Professional Documents
Culture Documents
April 2014
Contents
1
Investing in Libya
1.1
1.1.1
1.1.2
1.1.3
1.1.4
1.1.5
1.1.6
1.1.7
1.1.8
1.1.9
1.1.10
1.1.11
1.1.12
Economic Climate
Background
Political Scenario
Living Conditions
Economic Growth
Labour Market
Industries
Oil and Gas
Market Structure
Foreign Direct Investment
Currency
Exchange Rates
Inflation
1
1
3
3
4
5
5
6
8
8
9
9
10
1.2
1.2.1
1.2.2
1.2.3
Operating in Libya
Why Invest in Libya?
Regulatory and Compliance Requirements
Risks and Barriers to Business
10
10
11
13
Investing in Libya
1.1
Economic Climate
1.1.1
Background
Tunisia
Algeria
Tripoli
Benghazi
Libya Egypt
Niger
Chad
Country
HDI
Seychelles
Libya
Mauritius
0.806
0.769
0.737
Rank
1
2
3
Algeria
0.713
Tunisia
Gabon
Egypt
Botsw ana
South
Africa
Namibia
0.712
0.683
0.662
0.634
0.629
0.608
5
6
7
8
9
10
Country
Seychelles
Equatorial Guinea
Botsw ana
Gabon
17,586.34
Mauritius
Libya
South Africa
Tunisia
Namibia
Algeria
16,350.47
14,474.75
11,750.37
10,200.29
8,159.88
7,736.90
In 1969 Muammar Gaddafi, then an army officer, together with a small group of other military
officers, staged a coup dtat against King Idris. In 1977 Libya officially became known as the Great
Socialist Peoples Libyan Arab Jamahiriya, with power supposedly held by the General Peoples
Committee, however in reality Gaddafi became a de facto dictator. From 1977 onwards Libya saw
great progress with regards to its development: GDP per capita rose at a fast rate while the HDI
became one of the highest in Africa, all this was achieved through the revenues from the oil industry
and without the need for any foreign debt.
Early in 2011, in the aftermath of the revolutions in Tunisia and Egypt, protests began to break out
across Libya. As the protests escalated in severity government forces began using more violent
methods to suppress them until the situation degenerated into a full scale civil war. With the
combined efforts of rebel and NATO forces, the Gaddafi regime was toppled and a transitional
government was set up to begin reconstructing the country.
Following the collapse of the Gaddafi regime, Libya has the opportunity to rebuild itself from scratch.
The transitional government handed over its power to a newly elected parliament, The General
National Congress (GNC), with Dr. Ali Zeidan as the Prime Minister of Libya. This new National
Investing in Libya
Congress is expected to compile a draft Constitution and to enable new parliamentary elections to
take place in 2014.
The Libyan economy has a strong foundation and many promising opportunities. In reality Libya has
not yet tapped much of its oil reserves meaning there is much room for output growth. Furthermore
the oil industry has left Libya with large foreign exchange reserves and a rich sovereign wealth fund.
One advantage of such large foreign exchange reserves is that it makes it easier for the government
to protect the value of the Libyan Dinar. Large foreign exchange reserves also grant the government
a degree of flexibility with regards to monetary and exchange rate policy, which in turn can help
influence the volume of imports and exports and keep the economy stable.
Partly due to the success of the oil industry, other sectors have unfortunately been overlooked and
much of Libyas potential in other economic sectors such as tourism, alternative energy and services
have not yet been realised. For this reason the economy is very dependent on hydrocarbons for fiscal
revenues and foreign exchange reserves, and this carries with it the risks normally associated with
any highly specialised economy. Development of the non-oil industry is a priority for the government.
The Libyan government has embarked on a programme of privatisation of state-owned entities which
may constitute an area of opportunity. At the same time, one issue potential investors may face in
Libya is the fact that much of the economy is still state controlled, which creates a challenging
business environment further compounded by the fact that decision-making tends to be inconsistent.
Transparency in post-Gaddafi Libya may improve over time.
