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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 19,131     71
GNI per capita
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Ranking is given out of 208 nations - (data from the World Bank)

Books on Libya

Update No: 082 - (29/09/10)

A Newer Kind of Libyan Business Risk :Another ‘Profumo Affair’
In September, Europe, indeed the West, has come face to face with a newer kind of Libyan political and business risk. Typically, companies and governments are interested in the kinds of situations and issues they will have to confront in Libya, but an Italian bank CEO has learned the kind of risks that Libyan investment can generate at home. The increased presence of Libya, through its Investment Authority, in the Italian-German Unicredit group has produced a deep fracture at the board of what is Italy’s largest bank, leading to the resignation of their CEO, Alessandro Profumo, who had been widely blamed/credited for having opened the door to Libyan petrodollars. This is not the first time that Libya has taken important stakes in Italian companies. In the 1980’s, Libya owned close to 15% of Fiat and LIA had already an important share package in Unicredit, some 4.7% (It had shares in Banco di Roma, which was absorbed by Unicredit in 2005). The scope of Libya’s increased investment is about 2.8%, bringing Libya’s total ownership to about 7.5%. The problem is that in the current ‘protectionist’ climate in Europe, the increased Libyan participation has raised several political eyebrows. Unicredit, based in Milan, has become a pawn in Italian political affairs within the majority coalition headed by Silvio Berlusconi, which relies on strong support from the separatist and anti-migration Northern League party.

A Verona (very much Northern League territory) based foundation, Fondazione Cariverona, under strong influence from the mayor, a member of the League, harshly criticized the Libyan capital ‘climb’ in Unicredit, and reduced its own significant participation from almost 5% to 4.6%. Concern over Libyan involvement then raised tension within the board such that its chairman, a German, Peter Rampl, forced out Profumo, the architect of Unicredit’s success (one of few banks that did not need to borrow from governments in the wake of the financial crisis two years ago). Evidently, the Libyan Investment Authority attracts the wrong kind of attention and the CEO has been, by all practical accounts, sacked because he gave the Libyans more room; in fact the Libyans are now the largest single shareholders, giving them power within the board. Qadhafi’s money is more than welcome, but their potential influence in the governance and affairs of the companies in which they have shares, is not. Libyan government money is still associated directly with Qadhafi. It is to no avail that the Libyan 7.5% share package is actually divided between two distinct trading entities, the Libyan sovereign fund (LIA) and the Libyan Central Bank. Mr. Profumo told the board he had no knowledge of the Libyan intentions, saying it was an ‘autonomous’ move. It should be noted, that Mr. Profumo’s success in warding off the worse effects of the financial crisis, was in no small part because the Central Bank of Libya bought the initial 4.9% stake in 2008. In 2009, Fahrat Omar Bengdara, the head of the Libyan Central Bank joined the UniCredit board as deputy chairman.

Qadhafi’s Image is not Helping
The clownish spectacle that Qadhafi gave during his visit to Rome at the end of August and the polemic it has raised within the opposition and the majority, has no doubt contributed to further tarnishing the image of Libya. Libya's ‘unusual’ leader suggested “Europeans should convert to Islam” and “pay billions for him to stop African migrants crossing the Mediterranean…Tomorrow Europe might no longer be European and might even be black, as there are millions [of Africans] who want to come in”, he told a group of Italian business leaders interested in securing deals in Libya. He is infamous for this kind of speech, differently phrased of course, when he makes the rounds of member states of the African Union of which he is the president

Of course Italy does actually pay Libya to keep migrants out, having signed an agreement to stop migratory flows to the tune of EUR five billion, which include gunboats from the Italian navy. Recently, one of these gunboats was engaged in a most unusual episode. The Libyan captain and crew of the Italian built vessel, which had Italian officers training the Libyans aboard, as part of the deal, started shooting against an Italian fishing trawler supposedly found operating in Libyan waters. In any normal country, such an episode would have raised many questions in parliament and certainly resulted in a resignation or two, but not in Berlusconi’s Italy, which has made Libya an important pillar of its foreign policy.

The Italian media, the opposition media, which now includes many centrist papers, derided what has become a "humiliating circus". No doubt, such spectacles raised concerns in the co-German controlled board of Unicredit, where the new Libyan control is seen with embarrassment. Interestingly, the Libyan government, since the ‘Profumo’ scandal, has downplayed any rumours that it intends to invest in other European companies, oil ones especially. This may well be another internal struggle between pragmatists and ideologues; however, the Italian debacle will not have been lost on the Libyans; they have even issued a formal apology for the fishing vessel incident. The head of Libya’s National Oil Company, Shokry Ghanem, who has held his share of differences with the leadership and who suggested that NOC buy shares in British Petroleum (BP) or the Italian ENI, was contradicted by the General People’s Committee, which issued an official communiqué to this effect. The statement said that only the Libyan Investment Authority (LIA), the very same that raised Libyan ownership of Unicredit beyond the ‘limit of good taste’, has the power to decide in which foreign equity to invest. Interestingly, BP and Britain have confronted considerable scrutiny because of their Libyan connections and that, combined with the political fallout from the Unicredit deal, have turned the subject of Libya’s foreign investment into a very sensitive topic.

Apart from the questions of governance, the cultivated buffoonish reputation, do Western companies and governments have reason to worry about an excessive Libyan presence in their affairs? Indeed, Libya’s behaviour, even, or perhaps especially, its recent one, does carry significant risk. The main concern for a European country is that it could end up in a dispute with the Libyan leadership over entirely unpredictable events. The case of the two Swiss executives, who were arrested in Libya after Qadhafi’s son, Hannibal, physically attacked a hotel maid and was arrested , was an unpredictable risk, which ended up ruining Swiss-Libyan relations and, which put two innocent men in prison over alleged visa violations. The dispute lasted almost two years, and there are rumours the Swiss were planning to launch a covert military action to free its citizens. Three Libyan nationals were arrested for harassing members of the Libyan opposition in Germany. The prosecutor and many German company CEO’s with employees in Tripoli, or Benghazi, must be have lost plenty of sleep, wondering what consequences would result. Actions, legal ones, adopted against certain Libyans in Europe, may end up having disastrous consequences for Europeans residing and working in Libya. More Libyan shares give Libya excessive advantage; so far, it has been able to hold European workers as virtual hostages (the Swiss, the Bulgarian nurses) on flimsy charges. Increased Libyan investments and fickle responses to international crises, for which the Libyan government has shown a special predisposition, can generate considerable market risk.

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