LIBYA

BUSINESS WEEKLY

8TH FEBRUARY 2013

issue 04

SERVING THE LIBYAN OIL INDUSTRY

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Libya is open for business, but on what terms?

Ibrahim A. El Mayet Tripoli 06.02.2013

Contents
P1 Note from the Editor P2 International Perspective
Tripoli International Airport pilots new system for passport control Lufthansa has cancelled all flights to Libya amidst growing security risk EU Foreign Ministers officially launch planning process for Libyas Border Management Mission France to host meeting of senior officials and diplomats Italian Foreign Minister confirms Romes commitment to Libyan border control system Royal Jordanian increases flights between Libya and Amman Egyptian-Libyan Relations Committee discuss situation for Egyptian workers in Libya Tunisian business mission organised by the Tunisian Economic Committee visits Tripoli to discuss problems at Ras Jedir border crossing Ministry of the Interior present proposal to bring Egyptian workers to Libya A Brief History of Foreign Investment Law Abdulla Boulsien Businesswomen and founding member of the Women in Business Committee Ibtisam Ben Amer P8 Banking CBL liquidity, Food P9 Trade Turkish Imports Triple, Oil & Gas Oil Minister visits Saudi Arabia, Media Press Freedom, Construction Hyundai restart projects,

Despite on-going concerns over security in Libya interest from international companies and investors seeking to do business in Libya remains high.
So far in 2013 Libya has received a number of official visits and trade delegations from different countries looking to develop business with Libyan clients and partners. The main question for these visitors some with previous experience in Libya, others new to the market, is not whether the opportunities exist, it is how to engage with them. Following the liberation of Libya in October 2011, the existing laws governing foreign investment in Libya were amended changing the terms of engagement for foreign companies wishing to set-up business locally, registration of branch offices for foreign companies was suspended and partnerships through Joint Stock Companies switched from a maximum of 65%-35% (in favour of the foreign partner) to a 51%-49% in favour of the local partner. A resolution issued in 2012 which sought to maintain the 65%35% structure and implement measures to further liberalise the legal framework was quickly overturned following intense

lobbying of the Ministry of Economy by some members of the local business community and unions leading to the introduction of Decree 207 which is currently being applied. (see Abdulla Boulsiens article: A brief history of foreign investment law page 4). Addressing the need to encourage foreign engagement in the Libyan economy, the Ministry of Economy recently announced that it has instigated a working review to study previous resolutions, and issued Decree 22 of 2013 which extends the period for existing Joint Stock Companies to comply with Decree 207 until the review has been completed. It is thought that the extensive review of the legal framework could take between 6 15 months, although no specific time frame has been stated. It is unclear when a decision will be reached on legislation for foreign participation and investment. Whether the Libyan authorities opt to liberalise the economy or stick with the principles of decree 207, it is clear that until Libya has a solid legal framework, the country will struggle to encourage meaningful international engagement which is vital to stimulate economic development and job creation.

P3 Regional Focus

P4 Feature

P5 P6 The Interview

P8 P9 Business in Brief

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EU Foreign Ministers officially launch planning process for Libyas Border Management Mission 03.02.13 EU Foreign Policy Chief, Catherine Ashton, stated that A civilian mission to build Libyan capacities in border security and management is not only important for Libya, but for the entire region. The EU mission has come closer to fruition with the official announcement of the missions planning process. Following last months terrorist attack in Algeria concern has been growing over smuggling of weapons and drug, and human trafficking through Libyas porous borders, the matter of Libyas border security is a major concern for the entire region.

International Perspective
France to host meeting of senior officials and diplomats from countries that supported the downfall of Gaddafi 06.02.13 A meeting of senior officials and diplomats from America, Britain, France, the Arab Nations, United Nations and European Union will take place in France to discuss the ever growing security risks in Libya. A source from the French diplomatic service said The Libyan security situation is a real subject of concern for its neighbours and the countries that helped the transition. We need to help the Libyans gain the tools for their own security. Its a difficult situation because they need to rebuild everything for the state. Lufthansa has cancelled all flights to Libya amidst growing security risk 05.02.13 Having resumed flights to Tripoli in February 2012, providing 3 weekly flights to the Libyan Capital; the airline has now cancelled all flights to the country. Lufthansas subsidiary airline, Austrian Airlines has also cancelled their bi-weekly flights to Libya. A Lufthansa spokesperson stated that we have taken the decision given the developments in Tripoli and the tense situation in the region.

Italian Foreign Minister confirms Romes commitment to contribute to Libyan border control system 05.02.2013 Confirming Italys commitment to its partnership with Libya during a meeting with his Libyan counterpart the Minister said, we want to contribute significantly to the border control system, and activate programs of interest to Italian companies, as well as in training the Libyan administration adding that it is a bilateral obligation which has a strong support from our side.

