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issue 3 June / July 2013 Business EYE

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Focus on PORTS & SHIPPING Interview with IMF Banking - Finance - Economy

Construction

Tripoli Port Renewables

EDITORIAL Issue 3 JUNE / July 2013

Business EYE www.libyaherald.com

CONTENTS 02 Focus: Ports & Shipping From the Editor 04 Interview: President of Ports 06 Tripoli Port 08 Sirte Port 10 Khoms Port Libya imports the majority of its needs and most of these goods Safety at sea 12 come by sea. Its ports are already busy, struggling even, to 14 Aviation handle the flow of consumer items. When the government finally 16 Finance & Economy starts spending the budget to rebuild infrastructure, and foreign contractors restart work on stalled construction projects, the 16 Interview with IMF pressure on the ports asked to handle a flood of building materi- 18 Interview: Gumhouria Bank als, is going to become intense, some fear unsustainable. 20 Interview: United Bank 22 Energy There are two roots to the problem. The first is the decayed state of the ports themselves. Thanks to years of neglect, wharves are 26 Renewables crumbling into the sea. There are simply not enough cranes to 28 Construction handle a substantial increase in container movements. 32 Telecoms The second is the restrictive practices of the dock workers, who Interview: 2nd Deputy Minister CIM 32 operate a single daily shift, as do the truckers who take goods 34 Retail from the docks. The distribution of management functions 36 Exhibitions across different organisations within each port compounds the challenge. With no overall control, no one has the ultimate power to drive through change. And Libyans must pay the high extra cost of ships standing offshore for up to 12 days, waiting to come Editor: in and be unloaded. Michel Cousins [email protected] Yet there are good people at all levels in the ports, who really +218 (0)91 770 3242 want the docks to play their part in rebuilding the new Libya, who see how dangerous is a future without radical change. Managing Editor: The IMF says it expects Libya’s economy will have grown this Sami Zaptia year by 16.5 percent. The bottleneck in the country’s maritime [email protected] trade has to be unblocked to make that happen. +218 (0)91 212 1272

Business Editor: Nigel Ash [email protected]

Chief Reporter: Ashraf Abdul Wahab [email protected] Michel Cousins Social Media: Editor-in-Chief Nihal Zaroug [email protected]

Sales and Marketing: Yolanda Zaptia [email protected]

Creative Director: Imad Ali Khan [email protected]

Hay Demashque, Al-Hadba Al-Khadra, © The Libya Herald PO Box 83510, Tripoli, Libya The views expressed are not necessarily those of the Libya Herald. Fax: + 218 (0) 21 491 0464 June / July 2013 Business Eye 1 FOCUS Ports Post-revolutionary berthing pains at Libya’s ports By Hadi Fornaji and Tom Westcott

very Wednesday, the Deputy Min- compared to a one-day turnaround at a Tu- are beginning to work longer shifts, thanks ister of Transport, Farid Gheblawi, nisian port. At a charge of $6,000 - $10,000 a to overtime payments. “We’re planning to responsible for ports and maritime day per ship, it is costing the country an esti- have two shifts at Tripoli, from 7am to 3pm transport affairs, is at Tripoli Port. mated half million dollars a day. and 3pm to 11 pm.” It will happen, he insists. EHe is there to chair the Tripoli Port Crisis “We will enforce it.”Moreover, the private Committee which includes representatives Yet waiting ships means major activity. Ghe- sector is to be involved. At Sirte, he says, a from all the organisations in the port as well blawi estimates up to 80 percent of imports contract is going out for dockside operations. as shipping agents and customers. The aim is come by sea and the amount is growing. Most to try and sort out whatever are the current government projects may still be on hold but The LPC, deeply opposed to the private sec- problems. the private sector is busy importing. tor, launched a national strike when a private company was given permission to operate at There is a lot to sort out. Cement is a major import at the moment Khoms port. Says Gheblawi: “There are more with so many small construction projects in than 5,000 people working with LPC. They Talk to any shipper about all Libya’s ports; hand. When the Libya Herald visited Tripoli thought that we’d given a contract at Khoms the complaints are the same — lack of equip- docks many vessels were cement-related. and that they were about to be thrown out, ment, skills, container handling facilities “There is a huge demand at the moment, so first in Khoms, then in Tripoli and Benghazi. and deep water quays to accommodate everyone brings cement”, notes President of mega-container ship. They also complain of the Ports and Marine Transport Authority They blocked the ports for two days, even restrictive practices by the former Socialist Sharafeddin Banghazi, “but we cannot have at Misrata which isn’t run by us. They don’t Ports Company, now the Libyan Ports Com- all the quays handling cement. We are lim- want the private sector to come.” pany, whose employees ensure that ports op- ited by draft and by cargo-specific berths.” erate a single eight-hour shift day. Thus, ves- The Ministry, he said, was talking to work- sels have to wait outside the ports for days Gheblawi accepts the various problems al- ers “to help then understand that the private for a berth. though disputes the figures. Waiting-time sector will use them and probably pay them costs are nearer $6,000-$7,000 a day per ves- more”. The complaints apply to all the ports – Trip- sel and the maximum wait is a week adding oli, Benghazi which is particularly active “We’re trying our utmost to overcome the Misrata is the best port in Libya at the mo- at present, Misrata Freeport, Khoms and problem.” ment and is the only one with two gantry the other, smaller ones, Tobruk, Derna, and cranes and substantial areas of land for stor- Zuwara. It makes Libya the most expensive Time for change age. However, says one shipping agent, the destination in the Mediterranean, shippers Working practices are a problem, but not the equipment is inadequate and the operators claim. They put the average wait at ten days whole problem, he adds, noting that dockers needed better training.

Khoms Port

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Prospects for Tripoli and Benghazi Ports LD 270 million contract with Turkey’s STFA than Libya and ships can be turned around to further develop the new port at Giuliana in a day, has seen an increase of cargos being There is a mixed response to the notion that is being reactivated and improved. The old shipped there and then trucked into Libya. Tripoli and Benghazi ports have reached the port will become a passenger terminal and end of their commercial lives because they marina. A consultancy tender issued for the Gheblawi does not accept that using Tuni- are hemmed in and the surrounding streets project closed on 23 May. sian ports is cheaper. “The cost of storage is can no longer cope with port cargo. up to 50 percent cheaper in Libya than any- Prequalification tenders closed the same day where else in the region”, he says. Yet, it is The main reason Tripoli port is a mess today, for the development of Derna port. A short- clear that unless Libyan ports upgrade and Gheblawi says, is because for years it was list is expected to be published after Eid, says became more efficient, Tunisia could effec- starved of investment and because Qaddafi Gheblawi. tively become Libya’s main port, the place suddenly decided in 2009 to turn it into a where most of its imports are unloaded. passenger terminal, demolishing facilities In the case of Tobruk, the aim is to issue a in the process. It is difficult to expand the tender for a master plan for its development. But there is another side to this. Last month, port, the Deputy Minister agrees, but for the Tunisian shipping company CTN launched moment, the aim is to restore facilities and But Libya may also need berth control. Zliten its first regular weekly sailing from the Tunis make it work as a general cargo port. “We too wants a new port, Gheblawi says, to ser- port of Rades to Khoms. It was a response may make Tripoli a passenger terminal, but vice the town’s development. There is to be to a series of disruptions at the land border not before five or ten years,” he adds. a study. But with Misrata and Khoms ports crossing at RasJedir. nearby, it does not make financial sense. One big problem, he adds, is divided man- If Libya gets it right – and soon – in terms agement. Each port must be under a single Competition from neighbouring countries of significantly better cargo handing in- authority, frastructure and productivity among dock While Libya continues to struggle to get its workers, its ports will be able to more than The longer-term aim is an entirely new port, ports affairs and practices in order, the con- fund their own expansion and upgrades. If already being referred to as “Tripoli West”. cern is that shippers will find way around the not, the ports could lose the very revenues There was talk of it being at Zuwara but the problems that could damage growth. Tunisia, that they need to make investments in the focus now is on the east of Zawia, 34 kilome- where costs are said to be significantly less new infrastructure and a vicious circle will tres west of the capital. “The area is good, the have been completed. water is deep” says Gheblawi. Shipping is a round-the-clock business. For It would serve the whole region from the Tu- Libya to be a real market player, addressing nisian border to Tripoli. Consultants are due Most government projects working hours is a priority. Increasing shifts to be hired to develop a master plan, says the may still be on hold but toward working 24-hour would reduce con- Deputy Minister. “We’re looking at the idea gestion and waiting times, so slashing costs of awarding a contract on a BOT basis, pos- the private sector is busy to be closer in line with other North African sibly for a 30-40 year period.” countries. Consumers in Libya would then importing. be able to reap the benefits of more reason- Benghazi is different. A pre-revolution ably-priced products.

June / July 2013 Business Eye 3 FOCUS Ports Libya Herald Interview: President of the Ports and Marine Transport Authority

Sharafeddin Banghazi, President of the Ports and Marine Transport Authority, describes some of the challenges facing Libya’s ports and outlines how they must be tackled.

By Tom Westcott Sharafeddin Banghazi President Ports Authority he country’s ports, Banghazi says, has absolute control over any one of the high freight rates for shipping to Libya”. “are not what we want them to be.” country’s ports: existing managers have “no He explains: “We feel as though control and no authority”. At present de- The state stevedoring company LPC, which we have just started, from almost partments, including customs, stevedoring, operates a monopoly very much under its Tnothing, because there has been no strategic security and inland transportation, all work own rules, is also partly responsible for this. plan for ports. We are trying to convince the independently. Currently working just one shift a day, Bang- government to think strategically, and look hazi says that it needs to increase its shifts. at how we can modernise each port.” “Each port should be under one management,” he says. “This is essential for the ports to This will start with urgent repairs, especially work effectively.” Different departments and at Tripoli and Benghazi, which have been ne- offices are necessary but these need to be run glected for many years. Banghazi is confident and monitored effectively by one authority. “People don’t that the Authority’s budget of LD 50 million “We need to change this 42-year mentality, realise that the is sufficient. “If we spend it according to our and push employees to get the ports work- boat is a customer.” plans, it is enough,” he says. Setting aside the ing,” he says. “People don’t realise that the cost of salaries, 85 percent of the budget will boat is a customer.” be spent on new projects, with 72 percent of this earmarked for much-needed construc- The Authority’s aim is to create management tion work. with a long-term vision, and training has an Terminals and ports that each specialise in important role to play. “No money spent on handling one particular type of cargo are an With the money only recently released, how- training is wasted,” Banghazi says, “especial- option that the Authority is exploring. “Car- ever, he points out that spending the whole ly for the country’s younger generations who go-specific terminals will help because each budget is a challenge in itself. Because of only ever knew the Qaddafi regime. We have type of cargo is different to handle, requiring Libyan rules and regulations, almost all of to be patient with our young people because different methods and equipment.” which are still in place from the old regime, they are our lasting resource,” he adds. plus the hot summer months and Ramadan, The problems facing the Authority, Bang- Banghazi says the Authority will be lucky if Time for a new approach hazi says, are endless. It is not just the it can actually spend half the money. “We are The Port of Khoms, Banghazi says, has been ports, management and procedures that are working against the clock,” he says, “and we chosen to pilot the new approach to running sub-standard. need committed staff who are prepared to a port. “All procedures will be done under work long hours”. one office and this will be a case study for us.” Libya is not yet compliant with international He adds that the project is due to start “very marine standards and regulations. “If we Need to improve port management systems soon”.Banghazi is convinced that improved want to be a real player in the Mediterranean Upgrading the ports is not just about physi- management systems will reduce the wait- Sea, we need to comply with international cal and material improvements, however. ing times for vessels calling at Libya’s ports. regulations.” Banghazi says, adding that this Another major problem facing the industry, “Waiting times are up to two weeks here,” he is essential, for Libya to become accepted Banghazi explains, is management. No-one admits, “which make the ship owners set internationally.

