HomeReportsBureau of Economic and Business Affairs2020 Investment Climate Statements…Libya

# 					2020 Investment Climate Statements: Libya			

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													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## EXECUTIVE SUMMARY

Libya presents a challenging investment climate.  Reconstruction needs, severely underserved consumer demand, and abundant natural resources provide many opportunities for domestic and foreign investors, and the Government of National Accord (GNA) has repeatedly expressed interest in receiving greater foreign investment.  Nonetheless, the country’s prospects for foreign investment continue to be hampered by:  1) persistent political instability and security risks posed by the ongoing civil conflict and by the presence of non-state militias and extremist and terrorist groups; 2) non-state actors’ seizure of key economic infrastructure, including major oil and gas terminals since January 2020; and 3) opaque bureaucracy, onerous regulations, and widespread rent-seeking activity in public administration.  The Libyan government has a long history of not honoring contracts and payments, and several U.S. firms continue to be owed back payments for work done before and after the 2011 revolution. The sectors that have historically attracted the most significant investment into Libya are:  oil and gas, electricity, and infrastructure.

Libya’s civil conflict reignited in April 2019 when Khalifa Haftar’s Libyan National Army (LNA), based in the east of Libya, launched a military offensive to seize Tripoli.  LNA-aligned forces have repeatedly attacked civilian infrastructure in greater Tripoli, and attacks against Tripoli’s Migita Airport have forced its closure on multiple occasions.  The LNA and its political allies have undermined key national institutions, including the Central Bank and the National Oil Corporation (NOC), by standing up parallel structures and attempting to use such entities to finance its activities.

Libya holds Africa’s largest (and the world’s ninth largest) proven oil reserves and Africa’s fifth largest gas reserves.  Most government revenues derive from the sale of crude oil.  Prior to the January 2020 LNA-orchestrated oil shutdown of five oil terminals and two oilfields in the southwest, Libya’s oil production had been making a gradual recovery from repeated attacks on oil infrastructure by ISIS-Libya and other armed groups in 2016, reaching an estimated high of 1.3 million barrels per day (bpd).  Technocrats heading the NOC, an independent, apolitical institution, continue to lay the groundwork for long-term development and stabilization of the energy sector.

The Privatization and Investment Board (PIB), supervised by the Ministry of Economy, is the primary governmental body for encouraging private foreign investment in Libya.

The Investment Law of 2010 provides the primary legal framework for foreign investment promotion. Passed prior to the 2011 revolution that toppled the Qadhafi regime, the law lifted many FDI restrictions and provided a series of incentives to encourage private investment.  No significant laws related to investment have been passed since the revolution.

Perceived corruption is deeply embedded in Libya and is widespread at all levels of public administration.  The lack of transparency or accountability mechanisms in the management of oil reserves and revenues, the issuance of government contracts, and the enforcement of often ambiguous regulations continue to provide the government with substantial opportunities for rent-seeking activities.

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Towards Foreign Direct Investment**

The Libyan government’s efforts to attract FDI, primarily through the PIB and NOC, are relatively recent.  Until the 1990s FDI was only permitted in the oil sector through sovereign contracts to which the state was a party.  A number of foreign investment laws were passed in subsequent years to encourage and regulate FDI, culminating in “Law No. 9 of the year 1378 PD (2010) Regarding Investment Promotion” (known as the 2010 Investment Law).  Though promulgated prior to Libya’s 2011 revolution, the law remains in effect.  This new law lifted many FDI restrictions and provided a series of incentives to qualifying investments, such as tax and customs exemptions on equipment, a five-year income tax exemption, a tax exemption on reinvested profits and exemptions on production tax expert fees for goods produced for export markets.  It also allowed for investors to transfer net profits overseas, defer losses to future years, import necessary goods, and hire foreign labor if local labor was unavailable.  Foreign workers may acquire residency permits and entry reentry visas for five years and transfer earnings overseas.

