Nov 2008: Libya earmarks major government fund for US investments

Los Angeles Times - Libya wants to open a new chapter in relations with the United States by tapping into a major government fund to invest in U.S. companies and sending thousands of students to study in America, the son of Libya's leader said Friday.

In an interview with The Associated Press, Seif al-Islam Gadhafi also outlined plans for Libya to move from the one-man rule of his father, Moammar Gadhafi, to a constitutional democracy as part of the country's modernization process.

The younger Gadhafi said he expects a constitution providing for democratic elections to be adopted by September 2009 — the 40th anniversary of the 1969 revolution that brought his father to power. He said he also expects Libya to modify its central government to a model similiar to the U.S. federal government, with strong regional and local governments.

Seif al-Islam Gadhafi, who was a key figure in normalizing Libya's relations with the United States, left the political stage in August and is on a private visit to the United States. But his visit had definite political overtones, including meetings with Secretary of State Condoleezza Rice, other administration officials and many federal legislators.

It also coincided with Friday's confirmation of Gene Cretz as the first U.S. ambassador to Libya in 36 years. Gadhafi was in Washington Thursday when the Senate approved the appointment after it was verified families had received full compensation from Libya for the loss of relatives in the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland. The bombing killed 180 Americans.

This week's events capped a halting, five-year rapprochement between the two countries that began in 2003 when the Libyan leader renounced terrorism and weapons of mass destruction. The process gained traction in August when the U.S. and Libya agreed on the compensation deal.

The younger Gadhafi said his main message was: "We are good people, and nice. We'll make business. We'll invest. We have friends here in the states and we have a new chapter in the relations."

He said Libya's sovereign wealth fund, a government-owned investment fund of almost $100 billion, "wants to invest here in America" despite the current financial crisis. He didn't say how much Libya would invest.

Because the fund is new, he explained, "we avoided that tsunami, the big wave. We escaped that risk, and now we are in good shape to invest right now."

Libya hopes that some of the American businesses it invests in will transfer technology to the North African country "like other countries are doing," he said.

Libya's other major focus is promoting education links with the U.S. and it expects to sign a cultural and educational agreement with the American government next month, he said.

"We hope to send ... thousands of our students to study here. And also, we are talking right now with many American schools and universities to come and operate in Libya," he said.

The younger Gadhafi said he decided to leave politics because his role addressing issues like sanctions and the U.S. embargo had ended.

"Libya for the first time has a normal relation with the rest of the world," he said.

He said he also worked hard to win government approval to invest $100 billion in Libya's modernization, which he called "a big struggle."

"Now the companies start working on that package, which is going to take the country forward," he said. "We are going to modernize everything in the country from A to Z."

The younger Gadhafi said his third battle is to have a constitution.

There is a draft constitution, he said, "and it's in the hands of the Libyans to fight for the constitution, to ratify the constitution, and then to have an efficient government with the people who are elected by the Libyans, and not appointed by us."

The younger Gadhafi sees a very different Libya with a central government similar to the U.S., after his 66-year-old father is gone.

"If you design everything around one person or one family or a couple of people, it's not going to work forever," he said.

Asked about speculation that he will succeed his father as Libya's next leader?

"You get the answer — constitution, democracy, election, like any other country," the younger Gadhafi said.

Nov 2008: UK and Libya sign their first ever double tax convention

International Tax Review: The UK and Libya have signed the first ever double tax convention between the two countries.

The treaty largely follows the OECD model double taxation convention. Important features include, with one exception, the complete elimination of source-country withholding taxes on dividends, interest and royalty payments, which is a first for a UK tax treaty with an African state

"This double taxation convention will bring benefits to British business in Libya and Libyan investors in the UK - benefits in terms of certainty, clarity and transparency and reducing tax compliance burdens," said a junior minister at the UK foreign office.

According to the UK Foreign and Commonwealth Office, UK imports from Libya consist almost exclusively of petroleum products. Total imports for 2003 were £202.1 million ($303.1 million).

"The treaty reflects the importance that the UK has always given to having tax treaties with its trading partners, and also the growing importance of the Middle East/North Africa region in the world economy," said Philip Marwood from KPMG in Bahrain.

"Certainly investors in the Gulf region and in Egypt have been looking at investment opportunities in Libya for some time, and it is good that UK businesses will be helped to do likewise," he added.

The convention will enter into force once both countries have completed their legislative procedures. In the UK the provisions of the convention for corporate tax purposes will take effect from April 1 2009. In Libya they will take effect from January 1 in the calendar year following the date of entry into force.

Nov 2008: IMF urges OPEC member Libya to diversify economy

TRIPOLI (Reuters) - OPEC member Libya should diversify its oil-dependent economy and boost regulation of its financial sector, International Monetary Fund Managing Director Dominique Strauss-Kahn said on Tuesday.

"It is not possible to stay years and years with an economy with 90 percent coming from oil," Strauss-Kahn told a news conference on a visit to the north African oil-exporting country.

"At the same time we need to have more regulations, more supervision in the financial sector," he added.

Libyan Central Bank Governor Farhat Omar Bin Guidara told the conference that he had agreed with Strauss-Kahn on a plan to expand reforms of the Libyan economy and energise efforts to integrate the economies of the five-member Arab Maghreb Union (AMU).

The AMU, comprising Algeria, Libya, Morocco, Mauritania and Tunisia, was set up in 1989 in the hope of creating a free trade zone and closer diplomatic cooperation.

But the Maghreb has the lowest internal trade of any region in the world. The border between Algeria and Morocco has been shut since 1994, with Algiers and Rabat criticising one another for failing to help resolve the Western Sahara conflict or cooperate in fighting terrorism and organised crime.

Guidara said several steps were needed to spur closer regional economic cooperation including the lifting of trade barriers between the five nations and the setting up a regional bank to be called the Maghreb Investment Bank.

Nov 2008: Socialism and consumerism rub shoulders in Tripoli

TRIPOLI (Reuters) - As economic barriers fall between Libya and the West, a boom-town atmosphere fed by the novelty of consumer culture has gripped its capital Tripoli.

Hotel rooms are in short supply as foreigners flock to the Mediterranean port city to seal business deals made possible by the OPEC member country's recovery from years of sanctions.

As the sun sets and a cool breeze wafts through shady colonial-era arcades, Tripolitans stroll past shops laden with a growing array of imported goods, from veiled Barbie dolls to England football shirts, designer handbags and silk scarves.

According to the United Nations Conference on Trade and Development, foreign direct investment into Libya rose to $2.5 billion in 2007 after a slow recovery since 2004, the year after Libya gave up its weapons of mass destruction program.

That put it on a par for inflows with Morocco and Sudan in Africa.

Near Green Square's glaring floodlights and posters celebrating 39 years of Muammar Gaddafi's Islamic socialist revolution, businessmen with the latest laptops discuss investment projects over Italian coffee and fruit smoothies.

As the number of flights to Tripoli grows, the airport's car park has overflown into a field nearby. A $2 billion project to increase passenger capacity more than sixfold is under way.

"If you don't visit a particular area for a while it becomes hardly recognizable," said Libyan singer-songwriter Ahmed Fakroun. "You ask yourself: "When did all this happen?'"

With unemployment estimated by the U.S. embassy to run at a minimum of 30 percent in Libya as a whole, the laid-back people of Tripoli appear unfazed by the level of activity and growing number of foreign visitors.

The most significant arrival by far was that of U.S. Secretary of State Condoleezza Rice, whose September trip was intended to end decades of enmity.

It raised hopes that Libya is on its way back into the international mainstream after years when it was seen in the West as a supporter of terrorism. To judge by the atmosphere in Tripoli, the shift to modernity is well rooted.

WHEEL SPINS AND NEW HOTELS

A tailback of BMWs and sport-utility vehicles forms along wealthy Ben Achour Street and young male drivers show off their powerful engines with screeching wheel-spins that send up plumes of smoke.

The noise fails to distract a group of old men playing draughts over a water pipe of tobacco.

Billboards across town advertise towering hotel developments. French perfume and Italian designer clothing stores have appeared to cater for a new class of wealthy, sophisticated Libyan with money to burn.

