Libya costs frustrate developers

UAE companies face series of hurdles such as high construction costs and excessive red tape

High construction costs and excessive red tape are among the hurdles facing UAE developers and contractors in Libya, experts say. The government of Libya, which holds 40 per cent of Africa's total known oil reserves, is trying to attract foreign investment with tax incentives as it diversifies its economy, while UAE builders are chasing opportunities in the country to counteract a slowdown at home.

But gaining a foothold in Libya is challenging for property companies, despite high local demand for new homes. Abu Dhabi's Al Maabar is one of the first UAE developers to enter Libya and plans to award the first construction contract on its US$750 million (Dh2.75 billion) Al Waha project in Tripoli in September. The development includes a commercial and hospitality tower with serviced apartments, as well as leisure and retail facilities.

Emhemmed Ghula, a country director for Libya at Al Maabar, said that while local demand was high, investors were deterred by high prices, which he said were double those in the UAE. This was because of high construction costs attributable to the country's reliance on imported building materials. "Construction costs are a nightmare, which is making it more difficult for us to sell," Mr Ghula said on the sidelines of Meed magazine's seminar in Dubai yesterday on investment in Libya. While there are numerous projects under consideration as the Libyan government develops its infrastructure and the property and tourism sectors, contracts are slow to be awarded.

Developments have also been put on hold or have stopped mid-way over the past year because of funding problems, Mr Ghula added. "The contractors and consultants are available, many come from the UAE and other places, but it's a matter of building something feasibly - that is the challenge," he said. New companies in Libya can also face delays in securing registration and difficulty in finding skilled staff for complex projects.

"The cost of operating as a contractor in Libya is now being seen as far higher than in the GCC," said Samir Khosia, the managing director of Brentford, a Dubai-based engineering company that plans to open an office in Tripoli. "If you want to accelerate your project, the skills might not be a phone call away ? the hiring market is rudimentary." Contractors including Al Shafar General Contracting and Drake and Scull have already won contracts in Libya, while Arabtec Construction and Al Habtoor Engineering are seeking opportunities there as they expand overseas.

The Libyan government has drafted a law that would give tax incentives to foreign companies, such as exempting them from duties on materials imports, said Mustafa Elhuni, a senior economic adviser with the Libyan National Economic Development Board. "We are trying to build up non-oil related sectors," he said. Meanwhile, companies with experience in the Middle East and with building complex projects are in demand in Libya.

"There are a lot of companies with very valuable Middle East experience, so the talent is ready to go there and the market is opening up at an alarmingly fast rate," said Brian Evans, the regional vice president at Aecom, a US-based construction consultancy that is working on a housing project for Libya's housing and infrastructure board. He added that as Libya moved towards being a market-driven economy, there would be manageable challenges.

"People are adapting and dealing with more complex projects; there are hiccups, but they're small, and they're no different to what they are in the UAE." [e-mail]