Libyan Investment Authority
|This article is outdated. (December 2012)|
|Industry||Sovereign Wealth Fund|
|Headquarters||Office No. 99, 9th Floor El-Fateh Tower, Tripoli, Libya|
Oil and gas
The Libyan Investment Authority (LIA) is a government-managed sovereign wealth fund and holding company headquartered in Tripoli, Libya. It was established on August 28, 2006, by Decree 208 of the General People's Committee of Libya (GPC), after the lifting of economic sanctions that had previously precluded foreign investment in Libya. The LIA oversees and manages investments in various areas including agriculture, real estate, infrastructure, oil and gas and in shares and bonds. It is one of the world's smaller sovereign wealth funds.
- 1 Board of trustees
- 2 Activities
- 3 Notes
Board of trustees
Although ultimately overseen by the Libyan Government, the LIA’s management has included some of Libya’s most established banking personalities.
The LIA was established in August 2006 to manage Libya’s mounting oil revenue surplus. The LIA now counts the assets of the Libyan Foreign Investment Company (LAFICO), established in 1982, and Oilinvest, founded in 1988, in its portfolio. The value of the LIA is widely quoted as 70 billion  but the LIA's September 2010 management information report valued its own investment portfolio at $64 billion and the Wall Street Journal quoted a value of $53 billion in June 2010.
BP Production Sharing Agreement
On May 29, 2007, during a visit to Muammar Gaddafi by British Prime Minister Tony Blair, British Petroleum (BP) signed a $900 million exploration and production agreement with the Libyan National Oil Company. The agreement, which will likely involve an estimated USD $2 billion in investment, covers three massive, largely unexplored tracts. The NOC signed the agreement with the LIA as BP’s 15% partner in a production sharing agreement (PSA).
Economic and Social Development Fund
The LIA also manages the Economic and Social Development Fund (ESDF). Established in February 2006, the ESDF manages substantial assets in Libya across a number of sectors to benefit Libya’s poor. The LIA’s share in BP’s PSA provides a direct conduit via which oil wealth can be recycled. However, some Libya experts believe that the presence of two state-owned companies in BP’s deal reflects divisions and tensions at the executive level in Libya, particularly over who controls the oil wealth.
During August 2007, LIA agreed to establish a Libyan-Qatari joint investment fund for $2 billion equally with the Qatar Investment Corporation (QIC). Also, the General People's Congress Secretary signed two agreements in Doha on July 2007 for establishment of a joint investment fund between QIC and LIA as well as establishment of the Libyan-Qatari Bank between QIC and the Central Bank of Libya. Also an agreement was signed concerning establishment of joint company for real estate development between Al-Diar real estate investment company (Qatar) and the Libyan Arab Foreign Investment Company.
Investment in Fortis
In July, 2008, LIA bought a share in the Dutch-Belgian bank of Fortis, which needed additional funds to maintain solvability. LIA would not confirm the investment, since they are not required by Dutch or Belgian law to do so. However, later that week, the Dutch Minister of Finance Wouter Bos admitted that the situation 'had his attention, as well as that of the Dutch Central Bank', considering previous Libyan involvement in international terrorism.
Investments in Juventus
As of June 2010, Lafico holds 7.5% of the total shares of Italian football club Juventus.
Investments in Equity and Currency Trades
Between January and June 2008, the LIA paid $1.3 billion for options on a basket of currencies and options on six stocks (Citigroup Inc., UniCredit SpA, Banco Santander, Allianz, Électricité de France and Eni SpA) via Goldman Sachs. By February 2010, the value of these investments was 0.025 Billion - a 98% loss.
Assets as of 2010
In May 2011, The Washington Post detailed the holdings of the LIA. Despite a severe lack of transparency, the LIA saw an astonishing influx of foreign investment after Libya was removed from the U.S.'s list of state sponsors of terrorism in 2006, thereby lifting previously imposed economic sanctions. The Post reported that investment in Libya "occurred with encouragement from U.S. officials, who wanted to reward Gaddafi for pledging to honor international law, disavow terrorism and compensate relatives of victims of the Pan Am Flight 103 bombing:"
“Sanctions are powerful because of our ability to leverage the U.S. financial system. Immediate access to the U.S. and Western investment upon the removal of sanctions is the ultimate carrot...That carrot is what compels sanctioned narcotics traffickers, proliferators and supporters of terrorism to change their behavior and stop engaging in the illicit conduct that got them cut off from the United States.”—Unnamed senior U.S. official, The Washington Post, 25 May 2011
- $22 billion: Cash and deposits, mostly gold reserves in the Central Bank of Libya, with a small amount held by other banks including HSBC and Goldman Sachs.