Tripoli International Airport pilots new system for passport control 03.02.2013 The head of the relations and cooperation department in the Passports agency Nasreddin Ghellab announced on Sunday, that the passport system for foreigners will be tested on Monday in Tripoli International Airport. The new system will involve taking a photograph of visitors on arrival as well as logging the time and date of arrival. Ghellab confirmed that the system will be activated at Tripoli and Misurata airports, as well as the Ras Jedir border crossing between Libya and Tunisia. Royal Jordanian increases flights between Libya and Amman 07.02.2013 Responding to growing demand from Libyans seeking medical care and passengers connecting through to the Gulf region, Royal Jordanian will increase flight frequency to 15 per week adding an additional three flights per week between Amman and Tripoli and a second flight between Amman and Misurata. The airline will continue operating four weekly flights to Benghazi.

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Ministry of the Interior present proposal to bring Egyptian workers to Libya 05.02.2013 The spokesman for the ministry Magdi Alarufi said bringing in such employment will be in coordination with the Egyptian Ministry of Labour according to the requirement of the Libyan market needs for employment. He explained that once approved the proposal will be activated by a committee made-up from the Interior Ministry and the Egyptian consulate in Libya.

Regional Focus

Tunisian business mission organised by the Tunisian Economic Committee visits Tripoli to discuss problems at Ras Jedir border crossing 06.02.2013 The mission which included Tunisian business owners, members of Chambers of Commerce and industry leaders was in Tripoli from the 2nd 5th February to look at solutions to issues disrupting movement of trade between Tunisia and Libya. Meetings were held at the Tunisian Cultural Centre in Tripoli, bringing together businessmen participating in the Mission with their Libyan counterparts.

Egyptian-Libyan Relations Committee discuss situation for Egyptian workers in Libya 05.02.2013 The meeting attended by Egyptian Prime Minister Dr. Hisham Kandil as well as a number of Libyan and Egyptian officials convened to discuss the situation of Egyptian workers in Libya and the thorny issues between the two countries, as well as follow-up on the development of strategic relations between the two countries following the recent signing of a cooperation agreement between GNC Chairman Mohamed Magarief and Egyptian President Mohamed Morsi. The meeting also discussed on-going efforts to revitalize relations, open markets, and attract Libyan investment in the Egyptian market. Previously Magarief and Morsi had agreed to establish a joint committee including ministers from the two countries, and the formation of sub-committees in the areas of politics, agricultural, security, energy, manufacturing, facilitating visas and traffic in ports, and activate the cooperation between the two countries.

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Feature

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to a poor flow of investments and, relatively quickly, scepticism that Libya really was open for investment.

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A brief history of foreign investment law

ABDULLA BOULSIEN 06.02.2013

Law No.7 emerged in 2004 and was essentially the same as Law No.5 but focused on developing tourism investments. In 2010, Law 5 and Law 7 were merged to form Law 9. Around this time, the LIFB was merged with the Privatisation board to create the Privatisation & Investment Board (PIB). With a few improvements, Law 9 is most certainly a better framework and, in its raw detail, it is very flexible and workable. However in practice, and due primarily to the revolution, we are still to see whether investors will be encouraged to enter Libya under its umbrella. Certainly it seems clear that, like Law 5, the success in its application will be more driven by the implementation policy and management of the PIB, than by the actual law. Many things in Libya fail, not because of the framework but because of the bureaucracy and lack of will and leadership at the managerial level. In 2006, after much debating, and to encourage the involvement of foreign companies (particularly in the oil services sector) who did not necessarily want to commit LYD5m, the Libyan authorities issued Law 443 (Im not sure that anyone really understands the numbering system). This law was most certainly progressive in scope and objective and allowed international investors and companies to partner with indigenous shareholders to form joint stock companies (JSC) with a lower level of share capital than Law 5, being LYD1m, and with a shareholding up to 65%, thereby allowing majority control of the entity. There were other restrictions, mostly with respect to the Libyan shareholder (i.e. minimum number of shareholders a rather Jamahariyan and ineffective principle, devoted to minimising the accrual of wealth, and thereby influence, by Libyans), but overall this sparked a reasonable level of investment and interest from outsiders looking at opportunities in Libya. A few years later, the Libyan authorities commendably took a very progressive approach to the tax system and introduced a flat rate of corporate tax at 20%, replacing the staggered system. Combining the Law 443 with this new tax, one had the ingredients to build on international / Libyan partnerships across the economy.

