Foreign direct investment (FDI) in Libya

FDI in Figures

Libya's development has traditionally relied on a number of positive factors, such as the abundance of oil and gas resources, a young and relatively small population (6.5 million inhabitants), and a strategic geographical location between Europe, Africa, and the Gulf Region. Nevertheless, the ongoing civil war, along with the country's bureaucratic burden, low-skilled workforce, and very low level of economic diversification constitute severe challenges. The World Investment Report 2023 published by UNCTAD estimated Libya's 2022 FDI stock at USD 18.4 billion (around 41.9% of the country’s GDP), while there was no reliable data concerning FDI inflows in the report.
Libya's industrial sector is based on oil refining, petrochemicals, and iron & steel. Foreign investment mainly targets the oil industry and is vulnerable to the changes in the market. As central Tripoli comes under greater threat of devastation, other parts of the country appear to be attracting investment. Misrata, once known internationally for suffering a protracted siege in 2011, is once again a bustling commercial centre. Benghazi has received significant foreign investment to rebuild the city after the long conflict.

The primary legal framework for encouraging foreign investment in Libya is the Investment Law of 2010. Enacted prior to the 2011 revolution that toppled the Gaddafi regime, this law abolished many Foreign Direct Investment (FDI) restrictions and introduced various incentives to foster private investment. However, no significant legislation concerning investment has been introduced since then. According to Transparency International and numerous reliable local sources, corruption is deeply entrenched in Libya and is pervasive across all levels of public administration. The absence of transparent and accountable mechanisms for managing oil reserves and revenues, awarding government contracts, and implementing often ambiguous regulations continues to provide ample opportunities for government officials to engage in rent-seeking behavior and corrupt practices. As a result, the country ranks 170th out of 180 on the 2023 Corruption Perception Index, while it is not ranked on the latest Index of Economic Freedom.

What to consider if you invest in Libya

Strong Points

Libya's main strong points in terms of attracting FDI are:
- Its geographical location: the country is in the centre of a triangle formed by Europe, Africa and the Arab countries of the Middle East;
- Considerable natural ressources;
- Liberalisation policies which favour private investment and should revitalize Libya's economy;
- Low level of foreign debt;
- Its dynamic demography.

Weak Points

Libya's main weak points impeding FDI are:

- Political instability and ongoing violences in Tripoli, which continue to threaten the democratic process of elections (the country remains divided into the western territory managed by the government of Tripoli recognized by the international community, and the eastern territory under the tutelage of the government of Al-Beida supported by Marshal Haftar).
- The south of the country faces the proliferation of trafficking (humans, weapons, drugs)
- Omnipresence of the State in the economy;
- The country's extreme dependency on oil resources;
- An inefficient administration which hinders the development of the private sector;
- Lack of loans and a control of prices and exchanges, constraining economic growth;
- Imports restrictions causing shortage of basic goods and food products;
- A high unemployment rate, estimated to 25%, mainly among the youth.

Finally, even if Libya's rehabilitation in the international community has given confidence to investors, structural reforms remain essential.

Government Measures to Motivate or Restrict FDI

The business environment in Libya is very unfavourable and the country ranks at the 185th spot according to the 2018 Doing Business Report of the World Bank.

The Lybian Investment Law is designed to encourage the investment of national and foreign capital in Libya. Tax benefits are granted to companies that can contribute to the diversification of the local economy, the development of rural areas, the increase of employment, etc. The tax exemptions applicable to companies registered/governed by the Investment Law include a five-year exemption from income tax; an exemption from tax on distributions and gains arising from a merger, sale or change in the legal form of the enterprise; an exemption for profits generated from the activities of the enterprise, provided the profits are reinvested; an exemption from customs duties on machinery and equipment; and an exemption from stamp duty. A free zone has been established in Misrata (Qasr Hamad port area).

Foreign investors in Libya are required to have an agent in the country; in addition, it is difficult to find a good business partner and there is an absence of reliable statistics for marketing studies. Through the Law n°5 of 1997, amended by law n°7 of June 2003, the Libyan government has taken measures regarding training of local technicians, transfers of technology, participation to the development of local production, creation of regional development and diversification of sources of income.

Tourism, industry, health, services or agriculture are sectors defined by the General People's Committee as being open to foreign investment. Advantages such as tax exemptions are reserved for projects carried out within the framework of this law. However, the percentage held by Libyans or Libyan companies within the framework of this law cannot be less than 51%.

Bilateral investment conventions signed by Libya

The bilateral conventions on investment signed by Libya may be found on the policy investment hub website.