Libya: U.S. Non-Oil Businesses Eye Return to Libya

8 October 2004

Washington, DC — U.S. corporations are positioning for a return to Libya, where they have been banned from doing business since the late 1980s.

A ten-corporation delegation visited Libya in August as part of an effort to assess the Libyan business sector and establish relationships between non-oil partners. This trip came after the United Nations lifted sanctions on Libya and the United States removed parts of an embargo that were imposed in response to a Libyan-sponsored attacks on Pan Am flight 103 in 1988 and UTA flight 772 in 1989.

"The Libyans are hungry for U.S. involvement," said Stephen Hayes, president of the Corporate Council on Africa, who organized the trip. "There is sort of a honeymoon period that may be anywhere between six months to a year."

"We need to take advantage. There is going to be a lot of opportunity for U.S. business. That means jobs for U.S. people."

Hayes, who has traveled to Libya several times during the past ten years, says that the country has not had much economic development during the decade. "It's more open, but it's got a long way to go," he said.

Hayes said there is a very practical rationale behind the recent moves by Libyan President Moummar Ghaddafi to gain acceptance in the world community. "Iraq [has not] had much to do with the change in Libya," Hayes said. "I think the change was that they needed to have a much healthier and more diversified economy and it wasn't happening because of the isolation."

At the same time, the U.S. is trying to develop partners in the region. "Right now, we could use all the friends in that part of the world that we can get," Hayes said.

Trip participants included representatives from Raytheon, Motorola, and Northrop-Grumman. This non-oil based business group is the first to visit Libya since the recent opening of the economy to foreign interests.

Habib Ghanim, Sr., president of the DC Arab-American Chamber of Commerce, believes that this newly founded relationship holds great potential as the "sleeping giant" of the North African scene. He said business relationships with Libya will initially include deals concerning oil, gas, medicine, and food.

Libyan businesses are interested in diversifying their economy and raising the standard of living, Hayes said. "[Libya's] oil services have depended completely on U.S. products," Hayes said. "They couldn't replace much of their equipment of their oil wells because it required U.S. patented equipment."

Regardless of decaying equipment, Libya's business community is up to the challenge.

"One of the greatest exports of Libya these past two decades have been entrepreneurs," Hayes said. "Since business people have left Libya, they maintained business. They knew how to do business well. They are now returning to Libya."

Hayes said Libya must improve its infrastructure, including telecommunications and housing, to ease investment and capitalize on the new opportunities. On the bright side, Hayes said that Libya is easier to do business with than other North African countries, as Libya was never fully colonized by Italy, so it did not inherit a massive colonial bureaucracy.

Libya's oil deposits aside, water could transform the country into a powerhouse of the region, Ghanim said. A large aquifer under the Libyan desert gives Libya access to massive amounts of water reserves that are highly valued in the desert region. Calculations of quantity vary greatly, but there may be enough water to supply Libya for generations to come.

Ghanim believes the future of the Middle East and North Africa will depend on water and Libya may come to hold a position of considerable influence. However, Hayes said, Libya faces the challenge to prevent waste or pollution from entering the acquifer, which would quickly destroy its potential.

Hayes urged caution against any hype, stressing that investment in Libya will have limits, due to its population of only five million people. However, some Libyans have grown very wealthy from the domestic oil industry and are eager to reinvest their earnings, he said.

Hampered by sanctions for the last two decades, Libya's tourism industry has enormous potential. "I see a huge role for tourism," Hayes said. "They have 1200 miles of some of the most pristine beaches in the world. They also have a set of Roman ruins."

Similar to the challenges and risks that the aquifer poses, Libya needs to establish a plan of action for how and what kind of tourism will take place. "You have a relatively progressive society, when compared to more traditionally Islamic regimes like Afghanistan or even some parts of the Saudi Peninsula," Hayes said. "Women are educated to a certain level. Yet, if you have the Mediterranean-type scenes, you're also going to have the danger of some culture clashes."

Ghaddafi's authoritarian control of the country may be the "most disruptive thing in the system," Ghanim said. "It does not create stability as we business people know it but an environment of control." From a business point-of-view, Ghanim says that a change of leadership is important because, "computers need to be rebooted once in a while."

Hayes hopes that business may spark change. "If you allow private enterprise to foster and grow, that's going to be less power for the government," Hayes said. "It is the same dilemma that a lot of African countries are facing. Unfortunately, a lot of them are choosing to continue controlling things from the ministerial level, which has essentially slowed economic growth tremendously."

Hayes is encouraged by the excitement he says exists on both sides of the Atlantic. The U.S. State Department and the Department of Commerce worked closely with the CCA to arrange the trip, which received front-page coverage every day in the Libyan press. Hayes said Libyans' transparency is comparably better than other African countries but, "the issue will be, how open of a society will the Libyan government allow Libya to become."

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