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Between two shores: shipping from Turkey Ports need rapid hand- to Libya ling improvements By Hadi Fornaji By Hadi Fornaji

lsari, a Libyan shipping company established after the Shippers fear that with Libya “For us this is a big, big cost” says A revolution as the agent for Turkey’s Sana Lines, is reap- about to embark on major recon- Trevisan. A large vessel standing ing the benefits of being small but perfectly formed to target struction while its economy is al- off at sea awaiting an unloading the lucrative market between the two countries. ready booming, the two realities berth costs a shipping company will collide on the already over- $10,000 a day in charter fees alone. “We offer the only direct line from Istanbul to Tripoli, of- stretched wharves of the coun- fering customers a three-day service,” sales and marketing try’s ports. Med Cross has therefore come manager for Sana, Gulden Unsal, says, “and we have another up with a hub port at Augusta, in route from Gemlik and Istanbvul to Benghazi and Misrata.” “What is moving into Libya so far”, Sicily where Libya-bound goods warns Loris Trevisan, CEO of Med are held for transshipment onto a Alsari’s first voyage to Libya carried just 38 containers. Just Cross Lines, “is nothing compared smaller vessel. Having a ship half sixteen months later, they are averaging between 160 to 200 to what will be moving when the the size waiting offshore to come containers per voyage, as well as other cargo. To date, the real reconstruction starts, hope- in and unload is half the cost, says line has delivered some 8,000 containers to Libya. Goods fully by the end of the year or the Trevisan. include large quantities of food, as well as pre-fabricated beginning of 2014.” housing. “Meanwhile the larger ship can go To avert disaster, what is needed – off and fetch more cargo.” At the Sana operates two vessels which can accommodate mixed and needed fast – he says, is invest- moment he says, Augusta is only cargoes of containers, construction equipment and break- ment in new cranes and handling being used for cargo from Turkey bulk. Built in 2000, M/V Denizhan Bayrakter services the equipment. Med Cross, which and the Adriatic. In September, Istanbul-Tripoli route. It has two on-board cranes, each began operating to Libya last year his company will be adding a third with a 40-tonne lifting capacity, well-suited to port calls at from ports in Turkey, the Adriatic, vessel to move cargo to Libya, Tripoli, with its limited equipment and resources. “We know France and Spain, had originally transshipped through Augusta that the port isn’t very good but we must go there because planned for turnarounds in Trip- from France and Spain. it is the capital,” says Sana Lines’ general manager, Mehmet oli, Misrata and Benghazi (the Alioglu. three Libyan ports it serves) of an average of three days. Sana’s vessels are of a modest size to avoid being stuck at an- What is needed is chorage for more than a few days. “We wait a maximum of The reality, says Trevisan, is that investment in new two to three days because our vessel is small and we have a this period is nearer five or six cranes and good relationship with Tripoli Port,” explains Alsari’s direc- days and at Misrata, because of handling tor of operations, Abdulgader Bugrara. its popularity with shippers, Med Cross last month had a vessel equipment. Headquartered in Benghazi, with branches in Misrata and waiting for just over 12 full days. Tripoli, Asari and Sana are now considering starting a new direct line between Mersin and Tobruk.

Container shipping to Libya

There is an adage in business: the less you The French company declines to reveal its ans ports are not fit for bigger boats. It takes talk about a market, the more you are inter- turnover in Libya, on the grounds of compe- about five days for workers to discharge and ested in it. This means that CMA CGM, the tition however Sharara reveals that between to load the containers. Some of the vessels third largest container shipping group in the 2006 and 2012 business has grown eightfold. used in Libya have their own cranes to speed world, is definitively focused on Libya. up the process. Presently, CMA CGM is shipping through, The company has been working here since in order of importance, Tripoli, Misrata, “We will be happy to participate to the de- 1993 and has 87 local employees. But Libya Benghazi and Khoms ports with four vessels velopment of the ports”, Mr. Sharara said. has a new momentum according to Ossama docking monthly in each port. The greater Sharara, managing director for CMA CGM in number of its containers arrives from Asia, This last statement is not only to please Libya: “A lot of rebuilding projects have been particularly China, followed by Europe and Libyan authorities. CSM CGM owns Marco launched since the Revolution. So Libya is North America. Polo the largest container ship in the world potentially an important market for ship- which can carry 16,000 containers. Will the ping development. It is importing 90 percent CSM CGM’s feeder vessels cannot exceed a Marco Polo ever been seen in a Libyan port? of what it requires. maximum of 1,000 containers because Liby- Mathieu Galtier

June / July 2013 Business Eye 5 FOCUS Ports Tripoli Port: Working, against the odds By Tom Westcott

“This is not Tripoli Port, this is Tripoli dis- The port took a further hammering in 2009, begun, after the Minister of Transport, Ab- aster,” exclaims General Manager Captain when the former regime decided to destroy del-Qader Mohamed, spent over a week at Hassan Gwile, gesturing behind him to the most of the facilities, with an on-the-spur-of- the port earlier in the year and agreed to country’s largest port. “But the people of the-moment decision by Qaddafi to replace spend LD 2 million on regenerating part of Tripoli need this port, they eat from it,” he the entire facility with a passenger terminal. the dockside. It is not a lot for what is needed, says. “That’s why we are trying to make The project never came to fruition and the nonetheless, Libyan company Faiad Bergen things work. We have to make it work.” port has limped on, trying to make the best has spent the last three months working on of what was left, after its modest ship-repair a 22,000 square-metre area, breaking up the The port, much larger than it looks from the yard, most quayside buildings and a fixed old concrete and laying a new, reinforced Corniche, is in very poor condition. Along crane on rails had been demolished. surface. This is designed to handle the seri- with much of the country’s infrastructure, it ous weights of cranes and loaded containers. bears all the hallmarks of 42 years of neglect. Even the demolition was left incomplete. Large areas of the ground are pitted and un- Skeletal structures line one side of the port, Ships always waiting to dock even, and five of the port’s 30 berths are out and battered and gnarled railway lines still Despite the limited facilities and berths, the of use, with the quayside literally falling into run along much of the quayside. the sea. number of vessels docking at the port has ris- en in the last two years. Around 800 docked Urgent need for repairs “Berth number ten is terrible,” says Gwile. in the port in 2010. This rose to 1,038 in 2012. “The dock is eroding into the water, making “This ground is not suitable for vehicles and this part of the quayside unstable and the equipment,” Gwile says. “These uneven ar- The constant marine traffic and limited berth is also losing depth, filling up with eas and the old rail tracks reduce the lifetime berths mean that there are always ships at mud and sand.” He adds: “We have been ask- of forklift truck tyres.” When it rains, the pit- anchor outside the port waiting to dock. “A ing to repair this for three years.” An enor- ted surfaces form huge puddles, rendering year ago we set up a special committee to mous floating cement works, which has also the area periodically unusable. control the berthing,” says Gwile. “We have been out of use for some years, is currently a large number of incoming vessels and we moored on the derelict berth. Works on improving the ground has finally need to prevent old practices like working

Tripoli Port

6 Business Eye June / July 2013 FOCUS Ports under the table.” Led by Mohamed Belashar, salaries. At Tripoli Port alone, it has 2,000 stackers, for moving containers. It also has Head of the Maritime Affairs Office, this com- employees. With an absolute monopoly four heavy-duty cranes, with a lifting capac- mittee has reduced waiting times for vessels. across the country, LPC also seems to oper- ity of 60-100 tonnes and five 50-tonne cranes. ate by its own rules. It has no contract with On an average day, there are now at least sev- Tripoli Port, nor has it paid any rental in- Aiming for international standards en to eight ships at anchor and, in a move to come for the last five years. The port is also way behind international encourage transparency, every day Belashar standards when it comes to health and safety. now lists the number waiting on the port’s “These are the problems when one company Lorries, cars and workers roam freely around Facebook page. is given the whole contract,” Gwile says. “What we need is for the government to open the site, and dodge behind reach stackers shifting containers. Personal protective The recent budget allocation, however, does stevedoring up to private companies so there not reflect the needs of the port. “We asked is a chance for some good competition.” equipment (PPE) is also rarely in evidence. for two million,” Gwile says, “but we have re- Gwile says that the problem is that there is ceived much less.” With an allocation of LD This, however, will take time. When the gov- no one authority in control at the port, which 246,000 for maintenance and works for the ernment recently tried to open stevedoring makes implementing and monitoring a sys- next six months, the annual figure is likely to at the Port of Khoms up to private competi- tem, at present, almost impossible. be just LD 500,000. “It’s very disappointing tion, the LPC embarked on a very effective because a port like this should have a good strike. After just two days, the government The first priority, however, is to regenerate budget,” he says, pointing out that in Janu- retreated. LPC has apparently agreed that, in the port, and bring operations closer to in- ary alone this year, the income of the port future, there could be more handling compa- ternational standards. Gwile says that, since was LD 1,255,000. nies, but only under clear rules. a commercial port should not really be in a city centre, building a new port on the out- Updating stevedoring practices LPC also dictates the working hours of the skirts of the city should be a future option. port. Starting times are vague but it is clear In the meantime, there is plan on paper to The port itself, however, sees nothing of this that, by 2 pm, operations are winding down rebuild and properly maintain the current income, because vessels pay the port han- for the day. Very little happens on a large port and all that is needed to put the wheels dling company. Formerly called the Socialist scale after 4 pm, although some urgent cargo, Ports Company and recently-renamed the such as livestock and vehicles are sometimes in motion is money. Libyan Ports Company (LPC), the state han- unloaded at night, to ensure swift operations dling company exclusively runs stevedoring and reduce further delays caused by the in- “Our goal is to have this port working 24 at all Libya’s ports except at Misrata and the famous Tripoli traffic. Gwile says the goal is, hours a day, like most ports in the world,” country’s oil terminals. however, to increase working hours. Gwile says, “but we know that this will take time. At the port we have started at minus, Despite being government-owned, LPC With no gantry cranes, the port is at a dis- not even zero. We are rebuilding our country, functions like a private company, dealing advantage when it comes to loading and un- and we are not in a hurry. We know that this with its own finances, much of which go on loading cargo. However, it does have 24 reach could take two to three years.”

June / July 2013 Business Eye 7 FOCUS Ports Sirte hopes to be Libya’s leading port By Michel Cousins

the master’s shrine. Planned too were stor- age buildings and other infrastructure, and, most importantly given those swells, an ex- tension to the existing breakwater.

By 2004, 30 percent of the contracts had been issued. The consultants were Mott Mc- Donald. It prepared the studies, the design and the tender documents. Construction was expected to start in 2007. But then the regime changed its mind and the project was frozen.

“It was crazy. You would have expected that, being Sirte, it would get top priority. That’s the wrong idea,” says Scewy. “Yes, there was the palace, the Congress Hall and other grand buildings. They were the spectacular centre pieces that Qaddafi wanted. But eve- rything else, built in the time of King Idris, was left to fester. When the Benghazi revolu- tionaries arrived they said ‘We thought we’d find the door handles made of gold. We were wrong.’ They were.” Sirte Port Nevertheless,by 2007 the authorities were irte is one of Libya’s smaller ports The story of how the port developed until thinking again. But, typical of the regime, but it has big dreams. According the revolution is in part the story in micro- nothing was straightforward or transparent. to Mohamed Salem Scewy, its gen- cosm of the intrigue, corruption and incom- Wikileaks published a report how Bechtel eral manager, the aim is not just to petence that went side by side during the had failed to gain the $1-billion contract to Sbecome Libya’s largest port, but one of the Qaddafi years and so thoroughly stymied de- build the port because of intrigue and per- largest in the Mediterranean, accounting for velopment in Libya. sonal agendas by members of the regime. a massive 21 percent of its entire container traffic. Stop-start development since 1998 In 2007, Saif Al-Islam’s Qadhafi Develop- Work on a new port started in 1998. Phase ment Foundation called on US giant Bechtel That Libya is going to be a major importer for One was to provide for some mixed commer- to bid for the port project along with an in- many years to come is certain, and Sirte, dev- cial traffic. Then came the much more ambi- dustrial city at Ras Lanouf. But then regime astated during the revolution, will be a major tious Phase Two which envisioned container enthusiasm waned, with Bechtel finding it destination for building materials. But nei- and ro-ro berths as well as those for liquid difficult to obtain visas largely, it was said, at ther will be enough to sustain such a gran- and dry goods. There was also a passenger the behest of the General People's Commit- diose vision. Rather, it is based on Qaddafi’s terminal and even one for cruises – presuma- tee for Transportation which did not want dream of Sirte becoming the gateway to bly to welcome all those tourists that Qaddafi the deal. Then in February, 2008, According Africa, in this case with container loads of fantasised wanted to come to pay homage at to the leaked report, Bechtel was suddenly goods being taken on by rail to elsewhere in the continent. It is a bold vision considering there has been Today the port is 85 percent complete and, according to nothing there before. Until Qaddafi decided that his hometown should have a major port, Scewy, needs one and a half years at most to compete. there were no facilities of any significance. There had been no port since Phoenician and There are four quays so far. Five more are to be finished, Greek times – for the simple reason that the of which three will be container berths with Rubber Tyre Gulf of Sirte with its heavy swells, has since time immemorial been viewed a dangerous Gantry Cranes (RTGs). place for shipping.

