COUNTRY NAME: Great Socialist People’s Libyan Arab Jamahiriya
LAND AREA: 1,8 million km2
POPULATION: 6,3 million (2010 est.)
LANGUAGE: Arabic (official), Italian, English
CURRENCY: 1 Libyan Dinar (LYD) = 1.000 Dirham; 1 EUR = 1.7 LYD (Nov. 2010)
MAIN CITIES: Tripoli (capital), Benghazi, Al-Djofra, Misurata, Zawia, El Khoms, Ras-Jedir
NATIONAL DAY: 1 September – Revolution Day
TIME ZONE: Standard Time is GMT + 2
Libya, one of the largest countries of North Africa, represents an exciting emerging market in close proximity to Europe. Today there is much that is positive concerning its economy as Libya makes progress in integrating itself within the global trading system and embarks on a major economic program of development. Libya’s market is increasingly open to foreign investors and offers tremendous opportunities for new business. Libya is undertaking a LD150 billion ($126.5bn) five-year infrastructure redevelopment plan to modernize water, irrigation and sanitation facilities and build airports, schools and houses. Spending is also high on areas such as railways and telecommunications. It is continuing with its efforts to diversify the economy and encourage more private-sector participation in areas like manufacturing and services. As the country moves forward with its modernisation and integration within the global economy, Libya offers potentially rich trade opportunities in nearly every sector, including oil and gas, agriculture, telecommunications, education, medical equipment and services and tourism.
Libya has been ranked by the World Bank as an “uppermiddle- income developing country”. The economy is dominated by the oil and gas sector, through which it has been transformed from a poor, largely agricultural economy to one of Africa’s wealthiest nations. It has the highest income per capita of the developing countries in the Mediterranean region. Income obtained from oil and gas exports has enabled Libya to maintain a large public sector with extensive public investment in services like health and education, as well as agriculture and the development of non-oil related industries.
Public services comprise about 7% of GDP. In 2009 the oil sector provides about 70% of GDP, up from 50% in 2002 in line with rising oil prices during the period. The share of other sectors to the economy has fallen correspondingly, except for public services, which absorbed a significant proportion of the higher revenue. The public administration employs some 16% of the workforce; health services employ 12% and education 27%. While the relative dominance of the oil and gas sector has continued to increase, the extraction industry employs less than 2% of the labour force. The manufacturing industry employs 8%, while agriculture, forestry, and fishing employ about 7% (agriculture having declined from about 70% before the growth of the oil industry). The country operates a large trade surplus. Some 97% of exports consist of oil, natural gas and petroleum-based commodities. The remaining 3% mainly consist of agricultural and fisheries products. In 2007, 88% of exports went to the EU, with Italy as the main destination, followed by Germany, Spain and France.
The country’s Promotion of Investment of Foreign Capital Law No. (7) 2003, which amended the Law No. (5) 1997 law on foreign investment, is the key investment law. The 1997 law allowed 100 percent foreign ownership of companies that receive a license. Relatively few projects were licensed, partly because of complex and time-consuming procedures, and partly because key sectors such as telecommunications, financial services and distribution were excluded. Under the 1997 law, the investor is entitled to employ foreign staff and technical expertise necessary for the establishment and operation of the project. The process for obtaining work permits can be cumbersome. Article 8 of the 2003 foreign capital law specifies that investment shall be allowed in the following fields: industry, health, tourism, services and agriculture, with other field specified by a decision of the General People’s Committee upon submission of the Secretary.
Banking & Finance
The most significant reforms in the service sector over the past decade have occurred in banking and finance. The latest Banking Law No.1 of 2005, along with the Anti-Money Laundering Law No.2 of 2005, are aimed at creating a new legal framework for the banking system. The country’s five public banks were recapitalised and its four private banks licensed. The Bank of Commerce and Development is the most substantial of the four private banks operating in Libya, and has led the way in the modernisation of the banking sector by introducing modern services such as ATMs and credit cards. Twenty-one regional banks have been merged, banking supervision reinforced, interest rates and foreign exchange partially liberalised, and the exchange rate unified. 2007 saw the start of a strategy announced by the Central Bank as early as 2004, to restructure, develop and modernise the banking system to reach standards of international institutions. Minority stakes of two Libyan banks were sold to foreign investors. The first step was to sell off a minority stake in Sahara Bank, Libya’s second largest commercial bank with total assets of around $3.6 billion. BNP Paribas SA won a bid for the privatisation of Libya’s Sahara Bank with 19% of the shares, for about €145 million with the option to raise their participation up to 51% in three to five years. The Wahda Bank sale was structured in the same way as the previous deal, with the offer of an initial 19% stake. In 2008, a number of foreign commercial banks won approval to open their representative offices in Libya. The Libyan Stock Exchange, established in March 2007, was the first exchange of its kind in the country.
Libya imports a wide range of industrial and agricultural products; major suppliers for these products are Italy, Germany, China and Tunisia. China is now Libya’s third largest supplier and the second largest after the EU as a whole. Libya is highly dependent on imports for much of its food supply, particularly cereals and fats and oils. Approximately half of Libya’s food needs come from imports. Major suppliers are Tunisia, the Russian Federation, Turkey, the Netherlands and Italy.
