Economics World, ISSN 2328-7144 May 2014, Vol. 2, No. 5, 325-332 Competitive Advantage of Libyan Business Environment
Salem Abdulla
Azzaytuna University, Tripoli, Libya
The economic development needs of developing countries require capital accumulation, which is no longer an easy
task, even for industrialized countries. Although borrowing remains an important alternative, it has proved to be an
expensive method in the long run. Conquently, to attract foreign direct investment (FDI), developing countries
have been liberalizing their economies, which is expected to contribute to job creation and income generation.
Libya declared its intention to liberalize its economy and to integrate into the global economy in order to achieve
comprehensive development. This study investigates and explores the condition of the Libyan business
environment in relation to foreign and joint companies, particularly in the non-oil ctors. This paper aims to
investigate whether or not the Libyan business environment is appropriate to attract foreign companies, particularly
in the non-hydrocarbon ctors. The method ud in this paper is bad on creating Porter model of competitive
advantage of in relation to attract FDI. The paper reveals clearly that apart from substantial oil rerves, Libya is
rich in other resources. Despite the positive advantages, there are numerous obstacles and shortcomings
associated with the Libyan business environment. It discovered that the general structure and policies in relation to
the Libyan business environment still require considerable attention to bring about the political and administrative
萨博93stability, as well as the stability of laws and regulations. Furthermore, intensive media campaigns need to be
launched with all the necessary legal and political guarantees for attracting FDI into the country.
Keywords: competitive advantage, North African region, economic development, Libyan business environment,
foreign direct investment (FDI) Introduction
Libya occupies a significant geographical location as it lies in the centre of the North African region. I
t covers a vast area extending from the middle part of the Mediterranean coast in North Africa to the northern highlands of central Africa. From an historical perspective, this distinctive location has made Libya the confluence that links Arab-Islamic cultures with African culture. Moreover, Libya has played a major role in the economic and political developments that have taken place in this part of the world since the early civilizations (Shernanna & Abdulla, 2007). Furthermore, Libya has numerous resources of oil and gas besides other natural resources such as the vast arable land, water resources, the climate, animal, and marine resources, not to mention its tourism potentials and the various mineral resources.
The Libya, as the ca with other developing countries, suffers numerous financial and economic problems such as a dependency on the oil and gas ctor as the main source of the national income. In addition, the Salem Abdulla, Ph.D. in government and International Affairs, lecturer in Finance at Azzaytuna University, Tripoli, Libya. Correspondence concerning this article should be addresd to Salem Abdulla, P. O. Box: 81589, Tripoli, Libya. E-mail:
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All Rights Rerved.
COMPETITIVE ADV ANTAGE OF LIBYAN BUSINESS ENVIRONMENT 326
limited capacity of its local market given its relatively small population acts as a constraint on economic growth.
烧烤叉However, the huge potential of the hydrocarbon ctor and the high levels of financial flows were generated
from the resources that can provide a reliable source of capital, and the need to develop the country’s
infrastructure should make Libya a target for FDI. Such investment is promising for the simple reason that the
u of the associated modern technology provides the ideal investment for the local natural resources.
Foreign investment, particularly FDI, is not a new phenomenon in Libya. The first law in relation to FDI came into force in Libya on 30 January, 1958. This was followed by Law No. 37 of 1968, which was amended
by Law No. 5 of 1997 with regard to the encouragement of the foreign capital, and which came to force on 29
May, 1997, sometime before the enforcement of its executive regulations (Retrieved from
v.ly/doc/dec_and_leg/astetmar.pdf). A further limited amendment was implemented by Law
No. 7 of 2003, which made it possible for local business using capital in Libyan Dinars (LD) to participate in
joint ventures with the foreign companies. This law is mainly concerned at encouraging foreign capital,
particularly in relation to projects which benefit from the introduction of new technology, training of local staff,
diversification of income, the development of local products to meet international standards or otherwi
contributing to local development (Article One of Law No. 7). Moreover, the idea of attracting the FDI into the
Libyan economy is not new as it started as early as the 1950s. Thereafter FDI played a major role in the
discovery of the huge oil and gas rerves, which have contributed to increasing the foreign earnings for the
state. The earnings have made it possible for the state to push ahead with its programmes of social and
economic development across the economy for almost half a century (Laws and Regulations Related to All Rights Rerved.
Investment, 2008).
However, despite the aforementioned advantages, FDI in areas other than the hydrocarbon ctor has rarely been attracted to Libya. Furthermore, FDI has made little contribution towards increasing the rate of
capital accumulation in the Libyan economy. FDI has not exceeded 1.99% of total investment in the 1980s and
1990s. In other words that ratio would indicate that only US$199 would become available for every US$10,000
of the total investment required for economic development in Libya. But as yet most of the FDI in Libya has
been directed towards the oil and gas ctor (Abdulla, 2013).
The Libyan Investment Board (LIB) was established at the end of 1998 at a time when the business environment was particularly weak. As a result, FDI inflows in its early years were slow. However, with the
positive political developments in the Libyan-Western relationships since the suspension of UN sanctions in
1999 and the government’s policy to improve the business environment, FDI flows into the non-oil ctor
started from mid-2003 (Abdulla, 2004).