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summoned by the Transportation Commit- “I expect in the next six months, a vessel every present, the port manager says, there are just tee to sign a contract. This it did — an MOU ten days of between 2,000 – 5,000 tonnes,” 35 people employed there. was inked in March 2008, and it was then an- says Scewy. After six months, when mainte- nounced that Bechtel would build the port. nance and cleaning are done, there should The government supports the expansion, he But by May the deal started unraveling. Con- one or two vessels a day.” He mentions ship- adds. “It is very positive about the project,” tacts with the company stopped and by July ping companies planning to bring vessels he says, stressing that “this is not my vision, Bechtel was informed that the contract was from Malta and Spain, as well as Turkey. it’s the port’s vision”. He points too to the fact dead. Later that year, the project was given that there is almost no possibility of expan- to Cypriot contractor J&P. But work then Looking ahead sion in Tripoli or Benghazi. “They’re in con- stopped with the revolution. A potentially highly significant aspect of the gested city centres.” plans is the hope of having a private company However, there are many who say that the Final stages expected to start soon for the stevedoring – possibly the new Libya idea of taking container loads of goods down Today the port is 85 percent complete and, ac- Ports Company. “We’re trying to get a private to Africa is a pipe dream, among them lead- cording to Scewy, needs one and a half years company in.” The government, Scewy be- ing Libyan businessman Husni Bey. He at most to compete. There are four quays so lieves, is sympathetic. “They want the private points out that even if the rail link from far. Five more are to be finished, of which sector to grow.” Sirte to the Libya’s southern borders were three will be container berths with Rubber built, the majority of people and businesses Tyre Gantry Cranes (RTGs). The other will With its restrictive practices and a strangle- in Chad and Niger are not in the arid north be for general cargo handling. Other work hold on other ports in the country, the state but in the tropical south, just 1,000 kilome- includes a quay wall extension. Of the nine stevedoring operation, the Socialist Ports tres from the Atlantic as against nearly 3,000 berths, two will be eight metres deep and Company (just renamed as the Libyan Ports kilometres from Sirte. seven 9.5 metres deep. Company - adding an ‘n’), has no established presence in Sirte. That could ease the pathfor That Sirte port can service the town itself J&P is preparing to start work again, Scewy a private operator. “We’re new, we can do it. and central Libya – Waddan, Hun and Seb- says. “We’ve solved all the problems for Let’s try and experiment,” said Scewy. ha – is certain. But further south than that them”, he says, hoping the work will start. will clearly depend on more than the rail- His optimism may be premature. Industry Another aim is to extend the port yet further. way being built. It will depend on costs and sources say there are still hurdles to be over- “We had planned for quays 21 metres deep subsidies. come before the go-ahead is given. but the contract was cancelled. We intend to reactivate the project. Long-term, there will At the moment maintenance including be six more quays at 17 metres depth. These dredging is being carried out. But the port days there are mega size container vessels at “I expect in the next six is operational. The first ship arrived on 28 13 metres depth.” months, a vessel every ten February. The business is mainly cement – to days of between rebuild devastated Sirte. There was another Another vision is a free port to compete with vessel on 31 March again, with goods for local Misrata. “The last time I was in Misrata I saw 2,000 – 5,000 use and yet another, again with cement, on 2 13 vessels waiting outside the port. We want tonnes,” May. All were from Turkey. to create jobs and new sources of income.” At

June / July 2013 Business Eye 9 FOCUS Ports

Khoms: the port with potential

Khoms is one of Libya’s youngest ports but one that has rapidly grown into the country’s fourth largest. It offers serious potential for development and expansion.

By Tom Westcott

“The port started in 2003,” General Manager the land, easily big enough, will be trans- that there would be no shortage of interest Mustafa Morshan says, “and in ten years we formed into a container terminal which because two international shipping lines and have become one of the biggest in Libya”. It could offer storage for some 30,000 TEUs one major ports’ organisation expressed in- has developed from what was originally a na- (twenty-foot equivalent units). The project terest in investing in Khoms as long ago as val port into a commercial one, with the lat- would almost double capacity and, Morshan 2007. However, if the government decides to ter gradually taking over more wharfage and says, “could make this the largest port in do the work, Morshan fears the project could berths. Libya”. take a lot longer to complete.

In May this year, Khoms Port signed an This project, however, will take time. “The Growing demand agreement with the Libyan Navy to acquire area is in bad condition, and needs a lot of The port is currently able to accommodate four additional berths and some 40,000 work,” Morshan explains. “We do not yet a maximum of seven ships at any one time hectares of land. Under the new agreement, know if a private company will take it over or but, once the new berths are all operational,, Khoms will have control over most of the the government, but we are trying to bring in 12 vessels will be able to dock at the port. harbour’s functioning moorings. These in- international companies, to make a contain- Khoms is steadily attracting more shipping clude four deep-water berths able to take er terminal and hub.” Khoms, then, could lines and in 2012, it received 506 vessels, and vessels drawing up to 14 metres, which will be the site of the country’s first container handled 67,409 TEUs and almost a million offer some of the deepest water berthing in terminal. tonnes of cargo. “Last year we received ap- any port in the country. proximately 60 vessels per month,” Morshan Morshan is confident that if the project is says, “which is much better than the 30-40 Potential container terminal given to one or more private companies, the per month of previous years”. “With these new berths we can bring in larger proposed terminal could be ready to begin Port Khoms Port container vessels,” Morshan says. He hopes operations in two years’ time. He anticipates The quayside at Khoms, still relatively new,

10 Business Eye June / July 2013 FOCUS Ports

is in reasonable condition. Situated on the gestion, forcing ships to wait at anchor. “On outskirts of the town, the port is also better- average there are between 10 and 12 ships suited than Tripoli Port to manage the con- waiting every day,” Morshan admits, adding stant traffic of lorries. It has larger and more that waiting times vary from three days to a accessible storage areas than most of the week. country’s other ports, as well as the capac- ity for storing and managing refrigerated, or “It is very expensive to ship to Libya,” Mor- reefer, containerised cargo. shan explains, “so many of the large com- panies are not coming”. He cites the Libyan Port Khoms Port However, the advantages Khoms has when it Ports Company (LPC) - formerly SPC - as comes to space, quayside quality and water another reason why larger companies are depth are negated somewhat by a paucity of deterred from shipping to Libya. LPC ef- equipment. It has no gantry cranes and has fectively runs the Port of Khoms, as it does just two moveable cranes with a 100-tonne Tripoli Port. “Shipping lines have few rights “We do not yet know if a lifting capacity along with three smaller here,” Morshan explains, “because there is private company will take 50-tonne-capacity cranes. This makes un- only one stevedoring company, which can it over, or the government, loading cargo a time-consuming business, force the lines to do what it wants”. with a knock-on effect on vessel waiting but we are trying to bring in times. One shipping company has told the Despite the difficulties facing the port, it has international companies, to Libya Herald that it will not ship to Khoms serious potential, and is seeing a greater de- make a container because “it has no equipment”. mand, especially from vessels transporting terminal and hub.” general cargo, cement and steel. “This will Ships kept waiting keep increasing,” Morshan says. “We are ex- The slow discharge of vessels results in con- pecting more ships to come to Khoms.”

The private sector Condolences: Captain Ahmed Nassef, chair- always finds a way man of Green Waves shipping company, was tragically killed in By Tom Westcott a road crash a week after being interviewed by the Libya Herald. Khoms-based Green Waves Shipping who was tragically killed in a car crash a Agency is the only privately-owned bond- few days after speaking to the Libya Her- We would like to extend our condo- ed cargo handling facility in the country. ald. As a result, the port stopped sending lences to Captain Ahmed’s fam- With 40,000 square metres of storage cargo through Green Waves some three ily, friends and colleagues, one of whom, Captain Omar Fanoush, has space, 1,800 of which are bonded ware- years ago. houses, in a guarded compound next to given us this tribute to his friend. the Port of Khoms, it offers a range of sea Speaking of the “tyranny of state compa- “Captain Ahmed Nassef was a leading and land shipping services in Libya. nies,” Nassef said that Libya’s public sec- marine expert. He built a success- tor was trying to block the private sector ful reputation through hard work in The company also provides storage for by any means possible. Not to be deterred, reefer (refrigerated) cargo, which needs a series of public and private jobs in when Green Waves stopped receiving car- a backed-up electrical supply to keep the the marine sector. In each of these go from the port – it used to handle some contents cool. Green Waves used to han- posts he displayed wisdom, intel- 2,500 TEUs per month – it turned to man- dle most of the reefer cargo from the port, ligence, vision and an eagerness to aging empty containers. “That’s what the but this stopped several years ago. build a better maritime future for his private sector does,” Nassef explained. “It country, and especially his home The arrangement began to cause tension always finds a way to do business.” With town of Khoms. There, he set out to with the state handling company, Libyan most containers leaving Libya empty, be a pioneer in private sector marine Ports Company (LPC), which was appar- there is plenty of work in managing them. activity, so successfully indeed that ently annoyed by the private company’s he became an example, and we feel ability to consistently problem-solve. Nassef believed, however, that the fu- proud of his achievements. Captain The port then built its own system for ture would hold more opportunities for Ahmed was simply a friend to all. His managing reefer cargo, although this private companies and that soon, Green creative personality and his sense of was of poor quality and prone to power Waves would be able to use its facility to humour mean that all involved in the cuts according to the General Manager full potential, with its warehouses full country’s marine sector will find it of Green Waves, Captain Ahmed Nassef, once more. hard to forget this Libyan seafarer.”

June / July 2013 Business Eye 11 Focus Ports Safety at sea needs to steam ahead The clock is now ticking for Libya to boost its marine safety standards. The 1974 IMO convention for the Safety of Life at Sea (SOLAS) obliged all countries with coasts to meet minimum requirements for maritime safety and security.

By Tom Westcott

be done, and database centres and legal infra- structure have to be put in place before Libya is compliant,” Fanoush explains. Many of the workforce dealing with ships, including ste- vedoring and piloting services, lack adequate training and language skills, he adds.

IMO regulations are implemented by clas- sification societies but there is no approved surveyor from any classification society cur- rently in Libya. As the sole and exclusive agent of the Turkish shipping classifica- tion society, Turk Loydu, Al Joman Logis- tics is currently the only company in the country able to offer classification services as a local authorised classification society representative.

Preparing to meet increased demand It is also the agent for some of the biggest names in maritime safety equipment, in- cluding Viking, as well as marketing prod- ucts for managing oil spills. Captain Omar Fanoush With an increase in maritime traffic expect- ibya’s maritime sector is lagging ity to deal with any discrepancies that might ed – there are plans to upgrade the coun- behind international regulations be found.” try’s ports, build 12 marinas over the next when it comes to safety at sea but five years, and rehabilitate the country’s one company, Al Joman Logistics, is Urgent need to boost standards already ahead in the game. under-developed fishing sector – Al Joman L The clock is now ticking for Libya to boost its Logistics has built up a portfolio of products marine safety standards. The 1974 IMO con- Captain Omar Fanoush established Al Joman and services that Libya’s Ports and Marine vention for the Safety of Life at Sea (SOLAS) Logistics in 2005, when private companies Transport Authority quite simply cannot do obliged all countries with coasts to meet min- were first permitted in Libya. With knowl- without. imum requirements for maritime safety and edge gained from years working both at sea and for the Maritime and Ports Authority in security. Although a resolution later granted Its first commercial outlet will be an ultra- Benghazi, Fanoush set out to create a busi- an extension –until 2014 – to some nations, modern, ship-shaped building on the old pas- ness that would pioneer marine safety prod- including Libya, that were struggling to raise senger terminal of Tripoli Port. This is being ucts and services in the country. standards, time is nearly up. transformed into a purpose-built warehouse for supplying maritime safety services and He is one of only two people in Libya trained “By 2014, all marine activities must be com- products. It will be a bonded warehouse by the International Maritime Organisation pliant with IMO regulations,” Fanoush says. because, as Fanoush explains, “most of our (IMO) as a port state control boat surveyor. “It is a giant challenge for us to comply in targeted clients will be in transit so, for them, “Two of us were sent to the IMO in Genoa for seven months.” products will be duty free.” training, but when we came back, full of new ideas and enthusiasm, we hit a wall of rejec- The Navy and the Ports and Marine Trans- The plan is that, by the end of this year, tion,” Fanoush explains. “The old regime did port Authority have a long list of items that the firm will be ready to serve and supply not want to comply and it also had no capac- need upgrading. “There is a lot of training to customers.