Investing in Libya
1.1.2
Political Scenario
1.1.3
Living Conditions
Libya is one of the most developed countries in Africa and scores highly in terms of the UNDP
Human Development Index1. The demographics are highly promising; the country has a population of
over 6 million people, 68.8% of which are aged between 15 and 64 years. The median age in Libya is
24.8 years for men and 24.7 years for women. Based on estimates from the International Monetary
Fund (IMF), the population is expected to continue growing at a rate of around 1.8%2. According to
the World Health Organisation (WHO) life expectancy at birth as of 2011 is 58 for men and 74 for
women. However these figures are likely to be understated as a result of the revolution. The WHO
estimates life expectancy at 70 for men and 74 for women. Ignoring the effects of war, this puts
Libyan life expectancy on par with that of Europe, which averages 72 for both genders, and slightly
below the United States which averages 79 for both genders.
Primary education is compulsory in Libya, and provided by the sovereign state. Children between the
ages of 6 and 15 attend primary school and then attend secondary school for three additional years
(15- to 18-year-olds).
The de facto official language of Libya is Modern Standard Arabic. About 95% of the Libyan
population use different Arabic dialects as native language, most prominently Libyan Arabic, but also
Egyptian Arabic, Tunisian Arabic and other varieties. English is the most widely spoken foreign
language especially by the younger generation and business community. Moreover, there are
thousands of young Libyan professionals who were educated in universities in the United Kingdom
and Ireland. Italian is still known to some degree by some of the elderly people, mainly in the form of
Libyan Italian.
Despite the nations abundant natural resources, the people of Libya are relatively poor when
compared to western nations. IMF estimates for 2013 show GDP per capita in Libya is around
US$14,500 ranking it 6th in Africa but compares poorly with the EU and US where GDP per capita is
estimated at US$34,0003 and US$51,0004 respectively. As foreign companies return to Libya and
bring new investment with them, the potential for economic growth and an improved standard of
living for people in Libya is on the horizon.
Cost of living in Libya is relatively low when compared to major cities in the EU and US, with the
possible exception of property prices in prime areas in Tripoli.
The Human Development Index is a measure of development which combines life expectancy, educational attainment and
income into one composite indicator. This index covers 187 countries and is computed annually by the United Nations
Development Programme (UNDP).
2
Source: Eurostat
Investing in Libya
The cost of property in Libya is highly variable depending upon location, and proximity to the city
centre. The median rental cost for a three bedroom apartment in central Tripoli is about US$2,087 per
month, whereas the same type of apartment outside of the city centre would be available for
US$1,342 per month. An apartment in central Tripoli would cost around US$1,046 per square meter,
whilst an apartment outside the city centre will cost approximately US$63 per square metre.
Property prices in Benghazi tend to be less sensitive to city centre proximity.
Property prices in Libya
Tripoli
Rent of Apartment (3 bedrooms) in City Centre
Rent of Apartment (3 bedrooms) outside City Centre
Price of apartment per square meter in City Centre
Price of apartment per square meter outside City Centre
US$2087/month
US$1342/month
US$1046
US$63
Benghazi
Rent of Apartment (3 bedrooms) in City
Rent of Apartment (3 bedrooms) outside City
Price of apartment per square meter in City
Price of apartment per square meter outside City
Centre
Centre
Centre
Centre
US$630/month
US$393/month
US$669
US$472
1.1.4
Economic Growth
As a result of the revolution, GDP growth of the Libyan economy decreased dramatically. The conflict
caused significant disruptions in the supply of oil and gas, particularly as production and exports came
to a halt as a result of a brain drain and also due to the destruction of infrastructural set-ups. These
factors, coupled with the fact that the countrys assets were frozen during the same year, led to a
contraction in real GDP by 61%.
Growth regained a sharp momentum during 2012, whereby an increase in real GDP by 92%5 was
recorded, as foreign oil companies resumed operations and economic recovery is continuously
picking up at a hasty pace. This strong positive economic growth is likely to continue in the coming
years, with the Central Bank of Libya forecasting an increase of 11.3% and 9% in real GDP for 2013
and 2014 respectively. Political stability coupled with the restoration of national security and other
measures implemented by the new Libyan government are expected to sustain economic growth
over the short term scenario.
GDP (PPP)
100
$ Billions
% change
50
-50
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
-100
160
140
120
100
80
60
40
20
0
Source: IMF
Investing in Libya
High levels of sales of hydrocarbon products have always been the primary source of export revenue
for the Libyan State. This has lead to several successive surpluses in the Balance of Payments
Current Account, which records the balance between revenue from exports and expenditure on
imports. Estimates from the IMF predict that as the oil and gas industries in Libya return to their prerevolution output levels, the current account surplus will continue to rise. However this rise is
expected to be neutralised due to expected increments in imports as the country rebuilds and invests
in its economy.
