VZCZCXRO3439
PP RUEHBC RUEHDE RUEHDH RUEHKUK RUEHROV
DE RUEHTRO #0620/01 2151450
ZNY CCCCC ZZH
P R 031450Z AUG 09
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC PRIORITY 5100
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHLO/AMEMBASSY LONDON 1099
RUEHFR/AMEMBASSY PARIS 0774
RUEHRO/AMEMBASSY ROME 0544
RUEHVT/AMEMBASSY VALLETTA 0429
RUEHRL/AMEMBASSY BERLIN 0044
RUEHKO/AMEMBASSY TOKYO 0009
RUEHUL/AMEMBASSY SEOUL 0011
RUEHBJ/AMEMBASSY BEIJING 0026
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHTRO/AMEMBASSY TRIPOLI 5640

C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 000620 
 
SIPDIS 
 
STATE FOR NEA/MAG; STATE PLEASE PASS USTR PAUL BURKHEAD; COMMERCE FOR ITA NATE 
MASON; COMMERCE FOR THE ADVOCACY CENTER; ENERGY F 
 
E.O. 12958: DECL:  8/3/2019 
TAGS: ECON EAGR EPET EFIN PGOV ETRD LY

1.(C) Summary. Pol/Econ Chief and FCS were summoned, along with a handful of other foreign diplomats, to the Prime Minister-equivalent's office August 2 for a meeting with his director for cooperation and Ministry-equivalent of Economy officials to discuss the latter ministry's implementation of a law dating back to 2004, which stipulates that all foreign distributors must work through 100-percent Libyan-owned and operated trade agents in order to operate in Libya. The officials emphasized that the law had not yet been implemented in order to give companies an "opportunity to adjust their practices" independently. According to the law, all foreign distributors must work with Libyan agents only - no third country nationals - and must develop plans for expansion from Tripoli to the cities of Benghazi, Sebha, and Sirte. The law is likely to create conditions that prohibit small and medium sized distributors from investing in Libya and may cause some foreign companies to withdraw from the market. This and other efforts to impose old and new regulations may reflect a stepped-up effort by the GOL to gain some control over its helter skelter approach to development which enabled a rush of foreign companies to enter the country. End Summary.

2.(C) The Prime Minister-equivalent's (PM) office summoned Economic/Commercial Counselors from the Italian, German, French, Chinese, South Korean, and Japanese embassies, in addition to Pol/Econ Chief and FCS, August 2 for an unplanned meeting to discuss "trade-related issues." [Note: The PM's office first summoned the ambassadors of the above listed countries, later downgrading attendance after it was clear that the PM would not be able to attend the meeting. End Note.] Chaired by the PM's director for cooperation, Issam Zawia, and Dia Hammouda, the director of the same office at the Ministry-equivalent of Economy (MOE), the purpose of the meeting was to clarify the meaning and intent of Law Number Six of 2004, which governs transactions between foreign distributors and local trade agents in Libya. The law stipulates that each foreign distributor seeking to introduce its product in Libya must deal with a 100-percent locally owned and operated trade agent. Specifically, Hammouda wanted to ensure that the embassies representing the "industrialized nations" in Libya were aware that the Ministry was in the process of executing the law and would be preparing enforcement mechanisms to ensure compliance. The purpose of the late imposition of the law, according to Hammouda, was to allow foreign companies the time necessary to adjust their operating practices independently. As few companies had done so, the Ministry decided that it was time to enforce the law. Hammouda outlined his Ministry's interest in both creating a regulated, favorable, and transparent operating environment for foreign investors, as well as fighting corruption. He said that he would convene other meetings with the directors of foreign distributorships currently operating in Libya, as well as with local agents, in the near future. In response to an inquiry from one of the diplomats in attendance, Hammouda set a nominal deadline of the end of the year for compliance with the law but later backed away from that date.

3.(C) In addition to the first point of law that Hammouda highlighted, he noted that Law Number Six required each foreign distributor to develop plans to establish distribution facilities in four areas: Tripoli, Benghazi, Sebha, and Sirte. Moreover, each distributor must deal with a distinct trade agent in each city, for the purpose of expanding investment across the country. When several diplomats protested the difficulties that companies would face in trying to establish multiple operation sites with unrelated agents, Hammouda clarified that companies must merely have plans for expansion and that the government did not expect foreign distributors to open four sites at once. He stated that distributors would have time to settle into the local market before expanding and that expansion could be down slowly, in consultation with the MOE.

4.(C) Several diplomats debated the logic of the law with Hammouda for the greater part of two hours, particularly regarding the expansion requirement in four different areas with four different agents. The South Korean diplomat also noted the difficulties that companies might face if forced to break long-term contracts with local agents. The German diplomat TRIPOLI 00000620 002.2 OF 002 noted that many countries around the world allow foreign distributors to write exclusive contracts with a single local agent in order to better organize their business plans, to which Hammouda responded "Libya is not like other countries" and must develop its own laws to fit its environment.

5.(C) Comment: Hammouda seemed intent on Libya's enforcing the 2004 law, though his backtracking on a deadline and lack of a clear enforcement strategy reflected some confusion regarding whether the law could actually be implemented. It was also clear that the MOE lacks a strategy for confronting the problems that will arise when the law is implemented. The most immediate effects of the law for U.S. trade will be seen in the Caterpillar negotiations (reftel), in terms of whether the MOE will force the company to abide by the expansion requirement. The positive news, if any, is that the law will be applied across the board among the major investors in Libya (though the lack of UK participation in the meeting was notable). A well-connected contact in the business and government world here believes this is yet another in a series of GOL attempts (haphazard as they are) to gain control over the helter-skelter approach it has taken to developing its infrastructure through its heretofore open welcome-mat for foreign companies. End Comment. CRETZ