The political conflict has made the economy to remain in recession for the fourth consecutive year in 2016. Political strife, weak security conditions, and blockaded oil infrastructures continue to constrain the supply side of the economy shrank by 10% in 2015 compared to 24% in 2014. Production of crude oil fell to the lowest level on record, to around 0.4 million barrels per day (bpd), which represents a quarter of potential. The non-hydrocarbon sectors remained weak due to disruptions in the supply chains of both domestic and foreign inputs, as well as lack of financing. Overall, the budget deficit rose from 43 % of GDP in 2014 to 75 % of GDP in 2015. The deficit was mainly financed from the Government’s deposits at the Central Bank of Libya (CBL). Inflation accelerated to 9.2 % in 2015, mainly driven by a 13.7 % rise in food prices. The inflation is projected at 3.5% in 2016 and 3.0% in 2017. The official exchange rate of the Libyan Dinar (LYD) against other strong currencies continued to weaken in 2015. In the parallel market, the LYD depreciated by around 160 %, due to restrictions on foreign exchange transactions that were implemented by the CBL. The production of oil is projected to improve to around 1 million bpd by end 2016 but the revenues will not be enough to cover the budget expenditures and consumption-driven imports. Economic growth is projected to rebound at 46 % in 2017 and 15 % in 2018 before stabilizing between 5 and 5.5 % thereafter. Both the fiscal and current account balances will significantly improve with the budget running surpluses expected from 2018 onwards, while current account deficits will progressively decline to less than 0.5 % of GDP in 2019. Foreign reserves will average around $22 billion during 2017-2019, representing the equivalent of 8.2 months of imports. However the economic situation in will largely depend on the implementation of the Government of National Accord and the extent of security stabilisation
Why invest in Libya?
Supporting the UN backed unity government resume full scale oil production. Libya’s oil reserves are estimated at 47 billion barrels, the largest in Africa. The strong economic performance is most likely to continue.
Libya is best known for the 42-year rule of Col Muammar Gaddafi and the chaos that followed his departure. After several attempts, international efforts to forge a roadmap succeeded in December 2015 when the factions agreed on a national unity government deal at an UN-facilitated meeting in Tunisia. A Government of National Accord (GNA) was announced on 19 January 2016, and 32 ministers were proposed. However, the House of Representative (HoR) parliament rejected the UN-backed unity government because it included too many ministers and asked the Tunis-based Presidential Council to propose a new, shorter list of ministers within 10 days. A revised and shorter list was presented on 15 February but, by the end of the month, agreement had still not been reached. Following months of delay, Libya’s House of Representatives (HoR) was elected in June 2014, replacing the General National Congress (GNC), which had acted as Libya’s legislative body since July 2012. The election of HoR was disputed by the Islamist factions who subsequently reconvened the GNC in Tripoli in August. Consequently, there are currently two rival governments in Libya: one linked to the HoR, the internationally recognised government, the other to the GNC, indicating the depth of administrative and bureaucratic chaos in the country. Political divisions and the intense fighting between rival militias since August 2014 have cost hundreds lives and displaced over 435 000 people.
The 2006 Libyan census confirmed that 5,670,688 people were living in the country. That represented a significant rise from the findings of the previous census of 1995 which returned numbers of 4,405,000. The annual growth rate between these two surveys was therefore 2.3%. It’s difficult to assess the current population of Libya but is thought to growing at a steady pace. According to World Bank the estimated Libya Population in 2015 was 6.3 million people
According to CIA World Factbook, 78.6% of total population in 2015 lived in urban areas with estimated urbanization annual rate of change of 1.13% for the period from 2010 to 2015.
Doing business in Libya
The highlights of World Bank score of doing business in Libya are summarised as follows;
|Topics||World Bank 2017 Rank||World Bank 2016 Rank||Change in Rank|
|Starting a Business||163||158||
|Dealing with Construction Permits||187||186||
|Protecting Minority Investors||185||186||-1|
|Trading across Borders||114||112||
The government is the in process of creating conducive environment for doing business.
The strict regulations imposed by banks on foreign currency exchange, has ensured the unregulated and highly volatile black market is the only option left to ordinary people.
The 2010 Investment Law mandates disputes initiated by a foreign investor or the state are settled by competent Libyan courts although Libya’s judicial system has remained weak that has made enforcement of foreign judgments and arbitral awards through the Libyan courts challenging and lengthy. In the case of commercial disputes, most foreign entities currently opt to try cases before the International Chamber of Commerce, whose judgments Libya has a history of respecting. Libya is a member of the 1983 Riyadh Convention on Judicial Cooperation, which facilitates recognition and enforcement of judgments and arbitral awards among the Arab member states.
Key development challenges
- To achieve macro stability meanwhile providing basic public services;
- To achieve political instability;
- Providing the development and diversification of the private sector and
- To build human capability
Libya is the 170 least corrupt nation out of 175 countries and scored 14 points out of 100 according to the 2016 Corruption Perceptions Index reported by Transparency International.
The visitors have to take maximum care as the security situation is unpredictable.
Unemployment and skilled labour
According to World Bank unemployment was 40.3% in 2016.
Attitude to Foreign Direct Investment
Information not available.
Restrictions on Foreign investment
The promulgation of Law 443 on November 14, 2006, fundamentally changed the way that foreign businesses in the oil services, construction, industry, electricity, communications, transportation, agribusiness and marine sectors can structure themselves and operate in Libya. Among other measures, new foreign entrants seeking to establish themselves in these sectors of the Libyan market are required to establish joint venture companies with a Libyan entity. Law 443 liberalized the strictures of earlier regulations by allowing foreign companies to retain up to 65% ownership of these entities.
Intellectual Property (IP) Rights.
Intellectual Property Protection is enforced by the Trademark Office within the Ministry of Economy, and Customs. In practice, enforcement generally requires a specific legal claim. The IMF has called upon Libya to bring its IPR regime in line with international best practice, and the Ministry of Economy and Trade is reportedly making a renewed effort to deal with the problem.
Petroleum, natural gas, gypsum
Investment Climate in Libya has been summarized to include the following
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Sources of information