The Sentry

No Complacency Allowed
Between 2005 and 2010, Libya experienced extensive corruption in its infrastructure projects, and foreign firms were used as conduits to facilitate this wrongdoing. The absence of proper maintenance on Derna’s dams for many years before the September 2023 catastrophe is just one example of these practices.
A small group of high-level Libyan officials likely stole billions of dollars without leaving a clear paper trail, leading to years of impunity and even further entrenchment in the political ruling class, not to mention decrepit national infrastructure. This precedent of infrastructure-related irregularities from the mid-2000s calls for caution and vigilance regarding the ongoing reconstruction push in Libya.
Although the circumstances are different, present reconstruction contracting protocols, including in the city of Derna, should be closely scrutinized, as patterns of worrisome business practices may be repeating themselves. Many projects involve contract funds being split between foreign firms and Libyan private entities informally linked to the Haftar family, opening the door for the possible diversion of funds.
There is also a risk that some of the contracts involving Libyan companies may be used to facilitate fraudulent letters of credit, including for money laundering purposes. Such potential misuse and misappropriation of Libya’s public wealth would jeopardize the adequacy, sustainability, and feasibility of all new infrastructure projects announced by the Haftars.
It therefore is imperative to seek transparency on these publicly funded contracts, especially considering the secretive, unilateral approach imposed by the Haftar family. As for the Dabaiba family, presently in power in Tripoli, its members should also be held accountable for their suspected unlawful practices from the mid-2000s. Furthermore, Dabaiba’s government—as it has operated since 2021—bears at least some, and perhaps significant, responsibility for the Derna catastrophe.
The office of Prime Minister Dabaiba did not respond to a request for comment. The ever-deepening dysfunction in Libya’s economic governance calls for an international and domestic reevaluation of pressure and accountability mechanisms. If systemic gaps remain unaddressed, the ongoing surge in Libyan corruption will continue accelerating, with potential consequences including a relapse into economic turmoil or armed conflict.
Recommendations
The United States and other
like-minded countries
Resist any perpetuation of the current system of dual dynastic kleptocracy in Libya.
Instead, nations committed to reducing corruption in Libya should intensify pressure on both ruling families, as well as their closest business associates. This anti-corruption objective should be pursued even though US partners in the region such as Turkey, Egypt, and the UAE remain indulgent towards Libyan corruption.
Actively engage in discussions with the Central Bank of Libya’s leadership regarding Derna’s reconstruction.
Haftar-sponsored contracts should be appropriately vetted through all existing oversight mechanisms. There is a risk that the CBL may issue letters of credit for those contracts in an opaque manner. To prevent such a scenario, international stakeholders should urge the CBL leadership to increase transparency and accountability for reconstruction expenditures, which might otherwise bypass the ministries in Tripoli and all oversight bodies.
The CBL should refrain from exaggerating its enforcement role. Instead, it should focus on supporting the Audit Bureau, the Administrative Control Authority, and the Anti-Corruption Office in fulfilling their legal mandates. This is critical, given Belqacem Haftar’s relentless efforts to shield his Reconstruction Fund’s expenditures from any form of scrutiny.
Support the Audit Bureau, in exchange for their increased scrutiny of both past and present infrastructure-related corruption schemes.
The US should enhance USAID’s existing cooperation with the Audit Bureau, potentially including funding for its partnerships with international audit firms. US diplomats should advocate for the publication of the Audit Bureau’s annual reports and urge power brokers in both Tripoli and Benghazi to allow the Audit Bureau to operate without intimidation.
The Audit Bureau merits this focus by virtue of its competence and mandate to improve transparency in infrastructure spending.
Promote accountability and transparency in development spending beyond Derna.
For a better management of the so-called Chapter III section of Libya’s national budget, empower the Ministry of Planning and require the CBL to release detailed project lists, fund allocations, and progress reports, potentially through an accessible online portal.
Pair calls for increased transparency from Libyan leaders with targeted sanctions against those leaders’ closest associates and facilitators in the illicit realm.
Such an approach is needed because Derna’s reconstruction relies almost entirely upon Libyan resources, with foreign donations playing an insignificant role.307 Having made no substantial financial contributions, Western democracies lack leverage, making sanctions the primary tool with which they can influence Libyan behavior in the recovery process.
Support credible civil society organizations aspiring to mobilize the skills and efforts of Derna natives who live elsewhere in Libya and beyond.
Currently, the lack of interaction among members of the Derna diaspora results in a significant waste of potential, as many of them are adept at medical, administrative, and technocratic tasks. Initiatives aimed at fostering solidarity among people with roots in the bereaved city are worth backing, with one key goal being to elicit greater inclusiveness and transparency from the Haftar family
Investigate fraud, where possible. Given the Dabaiba family’s involvement in the Derna dam scandal
The United Kingdom should reinvigorate its decade-old investigation into ODAC-related fraud.
The UN Security Council
Maintain existing sanctions on Libyan Investment Authority assets until the sovereign wealth fund complies with the Santiago Principles by providing comprehensive accounts.
Even if Libyan officials cite Derna’s recovery in their request for an exception to the asset freezes imposed in resolutions 1970 and 1973 of 2011, the UN Security Council should remain steadfast.
International banks
Exercise increased vigilance. Given the risk that the Haftar camp may use reconstruction projects to launder proceeds from illicit activities, international financial institutions should exercise caution.
Under the guise of rebuilding Libya, the Haftar camp could use seemingly legitimate infrastructure projects as a means of integrating its illicit financial flows into the global banking system.
To avoid inadvertently facilitating Libyan corruption, foreign banks should scrutinize all transactions related to reconstruction, applying stringent anti-money laundering (AML) measures and focusing not only on members of the Haftar family but also on their enablers.
Libya’s ministries, agencies, and
other public institutions
Digitize the registry of private companies and make it publicly accessible.
This measure would facilitate the exposure of illegitimate firms linked to public officials and, in this way, help curb the misappropriation of government funds.
Launch a national taskforce dedicated to surveying existing infrastructure from a maintenance perspective.
Recent incidents—such as the August 2024 flood in Ghat, the February 2024 flood in Zliten, and the July 2023 collapse of the Great Man-Made River in Ajdabiya—show that the country’s vulnerability is not confined to Derna.
To prevent further instances of inadequate, underfunded, or mismanaged maintenance, the proposed taskforce should assess and publicly disclose the status of the nation’s infrastructure.
This initiative should involve existing bodies, including the National Planning Council, the Economic and Social Development Board, the Public Projects Authority, and the Ministry of Planning. Such a coordinated and comprehensive approach is imperative, given Libya’s heightened susceptibility to the adverse effects of climate change.
________________________