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Libya Table of Contents


Foreign Aid and Investment

Since 1985 direct foreign investment has not been permitted in Libya. Until 1984 Libya had had a negative direct investment balance for every year since 1971, indicating that Libyan investment overseas far outstripped foreign investment in Libya. Existing foreign investment was concentrated in the petroleum sector. In 1986 the United States ordered all American companies to liquidate their Libyan investments. It was not clear at that time, however, whether this action would result in a decline in the overall level of foreign investment in Libya, or whether the affected companies would merely transfer their Libyan investments to non-American subsidiaries.

Libyan investment abroad was made through the Libyan Arab Foreign Bank (LAFB) and the Libyan Arab Foreign Investment Company (LAFICO). Libyan investments have been particularly high in Italy, the best known being LAFICO's 15 percent share in Fiat, which it finally sold in September 1986. Other significant Libyan investments in Italy have included the LAFB's 1986 acquisition of 70 percent of the ailing Tamoil petroleum distribution company and the acquisition of 50 percent of LAFICO's Chempetrol. Chempetrol supplied about half of Italy's methanol imports in 1986. Libyan assets in the United States were frozen in early 1986, but the action had little impact because of the negligible funds involved. At the time of the freeze, the Central Bank held only about 10 percent of its assets in the United States.

Libya has also given and received foreign aid. On the receipt side, Libya consistently has sought to barter oil for long-term technical assistance agreements. During the 1970s, many cooperation agreements were conducted on this basis--particularly with East European nations. Yugoslavia, in particular, has been instrumental in providing Libya with timely aid. Yugoslav contractors were granted about 11 percent of the total volume of projects under the 1976-80 development plan in return for oil and some Libyan financing of several projects in Yugoslavia. In 1986, because of payment arrears on civil works contracts, Yugoslavia agreed to accept increased oil shipments valued at US$20 million. Much of Libya's debt for the military assistance it received from the Soviet Union has similarly been paid for with oil. In 1985 foreign observers estimated that Libya was sending 125,000 bpd of oil to Moscow to cover its arrears.

By 1984 Libyan assistance to other countries had fallen dramatically from levels at the beginning of the decade. Libyan foreign aid allocations peaked in 1980 at US$376 million. They declined in 1981 to US$262 million before dropping sharply in 1982 to only US$43 million. A recovery occurred in 1983, as Libyan funds earmarked for foreign aid rose again to US$142 million, only to plummet in 1984 to US$17 million. This latter figure represented only .06 percent of GNP, well below the OPEC average for foreign assistance of 1.16 percent.

Libyan bilateral assistance programs have concentrated on countries where Libya has substantial strategic interests. Many of these countries are located in the Sahel region of sub-Saharan Africa. Throughout the 1970s, Libyan aid projects were mainly concentrated in Chad, Mauritania, and Niger. Since 1980, with the general decline in foreign assistance allocations, promises of Libyan aid to sub-Saharan Africa have not always lived up to the expectations they created and have resulted in discontent on the part of recipient states.

Data as of 1987