Farhat Bengdara served as governor of the Central Bank of Libya from March 2006 until February 2011, when he defected to the opposition. He has been acting as an advisor to the interim government – the National Transitional Council – since February 25, but is adamant that he will not resume his former role unless the government is democratically elected.
Libya began shedding its pariah status in 2003, after the UN lifted decade-long sanctions against the country. Since then, Libya has become increasingly vocal about its plans to liberalise its economy. In 2006 it began implementing a comprehensive reform programme, which resulted in positive economic growth of 4.2% in 2010, according to the International Monetary Fund.
During his tenure as central bank governor, Farhat Bengdara was a key advocate of increased privatisation – a process he would like to see continued in future years. Building on this, he believes that foreign banks should be granted better access to the country.
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“Since the fall of [Colonel Muammar] Gaddafi, I have been contacted by many international banks saying they want to get into Libya,” says Mr Bengdara. “This is encouraging as Libya is a very under-banked market.”
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Of the 16 commercial banks licensed in the country today, six have strategic foreign partners. Current central bank policy prohibits foreign banks from opening a branch. “Obviously, the immediate concern is the stabilisation of the banking sector, but once that is done, they can start implementing reforms. The Gaddafi regime prohibited Islamic finance but I think this offers huge growth potential, although opportunities lie across all spectrums of banking,” says Mr Bengdara.
Project finance will be a particularly popular growth area. Large-scale reconstruction will need to take place in light of the six-month conflict that has ravaged the country, while under the former government, Tripoli had begun ploughing $60bn into infrastructure projects, such as the construction of the $5bn integrated energy hub, Energy City Libya. Such projects desperately need local advisory but there is little expertise on the ground to develop such mandates.
On top of this, as well as boasting Africa’s largest oil reserves, Libya's economy also offers investment opportunities in tourism, mining and agriculture.
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There is pent-up demand from Gulf banks to access the Libyan market. In August 2010, five international lenders including three Gulf institutions – the United Arab Emirate’s Emirates NBD and Mashreq, as well as Qatar Islamic Bank – lost out on a licence application after Italy’s UniCredit won approval to open a subsidiary.
Prior to Mr Bengdara’s appointment, Libya’s banking sector had been criticised for its slow progress in opening up to foreign institutions. However in 2007, the central bank unveiled a reform programme with the stated aim of making Tripoli a regional finance hub by 2012.
Libya’s banking infrastructure is in desperate need of modernisation. There is neither internet nor telephone banking, and customers have struggled to even get basic products such as mortgages or credit cards. During his tenure as central bank governor, Mr Bengdara commissioned an IT infrastructure upgrade across the entire banking sector. “We began implementing the upgrade in 2006 and roughly 65% of the sector had been automated by 2010. But it will take another one to two years to finalise,” he says.
Mr Bengdara says there also needs to be an emphasis on education going forward. “Tripoli needs to build up good vocational training for Libyan bankers and they should also allow commercial banks to hire international bankers,” he says.
Put on ice
A large proportion of the country’s foreign assets, valued at $168bn according to Mr Bengdara, were frozen after he resigned and joined the opposition earlier this year, leaving Libya with no liquid means of financing its operations. Uncertainty about the nature of the post-Gaddafi government is expected to delay the unfreezing of these assets – roughly $50bn of which is in bank deposits in European countries.
Tripoli needs to build up good vocational training for Libyan bankers and they should also allow commercial banks to hire international bankers
To date, several countries including the UK, Canada and the US have agreed to release the seized Libyan assets, but other countries have shown reluctance until the National Transitional Council is formally recognised as a legitimate entity.
“I think it will take time to unfreeze the assets,” says Mr Bengdara. “My proposal is to request bridge-financing from the UN for three months, which could be extended to six months. This should either be interest-free or, at the most, charged at the same interest rate that the central bank earns on its deposits.”
No one doubts Libya’s potential, least of all the former governor who forecasts the country’s economic output – which stood at about $80 bn before the revolution – can easily double in no longer than 10 years if managed correctly.
“The biggest potential enemy for the revolution will be corruption,” says Mr Bengdara. “There was corruption at all levels under Gaddafi’s rule. If Libya is to effectively conquer this, it needs transparency and privatisation [to] help usher that in. I have faith that the Libyan people won’t allow the revolution to be stolen from them.”
