Transition in Libya – What MNCs Need to Know

Muammar Gaddafi’s 42-year grip on power is slipping away as rebel forces fight to gain control of Libya’s capital Tripoli. This bloody conflict has taken a heavy toll on Libya’s economy and its people, but more challenges lie ahead as the country will soon focus on rebuilding and a political transition.

While it is too early for most foreign companies to return to Libya, firms should start to assess major players in the National Transitional Council (NTC) for a future government relations strategy. A transitional leadership already exists and new political players will emerge as prospective candidates start to jockey for position ahead of elections that will take place within the next year.

The NTC is speaking in a conciliatory tone regarding how former regime associates will be treated during the transition. This is not surprising considering the number of officials that have defected in recent months. However, foreign MNCs should still evaluate local partner ties to the past regime, especially if there are tribal connections to Gaddafi. As we are seeing in Egypt, Tunisia, and around the region, companies can experience a significant slowdown in business if the government targets their local partners for corruption investigations. There are serious reputational issues to consider as well.

Because many government institutions will need to be built from scratch, companies should keep a close eye on efforts to write a new constitution. This will likely mean significant changes to a post-Gaddafi business environment, which could lead to much greater transparency in the long term.

The hydrocarbon sector is still critical to Libya’s development, but there is already talk that it will take 18 to 24 months to return oil production to pre-February 2011 levels. Libya will continue plans to diversify its economy away from hydrocarbons and there will be a need to (re)build infrastructure- both physical and institutional- which will provide long-term opportunities to B2B companies in the construction, IT, cement, and transportation sectors.

GDP per capita is among the highest in Africa due to Libya’s oil and gas resources and a small population though little of this money has flowed to the majority of the population in the past. If the government implements new policies to address this critical flaw, then it could lead to a plethora of new opportunities for B2C companies.

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