From destruction to reconstruction: business looks forward to ‘new era’ in Libya

What will business be like in a post-Gaddafi era?

For a country besieged by the dominance of its 42-year dictator in all spheres of its economy, the oil-rich nation may be now primed for big opportunities. Even Germany, the EU powerhouse that balked at Libyan intervention, has sent representatives from 20 companies to meet representatives of the Libyan transitional council and of the country’s central bank in an effort to pursue economic interests in the country.

This week, finance minister Tonio Fenech told Church radio RTK that a shift was evident in relations between Malta and Libya with the members of the NTC, specifically highlighting oil exploration. Muammar Gaddafi “never entertained” the possibility of considering joint oil exploration with Malta, with the two countries locked in a dispute over the continental shelf median line.

Now he says that a new era starts for Libya. “I have met with high officials of the National Transitional Council on an economic level, to discuss Libya’s future and how Malta can participate. Some important declarations have already been made, for example to see Maltese investment in Libyan reconstruction… and joint oil exploration in disputed zones between the two countries,” Fenech said.

Libya is an oil-rich nation whose bounty was there for those who knew how to exploit the Gaddafi network. As Roderick Cutajar of aviation specialists Medavia says, he hopes the economy will be “one based on meritocracy” and that the many obstacles that previously characterised Libyan business are jettisoned.

According to US embassy cables published on Wikileaks, Libyan ministries are alleged to have asked US interests not to make use of Maltese businesses if they wish to set up shop in the North African dictatorship. In one instance, the National Oil Corporation – which controls all form of oil production onshore and offshore Libya – was reported to be laying new conditions with exploration firms not to use servicing firms based in Malta.

American ambassador Gene Cretz reported in a November 2007 cable that the Libyan government was looking to extract additional tax revenue from offshore exploration and drilling, by prohibiting offshore servicing that is not based in Libya.

“The GOL had previously allowed the servicing of these activities out of Malta, but is now moving to curtail that and to require that they be based out of Libya. The relocation of onshore support services for offshore operations generates considerable income for the Tax Authority: offshore drilling operations can cost up to $750,000 per day for deep-water operations.”

Oil companies, many of which use Malta as a base to host employees, are reported in the cable to find it hard to conduct business in Libya. Restrictive conditions include the forcible employment of Libyans in key positions: so for each renewal of a one-year visa for an expatriate employee, an additional Libyan employee must be hired. An expatriate employee staying on for three years could be accountable for the addition of four Libyan employees (one counterpart at hiring plus one for each visa issued).

In another instance, Libya’s secretary for industry Mohammed Ali al-Hweij had told a director of Caterpillar – the US heavy machinery firm – that it could not have any Maltese partners in Libya. According to the August 2009 cable, Andrew Sheridan of CAT’s Middle East regional office was told that if CAT was to set up a dealership in Libya “partners from Tunisia, Malta, Egypt or Saudi Arabia were unacceptable even as managers or agents but that ‘European and American’ partners were acceptable.”

New opportunities

For 31 years, Medavia has operated its airline, taking employees of oil companies deep into the Libyan desert with its special aircraft. Its big contracts with oil giants like BP and Chevron will hopefully be reactivated, director Roderick Cutajar says. But in the meantime, the company had to cut back and look for new opportunities.

“When the conflict broke out in Libya we tried to cut back as many overheads as possible while trying to keep on as much staff as possible.

“The main costs cut was overtime, where we imposed a zero-tolerance policy on extra hours, and cuts in stationery and marketing. We could not lose our pilots, who are type-rated for our aircraft. On the other hand, we ran flights to Italy and Cairo, while also running services for humanitarian agencies throughout the conflict.”

With Libya opening up, Cutajar says that the field is open for new operators to make business in Libya. “Our own business is done with firms that need services in Libya, so once the country opens up we hope that key firms will entrust us with aviation services.”

Lino Callus, corporate services director at Panta Lesco, expects exports to Libya to pick up even before full stability is established. “Once a new government is elected, the country will be stable enough for us to send Maltese employees back to Libya,” Callus says, based on declarations that new elections will be held within eight months.

However, he adds a proviso that this will not take place before Col. Gaddafi and the rest of his family are apprehended.

