In July 2012 Libya held its first multi-party democratic election since 1964. The National Forces Alliance won the majority in the election and holds the most seats in the new National Assembly bloc.
The National Transitional Council, which had run Libya after the uprising, was replaced by the General National Congress (GNC) whose task is to either appoint, or hold elections to appoint, a Constitutional Committee to draft a constitution and oversee a national referendum on the draft. The GNC can also set out strategic plans for Libya's economic future, release budgets for public sector spending and modernise the country's oil, gas and infrastructure sectors.
Libya's economic growth in 2012 was significant due to the restoration of crude oil production which was halted during the civil war. Production has nearly returned to pre-war levels of 1.6 million barrels per day. According to the International Monetary Fund (IMF), hydrocarbon production is now close to 90% of the pre‑war level and should have fully recovered in 2013. Libya's GDP is expected to rise by 17% in 2013 and between 2014 and 2017 is expected to rise by an average of 7% per year.
The country's oil wealth will create opportunities as the country expands and diversifies and international companies invest. Libya is now seeking to move away from a centralised, closed economy to a free market with liberalised policies which enable private investment.
The planned liberalisation of Libya's commercial laws is aimed at enticing foreign investment. This liberalisation and the prospect of the country's infrastructure opportunities have already attracted international delegations to visit Libya to meet with government and business officials.
Access to finance
Access to financial services was severely disrupted as a result of the uprising, when oil production stopped. Even before that, though, the IMF considered the country's banking sector to be under developed. However the World Council of Credit Unions' recent visit to Libya to explore opportunities to develop credit unions in Libya indicates that this may be set to change.
The Council met with representatives from the Central Bank of Libya, the Libyan Business Council, a business group in Misrata and the civic and human rights group Libyan Liberal Forum for Democracy to explain the credit union model.
There is an opportunity for credit unions to participate in the reconstruction of Libya's economy. Libya’s state officials and business councils are investigating the possibility of releasing central bank guarantees and financing for businesses investing in projects in Libya.
Business law in Libya
Despite the great potential for revenue and the many investment opportunities Libya has to offer, prospective new market entrants may find Libya a difficult place to do business due to the lack of clear guidance and the constant change of law and regulations.
One recent example of this is the law relating to the establishment of joint ventures in Libya and the capacity for foreign investors to own companies. As the law currently stands, the establishment of joint ventures is governed by Decree 207 which sets out the conditions and percentages that non-Libyans can own in Libyan companies. Foreign ownership in a joint venture is capped at 49% of the share capital unless expressly authorised by the Ministry.
In other words, foreign companies cannot ever own more than half of a company set up in Libya without government permission, which is difficult to get. In addition, the investments must meet certain criteria regarding technology transfer or employment of Libyan nationals.
Companies have until January 2013 to regularise or obtain an exemption to the new rules. This Decree reversed a number of positive measures which were put in place by the Libyan Minister of Economy months earlier under Decree 103.
International investment on a major scale is unlikely unless the new government, with assistance from professional bodies and outside advisers, puts in place a body of civil law which enables businesses to commit to projects based on financial fundamentals and with a greater degree of certainty.
Businesses looking to take advantage of projects in Libya should contact the UK government's trade body (UKTI) and the commercial section of the embassy in Libya.