- $16.8 billion: Subsidiary companies owned by the fund, including Oil Invest.
- $6 billion: Equities in companies including GE, AT&T, Citigroup, and Juventus
- $3.8 billion: Alternatives, including investments with J.P. Morgan, Lehman Brothers and The Carlyle Group.
- $3.2 billion: Bonds, including U.S. Treasuries.
- $4.2 billion: Other assets.
By May 2011, U.S. regulators had frozen $37 billion of the LIA's assets there, including $29 billion in a single bank. The head of the London School of Economics resigned after it was revealed that he had served as an informal adviser to the LIA and accepted a donation from the fund to the school. UniCredit, Italy's largest bank, also froze some of Gaddafi's assets.
False Claims of Mismanagement and Misappropriation of Funds
In 2011, Ali Tarhouni, minister of financial and oil affairs for the rebel National Transitional Council, appointed Mahmoud Badi, formerly a civil servant under Gaddafi, to investigate the Libyan Investment Authority. In August 2011, Badi found "misappropriation, misuse and misconduct of funds" with $2.9 billion missing from the LIA. Mr Badi's report was the first in a series of reports by Gadaffi era technocrats claiming large losses and misconduct. Mr Badi himself was a Gadaffi era technocrat and was removed soon after his claims were made. He now heads the Libyan Economic and Social Fund.
Internal Management Reports were leaked to the Press by sacked staff in June 2010 and September 2012 which showed the Libyan Investment Authority had suffered much smaller losses than expected compared to the huge losses suffered by many sovereign wealth funds in the fallout of the 2008 crash.
The Financial Times interviewed Gadaffi era appointees and directors of LIA, bankers who had never done business with the LIA, and former Gaddafi Libyan officials and reported more rumour and innuendo with no hard evidence generally making vague claims of mismanagement. Farhat Bengdara, a Gaddafi appointee, the former governor of the Central Bank of Libya and member of LIA's board of trustees claimed that there was a "clear lack of governance at the LIA" surprising since he been on its governance Board of Trustees until the revolution came. On Bengdara's recommendation Sami Rais (another Gaddafi era appointment)had been made chief executive of LIA in October 2009. Rais and Bengdara were subsequently sacked by the new Governments of Libya. The accountancy firm KPMG had provided reports and audit in 2010 which showed the LIA asset position steadily improving and made no suggestions of corruption or wrongdoing by any LIA staff member.
As at December 2012 the Libyan Investment Authority appears to be operating normally  and no responsible investigation has demonstrated any real substantiated evidence of corruption or malfeasance. The record actually shows the Libyan Investment Authority managed to preserve Libyan state assets throughout the banking crisis of 2008 - 2010, and then during the revolution. Although a few investments showed book losses in 2010 the Asset base has grown from US$ 50 billion in 2008 to US$ 63 billion by 3Q 2010. The performance of the Libyan Investment Authority compares very favourably with the huge losses (up to 50% of total asset value) suffered by most other Arab and international sovereign wealth funds over the same period. Stephen Jen, a Morgan Stanley economist, put actual international sovereign wealth fund losses at US $ 700 billion to end of 2008, compared with the Libyan Investment Authorities reported actual profits and increase in asset value over the last six years.
- Libyan Investment Authority. Overview by the Sovereign Wealth Fund Institute
- The Washington Post - Libyan gold rush followed end to sanctions
- Staff (24 August 2011) Depleted Fund May Hamper Libya Rebuild The Tripoli Post, Retrieved 10 September 2011
- Coker Margaret and Rappaport, Liz (31 May 2011) Libya's Goldman Dalliance Ends in Losses, Acrimony The Wall Street Journal, Retrieved 9 September 2011
- BP Snares Huge Libyan Gas Fields 31 May 2005, Business Week
- Establishment of Libyan Qatari joint investment fund, 29.08.2007 Libyaninvestment.com
- Fortis-Libya deal under investigation, 04.07.2008 Quotenet.nl
- Graphic: Libya's assets - The Washington Post
- Libyan sovereign wealth fund 'missing $2.9bn' BBC News Business, Retrieved 29 August 2011