Libya Econom ic Indicators
Indicator
GDP (% real change pa)
Gross fixed investment (% real change pa)
Private consumption, contribution to real GDP grow th (% points)
Government consumption, contribution to real GDP grow th (% points)
Unit labour costs (% change pa)
Labour productivity grow th (%)
Total factor productivity grow th (%)
Exchange rate LCU:US$ (av)
Budget balance (% of GDP)
Public debt (% of GDP)
Lending interest rate (%)
Deposit interest rate (%)
2008
2.7
13.1
2.6
2.5
2.2
-0.9
-1.1
1.224
23.7
3.1
6.0
2.5
2009
-0.7
9.0
2.5
-0.1
1.6
-1.1
-2.5
1.254
7.1
4.5
6.0
2.5
2010
4.3
10.2
2.9
1.7
2.0
2.3
1.2
1.267
6.8
4.0
6.0
2.5
2011
-61.4
-86.5
-22.8
-15.2
-18.2
-48.2
-43.0
1.224
-15.7
10.2
6.0
2.5
2012
92.1
115.0
56.8
21.4
8.5
67.4
83.7
1.252
26.9
3.5
6.0
2.5
Source:
Intelligence
Unit, Central of Libya, IMF, OECD. NB: Data for 2013 is an estimate
1.1.5Economic
Labour
Market
The total labour force comprises individuals aged 15 or over, who supply labour for the production of
goods and services during a specified period, including employed and unemployed individuals.
Currently, the total Libyan Labour force is estimated to be close to 2.4 million people. However
following the revolution one of the main issues the government needs to address is the complex
Libyan labour market situation.
Rising unemployment amongst Libyan nationals co-exists with growing numbers of foreign workers.
Since a labour force survey has not been carried out in recent times, very little accurate information is
available on the state of the labour market and various sources provide varying estimates. It is
generally accepted that expatriate workers constitute a significant proportion of the total labour force.
Unemployment amongst young Libyans is also frequently cited as a problem. Libyan workers tend to
lack the skills and willingness to compete with foreign workers.
According to the World Bank, Libya has one of the highest levels of public sector employment in the
world, employing up to 70% of the formal workforce. The wages and generous non-wage benefits
offered by this sector have resulted in unrealistically high wage expectations from job seekers, and
university and vocational education and training school graduates.
According to the Global Competitiveness report 2010-2011, Libya performs poorly in terms of the
overall quality of the education system, ranking 128 for primary education and 138 for higher
education and training out of 139 countries.
Despite the high enrolment numbers, the quality of education of is poor mainly due to low teacher
qualification levels, gross absenteeism, a lack of facilities and adequate equipment and traditional
curricula oriented towards the preparation of students for university students.
1.1.6
Industries
The Oil and Gas industry is currently the single largest contributor to the Libyan economy. Since the
end of the revolution, oil production has restarted and the oil industry is getting back on its feet. A
few corporations have still not returned due to the security situation; small militia groups are still
Investing in Libya
2013
11.3
65.0
5.2
2.4
5.4
-9.8
-3.6
1.278
20.4
3.0
6.0
2.5
present across the country. However, as the situation improves there is hope that oil production
levels could rise significantly.
During the MEED Libya Projects 2013 conference the Libyan government unveiled some of its
plans for the reconstruction of Libya. In total, around 200bn LYD (over US$150bn) worth of projects
will be initiated over the next decade. Much of this is related to rebuilding the country after the civil
war and hence there is much opportunity in the construction industry. Beyond this reconstruction,
there are also plans to further develop the oil and gas industry in order to increase output, as well as
plans to develop a flourishing tourism industry which will take advantage of Libyas climate and
Mediterranean coastline.
The potential growth for the Libyan economy can be seen through the success of events such as
Libya Build. This is an annual building and construction exhibition which has proven very popular
with foreign and local companies willing to explore the possibilities of investment in Libya. In 2012
636 companies attended the event which attracted over 17,000 visitors.
Other important emerging industries in Libya include renewable energy, transportation and tourism.
In particular, the tourism industry has the potential to be Libyas second largest industry as the
country boasts of its UNESCO world heritage sites, sea resorts and desert tourism.
