Reforming Libya's Business Climate: the Role of SME and Investment

Reforming Libya’s business climate: The role of SME and investment policies

AGENDA

This meeting is co-organised by Libya and the OECD within the framework of the projects “SME Development Strategy for Libya”, financed by the Deauville Partnership Transition Fund, and the “EU-OECD Programme on Promoting Investment in the Mediterranean”, financed by the European Union.

VENUE: Hotel Sheraton, Tunis DATE: 11-12 July 2018

Context SME Development Strategy in Libya Under the ongoing Deauville Partnership MENA Transition Fund to support SME policies in Libya, the OECD, Libya Enterprise and other key Libyan stakeholders launched a Short-term Action Plan for SME policies in Libya. The Short-term Action Plan builds on the findings of the SME Diagnostic Study and has been developed following extensive local consultations carried out in seven Libyan cities. One of the 6 key pillars of the Short-term, pillar 2, plan addresses the legal and regulatory improvements to be done in the country as necessary steps to establish a longer term strategy for SME development.

SHORT TERM ACTION PLAN FOR SME POLICIES IN LIBYA PILLAR 2: LEGAL AND REGULATORY IMPROVEMENTS Strategic goal: To foster a legal, regulatory and administrative environment that is more conducive to the start-up and growth of private SMEs.

A central aspect of this pillar depends on the development of the SME draft Law. The review of this draft is also the third component of the MENA Transition Fund to support SME policies in Libya and the OECD has already provided support on this regard in 2017, including a dedicated session in December 2017 and the revision of the law through an internal consultation process.

Libya’s investment climate and reform priorities This event will also convey Libyan investment policymakers to support the broader policy dialogue in the country on improving the investment climate. Libya is a beneficiary country of the EU-OECD Programme on Promoting Investment in the Mediterranean, launched at the MENA-OECD Ministerial Conference on 3 October 2016 in Tunis. The Programme supports efforts to boost the quality and quantity of investment in the Mediterranean region. Working in partnership with governments and institutions, the Programme engages in regional and national actions to create more robust and coherent investment policies and strategies.

Objectives of the workshop The workshop will serve several purposes, including: x Working session on the SME Law draft: The OECD will discuss the latest draft of the SME Law for Libya with the members of the National Committee for the SME law, as a conclusion of the first consultation held in December 2017. This session will also welcome the feedback and comments from policy makers from Tunisia and Italy, which will also present their country’s experiences in drafting similar laws. x Scoping session on Libya’s investment climate and reform priorities in the country: The workshop will dedicate a session to take stock of the main challenges Libya faces in attracting investment and discuss reform priorities in the areas of investment policy and promotion.

Wednesday 11 July, 2018 Hotel Sheraton, Tunis 14:00 – 14:30 Registration 14:30 – 14:45 Welcoming remarks

x Dr. Abdulnaser ABOUZKEH, General Manager, Libya Enterprise x Mr. Essam ZAHAF, Director of International Cooperation, Libyan Privatisation and Investment Board x Mr. Carlos CONDE, Head of the Middle East and Africa Division, OECD 14:45 – 16:15 Session 1: SME laws in other countries

Moderator x Mrs. Pilar SANCHEZ-BELLA, Policy Analyst, OECD Speakers x Mr. Mattia CORBETTA, Policy Advisor on Innovation and Startups, DG Industrial Policy, Competitiveness and SMEs, Italian Ministry of Economic Development x Mr. Sadok BEJJA*, General Director of SME promotion, Ministry Industry and Commerce, Tunisia x Mr. Abdalla TELAILIA*, Directeur d’Etudes à la Direction Générale de la Promotion de l’Investissement Ministère du Développement Industriel et de la Promotion de l’Investissement, Algeria This session will be dedicated to showcasing examples from other countries that have recently issued legislation on SME policies. Italy will present the Start-up Act and the policy mechanisms around it such as the political economy around the law and the monitoring and evaluation tools developed. Algeria will present the recent SME Law 1702 of 2017, which lays out the institutional setting and includes an SME definition. Tunisia will discuss about their Investment Law.

16:15 – 16:30 Coffee break 16:30 – 17:30 Session 2: Libya’s SME Law project

Moderator x Mr. Roger FORES, Policy Analyst, OECD Speakers x Mr. Ebraheem M.Y. SAEID, Legal Counselor, Libya Enterprise Over the past year, Libya Enterprise has developed a draft SME law, which has already received reviews from experts in the context of the MENA TF OECD project, and which was briefly discussed in some of the previous workshops. In November 2017, the Ministry of Economy created an inter- ministerial committee to discuss the proposed law. In this session, members of the committee will be briefed by Libya Enterprise on the latest version of the draft SME Law for Libya.

