Tripoli – Bawabat al-Wasat: Summiah Ahmed – 13 August, 2016
The al-Wasat newspaper continues looking into the Libya’s foreign investment file. It is now opens part two of its interview with the LIA Chairman, Abdulmajeed Breish.
He has now confirmed that he presented proposals to the Presidential Council on how to re-unify the Libyan Investment Authority. He had also shown the same proposals to Hassan Bouhadi (chairman of the parallel LIA in Tobruk)
Breish stated that he welcomes the accord process. He called for a return-to-square-one process by which the LIA goes to the statue quo ante, before the split. This would mean the re-institution of Hassan Bouhadi, Faisal Gergab, Ahmed Atteqa and Ali al-Hibri into the Council of Directors.
Libyan and Norway and close in resources, but Norway has the largest sovereignty fund on the world, worth some $900bn
Regarding the most favoured investment for the Libyan funds, Breish compared Libya with Norway, saying they are comparable with respect to the resources, whereas Norway has the largest sovereignty fund in the world, with a value of some $900bn. He stressed the need to move away from a backward system of governance to a modern one ambitiously endeavouring to reach world standards. He spoke on the Libyan assets in Africa and the attempt to save some of them especially the ones on Uganda and Sudan, developing and them put them in market for sale. Breish revealed the projects and size of Libyan investments in Egypt, especially in hotels, farming and marketing of oil.
The following is the text of the interview:
Al-Wasat: would you kindly elaborate how Libyan foreign funds came to be frozen?
Breish: In 2011, the National Transitory Council (NTC) requested European counties and the United Nations to apply sanctions to Libyan funds. These sanctions were not forced on us from outside powers but were imposed at our demands for fear that some individuals had the right to sign for them and could, therefore, withdrew the funds.
About a year later, funds were released to the Libyan Central Bank (LCB), but the LIA assets remained subject to sanctions. All through the tenor of Mr Abdurahman bin Yezza as Chairman of the LIA, and my own tenor, and until today, we have consistently insisted that funds should remain frozen and under sanctions, despite the fact that successive governments, from the government of Abdurrahim Alkeib, Ali Zaidan, Leghwail and Abdullah al-Thini, have all called for ending the freeze. We, from here, remained insisting that the fund should continue to be frozen.
In 2011, when the previous regime fell, resources and reserves with the CLB were between $300bn and $350bn – I don’t have accurate figures with me now. Added to this is 100bn to 105bn dollars being the oil revenues for 2011/2012. Oil production at that time was at its peak. During the last six years, immense amounts of money were spent. It was maddening. There was nothing to show for it on the ground. Not in health, infrastructure, electricity or any other utility or services. There was absolutely nothing. There was no maintenance to talk about. No roads fixed, no airports, no sea ports. Even in the oil sector, no maintenance or repair work. In other words, billions upon monstrous millions were spent but God know where they have gone.
In Norway, they employ the best manager in the world to manage their funds. After some time they learned and formed a unit which was given some of the funds as an experiment in buying and selling
In addition there were huge increases in the public sector salaries, by a 100%. in the diplomatic sector by about 500%. Grants of the students sent abroad reached 25,000. This haemorrhaging of the national wealth. Resources at the moment are very meagre – they would not cover up to this time next year. There are no more funds, the coffers are empty. Thus, we are always calling for freezing the assets. We do not support the releasing the funds unless the LIA has a clear plan, and unless the country has a of kind of stability and a unified government.
This institution was established by the law and, therefore, any changes to made in its structure or identity, have to be done by law. Its dissolution, closing down, withdrawal or increase in any of its fund, must be by law. The law shall be responsible for all of its own decisions.
This is the situation inside the LIA, generally, where it is today and what it has. It has 1,800 employees, inside and outside Libya, and 550 companies in addition to various councils of director etc…
Al-Wasat: How do you see the future of the LIA
Breish: We must move away from a backward, outdated governance system to a modern professional governance system comparable to other international sovereign wealth funds. A good example is Norway. It has a sovereign wealth fund (SWF) established some 25 years ago. It is an oil state, with a population of 5 million. Libya is also an oil state with 6 million people. Norway has a small timber industry, with small heavy industry, but most of its local production is oil. We have yet to exploit Libya’s potential in trade, industry and tourism. Norway and Libya are closely analogous with respect to resources, yet Norway has the largest SWF in the world with a value estimated around $900bn. It possesses more than 2% to 2.5% of the shares of biggest international companies, in all parts of the world. As I recall, its income from the SWF for the last years reached $109bn.