While oil giant ENI has already got itself busy getting the oil ready to flow, with NTC chairman Mahmoud Jibril meeting Italian prime minister Silvio Berlusconi this week, Malta itself is gearing up with the unfreezing of some €377 million in Libyan assets – €86 million of which belonged to the Gaddafi family alone. Prime Minister Lawrence Gonzi has spoken of Jalil’s gratitude towards the Maltese government and its people, who were mainly involved in a humanitarian effort and logistical operation that assisted the rebels. But first in line will be the French and the British, who spearheaded the need for a Security Council no-fly zone enforced by NATO. They will certainly reap the benefits of their well calculated move.

“We hope that in the shortest possible time, stability is restored so that we can re-establish our business relationships and hopefully even improve our business in that country,” Callus told MaltaToday.

“We feel there should be no major reason for any new Libyan government to somehow sideline Maltese enterprises from any government business. One must bear in mind that the stated aims of the provisional government is to have a more democratic country in which private enterprise would be at the forefront of new business. If this actually happens we believe that Maltese companies can and should be successful in Libya.”

Last year, Malta registered a total of €89.7 million in exports to Libya. Callus believes that all Maltese companies and self-employed businessmen with Libyan interests lost “substantial amounts” throughout the conflict.

But a sceptical voice however comes from one of Malta’s main exporters to Libya, Silvio Scerri of Nexos Lighting, which in 2010 exported over €3 million in goods and services. “Everyone knew that the Gaddafi government was difficult to work with,” he said. “It will be difficult to see definite change as those who once supported Gaddafi have now moved to the other side.”

Scerri feels that businesses are now set to suffer, as real structures are not in place. He stated that it has always been up to the Maltese to adapt to the Libyan working system.

“One of the main obstacles was that you had to have a Libyan partner close to the system,” he says, adding that he expects at least six to eight months to pass before businesses could start operating again.

Scerri explained that Libyans have a different understanding of work from the Maltese: “For example, it is easy to ship and transfer goods and equipment to Libya, but it becomes a nightmare to get it back.”

It is not the first time that businessmen have been heard complaining that paying commissions were part of the daily business in Libya, Scerri said.

“Businessmen have more than once voiced complaints over the fact that, while it takes a maximum of few days for Libya to arrange for them to go abroad, the Maltese government would take months to issue visas and other permits which the businessmen would need.”

Reconstruction expectations

Joshua Zammit, president of the Malta Employers Association, says the past few months were very difficult for businesses operating in Libya. “We know many of them had to make some pretty big sacrifices in order to keep their employees with them while business in Libya came to a complete stop. It now seems that the tipping point has been reached and there seems to be light at the end of the tunnel.”

The MEA have been at the forefront of putting Libyan events on the discussion table at the Malta Council for Economic and Social Development. Zammit, who also works at one of Malta’s main exporters to Libya – pharmaceutical manufacturer Aventis – says the definitive turn in events in Libya has prompted a feeling of optimism and hope for business.

“We are relieved that the end to the Libyan conflict seems to be getting closer, and with every day that passes, the people of Libya can look forward to creating their own future and taking control of their destiny,” Zammit told MaltaToday.

The MEA have once again requested an urgent meeting of the MCESD to encourage government to do all that is possible for Malta to be among the first to contribute to the reconstruction effort which will be taking place in Libya.

“Our expectations are that government provides a clear analysis of the situation in Libya and although we understand that the situation is very fluid and difficult to predict, we would like to understand what different scenarios the government may be looking at going forward,” Zammit says.

The MEA will also ask what a roadmap will look like to have Malta be amongst the first nations contributing to the emergence of a post-Gaddafi Libya and to strengthen the present ties: in concrete terms, what action government will take to ensure Maltese business benefits from the reconstruction effort.

And while Lawrence Gonzi has more than once voiced trust that Malta expects to have good economic relations with the new government, Nexos’s Scerri says good ties between the two countries go beyond government’s work: “Maltese companies have a fine reputation and renowned to deliver in time. The immediate proximity also helps.”

Scerri said Libyans were ready to choose Maltese over Italians, English or Americans for work: “For them, the Maltese are trustworthy.”

And at the end of the day, it is up to the businessmen to secure deals with the Libyans, while government should assist them and, as far as possible, facilitate things for them.