The goldmine of new markets

Local partners are key to business success in Libya, where the laws and regulations are not clear cut.

Tawfiq Abu Soud from Drake and Scull, which is yet to win a project in Libya, refers to the issues around project tendering and goods importing.

“The entire pre-tender process is very involved and time consuming, with much re-registration required for all the main government work providers.

Importing of materials can be slow with frequent hold up of customs procedures and difficulties understanding tax laws, foreign trade and currency.”

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But according to solicitor Peter Morris from Systech Solicitors, one of the biggest barriers to market entry, regardless of the company and even the market itself, is the legal system.

“With the current state of the construction industry in Dubai, many contractors are looking to expand their businesses into new international markets. Whilst this is clearly a prudent move, it could turn out to be a nightmare if a company doesn’t do its research first.

It pays dividends to spend some time first researching the legal framework of the target country to avoid potential pitfalls and unforeseen costs – which can mean the difference between success and failure.”

He adds: “Only too often have ill-informed companies set off down the process of establishment abroad only to find they have been caught up by a legal issue that wraps them up in expensive litigation for years and destroys their profit, and in some instances, their company.”

Across the board, experts suggest that one of the best ways to ensure this doesn’t happen is to partner with a local firm.

“The majority of countries require licensing of businesses that wish to operate in their country and the setting up of either a branch of the foreign company or as a local company,” says Morris.

“As with the UAE, there will often be a requirement to enter into a sponsorship agreement with a local partner or to establish a corporate vehicle in which a local partner must own a 51% share or more.”

Other firms cite the importance of spending time in Libya, networking with the locals and making contacts in order to facilitate access to its unique market.

“Contractors have to be prepared to invest time and money in multiple visits to the country, both to develop relationships and to find the right partners to work with,” says John Ellis, the business development director from SECBE. “Wasted time can be spent not dealing with the right people.”

Eek agrees. “Libya is a country where connections are very important indeed. It is slightly complicated for ‘beginners’ knowing who is who in the jungle of clients.”

Hamelin is of a similar view. “We [Aconex] have been in Libya for two years now, and have a team of about 15 people there. The first thing we thought important was to get local people to help with Libyan processes. In Libya, networking is very important.”

For some companies, staffing in Libya has presented additional problems. Doka is one of them. Whilst well established in Libya today, one of its projects being the Burj Bulayla Tower in the capital Tripoli, the company found initial recruitment to be a challenge.

“The process of performance and selection is difficult,” says the Doka representative.

“There are no recruitment agencies, and nearly all the common workforce in construction and service-related sectors comes from outside and neighbouring countries in the Middle and Far East. The sometimes quite fast-changing immigration laws also add an edge to mid-term staff planning.”

On the contrary, Jotun says the problems are more related to getting technical, high-quality staff. “At the beginning we counted on Jotun employees from Egypt but now we are hiring local staff, and this is not a big challenge.

"Ninety per cent of the organisation isnow Libyan and developing very well. What are not available locally are high-level and technical employees.”

Overriding the challenges, the general consensus of advice from established and bidding firms is not to give up. Indeed, with demand only set to increase in the future, ultimately, the Libyan market can only offer huge opportunities for the GCC construction sector.