Gérard Verron International Project Development
Business evaluation report Benghazi – Mai 23rd till June 7th, 2011
http://g.verron.free.fr GV-1104-004-Report-Benghazi-20110607
June 7, 2011 1/10
Preamble I overpassed the SUPERJET passenger bus shown on the front page on my way to Benghazi; commuter bus was carrying commuters from Egypt to Libya. The establishment of these regular lines between Egypt and Libya shows that the real entrepreneurs do not wait for reports recommendations of experts, strategists and politicians to embark into new ventures. This fact reality signal which tells that time will not wait for those who will come late.
this bus and is a
I wished to go there, to establish by my-self the present conditions in the liberated area of Libya, and establish how business can resume in the present conditions. The present notes are not a collection of news readings; instead they collect the real observations which I made locally and the discussions which I have had with local people, based on the set of questions that I had prepared prior to this trio in Libya. These observations and opinions do not pretend to reflect a general summary of the public opinion nor an objective statement of the overall situation as I have met only a limited number of persons during this short stay. However, they try to summarize with good faith the insights which I have gathered while sharing views and ideas as to the future development of the region (in particular in the field of infrastructure development which is my basic field of activity). Although the mission has lasted 14 days from France to France, its work days in Libya have been limited to 8 days. Yet, within these 8 days, and in parallel to several information meetings, I could start the initiation of three projects which I had never heard of nor imagined before my departure. This shows that the present situation provides room for opportunities of many potential development projects and that the situation is ripe to grasp these opportunities. I want here to thank all the persons that helped me during this trip: Firstly and foremost the whole Gaber family; without their personal support and backing, I would not have been able to undertake and carry out this endeavor, Also the French Authorities for the permanent support and follow up which they provided during the trip. I want also to thank particularly the GEODIS team, their partners in Libya and in France, as this mission would never have been so fruitful without their precious advice and support.
http://g.verron.free.fr GV-1104-004-Report-Benghazi-20110607
June 7, 2011 2/10
General context during the stay The visit occurred a few days after a meeting of the 22-nation Contact Group in Rome, where the group promised to set up a fund to speedily help finance the Council. The NTC communicated on the public TV about the urgency of the situation which was not understood and that they were fast running out of money. The finance Minister of the NTC also complained that many countries that pledged aid had instead sent a string of businessmen that are only looking for business beyond offers of financial help.
This context came as the NTC was not in a position to resume the production of the oil fields located in the eastern half of the country as the area is not safeguarded and sufficiently controlled to send workers to the fields. The NTC is working day and night to improve this protection. Reaching a minimum level of security is a complicated matter that cannot be solved in a few days, and which is going to take some time.
The NTC indicated that in the present circumstances they will be signing no long-term contracts, nor any contract that has any consequences for the future of Libya, with the exception of what is needed in terms of food, medicine and fuel.
As a consequence of the present blockade, prices are going up and the local economy is showing signs of inflation:
Price of food and hotel accommodation has become as much expensive as in Europe, Price of fish at the market is 2 times higher than in Egypt, The “open market” is developing showing signs of a growing parallel economy.
The control of local authorities on private economy has never been strong in Libya as the state did not need to tax activities to get income. But in the present circumstances, there is a risk that the control of the economy may pass from weak to almost inexistent which may lead to instability and the weakening of the overall security level. The authorities are aware of this situation and proposals are being done for example to sell telephone SIM cards so as to put an end to the present risks of disorders. Despite the official standstill of the public administration services, the executive and operation staff is present and at work in all public and private offices. The police and security forces are there, and all the aspects of normal economic life are in activity, although they operate with a much reduced activity, and the employees are mostly doing act of presence.
Preparation of the transition towards a new regime The NTC has asked for an economic report to prepare for the future stabilization of the economy, called the “stabilization economic report”. This report is being prepared by an international team of planners and economists under British leadership. This team is meeting representatives of the private and public sectors of the economy. The NTC mentioned that this report is meant to be used by the next government and that private foreign firms are invited to bring their contribution or give information to its preparation team. However, the NTC is not in a position to indicate whether these proposals will not be included in the report of this mission team, nor can they assure that the recommendations of this report will be implemented by the coming government. http://g.verron.free.fr GV-1104-004-Report-Benghazi-20110607
June 7, 2011 3/10
Due to the present context of preparation of this stabilization plan, I have not been in a position to discuss any future opportunity of contract, as no stake holder is in a position to hold such discussions with non-authorized persons. I had no other means than to go fishing in the open. The NTC is also appointing „shadow ministers‟ whose role is to prepare for the future transition government. These Ministers are hardly joinable showing signs that a shadow government is already heavily preparing for being in position to handle all the matters on a national level on the aftermath of the liberation of Tripoli.