Thursday 12 July, 2018 Hotel Sheraton, Tunis 9:00 – 11:15 Session 3: Roundtable - Discussion

Moderator x Mrs. Lois STEVENSON, SME Expert Roundtable to discuss SME law This will be a working session for participants to provide comments to the latest version of the SME law draft.

11:15 – 11:30 Coffee break 11:30 – 12:45 Session 4: Libya’s investment legal framework

Moderator x Ms. Hélène FRANCOIS, Legal Advisor, OECD Roundtable discussion The objective of this session is to present the activities of the EU-OECD Programme on Promoting Investment in the Mediterranean, take stock of the main challenges Libya faces in attracting investment and discuss reform priorities in the area of investment policy. This session will focus on Libya’s investment legal framework and how it can strengthen the resilience of the Libyan economy.

12:45 – 14:00 Lunch Break 14:00 – 15:30 Session 5 : Libya’s investment promotion framework and role of FDI-SME linkages

Moderator x Mr. Fares AL HUSSAMI, Policy Analyst, OECD Roundtable discussion The objective of this session is to discuss Libya’s investment promotion and facilitation framework. The session will build on the results of a recent OECD mapping of Investment Promotion Agencies (IPAs) in MENA and OECD countries. The role of the Libyan Privatisation and Investment Board in fostering business linkages between foreign companies established in Libya and SMEs will be discussed.

15:30 – 15:45 Conclusions and closing remarks

x Mrs. Pilar SANCHEZ-BELLA, Policy Analyst, OECD x Ms. Hélène FRANCOIS, Legal Advisor, OECD

Contacts Mr. Roger FORES Mrs. Sophie ELLIOTT Policy Analyst Project Assistant MENA-OECD Competitiveness Programme MENA-OECD Competitiveness Programme Global Relations Secretariat Global Relations Secretariat Tel.: +33 1 45 24 96 71 Tel.: +33 1 45 24 96 71 Email: [email protected] Email: [email protected]

List of participants

Libya Enterprise x Mr. Abdalnasr ABOUZKEH, General Manager x Mr. Isam MOHAMED TOSHANI, Project coordinator x Mr. Ebraheem Mohammed Yousuf SAEID, Legal counsellor x Ms. Abir Ali Abd Allateef ALGHUWEEL, Assistant to legal counsellor x Mr. Ramadan ELMORHAG

Libya Privatization Investment Board x Mr. Essam Yusaf Zahaf ZAHAF x Ms. Suad Abdulsalam ABOULQASSIM x Mr. A. Gheryani Adam AHMED H x Mr. Jamal Massoud Alajeli ALAJELI x Mr. Krayem Aboulhamid IBRAHIM MOHAMED

Members of Inter-ministerial Committee for the Development of an SME law x Mr. Ahmed BELHAJ, Central Bank of Libya x Mr. Alfudail ALAMEEN, Head of Economic Development Board x Mr. Omar Amar Amhimmid GELBIB, Ministry of Agriculture x Mr. Mussa Ahmed Abdussalam EZUBIK, Ministry of Economy x Mr. Misbah Omar Ahmed ELMATRI, Ministry of Planning

House of Representatives x Mr. Fathi BASHAAGHA x Mr. Ali ESWAIAB x Mr. Abdelfatah HABLOUS x Mr. Ali NUESER x Dr. Mohamed Muftah TEKALA

Libyan private sector x Ms. Hala Tawfik Masoud BUGAIGHIS, Jusoor x Mr. Omar Faraj Fadhlullah FANOUSH , Private Sector

International organisations x Ms. Janet HECKMAN, Managing Director for the South and Eastern Mediterranean Europe Region, European Bank for Reconstruction and Development (EBRD) x Mr. Antoine SALLÉ DE CHOU, Head of Tunisia, European Bank for Reconstruction and Development (EBRD) x Mr. Lars Flocke LARSEN, International Cooperation Officer, Private sector and economic integration, European Union Delegation to Tunisia x Mr. Antonios TSAMOULIS, International Cooperation Officer, Operations Section, European Union Delegation to Libya x Mr. Matthias PEITZ, European Union Delegation to Libya x Mr. Alexandre CHATILLON-MOUNIER, Expertise France

Organisation for Economic Co-operation and Development (OECD) x Mr. Carlos CONDE, Head of Middle East and Africa Division, Global Relations Secretariat (GRS) x Ms. Pilar SANCHEZ-BELLA, Policy Analyst, Middle East and Africa Division, GRS x Mr. Roger FORES CARRION, Policy Analyst, Middle East and Africa Division, GRS x Ms. Hélène FRANÇOIS, Legal Advisor, Investment Division, Directorate for Financial Affaires x Mr. Fares AL HUSSAMI, Policy Analyst, Investment Division, Directorate for Financial Affaires x Ms. Lois STEVENSON, Expert

ANNEX I. Framework for the Short-term Action Plan for SME Development – Strategic pillars and goals

Overarching goal: To contribute to the promotion and support for the development of a dynamic and diversified MSME sector in all regions of Libya and enable a generation of Libyans capable of developing and creating innovative businesses, providing value-added employment, and helping to diversify the Libyan economy.