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Organising Libya's skies By Nigel Ash

NATS Heathrow

hen Libya’s Civil Aviation Au- not integrated nationwide and has been built are many other important changes that the thority has modernised its up on a piecemeal basis, a recent ICAO audit CAA will need to make across the country, Air Traffic Control Systems found that, by and large, it works. However, such as an integrated safety management and updated its training and the growth in traffic (thanks to more inter- plan. Wprocedures, it will have made a significant national flights, Benghazi has reportedly contribution to the unity and stability of the doubled its daily movements to around 60 a Essential to meet international standards country. day) has not been matched by an increase in For Libyan ATC to come up to international ATC capacity; standards will be the work of maybe 15 years “The free movement of people is the one way at a cost of many millions of dinars. Nor, says that Libyans will get to understand each oth- Cookson explains that this is in part because Cookson, will it be a finite process.“Once er better,” explains John Cookson of UK ATC ATC is generally out of sight and out of mind: you’ve made the decision to start, you have to provider NATS. “With such a large country, “From an ATC point of view, if we are doing keep going. This is because if you are doing doing this by road is not going to work. Doing our job well we are invisible. So there are far this because you are looking to increase the it by a safe and efficient air service will.” bigger and sexier things than improving Lib- numbers of aircraft and the number of peo- yan ATC that people want to spend money on ple that are flying in and out of Libya, the air- NATS is one of the international bidders for at the moment”. lines will have a justifiable expectation that the job of giving Libya an integrated ATC sys- you are operating fully to the standards that tem that will tick all the boxes with the Inter- “This is the same in any country. If you con- they would expect anywhere else.” national Civil Aviation Organisation (ICAO), sider schools or hospitals or roads, they are as well as permitting significant increases in all things that you can see. Even if you look For instance, it will mean, he says, that every the safe movement of internal air traffic. The into an airport where there is a new terminal, engineering record will need to be stored Libyan Civil Aviation Authority is currently you see something tangible. However, if you centrally. With equipment, it will no longer running a technical assessment of what are improve the ATC system, you will not see any be a case of waiting until something needs to believed to be around half a dozen responses difference. So it is always difficult for ATC be fixed. to its request for proposals. to get funding when there are a lot of other pressures on budgets.” “You are looking at asset management. You Need to increase capacity say this piece of equipment was installed Including oil field strips, there are currently Pre-2010, the Libyan CAA did invest in new today. It comes with a life of 20 years and 28 civilian airports, some of which are shared ATC centres with Spanish-made equipment. during that time scale it will have X number with the military. Though the ATC system is However, that hardware has yet to be com- of upgrades and X number major overhauls. missioned. Moreover, says Cookson, there

14 Business Eye June / July 2013 AVIATION

When those overhauls are taking place, you and nor can you abandon it in large sandy will need to work out the impact on the traf- wastelands”. fic level. The NATS solution in the North Sea for in- You will need to know and record the cur- stance, where besides airlines flights, a big rency and qualification of the engineers who job is controlling multiple helicopter move- service it, know how often they have to work ments, is to build what is effectively a radar on that equipment to stay current with it and picture from radio transmissions, generated find out if the safety case has ever been writ- from equipment installed on oil rigs. ten for that piece of equipment which needs to be installed.” “A similar solution could be used in Libya, based on manned oil fields,” explains Cook- Requires on-going commitment son. “What you do not want to do is leave

The process, he explains, will be on-going. equipment in the middle of nowhere. It has a Tripoli Intern Airport photo inside “Once you start on this road, you have to keep habit of walking or it becomes a real burden has most of the right equipment and good going. And you can’t say ‘We never did that to keep it serviced.” engineering staff and controllers. What it before and we are not going to do it now’, be- might not have, however, is the most up-the- cause modern systems don’t work that way.” Cookson also explains that NATS makes date training. This NATS would provide at its no equipment itself and therefore chooses UK centre, where its own staff train along- NATS runs the world’s busiest airspace as whatever is best. “But anyone can make side ATC colleagues from around the world. well as a geographic area that is actually larg- equipment,” he says. “The challenging part er than Libya’s 1.7-million square kilometres. is making it work together, integrating it into “I am based in Libya and since I have been This is because it also controls air move- ATC. For our bread-and-butter we do the here”, says Cookson, “I have detected real ments in part of the north Atlantic. “Libyan ATC back in the UK. We have to make it work. determination among the CAA people. They ATC therefore,” says Cookson, “shares the So we are very good at ensuring that the tech- know that they have to change and they same issues that we face, except that we do nical solutions are the best solutions for the are desperate for help to make that change. it over water and they are doing it over sand. job, because we know what the job is.” There is this real desire for knowledge and The challenges are the same. You cannot training, so that they can bring their systems put lots of clever equipment out on water Cookson takes the view that Libya already up-to-date and move them forward.”

Tobruk International

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bers of the Scouts and a group of local residents. The sixty passengers had each paid LD 235 for the return flight. Clients include Mellitah Oil & Gas, Mabruk, Ras Lanuf, Waha

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June / July 2013 Business Eye 15

ECONOMY Libya, the new Norway on the Mediterranean – Ralph Chami, IMF

On 31 May, the IMF released the full report of its Article IV consultation with Libya. Consultations under Article IV between countries and the IMF are done on a request basis by countries although the country receiving IMF advice is not obliged to implement it. This will be the first report to be released by the IMF since 2010 and hence the first since Libya’s 17 February 2011 Revolution.

By Sami Zaptia

Ralph Chami, IMF

Ralph Chami, IMF’s Division Chief Middle East & Central Asia Department, Head of Mission to Libya, discussed the report in an exclusive interview with the Libya Herald

alph Chami says that there have exists, the infrastructure and a social safety lending market in the short term that needs been 11 visits to Libya, includ- net to ensure inclusive growth. to be thought through with more care. ing joint missions with the World Bank and Technical Assistance Therefore, if the Norway economic model Subsidy reform missions. The report is, therefore,based “on R is the aim, there needs to be private sector- With regards to Libya’s intended subsidy re- extensive discussions and meetings with the led growth because that is where jobs will be form, Chami is “happy to see that the GNC three different post-revolution governments created and that is the engine for youth em- has asked for recommendations by this sum- of Mahmoud Jibril, Abdulrahim Al-Kib and ployment. But the private sector needs help, mer. There needs to be a move from untar- Ali Zeidan”, he notes. Chami adds. It needs regulatory uncertainty geted to targeted subsidies, to those who are to be reduced, investment in education and in need. Now, the poor are subsidising the The report is important,Chami says as “Lib- human capital, and a functioning financial rich. ya is at a crossroads. Decisions taken today sector. “Libya has all the ingredients”, Cha- will have great impact on its future”. mi insists. It has the location and all it takes Targeted subsidies reduce the room for cor- to move out of high hydrocarbon depend- Chami is optimistic for Libya. “One can ency to provide a viable private sector. But it ruption and smuggling and other negative dream of a Libya being the Norway on the has to better exploit its endowment. side effects. An efficient safety net to protect Mediterranean. Like Libya, Norway has hy- those that need protection also needs to be drocarbon wealth, but also a first-class econ- Over dependency on hydrocarbons put in place.” We have received an official re- omy. So Libya can improve in that direction, quest to help in this area and we are happy to Libya has quickly succeeded in reaching pre- help with this study”, confirms Chami. but to do so it has certain things that it must revolution hydrocarbon production levels, do. Therefore the IMF report is structured in but its hydrocarbon dependency makes it More transparency that way”, he explains. vulnerable to hydrocarbon price volatility. It needs to diversify its economy and the new Chami praises the Libyan authorities for Short term and medium measures growth will be in the private sector. publishing the full report as “a good sign of With a background of institutional capacity transparency”. He admits that the current constraints, the constitution in the process For the private sector to flourish, a viable and authorities have inherited a heavy legacy of being written and institutional capac- healthy financial sector is needed to provide from the previous regime that needs to be ity being rebuilt, Chami explains that in the credit. To this end, Chami expresses concern publicised. But equally, he feels that it is short term Libya has to maintain microeco- at the effect that the newly announced inter- time to draw a line under the previous era nomic stability and a disciplined budget. In est ban will have in practical terms. Chami is and move forward. “Libya had to move from the medium term, there are structural chal- keen to stress that the IMF has no view on transition to development mode, which had lenges – such as enhancing the education the policy itself, but that it is the practicali- to take part at the same time”, concluded the system to remedy the skills mismatch that ties of its rollout and their real effect on the IMF Division Head.

16 Business Eye June / July 2013 ECONOMY The “Libya 2030 Vision” committee holds first meeting By Sami Zaptia

Libya 2030 vision meeting he Libya 2030 Vision Committee held experts. The first meeting of the 2030 Com- T its inaugural meeting at the end of May mittee was attended by Deputy Prime Min- at the High Institute of Planning, in Tripoli. ister Abdulsala Al-Gadi, Planning Minister International Almehdi Agnaia and the Head of the Plan- The Committee is tasked with coming up ning Committee at the GNC. with a policy vision and strategy for Libya up companies to the year 2013. The long term plan should Deputy Prime Minister Al-Gadi said in his also include the setting of interim three-year, cannot appoint four-year and five-year targets and plans. opening remarks that competent, skilled Libyans, rather than foreigners, assumed the non-Libyan The committee is headed by the former Plan- role of transforming Libya, and moving it on ning Minister under Prime Minister Al-Kib, from the present post-revolutionary stage to agents Issa Twejri, and includes a number of Libyan a working, successful economy. No foreigner or foreign company can act as an agent in Libya for an international corporation or brand, Workshop on improving the government has said. The Min- istry of Economy has issued a no- tice stating that the appointment of government performance non-Libyans as agents for interna- By Sami Zaptia tional trade brands is illegal under Libyan law. Only Libyans and Lib- yan companies can act as commer- two-day workshop was held in Tripoli monitoring its implementation. cial agents, it says. A at the end of April on “Monitoring and Evaluating Government Performance” or- The seven points of the plan are security, The notice warns international ganised by the Ministry of Planning in co- justice and human rights, infrastructure companies wishing to be present in operation with the UNDP. The event was and public services, economic development, the Libyan market not to appoint opened by the Minister of Planning, Alme- human resource development, institution- foreign businesses to represent hdi Agnaia and UNDP Country Director Eric building and decentralisation, communica- them as agents. If they do so they Overvest. tion and participation. risk being banned and having other proceedings taken against them. Officials from Libyan ministries were given Throughout the two days, there was a focus a review of examples of best international on establishing responsibilities, the remits The decision to enforce the regula- practice in the monitoring and evaluation of within and between ministries and the role tion is expected to hit a number of government performance. The seven-point of specialists. Participants also looked at foreign companies planning to en- 2013 Policy Plan of the Libyan government developing examples of procedures and op- ter the Libyan market. was also discussed, along with the role of the erations for monitoring policy execution and Prime Minister’s Decision Support Unit, in outcomes.

June / July 2013 Business Eye 17 ECONOMY Moving ahead despite banking sector challenges Libya Herald interview Gumhouria Bank Chairman

By Ashraf Abdul Wahab

efore 1969, it was not uncommon to see gold dealers merely leave a broom across their shop doors when they popped out, says Mus- Bbah Mohamed Akkari, chairman of Gumhou- ria Bank. The corrosive moral influence of the Qaddafi years, coupled with the complete neglect of banking sector development has, he says, left Libyans with a limited knowl- edge of banks and what they can do for them, as well as challenges for the banks them- selves in extending credit.

