Libyan revolution opens doors to foreign investment

These companies must also contend with the fact that political risk insurance is currently off limits in the troubled country.

In the new Libya there will be real opportunities, particularly for those companies from countries that were vocal in their support for the new regime and were part of the Nato taskforce, said Mr Van den Born.

These include countries such as Britain, France and Italy, along with certain Arab states such as Qatar.

But there remain some very daunting challenges ahead. The country will not move from four decades of dictatorship to a plural democracy overnight.

Security, not only for Libyans but for anyone seeking to do business in Libya, will be the key concern, at least in the short-term.

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The conflict has left a very heavily armed population and Libya’s National Transitional Council (NTC) will need to take urgent steps to disarm and demobalise the combatants, said Mr Van den Born.

Security must remain the number one priority in order to attract the necessary investment the country now requires, he added.

The oil industry is the obvious area for opportunity and the likes of Italy’s Eni as well as BP, Shell and others have already made overtures to the NTC about new contracts.

Also Vitol, the world’s largest oil trader, has continued to supply the NTC with product throughout the conflict and for which they still have to be paid-—this supposedly runs into the hundreds of millions of dollars.

“It is these companies who have supported the incoming regime, rather than say those from Russia, China and Brazil, who will benefit,” said Mr Van den Born.

The general consensus is that Libya will not be another Iraq because there is no Sunni-Shia divide and, secondly, the liberation of Iraq did not lead to the formation of a new government, whereas in Libya there is a government in waiting.

“However, Libya remains very tribal and the NTC will have to unite the various factions and tribes and include all Libyans in the new administration—unlike in Iraq where the Baath party were excluded at great cost,” explained the broker.

It is doubtful that there will be a threat from Islamic extremists, as they do not appear to have any significant following in Libya, he continued. However, Islamists will have an increased influence and degree of control but this should not be a threat to the West or provide instability, he said.

For those looking to invest in Libya, insurance will have a very important role to play.

The major oil companies largely self-insure so this is less of an issue, explained Mr Van den Born. But those companies looking to be involved in infrastructure projects or supply equipment face such risks as contract frustration, confiscation of assets, physical loss or damage as a result of political violence and any resultant business interruption risks. And they would like to have access to the insurance market.

“The insurance market is currently off-cover for political risk insurance in Libya and it may take some time before they dip their toes back in this market,” explained Mr Van den Born.

Currently there is some $500m in notifications of claims in the market—largely involving contracts with French and German capital goods exporters for non-payment of goods and unfair calling of bonds, he told Commercial Risk Europe.

If the new regime honours these contracts then a number of these claims could be resolved, overall losses reduced and the insurance market could more quickly resume business as usual.

However, insurers are aware that they ‘would look pretty stupid, particularly to their reinsurers, if they were to open for business again only to be hit by another influx of losses,’ argued Mr Van den Born.

“So the current unavailability of political risk insurance could be a hindrance to foreign direct investment in the short term,” he concluded.