PILLAR 1: SME POLICY DEVELOPMENT AND PILLAR 4: PROMOTION OF AN COORDINATION ENTREPRENEURSHIP CULTURE Strategic goal: To improve entrepreneurship Strategic goal: To nurture and stimulate a more and SME development policies, the evidence- entrepreneurial society and expose more Libyans base to support them, and the coordination to the idea of becoming an entrepreneur and mechanisms among public institutions and with starting a business as a viable career, the private sector and civil society. employment and livelihood option.

PILLAR 2: LEGAL AND REGULATORY PILLAR 5: SKILLS AND CAPACITY OF POTENTIAL IMPROVEMENTS AND NEW ENTREPRENEURS AND EXISTING Strategic goal: To foster a legal, regulatory and SMES administrative environment that is more Strategic Goal: To increase the number of conducive to the start-up and growth of private Libyans, including the youth and women, SMEs. capable of establishing their business and the skills and capacity of existing MSMEs to “scale- up” and expand their businesses.

PILLAR 3: ACCESS TO FINANCE PILLAR 6: ACCESSIBILITY, SCOPE AND QUALITY Strategic Goal: To strengthen policies and OF BUSINESS DEVELOPMENT SUPPORT (BDS) funding mechanisms to improve access to FACILITIES finance for SMEs. Strategic Goal: To expand, strengthen, and improve the quality of the entrepreneurship and SME support ecosystem to be more effective supporting SMEs, inclusive of geographic regions, and sensitive to the needs of different segments of the population.

ORGANISATIONAL OVERSIGHT, MONITORING AND REPORTING

ANNEX II. Overview of short-term actions by strategic pillar

PILLAR 1: SME POLICY DEVELOPMENT AND PILLAR 2: LEGAL AND REGULATORY PILLAR 3: ACCESS TO FINANCE COORDINATION IMPROVEMENTS Short-term Actions Short-term Actions Short-term Actions 1.1 Improve the overall institutional framework 2.1 Draft an SME Law in consultation 3.1 Expand microfinance for SMEs. and capacities for SME and with appropriate stakeholders 3.2 Re-activate and modernise the National entrepreneurship policies in Libya. (including references to a MSME Guarantee Fund to be more effective in 1.2 Establish a communication co-operation definition, incentives and facilitating bank loans to SMEs. exemptions, and support mechanism between institutions involved in 3.3 Establish programmes to provide loans to developing and implementing SME and structures to promote SME development). micro and small entrepreneurs in the start- entrepreneurship policies, including up stage. international organisations and donor projects. 3.4 Support banks to improve their capacity to lend to SMEs. 1.3 Promote public-private sector dialogue to feed into SME policies. 1.4 Develop research and analysis that feeds into SME policy-making.

PILLAR 4: PROMOTION OF AN ENTREPRENEURSHIP PILLAR 5: SKILLS AND CAPACITY OF PILLAR 6: ACCESSIBILITY, SCOPE AND QUALITY CULTURE POTENTIAL AND NEW ENTREPRENEURS OF BDS FACILITIES AND EXISTING SMES