Bad debts, the banks’ inability to seize col- lateral, the fact that bouncing cheques is not a criminal offence and the use of loans for other than their intended purpose, have all served to undermine the financial system. It also means, says Akkari, that banks have had to protect themselves by imposing re- strictions and demanding extra guarantees, which have increased banking bureaucracy. Musbah Mohamed Akkari, Gumhouria Bank Chairman

Libya’s 2013 Budget – Section Three: Development & Reconstruction

1 – Development Projects New academic complexes & develop- Description LD 16 495,567,000 ment of existing universities 1 Housing, cities, public buildings & utilities 3,507,500,000 New technology complexes & develop- 2 Water & sewage 385,000,000 17 61,847,000 ment & furnishing of existing tech institutes 3 Gas transport & distribution 190,000,000 18 Schools & classrooms – construction & maintenance 369,759,000 4 Oil & gas 1,989,500,000 19 Hospitals & health utilities development & furnishing 1,014,865,000 Electricity (generation, production, trans- 5 1,878,494,000 20 Culture, civil society & archaeology 17,309,000 port, distribution & renewables) 21 Sports complexes & playgrounds 238,000,000 6 Water 185,000,000 Basic development projects for agri- 7 Water desalination 78,000,000 22 338,891,000 culture, animal, marine & aquatic 8 Industrial 246,054,000 23 Social care 67,915,000 9 Communications 790,829,000 Courts, prosecution, qualification cen- 24 334,018,000 10 Airports 90,131,000 tres & real estate registration 11 Railways 85,000,000 Local governance (municipal guards, his- 25 toric sites, local councils, environmen- 180,399,000 12 Roads & bridges 72,130,000 tal protection, municipalities) 13 Seaports 48,905,000 26 Environment and historic manuscripts 9,254,000 14 Meteorology 3,456,000 27 Tourism basic infrastructure 1,000,000 15 Civil aviation 69,042,000 28 Labour & qualifications 11,550,000

18 Business Eye June / July 2013 ECONOMY

Offering new products are willing to finance small and medium-size projects with up to half a billion dinars, ”he As a bank which, says Akkari, holds a 45 per- “We are willing to finance explains, “because we believe that this part cent share of the market, Gumhouria is in a of the private sector has an active role to play small and medium-size strong position to take the lead in new prod- in providing young people with jobs.” ucts and services. It was one of the first Lib- projects with up yan banks to offer Sharia banking products to half a billion Increased lending opening counters in Derna, Timzin, Tan- dinars” damira and Zintan. Since Akkari, who comes from Zawia, took over Gumhouria in February 2012 the bank “We are certain that Islamic banking will be a has taken a more aggressive lending position. success in Libya” he says, “based on the Lib- This, he says, is despite the enduring prob- “The problem has been with the telecommu- yan environment and people’s acceptance lem of unclear title to land because of the nications, not with the Oracle Iflex software that it is based on clear and pure dealings, no lack of a land registry. “It needed courage but that we have adopted, which is used by major interest and no suspicions”. Thus this April, we didn’t think that the land issue and the se- banks around the world and is considered says Akkari, Gumhouria’s board decided on a curity situation should be used as an excuse one of the most successful systems,” explains gradual switch of the whole bank to Sharia- to put off decisions”. Akkari. However he accepts that there have compliant products. also been problems with the database. The Therefore it has provided the finance for a bank is monitoring the issue and has brought LD 40-million hospital in Ghotaroman and in specialists to help address it. a LD 27-million heart hospital in Benghazi, Gumhouria is one of the first as well as funding a pasta and a semolina fac- Akkari is frank about the seriousness of the tory. He adds that the bank also acted as lead problem. “The failure of banking systems, Libyan banks to offer Sharia manager and participated in the financing of not only inconveniences customers, but it new Airbus aircraft for both Libyan Airlines puts the bank’s credibility at stake at time banking products and Afriqiyah Airways. when we are seeking to introduce more ser- vices, such as electronic banking cards and Tackling problems mobile account queries.” Gumhouria Bank is, he explains anxious to He accepts that not everything has been become involved in funding reconstruction plain sailing for the bank recently. In partic- He adds: “I think by the end of 2013 there undertakings and has been in discussions ular customers using its ATMs, the number will be fundamental solutions for database with both the Housing Ministry on their of which has expanded by 100 to 160 in the system failures and I think when this prob- projects and with the Economy Ministry on past 12 months, have complained of frequent lem is solved, the banking sector will witness promoting the private sector. “We said we service interruptions. a huge leap forward.”

LD 19.3 billion (28.9% of total)

29 Price stabilisation Fund projects 10,035,000 Means & requirements of education & up- 30 Martyrs & care of families of missing 15,531,000 42 grading of education methodology (basic/ 140,782,000 intermediate) & training of teachers 31 Endowments 15,783,000 Means & requirements of education & up- 43 20,000,000 32 Communication & informatics 229,124,000 grading of cultural & artistic education Maintenance & purchase of Lib- 33 91,701,000 44 Means & requirements of higher education 137,783,000 yan embassies abroad Programmes of higher educa- 45 103,735,000 34 Ministry of Interior development projects 348,619,000 tion & scientific research 35 Ministry of Defence development projects 800,000,000 Programmes for vaccinations & fur- 46 127,954,000 36 Lending (industrial, agricultural & real est) 500,000,000 nishings of health sector Programmes & refurbish- Sub-total 14,776,208,000 47 35,532,000 ment of culture & civil society 2 - Refurbishment & Trainings Refurbishment of justice & real es- 48 23,389,000 Description LD tate registration centres Programmes & refurbishment of in- Periodical programmes for agricul- 49 30,389,000 37 66,086,00 dustry & mining sectors ture, animal, marine & agri police 38 Refurbishment of Ministry of Interior 460,495,000 50 Programme & refurbishment of defence sector 78,000,000 39 Postgraduates & scholarships 1,000,000,000 51 Programmes, refurbishment and sectorial studies 1,031,224,000 40 Training 1,000,000,000 Total refurbishment programmes 4,523,792,000 41 Transport means 268,802,000 Total (Items 1-51) 19,300,000,000

June / July 2013 Business Eye 19 ECONOMY

A question of trust

Libya Herald Interview Ayman El Gammal, CEO of United Bank for Commerce & Investment

By Nigel Ash

ibyan banks have limited options gence procedures, ways have been found to when it comes to using the cash get around the challenges of a lack of clear piles on which they sit. Buying Cer- title to collateral. “It is trust”, says Gammal, tificates of Deposit and placing mon- “simply a question of trust. You have to know Ley overnight with the Central Bank hardly your borrower. Know the family. Know their amounts to deploying depositors’ funds for record. I have seen businessmen who hesi- the good of the Libyan economy. tate when they are given a loan agreement to sign, because they take the view that their With major infrastructure projects and word is their bond.” housing construction still effectively on hold and ministries not yet starting to spend their Finding such customers involves careful re- new budgets, banks can look only to the pri- search. Moreover, to keep them, a bank has vate sector to find good business. to prove itself trustworthy as well.

Since Libya imports virtually all its consum- Though the major government infrastruc- er goods, the major opportunity, says Ayman tural projects have yet to be kick-started, El Gammal, CEO of United Bank for Com- there are already considerable flows of build- merce and Investment, is in trade finance. ing materials entering the country, in the main for private sector projects.“There is UBCI is now 40-percent owned and run un- a lot of construction that needs to be done,” der a management contract by Bahrain’s Ahli says Gammal. “And there is also lot of acqui- United Bank Group, which has subsidiaries sition of land going on. People are buying up in six countries including Egypt, Kuwait and land left, right and centre. They are looking the UK. in particularly to industrial areas. The gov- United Bank-CEO-AymanUnited El Gammal

ernment is keen on developing that.” The Egyptian sister bank has given UBCI an unique advantage in Libyan-Egyptian trade Transition from state to private sector finance, since transfers are effectively in- Gammal believes that Libya is embarked on terbank and are therefore faster and more Though the major a transition from state to private sector with efficient.“This allows us to compete on qual- a consequent creation of productive jobs. “I ity of service, which as much as price, is the government infrastructural saw this transformation in Egypt where the key issue for private business in Libya,” says projects have yet to be private sector, which even a decade ago was Gammal. “Businessmen want transactions kick-started, there are very limited, now accounts for around 70 to be timely and efficient.” percent of gross domestic product. It takes already considerable flows time for people to get used to it, but I think Some 80 percent of UBCI’s business is now of building materials it will happen before too long here in Libya trade finance. “Then there's another portion as well.” which is real estate finance, which actually it entering the country, in isn't really. It is funding with real estate col- the main for private sector And foreign investment will be an important lateral. But this is very difficult as the real es- projects.“There is a lot of part of this transformation, though Gam- tate registry office is closed and records are construction that mal understands the suspicion with which not available.” it is viewed in some quarters.“If, for 40 years, needs to be done,” people have been told that the foreigners Know your customer want to come in and steal their country, you Although bank credit committees are there- cannot except that overnight they will see fore not operating within classic due dili- this isn’t true.”

20 Business Eye June / July 2013 Malta – Tripoli – Malta

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[email protected] Tel: 021 3350579 ENERGY Outside Investment Option for Oil & Gas Sector

By John Hamilton

Nuri Berruien, NOC Chairman (center)

he National Oil Corporation executives who gathered in Require significant changes the Tripoli’s Mahari Radisson Blu Hotel for two days in For a start, NOC or its operating companies would have to become mid-May were thinking in radical terms that would have independent profit centres rather than passing all revenues directly been impossible to contemplate in pre-revolution Libya. T to the state treasury. Now, as under the Qaddafi regime, NOC has Under discussion was the question of how to bring in outside financ- to reclaim funds to back projects and budget requests are routinely ing for both upstream and downstream projects. Talking to the Libya turned down. This has a knock-on effect all through the supply chain. Herald on the first day of the seminar, Chairman Nuri Berruien said Service providers in Tripoli routinely complain of waiting up to 90 he was committed to the idea. He said that the hydrocarbons sec- days to get paid by NOC, which is particularly painful when many in- tor could not claim state resources needed for investments in health, ternational suppliers refuse to give credit to Libya-based entities. education and building infrastructure. But oil and gas projects were “very attractive to investors because their rates of return are very Some fundamental changes in culture and management style, as well high”. He said Libyans had to “liberalise our laws” to enable, not just as to legislation will clearly be essential before institutions are pre- the loan finance but also direct investments, especially in the down- pared to back projects. It will almost certainly require new clauses stream sector. in the hydrocarbons law – a rewrite of which is already under discus-

However, introducing such a reform will have fundamental conse- quences. While some privatisations of non-core parts of NOC, which Oil and gas projects were “very deal with services and logistics, may be possible in the short-term, attractive to investors because their getting foreign or international banks to set up project financing or syndicated loans linked to particular developments would need legal rates of return are very high”. changes and a significant culture shift.

22 Business Eye June / July 2013 ENERGY sion. Arguably this will be impossible until after the constitution has been passed and a new parliament elected under its authority. Libya has already consumed between 50-60 Tripoli University Professor Abdulhamid Urayet who has worked as percent of the hydrocarbons that it is ever an advisor to oil companies for 35 years, told the Libya Herald: “Two main responsibilities, that cannot and should not be taken by the going to produce. ministry or NOC, are to define the future production strategy and rates of production, and to define the new model production sharing agreement – including the ceiling for net profit of the second party.” Far from being wealthy, he said, Libya should consider itself a poor He said that these decisions belonged to the Libyan people and had to country. He argued that if the revenue generated by Libya’s current wait for the constitution. A change as fundamental as allowing non- oil sales were divided amongst every citizen on a daily basis, the sum state parties to benefit from the financing of oil and gas production they would receive around LD 25, not enough, he said after the pres- would most probably fall into the same category. entation, to pay for the lunch for a single workshop attendee at the Radisson’s buffet restaurant. Oil reserve estimates In subsequent correspondence with the Libya Herald, Bey pointed The implications of what is decided today will be felt for decades to out that over the entire history of Libya’s oil production, it had per- come. There is now no time for second chances. Urayet estimates the haps generated revenues equivalent to between $900 billion and $1 total amount of Libyan oil discovered amounts to 48 billion barrels, trillion. Particularly in the early years, a sizeable proportion of these of which 18 billion barrels of recoverable reserves remain. Some 12 were shared with IOCs. Latterly production shares have been driven billion barrels of these are proven and the remaining 6 billion barrels down in a series of renegotiations. are probable or possible reserves. What this means is that while getting banks to finance NOC projects In oil industry jargon, this means the recoverability of the six billion is the right thing to do in practical terms, getting the politics right and barrels is still in question. Urayet believes technology will improve obtaining popular consent is going to be very difficult. – and therefore recovery rates – enabling all 18 billion barrels to be extracted. He also estimates there may be another 6 billion barrels John Hamilton is a contributing editor at African Energy www.africa- of reserves yet to be discovered. Yet, according to these figures, Libya energy.com, and a director of Cross-border Information www.crossbor- has already consumed between 50-60 percent of the hydrocarbons derinformation.com that it is ever going to produce.

According to a further set of estimates laid out by Urayet, hydrocar- The Most Prestigious Meeting bons production in Libya will start to decline sometime after 2030- 35, depending on the rate of sector development. Once this decline for the Libyan Oil Industry & sets in, the next question is when Libya will switch from being a net International Partners exporter to become, as Egypt has recently done, even if only tempo- rarily, a net importer of hydrocarbons. Domestic oil consumption is Produced By Fully Supported & Endorsed By currently about 180,000 - 190,000 b/d oil and is increasing at 3.6% per year.

