing investment, registration of companies,” he said. “Companies want to know, ‘Should we be doing it under old rules or doing it under new?’ A lot of companies have presences here but aren’t operating.”

The challenges for conducting business in Libya under its old rules are daunting. Regulators required companies to hire large proportions of Libyan workers and managers even if they were unqualified. Land ownership was impossible. Even majority ownership in joint ventures did not translate into authority over strategic decisions. Many of the rules could be circumvented with a well-placed bribe.

The country’s top officials say they know they have to change the regulations soon, but are waiting for an elected government to make such decisions. For now, they are concentrating their limited resources on getting large infrastructure projects back up and running rather than drumming up new business.

Some business is flickering back to life.

Distributors of consumer goods and even small industrial products such as tools and lenses have made a slight comeback. But a cash crunch that has spurred a 750-dinar ($605) monthly limit on bank withdrawals has curtailed consumer activity.

The representatives of foreign companies who have begun heading back to the capital since mid-January also say they often find it difficult to get simple things done.

New mobile phone cards have been unavailable for months except through the black market. No Libyan knows how to operate the machines that produce the chips. Power cuts have become endemic in western Libya, especially Tripoli. Internet service is slow and patchy.

“The country has just gone through a great ordeal to say the least and after 42 years of the same system in place change is always difficult to deal with but manageable given the right tools,” said Ms Gatt.

The infrastructure problems are fuelled, ironically, by Libya’s long-time dependence on foreign expertise reluctant to return.

“What’s lacking is the companies coming back and doing what they used to do,” said David Bachmann, commercial counsellor of the Austrian embassy in Tripoli. “But everywhere they come back, it’s the same problems.”

Of 25 Austrian companies that operated in Libya before the uprising 13 have returned, two of them in the oil sector and the other 11 with mere skeleton presences.

Now that a fairly robust schedule of flights between Tripoli and Europe and the Middle East has resumed, many of the expatriates spend alternating weeks at home and in other countries.

“Many businesses have temporary accommodation until they are certain where they want to be located and are able to bring in their employees phase by phase,” Ms Gatt said.

Aside from seaside lunches, representatives of companies here bide their time building new contacts with the transitional government. But those same officials could be thrown out by the next government, or ejected in 2013 elections based on the new constitution.