1.1.7
According to the IMF, the value of Libyas oil reserves per capita is the 5th highest in the world after
Kuwait, Qatar, the United Arab Emirates and Saudi Arabia. Libyan oil reserves also rank 8th globally
according to OPEC statistics. As a result of this oil wealth, the Libyan economy tends to compare
favourably with other African nations.
12000
10000
8000
6000
4000
2000
0
Russia
Saudi Arabia
United States
China
IR Iran
Kuwait
Iraq
Venezuela
United Arab
Mexico
Brazil
Nigeria
Angola
Norway
Libya
Canada
Kazakhstan
Algeria
Colombia
United
350000
300000
250000
200000
150000
100000
50000
0
Millions of Barrels
Oil Reserves
During the civil war oil production practically ceased, and during 2011 oil and gas production
decreased by more than 70%. This resulted in a massive contraction in real GDP, export earnings and
fiscal revenues in 2011. Since the end of the revolution many hydrocarbon industry companies have
returned to Libya to resume operations. In fact, crude oil and gas production rose close to pre-crisis
levels by end-2012, albeit instability during the summer of 2013 reduced oil production to a relatively
very low level. As a result of the return of major players the sector is estimated to have expanded by
about 195% in 2012 and is expected to continue expanding by another 14% in 2013 and 4% in 2014
as more companies return to Libya. Plans to increase output of the hydrocarbon industry could
potentially result in another wave of rapid growth for both the sector and the Libyan economy as a
whole. However, no concrete proposals for this have been laid out as of yet.
Before the onset of civil war in 2011, Libya produced in the region of 1.55 to 1.6 million barrels per
day (bpd) of crude oil, had a refining capacity of 380,000 bpd, and crude oil exports of around 1.3
million bpd. In recent months, instability and industrial action have significantly reduced this volume.
Investing in Libya
The Libyan economy is highly dependent on the hydrocarbon industry a fact that becomes clear
when one notices the effects a slowdown in oil production had on GDP Growth. The government has
stated intentions that it wished to use revenues from this industry to finance massive investment
projects across Libya, mainly in an effort to rebuild after the war but also to develop new industries.
Libya has the potential to operate large and successful tourism and solar energy sectors alongside its
oil and gas industry, which would serve to grow and diversify the economy hence strengthening its
resistance to fluctuations in the commodity market.
Libya also possesses significant reserves of Natural Gas, however in terms of global ranking, Libyas
place in the gas market is not as relevant as in the oil market. It produces approximately 15.8 billion
m3 per year, of which more than 60% is exported to Europe (Italy) via a pipeline. Prior to the
revolution, new discoveries and investment into the industry were expected to raise the proven
natural gas reserves in the short term.
In the years leading up to the revolution Libyan production of natural gas was steadily rising from year
to year. As a result of the conflict, gas production much like oil was almost entirely shut down for a
prolonged period of time. Since the end of the revolution however production has restarted and the
industry has shown itself to be quick to recover. The National Oil Corporation has stated that natural
gas is a priority and that there are plans to re-evaluate reserves and explore the existence of shale
gas deposits in Libya. The following table shows Libyas position natural gas reserves and production
relative to states in Africa and the Middle-East as well as market leading nations.
Investing in Libya
Top 10 + Middle East and African Natural Gas Reserves and Producers
Rank
1
2
Natural Gas Reserves (billion Standard Cubic Meters) Rank Natural Gas Production (m illion standard cubic m eters)
Russia
48,676
1
United States
682,719
IR Iran
33,780
2
Russia
609,200
Qatar
25,069
IR Iran
202,431
4
5
6
7
8
9
10
11
Turkmenistan
United States
Saudi Arabia
United Arab Emirates
Venezuela
Nigeria
Algeria
Iraq
...
Egypt
...
Kuw ait
...
Libya
...
Others - Middle East
...
Oman
...
Others - Africa
...
Angola
...
Cameroon
...
Congo
10,000
8,910
8,235
6,091
5,563
5,118
4,504
3,158
4
5
6
7
8
9
10
Qatar
Canada
Norw ay
China
Saudi Arabia
Algeria
Netherlands
...
Egypt
...
United Arab Emirates
...
Nigeria
...
Oman
...
Libya
...
Kuw ait
Bahrain
...
Others - Middle East
...
Syrian Arab Republic
Equatorial Guinea
...
Mozambique
...
South Africa
...
Others - Africa
...
