Libya’s projects still ‘on hold’ but promising future beckons

Business life in Libya has not yet returned to normal as most projects and operations remain on hold, but the future for the newly liberated country is bright, Malta Enterprise Tripoli office manager Salem Megadmi told The Times Business.

Laws and regulations implemented by the ousted regime still stand

Some Maltese companies servicing the oil and gas industry have already returned to Libya but the dust on the wider economic and commercial landscape has only just started to settle. Now, the international business community estimates the Libyan market could grow and expand exponentially within 36 months.

Mr Megadmi, who reopened the Libyan office in September, explained the team had been busy chasing service providers to get the operation going and then following up changes on the ground, and carrying out market research and gathering information for enquiring Maltese companies.

After the fall of the Gaddafi regime, many Maltese companies were among the international firms returning to Libya to assess the damage to their operation’s infrastructure.

Throughout the crisis last year, Malta Enterprise’s head office had already handled more than 200 issues ranging from deferral of tax or VAT payments to speeding up payments from government departments or entities.

“Many companies suffered losses as office premises, warehouses, residences and other assets had been ransacked in the chaos under the old regime’s watch and during the fall of Tripoli,” Mr Megadmi explained.

“When the conflict ended and Libya declared its liberation from the grip of the regime, business communities in other countries, particularly those close to Libya, realised that the country could now offer endless business opportunities. Firms presumed that these opportunities would be on offer from day one.

“However, in most sectors – including infrastructure and construction – most of the projects and operations remain on hold. Services in high demand, such as those relating to the oil and gas industry, were the only exception. It was vital to resume production as soon as possible. Companies in this industry turned to their reliable, expert service providers, among which were some Maltese companies.”

Services organisations which have gradually returned to Libya might already have some clients but business is still slow, Mr Megadmi cautioned. Most Maltese firms servicing foreign companies in the oil and gas sector and in the construction field will not be able to resume their operations until their international partners return.

Mr Megadmi explained that while business is expected to return to pre-conflict levels soon, the general feeling is that that will not happen before June or July at the earliest. He is confident that the Maltese companies who previously operated in Libya successfully would be able to seize opportunities as they arose.

“The Malta Enterprise office in Libya always seeks to look out for further potential that would be of interest to the Maltese business community, whether based at home or having some presence in the Libyan market,” he promised.

Libya’s business environment is braced for major change. Pre-conflict authorities were controlled by the regime and Malta Enterprise worked closely with organisations such as the Investment Promotion Board and various Chambers of Commerce.

Mr Megadmi recalled it was evident they lacked a free hand and were tightly constrained in implementing constructive initiatives to work with their counterparts. Most of the time, Malta Enterprise would be expected to deal with them through a bureaucratic communiqué system of the protocol department. All official departments were under strict instructions not to communicate directly with foreign investment agencies like Malta Enterprise. Foreign officials were warned not to address heads of public establishments by their names but only by their titles. Some of those old faces remain, but attitudes in general have changed.

“The old regime left behind a terrible legacy,” he continued. “Hardly any proper governmental modern systems are in place. The country actually needs to build, not restructure, as there were no proper structures in the first place. Libya is now buzzing with all sorts of international NGOs and UN organisations involved in assisting the country to build its establishments from scratch.

“While the authorities on the whole remain more or less the same, their heads have now been practically all replaced. The new faces seem to be receptive and open to business but they still need some space to find their feet.”

Mr Megadmi believed policy makers in the new Libya can rectify unjust regulations and clear away hurdles which stood in the way of the local private sector’s performance, a key driver of economic growth. Meanwhile, organisations like the Chambers of Commerce can take up their rightful role as representatives of the private sector.

Mr Megadmi said the personal relationships fostered with counterparts in these institutions – who had also helped waiver some of the restrictions of the past – should enable Malta Enterprise’s office to work closely with the authorities again. Malta Enterprise is looking forward to having access to simple tools and services taken for granted anywhere: use of proper informative business directories, databases, and a reliable and transparent point of contacts to survey local company profiles and carry out company checks.

But there have been reports in the international press that applications by Libyans to start new businesses are being stalled as government employees await orders from superiors.

Mr Megadmi said the process of applications has been stalled mainly because of technical issues like the delayed arrival of new official printed document templates and forms, or rubber stamps.

Past rules and regulations governing the establishment of businesses and the prohibitive fees imposed on foreign companies attempting to set up a presence in the country remain in place. It is widely expected that the measures will be re-examined soon so that Libya becomes more business-friendly.

Meanwhile, Libyans are showing increased initiative and willingness to embrace foreign investment although the country is still going through the initial stages of the rebuild. The priorities at this crucial stage are establishing a democratic government, a constitution, military and police law enforcement and security agencies, and the maintenance of law and order.

Asked about the small Libyan private sector’s perception of Maltese entrepreneurs, Mr Megadmi said that although independent entrepreneurship still had to emerge and develop, Libyan firms welcomed companies from the neighbouring island. They recognised the Maltese not only shared their vision but were able to bring sound technical expertise to Libya.

Some of the current legislation may still stand in the way but Libyans are looking forward to the government’s strategy to encourage the development of small and medium enterprises by providing bank guarantee loans, for instance. There are some other issues which may hinder private Libyan entrepreneurs from reaching out to do business with the Maltese. The entry visa requirements, seen by the Libyans as a very bureaucratic process, was one such obstacle.

Malta’s business community, however, still enjoyed a cultural advantage over international competitors, despite the visa issue. While that factor will continue to work in its favour, the island’s investors will have to be patient.

“Laws and regulations implemented by the ousted regime are still effective,” Mr Megadmi stressed. “Business life in general has not yet returned to normal, particularly the banking system. It will get there, as will law enforcement, which is starting to recruit and train, and root out rogue elements within the ranks.

“Many traders and entrepreneurs who fought against the regime are now struggling with cash flow. Others who were in business with silent partners in the old regime’s elite and who may have capital abroad face similar problems. Additionally, these are seen as rogues and are somewhat blacklisted by the people. Time will clarify these issues, as Libya comes to terms with some form of national reconciliation.”

Meanwhile, the general mood in Libya is increasingly upbeat. Mr Megadmi said security is improving and the sound of gunfire – so characteristic of the conflict’s aftermath – is dying down, thankfully even at night.

He said prices of consumer goods have risen above pre-conflict levels. People are struggling to make ends meet: departments, establishments and firms are stalled and staff go unpaid.

“As a result of the crafty legacy of the former regime, trouble still breaks out between neighbouring towns,” Mr Megadmi explained.

“It is normally sorted out quite quickly through a tribal arbitrary system set up by the new government, but still takes time, effort and resources which could be put to more fruitful use elsewhere. People are waiting for the newly established interim technocratic government to lay out the plans ahead so that a way forward for Libya can be mapped out.”