The law regulates the establishment of foreign-owned companies and the setting up of branches in representative offices.  Branches are allowed to be opened in a large number of sectors, including:  construction for contracts over LYD 50 million; electricity works; oil exploration; drilling and installation projects; telecommunications construction and installation; industry; surveying and planning; installation and maintenance of medical machines and equipment; and hospital management.  However, the investment law restricts full foreign ownership of investment projects to projects worth over LYD 5 million, except in the case of limited liability companies, and requires 30 percent of workers to be Libya nationals and to receive training. Foreign investors are prevented from owning land or property in Libya and are allowed only the temporary leasing of real estate.  Investment in “strategic industries” – in particular, Libya’s upstream oil and gas sector, which is controlled by the NOC – requires a foreign entity to enter into a joint venture with a Libyan firm that will retain a majority stake in the enterprise.  It is not clearly defined which industries other than upstream oil and gas may be considered strategic.

The most important investment promotion institution Libya is the PIB, established in 2009 to assume responsibility for the Libyan privatization program and oversee and regulate FDI activities.  The PIB’s screening process for incoming FDI to Libya is not clearly defined; the bidding criteria and process for investment are not published or transparent, and it is therefore not clear whether foreign investors have faced discrimination.  The PIB states that it reviews bids or proposals for general consistency with Libya’s national security, sovereignty, and economic interest.  The Minister of Economy must give final approval to all FDI projects, at the recommendation of the PIB.  There is no information available on the timeline of the approval process or any potential outcomes of the process other than an affirmative or negative decision by the PIB or Minister of Economy.  The PIB maintains that it keeps all company information confidential.  U.S. firms have repeatedly expressed frustration about the slow pace by which the Libyan government makes business-related decisions.  Despite these complaints, some U.S. firms have successfully invested in Libya, particularly in the country’s oil and gas sector.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

The ownership of real estate in Libya is restricted to Libyan nationals and wholly-owned Libyan companies.  The 2010 Investment Law permits the ownership of real estate in Libya by locally established project vehicles of foreign investors.  However, such ownership is limited to leasehold ownership only.  Foreign investors are allowed lease property from public holdings and private Libyan citizens, according to Article 17 of the 2010 Investment Law.  There is considerable ambiguity in both the public and private rental markets; many aspects of these arrangements are left to local officials.

**Other Investment Policy Reviews**

Libya has not undergone any recent investment policy reviews by the OECD, UNCTAD, WTO, or any other international body.

**Business Facilitation**

Business registration procedures in Libya are lengthy and complex.  The Ministry of Economy is the main institution for processing business registration requirements.  The Libyan government does not maintain an online information portal on regulations for new business registration or online registration functionality for registering a new business.  There are multiple corporate structures based on the type of business undertaken (e.g. limited liability, joint venture, branch office) and each has specific registration requirements.  Some requirements apply to all businesses, including:  obtaining a Commercial Register certificate, registering with the Chamber of Commerce and the tax and labor departments, and obtaining a working license.  If a company will be importing items, a statistical code will be required.  If the company will be obtaining letters of credit in Libya, a Central Bank code will be required.  A specialized agent must complete these tasks on behalf of the registering company.  For the simplest corporate structure (limited liability with no Central Bank code) the process can take two to three months if the registration agent is familiar with the procedures.

**Outward Investment**

Libya is a member of the Islamic Corporation for the Insurance of Investment and Export Credit, which provides investment and export credit insurance for entities in member states.   FDI outflows in 2018 were USD 315 million, compared to USD 2.7 billion in 2010.  The Libyan government does not formally promote or incentivize outward investment.  Stress in the banking sector has reduced liquidity, and this has negatively affected the ability of Libyan citizens to acquire the hard currency to invest abroad.

