Cablegate: Embassy Tripoli

VZCZCXRO2912
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHTRO #0925/01 3231604
ZNY CCCCC ZZH
O P 191604Z NOV 09
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5489
INFO RUEHXK/ARAB ISRAELI COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFISS/CDR USAFRICOM STUTTGART GE
RHEHAAA/NSC WASHINGTON DC
RUEAIIA/CIA WASHDC
RUEHTRO/AMEMBASSY TRIPOLI 6038

C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 000925

SIPDIS STATE FOR NEA/MAG; STATE PLEASE PASS TO USTR; COMMERCE FOR NATE MASO

E.O. 12958: DECL: 11/19/2019

TAGS: ECON PGOV EFIN EPET LY

UBJECT: 110 LIBYAN COMPANIES PRIVATIZED: HEAD OF LIBYAN PRIVATIZATION AUTHORITY REPORTS ON CONTINUED PROGRESS REF: TRIPOLI 869 TRIPOLI 00000925 001.2 OF 002

CLASSIFIED BY: Gene A. Cretz, Ambassador, U.S. Embassy Tripoli, Department of State. REASON: 1.4 (b), (d)

1. (C) Summary: Dr. Mahamud Ahmed Al-Ftise, head of the Libyan Privatization and Investment Authority, told Econoff November 10 that Libya's efforts to privatize its state-owned enterprises (SOEs) are progressing and that 24 companies have been privatized in 2009, resulting in a total of 110 companies privatized in Libya since the process began four years ago. The Authority has also established a "one-stop shop" facility for foreign investors, designed to ease access to government offices ranging from visas to customs. Al-Ftise requested U.S. assistance in providing training to the Authority's Training Department, as well as to the newly privatized Libyan companies. He also invited U.S. firms to bid on any of the companies undergoing privatization. End summary.

2. (C) During a November 10 meeting, Dr. Mahamud Ahmed Al-Ftise, Secretary of the Libyan Privatization and Investment Authority, reported that Libya's efforts to privatize its state-owned enterprises (SOEs) were moving forward, with 24 companies privatized this year. He said that in total, the Authority had worked to privatize 110 companies since the process began about four years ago. Al-Ftise noted that the Authority's future plans included privatization of oil service companies, which currently make up 49 percent of the companies own by the National Oil Company (NOC). Additionally, 25 industrial plants are slated to be privatized in the next few years, including a steel mill. As an example of how the privatization process functions in Libya, he explained that ten-percent of the shares of the steel mill would be offered on the Libyan Stock Market, and over the long-run, the mill would be completely privatized. He characterized the entire privatization process as completely "transparent." [Note: This contradicts information we have received during separate meetings on the privatization process, as reported reftel. End note.]

3. (C) When asked whether foreign companies had purchased any of the newly-privatized Libyan firms, Al-Ftise said that foreign firms had not expressed much interest in the "old factories." He explained that the Authority encourages buyers to purchase not only the assets of formerly state-run companies but also to keep existing employees on the payroll. [Comment: This is often an unattractive prospect for foreign investors, as Libya's state-owned companies are infamous for low productivity and over-staffing due to Libya's generous labor laws. End comment.] In what he termed as a "trade-off," he explained that the Authority would charge a lower price if the buyer accepted a company with its current employees.

4. (C) According to Al-Ftise, the Privatization and Investment Authority does not widely advertise which companies will be available for purchase, but rather, it has adopted a more targeted approach towards possible buyers, both Libyan and foreign. He said U.S. investors would be welcome to bid on any of the available companies and he cited a chemical plant as a potentially interesting property xxxxxxxxxxxx. He noted this chemical plant would need to transition away from using mercury in its production, and an American firm might have expertise in this particular area. [Comment: Econoff has visited the area near the factory and Libyans living nearby have reported wildlife with genetic abnormalities, even showing photographs of two-headed fish. It is doubtful an American firm would want to take on liabilities associated with using mercury. End comment.]

ONE-STOP SHOP OFFERS GOVERNMENT SERVICES: GREAT IDEA BUT IS ANYONE HOME?

5. (C) The staff of the Privatization and Investment Authority took Emboffs on a tour of the new "one-stop shop" for investors seeking information and help in entering the Libyan market. The "shop" features desks for representatives of the various government offices that investors need to contact in order to do business in Libya, such as tax, electricity, industrial zones, manpower (labor), customs, and immigration (covering visas). During our visit, however, only one desk was occupied (immigration).

U.S. TECHNICAL ASSISTANCE WOULD BE WELCOME

6. (C) According to Al-Ftise, the newly-privatized companies may have training needs that the U.S. can help with, including TRIPOLI 00000925 002.2 OF 002 training for their boards of directors on their roles and responsibilities, as well as the need for technical assistance in areas such as marketing, quality assurance, and operational management. Al-Ftise further requested that the U.S. provide Arabic speaking consultants to provide training and technical assistance to the Authority's ten-person Training Department.

BIO NOTE

7. (C) Al-Ftise received a scholarship from the Libyan Government to study in the U.S. and earned his BSc in Industrial Engineering from the University of Toledo (Ohio) in 1981. He then went to Hungary, where he received his PhD in Project Management in 1996. Between his return from Toledo in 1981 and taking up his PhD studies in Hungary in 1996, he worked for the General People's Committee for Industry and Minerals. Al-Ftise is married with five children and has several grandchildren. While in the United States, he and his wife had a daughter, who is a US citizen. She is a dentist and lives in Libya. He speaks English fluently and speaks (but does not read) Hungarian.

COMMENT

8. (C) The Privatization Authority appears to be making progress, in terms of transferring 110 state-owned enterprises to private ownership. The Authority now has new offices in downtown Tripoli (as opposed to shabby offices in a former factory in the suburbs) complete with its "one-stop shop" to facilitate foreign investor access to government services. As reported in reftel, however, the privatization process is not readily transparent, and many of the companies are reportedly not being awarded on a competitive basis, with certain beneficiaries appearing to be regime loyalists. We will follow-up with Al-Ftise on his requests for training and technical assistance. End comment. CRETZ

© Scoop Media