Libya Infrastructure Report 2013

BMI View: Progress has been made on reconstruction of essential infrastructure in the aftermath ofLibya's civil war. Following a 79.0% contraction in real industry value in 2011, initial reconstructioncombined with base effects is estimated to have propelled growth back to 35.4% in 2012. Whilst strong,this by no means spectacular given the context; with the ongoing violence and the lack of a strongpolitical mandate in government, we believe more serious reconstruction will take some time to filterthrough. Consequently, we are not forecasting reconstruction to generate one boom year of growth, butrather strong, albeit gradually slowing, growth over the medium term, with double-digit growth expectedeach year until 2017.

Factors underlining our outlook for Libyan infrastructure:

Returning oil production to pre-war levels was deemed the most important goal in the wake ofthe civil war. Oil production has indeed come back at a rapid pace, although BMI does notbelieve it will reach pre-war levels until 2013. This increase in production necessitates the repairof pipelines and export infrastructure.

The electricity grid was one of the primary areas of focus in the aftermath of the civil war. Thenetwork incurred an estimated US$1bn in damage. Work started on repairing the grid inSeptember 2011. As of Q312, over 70% of the network had been fixed.

The provision of housing for those displaced by the war added to an already pressing housingshortage in the country. Immediate measures have taken place, with contracts for theconstruction of 2,500 prefabricated homes in Sirte, which was one of the cities most damagedduring the fighting awarded in April 2012. In May 2012, Libya's Housing and InfrastructureBoard (HIB) authorised 248 contracts for repairs to public housing in Tripoli and Benghazi, witha further 4,000 small contracts due to have been awarded in the second half of 2012. Addressinga more long-term solution will require the resumption of large housing projects that were underway before the war. The HIB has signed contracts for work to resume on three housing projectsin Tripoli worth a combined LYD1.1bn.

For most of 2012, under the National Transitional Council (NTC), the priority was addressing criticalinfrastructure needs for day-to-day operations. However the elections in July 2012, which saw Ali Zeidanelected Prime Minister, should a turning point from more immediate measures to longer-term growth forthe infrastructure and wider construction sector. However, high levels of violence, including the attack onthe US embassy in Benghazi in September 2012 and the ongoing ministerial investigations by theIntegrity Commission, is preventing effective governing in the country. With establishing rule of law theprimary goal, we do not expect any big ticket investment to be announced until mid-2013. In order for acomprehensive revival of the construction sector to take place, clarity on the status of existing contracts,compensation for damaged sites and establishing the necessary institutional capacity to procureinfrastructure projects is necessary.