Short-term Actions Short-term Actions Short-term Actions 4.1 Spread the culture of entrepreneurship, 5.1 Train young people in 6.1 Extend the reach of business enterprise innovation and creativity across different entrepreneurship skills and on centres and business support services to fields and among the different segments of how to frame their business improve their accessibility to entrepreneurs society, including youth and women. models and write business plans and SMEs across the country. 4.2 Raise awareness in society of the and proposals. 6.2 Increase the number of business importance of women’s role as 5.2 Provide technical assistance to incubators by re-activating existing entrepreneurs in order to reduce the main entrepreneurs to help their incubators and establishing new ones to obstacles facing women in entrepreneurship businesses develop and expand, enable support for more growth-potential and SMEs, especially social barriers and to include business training, start-ups in various regions of Libya. traditions. counselling, and research and 6.3 Enhance the capacity and competencies 4.3 Identify, promote and celebrate success development support. of the management and staff of the stories of Libyan entrepreneurs and SMEs as 5.3 Provide technical support for new business enterprise centres and incubators role-models for others. entrepreneurs and SME owners to deliver consistent and quality technical 4.4 Engage a variety of media (e.g. broadcast, for a period of time up to two support and services to entrepreneurs and print, social media, competitions, events) to years after the project has started. SMEs. promote and reinforce entrepreneurship and 5.4 Establish mentoring programmes 6.4 Improve the capacity of business the availability of development and support for entrepreneurs and SMEs enterprise centres and incubators in services. during all stages of development. addressing the needs of women 4.5 Develop awareness plans through 5.5 Create local and international entrepreneurs and attracting them as universities/colleges, TVET institutions, and partnerships to support women’s beneficiaries. civil society organisations for youth who wish economic empowerment and 6.5 Set up networking mechanisms for to establish their own entrepreneurial entrepreneurship. business support providers to exchange projects. views and experiences, improve business 4.6 Integrate entrepreneurship as a component development service offerings, and foster in the education system, with an initial focus co-operation and co-ordination in provision on promoting and introducing the SME of services. option among university students and 6.6 Set up an information database to support graduates. the creation and development of new and small and medium businesses.

ANNEX III. SCOPING QUESTIONS ON LIBYA’S INVESTMENT POLICY AND PROMOTION FRAMEWORK

I. Brief overview of political and economic context of Libya o Are there a national development plan and sectoral investment strategies? If so, please provide relevant documents.

II. Stocktaking of progress and reforms in the following areas:

1. Investment policy and legal framework

x Stocktaking of reforms achieved and ongoing reforms in investment legislation o Has the government established a clear and comprehensive legal and regulatory framework for the conduct of business and investment activities? o What policy goal drove the 2010 investment law reform? Have there been any further reforms of the investment legislation since the enactment of the Law on Investment Promotion in 2010? o Are there any current or upcoming regulatory reforms? Please list all laws and regulations relevant to the conduct of business activities in Libya, and provide relevant documents. o What are the main shortcomings in the existing legislative corpus? o Does the development of laws, investment treaties and regulations involve stakeholder consultations and are all relevant ministries and other public bodies involved?

x Overview of existing stock of IIAs o What is the government’s policy toward international investment agreements? o In how many investor state dispute settlement (ISDS) cases is Libya involved? How is the defense of the State organized? Which Ministry/institution, is in charge of managing ISDS cases?

x Overall assessment of existing regime o How does the government balance its sovereign right to regulate against the importance of providing legal certainty for investors? What are the legal obligations binding upon investors? o Are there any differences in the treatment of foreign and domestic investors, or any group of investors? If so, what mechanisms have been put in place to ensure transparency of any discrimination against any group of investors and to periodically review their costs against the intended public purpose?

x Cross-cutting issues o How does the government ensure a sufficient degree of policy predictability for investors? Is there a review process for administrative decisions? Is there an appeals mechanisms against administrative decisions, (e.g. licenses denials, decisions of expropriation)? o What mechanisms exist to manage and co-ordinate regulatory policy across different levels of government to ensure consistency and a transparent application of regulations? o What are the policy priorities for reform?

2. Investment promotion and investment institutional setting

x Stocktaking of institutional reforms o How are investment promotion and facilitation measures developed, implemented, coordinated and evaluated?

o What is the exact mandate of the Privatization Investment Board? What are the other bodies/institutions in charge of dealing with investment facilitation, promotion, and monitoring? o How does the government’s investment promotion and facilitation strategy support the country’s overall development goals and growth objectives? o How does the government’s investment promotion strategy contribute to the integration of Libya, and Libyan SMEs in particular, into global and regional value chains?

x Overview of existing institutional setting for investment promotion o Has the government used international and regional networks to promote investment? If so, which ones? o To what extent does the government promote and maintain dialogue mechanisms with investors and policy advocacy to inform policy making?

x Preliminary identification of institutional weaknesses and priorities for reform

3. Benchmarking of FDI regulatory restrictiveness:

x Have you adopted a negative list approach to FDI regulation, whereby foreign investments are allowed in all sectors without discrimination unless otherwise specified in the laws and regulations of the country and in international treaties to which the country is a party? If so, have these discriminatory measures been compiled into a negative list? Please provide a copy of the list.

x Is there a sector (or sub-activity in a sector) which is closed to private investment (domestic or foreign), i.e. where a state-owned enterprise holds a de jure monopoly over the activity.