							2. Bilateral Investment Agreements and Taxation Treaties					

Libya has signed bilateral investment protection agreements with Algeria, Austria, Belarus, Belgium, Bulgaria, China, Croatia, Egypt, Ethiopia, France, Gambia, Germany, India, Iran, Italy, Kenya, Luxembourg, Malta, Morocco, Portugal, Qatar, Russia, San Marino, Serbia, Singapore, Slovakia, South Africa, South Korea, Spain, Switzerland, Syria, Tunisia, and Turkey.  Some of these have yet to formally enter into force.  Libya is part of the Greater Arab Free Trade Area (GAFTA), a Free Trade Agreement joining Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Morocco, Oman, the Palestinian Authority, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, the United Arab Emirates, and Yemen.  Libya is also a member of the Arab Maghreb Union (AMU) Free Trade Agreement with Morocco, Algeria, Tunisia, and Mauritania.

Libya does not have a bilateral investment treaty, a Free Trade Agreement, or a bilateral taxation treaty with the United States, but signed a Trade and Investment Framework Agreement (TIFA) with the United States in December 2013 that the Libyan government ratified in February 2019.

							3. Legal Regime					

**Transparency of the Regulatory System**

The Libyan regulatory system lacks transparency, and there is a general lack of clarity regarding the function and responsibilities of Libyan government institutions.  Transparency International placed Libya 168 out of 180 countries (“1” indicates least corrupt) in its 2019 Corruption Perceptions Index, and Libya ranks 186 out of 190 on the World Bank’s “Doing Business” Index.  Libya’s bureaucracy is one of the most opaque and amorphous in the Middle East region; its legal and policy frameworks are similarly difficult to navigate.  The issuance of licenses and permits is often delayed for significant periods for unspecified reasons, and the adjudication of these applications is most often done in a subjective and non-transparent fashion.  This has created an environment ripe for graft and rent-seeking behavior.

Neither ministries nor regulatory agencies publish the text or summary of proposed regulations before their enactment.  Accurate, current information about key commercial regulations is difficult to obtain, and this situation serves as a deterrent to foreign investment.

**International Regulatory Considerations**

Libya is not a member of the WTO.  The WTO received Libya’s application on June 10, 2004. The General Council established a Working Party on July 27, 2004, but no formal progress on Libya’s application has been made.

**Legal System and Judicial Independence**

The 2011 Constitutional Declaration functions as the interim constitution.  It states Islam is the state religion and sharia is the principal source of legislation. The Libyan civil code begins with a preliminary title containing general dispositions regarding law, sources of law, application of the law, and general dispositions regarding the legal definition of persons as well as the classification of things and property.  Thereafter, the code is divided into two parts and four books.  The first part addresses obligations or personal rights and contains similarly named subdivisions:  Book I (Obligations in General) and Book II (Specific Contracts).  The second part of both codes is entitled “Real Rights” and contains Books III (Principal Real Rights) and Book IV (Accessory Real Rights).  In the absence of a legal provision, the Libyan civil code requires courts to adjudicate matters “in accordance with the principles of Islamic law.”  In the absence of an Islamic rule on a particular matter, the Libyan civil code requires courts to look to “prevailing custom,” and in the absence of any custom, “to the principles of natural law and the rules of equity.”

Article 89 of the Libyan Civil Code states that “a contract is created, subject to any special formalities that may be required by law for its conclusion, from the moment that two persons have exchanged concordant intentions.”  The Libyan court system consists of three levels:  the courts of first instance; the courts of appeals; and the Supreme Court, which is the final appellate level.  Libya’s justice system has remained weak throughout the post-revolutionary period, and enforcement of laws remains a challenge for the GNA.

**Laws and Regulations on Foreign Direct Investment**

Laws and regulations on investment and property ownership allow domestic and foreign entities to establish business enterprises and engage in remunerative activities.  Investment law and commercial law differ in their foreign ownership restrictions for business enterprises.  Article 7 of the 2010 Investment Law specifies, in general accordance with standard international practice, conditions a project must fulfill in part or in full in order to qualify as an investment rather than a commercial vehicle.  Investment projects that meet the conditions set out in the 2010 Investment Law enjoy a number of benefits, such as relief from income taxes for a set number of years. Further, a foreign investor may wholly own the enterprise if the foreign investment exceeds LYD 5 million. This is reduced to LYD 2 million if a Libyan partner holds at least half of the investment.  For investment projects that do not meet the conditions set out in the 2010 Investment Law, these benefits do not apply and Libya’s Commercial Code stipulates no more than 49 percent foreign ownership unless the enterprise is a branch of a foreign company, which the foreign company can then fully own.