Tunisia
Cte dIvoire
157,050
154,927
114,570
106,429
99,330
86,454
78,150
17
19
22
26
28
31
44
48
51
15
2,190
17
1,784
20
1,549
26
1,077
32
950
652
35
36
275
43
153
46
47
124
52
54
56
59
60
60,600
54,308
42,571
31,583
18,118
15,515
12,450
9,190
6,830
6,500
3,600
3,200
1,930
1,860
1,317
...
64
65
Angola
Iraq
760
646
1.1.8
Market Structure
The free market concept is still relatively new in Libya. Under the old regime the private sector was
tightly controlled. However since the revolution, the government has been taking steps to encourage
investment by foreign companies and has become more open to private sector involvement in the
economy.
Nevertheless it will take time for these measures to have any noticeable effect; the vast majority of
Libyans still work with the public sector.
1.1.9
Foreign direct investment (FDI) inflows to Libya slowed down during the revolution. It is expected
that for the time being most FDI will continue to be in the oil and gas sector. Given the challenging
Investing in Libya
business environment, inconsistent decision making and high levels of bureaucracy, investment into
other industries is not expected to arrive at the same rate.
Libya has a score of only 10 out of 100 (where 100 is best) in the Investment Freedom category of
the Index of Economic Freedom, which illustrates the difficulty of investing in the country. One factor
influencing slow FDI inflows over the short- to medium-term will be political instability and economic
policy uncertainty, as well as fears over the security situation.
1.1.10 Currency
The currency in Libya is the Libyan Dinar (LYD). The currency is issued and controlled by the Central
Bank of Libya and to ensure the stability of its currency, the Libyan government pegged the Libyan
dinar to an SDR6 (special drawing right) at a fixed rate.
The Dinar is subdivided into 1000 dirhams. The coins used are the 50 and 100 dirham coins, as well
as the and dinar coins. The current series of banknotes includes denominations of 1, 5, 10, 20,
and 50 dinars.
1 Libyan Dinar is approximately equivalent to US$0.78
The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF
members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the
arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external
positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve
asset, the SDR serves as the unit of account of the IMF and some other international organizations.
After the collapse of the Bretton Woods system in 1973, the SDR is as a basket of currencies, today consisting of the Euro,
Japanese Yen, Pound Sterling, and U.S. Dollar. The U.S. Dollar-equivalent of the SDR is posted daily on the IMFs website. It is
calculated as the sum of specific amounts of the four basket currencies valued in U.S. dollars, on the basis of exchange rates
quoted at noon each day in the London market.
Investing in Libya
LYD
1.1.12 Inflation
Statistics from the IMF show that Libya has historically managed to keep average yearly inflation
below 4% ignoring a few exceptional periods. During 2011 inflation is estimated to have risen as high
as 15.9%, most likely due to the revolution, but is expected to have fallen in recent times. IMF
estimates for the near future predict that inflation will start to stabilise and fall to less than 4% in a
few years.
Inflation Rate %
1.2
Operating in Libya
1.2.1
There are multiple business opportunities in Libya in every sector of the economy particularly as Libya
needs to re-organise and re-build its infrastructural set-up and economy. Although oil is a
predominantly important sector, there are many other various opportunities for foreign direct
investment in diverse sectors including health, transportation, education, tourism and public utilities.
The Libyan government has made it clear that it plans to expand the oil industry and use the
revenues to fund investment projects in Libya with a value of around US$200bn. Over and above
government contracts, as economic prosperity starts to spread through the country, demand for
increasingly varied and higher quality goods and services should develop, hence presenting greater
opportunities for investors in all fields of business.
Investing in Libya
10
1.2.2
1.2.2.1
Under Libyan law, all companies formed in Libya must be Libyan controlled. Most foreign companies
currently operating in Libya tend to operate through a branch or a subsidiary.
A foreign company must register its branch with the Secretariat of Economy and Trade and
International Co-operation. Once registration is completed, a five year renewable business licence is
issued. An application for the registration of a branch can only be made after a number of procedures
have been complied with. These would include:
After compliance with the above, an application has to be submitted to the appropriate Secretariat.
The application together with the supporting documentation would be first checked by the secretary
of the Registration Committee of the Secretariat. The application may well be rejected if the
documents are not prepared in the prescribed format. If the application is approved a business
licence will be issued. This process may take anything between three to six months. If the application
is refused, reasons for the refusal will be given.