Exports of agriculture goods are extremely small, primarily animal and vegetable oils and fats, potatoes and some beverages. Local consultations have confirmed a prolific trade in smuggling subsidised food into neighbouring countries means that much of Libya’s agriculture exports not being captured by official statistics. Subsidised agricultural products from Libya reach Chad, and other Maghreb countries through Tunisia and then on to Algeria. Libya is a net importer of fish and fish products, a trend that has increased over recent years as exports of Atlantic bluefin tuna have declined and imports of processed pacific tuna have increased substantially. Fisheries exports are categorised by small volumes of high value premium bluefin tuna and frozen fish fillets sold to the Japanese and Korean markets, with higher volumes of common varieties sold live or chilled to nearby Tunisia, Malta and Turkey.
Some 97% of Libya’s exports consist of oil, natural gas, iron and steel and petroleum-based commodities. The energy industry is thus the country’s most important export industry and a key source of income. Libya’s proven oil reserves of 41 billion barrels are almost half the total reported oil reserves in Africa and over 3% of the world total. Libya has the largest proven oil reserves in Africa, at 41.5 billion barrels as of January 2007 which is up from 39.1 billion barrels in 2006, with new discoveries supporting, and often allowing increases, in the rate of production. Libya is currently the second-largest crude oil producer in Africa, with an estimated 1.7 million barrels per day in 2006. With current plans to expand production to 3 million barrels a day, Libya’s proven reserves would last for 38 years. Despite the lifting of sanctions, Libya’s current oil production is still only half of what it was in the early 1970s, and is expected to climb back to 3 million barrels per day by 2015. It has been estimated that more than $30 billion in foreign investment will be needed to achieve this increase in production. Production costs are relatively low, and Libyan oil is high in quality. Low transport costs given its close proximity to Europe give Libya a further advantage. European oil companies maintained their operations after US companies left in the 1980s; the American companies signed a Standstill Agreement with the Libyan National Oil Corporation (NOC) which allowed them to retain their original oil rights and obligations. The NOC maintained production at lower levels, and after the lifting of sanctions the US companies resumed operations. Some 5% of Libyan oil exports go to China. Libya has given limited prospecting concessions to both China and Taiwan. In 2004, the China National Petroleum Corporation constructed two oil pipes linking the Wafa oil field with the port of Mellitah in association with the Italian Ente Nazionale Idrocarburi and the Libyan National Oil Corporation. Further pipelines are under consideration to allow the export of oil from Niger via Libya. Libya’s gas reserves are estimated at 1,500 billion cu.m.,or 1% of world reserves. At an anticipated extraction rate of around 12 billion m3/y the known reserves would last for 125 years. However, at this extraction rate the income from gas is considerably less than that from oil. At an oil price of $50 per barrel, Libya’s oil income would amount to some $50 billion per year. Its income from natural gas at $350 per 1000m3 would be about $4 billion per year. If it were possible to increase the rate of gas extraction to give the same annual income as oil, the known reserves would last for 10 years. In total, Libya’s proven oil and gas reserves are enough to maintain its national income for about 50 years. Libyan natural gas exports have increased since 2005, particularly to Italy. The NOC has a joint venture with the Italian company, Agip, in the Western Libya Gas Project. Most of the gas will be exported to Italy via the Green Stream pipeline that was inaugurated in 2004, connecting Libya to Italy via Sicily. This is the biggest foreign investment in Libya’s energy sector since UN sanctions were suspended. For export further afield, Libya is expanding its current LNG plants and building new ones.
The telecommunications sector has grown dramatically since 1990. Considerable further expansion is planned, with a targeted increase in density from 12% to around 37% by 2020, at an estimated cost of $10 billion. Privatisation of the state monopoly is not currently intended, but foreign investors have played an increasing role. In 2004, France’s Alcatel and Finland’s Nokia won the contract to develop and construct the Libyan mobile network. In 2008, China’s Zhongxing Telecom Equipment signed an agreement for the construction of the first network in Africa under the WiMax regulation.
As a preferred sector for foreign investment, the tourism sector has attracted major investments from companies in the UK, Italy and other countries. Driven by an ambitious government target to see visitor numbers reach 10 million per year and lift the sector’s percentage of foreign revenue to ten per cent, the Libyan tourism industry is growing rapidly with the construction of hotels, resorts and upgrades in transportation systems, including new airports under construction in Tripoli and Benghazi.
The retail sector has stabilised in recent years, following the abolishment of a ban on private selling and control by state owned stores. The sector is characterised by more or less modern shops, mostly small; a traditional souk selling mainly household goods, clothes and textiles; and apparently unregulated street markets selling everything. Restrictions on private ownership have been lifted, attracting some local and foreign investment mostly into the higher end sector.
The negotiations on the return of the American oil companies led to the introduction of a privatisation policy. Some 360 production units were scheduled to be transferred from the public to the private sector between 2003 and 2008. By the end of 2004 only 14 had been successfully privatised. By August 2006 the number of privatized enterprises had reached 67, with a total value of LD 696 million (about $500 million). These included an aquaculture project, six chicken factories, and a range of industrial companies.
Source: Austro-Arab Trade Directory 2011.
The mentioned data are subject to modification. No responsibility is taken for the correctness of the details provided.
Last modified: 26 January 2011