FRONTIERS-Business in Libya: only the bold need apply

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* Libya spending billions on infrastructure projects

* Growth ‘could rival United Arab Emirates’

* Unpredictable rule makes some investors wary

* Muammar Gaddafi’s sons competing for influence

By Christian Lowe

SIRTE, Libya, May 27 (BestGrowthStock) – At the marina under
construction so yachts can moor off Muammar Gaddafi’s hometown,
the floodlights are switched on even though the mid-morning sun
is beating down.

Lights are often left on through the day at Libya’s
airports, along roads and on construction sites, because this is
a country with money to burn: it has about $150 billion in
foreign reserves, or $24,000 for every citizen.

Libya is using the cash pile it built up from exporting oil
and gas to fund a frenzy of economic development. Foreign
businessmen are rushing in to the boom, which is undimmed by the
slowdown affecting the rest of the world.

But there is a catch.

Libya may have stopped being an international pariah,
renounced banned weapons programmes and dropped the brand of
Socialism set out in the “Green Book” written by its leader
Gaddafi, but it can still be volatile and unpredictable.

It has few clear rules and, analysts say, decision-making
often depends on which of Gaddafi’s children is in favour: the
reform-minded Saif al-Islam, his brother Mutassim, who has ties
to the old guard, or one of six other siblings.

A protracted diplomatic row between Libya and Switzerland
was a case in point. It began with the brief 2008 arrest of
another Gaddafi son, Hannibal, in a luxury hotel in Geneva and
led to Libya threatening U.S. business interests and — until
late March — withholding visas from most European citizens.

“Libya might have had a point in its row with Switzerland,”
said Mustafa Fetouri, a Libyan political analyst and professor.
But its actions “made every single potential (foreign investor)
ask twice about the wisdom of any investment decision”.

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For a factbox on big construction projects: [ID:nLDE6491DH]

For key political risks to watch in Libya: [ID:nLDE6430SJ]

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BOOM TOWN

In the Libyan capital Tripoli, 500 km (310 miles) west of
Gaddafi’s hometown of Sirte, few of the people in the newly
opened Radisson Blu hotel seemed concerned.

In the lobby, a European businessman negotiated one deal
after another on his mobile phone. Nearby, visiting executives
from a U.S. bank handed out their business cards.

These days, it is a typical Tripoli scene. “If you go into a
cafe in the morning you’ll see people signing contracts,” said a
Libyan who returned home after living in the United States.
“This town is booming.”

British retailers Marks & Spencer and Monsoon have opened
stores in the city, a 5-star Marriott hotel will open next year
and migrant workers from south east Asia and sub-Saharan Africa
rush to finish shiny new office blocks.

It is not all chic. One weekday afternoon at the Tripoli
stock exchange — where Libya’s two mobile phone firms are
expected to float shares this year — an old woman with carpet
slippers on her feet took a rest on the front steps.

While there are few signs of extreme poverty in Libya —
gross domestic product per head is five times higher than in
neighbouring Egypt — there is plenty of neglect.

In Tripoli’s historic old city, the medina, the walls of
some of the houses have collapsed and residents use the exposed
rooms to dump their rubbish.

Still, Libya is a country on the move.

Its economy will grow 5.4 percent in 2010, according to the
International Monetary Fund. United Nations figures show foreign
direct investment into Libya rose to $4.1 billion in 2008 from
$1.038 billion in 2005.

The government says it has earmarked $150 billion for
spending on infrastructure, though the timetable for that is not
clear, and is inviting foreign firms to bid for contracts.

“Most people would agree that it’s high time Libya took back
its place in the international market,” said Pervez Akhtar, a
partner with law firm Allen & Overy.

“There’s no reason why it shouldn’t be at the same level as,
for example, UAE (the United Arab Emirates),” he said.

At an investment conference in Tripoli, Trade Minister
Mohamed Hweji made his pitch. “The Libyan environment provides
you with security and economic stability,” he told delegates.
“This is a very good time to make investments in Libya.”

UNPREDICTABILITY

That same conference also demonstrated the risks of
investing in this country of 6.3 million people, most of it
covered by desert.

The event opened three days after Tripoli lifted the ban on
issuing visas to most Europeans: as a result, only one employee
with the European conference organiser managed to get into the
country in time. Organisers had to ask a Tripoli-based diplomat
to step in and help hand out delegates’ name badges.

There are other examples of Libya’s unpredictability.

Max Goeldi, the head of Libyan operations for Swiss
engineering firm ABB has been barred from leaving Libya since
soon after Hannibal Gaddafi’s arrest. He is now in jail. Libyan
officials deny any link between the two cases.

In a separate case, a U.S. company which was negotiating a
big supply contract suddenly found its executives were being
denied visas, said a person familiar with the issue who did not
want to be identified.

One of the reasons decision-making in Libya can sometimes
seem arbitrary, say some analysts, is the rivalry among
Gaddafi’s own offspring.

Foreign-educated Saif al-Islam took part in the talks that
led to international sanctions being lifted. He is lobbying for
Libya to reform its institutions. Mutassim is national security
adviser and close to the military and security apparatus.

When Libya raised the stakes in its dispute with Switzerland
— a move many interpreted as the work of the old guard — Saif
al-Islam made his feelings clear by telling a newspaper he was
“sad about these quixotic battles”.

In the background are five other sons and a daughter. They
include Hannibal, who is head of the national shipping company,
Khamis, a senior military leader and Saadi, a businessman who
used to play professional soccer in Italy.

Gaddafi’s daughter Ayesha is a lawyer who was part of the
defence team of executed former Iraqi leader Saddam Hussein.

Fetouri, the Libyan academic, says weak rule of law, poor
management, and corruption — which he describes as “a national
sport” — are holding back foreign investment.

But he is hopeful. “Transparency is still lacking but it’s
making progress … Rule of law is gaining ground,” he said. “We
have come a long way and the way ahead is still a bit longer.”

Stock Market Research Tools
(Editing by Sara Ledwith and Samia Nakhoul)

FRONTIERS-Business in Libya: only the bold need apply