Arab Spring may turn page in Egypt-Libya economic relations

Sara El-Essawy and Ahram Online, Tuesday 8 Nov 2011

Now Gaddafi is gone the two nations may be primed for a better economic partnership, with Egypt eager to provide the labour and expertise to rebuild its war-torn neighbour

Libya supplies
Bringing it all back home: Libyans unload much needed supplies earlier in 2011 (Photo: Reuters)

Can revolutions succeed where decades-old dictatorial systems failed, and usher in stable, mutually beneficial economic relations between Egypt and Libya? The coming months may bring the answer. 

Last month's brief visit to Cairo by the chairman of Libya's National Transitional Council, Mustafa Abdul Jalil, came just days after he declared his country liberated, and opened what could be a fresh page in the two countries' oft-stormy relationship.
Economics and investment issues were said to have topped the agenda during Abdul Jalil's short meeting with Egypt's de facto ruler Field Marshal Tantawi and interim Prime Minister Essam Sharaf. 
One of the most pressing issues involves the estimated one million Egyptians who lived and worked in Libya before the country's uprising. Many are still in Libya, while others are considering a return, especially given Egypt's dire economic straits and squeezed job market.
The problem, however, is ensuring an improvement in working conditions and contracts for those employed in Libya -- long a bone of contention for migrant workers. 
The rebuilding of Libya after six months of artillery bombardment and bombing also presents strong opportunities for Egyptian construction and logistics firms.
Egypt's current leaders stressed their interest in full participation in the Libya's regeneration, but wishes alone may not be enough when facing fierce competition from companies from other foreign countries eager for a share of the pie.
A matter of days before Colonel Gaddafi's ignominius death in his hometown of Sirte, a delegation representing 80 French companies visited Libya with a view to new infrastructure projects -- sentiments echoed by their British and US counterparts. All three nations played major roles in the NATO no-fly zone that guaranteed victory for Libya's rebels.
Some French, US and UK companies already operated in Libya before the revolution, but they were greatly outnumbered by those from Turkey, China and Libya's old colonial overseer Italy.
Gaddafi opened the doors for foreign investment in his nominally socialist nation in 1997, with the issuance of Investment Law No. 5, adding a number of reforms in following years, most notably after the lifting of economic sanctions in 2003. 
In a visit to Tripoli around this time last year, a delegation of Egyptian businessmen and investors, headed by the former Minister of Trade and Investment Rachid Mohamed Rachid discussed Egypt's participation in the country's large-scale future projects. The ambition was clear to see in the construction projects taking shape across Libya's capital; the trip, however, ended on an uncertain note, with no agreements signed.
Before the Arab Spring hit both countries, the total volume of Egyptian investments in Libya before was valued at US$3 billion, according to 2010 data from Egypt's investment authority. Most investment was in the energy, electricity and construction sectors.
Egyptian investors faced major obstables in Libya during Gaddafi's rule, with all ventures requiring a local Libyan partner to hold a 51 per cent stake, and transferring funds being a complex process. On the other side, an estimated 236 Libyan companies were reported to operate in Egypt.
All this changed with February's upheavals.
The volume of Egyptian exports to Libya fell 65 per cent for the first nine months of 2011, reaching LE1.463 billion, according to Egypt's state statistics agency CAPMAS. 
Many of these exports were foods, medicine and plastics. In 2010, the figure was LE5.265 billion, with Egypt importing US$275m from Libya in return.
Informal trade also played a part in economic relations, through the smuggling of goods across the the two country's border. The smuggling of weapons from war-torn Libya has become a worry for Egypt, and was also one of the main issues raised during 
With Gaddafi's fall from power, a new investment framework may emerge.
The signs of growing economic convergence could be seen in Egypt's interim government's request to the Libyan transitional council that Egyptian firms Orascom Construction, Giza General Contracting and Arab Contractors all be considered for future contracts. The first stage of reconstruction is estimated to involve around US$ 200 billion in work.
On the sidelines of the Libyan delegation's visit, the Egyptian Businessmen's Association signed a protocol with the Libyan Businessmen's Association, agreeing to the founding of a joint business council to encourage investment and trade. 
The Arab Contractors Company and Giza General Contracting have been involved in developing roads, government buildings and airports in Libya for years, but their work stalled after civil war broke out. Now the two are eyeing even larger shares in the reconstruction process.
Egyptian companies in other economic sectors such as chemicals, pharmaceuticals and energy could all benefit from entering the Libyan market and forming alliances with local firms, say some analysts.
The two countries, after all, have much in common: both suffered for years from a lack of development. In Egypt's case due to a lack of vision and planning, in Libya's it was due to wreckless and idiosyncratic decision-making by the man at the top.
Now, with the upheavals of the so-called Arab Spring, the two neighbors are primed for a new partnership. But they will have to struggle to capitalise on it before the opportunities are seized by others.
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