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C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 000166

SIPDIS

STATE FOR NEA/FO, NEA/MAG AND EEB/NEA; NSC FOR S. AGUIRRE; COMMERCE FOR ITA NATE MASON

E.O. 12958: DECL: 2/23/2020

TAGS: PREL PGOV ECON ECIN EINV TNGD LY

SUBJECT: HALF OF LIBYA'S HOUSING AND INFRASTRUCTURE BUDGET STILL UP FOR GRABS TRIPOLI 00000166 001.2 OF 002 

CLASSIFIED BY: Joan A. Polaschik, Charge d'Affaires, U.S. Embassy Tripoli, Department of State. REASON: 1.4 (b), (d)

1.(C) Summary: The Head of Libya's Housing and Infrastructure Board Mohamed Abujela al-Mabruk told the Ambassador on February 15 that approximately half of Libya's 2008 projected investment of 62 billion Libyan dinars (USD 47 billion) in construction projects had been awarded, primarily to foreign companies. He noted that the projected investment was expected to increase by nearly 10 billion Libyan dinars within the next few years. While China and Turkey had received the most contracts thus far, Mabruk highlighted that there was plenty of room left for U.S. companies to compete, potentially for even larger projects than had been awarded to date. He welcomed the February 20-23 U.S. Trade Mission and expressed an interest in closer bilateral trade engagement. End Summary.

DEVELOPMENT BUDGET LIKELY TO INCREASE

2.(C) During a February 15 meeting with the Ambassador, the Head of Libya's Housing and Infrastructure Board (HIB), Mohamed Abujela al-Mabruk, accompanied by Dr. Ibrahim Shukri, HIB's head of the Follow-up Department, explained that Libya's projected investment in infrastructure construction of 62 billion Libyan dinars (USD 47 billion) would probably increase to at least 70 billion LYD (USD 55 billion) over the next few years. The reason for the increase, according to Mabruk was the absence of "a lot of information" from the previous estimate. Whereas the General People's Committee (Ministry-equivalent) for Planning and Finance estimated in 2005 that 420,000 houses would need to be constructed over the next five years to accommodate Libya's growing population, rapid demographic changes -- including hundreds of additional expatriate families -- had led to a current estimate of 500,000 housing units. Although the estimated number of additional construction projects had increased, the investment budget has not yet increased, he explained. He estimated that nearly 25 billion LYD would still be contracted out over the next few years.

3.(C) According to Mabruk, the HIB builds to the government's order and does not contribute to determinations of construction figures or the allocation of the housing units. HIB has been charged with building 200,000 housing units throughout Libya and is the only authority in Libya appointed to upgrade existing and new public infrastructure. Over 25 percent of HIB's contracts (more than 10 billion Libyan dinars) have been awarded to Chinese companies, representing the bulk of HIB's contracts. "And they will get more," Mabruk predicted. Turkish firms are the second highest recipient of HIB contracts, worth 3 billion Libyan dinars). In addition to the HIB, Libya's Organization for the Development of Administrative Centers (ODAC) was also tasked with building housing units, as well as large public projects such as schools, universities, and hospitals. Both organizations fall under the authority of the General Board of Public Works, along with three city-specific development agencies, in Tripoli, Benghazi and Ghadames. Outside of this authority, only the Ministry of Transportation manages urban planning projects, specifically for airports, roads, bridges, railways, and ports. Mabruk remarked that the Ministry of Agriculture was also involved in limited, specific development projects.

U.S. COMPANIES WELCOME TO BID ON CONSTRUCTION CONTRACTS

4.(SBU) The Ambassador highlighted the February 20-23 U.S. Trade Mission and inquired whether there was still room left in the infrastructure construction sector for U.S. companies. Mabruk explained that nearly half of Libya's construction investment budget, or approximately 34 billion Libyan dinars had been awarded in contracts so far. However, he believed that U.S. firms would be highly competitive for future bids, particularly in infrastructure construction projects for small cities, construction supervision, project management, engineering, water treatment and waste management, and architecture and design.

5.(SBU) Mabruk explained the process for U.S. firms to bid on HIB projects -- namely that a company must first contact the HIB with a letter of intent and begin negotiations with the agency. He noted that the HIB is willing to initiate negotiations with a company even before the company is legally registered in Libya. If a contract is awarded, the HIB will send the company a letter, which is required for a company to register itself. TRIPOLI 00000166 002.2 OF 002 Companies that enter into joint venture partnerships with Libyan firms will be given preference by the HIB, and if a foreign company partners with the Economic and Social Development Fund (ESDF), it can be awarded contracts without having to compete with other bids. (Note: Other agencies have informed us of the same preferential treatment to joint-venture firms. End note.) According to Mabruk, the Prime Minister-equivalent has recently moved to allow joint-ventures partnerships to be comprised of less than a 35-percent share for Libyan partners and a 65-percent share or greater for foreign partners. Prior to the change, a foreign partner could not own more than a 65-percent share in a joint-venture. He pointed to the example of a recent HIB contract that was signed on a public works project in the Green Mountains, by which the Libyan government allowed an Italian firm to take a 76-percent stake in the joint-venture project. If the Prime Minister-equivalent approved the contract, Mabruk remarked that it would be precedent for future joint-venture partnerships.

AECOM: A MODEL FOR U.S. BUSINESS IN LIBYA

6.(C) Mabruk explained that since 2008, HIB has been working with the American company AECOM as the direct program manager for every HIB contract. After a company approaches the HIB with interest in negotiating a contract, HIB refers the company to AECOM, which prequalifies bidders and refers them back to the HIB according to company size and specialization. After the HIB selects a company and signs a contract, AECOM is responsible for managing the work of that company. Mabruk noted that HIB's partnership with AECOM was the first and largest of its kind in Libya, whereby a foreign company is, for all intents and purposes, managing all of the HIB's work. xxxxxxxxxxxx He said that many infrastructure projects throughout the country were facing problems due to faulty contractors, but that AECOM was limited in the manner in which it could address such issues.

BIO AND COMMENT

7.(C) Mohamed Abujela al-Mabruk moved to Seattle in 1977 to study engineering. In 1978, he enrolled in the University of Southern California's Graduate School of Engineering, where he stayed until 1983. He earned a Master's Degree and Doctorate in Engineering from USC. In 1983, he moved back to Tripoli and become a professor at Al Fatah University School of Engineering, where he taught Saif al-Islam al-Qadhafi. He remained in that position until 1995, when he was named Chairman of the Industrial Steel Company of Misurata (1995-2005). During the second half of 2005, he was dual-hatted as head of the Authority of Infrastructure and Development, a precursor to the HIB. In 2006 he was named Deputy Head of the HIB, serving under then-chairman Abuzeid Dorda. From 2007-2009 he served as Minister of Transportation, and in 2009, he was appointed head of the HIB.

8.(C) Like other GOL interlocutors that we have met in advance of the Trade Mission, the HIB was extremely welcoming of U.S. investment in Libya and was very willing to coordinate meetings between the HIB and the twenty-five companies that will participate in the delegation. His assessment of current and future investment estimates shows that Libya will continue to be a land of opportunity well into the foreseeable future. POLASCHIK