The Libyan authorities have been working, albeit in dribs and drabs, on opening the market to international companies and investors since the early 1990s.
In 1997, the first structured law emerged, the Law for Encouragement of Foreign Investment, more popularly referred to as Law 5. Under the circumstances, this was a reasonable law and certainly encouraging of FDI. Amongst other incentives were income, import, capital gains tax concessions, along with the ability for foreign investors to own 100% of the company making the investment plus the concept of a one stop shop, where all Libyan administrative elements would be housed in certain locations (dedicated immigration, customs, legal, labour, and other government personnel would be housed at selected offices of the Libyan Foreign Investment Board (LFIB), across the country. Conceptually this was great. In practice, as with many things in Libya, the management and operation was very poor and so, what should have been a transformational law was anything but. Law 5 was supposed to be applied in a number of fields, particularly real estate and industry, and it was very much focused on developing greenfield investments with the minimum investment being LYD 5m for foreign companies. Libya was certainly slightly ahead of the curve in seeking to develop and encourage foreign investment but a combination of corruption, inertia, hollow promises and inconsistent application of laws led

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What is encouraging is that the bulk of my conversations with a reversion back to sensibility. In January 2013, the Ministry of the Economy issued Decree 22. This decree cancelled the notion of forming LLCs, but it extended the time required for JVs to comply with the 49% restriction outlined above. Hopefully the extension will not be needed and the new Minister of Economy will simply cancel decree 207 altogether. Further, in mid February 2013, a well-known international firm is appealing against 207 in the Libyan courts. Good luck to them.

Feature continued

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A brief history of foreign investment law

After the revolution, in April 2012, the Libyan transitional cabinet issued Cabinet Resolution 186 with regards to the share capital and shareholder numbers of joint stock companies. Its not clear whether this resolution relates to JSCs with foreign shareholders but nonetheless, it is generally assumed that the Decree 103 (explained below) supersedes this resolution. Essentially 186 allowed the share capital of JSCs to be LYD 100,000 and limited shareholders to a maximum of 10% of the shareholding (another reiteration of this socialist principle). In May 2012, after much debate and pressure from those in favour of and those against foreign investment, the Ministry of Economy issued Decree 103. This decree essentially reiterated Law 443 but provided some flexibility (lower levels of share capital, alternative corporate structures most importantly the ability for Libyans together with foreigners to establish LLCs with LYD 50,000, special case approval for foreign ownership up to 80%...), though, with a view to not suffocating Libyan enterprise with an influx of foreign investment (a slightly ambitious concept), the decree outlined a specific list of restricted economic activities only open to Libyan business and was restrictive in other areas. Overall however, I believe many sighs of relief were heard after this decree emerged, especially considering the gossip amongst the business community beforehand. Now it gets interesting. In July 2012, in a puff of smoke, Decree 207 made its way onto peoples desks. This decree, after much huffing and puffing and pressure from the Libyan business community, in my personal opinion, put foreign investment on hold in Libya (other than in the energy sector perhaps). The main issue was the reduction of foreign shareholders ownership from a maximum of 65% to 49%, thereby minority shareholders. It also sought to force all previously established foreign shareholding JVs to comply with the 49% restriction. Ask any lawyer and they will tell you that this retroactive application of the new law is simply unbelievable. Its issuance was certainly a step in the wrong direction for Libya at a stage where it needs foreign investment and expertise.

officials, lawyers, and businesspeople point to a growing force for

Abdulla Boulsien is the managing partner of OEA Capital. He is a Libyan investment banker and an advocate of reasonably free markets, private enterprise, and meritocracy. Additional analysis of the negative aspects of decree 207 by Abdulla can be found in his previous article http://www.libyaherald.com/2012/10/31/ the-oligarch-decree-is-bad-for-business-ali-zeidans-newgovernment-must-overturn-it/