In Norway, they employ the best manager in the world to manage their funds. After some time they learned and formed a unit which was given some funds as an experiment in buying and selling. However, most of their money are under experienced consultants.
We hope to set up the same system, with one difference that all their oil income goes to the SWF. At the end of the year, when the legislative approves a budget for the government, the government applies to the SWF for that budget. In Libya, however, we gulp all of the oil revenue, and this is wrong. We have, therefor, to learn from others within the transparency framework. This is the equation in the LIA, but we lack the staff to carry it out. Our staff learned and understood little in this field, because the problem is that our recruitment policy is not professional. It is subject to nepotism and intermediaries, and they had no chance to receive good training.
As an example, 90% of them don’t speak English, while working abroad requires follow-up and knowing what the stock markets are doing and reading economic newsletters. Even contracts are in English. We face a number of problems because of this.
Since I came to this position until today I have made any changes in the administration. I have not invested, I have not sold or bought anything and I have moved nothing. I simply preoccupied myself with other matters. The reconstruction strategy was delayed when the LIA split. Now until we come to some sort of agreement and achieve some stability and a strong fully functioning government that can last, there is very little we can do.
Al-Wasat: Do you see ay hope that the LIA can be unified again?
Breish: I have been in contact with the Presidential Council (PC) and their hope is that the LIA can be re-united and brought together again and we can achieve accord. And there was discussions with me based on total unification. I had a point of view which I would like to express very frankly. The process of accord is required principle, but it needs a mechanism and a programme and the PC must be involved. There is two parties fighting over legitimacy, how can they be reconciled? Therefore, there must be clear lines of direction, there must red lines, and all parties must be present and partake in the discussions, and this has not taken place.
We know the story f the Central Bank, and how a vacuum developed between the two governing bodies, in Tripoli and Beida. We have the crisis in the National Oil Corporation (NOC). Officially, I was very candid. I called for an accord among all concerned. These are state institutions and must be kept away from politics. They are responsible for the future of Libya, for the rights of the Libyan people. One is responsible for liquidity and the state’s finances, another for oil, another for communications, and another for investments and they must all carry out their duties.
I welcome the process of accord and agreement. I have suggested a technique or a mechanism we can follow, but it was not considered. I contacted the other side which was headed by Hassan Bouhadi and presented the same ideas I put to the PC. This is based on a return to status quo ante, to square zero where we were before the split. Kt would mean the return of Bouhadi, Gergab, Attiqa and al-Hibri to the first Board in effect prior to the split so that we can avoid complications.
A second point I suggested was that the PC passes its decisions unanimously and no groups can impose its opinion on the other. The PC should be considered a steering committee and does not have to be involved in every thing, apart from three issues: the auditing of all dispensations, where did the fund came from, and what its source according to financial statements, and then it goes to the PC.
This means that any funds under the control of the parallel Board must be place in accounts of the LIA. Secondly, we must move speedily and decidedly with the litigation to recoup the squandered funds. And, thirdly, embark on an initial review of the LIA restructuring plan and resume contact with the advisories. Perhaps within six or eight months’ times an trustees board willing for the same executive board to continue ad be changed.
I presented these proposals to Mr Hassan Bouhadi and his answer was: ‘Very well. I agree with you on everything except the chairmanship’. I said: ‘you were a member and the real chairman of this board. I have no problem with anyone becoming a chairman’. There was indeed a difference on the matter and we exchanged views on several issues including the legitimacy and who is legal chairman and other issues that was, regrettably, affecting the LIA negatively. We are now awaiting the PC’s call getting together and sorting out this problem.
Al-Wasat: What is your response to the Libyan Audit Office (LAO) report that talked of losses in your organisation amounting to $22bn?
