In a context where global foreign investment increased by 10.9% in 2013, in particular in Europe (+25.2%) and in Latin America (+17.5%), FDI flows to developing economies reached a new high of US$759 billion. The African continent has posted an increase of 6.8% of FDI in 2013.
Libya's development relies on a number of positive factors such as its abundance of oil and gas resources, its young and relatively small population (6.5 million inhabitants) and a strategic geographical location between Europe, Africa and the Arab countries of the Gulf. The government has been trying to make Libya a full market economy, with the support of the IMF. The 2011 regime change, driven by revolutions in Tunisia and Egypt, together with the armed conflict that ensued, should not bring any change in this matter. However, the shape of the "New Libya" remains yet uncertain. The weight of the administration, low-skilled workforce and very little economic diversification remain the country's issues.
The industry is based on oil refinery, petrochemicals and iron & steel. At this stage, foreign investment is needed to diversify the economy, which is excessively dependent on oil and vulnerable to the risks of the market.
The new situation in Libya - still uncertain - should not result in many new inflow of foreign investment and FDI flows shouldn't rise in 2014. The main question for Lybia's economic partners remains the conditions under which infrastructure projects, new development projects as well as incentives regarding the oil exploration - all depending on fragile political balance - will restart.
Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).
Finally, even if Libya's rehabilitation in the international community has given confidence to investors, structural reforms remain essential.
Tourism, industry, health, services or agriculture are sectors defined by the General People's Committee as being open to foreign investment. Advantages such as tax exemptions are reserved for projects carried out within the framework of this law. However, the percentage held by Libyans or Libyan companies within the framework of this law cannot be less than 51%.
The fields of activity authorized for foreign subsidiaries are specified in decree n°13 of January 9, 2005. They are: building and public works, electricity (except production), hydrocarbons (except extraction; the petroleum sector is regulated by the petroleum law n°25 of 1955, amended several times, especially in 1983), industry, topography, environment, information technology, engineering & technical studies and health. Moreover, the financial sector, telecommunications and wholesale and retail sales are reserved domains. Foreigners have also been able to buy landed property.
Since 2003, the lifting of international sanctions coupled with the new policy of encouraging foreign investment has improved the country's attractiveness. In addition, imports are no longer a State monopoly. Law n°5 creates a bureau to encourage foreign investment which authorizes each investment project by granting a five-year operating license, which can be extended for 3 years.
This law allows partnerships between Libyans and foreigners (with no limit on foreign holdings, except those concluded with State companies and the banking sector). Finally, foreign investment projects are freed from the main legal obligations that govern the activity of Libyan companies.
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Last Updates: October 2014