At present Libya has no operational railway system and lags behind its neighbouring countries such as Tunisia and Egypt. The overall infrastructure in Libya is not well developed and has been severely damaged as part of the revolution.

Libyan decision makers recognise that a functioning and well developed transportation system is key to creating an environment which attracts investment (both foreign and local). It is not surprising, therefore, that despite the many challenges faced by post-revolution Libya the establishment or the re-establishment of a functional transportation system is a key priority.

Libya had plans for a 3,170 km national rail network. This was shelved following the revolution but recent reports in the Libyan press refer to the potential resumption of the US$4.5 billion project to link Benghazi and Sirte with a 554 km railway line. Other proposed developments such as improvements to the airport and sea ports and the creation of a railway system and a metro that connects to the existing international airport indicates that other parts of the wider rail network project may also be resumed or commenced.

Given that Libya has the largest oil reserves in Africa and that oil production is back to its pre-revolution levels, it has the necessary funds to translate the vision of a modern infrastructure into reality, thus presenting potential opportunities for foreign specialized contractors and consultants. Given the UK's early support of the revolution, there is an element of goodwill towards UK companies doing business in Libya (both generally and in respect of infrastructure projects).

Even though UK companies are very well placed to get involved in infrastructure and railway projects in Libya, there are a number of challenges that companies wishing to do business in Libya are likely to face such as:

  • Uncertainty in respect of continuance of historic contracts
  • Uncertainty as to Libya's budget
  • Uncertainty as to when actual decisions relating to infrastructure projects will be made
  • Evolving and very fluid and hence uncertain legal environment
  • Security

Historically, Russian and Chinese contractors have profited from infrastructure contracts but as a result of the revolution the majority of contractors utilized force majeure provisions and the fate of contracts that are currently suspended remains uncertain. There are reports that estimate that a total of approximately 11,000 contracts are currently under review by the authorities in Libya to assess whether these were duly awarded at the time. It is unknown to what extent infrastructure contracts fall within this figure and the time line for completing this review is equally uncertain.

The finalization of a budget has been imminent for quite some time and it will be interesting to analyze the budget, once finalized, to assess the amounts earmarked for infrastructure projects. This, again, makes it difficult to assess or quantify the opportunities that may exist in respect of railway and related projects.

As is the case with other emerging markets, to carry out business in Libya and to mobilise the man-power required successfully to complete large infrastructure projects is not straightforward. Recent changes in the law have made it more difficult for foreign companies to enter the Libyan market by, for example, introducing foreign ownership restrictions which do not allow foreign companies to hold more than 49% of the shares in a local Libyan company.

Given our presence on the ground, Clyde & Co has its finger firmly on the pulse in Libya and we are exceptionally well placed to engage in dialogue with the relevant decision makers in respect of the tendering of infrastructure projects and any associated developments. In addition Clyde & Co has been advising companies in jurisdictions in which foreign ownership restrictions are commonplace for over 20 years and we are well versed in putting appropriate structures in place to ensure, as far as possible, that a foreign investor's economic benefit exceeds that of its legal shareholding.

In conclusion, Libya has the vision and funds to create modern transportation infrastructure and is likely to require foreign expertise to implement it. There are challenges in operating in any emerging market but through our team on the ground in Tripoli and our experience in other emerging markets we are exceptionally well placed to assist our clients with managing the challenges inherent with the local market thus enabling our clients to position themselves in Libya in anticipation of award of contracts ahead of their competitors.

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