Rebels vow to open up Libya to investment

The international airport outside Benghazi has been eerily quiet since the February uprising.

Aged MiG fighter jets hurriedly rescued from the scrap heap by an opposition air squadron stand idle alongside passenger aircraft while Nato maintains the UN-backed “no-fly zone”. Only humanitarian flights use the runway for Libya’s second-largest city now, airport officials say.

The torpor may be about to change. In a further sign of the international community’s recognition of the rebel government, Turkish Airways says it intends to resume flights to Benghazi from Istanbul within weeks.

At issue is more than just communications. Beyond the dusty landing strip, a new but as yet half-built passenger terminal stretches along the horizon. In 2008, Aeroports de Paris, a French operator, and SNC Lavalin, a Canadian contractor, closed deals to build and manage a €350m terminal, part of a national aviation upgrade.

Three years on, pro-democracy rebels who have taken over eastern Libya say they hope development projects will move forward again soon. As the pressure mounts on Muammer Gaddafi, the embattled leader in Tripoli, to step down, his opponents promise to open the whole country to unprecedented levels of foreign investment.

Foreign investors who came to Libya before the uprising have nothing to fear from the upheavals, insists the provisional government in Benghazi. “All contracts signed by the Gaddafi regime will be honoured,” says Abdel Hafeed Goga, vice-president of the Transitional National Council. Mr Goga has even sought to reassure China, which has criticised Nato’s intervention against Mr Gaddafi. Chinese companies signed $3.5bn of railway construction deals with Libya over the past three years.

Before the so-called Arab spring, Mr Gaddafi enjoyed several years of rapprochement with the west. Investors began thinking about the country’s future beyond oil and minerals, with a sunny climate and more than 1,770km of relatively unspoilt Mediterranean coastline suggesting untapped tourism resources.

“This is an untouched country in terms of investment,” says Esam Abdel Aziz Fatouri, the head of treasury at Wahda Bank, sold two years ago to Jordan’s Arab Bank and local shareholders.

“We have Africa’s longest coast, more Roman ruins than anywhere except Italy, and strong solar energy potential.” With extensive oil and gas reserves, these non-oil assets may ensure a bright economic future for Libya if the rebels fulfil their promise of establishing a well regulated, free-market democracy, he adds.

In the meantime, in the absence of access to the Gaddafi regime’s frozen assets, the rebel government in Benghazi has asked international donors for $3.5bn to tide it over for two to three months.

In the longer term, US, British, French and Canadian investors, to name a few, are likely to have an edge over Chinese rivals in bids for lucrative post-conflict reconstruction projects.

Some of the same contractors already have local partners and equipment in place. Western tourism and real estate entrepreneurs had come to view Libya as the ultimate emerging market, especially as the state drew on oil revenues to ramp up spending by 30 per cent per year through the global economic crisis.

These budget increases propelled infrastructure development, as the Gaddafi regime envisaged a financial and tourism boom based on partnerships with foreign companies.

The state-run Libyan Investment and Development Co formed at least 35 joint ventures with foreign companies in the two years before the pro-democracy outbreak, according to Oxford Business Group, a London-based emerging-market consultancy.

For example, Turkish investors formed a joint venture with Lidco to refurbish Benghazi’s main football stadium — now a half-finished shell — for the 2013 African Nations Cup.

Risks remained high, with a confusing, highly arbitrary legal system and close involvement by Gaddafi family members in projects worth more than $100m, local businessmen say.

Mustafa Geriani, a Libyan-American contractor, says he accepted working with state-run developers even as he tried to promote better work and management methods. Lidco owns 40 per cent of his Tripoli-based logistics company, he says.

“This was a very difficult business environment, with a lot of red tape and late payments,” he adds. “Gaddafi started the transition from socialism to capitalism, but his cronies got the loans and choice of projects, so the benefits mostly went to the privileged few.”

With construction at a standstill, Mr Geriani works for the opposition governing council, first as spokesman and now as economic adviser. “Everyone wants to see free enterprise and private business flourish,” he says.

Farej Mahdawi and his wife, Fawzia Salem Gheit, have converted their local road-infrastructure business into a relief operation. “We’re working with the International Red Cross and Red Crescent, helping to feed and evacuate refugees and dispensing medical aid for [enemy] prisoners of war,” Mr Mahdawi says. “There’s no business anyway, so we do what we can as citizens.”

Their company, Qalat al-Muraj, formed close ties with contractors in the European Union and former Yugoslavia, yet kept a low profile locally to avoid political entanglement, Mr Mahdawi says.

If the regime surrenders, Libya could become a “good environment for investors, with everything open, transparent,” he adds. “We expect a lot of reconstruction business, to begin with.”