Dominic Dudley
The Libyan Investment Authority (LIA) is making a renewed attempt to secure some easing of international sanctions on its assets, so it can launch a new wave of domestic investments.
The sovereign wealth fund has been under UN sanctions since 2011, but says it now wants to be allowed to transfer money from one frozen bank account to another, to avoid being exposed to negative interest rates. It also wants to be allowed to reinvest funds from maturing bonds and to be allowed to make new investments with frozen cash.
In the past month, the LIA has written to the UN Sanctions Committee highlighting the negative impact of the sanctions on its portfolio – an independent report in late 2020 showed its portfolio could have been worth $4.1 billion more if it had not been under sanctions.
Slow growth
A recent audit of its portfolio by accountancy firm Deloitte found the LIA had assets of $68.35 billion, barely more than the previously-announced figure of $67.16 billion in 2012.
In an interview with Forbes, LIA chairman Dr Ali Mahmound Hassan Mohammed (Dr Mahmoud) said the main reason for the small change was the freezing of its assets by UN sanctions – a restriction it has been supportive of, despite the costs it brings.
“Some of the funds we are not able to reinvest, like bonds and fixed income, when they have matured,” he said. “This demonstrates the negative impact of the sanctions regime. In a nutshell, the sanctions freezing regime is the main reason for no increase in our capital.”
Last year the sovereign wealth fund said it wanted to make amendments to the UN sanctions regime, but did not want the restrictions to be lifted entirely. The LIA says it is now preparing a request for changes to the sanctions regime that will be sent through the Libyan government to the UN Security Council.
Dr Mahmoud said this did not mean it was looking for all the sanctions to be removed, however. “We are not requesting lifting of the freezing orders. We are requesting slight amendments in a manner which will avoid the negative impact on our funds.”
Domestic opportunities
Dr Mahmoud said it had identified up to $1 billion of potential deals inside Libya, mostly in the power and real estate sectors.
“We will enter with force investments inside Libya. We will contribute to the rebuilding of Libya, especially in power and real estate, this year,” he said.
The fund is meant to receive excess oil income from the state, but the turmoil of the past decade – during which the country was thrown into a brutal civil war – has meant it has received nothing from the government since 2011.
The current portfolio is heavily weighted towards cash, which makes up 49% of the total. A further 29% is in fund investments and 17% in business and real estate assets, leaving 5% in other areas including loans.
In terms of geography, Europe accounts for 37% of the portfolio and North America a further 33%, followed by Africa with 23%, the Middle East with 6% and South America the remaining 1%.
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Dominic Dudley is a freelance journalist with almost two decades’ experience in reporting on business, economic and political stories in the Middle East, Africa, Asia and Europe.
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