Libya 2009

A S P E C I A L S U P P L E M E N T M A R K I N G T H E 4 0 T H A N N I V E R S A RY O F T H E G R E AT S E P T E M B E R R E VO L U T I O N

LIBYA A New Chapter Begins

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CONTENTS 40th Anniversary

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As Libya looks back on 40 years of revolution, it’s also looking forward to opening up a new era of relations with the rest of the world.

Energy

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Libya possesses nearly half of Africa’s oil reserves — a potential that foreign companies are eager to tap.

Profile

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Gene Cretz, the first U.S. ambassador in Libya in 36 years, talks about diplomatic life in Tripoli.

Investment

Country Profile

Libya Reflects on 40 Years, While Looking to the Future

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Libya’s Economic and Social Development Fund is hoping to help low-income families through asset-building rather than handouts.

Tourism

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The Libyan government is opening its doors to give foreigners a taste of the country’s treasures.

Infrastructure

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Libya’s Great Man-Made River easily ranks as the largest and most expensive irrigation project in world history.

Telecommunications

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Thanks to its vast oil wealth, Libya is on the verge of a telecom explosion as the only African country with more mobile phones than people.

Transportation

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Afriqiyah Airways hopes to become Africa’s favorite airline, and the Libyan government is helping by building a new airport for Tripoli that would be able to welcome 20 million passengers a year.

Business

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Two organizations, located barely a block from each other in Washington, D.C., are vying to boost commercial ties between the U.S. and Libya.

Defense

REVOLUTIONARY NEW PATH

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Since the U.S. lifted sanctions on Libya in 2004, Tripoli has opened its doors to American executives — even in once-unthinkable areas of security and weapons sales.

Report sponsored by the Libyan government and produced

by The Washington Diplomat.

Graphic Design by Libby Phillips Pinner

The Washington Diplomat International Department P.O. Box 1345, Silver Spring, MD 20915 USA www.washdiplomat.com

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RIPOLI — Workers in the large grassy park in front of downtown Tripoli’s state-run Al-Kabir Hotel were scurrying around for the past month or so, washing down the walkways, removing trash and setting up scaffolding.

They also plastered every available inch of wall space with identical banners celebrating Col. Muammar Qaddafi. The big event: the 40th anniversary on Sept. 1 of the revolution that brought Libya’s “Great Leader” to power.

“Forty years of revolution!” proclaims the Arabic-language murals, which depict the Leader at the center of a photo montage featuring fellow revolutionaries Che Guevara, Nelson Mandela, Gamal Abdel Nasser and Malcolm X. All across Libya, huge celebrations were planned throughout September to mark that historic day in 1969 when the young official — then only 28 — toppled King Idris and set the vast North African

nation on a path of socialism, confrontation, isolation and eventually reconciliation with the Western world.

Targeted by U.S. fighter jets during the Reagan administration and later blacklisted because of Libya’s involvement in the December 1988 bombing of Pan Am Flight 103 over Lockerbie, the Great Socialist People’s Libyan Arab Jamahiriya is now a full-fledged member of the international community.

The country’s $2.7 billion payout to families of the Lockerbie victims, the lifting of U.N. sanctions in September 2003, and the renouncement of weapons of mass destructions three months later — followed by the resumption of U.S. diplomatic relations with Libya in May 2006 — were all milestones on the road to Libya’s redemption in the eyes of the West.

“We had to work very closely with the American delegation, but we’ve been able to settle all issues of compensation as of August 2008,” said Ali Suleiman Aujali, Libya’s ambassador in Washington. In fact, when Aujali and his staff arrived five years ago, they were issued U.S. visas for only three months at a time, and could only travel within 25 miles of the Washington Monument. “But since then, we’ve been able to have all the sanctions removed,” he said.

“We have very good relations with the U.S., we’re working together in Africa, and various technology agreements and memos of understanding have been signed,” Aujali added proudly. “When I arrived, we had no Libyan students here in the U.S. Now we have 1,500 students here. All the American companies are back doing business, and many members of Congress have been to Libya.”

One year ago, then-Secretary of State Condoleezza Rice flew to Tripoli and met with the

TIMELINE

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SPONSORED REPORT

October 2009

Graphics: Armando Portela

LIBYA, THE FOURTH-LARGEST COUNTRY IN AFRICA, IS SLIGHTLY LARGER THAN ALASKA — YET IT’S HOME TO ONLY 6 MILLION PEOPLE, MAKING IT ONE OF THE LEAST DENSELY POPULATED NATIONS ON EARTH. SOME 90 PERCENT OF LIBYA’S INHABITANTS LIVE IN THE NARROW COASTAL REGIONS OF CYRENAICA AND TRIPOLTANIA.

OPPOSITE PAGE: A GIANT BILLBOARD OVERLOOKING TRIPOLI’S MARTYRS’ SQUARE DEPICTS THE LEADER AND THE GOAL OF AFRICAN POLITICAL INTEGRATION.

Leader, marking the highest-level U.S. visit to Libya since 1953. This past January, U.S. Ambassador Gene Cretz presented his credentials as the first full-fledged American ambassador in Tripoli in 36 years. Less than a month later, the Leader further burnished his credentials by getting himself elected chairman of the 53-member African Union.

In September, the Leader also planned to make an unprecedented visit to New York to address the U.N. General Assembly (which itself is headed for the first time ever by a Libyan, former foreign minister and veteran diplomat Ali Treki).

The flurry of good news extends to the economic front as well.

Flush with oil export revenue, Libya now boasts an annual per-capita GDP of $14,400, the highest in Africa. It’s the only country on the continent with more cell phones than people, and one of the few places on Earth not significantly affected by the global financial crisis.

Mohamed H. Matri is director of the Americas Department at the General People’s Committee for Foreign Liaison and International Cooperation — Libya’s equivalent of a foreign ministry. He says the Libyan economy will grow by at least 6 percent this year.

“The international sanctions declared against us were actually a benefit in disguise,” Matri said during an interview in Tripoli last month. “Because we were under an embargo, we didn’t have the chance to invest in international financial markets. So when the financial crisis hit, we didn’t lose much.”

Lured by the oil bonanza, businesses are descending upon Tripoli, which is witnessing a Dubai-style boom in construction of office towers and luxury hotels. A brand-new Radisson Blu hotel already dominates the Tripoli waterfront, with many more five-star properties on the way.

According to David Hamod, head of the National U.S.-Arab Chamber of Commerce (NUSACC), Libya can expect GDP growth of 5.4 percent in 2010, rising to 7.5 percent in 2011 and 7.8 percent in 2012. By that time, Libya’s total imports will have more than doubled, from $20.6 billion to nearly $43 billion, and the U.S. share of those imports will rise to 7.5 percent.

Even so, the country’s image in the United Continued on Page 4

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Peoples should interact, because governments come and go. We really want to have a solid foundation whereby Americans understand Libyans, and vice versa, and to work together toward mutual benefits.

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— Mohamed H. Matri, director of the Americas Department at Libya’s General People’s Committee for Foreign Liaison and International Cooperation

October 2009

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LIBYAN AMBASSADOR TO THE UNITED STATES ALI SULEIMAN AUJALI.

MOHAMED H. MATRI IS DIRECTOR OF THE AMERICAS DEPARTMENT AT THE GENERAL PEOPLE’S COMMITTEE FOR FOREIGN LIAISON AND INTERNATIONAL COOPERATION, LIBYA’S EQUIVALENT OF A FOREIGN MINISTRY.

Country Profile

and go. We really want to have a solid foundation whereby Americans understand Libyans, and vice versa, and to work together toward mutual benefits.

Things have changed since the ’70s and ’80s. We supported all the liberation movements, and now Africa is totally liberated, and we’re proud of that.”

The Leader’s 1975 masterpiece, “The Green Book,” outlines his political philosophy and has been translated into 84 languages including Vietnamese and Hebrew. His push for African unity is reflected in the billboards that pepper just about every highway in Libya.

Strolling around Tripoli even past midnight, you’re likely to see teenage boys munching on fast food and playing foosball in the glare of the bright lights that illuminate Martyrs’ Square. Older men prefer to sit in cafés, drinking sweet tea and puffing on their hookahs.

Women, meanwhile, generally stay at home — a reflection of deeply held conservative Islamic values — though even that’s starting to change. “Libya is getting better all the time,” says Bushra, a receptionist for a U.S. company doing business here. “Five years ago, girls couldn’t even go out for a coffee.” But now women can be seen in trendy restaurants dining together.

Lack of preparation for the modern world continues to be one of the biggest problems plaguing Libya, an Alaska-size nation where more than a third

of its 6 million inhabitants are 15 or younger. The literacy rate is 85 percent and rising, though few Continued from Page 3 Libyans speak any language other than Arabic.