**Competition and Anti-Trust Laws**

Chapter 11 of the Libyan Commercial Code deals with the issue of competition and prohibits market abuse.  The Commercial Code provides for the establishment of a Competition Committee to be responsible for reviewing complaints and investigating them and, in cases where the law has been violated, referring the cases to public prosecution.  There is not an active Competition Committee at the moment, and since these issues are regulated by law and considered violations, interested/damaged parties can pursue legal action directly.

**Expropriation and Compensation**

Article 23 of the 2010 Investment Law provides an express guarantee against the nationalization, expropriation, forcible seizure, confiscation, imposition of receivership, freeze or subjection of procedures of similar effect, except by virtue of a law or court ruling and fair and equitable indemnity, and provides such procedures be applied indiscriminately.  Article 43 of executive regulation No. 449 of 2010 implementing the law reinforces those provisions.  The Libyan government’s history of state expropriation of private property, including the assets of foreign companies, most prevalent during the 1980s, had already been in decline before the law’s passage.  There have been no nationalizations or expropriations under the current investment law.

**Dispute Settlement**

*ICSID Convention and New York Convention*

Libya is not a signatory to either the International Center for Settlement of Investment Disputes or the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘New York Convention’) and has not taken steps to accede to either.  In the case of commercial disputes, most foreign entities currently opt to try cases before the International Chamber of Commerce, whose judgments Libya has a history of respecting.  Libya is a member of the 1983 Riyadh Convention on Judicial Cooperation, which facilitates recognition and enforcement of judgments and arbitral awards among the Arab member states.

*Investor-State Dispute Settlement*

Libya is not a signatory to a treaty or investment agreement in which binding international arbitration of investment disputes is recognized.  Article 24 of the 2010 Investment Law mandates disputes initiated by a foreign investor or the state be settled by competent Libyan courts, unless there is an agreement between Libya and the state to which the investor is subject that includes provisions for alternative arbitration procedures.

*International Commercial Arbitration and Foreign Courts*

The Libyan Civil Code provides for the enforcement of foreign decisions or arbitral awards if they meet the following requirements:  the decision must be issued from a competent authority, according to the laws of the country of origin of the decision; the parties must have been duly summoned to appear before the court that handed down the decision and must have been duly represented (the laws of the foreign country also apply in terms of summons to and presence before the court);  the decision must not contradict decisions already issued by Libyan courts; and the decision must not include anything that conflicts with the principles of public order in Libya.  Libya’s justice system remains weak, making enforcement of foreign judgments and arbitral awards through the Libyan courts challenging and lengthy.

**Bankruptcy Regulations**

Libya does not have a separate bankruptcy law, but bankruptcy issues are covered under articles 1012 and 1013 of the 2010 Commercial Code. According to this legislation, bankruptcy proceeds in two phases. The first is preventative reconciliation, during which the debtor attempts to rectify the financial situation of the business through an agreement with creditors under court supervision. The second phase commences in the event of the agreement’s failure, whereby the court intercedes to protect the rights of the creditors through liquidation.

							4. Industrial Policies					

**Investment Incentives**

Investments set up according to the 2010 Investment Law benefit from the following incentives: tax and customs exemptions on equipment, a five-year income tax exemption, a tax exemption on reinvested profits and exemptions on production tax expert fees for goods produced for export markets.  It also allowed for investors to transfer net profits overseas, defer losses to future years, import necessary goods, and hire foreign labor if local labor is unavailable.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

Libyan Law Number 215 of 2006 established the Zuwara Free Trade Zone (ZFTZ), and Law Number 495 of 2000 (amended by Law Number 32 of 2006) created the Misrata Free Trade Zone (MFTZ).  Both the ZFTZ and the MFTZ are overseen by the Libya Free Trade Zone Board, created by Law Number 168 of 2006.  By law, the ZFTZ and MFTZ are financially and administratively independent, and are free to legislate “within the boundaries of Libyan law.”

