Libyan Investment Authority
|This article is outdated. (December 2012)|
|Industry||Sovereign wealth fund|
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. The LIA is currently chaired by Hassan Bouhadi who was appointed by a decree from the Board of Trustees on 11 October 2014.
- 1 LIA Governance
- 2 Activities
- 2.1 Offices
- 2.2 BP production sharing agreement
- 2.3 Economic and Social Development Fund
- 2.4 Libyan-Qatari fund
- 2.5 Investment in Fortis
- 2.6 Investments in Juventus
- 2.7 Investments in equity and currency trades
- 2.8 Assets
- 2.9 Claims of mismanagement and misappropriation of funds
- 3 References
Deeply rooted in the democratic structures of Libya, the LIA is overseen by the Libyan Government and is managed within strict governance processes, accountable to that government.
Board of Trustees
The Board of Trustees  of the LIA is:
- Mr Abdullah Althni, Chairman – Prime Minister of the Interim Government
- Mr Kamil Moamen, Member – Minister of Finance and Planning
- Mr Monir Ali, Member – Minister of Economy and Industry
- Mr Ali Alhibri, Member – Central Bank Governor
- Mr Gomah Yones, Member – Independent Member
Board of Directors
Since the inception of the LIA there have been six Chairmen of the Board of Directors.
- Hassan Bouhadi – Appointed as a member of the Board on 10 February 2014 and subsequently appointed as Chairman on 11 October 2014
- Ahmed Attiga – Appointed as a member of the Board on 5 March 2013
- Ali Mahmoud – Appointed as a member of the Board on 10 November 2013
- Faisal Gergab – Appointed as a member of the Board on 5 March 2013
- Osama Siala – Appointed as a member of the Board on 11 October 2014
- Fakher Buferna – Appointed as a member of the Board on 3 November 2014
- Idris Lahimer – Appointed as a member of the Board on 3 November 2014
Law No. 13 of 2010
The LIA is deeply embedded within democratic structures of Libya and it mandate is defined by Law 13 which became statute in 2010. Law No. 13 of 2010 sets out the LIA’s continuing mandate. The Libyan Investment Authority (“LIA”) was established in 2006 and is regulated under Law No. 13 of 2010 (“Law No. 13”), which continues to be in full force and effect as a matter of Libyan law.
Under Law No. 13, the LIA is composed of:
a. The Board of Trustees, being the ultimate governance body with oversight and control of the LIA. The Board of Trustees comprises: the Prime Minister (as Chairman); the ministers for Planning, Finance, Economy and Trade; the Governor of the Central Bank of Libya; and a number of experts. This structure was established by Decree No. 2 of 2014, the Council of Ministers, the executive branch of the Libyan Government appointed in accordance with the governmental mandate of the elected House of Representatives.
b. The Board of Directors, being the competent body to oversee the management of the LIA (articles 10 and 11 of Law No. 13). The LIA Board of Directors is to be made up of seven members, including a Chairman. They must be appointed by resolution of the Board of Trustees. The Board of Directors oversees three subcommittees, (Nomination & Compensation, Governance, and Audit & Risk Committee), each of which have an agreed mandate of responsibilities and undertake frequent reporting back to the Board of Directors. The Board of Directors frequently report to the Board of Trustees.
The LIA is currently chaired by Hassan Bouhadi who was appointed by a decree from the Board of Trustees on 11 October 2014.
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.
The LIA has three offices in London, Malta and Tripoli. In November 2014 the Board of Directors approved the relocation of the general office and investment operations to a temporary headquarters in Malta.
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.
Assets as of 2012
Following a validation and evaluation assessment undertaken by Deloitte for the Board of Directors in 2012, the LIA portfolio was valued at $67 billion as of December 31, 2012. The mandate for the LIA based on Law 13 of 2010 to the Board of Directors is to preserve, protect and grow the sovereign wealth investments.
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 of December 2012 the Libyan Investment Authority following the Deloitte validation and evaluation report and the commitment to meeting the governance of mandate outlined in Law 13, the LIA appears to be operating normally  and no responsible investigation has demonstrated any real substantiated evidence of corruption or malfeasance.
- Libyan Investment Authority. Overview by the Sovereign Wealth Fund Institute
- The Washington Post - Libyan gold rush followed end to sanctions
- "Appointment Decree" (PDF). Libyan Investment Authority Official Website.
- "Libyan investment chief: 'Goldman Sachs squandered a nation's wealth, someone has to answer'". The Telegraph.
- "LIA Governance". Libyan Investment Authority Official Website.
- "Libya steps out of financial wilderness with plan to manage assets". Telegraph.
- "Law No. 13 of 2010". Libyan Investment Authority Official Website.
- 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
- "We want partnership with global financial institution". Libya Herald.
- 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
- "Investment Portfolio". Libyan Investment Authority Official Website.
- "Oversight". Libyan Investment Authority Official Website.
- Libyan sovereign wealth fund 'missing $2.9bn' BBC News Business, Retrieved 29 August 2011