Libya

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

Libya

As a result of ongoing political violence, a significant degree of productive capacity 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.

Our coverage, using our unique Total Analysis model, ensures that our clients make sound business decisions in Libya. Our teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. We also provide in-depth analysis on seven of Libya's most important industries. Combining interactive data and forecasting with our expert research gives our clients the complete picture. We are confident that you will find doing business in Libya is made easier.

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,...

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Libya Operational Risk Coverage (9)

Libya Operational Risk

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BMI View: Libya presents investors with a very high level of operational insecurity, therefore any business venture will remain very risky in the short term. C rime and terrorist risks are extremely high, which has greatly enhanced the vulnerability of foreign workers and businesses to attacks. Moreover, Libya's appeal as a hub for foreign investment was already limited prior to the civil war, owing to key risks such as a poorly developed transport network, a large burden of red tape, and limited educational attainment. Although Libya offers some trade and investment opportunities in the oil, gas and construction sector, developments have been delayed by persistent insecurity and sporadic fighting.

Libya is one of the most uncompetitive performers in the overall BMI Operational Risk Index, scoring 27.9 out of 100, which...

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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 23.8 out of 100, Libya's score ranks last in the Middle East and North Africa (MENA) region for Trade and Investment Risk.

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

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Libya Industry Coverage (8)

Autos

Libya Autos

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BMI View: 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 towards the end of our forecast period to 2019.

Over the past quarter, Egyptian company Ghabbour Auto - which had been one of the first movers into the Libyan market following the overthrow of Colonel Gaddafi - announced that it was leaving the country. As part of its Q1 2015 earnings results, the company said bluntly that 'the challenging security situation will see GB Auto exit the market'.

The company added that: 'Given the ongoing challenges Libya is facing, management is in the process of liquidating inventory as it prepares to...

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Defence & Security

Libya Defence & Security

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BMI View: It is our belief that Libya finds itself in a troublesome predicament with strong rivalry existing between Islamist leaning factions and state security forces at both the political and military level. BMI views the Libyan crisis as a threat to wider regional stability where neighbouring countries concerned about security on their own borders are becoming increasingly involved.   We think that the international community, with the United Nations at the forefront, needs to pressure the political actors to the negotiating table...

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Food & Drink

Libya Food & Drink

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BMI View: The Libyan food and drink industry will continue to suffer from worsening political instability and severe government spending cuts. The dire humanitarian situation will also contribute to shrinking private consumption growth. While we predict that the Libyan economy will return to growth in 2016 from a sharp contraction in 2014 and 2015, the headline print will mask a continued crisis in the domestic economy.

We project real GDP will contract by 18.5% in 2015, following an estimated 44.2% contraction in 2014. However, we...

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Infrastructure

Libya Infrastructure

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BMI View: Our view that reconstruction efforts would lead to a recovery in Libya's construction industry has been delayed by a dramatic increase in security and political risks over 2014. With no central government able to plan or financing national projects or investment strategies and intermittent oil exports, we have cut our forecasts for real growth in the construction sector over 2015. We forecast that the industry will contract by 25% in 2015. Over the long-term, Libya will need major investment to rebuild and update its infrastructure.

Factors underlining our outlook for Libyan infrastructure:

  • There are now two administrations operating in Libya, one in Tripoli and the other in Tobruk. Coupled with increased levels of violence, this has caused a breakdown in governance and the ability to plan and fund...

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Insurance

Libya Insurance

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BMI View : We see significant potential in North Africa for insurers. However, continued economic constraints will hamper the full development of the sector over the short term, particularly the non-life segment. That being said, strong government impetus in much of the region to augment health insurance density will boost penetration over the medium term. However, we continue to expect life insurance will underperform in comparison to non-life insurance, owing to the disinclination among much of the population to purchase life insurance policies when household budgets are tight....

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Libya Insurance

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BMI View: Libya's embryonic insurance sector is unlikely to develop until after the civil war - which has now been running for over four years - ends. In Tunisia, the steady growth in the economy should boost premiums in most sub-sectors of the non-life segment. Tunisia's life segment should expand as the insurers reach new clients among the 90% or so of households who currently do not use their savings and protection offerings.

Even if Libya had not been in a state of civil war for four years, conditions would be extremely challenging for the under-developed insurance sector. The limited data available indicates that non-life insurance mainly involves the purchase of property covers by the government and its agencies. The Libyan insurers have access to global reinsurance markets:...

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Oil & Gas

Libya Oil & Gas

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BMI View : Oil production in Libya remains highly volatile, as pervasive insecurity continues to disrupt operations. Despite a significant ramp-up in output in recent weeks, we expect repeated supply outages, dragging down overall production volumes for 2015. A protracted civil conflict will slow the pace of recovery over the coming years, depressing sustainable output levels below 1mn b/d, across our 10-year forecast period.

Headline Forecasts (Libya 2013-2019)
2013 2014e 2015f ...

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Telecommunications

Libya Telecommunications

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BMI View : Markets in North Africa are quickly evolving from being voice-centric towards becoming data-centric, with mobile broadband being the core driver in all markets. 3G services have been launched with success in Morocco, Algeria and Tunisia, and the licensing and roll-out of 4G services is also on track. Success is dependent on the overall macroeconomic situation, with higher purchasing power helping with the development of the telecoms market, while the security situation is always at the forefront in the region. All markets have a mix of public and private operators, though liberalisation is not present in all sectors, and the competition has always driven greater uptake in the region...

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