**Performance and Data Localization Requirements**

The host government does not follow forced localization.  The 2010 Investment Law mandates that 30 percent of a foreign-owned company’s workforce consist of Libyans.  Exemptions are available if the required skills for a position are not available on the local labor market.

U.S. citizens traveling to Libya on business visas require an invitation from/sponsorship by a company operating in Libya.  Obtaining a Libyan business visa regularly requires several weeks or months.  Libyan Embassies in third countries have followed varying rules and procedures regarding the issuance of visas, but all visa applications require approval by the Libyan Ministry of Foreign Affairs.  Libyan law prohibits using a tourist visa to travel to Libya for business purposes.  The Government of Libya does not allow persons with passports bearing an Israeli visa or entry/exit stamps from Israel to enter Libya.  Further information can be found in the Consular Information Sheet for Libya at the State Department website travel.state.gov.  The 2010 Investment Law grants investors the right to a residence permit for a period of five years, subject to renewal if the project continues.

							5. Protection of Property Rights					

**Real Property**

Libyan property rights are complicated by past government policy actions and a weak regulatory environment.  The Libyan government eliminated all private property rights in March 1978 and eliminated most private businesses later in the same year.  The renting of property was illegal, and ownership of property was limited to a single dwelling per family, with all other properties being redistributed.  Reduced rate “mortgages” were paid directly to the Libyan government, but many Libyans were exempted from these payments based on family income.  This process, and destruction of official documents that followed several years later, has served to greatly complicate any subsequent effort to prove clear title to property throughout Libya.  Post-revolutionary governments have made little progress on improving the situation.  As a consequence of the ambiguity of property ownership, banks are reluctant to take property as collateral for loans until property disputes are resolved.

**Intellectual Property Rights**

Libya does not have an intellectual property law.  Article 1286 of the 2010 Commercial Code covers a set of rules which seek to protect intellectual innovations and the non-material aspects of industrial and commercial projects.  It prohibits infringement of trademarks and transgression on registered trade names and logos; bans all acts of forgery, trademark or local counterfeiting, and all forms of intellectual property violations; and outlines the nature of financial and criminal procedures against those violations.  The law provides for enforcement of the rules regulating registered industrial designs and models as well as information systems.  Some additional laws providing protection of intellectual property rights (IPR) have been passed, such as Law No. 7 of 1984 and Law No. 8 of 1959 on patents, commercial designs, and models.  The trademark office in the Ministry of Economy is responsible for enforcing the law of consumer and intellectual property protection, but trademark violations are widespread, especially in the retail sector, and enforcement generally requires a specific legal claim.  U.S. brands remain vulnerable to such activity.

While Libya is in the process of applying for entry to the WTO, it is not currently a member, and thus is not a party to TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights).  The IMF has asked Libya to bring its IPR regime in line with international best practice.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

The Libyan government passed a law in 2007 to establish a stock market, primarily to support privatization of SMEs, but it is not well-capitalized, has few listings, and does not have a high volume of trading.  Capital markets in Libya are underdeveloped, and the absence of a venture capital industry limits opportunities for SMEs with growth potential and innovative start-ups to access risk financing for their ventures.

**Money and Banking System**

Libya has been attempting to modernize its banking sector since before the revolution, including through a privatization program that has opened state-owned banks to private shareholders.  The Central Bank of Libya (CBL) owns the Libyan Foreign Bank, which operates as an offshore bank, with responsibility for satisfying Libya’s international banking needs (apart from foreign investment).  The banking system is governed by Law No. 1 of 2005, as amended by Law No. 46 of 2012 on Islamic banking.  In accordance with that amendment, Law No. 1 of 2013 prohibits interest in all civil and commercial transactions.  The banking modernization program has also been seeking, among other components, to establish electronic payment systems and expand private foreign exchange facilities.