x Please provide information on any measure applying sectorally or horizontally across economic sectors on the following issues: 1) Foreign ownership restriction or joint-venture requirements; 2) Screening or prior approval mechanisms applying exclusively, or in a different manner, to investments by foreign-owned enterprises (either greenfield investments or acquisitions of domestic companies). If the case, please explain its scope and rationale: x Is it a screening and approval requirement for the entry of the investment or only for obtaining any incentive provided in the law? x What are the criteria for approval (e.g. national security; economic needs test, etc.)? x Are the criteria for approval transparently and clearly established in the law and regulations? x Do decisions have to be rendered within a specified time? Are the reasons for rejecting a project published? x Can the investor appeal the decision? x Is there a system for monitoring commitments by the investor once established? 3) Restrictions on land acquisition applying exclusively, or in a different manner, to foreign-owned investors (both acquisition of land or other real estate asset for conducting their business operations and as for real estate applicable leasing terms and possible extension periods. 4) Other operational restrictions affecting investments by foreign-owned enterprises (e.g., local incorporation requirement, restrictions on access to local finance, limitations on the expansion of indirect branches, regional/geographical zone limitations for business operations, preference for domestically-owned companies in government procurement, reciprocity requirements, different minimum capital

requirements than required for domestically-owned investments, local content requirements, restrictions on profit/capital repatriation etc.).

x Country’s ranking in the OECD FDI regulatory restrictiveness Index

4. Investment statistics

x Overview of existing statistics on foreign and domestic investment: o Which institutions are in charge of collecting and publishing statistics on foreign and domestic investment in your country? o Are foreign and domestic investment statistics collected at the industry level? If yes, which industry classifications are followed and what is the level of disaggregation? o Are foreign and domestic investment statistics collected at the sub-national level (e.g. by region, state, city, etc.)? o Are foreign investment statistics collected by type of investment (e.g. greenfield investment, Mergers and acquisitions, etc.) as well as by country origin? o Are there any recent firm-level surveys that collected information on foreign- owned firms? If yes, what are the variables covered by the survey? How the results of such survey were used by policymakers?

x Preliminary review to assess compatibility of each country’s FDI statistics with international recommendations: o Does the collection of FDI statistics follow the OECD Benchmark definition of FDI – BDM4? If not, what is the definition followed to collect statistics on FDI in your country? o How does the IPA use official FDI statistics for promotion purposes? x Identification of possible technical assistance activities to align with international standards

5. Inclusive and sustainable investment policies

x Initial overview of existing inclusive policies/strategies designed to maximise investment impact on the host country. o What policies are developed to mainstreaming inclusive growth and sustainable development objectives within the overall legislative and regulatory framework relevant to investment? o Does your IPA collect data and monitor the development impact of different types of investments? If yes, what are the indicators/statistics used? Does the IPA publish the results to inform the policy debates and stakeholder dialogues?

x Decent jobs and skills development o To what extent do labour market regulations support job creation and the government’s investment attraction strategy? o Is there an effective system for tackling discrimination that affects labour market outcomes? o Are there specific rules for women empowerment and other measures to ensure that disadvantaged people benefit equally from economic opportunities created by domestic and foreign investment? o Are there policies encouraging investors to offer on-the-job trainings, including for youth? How is the demand for skills from the private sector, including foreign investors, channelled to avoid skills shortages and mismatches? o What measures are in place to protect workers, including migrant workers, if they are not covered by labour laws or social protection schemes?

x SMEs development and linkages o How does the government promote business linkages, including those between foreign and domestic enterprises and in particular domestic SMEs? o Are databases of potential SME suppliers made available to foreign investors? Do foreign investors and large domestic enterprises help to develop local firms, including SMEs, so as to strengthen the local supply base and increase local value addition? o What measures are in place to promote the internationalisation of SMEs? o What does the government do to help business, particularly SMEs, to identify and pursue trade and investment opportunities opened up through trade agreements? o Is there adequate access to bank lending for SMEs? To what extent are non-bank financing instruments available for SME?

x Balanced territorial development o What mechanisms are in place to promote co-ordination between the supranational, the national and sub-national levels of government? Are these co-ordination mechanisms also promoted between PIB and sub- national entities? I so, how? o Do infrastructure plans/strategies take into account national and local development objectives and sustainability goals?

6. Responsible Business Conduct (RBC):

x Stocktaking of existing policies and initiatives on RBC o Does the government facilitate enterprises’ ability to meet expectations of RBC? o Does the government effectively communicate what constitutes RBC to companies and other stakeholders? o Does the government provide support and incentives to companies to strengthen RBC?

x Identification of policy reforms to be undertaken o Does the government establish and enforce an adequate legal and regulatory Framework that protects the public interest and underpins RBC? o Does the government cooperate with other governments in promoting international policies and principles for RBC?