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Libya

Executive Summary

Libya presents a challenging investment climate. Reconstruction needs, severely underserved consumer demand, and abundant natural resources provide many opportunities for domestic and foreign investors, and the Government of National Unity (GNU), which took office in March 2021, has expressed a strong desire to receive greater foreign investment and partner with foreign companies. Nonetheless, the country’s prospects for foreign investment continue to be hampered by security risks posed by the presence of non-state militias, foreign mercenaries, and extremist and terrorist groups, and opaque bureaucracy, onerous regulations, and widespread rent-seeking activity in public administration.  The Libyan government has a long history of not honoring contracts and payments, and several U.S. firms continue to be owed back payments for work done before and after the 2011 revolution. The sectors that have historically attracted the most significant investment into Libya are: oil and gas, electricity, and infrastructure.

Following years of civil conflict, Libya’s warring parties signed a ceasefire in October 2020 that paved the way for a United Nations-facilitated political process that resulted in the country’s first unified national government since 2014. The GNU is an interim government charged with leading the country toward national elections scheduled for December 24, 2021. Despite the current government’s limited time-horizon, Prime Minister Dabaiba has committed his administration to creating a more enabling business environment and to engaging U.S. companies, particularly in the fields of healthcare, electricity, security, and oil and gas.

Libya holds Africa’s largest (and the world’s ninth largest) proven oil reserves and Africa’s fifth largest gas reserves.  Most government revenues derive from the sale of crude oil.  Libya’s oil production has been making a gradual recovery from repeated attacks on oil infrastructure by ISIS-Libya and other armed groups in 2016 and a nine-month forced shutdown in 2020 due to the civil conflict. Production has reached 1.3 million barrels per day (bpd) as of March 2021.  Technocrats heading the NOC, an independent, apolitical institution, continue to lay the groundwork for the long-term development and stabilization of the energy sector.

The Privatization and Investment Board (PIB), supervised by the Ministry of Economy, is the primary governmental body for encouraging private foreign investment in Libya.

The Investment Law of 2010 provides the primary legal framework for foreign investment promotion. Passed prior to the 2011 revolution that toppled the Qadhafi regime, the law lifted many FDI restrictions and provided a series of incentives to encourage private investment. No significant laws related to investment have been passed since the revolution.

Perceived corruption is deeply embedded in Libya and is widespread at all levels of public administration. The lack of transparency or accountability mechanisms in the management of oil reserves and revenues, the issuance of government contracts, and the enforcement of often ambiguous regulations continue to provide government officials with substantial opportunities for rent-seeking activities.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 173 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 186 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index N/A N/A https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 TBD https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 TBD http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Libyan government’s efforts to attract FDI, primarily through the PIB and NOC, are relatively recent. Until the 1990s, FDI was only permitted in the oil sector through sovereign contracts to which the state was a party. A number of foreign investment laws were passed in subsequent years to encourage and regulate FDI, culminating in “Law No. 9 of the year 1378 PD (2010) Regarding Investment Promotion” (known as the 2010 Investment Law). Though promulgated prior to Libya’s 2011 revolution, the law remains in effect. This new law lifted many FDI restrictions and provided a series of incentives to qualifying investments, such as tax and customs exemptions on equipment, a five-year income tax exemption, a tax exemption on reinvested profits and exemptions on production tax expert fees for goods produced for export markets. It also allowed for investors to transfer net profits overseas, defer losses to future years, import necessary goods, and hire foreign labor if local labor was unavailable. Foreign workers may acquire residency permits and entry reentry visas for five years and transfer earnings overseas.

The law regulates the establishment of foreign-owned companies and the setting up of branches in representative offices. Branches are allowed to be opened in a large number of sectors, including: construction for contracts over LYD 50 million; electricity works; oil exploration; drilling and installation projects; telecommunications construction and installation; industry; surveying and planning; installation and maintenance of medical machines and equipment; and hospital management. However, the investment law restricts full foreign ownership of investment projects to projects worth over LYD 5 million, except in the case of limited liability companies, and requires 30 percent of workers to be Libya nationals and to receive training. Foreign investors are prevented from owning land or property in Libya and are allowed only the temporary leasing of real estate. Investment in “strategic industries” – in particular, Libya’s upstream oil and gas sector, which is controlled by the NOC – requires a foreign entity to enter into a joint venture with a Libyan firm that will retain a majority stake in the enterprise. It is not clearly defined which industries other than upstream oil and gas may be considered strategic.

The most important investment promotion institution Libya is the PIB, established in 2009 to assume responsibility for the Libyan privatization program and oversee and regulate FDI activities. The PIB’s screening process for incoming FDI to Libya is not clearly defined; the bidding criteria and process for investment are not published or transparent, and it is therefore not clear whether foreign investors have faced discrimination. The PIB states that it reviews bids or proposals for general consistency with Libya’s national security, sovereignty, and economic interest. The Minister of Economy must give final approval to all FDI projects, at the recommendation of the PIB. There is no information available on the timeline of the approval process or any potential outcomes of the process other than an affirmative or negative decision by the PIB or Minister of Economy. The PIB maintains that it keeps all company information confidential. U.S. firms have repeatedly expressed frustration about the slow pace by which the Libyan government makes business-related decisions. Despite these complaints, some U.S. firms have successfully invested in Libya, particularly in the country’s oil and gas sector.

Limits on Foreign Control and Right to Private Ownership and Establishment

The ownership of real estate in Libya is restricted to Libyan nationals and wholly-owned Libyan companies. The 2010 Investment Law permits the ownership of real estate in Libya by locally established project vehicles of foreign investors. However, such ownership is limited to leasehold ownership only. Foreign investors are allowed lease property from public holdings and private Libyan citizens, according to Article 17 of the 2010 Investment Law. There is considerable ambiguity in both the public and private rental markets; many aspects of these arrangements are left to local officials.

Other Investment Policy Reviews

Libya has not undergone any recent investment policy reviews by the OECD, UNCTAD, WTO, or any other international body. An ongoing UN-facilitated audit of Libya’s banking sector may provide insights into the disposition of Libya’s assets in recent years.

Business Facilitation

Business registration procedures in Libya are lengthy and complex. The Ministry of Economy is the main institution for processing business registration requirements. The Libyan government does not maintain an online information portal on regulations for new business registration or online registration functionality for registering a new business. There are multiple corporate structures based on the type of business undertaken (e.g. limited liability, joint venture, branch office) and each has specific registration requirements. Some requirements apply to all businesses, including: obtaining a Commercial Register certificate, registering with the Chamber of Commerce and the tax and labor departments, and obtaining a working license. If a company will be importing items, a statistical code will be required. If the company will be obtaining letters of credit in Libya, a Central Bank code will be required. A specialized agent must complete these tasks on behalf of the registering company. For the simplest corporate structure (limited liability with no Central Bank code) the process can take two to three months if the registration agent is familiar with the procedures.

Outward Investment

Libya is a member of the Islamic Corporation for the Insurance of Investment and Export Credit, which provides investment and export credit insurance for entities in member states. FDI outflows in 2018 were USD 315 million, compared to USD 2.7 billion in 2010. The Libyan government does not formally promote or incentivize outward investment. Stress in the banking sector has reduced liquidity, and this has negatively affected the ability of Libyan citizens to acquire the hard currency to invest abroad.

Investment Climate Statements
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