Indeed, Libya already imports large quantities of gasoline and diesel. Not all its 360,000 b/d total refining capacity is being used. Addition- ally, because even the two larger refineries at Zawiya and Ras Lanuf have relatively basic technology, they are incapable of producing the diesel and gasoline Libya needs. Instead they produce a large excess of fuel oil which is sold globally.

Looking ahead The government’s adoption of energy efficiency, conservation and re- 16-18 September 2013 | Tripoli | Libya newables policies could reduce the rate of increase in consumption to Petroleum Leadership & 2.4 percent - the rate of population increase, or even get it as low as 1.8 Maximising Unconventional Law Human Capital percent, says Urayet. However this would require reforms that would Production Gas & Contracts Development be enlightened and difficult to implement. If this does not happen, then Libya may become a net oil importer by 2045 or as late as 2055. For further information on the Libya Forum 2013 contact Phillip Clarke on + 44 20 7978 0056 or [email protected]

For anyone contemplating Libya’s long-term future, this a key date. Gold Sponsor If the authorities have not used the remaining half of Libya’s hydro- carbons wealth to invest in infrastructure, sewage, hospitals, roads, schools universities, the accumulation of sovereign wealth – and above all, in stimulating economic diversification – the chance will have been lost. Silver Sponsors Bronze Sponsor

The financial aspect of this argument was put to NOC’s financing workshop by Husni Bey, considered one of the most wealthy private businessman in Libya, running a retail empire including the Marks & Spencer outlet and other big name brands. He was invited to give the www.cwc-libya-forum.com private sector’s view.

June / July 2013 Business Eye 23 ENERGY NOC to move to Benghazi? By Ahmed Elumami

fter months of wrangling and ru- nounced that new headquarters would be mours as to whether the National built for the NOC in Benghazi, Deputy Oil Oil Corporation (NOC) would go and Gas Minister Omar Shakmak told the to Benghazi or stay in Tripoli, the Libya Herald that what was meant was that Agovernment has finally opted for Benghazi. A there would be a split and that the refining cabinet notice issued on 5 June, instructed company, to be known as the Libyan Corpo- the Ministry of Oil and Gas to take “the nec- ration for Refining and Downstream Opera- essary measures, in coordination with the tions would go to Benghazi but that the new relevant authorities” to facilitate the trans- Libyan Corporation for Oil Exploration and fer. Along with the NOC, the government has Production would be in Tripoli. Each would also ordered Libyan Airlines, the Libya Com- have representative offices in the other city, NOC Tripoli pany for Insurance and the Internal Invest- he said. At present it remains unclear whether what ment Company to go to Benghazi. is going to Benghazi is the NOC as it stands, “The NOC has land in Benghazi near Al- the NOC as a holding company along with The decision is seen as a conciliatory gesture Fadeel Hotel and it has been chosen as the the refining corporation but leaving explora- to Cyrenaica federalists who had made the location of the new corporation,” Shakmak tion in Tripoli, something between the two return of the NOC and the other companies said. – or whether it will survive at all. “We in the that used to be in Benghazi until Qaddafi re- Energy Committee of Congress are confused moved them, a key political demand. Just Altogether, he said, the planned new oil com- whether the NOC will be abolished or not,” days before the announcement, the federal- plex in Benghazi would comprise : Congresswoman Fawzia Karwan, a member ists declared self-government for Cyrenaica of the Committee told the Libya Herald at at a mass rally near Marj. • A branch of the Oil and Gas Ministry; the time of the Prime Minister’s announce- • An executive office to oversee the develop- ment of the move. The relocation announcement, however, ment of oil projects in eastern Libya; caused confusion in both Congress and the • The Benghazi branch of the Tripoli-based NOC staff based at its headquarters in Trip- oil industry. There had been earlier reports Libyan Oil Exploration and Production oli are known to be opposed to any move or that the NOC would be split, with one com- Corporation; split and may attempt to resist any change. pany in Tripoli in charge of exploration and • The headquarters of the Libyan Oil Refin- Last year, after the government announced production, the other in Benghazi running ing and Downstream Corporation; that the whole NOC would go to Benghazi, refining and downstream operations. When • The Metallurgical Construction Company the decision was swiftly annulled following at the end of May, the Prime Minister an- (pipes and tanks). staff protests.

The Libyan American Business Council is formed at OTC, Houston, Texas By Sami Zaptia

The Libyan Council for Oil and Association as well as the Libyan Gas (LCOG), the body that repre- Ministry of Oil and the NOC. sents Libyan oil and gas private sector companies, participated Khalid Ben Othman told Libya with a delegation at the Offshore Herald that he “hoped that the Technology Conference (OTC Libyan American Business Coun- 2013)Houston, Texas, USA from cil would help in the exchange of 6-9 May. commercial, economic and sci- entific experiences leading to the At the OTC, the LCOG formed the promotion of business relations Libyan American Business Coun- between the two parties” Ben Oth- cil with its American counterparts, man was pleased that “there was a signed for the Libyans by LCOG positive reaction to the signing of president and member of the Lib- this agreement which will lead to yan Businessmen Council, Khalid improved relations between the Ben Othman. The event was at- two countries”. tended by leading international oil corporations, Libyan business- For more information see men, the Arab American Trade www.lcog.ly The Libyan Council for Oil and Gas

24 Business Eye June / July 2013 ENERGY Private sector should help fund oil industry By Sami Zaptia

he National Oil Corporation studying plans with Eni to develop offshore Financing constraints (NOC) should consider using lo- fields which would need an estimated LD 7.2 Although under Law 10 (1979) NOC is per- cal investors to help fund the LD billion ($9 billion). The Hamada fields would mitted to borrow, it is then obliged to trans- 50 billion of fresh oil field invest- need about LD 1.8 billion ($1.4 billion). There Tments planned for the next six years, NOC is a team studying a vision for petrochemi- fer all its hydrocarbon revenues directly to chairman Nuri Berruien has said. Private cals as well as new refineries, which would the Ministry of Finance’s accounts within 48 sector financing could by-pass the cumber- need about LD 3-4 billion each ($2-3 billion).” hours. In fact, NOC head Nuri Berruien con- some and politically-affected process of state firmed to theLibya Herald this procedure financing Berruien told a Tripoli conference Berruien added that these investments could was automated. Between 1995 and 2008, its in May. Such funding, he said could help “the not be met from the state budget. Therefore, six foreign currency loans were all from local development of some oil fields, for exam- with Libya’s new plan to cede economic space providers with interest set at around 17 per- ple, that some of the large international oil to the private sector, he foresaw that certain cent, considerably above international rates. companies do not find attractive enough for areas of the petrochemicals industry would investment”. be opened up for private sector investment. For both new investments and even the funds to repay these loans, NOC had to go Outdated laws and regulations were first Planned developments through the oil ministry, adding politics to however, in urgent need of reform, said what should have been commercial decisions. Planned developments, he explained, includ- Amar Amary, a member of the NOC finance ed the offshore fields in partnership with Eni, committee. They were he said “limiting the Indeed, because the government did not re- the Hamada oilfields, petrochemicals and scope and speed of the development of the lease funds on time, NOC also incurred pen- new refineries, as well as the development hydrocarbon sector. In the New Libya, where alty charges. The lenders were Libyan Arab of other oilfields. These, he estimated would the private sector is to be the future of the Foreign Bank (now Libyan Foreign Bank), need a total investment of about LD 50 bil- economy, we want it to participate actively in the Economic and Social Development Fund lion ($40 billion) over 5 to 6 years.“We are the development of our oil and gas industry.” and the Libyan Investment Authority.

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June / July 2013 Business Eye 25 ENERGY Renewables – The Big Vision

By John Hamilton

Tripoli sunset ibya faces major political and cul- able energy, and why we should spend all this and cooling. Meanwhile, the government’s tural challenges in getting renew- money on it.” historic treatment of hydrocarbons as an al- able energy projects off the ground. most free resource makes it reluctant to take Historically, the country has relied With many other challenges before it, the on the high up-front capital costs of most Lheavily on hydrocarbons for its energy needs GNC may take time passing the necessary renewables projects. Even basic energy effi- and has paid little attention either to energy legislation. The Ministry of Electricity is ciency savings are currently hard to achieve. efficiency or to alternative methods of gener- currently drafting a new electricity law. Re- ating electricity. This must now change, but newable energy legislation is also under con- According to a recent assessment by GECOL, mustering the political will to establish the sideration. Additionally Reaol is drafting a if the government gave every Libyan house- necessary laws and regulations will be very national energy efficiency action plan, to be hold cash to pay a fully commercial electric- hard. opened for public discussion in the coming ity bill, it would cost about LD 4,000 per year months. for every family of five. Speaking at workshop organised by United Kingdom Trade and Industry (UKTI) in April, Renewable Energy Authority of Libya Next steps to expand capacity (Reaol) chairman Khairy Qassim Agha said Libya is now a major oil Libya’s current renewable energy capacity Libya had to “be in line with our neighbours is limited to a programme of relatively small and to work with the European Union. We exporter and we want to be photovoltaic projects totalling 4MW out of a have a very big vision. Libya is now a major a clean energy exporter 20 total installed capacity for all types of gener- oil exporter and we want to be a clean energy ation of about 6,600MW. Reaol is also install- exporter 20 years from now.” According to years from now. ing solar cooling plants on all government the official target, Libya must increase its buildings which will substantially reduce share of power from renewables to six per- the cost of air-conditioning during summer cent by 2015 and 20 percent by 2020. This months. This latter project is the only one will require an enormous acceleration in the UKTI expert Aidan Kinsella, a director of to have been signed off since the end of the size and pace of projects. anaerobic digestion specialists Greeneos led Qaddafi regime. It was approved rapidly by a discussion on implementing this technol- Huge hurdles to overcome ogy. Although capable of resolving the coun- the government of Dr Abdurrahim Al-Kib. At the same workshop, General National try’s sewerage and waste problem while also generating clean electricity, the logistical The next major renewable project is the Congress Energy Committee member Ab- 60MW Derna wind farm. Three others are delkarim Al-Jiash said the Committee was difficulties are immense – both the require- planned; a 120-MW plant at Al-Muqrun and “ready to support such activities by issuing ments to fix the sewage system itself, and 50MW plants at Emsalata and Tarhouna. the required laws and regulations”. How- separate organic matter from regular house- Reaol has carried out feasibility studies for ever, Libyan experts and engineers respon- hold waste. sible for getting renewables projects off the a 100MW concentrated solar power plant at ground face a host of bureaucratic, financial New legislation and subsidy reforms needed Sebha, a 50MW CSP plant in Ghadames, and and also cultural hurdles. Privately-financed power projects require a 15MW photovoltaic plant in Shahat. new legislation and subsidy reform. With According to one specialist from the General heavily-subsidised power currently being John Hamilton is a contributing editor at Af- Electric Company of Libya (GECOL), “there sold to end users at the equivalent of one rican Energy www.africa-energy.com, and is a gap between the technical people and Euro cent/kWh, there is almost no incentive director of Cross-border Information.www. the decision-makers. We need an effort to for consumers to adopt technologies such crossborderinformation.com. He was also let people know what is expected of renew- as domestic photovoltaic or solar heating chairman of UKTI’s renewables workshop.

26 Business Eye June / July 2013 ENERGY Solar Energy Study at AGOCO Oil Fields By Sami Zaptia

The Arabian Gulf Oil Company (AGOCO) an- CSP systems use lenses or mirrors and track- nounced in May that it intends to undertake ing technology to focus sunlight on a focal an engineering study exploring the possibil- point to create energy. PV technology direct- ity of using solar energy technologies in at ly converts light into electric current using least three of its oil fields. the photoelectric effect. Both technologies have different strengths and weaknesses. The announcement came in the form of an invitation to pre-qualification for the project If successful, this project could revolutionise which closed at the end of May. The solar en- ergy would be used either for power genera- the renewable power generation sector of tion and/or to produce steam for enhanced Libya, which has been threatening to take- oil recovery (EOR). AGOCO hopes the study off for a few years, without much success. It will help it identify suitable, cost-effective would also put the hydrocarbon sector in the and efficient concentrated solar power (CSP) ironic position of taking the lead in the use of and/or photovoltaic (PV) technologies. solar energy in Libya. Solar Panel, Tripoli

June / July 2013 Business Eye 27 CONSTRUCTION

Libya’s future housing policy Deputy Prime Minister and the Housing Minister share their views

By Sami Zaptia

conference was held in Tripoli at the end of April on the role of the private sector in the housing market. This was probably the Afirst occasion where the role of the private sector in the development of the housing market was discussed at the highest private sector and government level.

