We want partnerships with global financial institutions: Hassan Bouhadi LIA chairman

By Libya Herald reporter.

London, 7 July 2015: 

‘‘Our aim at the LIA is to stay above the political fray. Appointing a Receiver is the right and responsible thing to do’’, explained Hassan Bouhadi, the chairman of the Libya Investment Authority (LIA) in London speaking exclusively to Libya Herald yesterday.

Bouhadi was in the LIA’s London office overseeing the High Court case last Thursday. The High Court had made an order appointing a Receiver to protect and pursue the interests of the LIA in its ongoing litigations against Goldman Sachs and Société Générale in the Chancery Division and the Commercial Court, London. 

The LIA is Libya’s main Sovereign Wealth Fund institution with diverse worldwide investments estimated at $67 billion in 2013 by auditors.

The LIA is suing Goldman Sachs of the US for US$1.2 billion and France’s Société Générale for $2.1 billion. It is claiming that Goldman advisers lured LIA investment managers into high-risk derivatives that went sour, losing virtually all their value.

Meanwhile, SocGen is accused of handing out bribes worth tens of millions to top Qaddafi aides to secure the approval of another high-risk portfolio that also went disastrously wrong. Both banks are alleged to have also charged swingeing fees for their dud advice. Each has denied any wrong-doing.

On the decision to appoint the High Court Receiver, Bouhadi explained that ‘‘after careful analyses and legal advice on the matter, I took the decision to appoint a Receiver in the interest of Libya and Libyans. Much work was has been done to reach this point in order that political turmoil in Libya does not affect the greater Libyan interest. Our aim at the LIA is to stay above the political fray’’.

Bouhadi, is a Libyan national, educated at University College London and Imperial College. He had played a role in the Libyan Revolution as a member of the Libyan Stabilization Team under the National Transitional Council. Prior to the Revolution Bouhad held several regional management positions in the UK, Middle East and Africa for multinational companies, including Bechtel International, Fosroc (a BP company), BASF and GE.

”The LIA is unified amongst its board members as per law 13 (2010). There are clear lines of authority and command. If lines of authority and chain of command are not clear Libyan interests cannot be protected’’, he admitted.

”Appointing a Receiver is the right and responsible thing to do”. Bouhadi was adamant that this was his decision and dismissed claims that the appointment was taken by the Tripoli authorities. ”Court papers show that I, as chairman of the LIA board, took the decision to appoint a receiver’’.

Moreover, Bouhadi went further adding that ”through its governance structure the LIA board is part of the democratic process of Libya. It is our duty to handover an intact LIA to future governments’’.

Asked where he planned to take the LIA on from here, Bouhadi said that the next moves are to make the LIA’s visions a reality. He explained that the board meets on a monthly basis and that all its subsidiaries are active and reporting. Together with its partners and lawyers its team in Malta is working day to day to ”protect and maintain’’, Bouhadi explained

The LIA’s vision preceded Bouhadi’s appointment as chairman in October 2014 and was started in 2013. Post Libya’s 2011 revolution, ending four decades of Qaddafi dictatorship, the first task was to review and analyse the LIA’s current structure and see how it reflected the LIA’s set mandate.

For this leading international management consultants Oliver Wyman had been hired to carry out the review process which led to a blue print produced by the LIA board for a long term strategy. ”The LIA wears two hats’’, Bouhadi explained, ”a sovereign fund hat and a holding company hat’’.

On the sovereign fund front the LIA will continue with its stocks and bonds investments and continue to develop using its peers as benchmark in governance and investment returns. As a holding company, the LIA will, Bouhadi explained, review its 550 operating companies in all various fields of energy, telecoms, tourism etc, and decide the way forward. However, moving forward will be ”subject to a political settlement being reached in Libya, but meanwhile we will protect and maintain our investments’’, stressed Bouhadi.

The LIA Sovereign Fund had created three funds: The Future Generation Fund (FGF), the Stabilization Fund and the Local Investment and Development Fund (LLIDF).