“In 1948, we had only seven university graduates States is decidedly negative. in all of Libya. Today we have hundreds of “Despite our best efforts to show Western media thousands,” said Matri, who studied political science what Libya is all about, they’re always one-sided,” at the University of Oregon (he also has a master’s complained Abdul Majeed el-Dursi, chairman of the degree from Portland State University). state-run Foreign Media Corp., which controls the “Unfortunately, there was a period during the 1980s nation’s newspapers, radio and TV outlets. “Last when foreign languages were eliminated from the March, we invited a number of journalists from curriculum. It was a mistake. But now we are trying to Europe and the States to come here and see for make up for this.” themselves. They liked what they saw. But when they Even the Leader himself has expressed concern went back, they wrote the same old stereotypical that “Libyans have become lazy,” a wakeup call that stories.”

— 40 years after the Great September Revolution — That’s unfortunate, because ordinary Libyans are attitudes must change. genuinely friendly with the few Americans they run “When states are very generous with subsidies into. A typical example: After this journalist placed a and everything comes easy, people don’t feel they five-minute phone call to Florida from an international need to work. And here in Libya, this generation is call center in Tripoli’s ancient medina, the man who spoiled,” said Matri. “We know that in the final ran the kiosk refused to accept payment of any kind. analysis, the oil won’t last forever. That’s why we “No charge — we love USA,” he beamed, even are sending so many students to the United States running outside in the 100-degree heat and insisting and Europe, in order to capitalize on our human that his grateful customer accept orange juice and resources.” bottled water as a thank-you for stopping in his little In fact, some 1,500 young Libyans are enrolled hole-in-the-wall shop. at U.S. colleges and universities — a direct benefit “Our most basic belief is that relations should be of the renewed diplomatic relations that have also between peoples, not governments,” said Matri. allowed Americans to visit and invest here.

“Peoples should interact, because governments come Despite the frenetic growth and the appearance of construction cranes all over the Tripoli and Benghazi metro areas, which together account for about a third of Libya’s population, remember that this is still a conservative developing nation.

Accordingly, a few words of advice from NUSACC’s Hamod: “Things take time, so be patient. Libya has not been part of the international marketplace for decades, so prospective partners in Libya will need time to get to know you. Personal relationships remain paramount.”

He quickly added: “Make no mistake, Libyans drive a hard bargain, and they’re some of the toughest A PRIVATE FOOD VENDOR SELLS SUGAR, EDIBLE OILS AND OTHER STAPLES AT A STREET KIOSK IN BENGHAZI. RIGHT, COL. MUAMMAR QADDAFI’S 1975 “THE GREEN BOOK” OUTLINES THE LIBYAN LEADER’S POLITICAL PHILOSOPHY AND HAS BEEN TRANSLATED INTO 84 LANGUAGES. negotiators in the Arab world.”

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October 2009

Energy

TAPPING A VAST POTENTIAL

Foreign Oil Companies See Lucrative Opportunity in Libya

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SSIDER, Libya — Capt. Ali Kikli may not be a politician or a government minister with a chauffeur-driven limo, but here at the remote Essider oil terminal 650 kilometers east of Tripoli, he’s clearly the boss.

“This complex represents many billions of dollars of investment. It’s the largest oil terminal on the Mediterranean,” Kikli says proudly as he takes his visitor on a tour of the sprawling, carefully guarded coastal facility, which exports one-third of Libya’s petroleum.

The captain shows off Essider’s tank farm, which consists of 18 enormous white cylinders that can store up to 6 million barrels of oil. Next up is the loading dock, where on a typical day 350,000 barrels of oil are pumped onto specialized tanker vessels for transport to Turkey, Germany, Italy, France and even China.

Last on the tour is Essider’s administration building. The 1960s-style structure is the nucleus of an operation that involves 450 people — including cus-

toms, immigration, security, police officers and employees of Waha Oil Co., which owns the terminal.

“We’re like a self-contained city. We even produce our own electricity,” said Kikli, declaring his port to be in compliance with international maritime protocols issued in the wake of 9/11. “All of us are against terrorism, but with the security we have here day and night, I don’t think anything will happen to this place.”

The captain, a 1972 graduate of Kings Point Merchant Marine Academy in Great Neck, N.Y., is old enough to remember the good old days when American oil companies dominated his country’s petroleum sector and Libya was producing 3.7 million barrels per day (bpd).

At that time, most of the world’s oil giants left Libya, though a few European holdouts — including Italy’s Agip and French energy conglomerate Total — stayed on despite the sanctions.

With the doors open once again, the world’s oil energy giants are tripping over each other in a race to get a piece of the action. These include well-known multinationals like Occidental Petroleum, ExxonMobil and Royal Dutch Shell, as well as overseas firms like Brazil’s Petrobras, Canada’s Verenex, Japan’s Nippon Oil and Russia’s Gazprom.

And with good reason. Libya possesses 42 percent of Africa’s oil reserves and 3.11 percent of the world’s total. At the end of 2008, current proven and recoverable oil reserves were estimated at 43.7 billion barrels, up from 29.5 billion barrels in 1997. In 2008, Libya’s production came to around 1.8 million bpd, translating into annual oil revenues of $46 billion, or about $7,900 per citizen — roughly the same per-capita amount as Saudi Arabia.

Libya’s gas reserves, meanwhile, are estimated at 1.5 trillion cubic meters, the fourth-largest in Africa and 0.8 percent of total world proven reserves. In addition, Libya is believed to possess at least 3.0 trillion cubic meters of unproven reserves.

In 1971, Libya became the second country in the world to export liquefied natural gas (LNG). It now pipes gas to Italy via a $6.6 billion pipeline that’s 75 percent owned by Italian energy conglomerate Eni. Libya also ships LNG to Spain, though huge potential exists for gas to become a major source of the country’s export revenue.

The International Energy Agency estimates that, once Libya is fully explored, a total of 100 billion barrels of oil equivalent will have been discovered.

Continued on Page 6

NATURAL GAS IS FLARED OFF AT THE FAREGH OIL AND GAS COMPLEX DEEP IN THE SAHARA DESERT.

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Libya possesses 42 percent of Africa’s oil reserves and 3.11 percent of the world’s total. In 2008, Libya’s production came to around 1.8 million barrels per day, translating into annual oil revenues of $46 billion, or about $7,900 per citizen — roughly the same per-capita amount as Saudi Arabia.

October 2009

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Energy Continued from Page 5

CHINESE WORKERS ON CONTRACT FOR COSL (CHINA OILFIELD SERVICES LTD.) TIGHTEN A VALVE AT AN OIL RIG DEEP IN THE SAHARA DESERT.

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Steve Guidry is president of Marathon Oil Libya Ltd., one of three U.S. entities that comprise the Waha venture. “Libya has a longstanding, robust infrastructure to get oil out of the ground and move it to market,” Guidry said from his office at Tripoli’s Corinthia Bab Africa Hotel.

“Their crude is highly rated and the reservoirs themselves are world-class, though many of them are undeveloped.”

Waha currently employs 3,500 people, 92 percent of them Libyans. Known as Oasis in presanction days, it operates four oilfields and is the second-biggest oil producer in Libya. Its majority stakeholder is Libya’s National Oil Corp. (59 percent), with minority shares owned by Marathon (16.5 percent), ConocoPhillips (16.5 percent) and Hess (8 percent).

Guidry, whose career has taken him from the oil patches of his native Louisiana to Equatorial Guinea, has been in Tripoli for eight months. He declined to say how much Marathon or its partners are investing in Waha, or how much they expect to make.

“Our group re-entered Libya in December 2005, so in many ways we’re still in the early stages,” he explained.

“When we left, the Americans were deeply embedded in the operation. We’re back as owner, in an oversight role, but we’re nowhere near as embedded in the operation as we used to be.”

In fact, a visit to the Gialo concession in the Sahara Desert south of Benghazi revealed almost no Americans in the field — though Vietnamese and Filipino workers were seen doing everything from welding pipelines to serving food at the crowded cafeteria-style mess hall during lunchtime.

Waha currently produces 315,000 bpd, with capacity of 380,000 bpd. Its goal is to produce 650,000 bpd by 2014. Fields operated by Occidental Petroleum are currently producing around 100,000 bpd, with that number rising to 300,000 bpd by 2013. Spain’s Repsol and PetroCanada are also major oil producers.

On the exploration side, BP is spending $1.3 billion to scour 14,000 square kilometers of Libyan desert (about the size of Kuwait) and 30,000 square kilometers offshore (about the size of Maryland) for untapped oil. If successful, the venture could mean billions more for the British company whose assets were nationalized 33 years earlier by the Libyan government.

“From an exploration standpoint, I couldn’t be in a better place,” said Hugh McDowell, president and general manager of BP Exploration Libya Ltd. “There’s a lot of hope that we can take Libya to the next level. We’d be happy either way — whether we find oil or gas — because that would put Libya in a strategic position to supply SPONSORED REPORT

gas to Europe.”

McDowell, whose office has four clocks on the wall showing the time in Tripoli, London, Greenwich and Houston, said BP Libya currently has 70 employees, and will probably have 120 by the time it starts drilling next year.

