WILL SMALL BUSINESSES HATCH IN LIBYA? PM AL-MAHMOUDI OPENS FIRST SMALL BUSINESS INCUBATOR

C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 000223



SIPDIS



STATE FOR EEB (EGAN) AND NEA/MAG; ENERGY FOR GINA ERICKSON,

COMMERCE FOR NATE MASON; CAIRO FOR TREASURY LIAISON ALEX

SEVERENS; LONDON AND PARIS FOR NEA WATCHERS



E.O. 12958: DECL: 3/11/2019

TAGS: ECON, ECIN, LY, ELAB, EPET, PGOV, BBSR, PTER

SUBJECT: WILL SMALL BUSINESSES HATCH IN LIBYA? PM AL-MAHMOUDI OPENS

FIRST SMALL BUSINESS INCUBATOR



REF: A) 08 TRIPOLI 937; B) TRIPOLI 212



TRIPOLI 00000223 001.2 OF 002





CLASSIFIED BY: Gene Cretz, Ambassador, U.S. Embassy Tripoli,

U.S. Department of State.

REASON: 1.4 (b),(d)

1. (C ) Summary: Secretary of the General People's Committee

al-Baghdadi al-Mahmoudi (PM-equivalent) recently officially

opened the first "business incubator" in Tripoli to assist

small- and medium-sized businesses (SME's),diversify Libya's

petroleum-dominated economy, and reduce the high unemployment

rate among Libyan youth. Participants in the Business Incubator

program will receive training, such as in preparing business

plans, conducting feasibility studies, and access to credit if

needed. End note.



LIBYA EARMARKS 16 BILLION DOLLARS TO HELP SMALL BUSINESSES



2. (C) On March 10, Secretary of the General People's

Committee al-Baghdadi al-Mahmoudi (PM-equivalent) officially

opened the first "business incubator" in Tripoli to assist

small- and medium-sized businesses (SME's). Also present at the

opening were Secretary Matuq Matuq (head of the General People's

Committee for Facilities, an agency created in last week's

cabinet shuffle reported in Ref B),the director of the National

Economic Development Board (EDB),Mahmoud Jibril, as well as

members of the diplomatic corps. As part of the Libyan

government's efforts to reform and diversify the economy away

from hydrocarbons, al-Mahmoudi's EDB has spear-headed the

creation of "business incubators" with the hope of reducing

unemployment (estimated at 20 percent) and creating

opportunities for Libya's unemployed youth. Participants in the

Business Incubator program will receive training, such as in

preparing business plans, conducting feasibility studies, and

access to credit. The incubators will also provide information

and communication technology, office space, workshops, business

and financial management training, and help entering new

markets. (Note: The Embassy is currently working with the EDB

to provide technical assistance to the Business Incubator

program managers by partnering with the U.S. Department of

Commerce's Commercial Law Development Program. See Ref A. End

note). In his remarks at the opening ceremony, al-Mahmoudi said

the Government of Libya (GOL) had earmarked 20 billion Libyan

dinars (about 16 billion USD) for the promotion of small- and

medium-sized businesses and for a "Financial Fund" as part of

the program. In a follow-up conversation with EDB staff,

Econoff asked for more details on the "Fund" but staff said the

modalities of how small loans would be disbursed were not yet

known. In all, five incubators are planned to be opened

nation-wide with some focusing on agriculture and some on

industry. They will target new graduates, the unemployed

(especially youth),and women.



WORKING IN COOPERATION WITH THE EU, TUNISIA, EGYPT, AND JORDAN



3. (C) At the opening ceremony in Tripoli, al-Mahmoudi said

that Libya was working in cooperation with the European Union,

and bilaterally with Italy, to promote small business

development. He noted the recently-ratified Libyan-Italian

partnership agreement "required" Italy to open its markets for

Libyan goods that would be produced by the new entrepreneurs

from the business incubators. He said Libya hoped to exchange

experiences in promoting small businesses with neighbors such as

Tunisia, Egypt and Jordan. The Jordanian organization,

Jordanian Expertise House (JEH),is assisting the Tripoli

Business Incubator in its early stages. No mention was made of

plans for American technical assistance via the Commercial Law

Development Plan but this could be because joint-activities are

not slated to begin until this coming June. Dr. Mahmoud Jibril

of the EDB also made remarks at the ceremony, in which he said

the opening of Tripoli Business Incubator represented an

important step in preparing youth to run their start-up

businesses successfully. He noted the incubators were

especially important in oil-producing countries, like Libya,

where the culture of self-employment and private initiative was

almost non-existent. A change in the "work culture" of Libyan

youth would be a great accomplishment of the program, in his

view.



BUT IT'S NOT THE FIRST TIME LIBYA HAS TRIED THIS



4. (C) At the reception following the ceremony, the German DCM

asked whether the incubators would connect Libyan entrepreneurs

to foreign companies, noting that many small- and medium-sized

German firms were looking for Libyan partners. A member of the

EDB staff said this had not figured into the initial plans but

that eventually the incubators could serve as a clearinghouse



TRIPOLI 00000223 002.2 OF 002





for matching Libyan and foreign SME's. The French Economic

Counselor told Econoff that this program was at least the third

attempt to assist SMEs in Libya and his predecessor had tried to

link the EDB to French organizations that help SMEs by sending

Dr. Jibril to France on a study tour. He said this had not been

fruitful due to the lack of institutional structures and

bureaucratic capacity to help SME's in Libya.



POST-CABINET SHUFFLE: AL-MAHMOUDI TRYING TO SHOW RESULTS?



5. (C) Comment: Will the business incubator program succeed?

This is not yet clear but it won't be for lack of funding. The

reported budget of 20 billion dinars (16 billion USD) is huge

but it is unclear as to how it will be allocated and whether

some portions will be loans or loan guarantees. Another unknown

is how micro-loans would be disbursed given that the Libyan

economy is largely cash-based and banks are not widely-used,

except for disbursing payrolls. Whether or not the loans would

be paid back is another question mark, particularly in a country

where loans from state-run banks have traditionally been given

based on patronage and where there is no nation-wide credit

bureau. The roll-out of the incubator program also coincides

with the General People's Congress' decision to postpone

al-Qadhafi's much-touted wealth distribution program. The

announcement of the incubator program could be an effort to

demonstrate that the government will help Libyans in other ways

than distributing the country's oil revenues directly to the

people. The undertone to the talk of helping unemployed youth

is that the regime is under pressure to provide meaningful

options for young people lest they turn to extremism and

terrorism. Setting up business incubators elsewhere in Libya,

particularly around Benghazi, will be especially important there

since rates of unemployment are even higher than the nation-wide

average of 20 percent, a potential driver of extremism in a

region that has historically provided foreign fighters to

al-Qaeda in Iraq. End comment.

CRETZ