The conference was organized by BNP Pari- bas Sahara Bank and was sponsored by the Ministry of Housing and Utilities under the banner “The Future Vision for Supporting the Private Sector in Limiting the Housing Problem”.

Libya suffers from an acute housing shortage caused by the policies of the Qaddafi regime that changed property ownership laws and dis-incentivised the private sector from de- veloping new housing. This housing shortage has been further exacerbated since 2011 by the 17th February revolution and the ensu- ing two years of transition. Awad Barasi, Deputy PM

At the conference, the Deputy Prime Minis- of PPP in developing the housing market, he This over dependency on the state sector was ter, Awad Barasi, and the Housing and Utili- added that“the government should provide forced upon us by the former regime. We are ties Minister, Ali Sherief spoke, probably for the basic infrastructure and exploit Libya’s convinced that the solution of the housing the first time at length, on the government’s vast expanses.” problem can only be achieved with the help future vision for this sector. According to of the private sector.” Deputy Prime Minister Awad Barasi “The Drawing on his long experience working in housing problem is a leading issue and is one Dubai, and hinting at his vision for the sec- “Sahara Bank was one of the banks with which of the leading challenges facing us today. The tor, Barasi said that he “lived this experiment we discussed the possibility of cooperation socialist laws under the former regime had in UAE. Banks should offer “lease to own” between the local private construction sec- over 25 years in areas prepared by state with a huge negative effect on the housing sector tor, the local banking sector and the state.” for over 25 years. This has led to the regres- roads, utilities, schools and all the necessary sion of the sector from various angles.” amenities.” According to Sherief; “The spread of un- planned buildings all over the country is a Role for the private sector Regarding the stalled current housing con- tracts, once again the Deputy Prime Minister problem. But this has proved that there is Looking forward to a new private sector financial capability to build, but not to buy and housing market, the Deputy Prime confirmed that “there is a committee review- ing current contracts with foreign compa- within the officially planned areas. There- Minister said that he saw “a promising fore we need to open up new areas. We still role for the private sector in future urban nies”, but gave no more detail. await the latest 3G Master Plan which is not development”,adding “We will review the ready yet. We will plan satellite cities and set rules and laws to enable the effective partici- Involving the banks standards. We will rely on the private sector pation of the private sector - including the Ali Sherief, Minister of Housing and Utili- role of the banking sector through Islamic ties, said “When we reviewed the needs of and the banks to conduct the building of new banking.” citizens, infrastructure and housing were developments in a more organised way and clearly high on agenda. We tried to finish so as to assume affordable prices. The banks Commenting on the sector dynamics post the outstanding contracts, but there were can help in solving the housing issue and also the 17th February Revolution, Barasi said many barriers: contractual, legal, and the bypass state finances which take time. I hope that “recently, the private business sector like” He continued by saying ; “This may take a committee between the Housing Ministry, had started to try to meet housing demand”, time. We now need around 350,000 housing the Central Bank of Libya, and the private but he felt that “prices are still too high for units. We are contracted for around 260,000 sector will come up with practical solutions the average citizen.”Anticipating a new form through ODAC, HIB, and the Housing bank. to the current acute housing problem.”

28 Business Eye June / July 2013 CONSTRUCTION Libya Build 2013 - a serious success By Nigel Ash

here was a fear that had May’s building and construction show Libya Build 2013 flopped, with both exhibitors and visitors stay- Ting away, it would have demonstrated a general collapse of international confidence in Libya because of concerns over security, political uncertainty and the painfully slow pace of change.

As it was, the four-day event was an out- standing success with 715 companies from 27 countries, including 252 Libyan exhibi- tors, 24,637 visitors and the signing of deals worth several million dinars.

It was staged not at the Tripoli International Fair Ground, the venue for most trade exhi- bitions, but in a 30,000-square-metre white- tent complex specially erected in Tripoli Sports City’s car park.

Orders for Turkish companies Libya Buiild 2013 There were 102 companies from Turkey. “It has been a very good show for us,” said Cemal local partner is in Tripoli, Benghazi and Mis- French exporters offer niche products rata and installs and services our machines.” Dener, General Manager of Dener Makina, The French pavilion had 15 firms, half as maker of hydraulic presses and plasma cut- Over 100 Italian companies many as last year and with four last-minute ting machinery. “We have sold 25 machines cancelations because of security concerns. worth a total of LD 1.5 million and have se- From Italy, 118 companies crowded into their Jean-François Le Borgne, building sector rious expressions of interest that could add country’s section, twice as many as last year. project manager at Ubifrance (the French Indeed, so great was demand, some firms another LD 2 million”. Agency for International Business Develop- in the same field of business and from the ment) also said that French companies strug- Most of the orders are coming from SMEs same part of the country, shared a display gled to compete on price with Turkish and said Dener, the sector in which it seemed area – such as a stand for the Marche region, Asian constructors, so they were focusing on everyone wanted to invest. “In Qaddafi’s days, in central Italy, housing a group of furniture niche markets. Libyans were afraid to spend their capital. specialists. We are going to be expanding in Libya. Our Daniele Pivetti of Gamma Meccanica, which French synthetic building materials compa- produces mineral wool machinery and ex- ny Nicoll, for instance, was attending Libya truded polystyrene systems, explained: “The Build for the first time: “We aim at the pre- Most of the orders are goal is clearly to multiply contacts to find in- mium market” said export manager Chris- coming from SMEs, the vestors. Libya may not be completely ready tophe Pague. “Libya has great potential for sector in which it right now, but the reconstruction will bring us. The difficulty is to find a local partner seemed everyone new business, so we have to be ready.” who can explain the competitive advantages of our products compared to Turkish ones wanted to invest. Stefano Frangerini, of construction technol- for example.” ogy company Frangerini, attending for the third time, said it was hard to compete with Building Equipment manufacturer CDH Asian or Turkish firms for new projects, so Group had a different approach. “I start his business was prospecting two new mar- with inexpensive basic models,” said export kets: photovoltaics and building restoration. manager Nathalie Caucheteux, “and then I Block-making machine producer Cadonà explain to the client that certificated better was meanwhile capitalising on a doubling models can be more useful for them. We have of orders in the last year. “I know the Liby- to educate the consumer.” an market can work for Italian companies,” Paola Cadonà explained. “I am pleasantly If their strategies differ, French companies surprised by our performance. We sell to agreed on one absolute intangible rule about SMEs and in this sector reconstruction has doing business in Libya: to be physically pre- already started.” sent, even if the security is not yet stable. Dener Plasma cutting

June / July 2013 Business Eye 29 CONSTRUCTION Libyan Housing & Public Private Partnerships (PPP)

Adrian Creed, Clyde & Co. o date, any form of affordable housing PPP (Public Private Part- nership) in Libya has been impos- sible because of the very confused Tstate of Libyan land law, the absence of a sophisticated private sector, the inability of local finance institutions to take proper col- lateral over real estate assets and the unwill- ingness of landowners to develop anything other than high-return, high-end accommo- dation maximise their returns.

Reforms to Libyan land law will be contro- versial and take time. However, Libya simply cannot delay affordable housing initiatives until new legislation is passed to safeguard landowners, compensate owners of appro- priated property and tackle illegal develop- ments on land designated as “agricultural land”.

High demand for housing With current high demand for affordable housing and government moves to encour- age the private sector, it is worth considering a “pathfinder” housing project whereby the government sets the high-level objectives and output specifications, giving private sec- Tripoli construction site tor developers and lenders full title guaran- The key requirements for Housing PPP take accommodation demand risk or will tees on the site, together with certain pay- A clear specification is fundamental. This charge a significant risk premium for do- ment guarantees where such housing will ing so. Therefore probably the government be occupied by government employees. The must clearly set out an objective project would need to undertake to pay for the private sector, through a compulsory com- measurement, on an output rather than an dwellings, whether occupied or not. During petitive tender process, would then actually input basis. Whilst the government is not di- build, manage and maintain a new housing rectly employing the building contractor, it the operational phase there may be a service project for, say 20 years. must monitor the works as they progress, to delivery or a solvency failure. As with the pick up construction problems early. At com- construction period, the government needs If Libya takes this route, it must recognise pletion, an independent professional, owing the right to terminate the contract. Funders the difficulty in making the financial model the government a duty of care, should sign will want the ability to step in to preserve the work without some element of state support off against the specifications. concession cash-flows. If the contract is ulti- or subsidy. Why would the private sector mately terminated compensation payments ever develop cheap housing, when it could Payment should only be made when the are probably appropriate. However, as with sell or rent expensive housing much more dwellings are practically complete and the construction period, these should be profitably? signed-off as specified. With any delays and geared to the value of the remaining project under performance, the government should term. However, a spin-off benefit for Libya is that consider levying damages. Periodic inspec- although the first such PPP project would tions should give the opportunity to require Since prevailing Libyan land law is a source be challenging, a successful financial close remedial action be taken. Once completed, of great divisiveness it is important to ensure would send a powerful and very positive sig- the housing will be let and management will nal to the local and international developer sit with the contractor. It must be managed the basic platform for all rights necessary to and lender communities. They would inevi- and maintained properly. Under a PPP con- (i) undertake the concession, and (ii) provide tably conclude that if Libya were capable of tract, payment is only made for the requisite appropriate security to the lenders are in putting together a properly structured pilot standard of services with deductions where place. Consideration also needs to be given housing PPP, there would be nothing to stop standards slip. to ownership of the developed asset. the government from doing the same in oth- er sectors. It is unlikely the private sector will wish to For full article visit www.libyaherald.com

30 Business Eye June / July 2013 CONSTRUCTION Readying up for AFCON 2017

By Nihal Zaroug

“We are ready” says Ziad Altoilb, an engineer and events commit- tee member from the Organisation for Development of Admin- istrative Affairs (ODAC), currently the project managers for the main 2017 African Cup of Nations (AFCON) stadiums in Libya.

“Everything, including contractors,” says Altoilb, “are lined up to resume work on the structures started pre-war, and even com- mence the new stadiums”, designed for AFCON 2017.

Money was now needed for the projects to proceed. Despite the budget having been approved by the General National Congress (GNC), it has not yet been disbursed. Like many other entities, ODAC must wait until funds pour in to start major projects. The estimated cost for getting Libya ready for the football tourna- ment is expected to surpass one billion dinars.

In April, Deputy Prime Minister Awad Barasi, said LD 400 mil- lion would be requested from the government to build 11 stadi- ums for this year. He also said that Libya would use “all its re- ODAC Exhibiting at Libya Build 2013 sources” to ensure that it was awarded the Cup. Despite, both FIFA and CAF lifting matches bans, Libya must still demonstrate it is Preparations need to be completed on time capable of hosting AFCON 2017. ODAC has the capacity to lead different projects simultaneously and Altoilb is confident that preparations for AFCON will be completed Cross-ministerial support needed on time. Originally scheduled to host AFCON 2013, Libya agreed to trade years with South Africa, the original venue for AFCON 2017, due to Looking at other ODAC plans, Altoilb says, there are projects that Libya’s inability to host matches after the end of the revolution. include sports fields in housing projects and public spaces, to give youth a place to participate in healthy activities. To those observing the country from the outside, recent political is- sues and security dilemmas make Libya look problematic. Challeng- Of the six main stadiums, four are scheduled to host the Cup. These es aside, Altoilb echoes the views of many involved with the Cup, that are the new National Stadium with 60,000 seats in the Tripoli suburb staging the tournament will be the catalyst for real progress. Hosting of Tajoura, and an expansion of the existing Tripoli Sports City into such an event says Altoilb, requires cross-ministerial cooperation the 42,000 seater Tripoli Sports Park, The new Merbat Stadium in and will have the effect of putting the “house in order”. Moving for- Misrata seating 23,000 spectators and Benghazi’s 41,000 seat capac- ward in Libya and getting ready for the Cup, are synonymous, he adds. ity Sports City which is to be upgraded.

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June / July 2013 Business Eye 31 IT-TELECOM Libya Herald Interview: Atef Al-Bahri, Second Deputy Minister of Communications

By Nihal Zaroug

However, there are challenging “external factors” that cannot be anticipated. Despite setbacks, such as the sabotage to fibre optic cables and the theft of solar panels and bat- teries, Bahri claims “we are planning that most of the projects scheduled to start or to finish during this year, go according to the plans of the ministry”.

Yet, the telecom sector is lagging behind con- sumers’ expectations, mainly due to slow speed, limited capacity and internet avail- ability. The country’s primary internet pro- vider, Libya Telecom and Technology’s (LTT) services are seen as sub-par, driving many to consider installing satellite internet for their homes and businesses.

