Business tourism: Corinthia Bab Africa Hotel is located in Tripoli, Libya's financial centre

Recent laws passed in Libya are aimed at removing the obstacles of previous legislations, allowing local businesses to compete and operate internationally, and bringing the economy into the modern age. Stephen Timewell reports.

"We need new regulations to encourage the private sector and modernise our economy," says Mohamed El Huwej, secretary of the General People's Committee of Industry, Economy and Trade. And this March, 22 new laws were passed creating a radical new legal infrastructure to replace not only the outdated laws of the past but to improve Libya's business environment and promote the role of the private sector.

Mr El Huwej, the minister of economy, says the new legislation covers commercial, tax, customs and labour relations laws, as well as laws for encouraging investment.

He emphasises that the rules do not differentiate between domestic and foreign investors and are part of a major opening up to the global economy, which includes preparations to be part of the World Trade Organisation and to sign a partnership deal with the EU.

Mr El Huwej believes that Libya offers massive opportunities in areas such as raw materials (including building materials - sand, cement and limestone) and solar power, and says the new legislation will help bring the country into the modern age by facilitating the development of major projects in tourism, downstream petrochemical plants and other mega-projects that are desperately needed.

A simple plan

The key focuses of the new laws are to simplify procedures, reduce complex bureaucracy and make investing in Libya attractive. Even the visa process has been simplified. On tax policy, Taher Sarkez, undersecretary for the General People's Committee, explains that corporate tax has been reduced to a 20% flat rate and that the system has been simplified significantly. The new tax law has had the effect of increasing tax revenues. There are plans to reduce trade tariff rates to zero and to adopt a free-trade policy.

The legislation is also designed to promote both domestic and foreign investment. This was helped by the merging in 2009 of the state agencies in charge of promoting local and foreign investment and the privatisation of state-owned enterprises to create the Privatisation and Investment Board. The PIB offers a one-stop shop to private foreign and domestic investors, incorporating branches of the labour, customs, tax and immigration departments.

All sectors are now open to foreign investors and best international practices were followed in drafting the new consumer protection law and the competition, or 'anti-trust' law. Mr Sarkez says that the new law on leasing incorporates the latest innovations related to mutual funds and financial securities markets.

He believes the new laws will "remove many of the obstacles that existed in previous legislations". Mr Sarkez foresees that productivity in Libya will improve, along with the transfer of knowledge and the ability of Libyan businesses to compete and operate globally.

Additionally, the role of the private sector will be bolstered and Libya's production base will be diversified.

The new laws will go a long way towards improving the legal and business environments needed to promote economic activities, but Mr Sarkez is well aware that Libya's transformation is happening in a relatively short space of time and that the country still has a long way to go, particularly when it comes to addressing the weaknesses in human capital through the development of broad-based training programmes.

Spreading the wealth

The Economic & Social Development Fund (ESDF) is a Libyan investment organisation established in 2006, providing a unique approach to wealth distribution and welfare among the country's poorer families.

The fund has a portfolio of $13bn, targeted at 220,000 families (900,000 people, a sixth of Libya's population), and is aimed not only at boosting the purchasing power of those families but also changing investment attitudes and helping build the country's economy.

ESDF chairman Hamed Arbi El Houderi explains the idea is built around the families having their own portfolio - with Ld30,000 ($24,108) for a family of three and Ld50,000 for a family of five - and the fund will hand over the portfolios to the families after five or six years.

The fund has bought majority stakes in two major banks, Sahara Bank and Wahda Bank, and also jointly owns a number of the newly established projects in Libya with domestic or foreign partners.

By 2011, according to Mr El Houderi, all families will have their own portfolios and the ESDF has recently introduced monthly advances (Ld300 for three-people families and Ld500 for five-people families).

The fund distributed Ld700m in dividends in 2008 and the ESDF's innovative approach is winning praise for providing a much more socially acceptable welfare and equitable wealth distribution model.

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