"Business is booming and next year promises to be even bigger," said Mustapha, a Tunisian working for Italian furniture group Doimo. "We've stopped taking more business for now as we just wouldn't be able to honor the contracts."

U.S. companies got involved in Libyan oil and gas after the end of sanctions in 2004 but many held back until this summer when the two countries agreed to set up a fund to cover terrorism compensation claims.

Today, big American brands are still conspicuously absent. There are burger bars, but no McDonalds. A man dressed in a furry duck outfit greets visitors to a family restaurant, yet Disney stores are nowhere.

Libyans interviewed in Tripoli say their country is opening to the global economy on its own terms, encouraging inward investment while eschewing symbols of western economic power.

They prefer not to discuss politics but some defend Libya's system in which young families are sold starter homes at favorable rates, flour is subsidized to ensure it stays "cheaper than sand" and few citizens are reduced to begging.

Gaddafi's Green Book, the theoretical foundation of his system of government published in the late 1970s, calls the employee-employer relationship one of slavery and proposes "Not Wage Workers, but Partners." Now his influential son Saif al-Islam has put his weight behind a campaign for more Libyans to set up small businesses.

INFLUX OF FOREIGNERS

Some Tripolitans say reforms to encourage people to retrain for real jobs rather than relying on government sinecures are a sign the country can modernize without a new revolution.

"You can get what you want in Libya, but you do need to work hard at your studies," said Abdelhafid Shtiwi, a 30-year-old desert oil field engineer. "Some people might take government money and just stay at home, but that's not much of a life."

Others say Libyan society has become a little more meritocratic -- their compatriots can be seen working as mechanics and even street cleaners where before they would have turned down such work.

They say a new atmosphere of enterprise has infected part of the population, and Tripoli's shops draw Tunisians stocking up on cheap consumer electronics and household appliances. Tripoli is some 180 km (112 miles) from the Tunisian border and in the years of sanctions, Tunisia was a relatively easy route in.

Yet Libyans with less well-paid jobs complain the influx of foreigners has pushed up the cost of living and family incomes have failed to keep pace.

"Everything is expensive, expensive, expensive," said taxi driver Mustapha. "My father is dead and I struggle to support my sisters and brothers. Only petrol is cheap."

Gaddafi has ruled out changing his system of government, which bans political parties in favor of rule by local committees. But he has suggested citizens should be handed more of the desert country's oil wealth and allowed to decide how to spend it themselves.

That reform is meant to start in January, although Libyan experts say it may be derailed by global financial turmoil.

"If the international circumstances do not permit such a program to be carried out now, it could be delayed," said Saleh Ibrahim, a member of Libya's National Planning Council and director of the Academy of Graduate Studies.

And after so many years of isolation, some Libyans remain suspicious of the growing foreign presence: "Apart from all these hotels, are they going to give us scholarships, better education and help our government offer free health?" said economic consultant Ismail Thurki. "I worry it will be the foreigners who take the profits, not us Libyans.

Oct 2008: Goodwill guides meeting in Libya

Rice, Gadhafi say it's a new era

The United States and Libya sealed a historic turnaround after decades of terrorist killings, American retaliation, suspicions and insults as Secretary of State Condoleezza Rice made a peacemaking visit Friday to Moammar Gadhafi, Libya's mercurial leader.

"The relationship has been moving in a good direction for a number of years now, and I think tonight does mark a new phase," Rice said following a traditional Muslim dinner -- the evening meal that breaks the day's fast observed during the holy month of Ramadan -- at Gadhafi's official Bab el-Azizia residence. It is the same compound hit by U.S. airstrikes in 1986 in retaliation for a deadly Libyan-linked terrorist attack in Germany. The attack killed Gadhafi's baby daughter.

"We did talk about learning from the lessons of the past," Rice said. "We talked about the importance of moving forward. The United States, I've said many times, doesn't have any permanent enemies."

Rice is the highest-ranking American official to visit Libya in a half-century. The United States considers Gadhafi rehabilitated since the days when President Reagan called him the "mad dog of the Middle East," because of the Libyan's surprise decision in 2003 to renounce terrorism and give up weapons of mass destruction.

His government has also agreed to resolve legal claims from the bombing of Pan Am Flight 103 and other alleged terrorist attacks that bore Libyan fingerprints.

"Libya has changed, America has changed, the world has changed," Foreign Minister Abdel-Rahman Shalgam said after a meeting with Rice. "Forget the past."

Gadhafi welcomed Rice in a room redolent of incense. Wearing flowing white robes, his trademark fez and a green pin of Africa, Gadhafi bowed slightly and put his right hand over his heart in a traditional Arab greeting. The two did not shake hands, but Gadhafi did shake the hands of Rice's male aides.

They then exchanged pleasantries, with Rice offering Gadhafi greetings from President Bush and Gadhafi asking about the hurricanes that have hit or are headed to the U.S. mainland, before dozens of reporters, photographers and television cameramen were ushered out.

"We're off to a good start," Rice said later. "It is only a start, but I think, after many, many years, it's a very good thing that the United States and Libya are establishing a way forward."

Source: Associated Press

Oct 2008: Back in fashion

After years of enforced isolation, Libya is back in the international fold and Gulf investors are among the first wave of arrivals to be welcomed by Colonel Muammar Qaddafi. But is the former pariah state really ready to do business with the West?

As the first us secretary of state to visit Libya in 55 years, Condoleezza Rice might have expected at least a handshake upon her arrival.

Yet when Colonel Muammar Qaddafi 'welcomed' her to his compound in Tripoli last month, Rice was left hanging by the Libyan leader, who ignored her proffered hand, dismissively gesturing her to a nearby sofa as he turned instead to the flashbulbs of the world's media.

If Libya is coming out of the cold, then it is doing so on its own terms. And while relations between the US and Libya are just barely cordial, the African state is more welcoming to Gulf investors with cash to spend.

Gulf companies are flooding into Libya, their execs travelling business class en route to the signing of multibillion-dollar real estate, energy, tourism and financial services deals.

In May this year HH Sheikh Mansour Bin Zayed Al Nahyan, the UAE's minister of Presidential Affairs and chairman of the Abu Dhabi Fund for Development (ADFD), entered into an agreement with Libya's Economic and Social Development Fund (ESDF) to form a joint venture company worth US$600m, to invest in property, tourism and energy projects in Libya.

Developers including Dubai's Emaar Properties, Qatar-based Barwa Real Estate Company and Bahrain's Tameer have all announced plans to enter the African state, while Gulf Finance House has signed a deal to build a $3.8bn 'Energy City' in the city of Sabratha, adjacent to the Mediterranean Sea.

Not to be outdone, Abu Dhabi's First Gulf Bank has entered into a joint venture with Libya's ESDF to establish a new bank, 'First Gulf Libyan Bank', while Masraf Al-Rayan, Qatar's second biggest Islamic bank by market value, has received regulatory approval from the African state's central bank to expand into Libya.

National Bank of Abu Dhabi is opening a representative office in Tripoli before the end of the year.

"There will be opportunities in real estate, financial services, infrastructure development, retail, telecoms - you name it," says David Butter, regional director for the Middle East and North Africa at the Economist Intelligence Unit (EIU). "Almost the whole gamut of economic activity provides potential for economic investment."

However, Gulf firms eager to benefit from the economic prosperity of a country that has spent much of the last half century in a stand-off with the West, will still have to contend with almost as many obstacles as there are opportunities.

"The difficulty is actually setting up the right kind of commercial structure for pushing those things forward," warns Butter. "It's still difficult for investors to tie up and conclude deals and I think there's still a persistent problem with the political environment, which infects the economic scene."

Libya has already flung the doors of its most lucrative sector, wide open. The African state holds the second largest oil reserves on the continent - around 3.4 percent of the world's total reserves.

More than 40 foreign oil companies are working in Libya, including Irving, Texas-based Exxon Mobil Corp, Los Angeles-based Occidental Petroleum Corp, The Hague-based Royal Dutch Shell Plc, London-based BP Plc and Rome-based Eni SpA.

