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Libya Lays Out Welcome Mat For U.S. Trade

By Phillip Kurata

Libya Lays Out Welcome Mat for U.S. Trade and Investment

The Libyan government is courting U.S. businesses to open trade and investment links as the country works to rejoin the international community.

"Many companies from around the world are arriving in Libya now. The Libyan government does not want U.S. businesses to lose a good opportunity," Libya Economy, Trade and Investment Minister Ali Al-Esawi told a group of U.S. businessmen in Washington, November 13. He cited oil, tourism, communications and information technology as sectors of the Libyan economy that are eager for U.S. investment.

Libya's ambassador to Washington, Ali Aujali, echoed the minister's appeal. "Now is time for the American companies to move forward. Strengthening our relations in economics and investment is very important to protect our political relations with the United States," he said.

The minister and the ambassador said Libya is a secure place for foreign investment as a result of Foreign Investment Law Number 5, which, on paper, creates the most liberal legal framework for attracting foreign direct investment ever adopted by the Libyan government. The law currently covers industry, health, tourism, agriculture and oil-related services, excluding drilling and exploration. The list of areas covered by that law is growing, they said.

The National US-Arab Chamber of Commerce (NUSACC) is preparing to bring a group of U.S. business people to Libya December 4-10. This NUSACC mission to Libya is its second since the United States removed Libya from the list of state sponsors of terrorism and restored diplomatic relations in 2006.

"Libya plans to dedicate billions of dollars to development and infrastructure projects in the months ahead, and our chamber wants to ensure that U.S. companies -- particularly small and medium-sized enterprises -- are in the running for those contracts," NUSACC President David Hamod said. "NUSACC wants Libyans to think first and foremost about partners in the United States. Our trips to Tripoli help to lay the groundwork for this to happen."


The warming in U.S. ties with Libya began in 2003 when Tripoli admitted blowing up a Pan American airliner over Lockerbie, Scotland, in 1988 and a French UTC airliner over Africa in 1989, and paid billions of dollars in compensation.

Deepening its commitment to combat terrorism, Libya signed the Comprehensive Nuclear Test Ban Treaty and acceded to the Chemical Weapons Convention in 2004, and the United States responded by lifting economic sanctions. Since then, Libya-U.S. trade has increased dramatically.

In 2003, the United States exported $200,000 worth of goods to Libya and imported nothing from that country. In 2006, U.S. exports to Libya totaled nearly $435 million, and U.S. imports -- mainly oil -- reached almost $2.5 billion. As a result of high oil prices, the Libyan economy is flush with money, and the emergence of a younger, technocratic leadership group in recent years has sustained the reform effort, according to an analyst at the Congressional Research Service.

Libya is offering contracts to foreign companies to build railways, hospitals, an international airport, schools and roads. It is planning a free-trade zone on the Mediterranean coast east of Tripoli and a national network of wireless telephones, to name a few projects.

Saif al-Islam al-Qadhafi, a son of Libyan leader Muammar al-Qadhafi, is the chief architect of Libya's reforms, according to U.S.-Arab Tradeline, a NUSACC publication. "The younger Qadhafi recognizes ... that with a helping hand from the international community -- particularly the United States -- Libya can leverage its natural resources (oil and gas) to benefit its human resources (the people of Libya)," according to Tradeline.

The U.S. Embassy in Libya cautions, however, that despite Libya's stated welcome to international business, foreign investment in that country is an uncertain prospect. In its overview of the Libyan market, the embassy Web site states, "The reform process has led to a great deal of confusion, particularly among foreign investors, as shifting regulations and procedures and a weak regulatory environment have not inspired confidence in the market."

An international law firm, Ali and Partners, writes on its Web site, "The tedious and discretionary administrative practices often undermine the very solid guarantees afforded by the law. This is particularly true in the light of the committee system adopted in Libya where everyone must agree and, even when they do, their decision is only a recommendation to yet another committee."

As a first step toward dispelling the confusion, Libya and the United States are exploring the possibility of negotiating a Trade and Investment Framework Agreement (TIFA). A TIFA is a consultative mechanism for the United States to discuss issues affecting trade and investment with another country.

TIFAs have been negotiated predominantly with countries that are in the beginning stages of opening up their economies to international trade and investment, either because they were traditionally isolated or had closed economies. According to Assistant U.S. Trade Representative Shaun Donnelly, developing an open, market-oriented economy will be "a long road for Libya."


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