Libya: a reforms guide identifying top reform priorities to improve business environment

The World Bank’s “Ease of doing business” index ranks Libya at its bottom end (186th out of 190 countries). In a large-scale consultative process with Libyan entrepreneurs, chambers of commerce, government officials as well as Libyan and international economic experts, a recent survey sheds light on issues hindering Libyan enterprises' growth potential, such as the unavailability of equipment leasing, the high legal fees of enterprise registration and registration renewal, and the lack of online credit card payments.

Based on the survey’s findings, a consortium of Libyan and international experts identified the key issues Libyan enterprises of all sizes and sectors said they face and offered concrete recommendations to facilitate a sustainable reform process.

The “Reform Guide’s” main goal is to enable constructive public-private dialogue and provide practical proposals to accelerate the economic reform process by focusing on key and achievable steps that will have the maximum positive impact on the country's economy.

“This guide is considered a practical beginning to guide government reform measures and enrich the dialogue between the public and private sectors in order to improve the business environment and investment climate. The Ministry of Economy and Trade will work continuously to build an effective dialogue that enhances confidence between stakeholders from the public sector, the private sector, the finance sector, and civil society institutions”. Said Mr. Suhel Busheha, Libyan Deputy Minister of Economy and Trade for Trade Affairs.

“Identifying the necessary reforms for improving the business environment in Libya is the first step towards a more diversified and resilient economy and sustainable growth,” said Marton Benedek, Head of Cooperation at the EU Delegation to Libya. “Libya has an enormous potential and a vibrant start-up ecosystem. The EU aims to support the growing network of SMEs in Libya and to help job-seekers build the skills on demand in today’s job market.”

Main recommendations and suggestions for implementation

According to the results of the consultation, a large scale of recommendations has been suggested to reinforce the business environment in the country and remove the barriers faced by the private and public sectors in conducting their business.

Thus, as an example of some of the suggested reform recommendations, the report encourages making equipment leasing possible for Libyan companies.

Equipment Leasing is regarded as a “low-risk form of lending” as the equipment remains the property of the leaser and as a “powerful economic and social growth tool” by international financial institutions, OECD countries, the European Union, and all leading emerging economies. Leasing will allow Libyan enterprises to use newer and better equipment at a low cost.

Also, in addition to implementing the International Accounting Standards in Libya, an important part of the reform would be allowed by introducing clear legal grounds for both the late or non-payment of taxes without penalty and for appeal possibilities against fines, especially in the case of force majeure.

Here is a glance at the core of the identified strategic priorities for reform:

- Enabling the official registration of limited liability companies with 1 LYD capital ;

- Reducing the minimum capital or deposit for Libyan enterprises with foreign capital ;

- Enabling the official registration of unipersonal companies with 1 shareholder ;

- Abolishing the practice of demanding a minimum amount of company capital to be eligible to public tenders ;

- Lowering the official legal fees for enterprise registration and registration renewal ;

- Introducing speedy and effective procedures for enterprise interim relief ;

- Creating an effective and operational registry of intellectual property rights ;

- Enabling online payments by credit card ;

- Reinstating letters of credit for the international payment of imported goods.

Part of these measures would enable Libyan SMEs to partner with all relevant SMEs worldwide and, therefore, contribute to the development and growth of the Libyan economy. Also, these measures aim to make Libya more competitive in the international market thanks to increased use of technology and know-how transfers from developed countries’ SMEs.

The relaxing of legal trade and business rules is another essential reform to enable the reduction of the level of the informal economy in Libya and boost entrepreneurship, enterprise creation, and private sector development.

The guide also points out that in facing emergency situations in which Libyan companies can’t rely on judiciary processes, the implementation of procedures for interim relief has a positive impact on the fragile economic situation of most Libyan SMEs by increasing their resilience to the challenging business life.

Focus on the methodology: a multi-stakeholder consultation process

Expertise France, in collaboration with the Libyan Chambers of Commerce, the Union of Chambers of Commerce, and the Ministry of Economy and Trade, supported the production of this Reforms Guide on priority reforms, gathering the feedback of more than 600 Libyan companies from all over the country. This document allows the identification of the most crucial improvements to the business environment that could strongly and positively impact the development of the private sector in Libya.

Based on a robust consolidation of qualitative and quantitative data, this Reforms Guide also represents a reference that may be useful for the international community when considering the support that it may bring to its Libyan partners in developing the private sector in the country.
It can be considered as a benchmark that, if this exercise is repeated periodically, is useful to measure the impact of public policies and reforms and allows for reorienting these interventions depending on the evolution of the needs of the private sector stakeholders.

Dialogue and cooperation, key to implement sustainable reforms

In order to have the maximum positive impact on the majority of Libyan enterprises in the minimum period of time, whatever their size, sector of activity, and geographic location, the guide provides some monitoring and measurement of progress made while keeping all stakeholders alert and active.

Achieving reforms is primarily the government’s responsibility. However, change for the best in Libya is a common concern and, therefore, a common duty to all Libyan stakeholders (private sector, media, civil society) and the international community committed to supporting the social and economic transition process in Libya.

For more details, you can read the Reforms Guide here