"Given that there was such a long period in which investment was extremely slow - it wasn't sloped off entirely by sanctions but is was sloped down - the National Oil Corporation (NOC) has made a big push to draw in international oil companies for exploration and production," says Butter.

"The Libyan economy is booming and it's globalising," says A Mahdevan, a director at Star Petro Energy, one Gulf firm looking to benefit from decades of underinvestment in the sector.

"There are quite a few construction projects going on so facilities are improving and people are now finding it much easier to work here."

Dubai-based Star Petro Energy has entered into a joint venture with the NOC of Libya, to own and upgrade the Ras Lanuf refinery in the north of the country. The planned venture will be incorporated in one of Dubai's free zones, with offices in Ras Lanuf, Tripoli and Dubai.

"It is cooperation between two Arab nations, and culturally they have many things in common," continues Mahdevan. "We are welcomed with open arms - Libya is opening up pretty fast, and making efforts to ensure processes such as visa entries are functioning smoothly.

"We are bringing our technical capabilities, our management skills and the credibility that we have in the marketplace, to Libya," he adds.

As an OPEC member, Libya's oil revenues generate over 50 percent of its total GDP and almost 95 percent of its total export earnings.

The official development assistance figures for Libya stand at $20.8m, of which only 0.6 percent comes from the US, while its overall debt has been recorded at $4.6bn, against its oil-related exports of $29.4bn.

The Ras Lanuf refinery became operational in 1984 and produces an estimated 220,000 barrels of oil a day, producing a total of 10 million tonnes of refined petroleum products a year for export to the US and Europe.

The $2bn upgrade is expected to take around five years to complete, and will involve revamping and refurbishment of the existing plant.

Following the Ras Lanuf deal, ETA Ascon Star Group - the parent company of Star Petro Energy - and its consortium partners Al Ghurair Investments are also pursing other deals in Libya's oilfield services, steel and cement industries.

"If you take the case of Ras Lanuf, the number of people who will be coming to work there will be substantially higher than it is now, so we need to increase the size of the township, as well as improve the roads and other facilities there," explains Mahdevan.

"We're also looking seriously at some medical centres and other infrastructural facilities, including building some hotels," he adds. "We want to ensure that the township is a pretty good place to live - and for that we need to have more houses and more facilities."

As the development of projects such as Ras Lanuf demand improved infrastructure and facilities, so the Gulf's real estate sector has been quick to notice Libya's economic resurgence - and lay the foundations for construction work across the country.

Dubai-based Nobles Properties is one such developer, and has signed a deal to build a $500m mega-project spread over 275,000 sq ft on the waterfront in the heart of Tripoli.

"We see great potential in the Libyan market and its outstanding level of economic competitiveness, which stems from a unique combination of attractions that cannot be found elsewhere," says Omar Ayesh, chairman of Nobles.

The Tripoli Towers project is in partnership with OYA Tourism Investment and Development, a unit of Libya's Economic and Social Development Fund (ESDF).

The preparedness of the Libyan government to seek partnerships with its Gulf partners is apparent thousands of feet above the ground, too.

In April this year, the UAE and Libya signed an air transport agreement to boost economic and commercial cooperation. The two sides also inked an initial agreement which will give Etihad Airways the right to run 21 flights to three Libyan airports of Tripoli, Benghazi and Sabha as of winter 2010.

Emirates Airline, meanwhile, started to fly to Libya in March 2001 with three flights a week. That has since increased to daily operations - four flights a week go direct to Libya and three go via Tunis. On each flight, there is rarely a space to be had in any of the 12 first class or 42 business class seats.

"Our revenues and passenger numbers from our Libya flights have risen between 25 and 30 percent in each of the last two years," says Emirates official Adnan Kazim. He adds that such is the demand for direct flights to Tripoli, Emirates is examining plans to increase their frequency.

"It is really opening up and the main focus for us has been businessmen and traders traveling to Dubai and to the Far East," he continues. "There are also more and more investors going to Tripoli, and so we have very few empty seats in our cabins on those flights."

As a direct result of growing international interest in Libya, credit rating agencies are coming under pressure to cover the African state.

South Africa-based Global Credit Rating (GCR) is currently setting up a North African office - which it hopes will be operational by early 2009 - to look at countries including Libya.

"The Libyan economy will grow to such an extent that eventually we will have to be in there," GCR CEO Dave King tells Arabian Business.

Cyprus-based credit analysis firm Capital Intelligence (CI) has been approached by institutions including Abu Dhabi Islamic Bank, JP Morgan and Barclays, with a view to obtaining credit ratings for some Libyan banks.

CI covered Libya up until 2001, when it gave the country a BB- rating.

When senior analyst Peter McFerran visited Tripoli back in 1999, he came up against a hostile banking sector that seemed unwilling to cooperate with outsiders.

"I think they were under instructions or felt constrained by the [state] centralised system," he recalls. "It was as though they feared they would get into trouble for saying more than they should do, so they decided to say very little."

Today, he sees clear signs that the country is prepared to show greater transparency across its banking and financial systems.

Moreover, the raising of sanctions by the UN in 2003 has paved the way for the Libyan economy to fulfill its potential.

The move came after Qaddafi gave up chemical weapons and nuclear arms development, and agreed to compensate the families of 270 victims of the 1988 Libyan-linked bombing of Pan Am Flight 103 over Lockerbie, Scotland.

"[The US government] has said that the black marks have now been erased off the page, and I would expect conditions to become more supportive of private consumption and investment in the near future," he says.

"Imports of goods, everything from washing machines to motor cars, is likely to increase and thus consumer expenditure will also rise if the wealth is distributed among the population more evenly, of which there are signs," he adds.

And yet it will not all be plane sailing for those Gulf investors looking to make millions on the Mediterranean. For Libya to make the giant leap into the global market proper, there will have to be fundamental changes - and changes Qaddafi is unlikely to approve.

"We're still going to see blockages for investment in the country," warns Butter at the EIU.

"Within Libya outside of the oil and gas sector there's too much incoherence in the way the government is run for anything really to change. A lot of very basic projects have been held up for years, decades even, because of problems in getting funding approved.

"I think the mood has changed," he adds. "It's just been very slow to actually see any real reforms."

Of course, the key decision-maker remains Colonel Muammar Qaddafi.

And as evidenced by the cool reception afforded Condi Rice, an invitation to Libya does not always guarantee a warm welcome.

Libya is opening up - but Gulf firms will have to fight hard to gain access to the African state's most lucrative prizes.

Source: Arabianbusiness.com

Oct 2008: US opens trade office in Libya

TRIPOLI, Libya (AP) — The United States has opened a trade office in Libya, the latest in a concerted push to normalize relations after three decades of confrontation and sanctions.

The opening of the trade section follows U.S. Secretary of State Condoleezza Rice's landmark meeting with Libyan leader Moammar Gadhafi last month.

The visit came about after Gadhafi renounced terrorism in 2003 and the government agreed to pay compensation to the families of the 1988 bombing of PanAm Flight 103 over Lockerbie, Scotland.

According to Monday's statement from Libya's trade ministry, U.S. Assistant Commerce Secretary Israel Hernandez, Libyan officials and businessmen from both countries attended the office's opening on Sunday.

Source: Associated Press

Oct 2008: Libya sees buy opportunity in real estate slump

TRIPOLI (Reuters) - OPEC member Libya will seek to invest in overseas real estate markets that have tumbled due to the global credit market downturn, the government said on Thursday.

The north African country will also seek to buy shares in international companies in sectors including oil, pharmaceuticals, communications and food, state news agency Jana said after a government committee met to assess the global financial crisis.

Libya's gradual exit from international isolation after years of sanctions has freed it to channel growing income from hydrocarbon sales into foreign investments, which experts estimate are now worth over $50 billion.

"It was agreed to diversify currencies which Libya preserves and to concentrate during the coming period on direct investment in real estate in the markets which witness the kind of sharp decrease in prices," Jana quoted the committee as saying.

The gathering included the governer of Libya's central bank, the head of its National Oil Corporation, the head of the Libyan Investment Authority and Prime Minister al-Baghdadi Ali al-Mahmoudi.

