Libya's firms need to plan long-term

13 July 2010

The conundrum for contractors is that margins come with risk and in Libya there is plenty

Foreign companies are going to be busy in Libya. Tripoli has plans to invest $500bn by 2020 in every major construction sector and foreign companies are going to be doing much of the work.

Libya’s gross domestic product in 2009 was $91bn, while population figures from the same year put its domestic workforce at just 2 million - most of which is unskilled. Put simply, Libya has the money, but it needs more people if it is too develop at the pace it wants.

Even if the market falls short it has the potential to become lucrative for the next 10 years

After four decades of inactivity Tripoli is keen to make up for lost time. So far Libya has $50bn invested in housing, a $22bn in a rail network and it also plans to add 13,000MW to the Libyan power grid by 2020.

These achievements are just the start. The Gaddafi government needs to move ahead with a similar volume of new work each year if it is to deliver on its objective of awarding $500bn of contracts over the coming decade.

Foreign companies may believe that Tripoli’s targets are too ambitious, but they should realise that even if the market falls short it still has the potential to become a lucrative market for the next 10 years.

The market is made even more attractive when you consider the slowdown in the Gulf where contractors are now desperately slashing margins to win work. The hope is that Libya, with its billions of dollars of contracts, will be able to support the double-digit margins that working in the Gulf used to produce.

The conundrum for contractors is that margins come with risk. In Libya there are plenty. The bureaucracy is slow, financial system is underdeveloped, and the supply chain is inadequate for the demands that will soon be placed on it. The hope is that these challenges will be dealt with over time, which means companies need a long-term strategy if they are to work successfully in what could become one of the region’s largest project markets.

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