For US companies long excluded from Libya, the announcement that Secretary of State Condoleezza Rice will visit Tripoli this week is a green light for business. But getting a toehold in Muammar Gaddafi's energy-rich north African country may prove the easy part. An opaque bureaucracy, erratic decision making and suspicion built up over decades of isolation means foreign firms may struggle to benefit fully from a wealth of money-making opportunities in Libya, analysts say. US-Libyan ties have improved dramatically since 2003 when Libya gave up banned weapons programs, and both countries saw the benefits of lifting hurdles to trade and investment. American companies got involved in Libyan oil and gas after the end of sanctions, but many have held back for fear US courts might freeze their assets for doing business with Libya before terrorism compensation claims are settled. Those fears receded this month after the two countries agreed to set up a fund to cover the claims. “Once the fund is funded I think there will be a big impact on the expansion of US business in Libya and Libyan business in the United States,” said David Goldwyn, executive director of the US-Libya Business Association in Washington. Libya's investment authority, looking for new destinations for growing oil profits, will be able to invest in the United States or join US companies to enter other markets, he said. Washington raised the status of its Tripoli liaison office to an embassy in 2006 but its diplomatic presence remains small. Rice's visit this week, the first by a US secretary of state in over half a century, should smooth the way for an exchange of ambassadors, ease visa procedures and make it easier for US firms to compete in trade and investment. Competition A succession of European leaders have visited Libya to drum up business. Italy agreed on Saturday to pay $5 billion in compensation for misdeeds during its colonial rule of Libya and was promised energy deals and other business in return. “American companies will be in fierce competition with Europeans, Asians and others, so we need to get on the plane and go to Libya and build relationships face to face,” said David Hamod, head of the National US-Arab Chamber of Commerce. US government figures show trade with Libya grew from zero in 2003 to $3.9 billion last year, more than four times the figure for Libya's neighbor Tunisia which has a bigger population but far less oil. Libya's energy industries earned over $40 billion in 2007 and the government wants to nearby double oil output capacity to 3 million barrels per day by 2012. Part of the profits will be used to upgrade and rebuild roads, ports, schools and factories in the country of 6 million that fell into disrepair during the years of sanctions. Top US construction companies, drinks makers and software firms have made forays into Libya but had mixed results, said Rajeev Singh-Morales, a senior partner at Boston-based Monitor Group, which produced an economic strategy report for Libya. “Foreign companies need to find local partners and people who understand the environment,” he said. “Libya still requires dedication and perseverance but it's certainly well worth it.” Policy confusion The lure of lucrative contracts must be set against the risks of doing business in Libya, where powerful interest groups wage a nebulous battle for influence and patronage. Many ministries and tribal groups have a say in policy, which could aid political stability but slows decision making. Gaddafi has watered down his socialist system in recent years to allow more private sector activity but a culture of business transparency is absent, analysts say. Policy confusion at the top echelons of power has also clouded the business outlook. Gaddafi has said repeatedly that much of Libya's state bureaucracy, including key ministries, must be abolished, with decision making and oil wealth handed directly to the people. His influential son Saif al-Islam has called for administrative reforms and a constitution but defended his father's unique system of rule by popular committee, which critics say is a fig leaf for authoritarianism. “These statements lend an air of unpredictability to the entire scene there,” said James Ketterer, an international relations expert at the State University of New York. Some US energy firms already decided the potential rewards outweigh the risks. ExxonMobil, Occidental, Chevron and Amerada Hess won acreage in bidding rounds for Libyan energy exploration leases in 2005. Since then, Libya has toughened terms for its main foreign oil partners. Analysts say the decision seemed to be motivated by a desire to allow Libya to benefit from higher world prices rather than discourage foreign players. Until new fields start pumping oil, foreign firms see quicker profits in enhanced oil recovery -- raising output from existing wells that lacked equipment and care. “US companies have tremendous technical advantages over others in this area,” said Goldwyn. “But the biggest risk will be decision making until we know whether and how Libya will pursue enhanced oil recovery.” - Reuters __