The committee found that Libya had not suffered losses in its investments abroad due to the credit crisis, Jana said.

Last month, the Libyan Investment Authority said the country's holdings in overseas markets were safe from the market turmoil because of its growing experience, a policy of low-risk investing and of spreading risk by favouring investments in several currencies.

An Italian newspaper said this week that Morgan Stanley had been hired by Libya's sovereign fund, which wanted to become an investor in Telecom Italia by the end of the year. The U.S. investment bank denied the report.

Libyan finance officials have avoided commenting on specific investments.

Al-Mahmoudi said the government was also looking at improving Libya's climate for inward and local investment by reforms in taxation, visa and customs procedures and infrastructure upgrades.

Sep 2008: Libya Attracts Foreign Business

U.S. Secretary of State Condoleezza Rice's visit to Tripoli, Libya, on Sept. 4, following the settlement of outstanding U.S. and Libyan compensation claims, eases the way for more U.S. companies to enter the Libyan market. Interest in opportunities in Libya from foreign investors and businesses is as strong as ever, despite the eccentricities of Libyan policy-making.

Economic boom

Libya's economy continues to be overwhelmingly driven by the hydrocarbons sector, despite efforts to diversify the economy. Thanks to the increased oil and gas prices in the past three years, the country has received a massive influx of revenues, generating a large fiscal surplus.

This has made possible a boom in investment and business opportunities for foreign companies, which have been accompanied and facilitated by some reformist measures, such as privatization and reform of banks and preparations to reform other state-owned enterprises. However, state-owned entities continue to play a significant role in many sectors. In some cases, work is going ahead on long-standing but costly ventures that have questionable economic merit--and that might be shelved if government revenues fall:

Oil and gas

Following the rounds of licensing in the past five years, the bulk of new activity is presently in exploration, though a number of companies with mature fields are beginning or preparing to carry out enhanced recovery programs.

Construction

A raft of new construction and real estate deals has recently been agreed.

Tourism

A new Dubai-based real estate company, Nobles Properties, has just agreed a project with Oya Tourism and Development to build and develop a large residential and commercial property complex in Tripoli.

Transport

Afriqiyah Airways, a part-private Libyan airline established in 1999, is expanding its fleet and has all but eclipsed state-owned Libyan Arab Airlines as Libya's leading airline. Last month, OAO Russian Railways announced that it had begun work on building track.

Telecommunications

Chinese telecoms Huawei and ZTE have just won contracts to expand the mobile telecoms network run by state-owned Libyana.

Challenges

Despite Libya's international political rehabilitation, doing business in and with Libya retains some idiosyncratic practical challenges and risks for foreign companies and governments:

Leveraging history

In July, Qadhafi agreed a new package of "compensation" from Italy for colonial misrule. The deal will benefit Italy--and Italian companies. It illustrates Qadhafi's willingness to repeatedly play the colonial compensation card with Italy. Similarly, though he recently described problems in U.S. relations as "completely closed," it is possible that he may seek to leverage past disputes in the future.

Sensitivities

Libyan officials and Qadhafi's family are prone to taking arbitrary or disproportionate measures, for example because of perceived slights or attacks.

Nevertheless, the level of business opportunities for foreign companies should be high for at least the near future. Political disputes may continue to have short-lived repercussions for these companies, but economic policy and the overall business environment will remain broadly stable.

Source: Forbes.com

Sep 2008: Nobles plans big with Libya project

Nobles Properties, a new real estate company, is developing the $500 million Tripolis Towers in Libya, officials said yesterday.

The Tripolis Towers in the heart of the Libyan capital Tripoli will be developed in line with an agreement signed with OYA Tourism Investment and Development, a subsidiary of Libya's Economic and Social Development Fund.

The Tripolis Towers will comprise two 40-storey residential towers on 275,000 square feet of waterfront land in Tripoli. The total built-up area will be 3.5 million square feet.

One tower will include a five-star hotel with business facilities, serviced apartments and retail space. The second tower will contain office space.

A Nobles Properties' spokesperson could not confirm the number of serviced apartments, but said the hotel would comprise 300 rooms.

Unit sizes and prices were also not known, the spokesperson said.

Omar Ayesh, founding chairman of Nobles, said this was a "significant" agreement in Libya as part of the company's plans to expand in the Arab world.

"We see great potential in the Libyan market and its outstanding level of economic competitiveness, which stems from a unique combination of attractions that cannot be found elsewhere," Ayesh said.

Wissam Al Idrissi, general manager of OYA, added that Libya is enjoying a period of substantial econ-omic growth, thus attracting many development opportunities.

There is a growing demand in the Libya for multi-purpose property developments, which Dubai developers plan to exploit.

Sep 2008: USAL, Libya sign memo on 600,000T aluminium smelter

The world's top aluminium firm United Company RUSAL said on Monday it had signed a memorandum of understanding with Libya to build an aluminium smelter in Libya with an annual capacity of 600,000 tonnes.

The parties also have agreed to build a 1,500 megawatt gas power station to supply energy to the smelter, UC RUSAL said in a statement.

The natural gas for the complex will be supplied by the National Oil Company of Libya (NOC) under a contract intended to last at least 30 years, it said.

UC RUSAL and Libya have agreed to create a joint venture for the complex with UC RUSAL holding 60 percent and Libya the balance.

The deal includes a pre-feasibility study of the technical, economic and financial parameters of the proposed complex.

If the results of the study are positive, the parties plan to sign a final agreement to establish the joint venture in 2009 and to start construction of the gas power station and the aluminium smelter in 2010.

'This memorandum of understanding marks another significant move forward in implementing the company's strategy of strengthening our position in the global market,' UC RUSAL CEO Alexander Bulygin said in the company statement.

The company's strategy is to increase its competitiveness by establishing energy and metals complexes in strategically important regions, Bulygin said.

The aluminium produced by the complex in Libya, the North African country's first, will serve both the domestic demand as well as European clients, UC RUSAL said.

UC RUSAL was formed in March 2007 by a merger between Russian producers RUSAL and SUAL, and the assets of Switzerland-based commodities trader Glencore.

Billionaire Oleg Deripaska owns 56.76 percent of UC RUSAL, SUAL shareholders 18.92 percent and Glencore 10.32 percent.

Tycoon Mikhail Prokhorov has a 14 percent stake, which he obtained in exchange for a 25 percent plus two shares in the world's top nickel producer Norilsk Nickel.

UC RUSAL has said it plans to increase its aluminium output 60 percent by 2015 from 4.2 million tonnes in 2007.

Sep 2008: Gaddafi extols virtues of capitalist reforms

Colonel Muammer Gaddafi, the Libyan leader, pledged to introduce free-market measures by the beginning of next year in an unprecedented speech extolling the virtues of capitalism.

"After four months, everything will be in your hands," he told Libyans. "Do not be scared ... begin discussing this issue and prepare yourself ... because this is a crucial and inescapable matter."

The leader, who on Monday celebrated the 39th anniversary of the coup which brought him to power, has presided for almost all these years over an economy controlled by the state, allowing only a small private sector which often came under pressure to limit its growth.

The state still exerts enormous control, although recent years have seen efforts to diversify the economy and encourage private sector participation.

"Laws have been amended to make it easier for Libyans to go into joint ventures with foreign investors," said a Libyan businessman. "Also banking has improved and we now have branches of foreign banks."

Libya's oil and gas exports are the mainstay of the economy and this revenue remains firmly in the hands of the government.

But now Mr Gaddafi appears to be preparing his country's people for a smaller state role in the provision of services such as health and education.

"The money that we put in the education budget, I say let the Libyan people take it," he said. "Put it in your pockets and teach your kids as you wish, you take responsibility."

He also said consumers would be able to demand better services from the private companies which will now provide telephone and electricity services.

This is all a far cry from Mr Gaddafi's views in even the recent past.

The man who shaped Libyan society for four decades had for a long time abhorred private property. There were restrictions on the formation of private companies and Libyan families were only allowed one piece of property - and could not rent it out to anyone else.

At one point during his rule Mr Gaddafi ordered all retail outlets closed and replaced them with huge government-owned stores, which later closed and shops were allowed to reopen.