Safety and security context At Sallum border a control of the entrance of foreigners is implemented at the Libyan side. Visit of foreigners is now organized after issuing a proper invitation letter registered at the custom service so as to initiate some kind of a visa control so as to responsibilize the inviting companies or individuals to provide safety for their guests. Such a system (which is not yet a visa system) allows the authorities to control the Libyan inviting parties, and to better assure the safety of the persons in the country. It is much preferable to the use of professional security teams that would be irrelevant in the present context of the Benghazi region. Within this framework, I have informed the French Representation of the name and telephone of my inviting family and I always remained accompanied by one of their members which I have employed as a driver. These simple measures where the inviting family is known and followed by both the Libyan and French authorities provided me with an impression of safety and comfort which has been in favor of the smooth development of my stay. The present financial crisis is such that risks against disturbances are being considered. This is all the more mandatory a car explosion occurred at the car park of the Tibesti hotel, show that risks of chaos and perturbation of the present smooth transition process. Immediate measures have been implemented to control and secure this access. But the people here hope that the international community will not bow to such terrorist acts by reporting the programs of their visits.
General situation The general mood is the one of a almost normal situation despite the almost stoppage of the investment economy. The Libyan people are a people of traders, with thousands of years of trading exchange between Europe and Africa, and with the capacity and potential to develop a powerful trade economy, even without oil resources. This specific aspect of the Libyan people has been neglected by the previous regime. The present period of time is the one of the revival of this potential. The observations on the overall context show that new solutions and actions are being taken every day to overcome the present difficulties and launch the new economic period.
http://g.verron.free.fr GV-1104-004-Report-Benghazi-20110607
June 7, 2011 4/10
Development of the private economy Business cannot operate without communication, and a minimum of logistics.
Financial resources The banks are open pour the operation of local accounts. Some local tradesmen seem to be still able to deposit contracts to open foreign exchange. In Sallum the shops that were filled with subsided goods are now replaced by money laundering activities.
How long can this system continue? Is there a way to guaranty the lending of private funds to those private entrepreneurs who are reviving the economy?
Telephone lines Till these days and probably not for a very long time again, telephone lines are free through the Libyana network which has been diverted to work locally. However, Sim cards are missing locally, and those that are found are probably stolen. Users of new Sim cards have to be prepared for this this kind of difficulty. These lines are accessible from outside with a 02189 prefix. Calls from abroad can be done through this network but access is not easy. From Ol Noran hotel, using skype telephone service is correct, which provides a secure service for voice communication.
Internet communication It is expected that internet will be resumed soon. Although a few internet internet cafes are operating in Benghazi
El Noran and Ouzo hotels Town center: El Jezrira café Rabillino : Ojwan cafe
Unfortunately, internet cafes are overloaded and waiting time is most often exceeding 1/2H. The service at AL-Noran is satisfying and reserved for hosts, but you can obtain extensions of access time with the nice smile at the waiting desk if you have spent a night at the hotel.
Mail and express parcel transportation Express parcel transportation is lacking. My inviting family has plans to prepare such a service via Alexandria. http://g.verron.free.fr GV-1104-004-Report-Benghazi-20110607
June 7, 2011 5/10
Project logistics In the present circumstance, the only means are the transportation by road, passing by the Sallum border. The return of GEODIS in Libya and their plan to establish within the coming days a regular air cargo line with CARGO-LUX at Benghazi airport shows that preparations are under way, and that dispositions are almost there to boost the restart of the economy.
Private projects I would have also liked to be able to get information on private development projects, but I have missed the opportunity to have a meeting with private entrepreneurs and Contractors so as to know better about their aspiration. I met a fishing import-export Contractor who is used to sell fish to Europe through „La Goulette” or Alexandria, and who has the capacity to apply for European aid to upgrade his installation so as to be able to sell directly to Europe. I intend to have time to prepare an agreement with him for this accompanying.
Estate and touristic property development Real estate development and touristic development projects are essentially based on guarantees that land rights are soundly based and not at risk of spoliation. I am personally versed into this sensitive issue:
What is the present situation of building and land rights? How do they need to be adapted to meet the future project needs of the population and the economic agents? The state is the owner of most of the land parcels: there a policy to sell large pieces of land to develop private building projects?
The land and building municipal offices (Shejil el Iraqi) keep a registry of public and private parcels of lands: Is there a policy to improve and develop this administration? There is probably room to propose the collaboration of French resources for this undertaking through the ADEF as such studies have already been developed in several north African countries.
I would like personally, to immerse myself into these issues, if this is possible, at the University of Gariounis next year and I have applied therefore for a position of fellow student, or conference assistant in project management.
http://g.verron.free.fr GV-1104-004-Report-Benghazi-20110607
June 7, 2011 6/10
Future development of the public economy The sensitivity of Libyan intellectuals against neo-colonialist economic attitude is high: in particular, collection of information on on-going programs and projects is being scrutinized carefully. Any future mission will have to consider this sensitivity and bring guaranties of confidentiality. The indications of this memo are however of public notoriety.
