Doing Business in… Libya
After more than two decades of isolation, the Socialist People’s Libyan Arab Great Jamahiriya (Libya) is making an impressive comeback to international business. This has been due to its shedding of the status of ‘pariah’, cautious liberalisation of internal economic policies, until recently a seven-year period of increasing oil prices, as well as having succeeded in drawing a significant amount of foreign investment and global trade connections.
Despite those advances, entrepreneurs planning to export their goods or services to Libya face significant barriers without an insight into the inside track. This article is to provide you with the fist steps to success in the expanding Libyan market. In general, economic activity in Libya by non-Libyan companies is prohibited. Laws exist, which allow the possibility of registering a foreign company branch only to a handful of business activities, most of which are specialized types of services in the Oil and Construction industry
Another option, currently enjoying government support is setting up a joint-venture or a joint-stock company where a foreign partner is allowed to retain a majority of shares. The other investor will be a Libyan entity from the private or public sector. Some companies with “foreign branch” legal status, have decided nevertheless, to establish a joint-stock company in order to make sure that public procurement regulations will not prohibit them from bidding for valuable tender opportunities which are on the increase.
Companies seeking to export ready made goods to Libya will face greater challenges, as trade in goods is only allowed by Libyan companies. This leaves a potential exporter only with the option of indirect exports. In this case, a lot comes down to how you select and manage the relationship with the local business partner is. Indirect exports will mean an exporter has little or no control over marketing their products in Libya, unless you have the correct agreements and controls in place.
Foreign businessmen try to overcome this through enabling potential local partners to set up their own companies and by creating durable business model with combining know-how and resources. These exporters with a solid local base can manage market developments on the ground, communicate regularly with end customers, monitor needs and offer good quality products and extended payments terms.
This “double-tier” system may achieve positive impact in B2B relationships – when selling to companies with foreign shareholders in Libya. Some of them often complain about unreliability, lack of transparency and communication problems when dealing exclusively with national importers or those without seamless operational integration with abroad.
Exporters planning on entering the Libyan market should note the following:
1) Libya’s schedule for trade exhibitions (especially in construction, oil & gas and home interiors sectors) is surprisingly well developed. Fairs provide excellent opportunities to get acquainted with potential partners and to gain exposure. For 2009, check exhibition opportunities at http://www.biztradeshows.com/libya/
2) Make sure you understand all documentary requirements when traveling and exporting to Libya. Regulations tend to change overnight without prior notice! Check frequently with your Embassy in Tripoli for the latest developments in visa regulations. As at the end of 2008, prior to issue in a country’s embassy or consulate abroad, all visas must be supported by an official invitation letter from public or private Libyan
3) The Letter of Credit is the preferred method of payment in international transactions. Presentation of invoices in both English and Arabic, legalized in a Libyan embassy (“Libyan People’s Bureau”) in the country of origin is typically required . You will also need to present a translated and legalized Certificate of Origin, obtainable through your local Chamber of Commerce.
4) Logistically, the main points of entry to Libya are sea harbors and airports in Tripoli, Misuratah and Benghazi. Due to its central location near roads leading to oilfields in central and eastern Libya, Misuratah is the port of choice for suppliers to the oil and gas industry.
5) It is advisable to work with your Libyan partner in finding a reliable customs clearance agency. Bear in mind that re-exporting equipment which has been previously imported on permanent import basis is prohibited (although in some cases exception can be negotiated with the Ministry of Investments, Economics and Trade).
Once you successfully enter the Libyan market some business practices tend to routineize with significant growth prospects.