Libya is the fourth largest economy in Africa. It has a rich culture, varied landscapes, a strategic position and the continent’s largest oil reserves. Once shunned by the international community for its involvement in the 1988 bombing of PanAm Flight 103 above the Scottish town of Lockerbie; its nuclear weapons programme; and its support for various militant groups, Libya began making amends with the world in 1999. The country is now out of political isolation and full of potential. Potential which the UK Government and European leaders should help the Libyans harness for a variety of economic, strategic and humanitarian reasons.
For the past decade, international firms have been lining up for a greater share of the opportunities presented by Libya’s reintegration into the global economy. Much of the interest has been in the oil and gas sector, which accounts for 95 percent of the country’s export revenues and one quarter of GDP. But opportunities have also been identified in the tourism, construction, education and financial services sectors.
In response to all this interest, the government has begun to overhaul the country’s socialist economy to enable and encourage trade and investment. State-owned enterprises have been privatised; the banking system has been commercialised; and the Central Bank has been reinvented as a supervisory organisation, as opposed to a controlling one.
With this, the widespread dismantling of barriers to trade and investment, and the country’s broader programme of legal and administrative reform, Libya is making itself a much more attractive place to do business, and companies are responding accordingly. UK visible exports to Libya, which are principally industrial machinery for the oil and gas sector, have risen by 35 percent in the past ten years. Over that period, UK imports from Libya have increased sevenfold and both inwards and outwards investment have risen sharply.
Libya has made great progress in the past decade. But there is clearly more that can be done to encourage further progressive reforms and greater returns for the business community in Libya, the UK and elsewhere.
Firstly, the European Commission should accelerate negotiations to establish a Framework Agreement between the EU and Libya. Officials have been given a broad mandate to negotiate a pact that will enhance political, economic, cultural, social and security cooperation between the two partners. This is a positive step and discussions have progressed well to date. However, the substantive details of a draft agreement are yet to be agreed, or even discussed in some areas, and the devil, as everyone knows, is in the detail.
It is in Europe’s interests to negotiate a comprehensive and ambitious agreement, and to do it quickly. Not least because getting in early will provide European businesses with a first-mover advantage that one expects will pay dividends in a relatively short period of time.
Negotiations stand to assist Europe to take forward a number of key policy objectives. Underpinning cooperation with Libya on energy issues should provide Europe with a reliable partner to meet long term energy requirements at a time when alternatives are in increasingly short supply.
It is not just in terms of energy supply that Europe stands to gain. The Libyan government has expressed a strong desire to further cooperation on key components of the climate change agenda, working with Europe to improve Libya’s energy efficiency and develop its capacity in renewables.
An agreement should also boost cooperation with the EU towards preventing illegal immigration, a key stepping stone towards reducing of the misery associated with human trafficking between Africa and Europe via Tripoli.
Libya’s further integration into the global community will help to safeguard the security of the Mediterranean region and to strengthen our relationship with a country that plays a leading role in the Arab world and in the African continent, a position that was consolidated by its recent appointment as Chair of the African Union.
Secondly, the UK and Europe should support Libya’s bid to become a member of the WTO. The legislative, policy and institutional changes that Libya would be required to make in order to join the organisation would ensure that the country develops an operating system that is truly ‘fit for purpose’. It would discipline the Government in its dealings with the private sector, and, since WTO commitments are binding, create a more predictable, secure and enticing business environment for internal and external investors alike. Membership would provide Libyan businesses and consumers with a broader range of competitively priced goods and services. They would also benefit from greater competition and the levels of investment required to stimulate innovation, diversification and the more efficient allocation of capital throughout the economy.
Libya’s WTO aspirations and its interest in negotiating a bilateral pact with the EU present real opportunities for business, consumers and taxpayers throughout the EU. We should hope that decision-makers in London and Brussels recognise this and engage accordingly.
Mike Pullen is a Partner at DLA Piper and head of the firm’s International Trade Practice in Europe, the Middle East and Asia. He is also a Board Member of the Middle East Association.