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The Interview

Ibtisam Ben Amer

Libyan businesswomen and a founding member of the Women in Business Committee This week Libya Business Weekly joined local businesswoman Ibtisam Ben Amer, owner of the Jeff de Bruges chocolate franchise and a founder of the Women in Business Committee which launched two weeks ago on 26th January 2013 under the auspices of the Tripoli Chamber of Commerce, for an insightful chat about the business environment in Libya, the role of women in business and of course chocolate! LBW: Why did you decide to form a committee for Libyan businesswomen? IBA: First of all it is for Libya, we face so many problems in business with institutions trying to get approvals. In Libya the idea of women in business is not yet well founded, we want to try as much as possible to organise ourselves, introduce ourselves and support each other in order to serve the country. LBW: How many members do you have? And what are the criteria for joining? IBA: We started with 9 founding members, and we already have 50 members, I was surprised that there are so many of us, membership is growing so fast. Now I would not be surprised if we had 150 members by the end of March! Our members are business owners from different sectors including services LBW: Tell us about your business, when did you start your business? IBA: During those difficult years, 1989. It was the wrong time to start a business but I am a fighter, nothing was going to stop me, once I had to wait one year for a licence, because I had a franchise, the Ministry of Economy refused to give me a licence, they said that franchises were not allowed. They came with so many demands to block the business like whether the Company had ever dealt with Israel. I dont like this kind of discrimination. But eventually I got the licence and registered the franchise which I still own, we were bringing antiques, reproductions and furniture from the Far East. I switched from furniture to chocolate 10 years ago opening the Jeff de Bruge franchise. I worked hard; I wanted to prove that women could do it. LBW: What impact has the revolution had on business? How does doing business post revolution compare to the time of the Gaddafi Regime? IBA: I have to be very honest and say that I feel more relaxed now even though things are not moving. I felt that I was working under a bad regulatory environment before. I closed my business on 17th February 2011 to support the revolution and didnt reopen until Libya was liberated. I received threats for not opening my shop; they sent people to my house to ask why I didnt open. I made an excuse that I didnt have stock. They said that they would provide stock, and provide money. I had to make a second excuse, but they knew what I was doing. Following that I even had a call from Shakir [a renowned and feared Gaddafi loyalist who was conducting television broadcasts in support of the regime and trade, but we also welcome professionals like lawyers and doctors. Our only condition is that if you are a business owner you have to be registered with the Tripoli Chamber of Commerce. We will be launching a webpage on the Chambers website soon for member applications. We are also getting our information out to other government and non-government organisations and international womens organisations, and trying to encourage Chambers in other Libyan cities to establish a committee for women in business.

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LBW: The current legislation is still unclear, what do you think about Decree 207? IBA: Well nothing is final yet, we do not have anything saying this will be the law, but I think 207 is good, it is an improvement. International partners need us as much as we need them, we need to work together. Libya should benefit from these partnerships. LBW: What needs to be done to create a good business environment for local and international companies? IBA: I think we should extend our hand to international companies and expect them to extend a hand to us, we should work together to improve life for Libyans, I think this can only be achieved through business. The Libyan authorities have a responsibility to make investment laws more appealing, and if foreign companies are sincere they must provide proper training and benefits for local employees. LBW: And finally, where do you see the main opportunities emerging in Libya? IBA: There is a big opportunity in tourism, and in education. I think our education system in general was a disaster under the Gaddafi regime and it is about time we improved it.

The Interview
during 2011]. After that call I took my daughter and we left, a call from Shakir meant a lot at that time. We didnt come back until after the revolution. Now business is not yet back to usual, but it is picking up. LBW: Do you think the revolution has affected the role of women, and attitudes towards women in society and business? IBA: Some people say the Gaddafi regime gave women a lot of liberty and space; personally I didnt believe that, he gave some women some space when it suited him. Women played a role in the revolution and they will play a role in building Libyas future. LBW: You are representing an international brand, what role do you think foreign Companies should in Libya? IBA: Libya needs everything, we are six million people in a large country and currently import almost everything, we need expertise in all fields to help develop local industry. In the 1960s Libya had many factories for all sorts of products like olive oil and tomato paste, they were very high quality. Now we have all this oil, luckily, but we ended up in the situation where we dont build anything, we took the easy way and import, import. I am currently studying a new production business; it will be made in Libya!

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ie. consultancy+ ie. consultancy+ Deputy PM Awad Barasi guarantees salary payments to Libyan workers at stalled companies 04.02.2013
Barasi confirmed in a press conference held with PM Ali Zidan on Monday that payment of salaries to Libyan employees working in foreign companies that stopped working in Libya, as well as workers in the troubled national companies would continue to be paid. Barasi confirmed that the government has taken these measures until the return of the companies to work on projects assigned to them, noting that these measures included salaries for 260,000 families who receive their salaries through the investment portfolio which were stopped. Barasi also announced that the government would raise the ceiling on housing loans granted to citizens from LYD60,000 to LYD120,000, in order to contribute to the solution of the housing problem in all Libyan cities.

Business in Brief

Libyas Central Bank gives sector clean bill of health refuting claims of a liquidity crisis 05.02.2013
The Central Bank of Libya (CBL) confirmed that the banking sector is in an excellent position, whether regarding liquidity indicators, growth rates or other factors. The CBLs Information Office refuted, in a press release on Sunday, rumours suggesting the Central Bank is suffering from a liquidity crisis and lack of funds, stressing that the state of commercial banks is good, and is backed by the good financial situation of the CBL, adding that citizens can withdraw cash from their accounts at any time, any amount they want, and without any obstacles.

