LIBYA: Confusing signals

The lobby of Tripoli's Corinthia Bab Africa Hotel is bustling with activity. Businessmen and women from all over the world have flocked to Libya this February in search of business opportunities. But outside the confines of the country's only five-star establishment, the pace is still sluggish.

There is no doubt that change is in the air in Tripoli. There is much talk of reform, but most people will tell you that the lack of a clear vision on the part of the government has resulted in a disjointed approach to foreign investment, leaving many confused.

Libya's economy is heavily skewed towards the oil sector, around which activity has centred since the lifting of sanctions. But even this crucial area is experiencing a degree of upheaval. Slow decision-making and frequent retendering of projects has frustrated international oil companies (IOCs), which are unclear about the National Oil Corporation (NOC) vision for the future.

IOCs have voiced concern over the division of labour between NOC and the newly-established Council for Oil & Gas Affairs.

NOC chairman Shokri Ghanem denies that there is any tension between the two bodies, but admits that progress is slow. 'We have so many things on our plate that sometimes our decision-making process starts to protract,' he says. 'It takes longer than someone like myself would like to see. I am a person who would like to take quick, but also well-founded, decisions.'

Ghanem is simultaneously trying to formulate policy on a new gas licensing round, on development and production sharing agreements (DPSAs) and on downstream investment. It is still unclear whether the gas round, which could be held this year, will follow the same formula as previous oil rounds. 'Well, the same with minor changes,' says Ghanem. 'You know maybe Ali Baba is a little bit different from Baba Ali.'

It is not only the oil sector where confusion reigns. Companies looking to enter the wider Libyan economy have numerous obstacles to overcome. In November, a decision by the General People's Committee's made it mandatory for foreign companies operating in Libya to set up joint ventures through joint stock companies with local partners.

Decision 443/2006 covers the oil services, construction, industry, electricity, transport and telecommunications, agribusiness and animal and marine resources sectors and requires the local partner to hold a minimum 35 per cent stake. A Libyan joint stock company must have at least 10 shareholders and no shareholder is allowed to hold more than 10 per cent of the company's shares. A 35 per cent stake in a joint venture must therefore be distributed between four Libyan investors or be taken by a Libyan company.

The government argues the new rule is a means towards encouraging local private enterprise. 'It is important to create bodies which will provide continuity for the future because branch companies can run away easily,' says Rajab Shiglabu, general director of the Libyan Foreign Investment Board. 'It's a proper start. New projects will not be given to branch registered companies, but those with already operating projects will not be touched.'

But companies on the ground are uncertain as to how the new decision will affect them. The Economy Ministry will not allow foreign companies to register in the country unless they are part of a joint venture. But what will happen to firms already operating in Libya when their registration comes up for renewal?

In the absence of clear guidance from Tripoli, many have resorted to a wait-and-see approach.

There is concern that those investors without local partners will be left in limbo once they complete their current projects. 'New laws need to be understood better,' says the country manager of a major European

contractor. 'In tendering, no-one knows what will happen. We don't know which companies will be allowed to prequalify because o