AN EMPIRICAL ANALYSIS OF LIBYAN BUSINESS ENVIRONMENT AND FOREIGN DIRECT INVESTMENT

Abstract

The economic development needs of developing countries require capital accumulation, which is no longer an easy task, even for industrialised countries. Although borrowing remains an important alternative, it has proved to be an expensive method in the long run. Consequently, to attract foreign direct investment (FDI), developing countries have been liberalising their economies, which is expected to contribute to job creation and income generation.

At the beginning of the 21st century Libya declared its intention to liberalise its economy and to integrate into the global economy in order to achieve comprehensive development. This study investigates and explores the conditions of the Libyan business environment in relation to foreign and joint companies, particularly in the non-oil sectors.

A questionnaire survey method was utilised to assemble the primary data. This was conducted with the representatives of both foreign and joint companies in order to establish their perceptions and opinions towards the Libyan business environment across various dimensions. In addition, a structured interview method was used with the Libyan senior officials to investigate the difficulties and challenges facing the General People’s Committees and bodies in improving the business environment.

The questionnaire data were analysed using SPSS through descriptive and analytical statistics by employing frequency, factor analysis, chi-square of goodness of fit test and cross-tabulation tools, while interviews were analysed by using coding technique through interpretative analysis. To substantiate the results, the Porter model was utilised supported by a SWOT analysis with the objective of gauging how competitive the Libyan business environment is for attracting foreign direct investment.

The study reveals that despite the numerous obstacles and shortcomings associated with the Libyan business environment, the country’s experiment for attracting FDI in the non-oil sectors can be described as successful. It also shows that despite this success, many foreign and joint projects have been cancelled as a result of difficulties associated with the Libyan business environment. The study also revealed that there are many challenges facing Libyan policy environment in order to reform the business environment to make it more attractive for FDI.