The Libyan leader has often been criticised for using Libya's oil wealth to fund rebel movements and militant organisations like the Irish Republican Army and to buy influence in Africa, especially during the years when his country was constrained under United Nations sanctions.

Now, however, he has warned his people of the dangers of leaving control of their wealth to the state.

"As long as money is administered by a government body, there would be theft and corruption," said Mr Gaddafi. "When we apply this system [capitalism], we will not worry about anything else. But if we do not establish it, it would be dangerous and would leave things in the hands of the ruler."

Sep 2008: Rice's visit to Libya signals new era

Condoleezza Rice, the US secretary of state, is poised on Friday to become the highest ranking US visitor to Libya for half a century, in a visit that seeks to resolve unfinished business between Washington and Tripoli and to smoothe the way for US investment in the country.

Ms Rice, who left Washington on Thursday night, hopes to address Libyan complaints that the US has lagged behind European countries in establishing cordial ties following Tripoli's 2003 renunciation of ambitions to develop weapons of mass destruction

Tony Blair, the former UK prime minister, and Nicolas Sarkozy, France's president, both visited Libya last year - and both announced energy deals. Silvio Berlusconi, Italy's prime minister, visited last weekend.

But no top-level US official has travelled to the country since Richard Nixon, then US vice-president, in 1957

US oil companies were quick to return after the lifting of many US restrictions in 2004. But many were held back by uncertainty about the dispute between Washington and Tripoli over outstanding claims in regard to the 1988 bombing of a Pan-Am flight. Libya has accepted responsibility for that attack, in which 270 people died. It has provided families with more than $1bn (€697m, £564m) of a scheduled $2.7bn compensation.

US diplomats add that Ms Rice will push Libya to provide about $1bn it has agreed to donate to a fund set up last month to resolve remaining claims of victims of terrorist attacks linked to Libya. The fund is also intended to compensate Libyan victims of a 1986 US bombing.

"It is true that our relationship in the past has been at times very adversarial but that has changed substantially...This, for the US, is, I would say, a success in our foreign policy," said David Welch, the state department's top official on the Middle East. "I think we can see the path towards a much more normal relationship," he added, citing the two countries' intentions to conclude a trade and investment agreement soon.

This week, in a description endorsed by Mr Welch, Muammer Gaddafi described Libya's relationship with the US as one of "neither friends nor enemies". By contrast, in 1986, President Ronald Reagan called Mr Gaddafi, whom Ms Rice is scheduled to meet, "the mad dog of the Middle East".

Mr Welch also highlighted other stops on this trip in Tunisia, Algeria and Morocco, and emphasised US concerns about al-Qaeda's activity in the region.

But the focus will be Libya. As a cash-rich country with a population of 6m, it is a market US companies have long been eager to enter.

Jomaa Al Osta, the head of the Libyan Federation of Trade and Industry, said that during the past year Libya received visits from at least four delegations of American businessmen, in sectors such as banking, pharmaceuticals, telecommunications and aviation.

June 2007: Emaar set to capitalise on Libya

Dubai-based property giant Emaar is finalising designs by three US firms and a Singaporean company for its largest global project in Libya, the company announced today.

Masterplan proposals submitted to develop the Zowara-Abou Kemash area on the Mediterranean coast near Tripoli are in the final stages of evaluation.

"The project's sheer vastness of size and scale makes its masterplanning a design challenge," said Mohamed Ali Alabbar, chairman of Emaar Properties. "An expert team of professionals is evaluating the four proposals and the final design will be unveiled soon."

A spokesperson at Emaar Properties told ArabianBusiness.com that the development value has not been announced yet, however the 380 million square metre project is the largest by size in Emaar's global portfolio

Emaar has extended its agreement to develop the project - a joint venture with the Zowara-Abou Kemash Development Zone - by another six months.

The development is made up of residential, commercial, industrial, educational, healthcare, leisure and entertainment facilities set to attract foreign investment to the country and to generate employment opportunities for Libyans.

"The Libyan government has announced several development initiatives that encourage foreign direct investment and provide a greater role for the private sector in fueling economic growth," said Alabbar.

"The size, scale and scope of development reiterate Emaar's commitment to Libya's growth plans. The various components of the project will be growth engines for the Libyan economy as they offer investment opportunities in several high-growth sectors such as industries and hospitality." he added.

"To give further impetus to investment inflow, Emaar is already in negotiations with our overseas partners to co-invest in the project."

The project further bolsters Emaar's presence in North Africa, where it has already launched several developments in Egypt and Morocco

The venture is also in line with Emaar's international expansion and diversification plans.

The company is set to implement AED140 billion ($38.1 billion) worth of projects over the next coming four years, with AED115 billion ($31.3 billion) to be spent outside Dubai, UAE's Al Khaleej daily reported today.

The Libyan project is not included in that figure.

Source: ArabianBusiness.com

June 2007: QATAR, LIBYA SET UP JOINT PROJECTS

Qatar has teamed up with Libya to set up a number of joint projects that will boost relations between the two countries. Qatar is set to launch a joint investment fund with the North African nation in a bid to provide economic assistance to Arab countries that are short of water resources, according to the official Qatari News Agency.

The two OPEC oil exporters signed the Memorandum of Understanding (MoU) for the joint fund in Doha yesterday during a visit by Libyan Prime Minister al-Baghdadi Ali al-Mahmoudi to the Gulf state. Qatar has signed three other bilateral agreements with Libya, one of which will see the setting up of a joint investment fund between Qatar Investment Authority and the Libyan Investment Establishment.

Under two other agreements, the two countries will establish the Libyan-Qatari Bank - jointly by Qatar Investment Authority and Libya Central Bank - and a joint real estate investment company. The property development firm is set to be a joint-stock venture between the Qatari Diar Real Estate Investment Company and the Libyan Foreign Investment Company.

The agency did not give further details about the agreements. Libya's economy - which depends primarily on revenues from the oil sector - has been coming in from the cold since UN sanctions were lifted in September 2003. The country's finance sector has picked up steam and is undergoing a business boom under previous prime minister, Shukri Ghanem, and current prime minister al-Mahmoudi.

Many international oil companies have returned to the country, including oil giants Shell and ExxonMobil, and tourism is also on the rise. Dubai-based property giant Emaar plans to build its largest global project in Libya - a development of the Zowara-Abou Kemash area on the Mediterranean coast near Tripoli. The mixed-use project aims to fuel economic growth by attracting foreign investment to the country and generating employment opportunities for Libyans.

Source: Arabianbusiness.com

May 2007: BP Returning to Libya in $900m Exploration Deal

BP and its Libyan partner, the Libya Investment Corporation (LIC), have signed a major exploration and production agreement with Libya's National Oil Company (NOC). The initial exploration commitment is set at a minimum of $900 million, with significant additional appraisal and development expenditures upon exploration success. The agreement was signed in Sirt, Libya, by BP's group chief executive Tony Hayward and NOC chairman, Shokri Ghanem.

BP and the LIC will explore around 54,000 square kilometers (km2) of the onshore Ghadames and offshore frontier Sirt basins, equivalent to more than ten of BP's operated deepwater blocks in Angola. Successful exploration could lead to the drilling of around 20 appraisal wells. During this exploration and appraisal phase, BP will acquire 5,500km of 2D seismic and 30,000km2 of 3D seismic and will drill 17 exploration wells

"With its potentially large resources of gas, favorable geographic location and improving investment climate, Libya has an enormous opportunity to be a source of cleaner energy for the world," said Hayward. "This is a welcome return to the country for BP after more than 30 years and represents a significant opportunity for both BP and Libya to deliver our long term growth aspirations," said Hayward. "It is BP's single biggest exploration commitment."

BP will spend $50 million on education and training projects for Libyan professionals during the exploration and appraisal period, and, upon success, a further $50 million from commencement of production. The education and training programs will be designed and managed in partnership with the NOC. "The agreement reached today is a great success for Libya, the NOC and also for BP," said Hayward.

