By Vanessa Tomassini.
While protests rage in Libya over dire economic situations and widespread corruption of state officials, on August 4, Ali Mahmoud Hassan Mohamed, chairman of the Libyan Investment Authority (LIA), following consultations with the head of Presidential Council of the Government of National Accord (GNA) Fayez al-Serraj, announced that the government-managed sovereign wealth fund and holding company plans to demand the United Nations to unfreeze or partially unfreeze the Libyan assets abroad.
Libya’s sovereign wealth fund head is asking UN to allow it to invest billions of dollars sitting idle in its accounts, after missing out on some $4.1bn in potential equity returns during nearly a decade of sanctions. In December 16, 2011, the UN Security Council imposed sanctions against the Libyan Central Bank and against the Libyan Foreign Bank, a Central Bank-owned offshore institution, in support of the protests against Colonel Muammar Gadhafi. The value of frozen Libyan assets is estimated at $150 billion. Previously only $18 billion had been released, of which only $3 billion was made available to Tripoli. According to the UN, the assets are needed to pay government employees and to rebuild state institutions.
The GNA had previously attempted to unfreeze those assets. In 2016, the government of Fayez al-Serraj asked the UN Security Council to approve a sanctions exemption for the LIA, but this request was turned down as the UN wanted to see a stable government in place before doing so. Although the LIA is not pushing for a full rollback, it is aiming to apply to the UN Sanctions Committee for adjustments to enable it to invest, via a custodian, some of the $12.7bn frozen cash held by its investment managers.
Fayez al-Serraj as Prime Minister is one of the seven members who compose the Board of Trustees, which in turn elects the Board of Directors. Ahmed Maeteeq and Abdulsalam Kajman, two other members of the Tripoli-based Presidential Council, officially demanded to attend any future meeting regarding LIA. UN sanctions have had a heavy toll on the LIA, with investment curbs meaning it had missed out on around $4.1bn in potential returns if it had invested in line with the market average. LIA chairman Ali Mahmoud Hassan Mohamed told Reuters last week, indicating that market volatility during the coronavirus crisis has hit the LIA, cutting the value of its stock holdings by about 5 percent and prompting a potential debt restructuring for some of its hundreds of subsidiaries.
Even as major players and the United Nations are conducting intense talks with Libyan parties to ensure the proper division of oil revenues and resources, is it a good idea to let the GNA manage these investments? And why right now? We talk about it with Mr. Omar Khattaly, former head of LIA Real Eastate Fund from 2012 to 2016; today Managing Director of the USA based Khattaly Consulting, an International Investment Consulting office, and founder of the Libya Political Economy Platform.
Mr. Khattaly thank you for accepting this invitation. Manage investments or leaving the assets frozen? As an expert, can you explain what they are trying to do?
“At this pivotal point in Libya’s’ history definitely leave the assets frozen. Neither LIA nor the GNA has the needed expertise or the know how to manage these funds or the Custodian. Since the fund’s inception, LIA, failed to manage these billions and management only proved itself as experts in lawsuit filing and losing billions to shady deals and corrupt practices. Prior to any changes to unfreeze these funds the U.N. should demand from LIA and the GNA to publicly publish its annual financial reports for the last 10 years and disclose its financials and practices in accordance to the Santiago principals of international transparency and disclosures.”
What do you think of this new decision taken by the GNA? Are we facing another attempt to circumvent UN sanctions?
“Definitely, since 2015, the GNA has failed to bring any measure of stability to government institutions, which has ultimately resulted in its complete collapse and further increasing corruption within its ranks. I believe this is another attempt by the GNA to have access to these funds to further finance its agenda and strengthen its position in Libyan politics. In summary a government that could not manage the collection of garbage from its streets, definitely should not be trusted with $12.4 Billion dollars, which equals the annual budget of many of Libya’s neighboring countries.”
What are the risks associated with these operations if the UN approves the request of the Tripoli Presidential Council?
“First, it will have a negative impact on the peace process; especially that wealth distribution is a key point of conflict in current negotiations. Second, this will open the door to further corruption and conflict amongst the GNA’s decision makers and LIA on the choice of the Custodian/Fund Manager. LIA has failed to present a clear and transparent case to the Libyan People on how they plan to manage these funds, the process it will adopt, and who will grant the final contract to manage these funds once the U.N. freeze is partially lifted. Third, and most important, the possible loss of these funds as they did with billions before.”
In February 2019, president Serraj appointed Yousef al-Mabrouk, his chief of staff, as Vice Chairman of the LIA, and Mustafa al-Manaa, Advisor to the Central Bank of Libya, as an additional member of the LIA’s Board of Directors. Libya Herald labelled the choice of Serraj as “controversial”, what do you think? Is this another reason why UN should not allow GNA to touch the assets and money of the Libyan people?
“Unfortunately, and for the last 5 years, the Presidential Council’s choices for Libya’s foreign investment sector were mainly based on nepotism and loyalty, and far from qualifications and expertise. They are more concerned with control of centers of money and hard currency than the welfare of the Libyan people. Securing high returns on Libya’s investments for the future generations of Libya was never a top priority for this government. In summary, I strongly support keeping the freeze on these funds until we see a strong constitution in place, and a legitimate government elected by the people that can be held accountable on the overall governing of the country and management of its wealth.”