“BP was here back in the late ’60s. We discovered the largest fields in the country,” he said. “After being absent for a long time — more than 30 years — we came back at the end of 2007 and have been on the ground since early last year, carrying out exploration. So far, we’ve invested only 10 percent of that $1.3 billion, with the lion’s share to come over the next seven years.”

Likewise, in July, U.S. oil giant ExxonMobil announced it had begun drilling its first deepwater exploration well, code-named A1-20/3, in the offshore Sirte Basin.

“We are pleased to start drilling our first deepwater exploration well in Libya, based on the rigorous technical work conducted by our Libyan national and expatriate scientists, and in collaboration with the NOC,” said Phil Goss, president of ExxonMobil Libya, referring to the Libyan-owned National Oil Corp.

Downstream, there is great interest in petrochemicals, refineries and service stations. In April 2007, NOC and Dow Chemical announced the formation of a venture to operate and expand the Ras Lanuf petrochemical complex just east of the Essider oil terminal. That venture, whose dollar value hasn’t been released, gives the largest U.S. chemical company easier access to European markets and provides it with cheaper feedstocks, helping Dow compete in polyethylene production against other Middle Eastern chemical producers.

But the industry is said to suffer significant infrastructure problems. Libya’s refining capacity has remained relatively constant at around 380,000 bpd — only a fraction of its daily production levels of 1.8 million bpd.

Dr. Shukri Ghanem, chairman of the staterun National Oil Corp. (NOC), said in early 2007 that Libya would have to invest $9 billion in refineries, petrochemical plants and fertilizer factories to fix the most urgent problems. Other NOC sources quoted by local media said the actual costs may be double that, though specific details of timing and possible foreign involvement in that sector have not been announced.

While McDowell declined to get into politics, he did say one of the biggest issues confronting Libya is the development of oil as a national industry.

“For 30 years, they really struggled to get training and international support,” he said.

“During that time, the oil and gas industry moved into a different world, and health and safety became a huge factor. There’s a great need to develop manpower.”

To that end, BP has made a $50 million commitment to help NOC develop its personnel through training and education.

“This is a very large project for BP. We’re in exploration, so the future’s ahead of us,” said the oilman, who worked in Azerbaijan before coming to Libya. “It’s a bit like the CIS [Commonwealth of Independent States] countries — offlimits for a long time, and now we’re back. But we have to go through the exploration side of it first. There are no guarantees here.”

October 2009

Energy

SIDEBAR

Libya’s Oil Man: Dr. Shukri Ghanem

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etroleum, which accounts for 70 percent of Libya’s GDP, 90 percent of its government revenue, and a staggering 98 percent of its export earnings, dominates this North African economy like few other places on Earth.

But the man who oversees Libya’s vast energy sector worries what will happen once the wells run dry.

“I’m sure our oil will be depleted one day — and on that day, you can imagine what the situation will be,” said Dr. Shukri Ghanem, president of Libya’s state-run National Oil Corp. (NOC).

“This is why we have to do something drastic to diversify our economy, and not resort to handouts and subsidies. We cannot subsidize everything.”

He added: “It doesn’t really matter whether it is Saudi Arabia, Libya or Algeria. All of our economies are at least 80 percent dependent on petroleum…. This is why some people think oil is a curse rather than a blessing.”

But Ghanem has been working hard to turn Libya’s natural bounty into a blessing. Ghanem, who served as general-secretary of the General People’s Committee (the equivalent of prime minister) from June 2003 until March 2006, remains

October 2009

one of the country’s most important and influential men, though the painful reforms he advocates have earned him plenty of enemies at home.

The 67-year-old petroleum economist spent an hour last month explaining what Libya must do to boost production while gradually weaning itself off its heavy dependence on hydrocarbons.

“In 1970, we were producing 3.7 million barrels of oil a day, and now we produce less than half of that,” he said, noting the enormous toll that international sanctions exacted on Libya in the wake of the Lockerbie incident in 1988.

“After the removal of sanctions and the normalization of relations between Libya and the West, we adopted what you may call an open-door policy,” said Ghanem.

“This involves transparency as well as competition. We offer concession blocks under what we call open tenders. We announce the tenders, qualify companies, and open their offers in front of everyone in complete transparency — and then let the best one win.”

Between January 2005 and December 2007, the Libyan government conducted four bidding rounds for crude oil and natural gas under a scheme known as Exploration and Production Sharing Agreement (EPSA-IV).

“Through this method, we were able to entice almost 50 companies to work in Libya, without discrimination as to whether they’re American, European or whatever,” Ghanem said. “We also have companies from Taiwan and mainland China. It doesn’t matter, as long as they qualify technically and financially.”

If all goes as planned, the NOC under Ghanem’s leadership will tender out more than 100 EPSA agreements over the next 10 years, generating total investment of around $7 billion.

Asked if he’s satisfied with the level of U.S. participation, Ghanem said simply, “oil companies are after oil” regardless of where in the world it happens to be.

“American oil companies were the first to come to Libya in the 1950s, the first to find oil and the first to export. We have a special soft spot for them,” he said, “but if they feel they’ll make a buck, they’ll come here, and if not, they won’t — whether I ask them to or not.”

He did say that over the past 20 years, the giants of the American petroleum industry could have made major discoveries had they been allowed under U.S. law to operate here.

“For two or three decades, there were no serious exploration plans because of the sanctions,” Ghanem said. “Libya is better off than other counSPONSORED REPORT

tries, but the easy oil is not there anymore. It’s more expensive to find.”

Libya is widely regarded as unexplored, though the Murzuq Basin alone is estimated to hold 10 billion barrels of undiscovered recoverable reserves. Both BP and Occidental have their largest international exploration projects in Libya, with many other companies are investing billions in exploration.

“It was our plan that by 2012, Libya would be producing 3 million barrels per day, but this now will take longer for a number of reasons,” Ghanem said. “When economies were growing fast, the whole world needed oil. Now, there’s surplus capacity all over the world, and budgets are constrained. Our target may not be reached until 2015 or 2016, taking into consideration the international economic situation.”

That’s not the only factor holding back the expansion of Libya’s oil industry. Another is the lack of a decent education system.

“We are very much interested in training Libyans,” Ghanem said, noting the high percentage of skilled foreigners involved in the oil sector.

“One of our biggest problems is the result of 30 years of not teaching English in schools. We are now concentrating on that, and we consider English the most important foreign language.”

Ghanem, whose own English is impeccable, was born and raised in Tripoli, attended school at Benghazi University and then went to the United States, where he earned a master’s degree in international economics and diplomacy from the Fletcher School of Law and Diplomacy at Tufts University. Upon returning to Libya, he served as director of foreign trade at the Ministry of Economy and chief adviser to the since-disbanded Ministry of Petroleum.

Among other things, Ghanem was also in charge of the Organization of the Petroleum Exporting Countries (OPEC) Secretariat in Vienna and headed OPEC’s research division. In 2001, Libya nominated him to be OPEC’s secretary-general, but that job was eventually given to Venezuela’s Ali Rodríguez.

Ghanem said that while OPEC only accounts for 30 percent of today’s global oil production, the 12-nation cartel remains important “because it tries to create an instrument for stabilization” — even if some members disagree on their quotas from time to time.

“When you are in a group working together, you have to accept the others’ point of view. They all come to a consensus, a middle ground that does not please everyone. If you get 80 percent compromise, that’s an achievement,” he said, smiling. “Even with your wife, you cannot have 100 percent agreement.”

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Profile

AMERICA RETURNS TO LIBYA

After 36-Year Absence, U.S. Embassy Returns to Tripoli

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n a hot Sunday evening in Tripoli last month, U.S. Embassy officials threw a lively farewell party for a colleague completing her tour of duty in Libya. As waiters passed out appetizers, local and foreign executives talked business and an expatriate band belted out “Midnight at the Oasis.”

In any other world capital, this would have been just another diplomatic reception — but not in Libya, where only five years ago, the Americans weren’t in any kind of oasis but rather a diplomatic no man’s land.

“It’s quite remarkable when you look at how far we’ve come,” said U.S. Ambassador Gene Allan Cretz, Washington’s first envoy in Tripoli since 1972. “Not many members of my generation of diplomats have had such a unique opportunity to make history.”

Cretz was in his final year of college when the last U.S. ambassador here, Joseph Palmer, left the country following increasing tensions between the United States and Libya’s newly installed leader, Col. Muammar Qaddafi.

Nearly four decades later, the power structure

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hasn’t changed — and Palmer’s official Libyan diplomatic license plate decorates Cretz’s office at the dusty U.S. Embassy compound just outside Tripoli.

That Cretz is in Libya at all is something of a small miracle, considering the 18 months his nomination by President Bush was delayed by Congress.

“Sen. Frank Lautenberg [D-N.J.] and three others, on the day of my nomination, announced they would place a hold on my appointment as ambassador until the Libyans made good on their promise to compensate the victims of terrorism,” Cretz said in a one-hour exclusive interview, rattling off by memory the pertinent dates of his U.S. AMBASSADOR long odyssey.

