Swiss trade relations with Libya have been growing steadily since the lifting of United Nations sanctions in April 1999. Imports, particularly of oil, have risen sharply.

Swiss companies, along with many western investors, believe Libya offers great potential. Rich in oil wealth, Libya is eager to modernise its oil production facilities which were closed off from foreign investment during the seven-year embargo. Telecommunications and transport are also in need of foreign investment and technology.

With the end of sanctions, Libya began to liberalise its foreign exchange management, as well as consumer prices. Private companies are allowed and prosper, especially in new areas such as tourism and communications.

Swiss business interests have grown, albeit at a moderate pace. In the first five months of this year, exports to Libya amounted to SFr46 million - a 50 per cent increase over the same period in 1999.

The value of imports from Libya has, however, grown at a rate of 150 per cent to SFr168 million - more than three times the total of exports. Libya has become Switzerland's main supplier of crude oil.

Whereas Tripoli would like to attract new and small-scale businesses, the Swiss companies which have responded to the new opportunities are mainly those with long-established links. The structure of exports remains traditional, with machinery leading pharmaceuticals and chemical products.

"Swiss entrepreneurs are cautious," says Elias Attia, secretary general of the Arab-Swiss chamber of commerce in Geneva who is trying to focus attention on the Libyan market. "They only venture onto new ground when they find it well prepared."

Switzerland's Export Risk Guarantee (ERG), a government-funded scheme which was closed for exporters to Libya during the sanctions years, has been reopened. But insured exports stand at only SFr11.4 million - a fraction, for example, of the ERG's engagement with Algeria (SFr98 million).

When Libya's foreign minister, Abdurrahman Shalgham, attended the Economic Forum in the Swiss resort of Crans-Montana last week with a large delegation of business experts, they met few, if any, prospective partners. "We came here because we need investment in tourism infrastructure," said Sani Mohammed Naas of the Libyan Tourism Investment Promotion Board. "But not a single interested party from Switzerland came to see us."

It may not all be the fault of a conservative Swiss business culture. Whatever the official pronouncements, the Libyan market is still considered difficult.

Foreign businesses have to deal with a de-centralised government structure of People's Committees. "The most important and difficult thing when you are a newcomer is to find out who makes the decision," says Ulrich Beckers, formerly a Ciba Specialty Chemicals representative and now an independent consultant in Reinach near Basel. "However, once you're in, business becomes easy."

Some businessmen who participated in a fact-finding mission organised by the Arab-Swiss chamber of commerce last November were taken aback by what they saw as the incompetence of some of their hosts. "The trip was more often enraging than encouraging," said one participant. "In some factories the people responsible on the ground didn't even know we were coming."

Foreign minsiter Shalgham said during his recent visit to Switzerland he was aware of inadequacies and the problem of red tape. "We are revising our regulations in order to make them helpful for foreign investors," he said.

One area which has not been tackled in the slow process of reform is bilateral investment agreements. Equally, Libya has not signed a number of international trade agreements.

Investors are required to enter into joint-ventures and are barred from holding a majority of shares. "Joint-ventures are designed to guarantee the transfer of technology, but many investors from Switzerland find it hard to agree to the condition under the circumstances," says Attia.

The reputation of the Libyan leader, Muammar Ghaddafy, as a leader of fickle convictions, as well as his undiminished power have led to continued caution towards the Libyan market.

Since hosting a summit of the Organisation of African Unity last September, Ghaddafy has been keen to pronounce on the theme of African integration. Libyan officials are now also trying to promote their country as a bridgehead to Africa. "But the idea didn't go down well with western business representatives," says a Swiss trader who often travels to Tripoli.

Another hurdle to the full normalisation of bilateral relations may, however, soon be cleared. The Libyan government, through its agencies and corporations, owes Swiss companies SFr60 million.

In an unofficial act of retribution, the debts were never serviced or repaid during the seven-year period of sanctions. According to Paul Koller, Switzerland's ambassador to Tripoli, the issue should be resolved "soon."

by Markus Haefliger

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