Of all the bureaucratic and political hurdles that businesses have to cross when working in Libya, the non-payment or late payment of bills cause the most pain. The capital-intensive nature of contracting means contractors suffer more than most when their cashflow is cut off.

It will come as scant consolation to contractors, but even government agencies face similar challenges. General Electricity Company of Libya (Gecol) has embarked on an estimated $2,000 million construction programme to double generation capacity by 2011, but a shortage of capital has prevented it from implementing several key projects. Gecols losses through non-payment for electricity amount to 40 per cent of costs and, because all its sales are to the domestic market at controlled prices, costs habitually exceed revenues, leaving the company unable to implement its building programme. 'Where are all the new projects?' asks another international contractor. 'Nothing is coming to market.'

Non-payment is not the only challenge facing foreign companies working in Libya. The unexpected introduction in June of a new labour law from Manpower, Training & Employment Minister Matuq Muhammad Matuq is also causing consternation among foreign companies. The details of the new law are unclear but the essence of it is that companies must employ one local worker for every expatriate on their books.

'We received a letter recently with the names of hundreds of Libyans that we have to employ,' says one contractor. 'We have no idea who they are and we will probably never see them, but we have to pay them anyway.' Another contractor is reported to have received a letter listing the names of more than 1,000 compulsory employees.

'What is most worrying is that we dont know any details about this new law,' says another contractor. 'I have been told that every year when we renew our residency visa, we have to recruit another local. That means a company with 100 expatriates would have to take on 100 additional Libyans every year. After 10 years that is 1,000 unnecessary workers.'

But in a country where the government is always the ultimate client, it is very

difficult for contractors to protest.

Construction: A growing market

Construction contributes about 4 per cent of Libyas gross domestic product (GDP) and employs an estimated 600,000-800,000 people. It is one of the fastest-growing industries in the country. According to an economic assessment carried out by the US Monitor Group as part of the governments national economic strategy (NES) project, the compound annual growth rate (CAGR) of Libyas construction industry from 1999-2003 was about 11.6 per cent. In 2005, the sector grew by about 5 per cent.

According to the Monitor report, about $13,000 million will be spent on building 420,000 homes up to 2015, with about $14,000 million going on infrastructure (see table). Foreign direct investment (FDI) will be an important driver for future commercial real estate development in sectors such as tourism, where more than $3,000 million has been committed and nearly $15,000 million is forecast over the next 10 years.

The growth in demand is driving up the cost of cement. Demand is about 8.5 million tonnes a year (t/y), but local production capacity from the three domestic sup