TO LIBYA GENE CRETZ “I had my Senate hearing on Sept. 24, 2008. The Senate confirmed me on Nov. 20, 2008, and [former Secretary of State] Condoleezza Rice swore me in on Dec. 17, 2008,” he said. “I arrived here on Dec. 27, 2008, and presented my credentials on Jan. 11, 2009.”

Even then, it was hardly smooth sailing for Cretz, a veteran U.S. diplomat.

“It took seven months for the Libyans to agree to my appointment, which is an inordinately long time,” he said. “But when you think about it, we had not had relations with Libya for 36 years. It was a long wait, but it was done — as everything is — in Libyan time, which means when they’re good and ready.”

But relations have progressively improved — to the point where the Obama administration now considers the Libyan government not a source of terrorism but rather a key partner in the fight against it.

“There’s no doubt we’ve had a very rocky relationship with Libya,” he said, “but Libya has acknowledged its responsibility for acts of terrorism. They did what the international community asked of them: They gave up their weapons of mass destruction, they renounced terrorism, and they compensated victims of their actions in the past.”

The final hurdle came on Oct. 31, 2008, when Libya made a final payment of $1.5 billion into a fund set up for families of the 259 passengers and 11 people on the ground who died in the 1988 bombing of a Pan Am jetliner over Lockerbie, Scotland.

“That payment enabled restrictions to be lifted and to allow restoration of immunity for Libyan diplomats SPONSORED REPORT

in the United States,” Cretz explained. “Today we have ambassadors in both capitals, we have high-level discussions, and we have the full range of diplomatic intercourse on consular issues. Right now, we’re in the process of a step-by-step approach to expanding our relations in several different fields. It’s a work in progress.”

A Peace Corps volunteer in Afghanistan, Cretz, 59, has served in Islamabad, Damascus, Cairo and New Delhi, among other postings. The welltraveled diplomat has nothing but praise for his counterpart in Washington, Libyan Ambassador Ali Suleiman Aujali.

“We’ve known each other for awhile now, and I find him to be professional,” said Cretz. “He’s a very sober individual, clearly up to the task of what he’s been asked to do in Washington, which hasn’t been easy. He was there during the rough period when the United States and Libya didn’t have a good relationship.”

These days, Cretz spends much of his time on economic issues — among them a Trade and Investment Framework Agreement that will serve as a blueprint for bilateral commercial ties. Cretz says that at least 20 U.S. corporate giants are active in Libya. Among the biggest are: Caterpillar, Hill International, ExxonMobil, AECOM and Occidental Petroleum.

“There’s a lot of money to be made here,” he said.

“The Libyans have an $84 billion infrastructure program, and they want American companies and expertise here. But the competition is fierce, because everybody is attracted to the place.”

As ambassador, Cretz oversees roughly 30 U.S. diplomats plus 150 local hires. Prior to his arrival, embassy staff worked out of a suite at the five-star Corinthia Bab Africa Hotel. For now, its operations are split between a complex of nine villas where Cretz’s office is located, and another site 16 miles away. Cretz said he’s looking for a secure site where a new U.S. embassy can be built from scratch, but that likely won’t happen for another five years.

“In April, we made the decision to provide full visa facilities here in Tripoli so that Libyans wouldn’t have to travel to Tunisia twice — once to apply for a visa, then a second time to pick it up. This was a big step on our part,” Cretz said. “I am now very intensively engaged with the Libyans to work out a reciprocal system,” he added. “Libya needs to be a bit more transparent when it comes to the issuance of visas. It’s still very difficult for Americans to get visas to come here.”

Cretz hasn’t yet sat down with Libya’s leader for a one-on-one meeting, though the two men have chatted briefly three times at various receptions. “When Qaddafi met with one of our visiting generals, he spoke with quite remarkable detail about Africa and the Middle East,” the ambassador recalled. “He’s very up to date on the news, even though we may not agree with his opinions.”

October 2009

Investment

SPREADING THE WEALTH

Ambitious Growth Fund Seeks To Jumpstart Libyan Economy

ABOVE, TRIPOLI HEADQUARTERS OF LIBYA’S ECONOMIC AND SOCIAL DEVELOPMENT FUND (ESDF). TOP RIGHT, WORKERS PAVE A NEW HIGHWAY ON THE OUTSKIRTS OF TRIPOLI.

S

ome of the biggest and most dramatic infrastructure projects now rising across Libya — from hotels to high-rise apartment buildings — are being funded by a government entity that aims to help lowincome families through asset-building rather than handouts.

The Economic and Social Development Fund (ESDF) was created by the Libyan Leader in 2006 and manages 14 billion Libyan dinars (about $11.3 billion) in assets.

“This is not a sovereign fund, but a fund owned by families,” said Hamed Arabi El-Houderi, ESDF’s chairman and general manager. “We are only managing it. The ultimate owner is those families, so all income and dividends go directly to them.”

The ESDF is distinct from the Libyan Arab Foreign Investment Company (Lafico), which invests

“

Libyan funds overseas and is currently active in 38 countries from Brazil to Russia.

El-Houderi was interviewed from his office at ESDF’s Tripoli headquarters, which is lavishly decorated with murals of both the Leader and some of the projects ESDF is bankrolling.

The largest of these is Energy City Libya, a groundbreaking $2 billion project located west of Tripoli, on the Mediterranean coast near the ancient Roman ruins of Sabratha.

“A fully integrated business city serving the needs of the region’s energy industry, Energy City Libya will provide a significant stimulus to the fastgrowing Libyan economy, helping it rise to spectacular new heights,” says an ESDF pamphlet promoting the ambitious project.

Built around a silver needle-like tower, the 700-hectare development will feature a series of specialized satellite clusters dedicated to different sectors within the energy industry. Energy City Libya is a joint venture between one of ESDF’s subsidiaries and Gulf Finance House, an investment house headquartered in Bahrain.

Construction of Energy City Libya hasn’t started yet, though groundbreaking is expected sometime before year’s end.

El-Houderi said the ESDF hopes to benefit 300,000 families throughout Libya. “Traditional welfare programs never allow poor or low-income families to build assets or wealth,” explained the official, who studied English at Louisiana State University in Baton Rouge; he’s also lived in New York and Ohio.

“For this reason, under the direction of our great leader Qaddafi — who insists on the equitable distribution of wealth among all Libyans — funds were allocated to this program to be invested on behalf of qualified families. This will encourage such families to be active within the economic cycle and generate income from their work and investment, rather than relying on donations or basic salaries.”

El-Houderi said the fund’s investments are distributed in five sectors: finance (2.94 billion dinars), services (2.18 billion dinars), real estate (1.68 billion dinars), industry (1.19 billion dinars) and tourism (1.27 billion dinars). The fund consistently enjoys a 10 percent rate of return, according to El-Houderi, who noted that its investments include stakes in cement factories, steel mills, pharmaceutical plants and engineering companies.

There are also four financial institutions in ESDF’s portfolio — Al Wahda Bank, Sahara Bank, First Gulf Libyan Bank and Al Wafa Bank — as well as $2 billion in various hedge funds, fixed-income accounts, equities and other short-term investments. In all, nearly 27,000 jobs are provided by the fund.

As Libya shifts from a centralized, socialist economy to one increasingly driven by market forces, El-Houderi said investment opportunities will continue to multiply, for the benefit of all the country’s citizens.

“The Libyan economy is doing well. You know that Libya was under an embargo for 15 years,” he said.

“At that time, most of our development programs were frozen. It’s very difficult to work on a program while you’re under sanctions. So after the embargo was lifted, we started building our infrastructure. At this stage, we’re still new, because most of our projects are still under construction.”

This is not a sovereign fund, but a fund owned by families.

”

— Hamed Arabi El-Houderi, chairman and general manager of the Libyan Economic and Social Development Fund

October 2009

SPONSORED REPORT

Page 9

Tourism

PLENTY TO SEE

Tourists Not Common Sight in Libya, But Picture Could Change Very Soon

A BEAUTIFULLY PRESERVED MOSAIC

T

FLOOR OVERLOOKS

RIPOLI — At the Fez Rest-

aurant on the 26th floor of Tripoli’s swank Corinthia Bab Africa Hotel, bartender Abdel Hamid proudly serves “mocktails” that — true to Islamic practice — contain no alcohol whatsoever.

For nine Libyan dinars (about $7.60), you can choose between Jamaican Delight (pear with bitter soda) and Sahara Mirage (a concoction of bananas, dates, almonds and milk). And just one dinar (85 cents) more can buy you an ice-cold frothy glass of Tripoli Sunrise (orange juice, fresh carrots and grenadine syrup).

But don’t expect too many tourists to join you at the bar.

In 2007, the last year for which statistics were available, only 105,997 bona fide tourists set foot in Libya — less than 1 percent of the 12.8 million tourists who visited neighboring Egypt the same year. And that was down 16 percent from the 125,480 who came to Libya in 2006. The reason: an abrupt decree in early 2007 that all non-Arab visitors must now have their passports translated into Arabic in order to obtain a Libyan visa.

