By Sami Zaptia.
Tripoli, 1 April 2014:
A meeting was held last Thursday at the (Tripoli headquartered) Libyan Business Council with Libya Enterprise and the Privatization and Investment Board (PIB) during which the role of SMEs and investment in the private sector were discussed.
Libya Enterprise (www.sme.ly) is the Ministry of Economy department concerned with matters relating to SMEs in Libya, whilst the PIB (www.investinlibya.ly) is the body concerned with encouraging both foreign and Libyan investment in Libya, in return for benefits such as customs duty and tax breaks.
The two state bodies were keen to reach out to members of the Libyan Business Council as part of the new outlook by the post February 17th revolution Libya government to increase the role of the private sector and reduce that of the state in the business arena.
To this end, the Libyan government has tasked Libya Enterprise to activate the role of SMEs including the setting up of a number of SME Investment Funds intended to promote investment in the sector.
Abdalnasr Abouzkeh, the General Manager of Libya Enterprise, told the gathered business leaders that “the IMF tells us that Libya should have 300,000 working for the state sector, whereas in reality Libya has 1.3 million”. This statistic encapsulated Libya’s problem of a bloated state sector and a stunted SME private sector, he explained.
There, therefore, needed to be a drive to encourage enterprise away from state dependency with the help of loans from the banking sector.
“The SME Investment Funds were launched last year and as a result we met with local banks in order to put in place a system of SMEs gaining access to their funds”.
Referring to the negative experience under the previous regime whereby debtors misused bank funds on non-productive projects, as opposed to really investing loans on SME projects, Abouzkeh said that ” the newly created funds are not intended to to give money away to potential SME projects, but they are intended to be a procedure and a connection point between SME investors and the banks”.
Libyan banks had come in for considerable criticism prior to the revolution for failing to back the private commercial sector in general and more specifically the riskier SME sector. The banks for their part have complained that the legal framework inherited from the Qaddafi era does not offer protection for their loans.
To this end Abouzkeh stressed that the agreement hammered out with local banks allows for up to 40 percent loans for projects, provided the SME investors participate with some capital of their own. This capital will vary from 5-10 percent depending on the size of the project.
He nevertheless admitted that there has been a loss of confidence between the banks, the state and the private sector. Abouzkeh also stressed that all Libya Enterprise loan activities will be Sharia-compliant in line with Islamic banking, as prescribed by Libyan law.
The new SME Funds can help SMEs in three ways, Abouzkeh explained; by co-financing, by guaranteeing or by participating with capital. Each project will be judged on its own merits and applicants must go through a process to prove their ability to successfully launch and manage the scheme.
The SME Fund will provide training, consultancy and monitoring of projects, the Libya Enterprise General Manager explained, adding that only projects that are approved could move on to the next stage.
Abouzkeh also revealed that his department is also preparing a 10-year business plan involving all ministries in order to create a database for further decision-making.
He decried the fact that the Libyan government spends LD14 bn on subsidies “yet if LD 1 bn was spent on SMEs it would leverage LD 12 bn from commercial banks. The effects of this LD 1 bn would be transformational on the Libyan economy”, he said.
There is a need for a national investment plan for a diversified and competitive Libyan economy which contrasts between the current economy of consumption of imports to one of a productive and competitive one, the Libya Enterprise General Manager added. [/restrict]