The FGF is a long term investment fund intended to provide Libya with long term revenues perhaps in a post hydrocarbon economy for future generations. The aim of the Stabilization Fund (or Budget Deficit Fund-BDF) which was established in 2010 is an investment fund on standby to make up for a budget shortfall when oil revenues are inadequate, as is the case currently in Libya.

Bouhadi recalled that Libya’s revenues are made up 90 percent of hydrocarbons which are susceptible to fluctuations in production and international prices. This fund is topped up annually with about 15-20 percent from hydrocarbon revenues.

The LLIDF , on the other hand is a fund that has US$ 9 billion currently held at the Central Bank of Libya (CBL) set aside for investment within Libya.

Unfortunately, it is currently sitting idle in the CBL, lamented Bouhadi. ”Libya is in dire need of investments and this fund can have an important role in rebuilding Libya. Today we have a very weak private sector as a result of the Qaddafi years of nationalization and anti-private sector policies’’.

”Today Libya’s private sector does well when state sector is doing well, however, the public sector in Libya is not sustainable. To have a third of the fiscal budget spent on public sector wages and a third spent on subsidies is unsustainable’’, said Bouhadi, explaining the rationale for the LIA’s domestic investment fund.

His hopes are that the domestic fund will help create jobs in the Libyan private sector. However he was keen to point out that it will not be the role of the LIA to carry out these investments, but that it will be the driver behind the policy using its mandated fund.

Bouhadi also envisages that the domestic fund would encourage FDI. The LIA is an investor in some of the biggest companies on the Stock Markets including multinational companies such as GE, Finmeccanica, Pearson (of which it owns 3 percent), Siemens etc.”’We can use this relationship to Libya’s advantage therefore the LIA has a role in activating the Libyan private sector and market’’, he further clarified.

”We hope to promote youth and SMEs in the Libyan private sector and help stabilize Libya by creating opportunities for youth. We want to build capacity after four Qaddafi decades of lack of education and low morale’’.

Despite the damage incurred by the four decades under Qaddafi and the current political conflict in Libya, Bouhadi was nevertheless optimistic adding that ”the spirit is still there. Trade is in the DNA of Libyans, they just need a chance. The LIA vision is to help enable these youth and determine their own destiny’’.

The LIA chairman was underscoring the fact that two-thirds of Libya’s population was under 35 years old and many of these are the very armed militias, many unemployed and with no future prospects, contributing to the country’s current instability.

With regards to the international community Bouhadi said that they need to believe in the LIA’s vision. ”They know how to help Libya’’, he added. ”We want partnerships with global financial institutions such as the World Bank and the European Bank for Reconstruction and Development (EBRD) to help build our infrastructure’’.

”The EBRD had a big role in developing Eastern Europe, which was in a way similar to Libya where the private sector did not really exist. Why reinvent the wheel when we can use international experience and models to rebuild Libya’’.

”In our most recent board meeting held last week in Amman, Jordan, we created a task force to review investments in Tunisia and Egypt. Bouhadi admitted that the ”efficiency of these investments has been questioned by some and that the authorities in those two countries want to see the more efficient running of these investments for the benefit of both parties’’.

In Egypt, for example, Libya owns investments in the farming sector and in fact Libya owns probably the largest productive farm in Egypt. The LIA also owns investments in tourism and in the real estate sector, all aimed at helping diversify the Libyan economy away from hydrocarbons.

Bouhadi hopes that synergies can be created with the same sectors back in Libya and that Libyan youth can benefit from training, knowhow and experience of these investment. ”We are looking at how we can benefit our youth and economy from our investments in our strategic neighbouring countries’’. The same rationale applies to Tunisia where Libya owns investments in hotels.

”The LIA needs the best talent in world, it needs to build capacity to renew itself, therefore, as part of its restructuring it has decided that its London office, close to the City of London, will run its investments. It is important to raise the LIA’s efficiency. Capacity-building is starting today and we plan to send Libyan staff on secondments with our partners’’.

Finally, Bouhadi agreed that the LIA and its subsidiaries have been ”media shy’’. The aim now is to be transparent and share our plans with Libyan public. This will drive our approach to the media’’, he promised. [/restrict]