Open for trade and investment again
Energy and Telecommunications are set To prosper in COLONEL Qaddafi’S LIBYA Now that U.S. SANCTIONS have been lifted and American trade and investment is returning

MUAMMAR EL-QADDAFI, Leader of Libya

SPEAKING recently of the relationship between Libya and the United States, Libyan leader Muammar el-Qaddafi assured the seeds are sown for positive U.S.-Libya relations.

Not long ago the prospect of the normalization of relations between the two countries seemed impossibly remote. However, the resolution of the Lockerbie affair and Tripoli's renunciation of weapons of mass destruction has brought an end to nearly two decades of international isolation and U.S. sanctions against Libya, opening up bright prospects for the development of its economy.

The return of American companies to the high-potential oil fields of the North African state is well under way, and Colonel Qaddafi has been emphasizing the need for economic reform to encourage investment in both this and other sectors.

“Libya is experiencing an investment boom from local and foreign investors,” he recently told government officials and supporters. “We have to change to sustain this momentum and win the respect and trust of our partners.”

President George W. Bush formally canceled all remaining U.S. economic sanctions on Libya last year, removing bans on scheduled and charter air services to Libya, and imports of Libyan refined petroleum products.

Hopes are high that Libya is on the way to resuming its role as a fully-fledged trading partner. Diplomatic links have been restored and a liaison office has been opened in the Libyan capital, Tripoli.

With United Nations and European Union sanctions also lifted, Libya’s economy is effectively reopened to the world, and discussions have started on Tripoli’s request for eventual membership in the World Trade Organization.

Colonel Qaddafi is the longest serving Arab leader, having been in power since 1969. In a recent speech celebrating the anniversary of the establishment of the Libyan Jamahiriyah (popular republic), Qaddafi urged his people to let freedoms blossom.

At the same time he reaffirmed Libya’s cooperation in the global war on terrorism, warning Libyans not to support foreign extremists.

The oil and gas sector dominates Libya’s economy, but there are moves to diversify.

Potentially one of the biggest oil-producing nations in the world, Libya has been off-limits to U.S. investment since the mid-1980s. That is already starting to change, however.

In January, Libya awarded its first contracts for drilling rights to U.S. companies in 18 years. Three American firms, Amerada Hess, ChevronTexaco, and, in particular, Occidental, won the lion’s share of oil blocks in the first round of the exploration and production sharing agreement (EPSA-4) auction. More than 120 companies made bids for the 15 onshore and offshore exploration blocks on offer. Another winner was Woodside, one of Australia's largest oil and gas producers.

The successful conclusion of the first bidding round—now being followed by a second—marks the end of the dominant position built up in the Libyan oil sector during the American absence by European firms like France’s Total, Spain’s Repsol, and the Italian giant Eni.

The return of U.S. companies will advance Libya towards its goal of doubling its oil production capacity to 3 million barrels a day by 2010.

Libya is relying on boosting its income from oil to fuel its economic revival. The state-dominated economy is primarily dependent on oil, which accounts for 95% of exports, 75% of government receipts, and 30% of GDP, and is the principal source of foreign exchange.

The authorities are eager to diversify and to encourage the growth of the private sector. Potential growth areas include agriculture, construction, manufacturing, and tourism.

“Since the lifting of most international sanctions, we have been discussing development projects,” says Abdulgader Elkhair, Secretary of the General People’s Committee (GPC) for Economy and Trade.

ABDULGADER O. ELKHAIR, Secretary of the General People’s Committee for Economy and Trade

“ We are mainly trying to work towards diversifying the economy and generating income in non-oil sectors and services. We have injected a large amount of money into agriculture and manufacturing,” says the secretary. “So far, this has depended mainly on the public sector. The challenge lies in how we are going to encourage the private sector.”

The process of motivating the private sector began in the early 1990s with the introduction of a law to encourage the development of small- and medium-sized companies. In 2003, the government decided to privatize 360 public companies. More than 40 state enterprises have been privatized so far, and another 80 are set to follow soon. “Industries such as cement and petrochemicals will soon be available to Libyan and perhaps foreign investors,” says Mr. Elkhair.

Telecommunications is a sector in which Libya aims to catch up fast. “We missed the opportunity of growing and benefiting from the technologies that originated in the United States,” says Mohammad el-Qaddafi, Chairman of the General Post and Telecommunication Company and the son of Libya’s leader.

“Now that sanctions have been lifted it is a good opportunity for us to develop the telecommunications sector and position it as one of the main contributors in the Libyan economy,” he concludes.