Page 10

Libya’s complete ban on booze doesn’t help attract foreigners either. Nor does the country’s undeserved reputation as a dangerous place for Westerners, particularly Americans — a holdover from the days when U.S.-Libya relations were at an all time low.

The fact is that while Libya is not Morocco — teeming with tour buses and throngs of camera-toting cruise ship passengers — it is not a dangerous spot either. Reports of violence against the few Americans or Europeans who venture here are unheard of; even minor crimes like petty theft are extremely rare.

From a tourism point of view, Libya is unique because of its relative isolation for the past three decades. Like communist Cuba half a world away (Tripoli is often called the “Havana of North Africa,” for good reason), the Great Socialist People’s Libyan Arab Jamahiriya offers visitors a colorful assortment of billboards and endless miles of white-sand beaches.

But it also boasts five UNESCO World Heritage Sites, spectacular desert landscapes, enchanting souqs (traditional Arab markets), and genuinely warm and hospitable people. The Roman ruins at Sabratha and Leptis Magna are world-class, as are the 12,000-yearold rock carvings of Wadi Tashwinat and the labyrinthine, covered passageways of the oasis town of Ghadames.

In Tobruk, near the Egyptian border, tourists can reflect upon the sprawling World War II cemetery to SPONSORED REPORT

THE MEDITERRANEAN SEA BY THE ROMAN RUINS AT SABRATHA.

October 2009

In the next three years, no less than 3,000 hotel rooms are expected to come onto the market, bringing the prestige of well-known international brands to Libya for the first time. fallen soldiers, while at the desert oasis of Awjila, one is slated to open in 2011. can stroll through the seventh-century Al-Kabir “We are very excited to be operating one of the Mosque, famous for its beehive domes and mud-brick first internationally branded hotels in Tripoli,” said Ed arches.

Fuller, Marriott’s president and managing director of One thing Libya doesn’t have is an overabundance international lodging. “The city has a rich cultural and of tourist-oriented hotels. One exception to this though historic legacy, and is emerging as a substantial is Tripoli’s five-star Corinthia — strictly a businesscommercial center in Libya. We look forward to man’s hotel, where a one-night stay can easily cost $700 participating in the city’s future.” excluding taxes. Despite those rates, this 300-room In addition, Libya’s first Holiday Inn should also property in the heart of Tripoli’s booming open in 2011. Kuwait’s M.A. Kharafi Group has commercial district is nearly always full. committed $130 million to develop this four-star hotel.

“We can’t handle the amount of Parallel to Tripoli’s hotel boom is the capital city’s business that comes in,” general manager efforts to make itself a hub for international airline John O’Brien said, noting that 90 percent of traffic. A local airline, Afriqiyah Airways, now offers the Corinthia’s guests are on expense direct flights between Tripoli and more than a dozen accounts. “Our largest corporate client is the African and Middle Eastern cities from Dakar to Dubai.

Libyan government, and they put most of It has also begun nonstop flights between Libya and the their VIP delegations in our hotel. The next Chinese cities of Beijing and Guangzhou. largest nationality would be Italians.”

Other airlines see Libya’s allure as well. Emirates O’Brien, an Australian who came to now flies between Tripoli seven days a week, while Libya a year ago, said “very few Americans Qatar Airways offers Casablanca-Tripoli service and is stay here. Most of them are involved in considering direct flights from Doha. British Airways government, or they’re in construction or oil flies between London and Tripoli daily, but is and gas.” considering a second daily flight because of strong The Corinthia — which for a time demand, while Turkish Airlines flies from Istanbul to hosted the U.S. diplomatic mission until a both Tripoli and Benghazi on a daily basis. real embassy was established not far away — is a 50-50 venture between Malta-based International Hotel Investments (IHI) and Lafico, a Libyan government sovereign fund (the IHI-Lafico partnership also owns Corinthia properties in London, Budapest and St. Petersburg, Russia).

The hotel, which Lonely Planet describes as “a towering temple of glass and elegance,” will generate revenues of 30 million euro ($43 million) in AMONG THE SITES IN LIBYA IS THE RESTORED STATUE OF SEPTIMIUS SEVERUS AT THE RUINS 2009, closing the year at 83 OF LEPTIS MAGNA, ONE OF THE WORLD’S BEST-PRESERVED ROMAN CITIES. percent occupancy. Since its opening in 2002, says O’Brien, the Corinthia has never But a major obstacle to luring more Americans to Libya lost money. All other five-star properties in the capital is the near-impossibility of obtaining tourist visas to the as well as in Benghazi are government-owned and North African country. managed. “We’ve been the only game in town for a Hamed Arabi El-Houderi, chairman and general long time,” he conceded. “But that’s about to change.” manager of Libya’s Economic & Social Development It sure is. In the next three years, no less than 3,000 Fund, which is investing billions of dollars in tourism hotel rooms are expected to come onto the market, ventures, says that “although relations with the United bringing the prestige of well-known international States are very good now, we still have this visa brands to Libya for the first time ever. These include a problem” that prevents more Americans from getting to 370-room JW Marriott, a 350-room Radisson, a 410know Libya and vice versa. room Mövenpick, a 400-room Sheraton and a 380-room Unfortunately, said El-Houderi, that probably InterContinental Hotel. won’t change until Washington reciprocates by making The 36-story Marriott, rising on an empty lot it easier for average Libyans to visit the United States. within walking distance of the Corinthia, will likely “Once I got a U.S. visa within a couple of weeks, but become a prominent landmark on the Tripoli skyline another time I applied for a visa and it took me 11 overlooking the Mediterranean. It’s being built by months,” said the official. “By the time I got it, I had no South Korea’s Daewoo construction conglomerate and reason to go anymore.”

October 2009

SPONSORED REPORT

THE AL-KABIR MOSQUE IN THE DESERT OASIS OF AWJILA WAS ORIGINALLY BUILT IN THE 7TH CENTURY AND RESTORED IN THE 1980S. IT IS ONE OF NORTH AFRICA’S OLDEST MOSQUES.

STONE ARCHWAY FRAMES THE RESTORED, 24-METER-HIGH MAUSOLEUM OF BES AT THE ROMAN RUINS OF SABRATHA.

RESTORED ROMAN AMPHITHEATER AT SABRATHA.

Page 11

Infrastructure

FLOODGATE OF DEVELOPMENT

Libya Touts Great Man-Made River As Eighth Wonder of the World ABDEL MAJEED AL-GAOUD, HEAD OF THE GREAT MAN-MADE RIVER AUTHORITY, EXPLAINS WHY WATER FROM THE MASSIVE IRRIGATION SCHEME COSTS MUCH LESS PER LITER THAN WATER TRANSPORTED FROM EUROPE OR MADE AVAILABLE

CIVIL ENGINEER MOFTA RARJAL CHECKS VALVES AT PUMP STATION C319.

THROUGH DESALINATION PLANTS.

B

ENGHAZI, Libya — From the sky, Libya’s Grand Omar Mukhtar Reservoir resembles a shimmer ing blue circle nestled in the desert sands. At ground level, the artificial lake is so vast that it’s impossible to photograph the whole structure with anything but a fisheye lens.

In fact, it takes a good 10 minutes to drive around the reservoir’s 3.5-kilometer-perimeter gravel road.

Holding 24 million cubic meters of water, Omar Mukhtar is the second-largest reservoir in the world — and a crucial element in Libya’s ambitious, $20 billion Great Man-Made River (GMMR) project.

“Before the implementation of the GMMR, the Libyan people were desperate for a few drops of water throughout the year,” says a government brochure

Page 12

describing the project. “Now, with a daily flow of over 6 million cubic meters, there is enough water to supply each citizen in the Great Jamahiriya with over 1,000 liters per day. In addition, 135,000 hectares of land will be freed from drought.”

The GMMR easily ranks as the largest and most expensive irrigation project in world history.

Conceived in the late 1960s, its mission is simple: to pump water from Libya’s vast, underground Nubian Sandstone Aquifer System in the south to populated coastal areas in the north where most of the country’s 6 million inhabitants live and work.

Phase I of the GMMR, with a price tag of $5.5 billion, commenced in 1984 and since 1991 has brought 2 million cubic meters of water daily from the immense Sarir and Tazerbo basins 1,200 kilometers north to the coastal strip between Sirte and Benghazi.

Phase II, costing just over $8 billion, carries 2.5 million cubic meters per day from the Murzuq Basin, feeding the cities between Sirte and Tripoli, Libya’s SPONSORED REPORT

capital, which received its first supplies of GMMR water in September 1996.

Following the completion of Phase II, a third phase — estimated to cost $6 billion — was built to connect the two existing networks. Total production of the GMMR comes to 6.43 million cubic meters a day, using 1,149 production wells, most of them more than 500 meters deep.