External financing of projects European states are studying the possibility to mobilize the value of the frozen Libyan assets and use them as a guaranty given to banks to allow them to propose short term loans. The setting up of the mechanism is complex. As indicated above, time is no more into talks, but in bringing solutions.
Which kind of financial engineering can be proposed from Europe? Can compensation operations be proposed? How to mobilize guarantees for these projects?
Time is no more into talks on these subjects but on tangible proposals.
Financing of immediate repair needs Large influx of public expense had to be infused to maintain the present economy alive while the region had no income either from oil sales, or from sales of other goods. The NTC is now bound to rely on promises of international assistance that are not coming. The present period is crucial to this extent. In the present circumstances, the NTC has even no means to cover expenses of immediate repairs. The following solutions should be studied and activated to cover partly these immediate repair needs:
Short term loans backed on the frozen assets of the Libyan government in the lending institution. Calls for the resources of the European Community through the program ECHO) Sponsorship of large private international firms that could finance immediate repairs against promise of support for future Contracts.
Reevaluation of large ongoing projects Although the Council has made it clear that the ongoing Contracts will be honored. Several ongoing projects had not been deepened with sustained studies. Studies are to be undertaken to reevaluate these projects and propose, when necessary modifications to be implemented at resuming stage. The remark applies also to the reform of the institutional system: the reevaluation of great investment projects to improve the operation of public services. Many assistance missions will be required to readapt the large projects to these new needs of the Society.
http://g.verron.free.fr GV-1104-004-Report-Benghazi-20110607
June 7, 2011 7/10
Concession contracting All representatives recognize that the redevelopment of Libya will not be possible without a reform in the organization of the public economy. The state organization has recognized this for long. Many consultancy studies and assistance teams have been mobilized by the previous regime to propose and implement these changes, without much success as the society was in a deadlock created by the greed of one family. The conclusions of these studies deserve to be reexamined. Reluctance to develop changes inside state organization is a characteristic of the Libyan culture since the Italian colonization. This reluctance is the basis of the activity of many intermediate professions that exert their activities for those public authorities. It is doubtful that this trading and lobbying culture will end with the new regime and the Companies will have to continue to deal with it. Nevertheless, the idea of a large development of the concession system comes out as a promising direct to reform the public economy. The major international firms that will be called to implement these changes will have to be prepared for a lot of lobbying and preparation time before implementing these changes.
http://g.verron.free.fr GV-1104-004-Report-Benghazi-20110607
June 7, 2011 8/10
Competition The competition on proposals of economic change is fierce and many delegations are entering the Country to bring in the ideas of their think-tank:
Already the British delegation in Libya has become the second delegation in Africa after the one in Cairo, in terms of persons in place. Many Turkish, Indian, and Italian delegations are already making huge proposals to obtain the attribution of concessions in all aspects of economic development (Turkey and India have many years of experience in this field of development). Bilfinger and Daewoo (The Great Man Made River Contracting Companies), are already back.
The local presence of French firms is now necessary to join this competition The international firms that operate in Libya are used to form Consortiums with French firms to develop their projects. These firms will probably be interested by associations with French firms in the fields of infrastructure and municipal development as a value added partnership. Associations will be necessary: „When you can‟t beat them, join them” is a British motto that applies in these circumstances; I intend therefore, during the next mission, to establish and initiate contacts with those large firms who have operated in Libya during the recent decades and seek association deals with them. Indeed, time is now for lobbying in the preparation of the new era, and for financial engineering to fill this transition gap.
http://g.verron.free.fr GV-1104-004-Report-Benghazi-20110607
June 7, 2011 9/10
Conclusions On my way back to Egypt, I saw at the Egyptian border a long file of trucks (several hundred meters long) of different sizes and capacity, showing that the Libyan entrepreneurs did not wait for the green light of their administration to resume what they do best: trading. The overall impression of this mission is that change is now not only irreversible but already deep and that it is now only a matter of days, weeks, maximum a few months before the end of the transition period. The energy of the people is there to lighten up the economy by influx of project initiatives or the preparation of new project. Those who will have taken a leadership and established business and cooperation activities with the emerging forces during the present transition period will be the ones who will gain the most of it. In particular those companies that can deal with the private sector and provide him with means to develop its activities will earn long time rewards. Time is no more for strategic and planification thinking but for action, in particular, to organize to find ways of short term financing. I wish that the above lines are showing that readiness for this context.
http://g.verron.free.fr GV-1104-004-Report-Benghazi-20110607
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