Libya
In-depth country-focused analysis on Libya's economic, political and operational risk environment, complemented by detailed sector insight

Our comprehensive assessment of Libya's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Libya, as well as the latest industry developments that could impact Libya's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Libya before your competitors.

Country Risk

Libya Country Risk

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Core Views

  • As a result of ongoing political violence, a significant degree of productive capacity (both physical and human) throughout the Libyan economy has been lost. Road, housing and utility infrastructure have suffered considerable damage and will take years to repair under even the most stable of political environments. Moreover, given the importance of the hydrocarbon industry, damage to oil production and refining infrastructure will pose significant long-term challenges.

  • Libya's political climate will remain volatile through 2015, as competing militias compete for control over the country's vast resource wealth.

  • A lack of institutional capacity will hamper reconstruction efforts. Libya lacks the institutions necessary to carry out much-needed investment projects.

  • Low oil prices, coupled with...

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Libya Operational Risk Coverage (9)

Libya Operational Risk

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The labour market in Libya is fraught with potential risks for investors even before the effects of the 2011 revolution are taken into account. BMI highlights that the lack of job opportunities, poor quality of education, and onerous bureaucratic procedures associated with employing foreign workers combine to reduce the options for businesses in the domestic labour market and increase the costs of employing workers from within the country or from abroad. Libya therefore performs poorly in the BMI Labour Market Risks index, with a score of 43.9 out of 100 placing it 12 th out of 18 countries in MENA. Low labour taxes and a lack of regulations governing the local labour force are identified by BMI as among the few advantages for investors in this segment.

Libya's score of 44.2 for Education is the country's highest in the BMI Labour Market...

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Libya Crime & Security

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Libya's chronic domestic security issues make it one of the most dangerous countries for foreign businesses and workers in the Middle East and North Africa. The weak control of the General National Congress (GNC) in Tripoli means that crime is common, armed militias remaining from the 2011 revolution have too much power, and terrorist groups are able both to operate reasonably freely from the country, and launch attacks on targets within it. Libya therefore scores very poorly in the BMI Crime and Security Risks Index, with 10.8 out of 100 placing it 16th out of 18 countries in the MENA region. Only Yemen and Syria score lower. The only factor slightly mitigating Libya's score in this regard is its relatively stable strategic international environment.

The lack of any capacity to launch a war or pursue territorial disputes with its neighbours means that Libya faces fewer risks from its strategic international position....

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Libya Labour Market

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The labour market in Libya is fraught with potential risks for investors even before the effects of the 2011 revolution are taken into account. BMI highlights that the lack of job opportunities, poor quality of education, and onerous bureaucratic procedures associated with employing foreign workers combine to reduce the options for businesses in the domestic labour market and increase the costs of employing workers from within the country or from abroad. Libya therefore performs poorly in the BMI Labour Market Risks index, with a score of 43.3 out of 100 placing it 12 th out of 18 countries in MENA. Low labour taxes and a lack of regulations governing the local labour force are identified by BMI as among the few advantages for investors in this segment.

Libya's score of 44.2 for Education is the country's highest in the BMI Labour Market...

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Libya Logistics

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The damage caused by the 2011 civil war has resulted in an already poor logistics network in Libya deteriorating even further. The supply chain options in the country are severely limited by the lack of inland waterways, railways, or air freight, and the poor quality of the road network. In addition, importing goods to Libya can be time consuming and costly due to high levels of trade bureaucracy and the reliance of the country's ports on feeder services. BMI considers these factors to pose significant risks to businesses in terms of delays and additional costs involved with importing goods into Libya and establishing well-functioning internal supply chains.

As a result of these threats, Libya performs poorly in the BMI Logistics Risks Index, with an overall score of 39.0 out of 100 placing it second worst among 18 Middle Eastern and North African countries, above only Yemen. The few advantages...

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Libya Trade & Investment

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Libya has not yet been able to fully open up to foreign investment, despite Colonel Qadhafi's removal from power in 2011. In fact, BMI notes that the instability affecting the country since the revolution has only added to an already hostile business environment, due to restrictions placed on foreign direct investment (FDI) by the new government, and a bureaucracy struggling to retain full functionality. Libya's overall score in the BMI Trade and Investment Market Risks Index is therefore low, which is indicative of the numerous risks we see posed to foreign businesses wishing to operate in the country. At 26.0 out of 100, Libya's score in this segment ranks it third-last out of 18 countries in the Middle East and North Africa (MENA) region.

The legacy of the Qadhafi era, combined with continuing instability in the aftermath of the civil war, restricts Libya's openness to foreign investment....

