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Wed 10 Apr 2013 10:12 PM

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Libyan and foreign firms eye post-war trade

Businesses in Tripoli cautiously optimistic about the long road to recovery

Libyan and foreign firms eye post-war trade
(Picture for illustrative purposes only)

Handing out plastic tea spoons of golden honey, Milad Ahmed Ajaj hopes his local produce will win over curious onlookers hovering around his stand at a commercial fair in Tripoli.

The businessman, whose food company Alshifaa also produces olive oil, showcased his goods at the Tripoli International Fair this week along with other hopeful Libyan exporters who, after years of cumbersome bureaucracy during Muammar Gaddafi's rule, now see a chance to tap overseas markets.

"You can find Egyptian goods abroad, Tunisian olive oil is everywhere so why not Libyan goods? We have a similar climate, natural and good quality produce," Ajaj said at his stand, surrounded by jars of clear honey and bottles of olive oil.

"We are like babies wanting to take our first steps. We want to export our goods but Libya still has problems. We need support, a first push to help us target international markets."

Boosting exports would reduce Libya's reliance on volatile oil revenues and the drive to sell more overseas is being spearheaded by the Libyan Export Promotion Centre (LEPC), a body set up in 2006 that is supported by the economy ministry.

The North African country's first elections in a generation last July were seen marking a new start for the economy after Gaddafi's 42-year autocratic rule. The new government is still transitional as the country prepares for a new constitution but with unemployment estimated to be running at around 15 percent, it is under pressure to diversify the economy and create jobs.

Gross domestic product more than doubled last year, according to the International Monetary Fund, but growth was driven almost entirely by the resumption of oil production to levels of close to 1.6 million barrels per day (bpd) seen before the uprising that toppled Gaddafi in October 2011.

"Libya produces good-quality dates, fish and olives, for example, and there is no reason why it can't develop those into a good little export niche, with the right government support and business environment, especially given the country's location," Alex Warren of London-based research and advisory firm Frontier, said.

"But it is never going to make inroads on oil and what that contributes to exports, and Libya will remain very dependent on imports for the majority of its needs."

The OPEC member relies on petrodollars from hydrocarbon exports for 95 percent of its income, with exports by state energy firm, the National Oil Corporation, amounting to 34.9 million barrels, or $4.054 billion, in February, the latest available data.

Analysts say Libya's new rulers need to develop the private sector, seeing strong potential for fisheries as well as tourism eventually, if the government can improve security in the country.

Economy Minister Mustafa Mohammed Abufunas has mentioned plans to improve business laws to boost the private sector and programmes to encourage job creation at small and medium-sized enterprises, but has yet to present specific details.

"We also plan to help increase exports and we are looking at dates, fish and olive oil. These steps (to boost the private sector) will also create new jobs," local media quoted the minister as saying.

A desert country, only around 2 percent of land in Libya is arable. It was the world's 12th largest olive producer in 2010 and the 10th biggest producer of dates, according to the United Nations' Food and Agricultural Organisation.

However, its estimated output of olives at 180,000 tonnes, lagged far behind Spain, the world's top producer, on 6.7 million tonnes in 2010 or even neighbours Tunisia, Egypt and Algeria which all produced more than double Libya's output.

"There is certainly untapped potential. Libya produces more than you might think but it needs more expertise in branding, packaging and selling on the international market," Warren said.

"You can buy a surprising number of Libyan-made products, but very few of them make it out of the country yet."

The country also has iron ore deposits, in the central Wadi al-Shatti area. Plans to develop them were interrupted by the war, but are likely to be taken up again in future, Warren said.

Ajaj exported honey to Abu Dhabi before the war but he and other companies say the government needs to help them if they are to export in big volumes.

"Promises (by the authorities to boost non-oil exports) were made but nothing was done; it was all through our own efforts," a spice vendor from Benghazi said at the fair. "We are still in a transitional period. I am looking to come to Tripoli (to sell products), then I would like to go wherever possible."

The LEPC aims to offer support programmes to help companies market their goods overseas but, like other organisations affected by the war, it is being overhauled.

"We only just started, studies need to be carried out, we need a proper members' database," marketing manager Ahmed Biri said. "Many companies suffered heavy (physical) damage, slowly they have been rebuilding themselves. We want to discover new markets."

While Libyan firms seek markets abroad, foreign companies are seeking a way into the country. Before the war there was little foreign investment, other than oil and some real estate and banking, but investors now see potential given the need to rebuild infrastructure.

Trade delegations from around the world have visited in the last year and trade fairs for the oil and construction industries have been held in Tripoli.

Major public projects are on hold as the interim authorities review pre-war plans but small private projects are taking off.

At the Tripoli International Fair, which was also held during Gaddafi's time, French, Turkish, Moroccan and Kuwaiti companies were among those exhibiting.

"We thought: why not come here? We didn't know the market. We've made very good contacts," said Christine Herzo, in charge of international development for French jeweller Herzo, which exhibited rings and necklaces adorned with sparking gems.

"It is still too early but you can see the potential."

Libya's economy is poised to grow 17 percent this year and should average growth of 7 percent annually between 2014 and 2017, assuming the domestic security situation improves, the IMF has predicted. The country is aiming to increase oil production, eyeing output of 1.7 million bpd by mid-2013 and 2 million bpd by 2015.

Security, however, remains a concern as the authorities struggle to rein in militias who refuse to lay down weapons. A member of the French delegation at the Tripoli fair said 22 companies exhibited this year, compared with 50 last year.

"I want to go to refineries and plants to meet officials but I will not leave Tripoli," a Moroccan businessman who works in the maintenance of industrial plants, said. "I have been told it is not safe."

Another concern is what the future legal framework for foreign firms operating in Libya will be. "The country is still in transition so nothing is clear," he said. "But there is a huge need here, that's why it's worth it."