For comparison, the acreage awarded in the North Ghadames block alone is the size of Kuwait. The acreage in the offshore Sirt basin is the size of Belgium or nearly three North Sea quadrants. In total the acreage is more than ten times the size of BP-operated Block 31 in Angola where BP has announced 14 discoveries so far, or more than 2000 Gulf of Mexico deepwater blocks.

This agreement follows a Memorandum of Understanding signed between BP and the NOC in October 2005. BP submitted its formal proposal to the NOC in April 2006. Negotiations commenced in July 2006.

This agreement represents a significant step forward in meeting the NOC's objectives as set out in its 'Exploration Master Plan' for 2005-2015. The Master Plan seeks to increase reserves to 20 billion barrels of oil equivalent by increasing exploration in offshore and 'frontier' areas and through the application of modern exploration technologies, and to increase production to 3.5 million barrels per day (mmbpd) by 2020 (the equivalent production rate of the 1970s). To achieve this, the NOC is targeting a minimum of 50 wildcat wells drilled per year and the shooting of a minimum of 4000 km2 of 3D seismic and 10,000 km of 2D seismic per year. These targets will be met through existing NOC and Joint Venture operations and through investment by international oil companies expected to total some $7 billion.

Sirt and Ghadames are two of Libya's five major basins. Sirt onshore has been the most productive to date, having produced over 20 billion barrels of oil equivalent. Offshore deepwater Sirt is believed to be 'on trend' geologically with onshore Sirt and is thought to be a buried rift with multiple play opportunities like those found in the North Sea where BP has considerable experience.

Ghadames basin is thought to be part of, and similar geologically, to the prolific Illizi and Berkine basins. Previous drilling in the 1970s and 1980s was based on early vintage 2D seismic data. BP plans to acquire extensive 3D seismic data using proprietary and the latest technologies. The offshore, deepwater Sirt acreage in water depths beyond 2000m, up to 300 km offshore is presently unexplored. It is considered a frontier deepwater basin, and a potential extension of the onshore Sirt basin.

The Libyan Investment Corporation is a corporate entity headquartered in Tripoli, Libya. It was established by Decree 208 (dated August 28th 2006) of the Libyan General Peoples' Committee (the Libyan Cabinet). The LIC is an 'umbrella' organization that oversees and manages a series of government investment funds, which invest in opportunities in Libya and internationally - most notably in Africa and the Arab world - in areas such as agriculture, real estate, infrastructure, oil and gas and in shares and bonds.

BP is one of the world's largest oil and gas companies, producing almost 4 million barrels of oil and gas and serving millions of customers every day. It operates in more than 100 countries across six continents. BP's business segments are Exploration and Production; Refining and Marketing; and Gas, Power and Renewables which includes its Alternative Energy business. Through these business segments, BP provides fuel for transportation, energy for heat and light, retail services, and petrochemicals products.

The education and training programs being considered include upgrading NOC's two primary Petroleum Training Centers; enhancing the skills of Libyan technicians and operators; developing a learning and competency development program for Libyans in technical and professional roles, including in senior management positions; enhancing English language skills; and developing training programs for Libyan suppliers and service companies to enhance their ability to compete for contracts with international oil companies. Opportunities to enhance Libya's formal education system will be explored, including academic exchanges between Libyan institutions and international centers of excellence.

Source: Rigzone

May 2007: BP-Libya Deal Could Hit $25bn

BP's natural gas exploration deal with Libya could end up hitting $25 billion, according to a senior company executive. The British oil and gas giant said it would spend a minimum of $900 million last week when the agreement was first announced, but an executive has told the Middle East Economic Digest (Meed) the final amount of investment could be much higher.

"Our intention is to spend well over the minimum commitment. We are planning a further 20 appraisal wells," the executive said. The seven-year deal gives BP the right to drill a total of 17 wells in the offshore Gulf of Sirte basin and onshore Ghadames basin, and the acquisition of 30,000 square kilometres of land for survey. "We are optimistic about the potential," the executive added. "There is a lot of unexplored territory in the Sirte basin, where there is potential for a number of gasfields. We believe that it will be a significant addition to the country's gas reserves."

He said if the project was successful, BP is looking at multiple liquefied natural gas facilities to supply energy to Europe. Part of BP's investment also includes education and training projects. The company said it would spend around $50 million on education and training during the exploration and appraisal period, and, upon success, a further $50 million from the start of production.

The agreement marks first time BP has done business in Libya in 30 years following the nationalisation of BP's assets by Muammar Gaddafi, who took power in a coup in 1969. Since the US and European Union eased sanctions following Libya's agreement not to pursue nuclear, chemical and biological weapons in 2004, foreign companies have been keen to get back into the country and secure a share of its largely untapped natural gas reserves. Many of the sanctions were imposed on Libya for the 1988 bombing of a Pan Am airliner over Scotland, which killed all 259 people aboard the Boeing 747 jumbo jet and 11 residents of the town of Lockerbie.

Source: ArabianBusiness.com

May 2007: Economist de Soto Arrives in Tripoli

Four billion people in developing nations - two thirds of the world's population - do not have the legal tools to operate in an expanded market economy. Forced to operate outside the rule of law, they have no legal identity, no fungible property, no structured legal organizations, no credit, no capital, and thus no way to prosper.

How can we address this challenge? This is the question that the world-famous Peruvian economist Hernando de Soto, who will arrive in Tripoli on Wednesday 30 May 2007, will attempt to answer

Mr. de Soto, has been adviser to over 20 heads of state around the world, will discuss ways to open the market system to everyone, through a strategy for legal reform that offers the majority of the world's people a stake in the market economy.

Mr. de Soto's visit is being sponsored by the Gaddafi Foundation for Development, organized by the National Economic Strategy (NES) through the support of the Monitor Group, an international strategy and economic consultancy.

He is expected to hold meetings with Libyan officials and other key stakeholders.

He will also deliver a lecture in Tripoli on the ways in which the 'formalization' of property rights and of informal business arrangements can spur entrepreneurship, employment and economic development.

Hernando de Soto is the founder, President and CEO of the Institute for Liberty and Democracy (ILD) Peru. Through the ILD, he has worked on designing and implementing capital formation programs to empower the poor in over 26 countries in Africa, Asia, Latin America, and the Middle East.

Mr. de Soto joins an elite group of world-famous individuals who have visited Libya over the last year to talk about elements of economic and political development that are relevant to Libya, including Anthony Giddens, former Director of the London School of Economics, Dr. Garret Fitzgerald former Prime Minister of Ireland, Professor Michael Porter, Bishop William Lawrence University Professor at Harvard Business School, Francis Fukuyama, Bernard Schwartz Professor at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University, Robert Putnam, Peter and Isabel Malkin Professor of Public Policy at the John F. Kennedy School of Government at Harvard University, and Joseph Nye, University Distinguished Service Professor, and the Sultan of Oman Professor of International Relations and former Dean at the John F. Kennedy School of Government at Harvard University.

Source: Tripoli Post

May 2007: Blair Sees `Huge' Opportunity in Libya as BP Returns

Prime Minister Tony Blair, announcing a $900 million contract returning BP Plc to Libya after more than three decades, said British companies will reap "huge" new contracts there because leader Muammar Qaddafi has joined the fight against terrorism.

"The relationship between Britain and Libya has been completely transformed," Blair said after meeting Qaddafi in Sirte in central Libya today. "We now have very strong cooperation on counterterrorism and defense and the commercial relationship that you can see by this huge investment."

Britain and the U.S. have worked to rehabilitate Libya's trade links after 20 years of economic sanctions prompted Qaddafi to curtail his ambitions for a nuclear weapon in 2002. With pressure building on Iran to abandon its own nuclear program, Blair, planning to retire on June 27, wants to draw attention to his effort to maneuver Libya away from antagonism.

"Libya has been persuadable, by setting clear standards for what constituted unacceptable behavior, by taking Libya's legitimate interests and views into account and with the right blend of penalties and inducements," said Richard Dalton, who served as U.K. ambassador to Libya from 1999 to 2002. "It's harder for the Iranians to turn themselves around."

