Libyan Firms Face Plethora of Challenges

The Private Sector Amid Conflict
The Case of Libya by Aminur Rahman and Michele Di Maio

The visit of Italian Prime Minister Mario Draghi to Libya in early April 2021 highlighted the hopes of some of the many actors with a stake in the Libyan drama of escaping the dark years. Italy in particular is keen to get the ball moving again, not least due to the geographical proximity – making the country a gateway for migrants.

Also, Italy and Libya enjoy ties that date back to the colonial years of 1911 through 1943. Making his first trip abroad the visit of his newly elected counterpart,  Abdul Hamid Dbaiba, signalled Draghi’s intent to make this hotspot a priority for his government.

Business leaders in Italy will have told him that any improvement in the trade between the two countries will hinge on Libya achieving some progress with respect to how its businesses are performing. Aminur Rahman and Michele Di Maio have compiled a comprehensive list of facts and figures showing in detail how the country has achieved its notoriety as a country with difficult economic conditions.

Their book, “The Private Sector Amid Conflict”, published by the World Bank Group, is based on a survey of 400 companies dating back to 2018. Although the groundwork was thus laid three ago, the work presented will go a long way in explaining the huge task the new government of unity is facing.

Having traditionally relied heavily on the (state) production of oil, Libya started into the troubled years after the fall of the Ghaddafi regime with a weak private sector. Businesses were naturally hampered in their development by conflict, but also by an absence of a reliable policy framework, a lack of skilled labor, a proper infrastructure and access to finance.

The conflict that escalated in recent years made life even harder for the private sector. It made letters of credit harder to get, increased uncertainty of economic and political conditions and further aggravated corrupt practices, according to the authors of the study. Furthermore, there is an acute concern about so-called “elite capture”. The concept describes a situation whereby the well-connected have preferential access to public contracts, foreign currencies and letters of credit.

The difficulties the Libyan economy is facing are substantial and any progress will not only hinge on a domestic push for reform but also international support. Rahman and Di Maio suggest that the government would be well advised to get started with a public-private dialogue. They refer to similar efforts launched in Bosnia and Herzegovina, Iraq or Sierra Leone as examples for how such a dialogue can help rebuild the private sector. Their work provides a good basis for any actor potentially involved in such an enterprise.

Published by The World Bank Group in 2020. /abr

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