The eastern branch of the Central Bank declared itself the legitimate Central Bank in 2014, though it is not recognized internationally as such, and since then the institution has been split between the legitimate CBL in Tripoli and the parallel CBL based in the eastern city of Al Bayda.  As Libya’s only legitimate Central Bank, the CBL in Tripoli is responsible for the receipt of all of Libya’s oil revenues, prints Libyan dinars, and controls the country’s foreign exchange reserves.  As a result, the split has reduced liquidity to eastern Libya, including to the LNA, eastern parallel institutions, and commercial banks.  In recent years, eastern authorities have imported counterfeit Libyan dinars from Russia in an attempt to stem the liquidity shortage. To access hard currency, eastern authorities have in the past issued junk bonds that it forced commercial banks to buy, used counterfeit dinars to buy hard currency on the black market, and illegally exported certain commodities, like scrap metal.  All the while, the parallel CBL has accrued vast debt which the legitimate CBL has no visibility on and which will need to be reconciled when the two banks eventually unify.

The CBL in Tripoli controls access to all foreign currency in Libya, and it provides Libyans access to hard currency by issuing letters of credit (LCs).  Access to LCs in Libya has historically been an issue, but with the 2018 implementation of a foreign exchange fee described in the next section, importers’ access to LCs had greatly increased.  However, since the shutdown in the oil and gas sector in January 2020, the CBL has restricted the issuance of LCs, as described in the next section.

The availability of financing on the local market is weak.  Libyan banks can only offer limited financial products, loans are often made on the basis of personal connections (rather than business plans), and public bank managers lack clear incentives to expand their portfolios.  Lack of financing acts as a brake on Libya’s development, hampering both the completion of existing projects and the start of new ones.  This has been particularly damaging in the housing sector, where small-scale projects often languish for lack of steady funding streams.  The World Bank ranked Libya 186 out of 190 economies on the ease of getting credit in 2019.

**Foreign Exchange and Remittances**

*Foreign Exchange*

The 2010 Investment Law provides investors the right to open an account in a convertible currency in a Libyan commercial bank and to obtain local and foreign financing.  The Libyan Banking Law (Law No. 1 of 2005) allows any Libyan person or entity to retain foreign exchange and conduct exchanges in that currency.  Libyan commercial banks are allowed to open accounts in foreign exchange and conduct cash payments and transfers (including abroad) in foreign currency.  Commercial banks operating in Libya may grant credit in foreign exchange and transact in foreign exchange among themselves.

The Central Bank charges a foreign exchange fee of 163 percent on sales of Libyan dinars for hard currency.  Government entities do not have to pay this fee, which has effectively created two exchange rates:  the official rate, to which the Libyan government has access, and a second rate – the official rate with the 163 percent fee – for all other buyers.  There is also a significant black market for hard currency that typically exchanges Libyan dinars for foreign exchange at three times the official rate or higher.  Entities engaging in foreign exchange must be licensed by the Central Bank.  Foreign exchange facilities are available at most large hotels and airports, and ATMs are becoming more widely available.  The importation of currency must be declared at time of entry.  The Central Bank’s Decree No. 1 of 2013 regulates foreign exchange, including by specifying authorities for the execution of foreign transfers, and by prescribing limits on the transfer of currency abroad for different public and private entities.

Most firms seeking to receive payment for services/products in Libya operate using letters of credit facilitated through foreign banks (often based in Europe).  Foreign energy companies remitting large sums often make arrangements for direct transfers to accounts offshore.  While the introduction of the foreign exchange fee in September 2018 greatly facilitated the Central Bank’s issuance of LCs, in response to the January 2020 oil shutdown the Central Bank has generally limited LCs to a minimum of $100,000 with a three-month limit to complete transactions.

*Remittance Policies*

The 2010 Investment Law allows for the remittance of net annual profits generated by an investment and of foreign invested capital in case of liquidation, expiration of the project period, or insurmountable impediments to the investment within the first six months.  As noted, the Central Bank charges a foreign exchange fee of 163 percent on sales of Libyan dinars for hard currency.

