Libyan Investment Authority woes mirror Libya’s chaos

Sunday 02/10/2016
LIA Chairman Fawzi Omran Farkash

TUNIS - Confusion about which entity is entitled to manage Libya’s investments is making problems of mismanage­ment and corrup­tion worse in the country, financial experts say.
With rival boards, some that include people with no clue about the technical aspects of the Libyan Investment Authority (LIA) and three chairmen, the LIA is seen to be mismanaged, subject to allega­tions of corruption and uncertain­ty about investment returns that are crucial to rebuilding Libya, they argue.
“Corrupt people want to control the LIA because it is the only source of cash and it will finance projects to rebuild Libya when embargo will be lifted,” said Fawzi Omran Farkash, the LIA chairman who draws his authority from Abdallah al-Thinni’s government, which is backed by the inter­nationally recognised House of Representatives (HoR) parliament based in the east.
LIA has invested at least $67 billion abroad to cushion Libya’s economy against changing oil prices and secure the well-being of future generations.
Comparing corruption now within LIA with the Muammar Qaddafi era, Farkash said: “Cor­ruption was controlled in the time of Qaddafi but now corruption is top down, down top and by the sides.
“Qaddafi was in his own ways very protective of public money. His son Saif al Islam ruined LIA with corruption and mismanage­ment by endorsing people on leadership positions with no skills and no knowledge.” he added.
Hassan Bouhadi also claims to be stewarding the sovereign fund and called his rivals “rogue” chairmen. Bouhadi, based in Malta since being forced out of Tripoli because of violence among militias, is challenging the leader­ship of LIA’s previous chairman, AbdulMagid Breish.
The UN-brokered government of Prime Minister-designate Fayez al-Sarraj appointed an additional rival chairman — Mahmoud Has­san Mohamed — to lead a steering committee to manage LIA, adding another layer of uncertainty about who is in control.
“Lack of unified leadership is harmful for the body’s interests. It contributes to worsening corrup­tion and unaccountability within LIA’s subsidiaries and portfolios,” Farkash said.
“We want to reach out to a portfolio manager or a subsidi­ary of the body they tell us they do not belong to us and are not under our watch. When Breish and his people do the same they get answers telling them that they follow orders of the rival boards and chairman,” he added.
“That obviously encourages mismanagement and corruption,” said Farkash, giving examples of a firm that had sold 30% of its shares and no one is aware where the sale receipts have gone and why a company relocated from Tunisia to Turkey.
UN reports and a London court ruling precedent appear to back Farkash against his rivals but international backing for Sarraj’s government might guarantee more support for Hassan Moham­ed as chairman at a time when LIA needs unity to follow multibillion-dollar cases in courts against finance titans such as Societé Générale and Goldman Sachs.
A 215-page report by UN experts last year recognised the authority of Thinni’s government to access LIA funds. The report came after Britain’s High Court put off a judg­ment over who has the legitimacy to control the Libyan fund.
LIA’s assets have been frozen since September 2011 at the request of the Libyan authori­ties and the LIA until a transition period had ended after Qaddafi’s ouster. It was assumed the freeze could not extend beyond two years.
Many experts said that, after six years, the freeze is damaging the value of the assets.
Experts also said bonds had matured and the cash from the return is setting idle in bank accounts while currency move­ments needed quick management intervention or the money would sit without improved earnings.
A typical chairman would have the records of all deposits and as­sets, the contacts of fund manag­ers and have the power to appoint top managers for subsidiary com­panies under LIA umbrella.
There seems to be hope for the unification of LIA’s top leadership as Breish and Farkash are near­ing an understanding about the necessity of unity. Both are backed by influential people in the HoR and Sarraj’s government umbrella Presidential Council, such as council deputy head Ali al-Qatra­ni, who faulted Sarraj for setting up the steering committee.
“We had talks with Mr Breish and we reached agreement over 90% of the issues,” Farkash said.
Breish said: “I agree with chair­man Fawzi Omran Farkash that appointing of the so-called steer­ing committee by the Presidential Council is illegal.
“It is possible to ensure the success and progress of the LIA only by appointing people with technical expertise to master com­plexities of managing a sovereign fund with a value estimated at $67 billion and following very sophis­ticated legal issues.”