Tripoli hosts Arab Maghreb Union (AMU) session on Food Security 03.02.2013
The seventeenth session of the AMU specialized committee for food security for the countries of the Maghreb region will is being held in Tripoli from the 5th 7th February. On the agenda is the free trade zone project, the integration and development of trade and agricultural products, enhancing food security, and developing a plan for the future of agriculture in the AMU to 2030. The Committee will also discuss encouraging joint investments between the AMU countries in the fields of agriculture, livestock, fisheries, and the exchange experiences in dealing with agricultural pests, in addition to activating quarantine agreements.

Big Exhibits joins forces with Almutwaset Expo for this years Libya Food Expo 02.03.13
Tripolis International Fair Ground will host the fourth Libya Food Expo in June this year. Almutwaset, a Libyan events organiser, has joined forces with Maltese events organiser Big Exhibits who are offering a turnkey solution to international companies interested in attending the event. The Libya Food Expo is one of the largest in the region offering a good networking opportunity for international companies working in the food and beverage industry.

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04.02.13

Imports from Turkey tripled in 2012

Libya became one of Turkeys main export destinations last year with $2.7 billion of products delivered to the North African country. This represented an over 180% increase from the previous year where by Turkey exported less than $750 million of goods to Libya. Prior to the revolution the products exported by Turkey were mostly industry products, whereas last year it was food, clothing and industrial products. As concerns Libyan exports to Turkey, as in the past, it has remained predominantly oil although this has been limited due to sanctions placed on the country as a result of the revolution.

ie. consultancy+ Libyas Oil & Gas Minister encourages Gulf investment in Libya during official visit to Saudi Arabia 05.02.2013
Libyas Oil Minister Abdulbari Alarusi met with his Saudi counterpart Oil Minister Ali Ibrahim Al-Naimi on Monday during his official visit to Saudi Arabia, the two discussed the importance of relations between Saudi Arabia and Libya as two major producers of oil with similar ambitions to strengthen their Oil industry and independence. Naimi stated that the two countries are seeking to stabilize the international oil market, through their membership in international organizations, such as OPEC. He explained that there are multiple areas of cooperation between the two countries, especially in the field of oil, both in terms of international coordination and in terms of the exchange of experience and expertise in the petroleum industry. Alarusi praised Saudi Arabias experience in developing its oil industry, hailing it as a leading example within the global Petroleum Industry. He called on Saudi Arabia and other Gulf nations to invest in Libya adding that favourable laws to attract investors, such as exempting foreign investors from taxes for a period of five years with an option to extend for three years, were among major suggestions being considered by the Libyan authorities.

Libya has risen 23 places in the World Press Freedom Index 2013
02.04.13 Under the Gaddafi regime press was non-existent, with newspapers and television being a tool of Gaddafis propaganda machine. As a result of the revolution Libya has now risen 23 places in the World Press Freedom Index. Reporters without borders (RWB), a French NGO, put Libya at 131 of 179 countries it reviewed. This ranks Libya above any other country in the MENA region and Saudi Arabia. However there have been a number of reported cases of intimidation and attacks on local journalists, photographers and film crews in Libya as new media outlets struggle to establish a modern free media in Libya.

Libya and Italy confirm defence and security cooperation

07.02.2013 Italian Defence Minister Giampaolo Di Paola visited Tripoli on Wednesday meeting with Libyan counterpart Minister Mohamed Al-Barghathi to discuss ways to strengthen bilateral military and security cooperation. Minister Di Paola handed over to Libya 20 Italian PUMA armoured vehicles to Libya in a ceremony at Tripoli Naval Base in a show of support for Libya. Di Paola said: we are prepared to help the new government by providing vehicles, training and a border control system, adding, Libya is strategically important to Italy. We want the country to be stable and secure. Libya and Italy have signed a number of agreements including those for integrated surveillance of Libyan borders and training of Libyans in the security field.

South Koreas Hyundai Engineering & Construction resumes work on Libyan Projects 07.02.2013
After a prolonged period of inactivity while Libyas interim authorities grappled with the process of re-evaluating existing contracts recent assurances on compensation and security from Libyas interim government have opened the way for a resumption of construction contracts allowing Hyundai Engineering & Construction to resume work on stalled projects in Libya. There are 19 South Korean construction companies with 25 projects worth a total of $10.6 billion in Libya. Speaking in Tripoli Korean minister counsellor Kyunghan Kim said that Many feel worried about returning to work and we are trying to help them as much as we can.

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