**Sovereign Wealth Funds**

Libya maintains a sovereign wealth fund called the Libya Investment Authority (LIA).  UN Security Council Resolution 1970 (2011) froze many of the LIA’s assets outside Libya.  The freeze on the LIA’s assets is intended to preserve Libya’s assets through its post-revolutionary transition for the benefit of all Libyans.  The most recent evaluation of the LIA’s assets in 2012 put their value at USD 67 billion.  The international community has provided technical assistance to the LIA to help it improve its governance, including adherence to the Santiago Principles, a set of 24 widely accepted best practices for the operation of sovereign wealth funds.  The LIA has agreed to make tangible progress on its draft governance guidelines and adherence with the Santiago Principles, including preparation of an annual report that contains an identification of assets and audited financials.

							7. State-Owned Enterprises					

The PIB Is responsible for matters related to privatization of state-owned enterprises (SOEs).  All enterprises in Libya were previously state-owned.  Except for the upstream oil and gas sector, no state-owned enterprise is considered to be efficient.  The state is deeply involved in utilities, oil and gas, agriculture, construction, real estate development and manufacturing, and the corporate economy.

**Privatization Program**

Libya has gone through three previous phases of privatization, the latest between 2003 and 2008 during which 360 SOEs ranging from small to large in various sectors were either fully or partially privatized or brought in private partners through public-private partnerships.  However, restrictions to individual shares and foreign ownership – individual investors’ share of the capital was restricted to 15 percent and local ownership had to be 30 percent – limited interest in the privatization program.  Accusations of fraud further discouraged investments.  Nonetheless, the food industry, healthcare, construction materials, downstream oil and gas, and education sectors are now partially or fully privatized.  Fragile governments and lack of security since 2011 have impeded implementation of further privatization programs.

							8. Responsible Business Conduct					

There is not a general awareness of, expectation of, or standards for responsible business conduct (RBC) in Libya, nor of businesses’ obligation to proactively conduct due diligence to ensure they are doing no harm (including with regards to environmental, social, and governance issues).  The Libyan government has not taken measures to define or encourage RBC, such as promoting the OECD or UN Guiding Principles on Business and Human Rights or establishing a national contact point or ombudsman for stakeholders to get information or raise concerns about RBC.  As far as domestic laws exist in relation to human rights, labor rights, consumer protection, environmental protections, and other laws/regulations intended to protect individuals from adverse business impacts, the capacity of the government to enforce these laws is very limited.

							9. Corruption					

Foreign firms have identified corruption as an obstacle to FDI; corruption is pervasive in virtually all sectors of the economy, especially in government procurement.   Officials frequently engage with impunity in corrupt practices such as graft, bribery, nepotism, money laundering, human smuggling, and other criminal activities.  Although Libyan law provides some criminal penalties for corruption by officials, the government does not enforce the law effectively.  Internal conflict and the weakness of public institutions further undermine enforcement.  No financial disclosure laws, regulations, or codes of conduct require income and asset disclosure by appointed or elected officials.

The Libyan Audit Bureau (AB), the highest financial regulatory authority in the country, has made minimal efforts to improve transparency.  The Audit Bureau has investigated mismanagement at the General Electricity Company of Libya that had lowered production and led to acute power cuts.  Other economic institutions such as the Ministry of Finance and the Central Bank  published some economic data during the year.

On 10 July 2018, GNA Prime Minister al-Sarraj requested international support to conduct an audit of the two branches of the Central Bank ,and this request was endorsed by the UN Security Council (UNSC) on 13 September 2018 (UNSC Resolution 2434).  The audit of the two CBL branches, if implemented by Libyan authorities, is a means to restore the integrity, transparency and confidence in the Libyan financial system and create the conditions for the long-awaited unification of Libyan financial institutions.  However, as of May 2020, the Audit Bureau has obstructed payment to the international auditing firm that won the bid to conduct the audit because the AB claims that Libyan law provides it sole authority for conducing financial audits of Libyan government institutions.