Africa Tour

Blair, on a five-day tour through Africa, is anxious highlight foreign policy successes and made Libya his first stop today. He last visited in 2004, announcing the return of the BP's smaller rival, Royal Dutch Shell Group Plc. Exxon Mobil Corp. and Occidental Petroleum Co., which like BP were forced out of Libya in 1974, also have returned.

Blair and U.S. President George W. Bush lifted sanctions after Qaddafi agreed to pay compensation to the families of 270 people killed in the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland, and to give up plans to build nuclear bombs. Last year, the U.S. restored full diplomatic relations with Libya and removed it from a list of state that sponsor terrorism.

"It's a success story for him and Bush," said Saad Djebbar, an expert on Libya formerly at Chatham House in London, said in an interview from Qatar. "They brought him back into the fold and are dealing with him reasonably well as a partner. They want it to be a monument to their achievements."

Libya's Need

Libya, with the biggest oil reserves in Africa, produces 21 percent less oil than Nigeria because of the lingering effects of sanctions imposed because of the nation's support for terrorism.

Blair touched down earlier today in Tripoli then flew to meet Qaddafi this tonight in Sirte, an oil-rich region of Libya's desert. The two will dine together this evening before Blair continues on his African tour.

BP Plc, the U.K.'s largest oil company, may spend $900 million exploring for oil and gas in Libya, according to the North African nation's top oil official Shokri Ghanem.

"The document that we're discussing provides for BP to commit $900 million on petroleum exploration, in offshore and onshore areas," Ghanem said in a telephone interview from Tripoli. "They will have to drill 17 wells in total."

Later this week, Blair will travel to Sierra Leone and South Africa, touching on Britain's efforts to alleviate poverty and disease in Africa by boosting aid and trade to the region. Blair is pressing the Group of Eight nations, who meet in Germany in June, to step up their own efforts in the region.

Pressure on the Rich

"Blair pushed Africa up the international agenda in 2005, yet he didn't really manage to bring the rich countries along with him," said Max Lawson, Africa policy adviser at Oxfam, Britain's biggest distributor of foreign aid. "They all made promises, but they haven't delivered."

Blair said Libya has been cooperating with Western nations in fighting terrorism and that the two governments would make announcements about joint anti-terrorism plans soon. He will hold a press conference in Libya later today. He said he had an easy personal relationship with Qaddafi.

"I find him very easy to deal with," Blair told reporters traveling with him to Libya today. "I find the relationship on a personal level with him a very easy one. Libya was treated as an outcast in the international community. The fact is, we need Libya's help now. There are fantastic huge new commercial opportunities."

Oil Supplies

For Libya, today's announcement may further bolster its petroleum output and its reputation as a sound place for Western companies to do business. Since the U.S. lifted sanctions in 2004, 45 foreign companies including Shell and Exxon have piled into projects there.

Libya currently produces about 1.68 million barrels of oil a day, up from 1.26 million barrels a day at the beginning of 2002. In February, the nation said it was looking for more foreign companies to drill 300 untapped oil fields.

BP to date has failed to win rights to explore for oil during bidding contests Libya held. The company operated in the Sirte Basin in the southeast of Libya from the 1950s until Qaddafi seized foreign oil assets in 1974.

"We've been in talks with Libya since we signed a memorandum of understanding with them at the end of 2005," Robert Wine, a spokesman for BP in London, said today. "We're looking at opportunities for natural gas exploration and production and are hopeful of reaching an agreement soon."

Gas Ambition

An agreement to tap gas may help Libya build its exports of the commodity in its liquid form and help Britain diversify its energy sources. The U.K. must replace a third of its electric power plants in the next two decades as aging coal and nuclear stations retire from service.

Libya's gas reserves of 52 trillion cubic feet are the fourth-largest in Africa, after Nigeria, Algeria and Egypt, according to BP. It produces about 12 billion cubic meters of gas a year, 8 billion of which are exported to Italy by a sub-sea pipeline opened in 2004. Less than 1 billion are liquefied and sent to Spain on tankers. The rest is consumed locally.

Finding more gas may allow BP or Royal Dutch Shell Plc to build a new plant for liquefied natural gas. LNG is gas cooled to a liquid so it can be shipped by tankers to places not linked by pipelines.

In 2005, Libya selected Shell as a partner to refurbish its LNG plant in Marsa Al-Brega, in the center of the country, and to increase its output from 700,000 tons a year to 3.2 million tons a year by 2010. Shell, which will spend as much as $450 million on the project, said the contract also provided the possibility of another LNG plant if enough gas was found.

To contact the reporter on this story: Kitty Donaldson in Sirte, Libya, at kdonaldson1@bloomberg.net.

Source: Bloomberg

Mar 2007: The Opening Of Libya

Harvard professor Michael Porter is helping to restructure the economy, but skepticism abounds.

Mohamed Zeyani is a baby-faced 27-year-old with slicked-back hair. He is also a new phenomenon in Muammar al Qaddafi's Libya—an entrepreneur. With his 25-year-old brother Ali, Zeyani opened the Al Sahab Training Center three years ago in the up-and-coming Bin Ashour district of Tripoli. The center is now teaching English, computers, and business skills to about 130 employees of local companies and multinationals such as Occidental Petroleum Corp. (OXY ) and Italian oil giant ENI. "We chose the field of education because we felt there was a big need," Zeyani says as he looks in on classrooms crowded with women in head scarves and young men in suede jackets. His annual revenues have already doubled, to $1 million, and he's thinking of setting up an executive MBA program.

Entrepreneurs in Libya? Isn't this the pariah state where everything is run by so-called peoples's committees and until recently private property was severely restricted? The answer is that Qaddafi has wised up—at least partly. He began changing course a few years ago when oil prices were low. The Libyan economy was close to collapse after more than a decade of U.S. and U.N. sanctions brought on by his reckless actions, such as the 1988 bombing of Pan Am Flight 103 over Scotland. After the U.S. invaded Iraq and toppled Saddam Hussein in 2003, Qaddafi settled his differences with Washington and abandoned his weapons of mass destruction programs.

Since then, foreign oil companies have been piling into Libya, and Tripoli has started to revitalize the economy. Much of the progress is due to an unusual partnership with Harvard Business School professor and competitiveness guru Michael E. Porter, who is advising the Libyans through Boston consultancy Monitor Group. For the past two years, more than a dozen Monitor consultants have been working in Libya, studying the economy and running a three-month leadership program intended to create a new pro-business elite. So far, 150 Libyans have graduated. The people in the course "were real role models, starting businesses, contributing to society," says graduate Yazid el Shaari, an engineer at Canadian-Libyan joint venture Veba Oil Operations.

Porter was persuaded to take the job by Qaddafi's son, Saif al Islam. The former London School of Economics graduate student is a lean man who favors expensive European suits and Western-style economic reform. Since first meeting Saif at several dinners in London, Porter has traveled to Libya three times and met top government officials, including the elder Qaddafi. "I didn't take this on because this is a big economy," Porter said in an interview at Tripoli's glitzy Corinthia Hotel. "It was very symbolic. If this can be successful, then other countries will be able to change."

It's a monumental task. Libya is behind the curve in just about everything. Moreover, the country's economy is more dependent on oil and gas than just about any other. The industry, which employs only 3% of the workforce, accounts for over 60% of gross domestic product—a higher share than in either Saudi Arabia or Kuwait. Even though Qaddafi, who has ruled since 1969, is taking the chains off the private sector, unemployment is still estimated to be as high as 35%, and the streets of Tripoli are filled with loitering young men.

LOCATION, LOCATION

Yet there's a buzz in the Libyan capital these days. Developers are eyeing the spectacular beaches west of the city, and real estate prices have doubled in the past year. "There is definitely an undercurrent of motion," says Abdulla Boulsien, a London-based Libyan who is scouting real estate and IT deals for Tuareg Capital, a private equity fund set up to invest in Libya and Algeria.

Even if it's not entirely open for business, Libya seems to be worth the trouble. After all, the country has oil and gas income approaching $40 billion per year, some $60 billion in the bank, and an attractive location across the Mediterranean from Sicily. So far, the biggest action is in energy. The Oasis Group—which includes ConocoPhillips, (COP )Marathon Oil (MRO ), and Hess (HES )—paid Tripoli $1.8 billion two years ago to return to the Libyan fields that the U.S. government forced them to give up in 1986.

