Is Libya’s telecoms industry an opportunity or adversity?

There is a glimmer of hope in the drafting of a new telecommunications law.
Tuesday 30/01/2018
A salesman is seen sitting in a mobile phone shop in Tripoli. (Reuters)
A salesman is seen sitting in a mobile phone shop in Tripoli. (Reuters)

LONDON - Libya’s civil war has crippled the country’s economy and disrupted its telecommunications sector. Much of the infrastructure has been destroyed or stolen.

Budde, a telecommunications research group, has released a report on the state of the Libya’s telecoms, mobile and broadband market indicating possibilities in the mobile sector.

“It’s all about timing in Libya,” said Robin Lamb from the Libyan British Business Council. This is the most important takeaway when conducting business in Libya. Timing is delicate. The exposure of slave auctions reveals Libya is facing its darkest chapter. The country remains strained. The trajectory is littered with security threats and the evolving battle of corruption since the fall of Muammar Qaddafi.

The World Bank estimated that Libya’s gross domestic product in 2016 was at half of its pre-revolution level, exacerbated by low oil production and prices. However, Libya was producing more than 1 million barrels of oil per day this past June. OPEC reported that Libyan output has slipped by 30,000 barrels per day due to protests and a volatile production environment.

This divided country is battling a power-sharing deal between the government in Tripoli and the military in the east. The Soufan Group Intel Brief illustrates the challenge: Field Marshal Khalifa Haftar seized several oil fields to reduce the credibility and legitimacy of the UN-backed Government of National Accord (GNA) in Tripoli. Many suggest that this approach by Haftar is to create a vacuum in the GNA’s leadership even after agreeing to the de facto power-sharing arrangement, it reported.

Experts said economic institutions in Libya remain divided and face the constant challenge of misappropriation. Libyan Minister of Planning Atther al-Jemi pointed out that 1.6 million government employees consume 65% of the general budget. This statement indicates the depths of corruption in the country.

Kinda Hattar from Transparency International said: “Libya scores badly on the corruption perception index and the political turmoil in addition to security and threats of terrorism will allow corruption to flourish. Fighting corruption requires a political will and strict enforcement mechanisms that is only ensured when the rule of law is applied with no exception.”

If the Libyan government does not enforce control of expenditures and fiscal stability, there is no opportunity in other markets, including telecoms.

An analyst from Budde said there was no opportunity for telecoms businesses to prosper when the government has the monopoly. He continued to address the issue of competitive focus for the provision of digital subscriber line (DSL) or fibre broadband, where the government prevents well-established cable TV operators from deploying cable broadband to subscribers, resulting in poor quality, pricing and services.

However, there is a glimmer of hope in the drafting of new telecommunications law. The government is in the process of creating an independent regulatory authority. Therefore, if the legislation is enforced it would allow other telecoms operators to compete with the government.

Lamb of the Libyan British Business Council said the state-owned Libyan Post Telecommunications and Information Company (LPTIC) retains its own earnings and funds are under its control, which gives it the freedom to pursue contracts. LPTIC Chairman Faisal Gargab said he hopes to create an IT academy at an estimated cost of $1.7 billion in the country but without 4G connectivity.

Coupled with a lack of foreign currency, it’s hard to see how this idea will mature.

Seddiq al-Kabir from Libya’s Central Bank recently stated at a government-held meeting in Tripoli: “We raise the red flag,” indicating the precariousness in Libya’s financial institutions that, if reform is not implemented, development will continue to stymie. However, one insider described the situation as much more reasonable and retorted that Kabir’s mention of red flags was an act of political manoeuvring. Some have described it as “drama out of a crisis” as rivals are eyeing Seddiq’s role as governor.

There has been significant interference by militants in many institutions from the Libyan Investment Authority to LPTIC. The UN Security Council described interference on economic institutions as alarming.

Foreign investors can only engage in Tunis as within Libya the security environment is not conducive to host delegates. The model for successful business acquisition has not been instructed and, as it stands, rewards for foreign investors in telecoms are only very slight. Due to the limited infrastructure, opportunities only exist on a short-term basis in fibre deployments in selected urban areas.

The challenges in the telecoms industry are emblematic of what Libyans are experiencing. It is estimated that, by 2050, 66% of the world’s population is expected to live in urban areas. Therefore, can precarious markets such as Libya prosper with the inclusion of smart city initiatives to induce transformative economic growth?

Budde analysts state that, without a spectrum management policy in place, this is not possible. The infrastructure does not support such a scaled initiative. Libya’s fragile and conflict-affected context equates to a low tax base that inhibits long-term investment.

Libya is a game being played out over power. Until it is ascertained who calls the shots the situation in Libya will leave the country more disconnected than ever.