Libya has signed and ratified the UN Anticorruption Convention.  It is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

*Resources to Report Corruption*

Libya has several anti-corruption agencies and bodies, including, most notably, the National Anti-Corruption Commission, the Office of the Attorney General, the Administrative Control Authority, the Accountancy Bureau and the Financial Information Unit.

Contact at the government agency or agencies that are responsible for combating corruption:

Akram BannurGeneral SecretaryNational Anti-Corruption Commission of Libya+218 91 335 8583Bannurakram@outlook.com

Contact at a “watchdog” organization (international, regional, local or nongovernmental organization operating in the country/economy that monitors corruption, such as Transparency International):

Ibrahim AliChairmanLibyan Transparency International+218916344442info@transparency-libya.org

							10. Political and Security Environment					

There is a significant recent history of politically-motivated damage and seizure by force of economic infrastructure and installations, particularly in the oil and gas industry.  Most recently, forces allied with Libyan National Army Commander Haftar forced the near-total shutdown of Libya’s energy sector in January 2020.  Civil disturbances are a daily occurrence, with rival militias jockeying for control over the GNA’s political institutions and economic resources, and an ongoing civil conflict between the GNA and LNA.  These events significantly affect foreign firms’ willingness and ability to invest in Libya.

							11. Labor Policies and Practices					

Libya’s labor market is characterized by a dominant public sector that employs 85 percent of the active labor force in the Libyan economy, according to the World Bank.  Just four percent of the labor force works for private firms.  The Libyan labor market has many skilled workers with high levels of education, but high public sector wages and benefits result in outsized expectations among job seekers, particularly among the highly-skilled.  The World Bank has estimated Libya’s unemployment rate to be around 20 percent, and youth unemployment to be around 50 percent – numbers that, given the already bloated public sector, indicate a lack of private sector jobs for skilled and unskilled Libyans.  The World Bank also noted significant “mismatches” between the skills Libyan degree holders possess and those demanded by foreign and domestic employers in Libya.  The 2010 Investment Law permits investors to hire foreign workers when national substitutes are not available.

The law does not provide the right for workers to form and join independent unions.  Formal sector workers are automatically members of the General Trade Union Federation of Workers, but can opt out on request.  Foreign workers are not permitted to organize.  Workers are permitted to bargain collectively, but the law stipulates that cooperative agreements must conform to the “national economic interest,” thus significantly limiting collective bargaining. The government has the right to set and cut salaries without consulting workers.  According to Freedom House, some trade unions formed after the 2011 revolution, but they remain in their infancy, and collective-bargaining activity was severely limited due to the ongoing hostilities and weak rule of law.  There is no data available about the prevalence of collective bargaining, or about the effectiveness of labor dispute or arbitration services.

Workers may call strikes only after exhausting all conciliation and arbitration procedures.  Over the past year, employees organized spontaneous strikes, boycotts, and sit-ins in a number of workplaces.  The government or one of the parties has the right to demand compulsory arbitration, though state penalties for noncompliance were not sufficient to deter violations.

The law prohibits forced or compulsory labor, but the government did not effectively enforce the laws. There were numerous anecdotal reports of foreign workers subjected to conditions indicative of forced labor.  The law prohibits children younger than 18 from being employed except in a form of apprenticeship.  It was unclear whether child labor occurred, and no information was available concerning whether the law limits working hours or sets occupational health and safety restrictions for children.  It was not clear whether the government had the capacity to enforce compulsory or child labor laws, nor was it clear whether non-enforcement of these laws posed a commercial risk to investors.

							12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs					

The DFC does not operate in Libya, and there is no OPIC agreement between Libya and the United States.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

Table 2 uses BEA data when available, which measures the stock of FDI by the market value of the investment in the year the investment was made (often referred to as historical value).  This approach tends to undervalue the present value of FDI stock because it does not account for inflation.