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The 'new Dubai'? Libya open for business

By Dale Gavlak
Associated Press Writer / August 27, 2010

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BENGHAZI, Libya—In the outskirts of this city, Libya's second largest, row after row of sand-colored concrete apartment blocks and villas are sprouting from the desert. Hundreds of kilometers away, construction cranes dot the Mediterranean skyline of the capital, Tripoli.

The multibillion dollar construction frenzy taking place is the latest and most visible sign of Libya's drive for growth. It's a push that largely ignored the global financial meltdown that left other oil-rich Arab nations stumbling over the last couple of years, and reflects how Libya is tapping its oil wealth to reshape a country isolated for years by sanctions and international disdain.

Libya is "really trying to become, for lack of a better term, a new Dubai." said Carlos Caceres, a representative of the Los Angeles-based engineering giant AECOM working in Benghazi. He was referring to the United Arab Emirate sheikdom whose stratospheric rise was rivaled only by its staggering debt woes.

AECOM is overseeing a $80 billion project to build 160,000 housing units throughout the country, about a quarter of which will be in Benghazi, and refurbishing sewage and paving roads there. Overall, however, Libya plans to spend $500 billion over the next decade on a host of projects.

New universities are being planned, Tripoli's shabby airport is being overhauled, new Toyota and Honda sedans abound in the streets and trendy cafes dot street corners.

The International Monetary Fund forecasts Libya's economy will grow by 5.4 percent this year, while the U.N. said foreign direct investment into the country quadrupled from $1 billion in 2005 to $4.1 billion in 2008.

"It's absolutely the boom country at the moment," said Richard Barber, a British supervisor with HanmiParsons, a South Korea-based construction management company. "So many engineers from Dubai and the rest of the Mideast are coming here now and finding work, including me."

The country's surge sits in stark contrast to the Libya of just over decade ago, when it was struggling under international and U.S. sanctions linked to Libyan leader Muammar Gadhafi's support for terrorism and the country's weapons of mass destruction program.

Gadhafi's decision to renounce terrorism, hand over the two suspects wanted for the 1988 airline bombing over Lockerbie, Scotland, and pay compensation to the families of the 270 people killed in the attack paved the way for Libya's re-entry into the international community. The U.S. restored relations and reopened its embassy, American and European oil firms have flocked to the country, home to Africa's largest proven oil reserves.

In addition, the government is pushing to revamp the business climate and a rapidly growing private sector has actively sprung up, reflecting a system that analysts say is surprisingly capitalistic in a socialist nation.

The projects under way are as much a product of that contradiction as they are a reflection of Libya's challenges.

Unemployment, according to the CIA, is pegged at around 30 percent, and Libya's youth -- who comprise the majority of the population -- struggle to find affordable housing. It's a prerequisite here, like elsewhere in the Arab world, for marriage.

The banking sector is being reformed. Italy's UniCredit was recently awarded the first international license. A second license has been offered, though it remains unclear when, or if, it will be awarded.

But more work needs to be done, said Tarek Alwan, the managing director of SOC Libya, a London-based company that advises firms looking to do business in Libya.

"Even credit cards are not widely accepted. Cash is still 'king,'" he said.

More troubling for businesses is Libya's image and the country's unpredictable politics.

Little, if anything, in Libya happens without a nod from Gadhafi, who has ruled the nation for more than 40 years. Critics say the "Brother Leader," as he is known domestically, is possibly the biggest single impediment to Libya's successful and complete reintegration into the international community.

In a decision that left experts scratching their heads, Gadhafi last year floated the idea of disbanding the government and distributing the country's oil revenues directly to the people. The move -- which he described as necessary because of corruption in the system -- failed to materialize.

Oil companies also found themselves renegotiating their contracts, and were squeezed into agreeing to turn over a bigger share of their production and paying bigger signing bonuses.

Libya's past deeds still weigh on its image.

Celebrations last August for the return of the terminally ill Libyan agent who was the sole person convicted in the Lockerbie bombing from the Scottish prison ignited a furor that left the U.S. and Scotland in a political sparring match. It also left oil giant BP PLC fending off allegations that it lobbied for the man's release just eight years into his sentence in order to win oil concessions.

Whether or not BP had a role in the decision to send the Lockerbie bomber home, "they're paying the price for it," said John Hamilton, a Libya expert and contributing editor of Africa Energy. "And other companies looking at Libya are going to have to realize that they may have to deal with similar issues" there.

For their part, the Libyans are simply focusing on making up for lost time.

Throughout Benghazi, new sewage pipes and electrical lines are being laid. In Tripoli, Turkey's EMSAS Construction is working on a $1.3 billion luxury high-rise complex along the road to the city's airport. The Bab Tripoli complex, to be completed in November, will include 2,000 apartments, a hospital and a giant mall with an ice-skating rink and a 22-lane bowling alley.

Another Turkish firm, TAV Construction is working with Athens-based Consolidated Contractors Co. to finish the revamping of Tripoli's international airport by next March. The project includes two new terminals that can handle 20 million passengers annually. Marlton, New Jersey's Hill International is also contracted for about $8 billion to manage the design of 25 new university campuses.

Top international hotel chains Intercontinental, Sheraton and Marriott will soon open their doors for the first time in Tripoli as Libya looks to draw more businessmen in and tap the tourist market with its beaches and Roman ruins.

Other projects include introducing 4G wireless services into the country and building a high-speed rail-link along the Mediterranean coast between Sirte and Benghazi, a distance of about 310 miles (500 kilometers). Future plans envision the General Motors-built trains running straight across from Tunisia to Egypt.

Gene Cretz, the U.S.'s first ambassador to Libya in 36 years, said the nation is keen to have American companies return because "our companies tend to go beyond the investment ... to provide capacity building."

But he said the Libyans have cautioned U.S. firms about doing business there. The advice: "'They can't come to hit and run. We want them to stay and help us. We want technology transfer and capacity building,'" he said.

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AP Business Writer Tarek El-Tablawy contributed to this report from Cairo.