Occidental Petroleum Corp. also reclaimed its old Libyan acreage in 2005, paying $133 million up front. The company was the big winner in the first of three auctions that the Libyans have held for new exploration rights in the past two years, paying $90 million and committing to an additional $125 million in investment. Exxon Mobil (XOM ) and Chevron have also picked up acreage in the auctions. And Royal Dutch Shell has agreed to a major gas deal. "We believe Libya will be a very interesting country to work in for the next five to ten years," says Tawfiq A. Mohamed, chairman of ete-laf Oil Services Co., a Tripoli-based company that performs oilfield construction work.

More tourists, too, might be drawn to Libya. An hour east of Tripoli lies one of the world's great ruined cities, Leptis Magna. Among the largest Roman settlements in Africa, it's well-preserved and promises to be a key attraction. But getting a decent hotel room or a table at one of the better fish restaurants in Tripoli is a challenge. Oil companies have booked blocks of rooms permanently. And the U.S. Embassy, which reopened last year, is using a floor of the Corinthia as a temporary base while its diplomats find a building site.

The growing stream of businesspeople and visitors is gratifying to hotelkeeper Mohammed Mesbah. He runs the Zumit Hotel, a spectacular hostelry built next to a Roman arch dedicated to Marcus Aurelius in Tripoli's old city. Mesbah recently spent about $400,000 renovating the colonnaded structure, which was built in 1816 to house traveling merchants. "I figured my vision may be four or five years ahead of its time," says Mesbah. But he's already fully booked on most nights.

REFORM ROADBLOCK

None of this means Libya is likely to turn into a new Dubai. Libyan society, which has lived for decades under Qaddafi's revolutionary populism, probably isn't ready for that degree of opening. "To change from a socialist culture to a private culture is a big project," says Saleh Zahaf, a lawyer who advises would-be foreign investors. "It requires a generation."

Porter complains that reform ground to a halt last year after Monitor recommended a big commitment to education and training and investment in energy, tourism, trade, and construction. One reason: a backlash against proposed layoffs of public-sector workers. A planned privatization of a public-sector bank called Sahara also failed when investors rejected the government's valuation.

Qaddafi and his son needed more time to build consensus. Over the past year, they have gradually replaced hard-liners in the government. On Feb. 22, Porter joined Saif in Tripoli to announce the launch of a Libyan Economic Development Board designed to speed government decision-making and boost private enterprise. Saif also promised to more than double compensation for state employees, whose salaries have been frozen at low levels for years. (A typical engineer, for example, makes about $400 a month.) And while he wants to shrink the state sector by some 20%—or 180,000 workers—those who leave will be given three years' salary, plus loans of $23,000 to start businesses. "We need to change from a state economy to an open economy," Saif told reporters, "but without it being out of control."

This balancing act is likely to continue as Libyans wait to see whether Qaddafi is truly serious about reform. "We are getting more comfortable, but lots of people don't feel confident," says one Libyan businessman. For decades, Qaddafi confiscated businesses and homes and treated enemies with brutality. Fear still lingers in the Tripoli air, and hotel rooms and restaurant tables are said to be bugged. Moreover, Saif isn't the only Qaddafi son with his father's ear. Saadi, a former professional soccer player, and Mohtassem, the chief of intelligence, also vie for influence.

But many business leaders believe the regime is finally listening. In 2003, a group was allowed to form a business council, which successfully lobbied for lower interest rates. Recently, council members prevented a project to build what they considered to be an overpriced flour mill that was backed by Maltese investors. Instead, a cheaper $15 million Libyan-backed facility got the green light. "We were kept out of [projects in] our country for years, and we want it back," says Abdalla M. Fellah, a former council chief who will invest in the mill.

Foreign investors in Libya will have to reckon with such nationalistic sentiments, so future deals won't come easily—just as nothing in Libya does. But the reward—a foothold in one of the world's great oil producers—is well worth it, many foreign executives believe. As Mohamed Zeyani says: "Something is happening. It may be slow, but it is happening."

Source: Businessweek

Mar 2007: ECONOMIST INTELLIGENCE UNIT

Policy towards private enterprise and competition

2007-08: The government makes only halting progress on its programme of economic liberalisation.

2009-11: The government seeks to accelerate its privatisation programme, in part by lifting individual ownership restrictions, but concerns over potential job losses prevent substantial progress and consolidation.

Policy towards foreign investment

2007-08: The government seeks to attract high levels of foreign investment, most of all in the hydrocarbons sector but also in industry, tourism, banking and, to a lesser extent, in agriculture and health.

2009-11: Measures are introduced to encourage investment outside the hydrocarbons sector and more areas are opened to foreign investment. The government drops its requirement for foreign firms to form joint ventures with local companies.

Foreign trade and exchange controls

2007-08: The US lifts remaining trade restrictions on Libya.

2009-11: The Central Bank of Libya removes remaining foreign-currency restrictions to ease the foreign investment climate.

Taxes

2007-08: The authorities formulate new plans for reforming the tax system, partly in line with IMF recommendations.

2009-11: Some measures are taken to simplify the tax system, in particular by introducing a single corporate tax rate.

Financing

2007-08: The government establishes a stock exchange in Tripoli, listing newly privatised firms to stimulate interest. The financial sector remains lumbered with considerable non-performing loans and is held back by insufficient regulation.

2009-11: More progress is made in developing local equity and capital markets, but the banking sector remains hampered by state interference.

The labour market

2007-08: The government seeks to force foreign companies to take on more of the burden of employing local labour, against a backdrop of high unemployment. However, low skill levels hamper progress, in turn forcing the government to rein in its plans to cut one-third of the public-sector workforce.

2009-11: The public sector remains the largest employer, but skill levels among Libyans improve.

Infrastructure

2007-08: The government pushes ahead with existing infrastructure development programmes, in concert with international investors. Funding is prioritised in areas such as power generation and transport infrastructure.

2009-11: Further efforts to develop Libya's infrastructure are made, with a particular emphasis on programmes that are behind schedule. These efforts are aided by more sophisticated financing options.

Feb 2007

++++ Press Release for Immediate Distribution - 8th February 2007 ++++

Tuareg Capital Signs Strategic Partnership with Capital Management House and Reaches 1st Close on the Libya Fund

Tuareg Capital Ltd announces that it has reached its first close target of US$30 million in commitments to its inaugural US$100 million fund, the Libya Fund. Tuareg Capital is a private equity firm established in 2006 and focuses on investment opportunities in North Africa.

The Libya Fund offers investors the opportunity to participate in a professionally-managed private equity fund, taking advantage of Libya's attractive investment prospects. The Fund will seek to benefit from the emergence and development of one of the last frontier economies in the MENA region.

Tuareg Capital is also pleased to announce the signing of a strategic partnership with Capital Management House ("CMH") of the Kingdom of Bahrain. Under this alliance, Tuareg Capital will partner and co-operate with CMH on investment opportunities in North Africa, particularly with regards to Islamic debt financing and other structured financing opportunities. CMH will also be a cornerstone investor in the Fund.

In response to signing the partnership agreement with CMH and to successfully reaching the Fund's first close target, Mr. Adel Saudi, Chairman & CEO of Tuareg Capital, said:

"We are delighted to form such a strategic partnership with CMH. They are an extremely focused and well managed investment banking group who offer us an array of services and abilities. As well as making a significant commitment to the Libya Fund, they will be instrumental in helping us to structure innovative financing solutions in our target markets. We see the partnership as a true win-win situation. With regards to the Fund, we have been delighted by the response from investors in the region. Libya is one of the most challenging markets in the MENA region to break into and investors view the Fund as a strong and strategic opportunity to gain exposure to the Libyan economy and its promising future. We believe that we are proposing a timely and compelling opportunity to investors. We will seek to leverage our team's significant and diverse skill-sets to generate superior returns across a diverse range of investments for our investors."

Mr. Saad Al Shamlan, CEO of CMH, said:

"We are absolutely delighted to have Tuareg Capital as our strategic partner for North Africa and regar