Over the next 50 years, cumulative investment is expected to hit $33.7 billion, with total production of 120 billion cubic meters of water, according to quality control manager Salim al-Hawari.

Without the GMMR, it’s evident that Libya would soon face a crisis of enormous proportions. According to the U.N. Development Programme, available renewable water per person in Libya is expected to drop from the 1955 benchmark of 4,103 cubic meters annually to only 332 cubic meters by 2025.

Al-Hawari rejected concerns by environmentalists that the water in the Nubian Sandstone Aquifer System — which accumulated during the last ice age — may

October 2009

Libya’s ambitious, $20 billion Great Man-Made River easily ranks as the largest and most expensive irrigation project in world history. actually run out within half a century at present rates of consumption.

To put things into perspective, the total quantity of cement used to build the GMMR is enough to build a concrete road from Tripoli to Sydney, Australia. If superimposed on a map of the United States, the GMMR — which the Libyan Leader has called the “eighth wonder of the world” — would easily stretch from Louisiana to western New Mexico and up into northern Colorado.

Despite its massive cost, civil engineer Abdul Majid M. Elgaoud said Libya had no other alternative.

“I think it’s quite clear,” said Elgaoud, who as secretary of the People’s Committee has overall responsibility for the GMMR’s management and implementation.

He said that his country’s options were limited to piping fresh water from Greece across the Mediterranean to Libya, transporting water by ship, or building desalination plants.

Based on official studies, the Great Man-Made River Authority concluded that one Libyan dinar would buy 0.74 cubic meters of piped water, 0.79 cubic meters of desalinated water, or 1.05 cubic meters of water transported by ship. By comparison, the GMMR provides a whopping nine cubic meters of fresh water for that same Libyan dinar.

“Desalination plants were among the options, but so far, it’s expensive because we’d have to generate power and then use this power to run the desal plants. So accordingly, if the cost of power is high, so would the cost of desalinated water. That’s one reason the water from our project is much more feasible,” Elgaoud explained.

In addition, he noted, “the desalination plants would be on the coast, and the water needed for agriculture is inland, so you’d have to pump the desalinated water again to irrigated areas, and that would be expensive. So in fact, the cost of our tap water today is 28 cents per cubic meter, while desalinated water wouldn’t cost less than 85 cents.

And when you add that to the cost of pumping the water inland, it comes to between $2.50 and $3 per cubic meter. So in fact, our water is quite economical.”

At present, 70 percent of the water produced by the GMMR goes to agriculture, with another 28 percent for municipal use (drinking water), and the remaining 2 percent for factories and industries.

All pipes used in the project are manufactured in Libya in accordance with American Water Works Association standards. Two factories, in Sarir and Brega, produce a combined 200 four-meter-diameter pipes per day. Since production began in September 1986, the two plants have manufactured around

530,000 pre-stressed concrete cylinder pipes weighing 75 to 83 metric tons apiece. Laid end to end, the pipes would stretch 4,000 kilometers.

“We monitor the pipes 24 hours a day using satellite technology, because if there’s any corrosion, the pipes will burst,” said Elgaoud, noting that several thousands of kilometers of special-haul roads had to be built across the desert just to transport the pipes to where they needed to go. The pipes are laid in trenches seven meters deep and must be buried underground, he said, because of the extremely high pressures involved.

Elgaoud said the GMMR continues to expand, offering enormous potential for joint ventures and investment by American companies. “But this depends on the willingness of American companies to come and establish joint ventures,” he said. “Honestly, we expected more interest than we’ve seen up to now.”

On the other hand, Elgaoud praised an irrigation venture between his agency and two U.S. equipment manufacturers, Valmont and Case, that aims to grow wheat, corn and other crops on previously unusable land. “We think this project could be an example for other investments if it succeeds,” he said, “and I think it’s going to succeed.”

The US-Libya Business Association

Welcomes a New Era in US-Libya Commercial Relations The US-Libya Business Association (USLBA) welcomes expanding engagement and commerce between the US and Libya, enhancing economic opportunity for both nations.

As the only US trade association focusing solely on the United States and Libya, the USLBA is dedicated to strengthening the US-Libya relationship, educating the public about important progress occurring between our nations, and facilitating commercial and diplomatic dialogue. The USLBA sponsors regular policy conferences, brieÀngs and unique forums featuring senior US and Libyan ofÀcials.

The US-Libya Business Association is a non-proÀt member-based organization of US Companies.

October 2009

SPONSORED REPORT

Page 13

Telecommunications

CAN YOU HEAR ME NOW?

Spurred on by Oil Revenues, Libya’s Telecom Sector Takes Off

I

n his office near Tripoli International Airport, top Ericsson executive Hans Josef Brueggen proudly displays the portraits of three famous people: company founder Lars Magnus Ericsson, Sweden’s Queen Silvia and Libya’s Col. Muammar Qaddafi.

The last portrait is much larger than the other two, and Brueggen has no intention of taking it down. After all, the Libyan government has been good to Ericsson over the years. In 2009 alone, the Swedish telecom giant expects its Libya operations to generate 70 million euro (nearly $100 million) in sales.

“Oil revenues are attracting a lot of investment to Libya, so there’s no real poverty here,” said Brueggen, country manager for Ericsson Libya. “Even immigrants here make the same salaries as educated professionals in Tunisia or Algeria.”

Thanks to its vast oil wealth, Libya’s annual percapita GDP of $14,400 is now the highest in Africa. It’s also the only one of Africa’s 53 countries with more mobile phones than people.

Officially, Libya’s mobile penetration rate exceeds 125 percent, meaning there are more than 125 wireless lines in service for every 100 inhabitants, up from a minuscule 2 percent in 2002.

Brueggen though says the official number is somewhat distorted. “They never really cleaned up the database, and they are also taking the number of subscriptions and dividing it only by the number of Libyan citizens,” he said, explaining that not counting the millions of Egyptians, Tunisians and other immigrants who live in Libya and have cell phone service artificially drives up the penetration rate.

Even so, there’s no question Libya is on the verge of a telecom explosion.

The country’s current 20-year plan calls for spending $10 billion on telecommunications between 2005 and 2020. The objective: to bring wired phone service to all of Libya’s 1.6 million households and wireless Internet to an estimated 300,000 subscribers using advanced WiMAX technology. In fact, Libya’s proposed Next Generation Network (NGN) is one of the most ambitious projects of its kind in the world.

“There is a will — for sure, driven by the chairman of the General Authority for Information and Telecommunications, Mohammad al-Qaddafi [one of the Leader’s four sons] — and of course there are the means: a huge amount of money,” said Mohamed Bala, an executive with French telecom giant Alcatel-Lucent.

“What they need at the end of the day is somebody to execute these projects.”

Page 14

A YOUNG MAN USES HIS CELL PHONE IN THE ANCIENT MEDINA OF TRIPOLI, IN FRONT OF A SHOP THAT SELLS TELECOM EQUIPMENT.

For that kind of expertise, the General Authority for Information and Telecommunications (GAIT) — through its Libyan Post Telecommunications and Information Technology Co. (LPTIC) subsidiary — has turned to companies like Ericsson, Alcatel and Nokia Siemens, as well as Chinese telecom giants ZTE and Huawei.

Toronto-based telecom consultant Robert Pachal has traveled to Libya at least 18 times to help negotiate contracts on behalf of LPTIC. “The overall vision is to bring fiber-optic access to every home and business in Libya. That has to be tempered with the practicality of cost,” said Pachal. Eventually though, he suggested, the government’s planned Next Generation Network will reach 80 percent of Libyan premises with high-speed Internet, high-definition television and other advanced services.

“The current program is designed to deliver 100 megabits of bandwidth to each customer, which is among the fastest access anywhere,” he added. “This is going to be an extremely significant improvement in access to modern telecom, particularly in isolated communities. And it’ll allow Libyans to place themselves potentially as leaders for Internet-based businesses.”

For the moment, U.S. companies do not play a major role in Libya’s telecom sector, though Cisco Systems and Motorola are trying to increase their foothold here.

“In this country, there is an artificial separation between European and Chinese companies,” said SPONSORED REPORT

HANS JOSEF BRUEGGEN, LIBYA COUNTRY MANAGER FOR SWEDISH TELECOM GIANT ERICSSON, STANDS IN FRONT OF A CELL PHONE TOWER AT ERICSSON’S TRIPOLI COMPOUND.

Brueggen. “It was decided that Al Madar would be supplied by Alcatel and us, and Libyana would be supplied by the Chinese.”

Al Madar is the smaller of Libya’s two mobile operators, with about 2.2 million subscribers. Ericsson supplies Al Madar’s core network and 60 percent of its radio base stations, mainly in western Libya. Libyana, the dominant operator, has around 6.2 million customers. As in most of Africa, pre-paid clients account for 99 percent of the business; only 56,000 VIPs have monthly plans, a holdover from the days when SIM cards were prohibitively expensive.