Breish: I have no idea were the LAO in the Eastern part of the country has come with these figures. During the years 2011, 2012 and 2013 until today there was no changes in the assets and the value of the 550 companies. The change was in the liquid assets. Share go up and down. In some years you might register profits and in others losses. But we never had losses in the millions.
The Goldman Sachs case has cost us $1.3bn. In the market today its value is only $100m. We, therefore, have to write of $1.2bn in the LIA account books. But we don’t say we have lost $1.2bn, because this is not the end of story.
We have a case in front of the courts that we might win next years. If this happens it will bring us a sum of $1.3bn plus all legal costs we incurred – tens of millions of dollars. As you can see we have no losses of $22bn whatsoever. I don’t know where the astronomical figures have come from.
Al-Wasat: What procedures have been or will be taken to prevent Libyan assets in some African countries being robbed or appropriated?
Breish: These assets are some institutions and in forms of portfolio. In some countries there were procedures to freeze these assets. Some took advantage of the chaos in the country. With some country we have a penalty clause. For example there is piece of land was granted to the LIA for investment within 3 years, but due to the war of liberation and the situation in Libya we could not fulfil our commitment.
They do have a legal, and some states took the chance and seized some projects. There were some unconditional projects, but the side took advantage of the Libyan situation.
We resorted to the courts in those countries. Some countries have handed the projects and the assets back to us because the courts ruled against them. In others the case are still on-going and we might have to resort to European courts where those countries have assets and funds there. But we must not forget that such litigation are a two-edged weapons.
Al-Wasat: Some media have reported on serious problems in all of the Libyan investment, in the communication sectors n some African countries, how true is this.
Breish: The communications issue if extremely complex, and I will give some of the details. In 2013, I informed all the funds and the portfolios and told then they are prohibited from making any new investment, including borrowing, spending, sale and purchase, without referring to me first. If they had urgent or necessary projects the must make a proposal and submitted it to the LIA. That was a critical period, and Libya was in a mess, and everything is possible including spending money, selling and buying, and we could not bring anyone to account.
I have the letter. The telecommunications company was under the Libya African portfolio. Ahmed Keshadeh was there and Ali al-Hibri was the chairman. Wafiq al-Shatir was in charge of the African communications company in Africa. They conducted a review and prepared a financial analysis which concluded that within 12 years we shall recoup hundreds of millions of dollars. We need between $350m and $400m and investment in 6 or 7 countries. We heard the analysis and seen the video. Some members of the board agreed to give them the money, and some refused. I suggested meeting with our legal advisors Deloitte and Oliver Wyman, both have a section in communication, to give us an opinion. We insisted on to the advisors to submit a copy of their report to the company to give their response and then submitted it to us.
The results were negative. The advisors said the suggestions are useless, ad the whole project was pointless. They said you put $1.5bn in the company and all of it has been waisted. There was only a little hope in two of the countries, Uganda and South Sudan, all the rest must by liquidated.
In Uganda and South Sudan there is more demand for financing to about $16m to $20m for upgrading the company in those two countries. But the aim remains to sell these investments to large companies that want a presence in those regions.
We can’t go into the jungles, build telephone networks and organise staff. In this way, the LIA restructuring will lead us to invest in communications through other international and specialised company. This means we invest in share of these companies that have armies from local populations.
I issued an order to liquidate and shut down the companies. I informed the officers in charge of those projects that the LIA was ready to liquidate the company’s assets in Uganda and South Sudan in order to upgrade ad then sell them. I decided to close our offices in Dubai and transfer to Uganda because the office in Dubai as costing us $17m every year employing five people.
Unfortunately, those in charge with these investments refused to comply with that order. When the LIA split, the company collapsed. Some funds were sequestrated because of delays in settling loans. I submitted notice to the attorney general to that effect because the matter turned into squandering public finds and refusal to comply with LIA decisions.
Al-Wasat: There are investment in hotels and tourism in Africa, don’t these bring returns yet?