Improvements underway To improve, LTT recently resumed ADSL Atef Al-Bahri, 2nd Deputy Minister CIM sales, doubling capacity to 20 gigabytes, and expanding provision to ten new towns. This, ince his appointment last Novem- and benefits government, businesses and along with completing WIMAX Phase II, ber to head the Ministry of Com- consumers.” should help meet high demand on Libya’s munication and Informatics (CIM) strained networks. Osama Abdurauf Siala, has had an Bahri has frequently stressed the telecoms active few months. Despite the difficult cir- sector is the “basis and driver” of economic, S Libya’s two mobile operators, Libyana and cumstances facing Libya, his ministry has cultural, educational and social activities. Its Almadar Aljadeed, are also working on ex- been able to roll out several plans aimed at progress is among the main indicators of the pansions and upgrades for better coverage improving telecommunications services “overall developments designed at improving and advanced mobile internet. While the throughout the country. the standard of living for Libyans”. ministry cannot force operators to upgrade, Minister Siala, has claimed pressure is being “The telecom sector is making steady pro- With such high deliverables and expecta- applied to revamp existing networks. gress,” says Atef Al-Bahri, Communications tions, it is small wonder there is such close and Informatics Second Deputy Minister. scrutiny of the ministry and the companies Telecom infrastructure development pro- under its umbrella. He tells the Libya Herald that the opening of grammes, says Bahri, show “how the tele- coms sector companies are determined to the call centre by Telecom Libya is a “major CIM oversees the Libyan Post, Telecommu- insure reliable and robust services that serve step towards serving consumers and initiat- nication & Information Technology Holding Libyans”. Of these projects, the Next Gener- ing the outsourcing business in Libya”. Company (LPTIC), a consortium of several ation Basic Network (NGBN) has been com- communications companies and two na- pleted with coverage reaching from Ajdabiya The centre aims to employ war injured, “as tional mobile operators. Consequently, the they can work from home. It also offers jobs to Kufra. A second stretch from the Tunisian ministry must have a “solid strategy” so the to the students in the summer periods”, adds border at Ras Jedir to Musaid on the Egyp- telecom sector provides “consistent services Bahri. tian border was finalised in April. to Libyan citizens”, says Bahri. Another undertaking is Libya’s e-govern- Moreover, says Bahri, “the latest signing be- Three main pillars ment project. It is currently spearheaded tween Libya International Telecommunica- by CIM. In March, the ministry contracted “Steady progress” he adds, has been possible tions Company (LITC) and Alcatel to assem- PwC as consultants. Among the chief tasks of by working on “three main pillars; insuring ble two international switches in Benghazi the e-government team, he says, is to merge reliable and robust telecommunications and Derna is a step towards decentralisation, the “previous fragmented efforts by different infrastructure, enhancing the existing net- providing Libya, particularly the Eastern re- ministries and governmental entities into works and services, and developing those gion, with more consistent and better quality a unified strategy that is easy to implement, networks and services.” international calls.”

32 Business Eye June / July 2013 IT-TELECOM ITEX Libya: First show a success By Nihal Zaroug

he first Libya ITEX was an “over- (LPTIC) and mobile phone operator Alma- all success” says Ahmed Elakkari, dar. It showcased the latest communications Managing Director of organiser technologies, and included leading compa- Saker Expo. The International nies such as Cisco, Huawei, Vocalcom, Aetech, TTelecommunication and IT exhibition was Eutelsat, Delta, Giga, Hatef Libya, Thuraya held from 6 to 9 May at Tripoli’s Internation- Telecom, Aljeel Aljadeed, Masafa Telecom, al Fairground and attracted close to 2,500 Cynapsys, Sotetel, IOTA and Dot’IT. visitors. Companies offered a wide range of products Saker and some of the exhibitors would have and services, including security solutions, been happier with higher traffic at the fair. educational learning tools, electronic bank- However, given the incidents leading up to ing, satellite internet, server solutions and the passage of the Political Isolation Law on various integrated IT programmes. 5 May, they were extremely satisfied with the outcome of the show. Many of the exhibi- The highlight at the Tunisian exhibitors’ pa- SalahLagtaa GM LPT IT& atCo ITEX opening

tors are looking to return and have already vilion was a unique opportunity to sit and booked booths for next year’s show, says discuss business prospects with LPTIC’s Elakkari. Saleh Lagtaa, and Head of the National Eco- munications sector. Regional and interna- nomic Development Board, Tarek Tantoush. tional cooperation could create trading cir- ITEX was sponsored by Rawafed Libya, The Lagtaa and Tantoush encouraged the exhibi- cles and lead to new business ventures, they Libyan Post, Telecommunication and Infor- tors and reassured them of Libya’s will to said, while giving the private sector a greater mation Technology Holding Company move forward, particularly in the telecom- role in the advancement of the industry.

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June / July 2013 Business Eye 33 RETAIL BMW expects growth in the premium car market and finance opportunities for banks By Michel Cousins

BMW Showroom

alking into the newly re- Distributors of several different brands of foreign dignitaries by the Protocol depart- vamped BMW centre in Trip- vehicle since the 1950s, the Muttawas, like ment. Audis were for ministers and heads of oli’s Draybi district is a bit of a other Libyan business families, prospered government institutions. For the rest of the shock. Outside, the streets are and suffered over the decades, in line with population, driving any quality car was a bit Wpotholed, littered with rubbish and vehicles the political shifts of the time. Oasis Motors, risky. It brought undesirable attention. As parked all over the place. Inside, you could like other parts of the group, is now rebuild- a result, there was little effort put into open be in Munich or Manchester. The showroom ing after the revolution. Business at the mo- marketing and promotion. The vehicles sold is spotless and sparkling, BMW accessories ment is both erratic and different says Oasis – around 250 a year, and at the high end of the are neatly showcased and the staff courte- Motor’s Managing Director Ali Muttawa, son range: the 5 and 7-Series and the X6 models. ous and focused on their work. A sleek black of the group’s founder. Since the revolution, it has become a very dif- BMW 3-Series lounges enticingly next to the ferent market. Now, the customers are ordi- plate glass window. Customers have changed nary Libyans, looking for style and individu- ality after decades of not daring to express Draybi is the location for the BMW importer During the Qaddafi period, he points out, the themselves in any visible form whatsoever, office, distribution, spares and service cen- make of car denoted the pecking order. Be- their cars included. Libyans, says Muttawa tre. The company that owns it, Oasis Mo- cause of their quality and reputation, BMWs “now aspire to quality”. tors BMW Libya, part of the Muttawa family were for the Qaddafi family and associates. business group, has been the importers and Mercedes, which Qaddafi reportedly nev- The most popular models today are the 3-Se- wholesalers of BMWs since 2005. er liked because he associated them with ries. “Libyans, like most of the rest of the capitalism, were allowed only for the use of world, are going for smaller cars,” he says.

34 Business Eye June / July 2013 RETAIL

About 30 vehicles are being sold monthly tions are strict. The applicant must be a gov- But there is also an important lesson. “If we across the country.“We’re way below poten- ernment employee, with a monthly salary of want a private sector that works, we have to tial,” he states. The target is 400 for this year. at least double the agreed monthly repay- have retail finance. For the economy to grow, In Morocco, they’re selling 2,000 a year, in ments, have had an account with the bank the banks have to start lending,” he says. Tunisia, 1,000. It should be 1,000 a year here.” for six months or three if personally known by the bank, and have a guarantor who has an It is not just the banks that have to respond Prior to the revolution, he points out, Libya account at the same bank branch as himself. to the changed circumstances. Dealers have imported 50,000 to 60,000 new cars a year. The guarantor too must have a salary double to do so as well. Oasis Motors is working on There has been a flood of second-hand ve- the monthly repayments and have been with it.“Before we didn’t do open marketing. You hicles into the country in the year and a half the bank for a minimum of six months. avoided getting into the spotlight under since then to meet surging demand, but he Qaddafi. Now it’s the opposite and marketing estimates the potential market for new cars Sahara Bank, which will provide finance up must be done more professionally.” in Libya at 100,000 a year. In keeping with to LD 47,500, has no such conditions. If it other countries, ten percent of this, he says, knows the customer, it will do business. “It With its service centre and plans for a body should be at the premium end of the market – is very market-driven,” says Muttawa, but it repair workshop soon, the Draybi centre is the BMWs, Mercedes, Jaguars, Audis and the has only recently started offering the pack- not where you buy a BMW. For that you need like. age. Presently, Sahara Bank is only offer- to head to one of the four dealerships in the ing Murabaha through its central branch in country, three in Tripoli and one in Benghazi. Limited lease financing Tripoli, but is aiming to extend it to the rest The last re-opened at the end of last year. A Some people express concerns about having of the country shortly. fifth is expected to open in Misrata by year quality cars in a country where so many ve- end. BMW is expanding its presence in the hicles show signs of having been involved in There is almost nothing else on offer. Un- country. That, together with the makeover at an accident. But the main problem is money, like the rest of the world where financing ac- the Draybi centre and the planned body re- Muttawa says. Unlike other countries, most counts for 90 percent of auto sales, in Libya pair workshop, speak of a BMW that is con- Libyans cannot get lease finance to acquire it is still in its infancy and only starting to be fident in the growing Libyan market and the the car of their dreams. rolled out. demand for premium cars.

Lending, on the whole, has not been in the Libyan banks cautious on lending Libyan banks’ vocabulary. There is one Sh- Libyan banks remain very cautious to whom aria-compliant package, Al-Murabaha, but they lend, especially given the present ease “If we want a private sector only two banks are offering it, the Gumhou- with which documents can be faked. Security that works, we have to ria Bank and Sahara/BNP Paribas. Oasis Mo- is not very strong. “So for the moment, most tors is doing its best to promote it. people have to buy with cash”, Muttawa says. have retail finance. For the But he is confident the market will grow. economy to grow, The two have different packages. Gumhouria “Fifty percent of customers who walk in ask the banks have to offers loans of up to LD 40,000 payable over about financing – or ‘staggered payments’ as 72 months with the bank charging a service they say”, indicating there is a lot of business start lending,” fee of 20 percent of the loan. But the condi- out there for the banks.

BMW Tripoli BMW Service Centre

June / July 2013 Business Eye 35 RETAIL Maltese company plans to open stores in Tripoli By Michel Cousins

Malta’s Michele Peresso Group is looking to of Administration, but the market in Malta is The idea is first to set up a multi-brand Euro- set up in Libya. The company is best known saturated. “Competition is intense”, he says. sport store, probably in Tripoli, and then go in Malta for its Eurosport stores, one of “So we decided to look to Libya.” It is a natu- for a “concept” single brand store, explained which is the largest sportsware and goods ral choice, he explains. “If someone thinks company director Michael Peresso. Within outlet on the islands. ‘overseas’ in Malta, the majority of people the first five years at least one other store think Libya” would follow. Through its Euro pharma business, it is also involved in pharmaceutical and medical The company has been investigating poten- equipment distribution while its Mamas & tial partners in Libya for several months Papas outlet retails products such as baby but is currently still looking for one. The “If someone thinks ‘overseas’ clothes, pushchairs nursery furniture and partnership deal would be that the Peresso in Malta, the majority of toys. It also has fashion stores including four Group run the business, taking care of the lo- Bata shops. gistics, the design, ordering, training and the people think like while the Libya partner would provide Libya” “We want to expand”, says Cedric Caruana, the infrastructure, including the sites. the group’s Financial Controller and Head

Exhibitions & Conferences in Libya (June – December 2013)

Date Title Location Contact 16-19 June Libya Food Expo Tripoli International Fairground www.libyafoodexpo.ly 17-20 June Libya International Furniture Exhibition Tripoli International Fairground www.libyamobilia.com 09-11 September Libya Franchise Corinthia Hotel, Tripoli www.franchise-ly.com 9-12 September The Build Expo – Misrata Misrata International Fairground www.buildexpo.libya 10-12 September 10th Libya Healthcare Exhibition 2013 Tripoli International Fairground www.maf.ly 16-18 September Libya Forum, Oil, Gas and Sustainable Growth Tripoli www.cwc-libya-forum.com 22-24 October Tripoli Fair for Advertising, Printing and Marketing Tripoli International Fairground www.libyatifa.com 28-01 November Tripoli Motor Show Tripoli International Fairground www.tripolimotorshow.com 16-18 December 12th Arab Structural Engineering Conference Tripoli University www.asec12.ly

Who is reading the

Ali Muhairiq, Electricity Minister Ali Sherief, Minister of Housing & Utilities Salah Marghani, Minister of Justice

 www.libyaherald.com

36 Business Eye June / July 2013

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