Method
The method ud in this paper is bad on qualitative rearch. The primary data was collected through a survey conducted by using a questionnaire with reprentatives of the foreign and joint companies in order to
discover their opinions in relation to the Libyan business environment. A structured interview technique was
also ud to gauge the opinions of the nior Libyan officials, who jobs were related to FDI operations, with
the objective of establishing the most important challenges facing the public administration in order to improve
the business environment. After summarizing the findings of both methods and categorizing them as variables,
the paper ud the variables in creating Porter model of competitive advantage of Libyan business
environment in relation to attracting FDI.
举起手来电影COMPETITIVE ADV ANTAGE OF LIBYAN BUSINESS ENVIRONMENT 327
Results and Discussion
By using data explained in Appendix 1, competitive advantage model of Libyan business environment was created. Figure 1 shows Porter’s model in relation to competitiveness and the business environment (Porter,初级精母细胞
1990). In terms of demand conditions, the Libyan economy has a strong financial position with high rates of
economic growth especially in recent years. It also provides an easy access to African, Asian, and Europe
markets. However, the economy is highly dependent on the oil ctor which is subject to external variables
such as production and prices. This dependence on oil is unreliable given the poor performance of the non-oil
ctor (Porter & Virgin, 2006).
In the area of related and support industry, the Libyan business environment is characterized by the private SMEs and the smooth flow of capital into the country. However, a number of problems exist in relation to the
organization of the markets of raw materials, which curtail the supply of the materials leading to price
increas. Another weakness is the poor organization of labor markets and the conquent difficulties of
importing foreign labor and the scarcity of skilled local labor.
In terms of factor conditions characterized, human resource competencies, social stability and young and cheap labor are the main positive characteristics of the factor conditions. In terms of natural resources, Libya
has a unique geographic location and a diversity of climatic conditions. In addition, apart from substantial oil
rerves, Libya is rich in other resources such as minerals, fisheries, arable land, and animal resources. Despite
the positive advantages, the physical infrastructure in Libya is weak apart from the transport and All Rights Rerved.
功夫熊猫二telecommunication ctor which are relatively strong. Libya also lags behind in the area of information
technology and rearch including inadequate business information.
* Access to capable, locally
bad suppliers and firms in
related fields
* Prence of clusters instead
of isolated industries
Figure 1. Competitiveness of the business environment. Source: The General Planning Council for Libya in 2006.
窗外雨
Source: The General planning Council for Libya,2006
In relation to firm strategy, structure, and rivalry, the policies aimed at encouraging FDI are the most
important factors. Furthermore, in the past decade, policy-makers have made great efforts to improve bilateral
盆栽葡萄relations with all countries particularly with the Western and African countries. However, despite thes
e efforts,
the general structure and policies in relation to the Libyan business environment still require considerable
COMPETITIVE ADV ANTAGE OF LIBYAN BUSINESS ENVIRONMENT
328
attention to bring about the political and administrative stability, as well as the stability of laws and regulations. Furthermore, intensive media campaigns need to be launched with all the necessary legal and political guarantees for attracting FDI into the country.
Factor Conditions in the Libyan Business Environment
Factor conditions are the situation in a region regarding the efficiency, quality, and specialization of inputs available to companies. The factors can be grouped into human, natural resources and infrastructure. It is important to note that each nation or region has its own particular t of factor conditions; hence, each country will develop tho industries for which the particular t of factor conditions is optimal. Table 1 shows the most important factor conditions in the Libyan business envi
尚姓男孩起名ronment.
Table 1
Demand Conditions in the Libyan Business Environment
Demand conditions influence the shaping of particular factor conditions, which impact the pace and direction of innovation and product development. According to Porter (1990) demand conditions are determined by three major characteristics: high customer expectations for products, local customer needs, and unusual local demand in specialized gments that can be rved globally. Table 2 summarizes the most important demand conditions in the Libyan business environment.
COMPETITIVE ADV ANTAGE OF LIBYAN BUSINESS ENVIRONMENT 329 Table 2
In terms of demand conditions, the Libyan economy has a strong financial position with high rates of economic growth especially in recent years. It also provides an easy access to African and Arab markets. However, the economy is highly dependent on the oil ctor which is subject to external variables such as production and prices. This dependence on oil is unreliable given the poor perform
ance of the non-oil ctors. Related and Support Industries in the Libyan Business Environment
According to the Porter Model, related and support industries help make local industry more competitive as firms can enjoy more cost effective and innovative inputs. This effect is strengthened when the suppliers themlves are strong global competitors. Table 3 shows the most important related and support industries in the Libyan business environment.
Table 3
In the area of related and support industry, the Libyan business environment is characterized by the private SMEs and the smooth flow of capital into the country. However, a number of problems exist in relation to the organization of the markets of raw materials, which curtails the supply of the materials leading to price increas. Another weakness is the poor organization of labor markets and the conquent difficulties of importing foreign labor and the scarcity of skilled local labor.
Firm Strategy, Structure, and Rivalry in the Libyan Business Environment
Firm strategy, structure, and rivalry include the local context and rules that encourage FDI in a context of open and vigorous local competition. Table 4 displays the most important firm strategy, structure, and rivalry in the Libyan business environment.
Table 4