Attention needs to be paid in the preparation of the documents for registration purposes. All
documents must be:
Endorsed by competent authorities in the country issuing the documents and by the Libyan
Embassy (Libyan People's Bureau) in that country. They must be original copies as photocopies
are not acceptable unless they bear an original endorsement of the competent authorities.
Translation into Arabic by a recognised translator. Translations, which originate outside Libya,
must carry an endorsement of the official authorities and the Libyan People's Bureau.
The documents which are required to accompany the application form must be sorted into the
groupings as shown by the list of requirements and attached to the application form in the same
order. Documents should be filed in order that may be read from right to left and the Arabic
translations must be placed on top of the original documents. Both the Arabic and original documents
must be notarised and stamped by the Libyan People's Bureau in the country of origin.
The following documents are required when setting up a branch in Libya:
A resolution passed by the Board of Directors for the approval of opening the Company's branch
in Libya, including a statement of activities to be carried out in Libya, provided that they are
consistent with the objects of the parent company, and are activities permissible for branches of
foreign companies in Libya.
The name of the Manager of the Company's branch in Libya provided that he holds Libyan
nationality or the nationality of the country of the parent company or of one of its owners.
An undertaking by the Board of Directors of the parent company to prepare the annual Balance
Sheet as well as the Profit and Loss Account of the branch.
An undertaking by the Board of Directors of the parent company that they will not interfere in the
political affairs of Libya.
Investing in Libya
11
Documents showing the company's competence and expertise in the activities that will be carried
out in Libya.
An Application Form prepared by the Libyan Administration for obtaining authorisation to open a
branch of a foreign company.
1.2.2.2
Legal Issues
In 1997 The Foreign Investment Law (Law 5) was passed in Libya with the aim of encouraging
foreign direct investment and promoting Libyan private capital abroad.
The law targeted several projects in Libya such as:
Under Law 5 investors have the rights to the following benefits and exemptions:
Imported machinery, tools, equipment, spare parts and raw materials are exempt from all duties
and taxes for a period of five years
The project is exempt from all income tax on its activities also for a period of five years, which
period can be extended for a further three years
Law 5 guarantees and protects the investor against nationalisation, dispossession, seizure, or any
other similar action. There is a Libyan Foreign Investment Board which promotes investment projects
and provides a one-stop shop for investors, providing all the required services, including the
processing of applications and the granting of licences and permits.
Investors are permitted to open an account in convertible currency, to repatriate profits, to employ
expatriates when there is no qualified local labour and to own and lease property. They are protected
against expropriation and permitted access to arbitration.
Nevertheless, Decision of the Minister of Economy no. 207/2012 concerning the participation of
foreigners in the companies and the branches and representation offices for the foreign companies in
Libya introduced a categorisation of economic activities that effectively limits or restricts expatriate
participation in a number of economic sectors. Moreover, this Decision introduces restrictions on the
ownership of equity non-non-Libyan persons, also depending upon the economic sector of activity.
Investing in Libya
12
Professional advice should always be sought on all matters related to the setting up of operations in
Libya.
1.2.2.3
Taxation
Corporate Tax
Any entity registered in Libya is considered to be tax resident in Libya, hence any income generated
in Libya from assets held, or work performed in Libya is subject to income tax in Libya.
Tax is incurred annually on net income accrued during the year. Taxable income consists of income
from business operations, less allowable expenses. Libyan companies are taxed based on their
submitted tax declarations, supported by audited financial statements.
A deemed profit tax may apply in the following situations:
1.2.3
1.2.3.1
Language
The official language in Libya is Modern Standard Arabic with the vast majority of the population
speaking one of the many varieties of Arabic, mainly Libyan Arabic, but also Egyptian and Tunisian
Arabic. A significant number of people also speak one of the various Berber Languages, especially in
the Tripolitania region.
Investing in Libya
13
Under the colonial regime, Italian was a prominent language in Libya and it was also the language of
instruction in educational institutions. A few elderly people in Libya still speak some Italian, mainly in
the form of Libyan Italian, however the younger generations are more likely to understand English.
From the 1970s onwards English started to become more important to Libyans, mainly due to
economic and business reasons. While less educated people may not be able to converse in the
language most business people are accustomed to speaking English. Furthermore there are several
Libyan professionals who received their education in the United States or in the United Kingdom and
hence have developed a certain level of proficiency in the language.