Breish: There is a hotel, one of the best, in South Africa and it has good return. We have a group in Europe, the Corinthia group in Malta, which has returns and its value has risen. We also have some returns from some hotels in African, Tunisia, Morocco and Egypt. In Egypt we have Sheraton Cairo, and it is one of the top hotels, but unfortunately, it is under maintenance since 2007. We have set up a joint team to look into the executing company and audit its affairs. Within properly 3 or 4 months on of the Cairo Sheraton towers will be complete. But I must point out that this work has so far run into about $120m.
The same goes for the Abu Nawaz Tunis, which is due to maintenance to complete by the end of the year and will be opened for business. This work has cost us gruesome sums. I would not like to lay the responsibility on anybody, since, as soon the two hotels re-open we are going to appoint an international team to audit the payments and expenses from the beginning till the end of the end of the work.
Which board of directors was in charge, and which director, and how much was spent and in for what… etc? For it was us who financed the these two hotels. There are other hotels in Sharm el-Sheikh also are corrupt deals, where the Egyptian partner is also in control of the hotel. These hotels have stopped work at the time being due to the situation faced by tourism in Egypt, as you know.
In Morocco also, we have a number of projects some of which is working well but other which not so good. Generally, I would just like to say that the LIA had all the world keys to 17 thousand hotels. I would like to mention also that for investment in tourism and hotels, there are professional international institutions specialised that help you keep your funds and own stocks in 20 thousand hotels throughout the world without having anything with running them, and you get dividends at the end of each year.
Al-Wasat: How do you rate the performance of ‘Oil Libya’ in Africa?
Breish: ‘Oil Libya’ has income inside Libya. It owns 250 service stations. These stations, unfortunately, are very under-developed and have not been upgraded and investing in them is nowhere at its best.
Cars need fuel by the stations lack in providing other services which provide income twice as much as that from selling fuel. We must, therefore, develop and modernise so that these stations t become modern. ‘Oil Libya’ has presence in many of the African countries. But they also need modernising and upgrading to take a market share. But I must say the our oil investments are all wrong because basically we established to provide an alternative to oil revenues.
Al-Wasat: How much is the agriculture investment in Egypt and what is its position?
Breish: I cannot give you accurate but, to my knowledge, investment in the Egyptian agriculture sector does achieve income for the LIA. Projects in Egypt could very well be more profitable if we are give the chance to expand and bring in modern technology and larger capital. But I can say it is generally profitable at present. We have in Egypt investments in agriculture, property and hotels. We have two pieces of land from the government, one measuring 40 hectares, in the heart of Cairo, the other measuring 45 hectares in the 6th October area.
Projects in Egypt could very well be more profitable if we are give the chance to expand
These projects need multi-millions dollars, to build complete city, hospitals, living units, flat for ownership and for rental, schools and hotels.
These all require finance. Egypt is a big country, politically and economically. But, as many countries around the world, it is presently suffering from a depression. We have large investments in Egypt, not less than $2.5bn.
Al-Wasat: In the past there were an almost total blackout on the investment, but it seems you are the same way? The Libyan don’t know the LIA owns 17 thousand hotel keys all over the world. Why is all this secrecy?
Breish: You right there. There should have been more communication with our people. We recently changed our website on the internet. But, in fact, we have been more preoccupied with the crisis rocking the LIA.
As for matters concerning the LIA, the foreign press is well briefed on everything. We have a specialist company for that which helps us in sending out material on these stories, including in Arabic and English. Sometimes we do send information to the local Arabic press concerning what our lawyers have said or done and on the latest developments in the court cases.
We also talk to press from time to time. But with the political vacuum in country, we still look for stability, a government and a council of trustees, a legislative and a united government to pull the country and move with it forward. The we shall lay down the projects we have. Regarding the legal situation before the courts and the cases of corruption, we did not wish to to go into details, because some of it would interfere and affect the litigation process.
But there will be time and all will be revealed and explained with transparency. This interview with your newspaper might well be the first we have gone into some details about what goes on inside the LIA. I am presently busy writing the “LIA story” since 2007 till now. I shall reveal the corruption and the problems, and with names. This way the whole story shall be documented for the Libyans and with the attorney general’s office and the Libyan Audit Bureau. We have many notices. I have an appointment with the attorney general shortly to go through several files. This is what I have to say about the general situation of the LIA. We pray God Almighty to guild us and to guild out country to the best.