Prepaid cards now sell for around five dinars ($4), compared with 400 dinars ($325) prior to 2004, Continued on Page 16

October 2009

Transportation

SKY’S THE LIMIT

Inspired by African Union, Afriqiyah Soars to New Heights

T

RIPOLI — One million passen-

gers will have flown Afriqiyah Airways this year, but few know the meaning behind the 9.9.99 logo painted boldly on the tail of every Afriqiyah jet.

It’s really no mystery at all. Ten years ago this month — on Sept. 9, 1999 — the Sirte Declaration was approved, marking the formation of the 53-member African Union.

As such, Afriqiyah hopes to become Africa’s favorite airline, as spelled out in the corporate mission that appears on its Web site: “to link the African countries directly with one another, without the need to suffer through the long connecting flights from Africa to Europe and then back to Africa again.”

The airline’s chief executive officer, Rammah Ettir, says that to a large extent, Afriqiyah has succeeded.

“We have made Tripoli a gateway to and from Africa, shortening routes from Europe and then developing the network to cover a considerable number of African destinations, which will be further extended to Asia and North America,” he explained.

Afriqiyah, which means “African” in Arabic, was established in 2001 and is 100 percent state-owned. So is Libya’s other major airline, Libyan Airlines. At present, it flies once a day between Tripoli and Benghazi, and has no plans on increasing its domestic routes.

However, Afriqiyah’s international network is expanding constantly. It began with five African capital cities: Khartoum, Sudan; N’djamena, Chad; Niamey, Niger; Bamako, Mali; and Ouagadougou, Burkina Faso.

The airline has since added eight more African capitals to its route map, from Brazzaville to Bangui, and will soon begin flying to the South African cities of Cape Town and Johannesburg as well.

Internationally, Afriqiyah has direct flights between Tripoli and seven European cities. It also flies to Cairo, Dubai and Jeddah (Saudi Arabia), and plans to launch direct service to Beijing and Guangzhou in the near future.

“China is a very important destination for us, since it’s developing quite rapidly for African travelers, merchants and businessmen,” said Ettir, noting that worldwide, 650,000 passengers flew Afriqiyah last year, rising to a projected 1 million for 2009.

This year, Ettir expects his airline to see revenues of 200 million Libyan dinars ($170 million), a 20 percent increase over 2008 sales. “The company has established its name in the market,” Ettir said. “We’re much better known than before. Also, we are now using our own aircraft, which were delivered in 2007 and 2008. That has made a great impact on our product offering, and they’re much better than what we previously had.”

October 2009

ARABIC-LANGUAGE SIGN WELCOMES VISITORS TO TRIPOLI INTERNATIONAL AIRPORT, HOME BASE OF AFRIQIYAH AIRWAYS. THE AIRPORT IS THE FOCUS OF A $1.4 BILLION MODERNIZATION PROJECT.

The airline started off with Boeing 737-400 aircraft, but in 2003 introduced all Airbus equipment. In 2006, it signed a $1.7 billion deal with the European aircraft giant to acquire six Airbus A320s and three Airbus A319s, plus an option on five, as well as three Airbus A330-200s, with three options. The first A319 was delivered exactly one year ago.

“We started operations while Libya was still under the U.S.-led United Nations sanctions. This limited our chances of acquiring our own fleet, so operations were carried out using wet-leased aircraft from other operators,” Ettir explained. “We had approached both Boeing and Airbus and were in deep discussions and negotiations with them, but finally Airbus won the deal because they were able to offer much closer delivery dates than Boeing.”

Ettir added: “We are committed to [buying] 23 aircraft from Airbus, and this will take us to 2017, so unless there’s a major change, I don’t think there will be room for other aircraft manufacturers.”

Afriqiyah’s CEO estimates that 70 percent of the airline’s business consists of passengers transiting Tripoli on their way between Europe and various African capitals; the remaining 30 percent of traffic either originates or finishes in Libya.

Only 15 percent to 20 percent of Afriqiyah’s passengers are bona fide tourists, though Ettir says tourism will be “of great importance” to the airline in the near future. The most heavily traveled routes for business right now are between Tripoli and Paris, Accra, SPONSORED REPORT

CHIEF EXECUTIVE OFFICER OF AFRIQIYAH AIRWAYS RAMMAH ETTIR.

London and Dubai.

“Our fares are on the lower side, though we are not a low-cost carrier,” he commented, adding that Afriqiyah and Libyan Airlines don’t compete with each other but rather depend on transit traffic.

Ettir said his airline, which has 1,200 employees, would like to extend Afriqiyah’s route map to the United States — particularly to New York’s JFK and to Houston, the headquarters of many U.S. oil companies.

“Both destinations are in our plans, and we’ve approached our own civil aviation authorities for getting the needed approvals and permissions. We have already assigned a general sales agent in North America, and will soon get in contact with U.S. authorities for their approvals to operate either route,” Ettir said. But he cautioned that “due to tougher regulations, I think it won’t be possible for any Libyan carrier to start direct operations there unless the new airport is completely finished.”

Continued on Page 16

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Telecom Continued from Page 14

according to Mohamed Ben Ayad, general manager of Libyana. That company and Al Madar compete mainly on affordability since 2004, when Al Madar had to slash its prices to keep up with Libyana’s cheaper rates. Average revenue per user now hovers around 25 dinars ($20) per month.

“Both operators are 75 percent owned by LPTIC, so they can drive the market any way they want,” said Brueggen, noting that the lack of competition has kept the quality of service down.

Yet that’s about to change.

Later in September, the Libyan government will open tenders for a third mobile operator — and unlike Al Madar and Libyana, this third operator will be 51 percent owned by foreign investors and 49 percent owned by LPTIC. Three international telecom entities have submitted bids: Turkcell, the leading mobile operator in Turkey, Etisalat of the United Arab Emirates, and Digicel, which operates in 24 countries throughout the Caribbean, Central America and the Pacific. The license is expected to be awarded before year’s end.

“This is obviously a signal that the market is open for investors, so whoever comes in will have a huge job to do,” said Alcatel’s Mohamed Bala, who expects revenues of 80 million euro ($115 million) this year. “With mobile penetration as high as it is in this market, the only thing that will be able to distinguish new entrants is quality of service.”

Under terms of the tender, whichever company wins the license will also be obligated to invest in fixed-line access. “You cannot load everything on wireless,” Bala said. “People by nature would also

Page 16

like to have a fixed phone at home. Also, when you encourage people to call from one fixed line to another, you take the load off the wireless network.”

Wired service, meanwhile, remains very cheap, with service costing the equivalent of $1.50 per month. And all landline calls within Libya are free — which is one way the government distributes its oil wealth to its citizens.

Fixed-line penetration is relatively low, at 20 percent. And that must be increased dramatically to keep pace with Libya’s frenetic economic growth, projected at 6 percent to 8 percent this year.

“It is understood that proper, modern telecom infrastructure will drive businesses in other areas,” said Brueggen. “For example, you need telecom services to survey pipelines and operate an oilfield.

The country plans to build 400,000 apartments in the next two years or so, and for this telecom infrastructure is also required.”

Yet Internet penetration is only 10 percent, lagging well behind mobile and fixed-line density.

WiMAX aims to change that.

With this new technology, anyone within 50 kilometers of a WiMAX tower can plug a simple USB device into a laptop and start surfing the net — eliminating the need for fixed phone lines or Internet cafes.

“We want to provide our residential and business customers a wide range of beneficial, easyto-use wireless broadband services,” said Abdul Majeed Husain, planning and projects department manager at Libya Telecom and Technology.

“Alcatel’s unique expertise and ability to set up a wireless broadband network quickly and economically will enable us to begin offering these new services to our customers in just a few months.”

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Airlines Continued from Page 15

To that end, the Libyan government will spend one billion euro ($1.4 billion) on a new airport for Tripoli that would be able to welcome 20 million passengers a year — up from the current 3 million.

The work is being carried out by a consortium of six companies including Vinci of France, Brazil’s Odebrecht and Turkey’s Tepe Akfen Ventures. The 1,165-hectare site will have two new 360,000-squaremeter terminals and be able to handle up to 100 planes, with parking facilities for some 4,400 vehicles.

French company Aéroports de Paris has been contracted to produce master plans for the project, as well as a new $500 million airport being constructed in Benghazi by Canada’s SNC-Lavalin Nexacor and a $253 million airport for Sebha, 1,000 kilometers south of Tripoli in the Sahara Desert.

“Afriqiyah’s growth was to a large extent limited

by Tripoli’s airport facilities,” Ettir said. “As soon as the new airport opens and we receive the long-haul wide-body aircraft on order, we will be in a better and stronger position in the market, and we expect to double our passenger volumes within the first year.”

Ettir declined to comment on persistent rumors that Afriqiyah and Libyan Airlines may be merged.

Asked about possible privatization of Afriqiyah, he simply said, “We are not there yet.”

“In fact, we are state-owned through different shareholders, so we are not directly sponsored by the government, even though our shareholders are government entities. Privatization means selling shares to the public, which is not the case yet. I don’t think it will be for the next two or three years at least.”

