VZCZCXRO4034
RR RUEHTRO
DE RUEHTRO #0397/01 1131742
ZNR UUUUU ZZH
R 231742Z APR 07
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC 2164
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAS/AMEMBASSY ALGIERS 0493
RUEHTU/AMEMBASSY TUNIS 0252
RUEHRB/AMEMBASSY RABAT 0446
RUEHEG/AMEMBASSY CAIRO 0755
RUEHRO/AMEMBASSY ROME 0277
RUEHVT/AMEMBASSY VALLETTA 0185
RUEHTRO/AMEMBASSY TRIPOLI 2474

UNCLAS SECTION 01 OF 02 TRIPOLI 000397 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECIN ECON EINV EFIN LY
SUBJECT: BEARISH: LIBYAN STOCK MARKET LUMBERING ALONG SLOWLY 
 
¶1.  (SBU)  Last month Libyan authorities announced the launch of 
Libya's stock market (the Libyan Stock Exchange Market, or LSEM) 
on the occasion of the 30th anniversary of the establishment of 
the Jamahiriya (or "state of the masses") with the unveiling of 
Moammar al-Qadhafi's Green Book.  This seemed an odd pairing, 
given that the cocktail of socialist economic admonitions found 
in the second volume of the Green Book ("The Economic Basis of 
the Third Universal Theory") are not obviously compatible with 
the form and function of stock markets.  It was also yet another 
widely-hyped announcement for an entity which has been difficult 
to quantify since its purported formation in 2004, and 
subsequent "launching" announcements each year since.  Adding to 
the confusion, conflicting official statements alternate the 
LSEM's headquarters location between Tripoli and Benghazi in 
different announcements. 
 
-------------------- 
"Like Starting a Stock Exchange on the Moon" 
-------------------- 
 
¶2.  (SBU)  In an effort to cut through the confusion, Econoff 
sat down on April 5 with a U.S. contractor who provides LSEM 
consulting support.  This source, with twelve years of 
experience working as a consultant to numerous governments 
establishing their own stock markets, was just finishing his 
first visit to Libya.  During his visit, he had delivered 
remarks at an Arab Stock Exchange conference in Benghazi, which 
he described as well attended and professionally organized. 
 
¶3.  (SBU)  The LSEM intends to draw from regional models -- the 
stock markets in Egypt, Jordan and Morocco -- to develop its own 
set of procedures and regulations.  Source described the LSEM's 
most pressing requirement as the selection and implementation of 
a computerized trading and settlement system, which will be 
issued as a tender to a select group of bidders in the coming 
months.  There are currently no established rules and 
regulations for the LSEM, no set procedures for registering 
companies and no mechanism for issuing stocks.  There are also 
no brokers or brokerage houses, and no companies are truly 
"listed" with the exchange (Note: Press reports and embassy 
contacts have indicated that a half-dozen companies were listed 
with the LSEM, but that seems to reflect planned, vice actual 
listings accessible to potential investors.  End note). 
Reflecting on the challenges of starting a stock market from 
scratch in the Libyan operating environment, source commented 
that it was "like starting a stock exchange on the moon." 
Despite the daunting task, source noted that there was great 
enthusiasm on the part of the LSEM staff to set up an effective 
stock market that would compare favorably to others in the 
region. 
 
--------------- 
How the LSEM Is Organized 
-------------- 
 
¶4.  (SBU)  The LSEM currently falls under the auspices of the 
Secretary of the GPC for Economy, Trade and Investment, and is 
managed on a day-to-day basis by General Director Suleiman Salem 
al-Shahomy.  It was formally established in Libyan law under 
General People's Committee Decree Number 34 of 2006.  The LSEM 
currently occupies two facilities, one in Tripoli and the other 
in Benghazi.  The fifteen employees at the Tripoli-based 
headquarters occupy a modern office located within the premises 
of the Tripoli International Fairgrounds.  The Benghazi office 
employs about thirty people in brand-new office spaces, and the 
facilities in both cities conduct basic training on-site for 
their employees.  Despite GOL announcements that the LSEM would 
be headquartered in Tripoli, Econoff's source surmised that the 
LSEM would ultimately be headquartered in Benghazi once fully 
operational.  He estimated that it would take another full year 
until a limited launch of the LSEM, with two or three companies 
participating, was possible.  The launch number might grow if 
Libyan authorities allow the LSEM to link-up with neighboring 
stock markets to generate cross-border trading and additional 
trading options. 
 
¶5.  (SBU)  Post Comment:  The LSEM launch is an integral part of 
the GOL's National Economic Strategy.  It is closely linked with 
efforts to privatize state-owned enterprises (SOEs) and may 
become the preferred means by which to broaden the ownership 
base of hitherto government-owned companies.  Saif al-Islam has 
announced that the government will create investment 
"portfolios" for Libyan citizens and some speculate that instead 
of giving people money, the government will give them shares of 
former SOEs.  Comments made last month by the Secretary of the 
GPC for Economy, Trade and Investment revealed how the LSEM will 
attempt to bridge the socialist and free market inclinations of 
the state.  He noted that, "the establishment of the stock 
exchange market is part of the general restructuring of the 
Libyan economy...and most importantly, broadening the base of 
public ownership."  The LSEM therefore appears to be a mechanism 
open Libya to the outside world, privatize SOEs, and serve the 
social aim of redistributing wealth internally.  How well it 
performs each of these roles will directly impact the other, and 
the GOL's opaque economic reform process will likely make for 
continued slow going at the LSEM. 
 
 
CECIL