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Libya Industry Coverage (7)

Autos

Libya Autos

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The near-term political and economic outlook for Libya remains very poor, with increased fighting among different militias doing much to undermine the local economy. As such, we believe that the near-term outlook for new vehicle sales remains very mixed, with only slight growth forecast over the remainder of our forecast period to 2018. Indeed, according to one of the few foreign companies currently operating within Libya, Egypt's Ghabbour Auto (GB Auto),'exogenous factors including ongoing civil unrest, a slow-moving state bureaucracy, a depressed market and oversupply of dumped goods from other regional markets have taken a heavy toll on our operations' over the year-to-date. More information on GB Auto's current views towards Libya can be found in the Company Profile section of this report.

In late August 2014, there were unconfirmed reports that the UAE and Egypt had launched air strikes against rebel positions in...

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Defence & Security

Libya Defence & Security

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Libya is at a significant crossroads following the conclusion of the civil war in 2011 and the end of the 42-year rule of Colonel Muammar Qadhafi. The country is home to an educated population and a considerable oil and petrochemicals industry. For these reasons, the internal situation in Libya has significant ramifications beyond the country's borders.

Libya is at a significant crossroads following the conclusion of the civil war in 2011 and the end of the 42-year rule of Colonel Muammar Qadhafi. The country is home to an educated population and a considerable oil and petrochemicals industry. For these reasons, the internal situation in Libya has significant ramifications beyond the country's borders.

Key Forecasts

  • We expect Libya to spend USD1.3bn on defence in 2014 and believe the defence budget will continue to grow over 2015-2018 to reach USD2.6bn.

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Food & Drink

Libya Food & Drink

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BMI View:   The Libyan domestic food and drink industry will continue to suffer from political instability and severe government spending cuts. In June 2014 parliamentary spokesman Omar Hmeidan said that lawmakers had approved a budget of LYD56.5bn ( USD47bn ) some 15.4% lower than the level proposed in the original budget document . These budget constraints will weigh heavily on economic growth and consumer spending this year.

With drastic cuts to spending unlikely and with our projections for the country's oil production averaging only 350,500 b/d (down 64.7%...

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Infrastructure

Libya Infrastructure

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BMI View: Following a 79.0% contraction in real industry value in 2011, we believed that 2013 would be the earliest the construction industry would experience a recovery . The sector saw the beginnings of rehabilitation in 2012, with 3.9% year-on-year real growth witnessed; however, 2013 looks set to impress, with the industry set to experience 25.0% growth over the year as a whole, followed by a 27.0% expansion over 2014. While strong, this is by no means spectacular , given the context; with the ongoing violence and the lack of a strong political mandate in government, we believe more serious reconstruction will take time to filter through. Consequently, we are not forecasting reconstruction to generate one...

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Insurance

Libya Insurance

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BMI View: The limited data that is available suggests that premiums are surging - or, more correctly, recovering from a low base in Libya. The overwhelmingly non-life market of Algeria has also achieved good growth through 2013. However, our overall view of insurance in the region is unchanged from previous years: North Africa remains a backwater. Sadly, this will likely be the case at the end of the forecast period .

To differing degrees, the markets of Morocco, Tunisia and Algeria are small, slowly growing, significantly constrained by the low levels of income for many households and dominated by sub-scale local insurers. Foreign companies are present but, except in Morocco, account for a fairly low percentage of activity. Life insurance, in particular, is underdeveloped. Major shareholders are often state-owned enterprises or conglomerates that have no clear...

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Oil & Gas

Libya Oil & Gas

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BMI View : Despite a rapid ramp-up in production in recent months, we see continued political instability, a deteriorating security environment and recurrent production shut-ins drag on overall oil output levels. Efforts to increase oil exports will also be undercut by both disruptions in the supply and increased oversaturation of the Atlantic light sweet crude market, depressing demand. Finally, we have downgraded the country's sustainable production capacity this quarter to below 1mn b/d, and see wide infrastructural damage, high depletion rates and limited investment inflows undermine efforts at a longer-term recovery in output.

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Headline Forecasts (Libya 2012-2018)
  2012e

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Telecommunications

Libya Telecommunications

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BMI View : The strong demand for mobile data services in the North Africa n telecoms markets is driving investments in network upgrade and expansion, with operators in Algeria, albeit from a low base, and Morocco leading the way in capital expenditure ( capex ) spending in 2014. The uptake of 3G network services in this region, aided by the increasing availability of low-cost smartphones, will allow mobile operators diversify their revenue streams away from basic services amid increased regulatory and competitive pressure. Libya is still left out of this development trend, with insecurity and political stability delaying a much - needed liberalisation process in the telecoms sector and...

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