October 2009

Business

LUCRATIVE LINKS

Two Washington Groups Help Americans Crack Libya’s Market ASHINGTON — Two organizations, located barely a block from each other along D.C.’s busy K Street corridor, are vying to boost commercial ties between the United States and Libya.

W

The National U.S.-Arab Chamber of Commerce (NUSACC) and the US-Libya Business Association (USLBA) aim to help American businesses crack North Africa’s most lucrative market — while navigating the lingering bureaucratic obstacles that make Libya such a challenging environment.

NUSACC’s president and chief executive officer, David Hamod, said total U.S. exports to Libya in 2008 came to $720.8 million, just over half of that from two states alone: Texas and Oklahoma. That, of course, is a consequence of Libya’s oil and gas-driven economy, which produces 60 percent of Libya’s public-sector wages and 98.7 percent of its export earnings.

By 2012, however, U.S. exports to Libya will more than quadruple to $3.2 billion, according to NUSACC projections. Drilling and oilfield equipment will account for $856 million, or 26.6 percent of that total.

Other lucrative export sectors will include new and used passenger cars ($260 million in projected 2012 exports); corn ($216 million); trucks, buses and special-purpose vehicles ($172 million); industrial engines ($96 million); and excavating machinery ($82 million).

“These numbers are based on a relatively speedy return to normalcy in the international economy,” Hamod noted. “We ran these numbers earlier this year, in the midst of the downturn, so I think they’re still largely on track. That assumes nothing catastrophic will happen.”

Hamod, 51, is a third-generation LebaneseAmerican who was born and raised in Iowa and took over the NUSACC in 2004. Before that, he ran his own consulting firm, which promoted business between the United States and the Arab world.

In the past five years, he’s been to Libya half a dozen times. “On two of those trips, I led business delegations from the United States, and on both occasions, we had approximately 20 companies, including not only the big guys but also small- and medium-size companies,” he said. “During my first trip, the Libyans were reluctant because for years they had been told not to do business with the Americans.

But now that those hurdles have been removed,

October 2009

there’s a great deal of interest on both sides.”

Unlike the 18-member USLBA, NUSACC has roughly 1,500 member companies, most of them small- and medium-size enterprises. The chamber has been around for nearly 40 years and has offices in Houston, Los Angeles and New York in addition to its Washington headquarters.

“There are so many business development opportunities in Libya that just about every sector from the U.S. has the potential to find a niche,” said Hamod. “Having said that, the visa issues are presenting problems on both sides. It’s not easy for Americans to go to Libya, and it’s not easy for Libyans to come to the United States.”

Hamod added that “the State Department has now put some procedures in place designed to expedite the process, and having a U.S. embassy there also helps a great deal.”

He also said U.S. companies are “the bestpositioned in the world” right now to cash in on Libya’s booming economy, which is expected to grow by 6 percent to 8 percent this year.

“Things don’t change overnight, but I’ve been very encouraged at the high level of interest by Libyan companies in identifying partners in the United States,” he said. “In recent years, Libya’s nascent business community has started to come alive again. The United States still has an excellent reputation in Libya, based on our activities there going back to the 1960s. People have very fond memories of the Americans who worked there.”

The USLBA, meanwhile, says its objective is three-fold: to promote the development of commercial law in Libya so that U.S. companies can do business there; to “educate” the U.S. government and the public about Libya’s new approach to the world; and to overcome “serious obstacles” to the bilateral relationship.

Formed in 2005, the association’s honorary chairman is David L. Mack, former U.S. ambassador to the United Arab Emirates and deputy assistant secretary of state for Near Eastern affairs. Its executive director is Charles W. Dittrich, who’s also vice president for regional trade initiatives at the National Foreign Trade Council.

“Our association isn’t geared toward developing a large membership,” Dittrich explained. “We tend to attract companies which have made a substantial and long-term commitment to the Libyan market.”

General membership in the USLBA costs $10,000 a year, while board membership costs $20,000 annually. Eight companies are board members at present: AECOM, Chevron, BP, ConocoPhillips, ExxonMobil, Hess, Occidental Petroleum and Marathon Oil. The USLBA’s 10 regular members are SPONSORED REPORT

DAVID HAMOD, PRESIDENT AND CEO OF THE NATIONAL U.S.-ARAB CHAMBER OF COMMERCE IN WASHINGTON.

Dow Chemical, Fluor, Halliburton, Midrex, Motorola, Northrop Grumman, Shell, United Gulf Construction Co., Valmont and White & Case LLP. The USLBA has a management contract with the National Foreign Trade Council (NFTC) but remains an independent organization. “Among our core missions at the NFTC is the ending of unilateral economic sanctions,” Dittrich said. Indeed, through its USA*Engage affiliate, the NFTC has pushed incessantly to abolish punitive U.S. measures against Cuba, Syria, South Africa and Iran.

In late September, when the Libyan Leader visits the United States for the first time ever to address the U.N. General Assembly, the USLBA will honor the Libyan leader with a lavish dinner and reception. “We look forward to welcoming him to New York,” Dittrich said. “We think this visit is a milestone in normalizing the U.S.-Libyan relationship.”

Still, because Libya was blacklisted by the United States for so many years, the Libyan Arab Jamahiriya remains a special case.

“Our members are very sophisticated global companies. They’re in any number of markets worldwide. What makes it easy to operate globally are common rules, and countries that are most integrated into the global economy operate by the same standards,” Dittrich said. “Libya, having been isolated and not yet a member of the [World Trade Organization], is not necessarily in sync with global standards. This makes things more difficult because you sort of have to re-invent the wheel.”

On the other hand, Dittrich added, “we see a continuing and growing pace of official visits from Washington to Tripoli and vice versa. Once Libya becomes a routine and sort of commonplace for U.S. companies to do business, then we’ll consider our work done.”

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Defense

SECURING TIES

Conference on Security Technology Reflects New Level of Libya -U.S. Trust

T

he West is extending its hand of friendship — and Libya is reaching to greet it. Since the United States lifted its sanctions on Libya in 2004, Tripoli has opened its doors to U.S. and European business executives —

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even in once-unthinkable areas such as security and weapons sales.

Libya’s Security Technology Exhibition, held July 27 to 29 in Tripoli, was aimed at promoting the importance of security technology in Libya, and educating local officials about the urgency of adopting new security systems.

Representatives from at least 35 local and foreign companies — specializing in everything from border control to software to maritime surveillance — were on hand to give presentations and host workshops. The event was organized by Alalama Group, a local media, events and public relations company.

Tom Ridge, the former Pennsylvania governor who

served as secretary of homeland security in the Bush administration, opened the exhibit with a keynote speech. Addressing 100 delegates, he spoke about striking a balance between national security and the needs of the people.

“Your economic security is as important as your physical security. In a word that has grown much smaller, the security and prosperity of every nation depends upon the security and economy of others,” Ridge said. “As you determine the kind of security you will use, you need to think seriously of the vision you have as a leader. What do you need? What do you want security to look like at your airports and government agencies?”

Despite the warming ties, many in Libya doubt the West’s sincerity. As if addressing that fear, Ridge told his audience that “it is important our efforts follow a similar path and that we share information, work together, identify our vulnerabilities and fill them with good technology.”

He added: “The combination of vision, people and the right technology will enable Libya to fulfill its needs.”

For event organizers, the Security Technology Exhibition was a way of serving their country while promoting their own interests.

“For so long, security was a non-topic in Libya. You couldn’t even talk about it,” said Ayman Annaffati, Alalama’s general manager. “We are trying to bridge the gap between the government and citizens, and at the same time help Libya catch up with the rest of the world.”

Also speaking at the event was Gary Messina, a top official at defense contractor Raytheon International, and Carol Haave, who served as the Homeland Security Department’s assistant secretary for international affairs in the Bush administration.

Because of Libya’s excellent ties with the rest of Africa, the country has been flooded with African immigrants crossing through Libya on their way to a better lifestyle in Europe. As a result, Libya is under pressure to secure its vast, remote borders.

“It is often said that Libya is the gateway to Africa,” said Haave. “If you get business in Libya, you’ll get it in Africa.”

— Yusra Tekbali

TRUSTED INNOVATION. YESTERDAY, TODAY, TOMORROW. For more than 80 years Motorola has been known for its inventive spirit, focused on advancing the way the world connects. Our technologies enable families to stay in touch, make businesses more productive and governments more efficient.

A company of firsts with a rich heritage, Motorola continues to lead the next wave of innovations that connect people and deliver mobility.

motorola.com/government MOTOROLA and the Stylized M Logo are registered in the U.S. Patent & Trademark Office. All other product or service names are the property of their respective owners. © Motorola, Inc. 2009. All rights reserved.

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October 2009

NUSACC: Gateway to Libya

National U.S.-Arab Chamber of Commerce (NUSACC) 1023 15th Street, Suite 400, Washington, DC 20005 (T) 202-289-5920 (F) 202-289-5938 www.nusacc.org October 2009

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October 2009