1.2.3.2
Culture
Three main elements of Libyan business culture are easily identifiable. The first is the concept of
Wasta or Influence. This is a direct consequence of the development of close personal ties in
Libyan society. The concept of influence relates to the importance of having friends in high places
that can facilitate and speed up some processes. As a system based on the reciprocation of favour
wasta is present in all aspects of Libyan life, especially in business.
A second element of Libyan culture is that of Face. Social status, respect and personal dignity are
very important to Libyans. As such the protection of the honour of ones family is paramount. As a
result of this business dealings in Libya are based on reputation and rely on trust.
Finally Libya is a predominately Muslim country and so features many traditions of Muslim society.
The majority of Libyans follow the Sunni branch of Islam and tend to be conservative without being
fundamentalist. As a Muslim state, Islamic rule pervades Libyan customs and culture, providing a
framework for the behaviour of individuals. Therefore care must be taken to respect this in both
social and business contexts.
Some Libyan Business Practices:
Business meetings should not be scheduled too far in advance in order to allow for any last
minute changes of circumstance. It is advised to confirm an appointment with your Libyan
colleagues a few days before you meet.
Libyans, although rarely punctual themselves, value punctuality and will expect their foreign
counterparts to arrive on time. If, however, you are running late a polite excuse will be accepted.
In Libya, business hours vary from season to season. In the summer, business is normally
conducted between the hours of 7am and 2pm. During the rest of the year, business hours are
8am to 1pm and 4pm to 6.30pm. The weekend tends to be Friday and Saturday.
Libya has a strongly hierarchical society, an awareness of social status and the vast power
distance between people is essential, hence many companies tend to place importance on
structure and hierarchy. Respect for social position, family name and profession is key to
successful business in Libya.
In Libyan companies, delegation is rare. Generally speaking, there is one owner or person in
authority who is responsible for all those involved in the business and held responsible for all key
decision-making.
Personal relationships built on trust form the basis of all business practice in Libya. Therefore, it is
vital that you allow time for cultivating a solid business relationship with your Libyan counterparts.
Despite the strong emphasis placed on respect for social status in Libyan culture, in the Libyan
business environment it is not uncommon for all members of an organisation to have equal
access to the most senior person in charge. As a result, you may find numerous employees
interrupting business meetings with their individual concerns.
A vital part of all business introductions in Libya is the exchanging of business cards. You should
have all business cards printed in Arabic on one side and in your native language on the other side.
Investing in Libya
14
It is customary to reserve the initial part of a business meeting for general conversation. Engaging
in small talk before you enter into business discussions with your Libyan associate is vital for
establishing a successful relationship. Mutual trust and compatibility are key requisites for doing
business in Libya, therefore getting to know your Libyan counterparts in this way is essential.
Negotiations play a central role in Libyan business culture. The process of negotiating is often
more valuable to your Libyan counterparts for gaining honour and respect than the end result and
is often a slow and drawn out business. As a nation whose people are known for their trading
skills, Libyans are excellent negotiators and pursue not only financial benefits, but also other nonmonetary incentives.
Generally speaking, Libyans place a greater value on someones word as opposed to a written
agreement. Former Libyan business protocol favoured spoken agreements, based on a
handshake, over written contracts. Contracts were seen, not as a fixed arrangement, but as an
indication of understanding. However with the rapid modernisation of the business scene, written
agreements have become the rule, especially among large companies.
1.2.3.3
Security
In the aftermath of the revolution the security situation in Libya has improved but remains unstable.
Several armed militia groups still roam rural areas and the risk of clashes between them, especially
during night-time, is present. It has been acknowledged by the government that the possession of
arms by individuals not connected to the police or armed forces is a threat to security.
Public demonstrations are frequent occurrences in Libya, and several governments have advised
travelling citizens to avoid such gatherings and take cover in the event of celebratory gunfire. Crime
rates in Tripoli have risen since the revolution and reports of armed crimes including robbery and
carjacking have increased.
Investing in Libya
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Contact us
Mark Bamber
Chief Executive Officer
United Accountants for Professional Services LLC
KPMG in Libya
Partner, KPMG in Malta
T (Libya)
+218 91 607 9876
T (Malta)
+356 7943 5670
E markbamber@kpmg.com
www.kpmg.com
2014 KPMG, United Accountants for Professional Services LLC, a Libyan limited
company and a member firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (KPMG International), a Swiss entity. All rights
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