VZCZCXRO9000
PP RUEHTRO
DE RUEHTRO #0856 3041158
ZNR UUUUU ZZH
P 301158Z OCT 08
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC PRIORITY 4056
INFO RUEHAS/AMEMBASSY ALGIERS PRIORITY 0793
RUEHRB/AMEMBASSY RABAT PRIORITY 0738
RUEHTU/AMEMBASSY TUNIS PRIORITY 0646
RUEHEG/AMEMBASSY CAIRO PRIORITY 1258
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHFR/AMEMBASSY PARIS PRIORITY 0606
RUEHLO/AMEMBASSY LONDON PRIORITY 0918
RUEHTRO/AMEMBASSY TRIPOLI 4577

UNCLAS TRIPOLI 000856 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/MAG; COMMERCE FOR NATE MASON; ENERGY FOR GINA 
ERICKSON; CAIRO FOR CLARENCE SEVERENS 
 
E.O. 12958: N/A 
TAGS: EPET EFIN PGOV LY EAID
SUBJECT: LIBYA'S CENTRAL BANK CONTINUES FINANCIAL SECTOR 
MODERNIZATION EFFORTS 
 
REF: A) TRIPOLI 827 , B) TRIPOLI 842 
 
¶1. (SBU) Summary: Libya's Central Bank Governor briefed a 
visiting U.S. trade expert and Emboffs on efforts by the 
Government of Libya (GOL) to modernize the financial sector, in 
part to attract greater foreign direct investment in non 
hydrocarbon sectors.  Libya is working with international 
organizations to improve financial sector transparency, plans to 
bring international credit rating agencies to Libya to assess 
Libyan financial instruments and its fledgling stock market, and 
is working to improve basic banking supervision and operations. 
Libya plans to sell Certificates of Deposit (CD's) to banks and 
eventually directly to the public, and is in the process of 
training banking officials in loan risk assessment as part of an 
effort to broaden lending to small and medium sized enterprises 
(SME's).  End summary. 
 
¶2. (SBU) On October 13, Public Affairs-sponsored speaker Bruce 
Stokes, a trade and economic specialist with the National 
Journal, met with Libyan Central Bank (CB) Governor Farhat Omar 
Bengadara.  Stokes was accompanied by the CDA, PAO, Econoff and 
PA Assistant.  Bengadara discussed, inter alia, a financial 
sector reform program that comprises encouraging financial 
market operations - including modernizing Libya's stock market 
and selling CD's to banks and the general public - and 
modernizing Libya's banking practices and the CB itself. (Note: 
See reftels for details on Libya's response to the global 
financial crisis and Bengadara's views on Muammar al-Qadhafi's 
proposals for government restructuring and privatization.  End 
note.) 
 
¶3. (U) Stressing the negative impact of sanctions-era isolation 
on Libya's banking sector and the need for technical banking 
assistance, Bengadara said the CB is also working actively with 
the World Bank, IMF and McKinsey (with whom it has a consulting 
contract) to improve Libya's banking and financial sector.  The 
overarching goal is to help create a better functioning, more 
transparent financial sector to make Libya a more attractive 
destination for foreign direct investment (FDI).  Noting that 
there was plenty of interest in oil and gas exploration and 
production, which benefitted from well-organized investment 
under the auspices of the National Oil Corporation's Exploration 
and Production Sharing Agreement scheme, Bengadara stressed that 
the CB's efforts were targeted at securing FDI in 
non-hydrocarbon sectors such as agriculture and tourism.  There 
was also room for more FDI in downstream hydrocarbon industries 
such as petrochemical production and refining (Libya imports 
most of its gasoline from Italian refineries).  Echoing a line 
we've heard from other senior GOL officials, he said Libya - 
with its strategic location, long shoreline and multiple port 
facilities - wanted to become a regional center for travel, 
banking and investment akin to Dubai. 
 
¶4. (U) As part of the program to sell CD's, the CB is working to 
facilitate visits by rating agencies Moody's and Standard and 
Poor in an effort to secure credible ratings of GOL financial 
instruments and as assessment of the fledgling stock market. 
The CB is also interested in improving greater overall 
transparency in the Libyan economy; Bengadara and his team have 
been involved in ongoing discussions with international groups 
working on this issue.  Specific areas of discussion included 
infrastructure development, tax reform and streamlining visa 
issuances for foreign businesspeople. 
 
¶5.  (SBU) Bengadara said the CB is also focused in efforts to 
improve basic banking supervision and operations.  The CB has 
two external advisors who oversee a credit risk initiative to 
train banking officials in analyzing loan applications from 
small- and medium-sized enterprises, although the retail banking 
sector is still very limited.  In broader terms, Libya views 
itself as being more akin to Saudi Arabia than the UAE, in the 
sense that the UAE has fewer oil and gas resources and therefore 
depends to a greater degree on FDI.  Like Saudi Arabia, Libya's 
considerable hydrocarbon resources afford it more cushion and 
make it less dependent on FDI; however, Bengadara is trying to 
encourage GOL officials to take a longer-term view of FDI as a 
means by which to help diversify Libya's oil-dependent economy. 
 
STEVENS