OECD Review of Foreign Direct Investment Statistics of Libya

Foreign direct investment (FDI) is one of the principal ways through which economies integrate into the global economy. FDI is not only an important channel for exchanging capital across countries, but it also facilitates the exchange of goods, services, and knowledge and serves to link and organise production across countries. FDI provides a means to create stable and long-lasting relationships between economies, and it can be an important vehicle for local enterprise development. FDI has grown rapidly in recent decades and both the destinations and sources of FDI have expanded with globalisation. Internationally harmonised, timely, and reliable FDI statistics are essential to assess the trends and developments in FDI activity globally, regionally, and at the country level.

FDI is one of the major types of investment included in the balance of payments (BOP) and international investment position (IIP) statistics. The International Monetary Fund (IMF) in its Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6, (IMF, 2009[1])) and the OECD in its Benchmark Definition of Foreign Direct Investment, 4^th edition (BD4, (OECD, 2009[2])), set the international standards for compiling FDI statistics. BD4 is completely consistent with the guidance in BPM6 but provides more detailed guidance on the compilation of FDI statistics; for example, BD4 offers more details to compilers of FDI statistics on the disaggregation by partner country and by sector of main activity than BPM6. The recommended measures of FDI statistics in BD4 produce indicators that are part of the larger System of National Accounts (SNA, (United Nations et al., 2009[3])). The SNA is the internationally agreed standard set of recommendations on how to compile measures of economic activity, such as Gross Domestic Product (GDP), gross national income, trade, and foreign borrowing and lending.

The OECD also hosts the Working Group on International Investment Statistics (WGIIS), which serves as a forum for FDI statisticians from both OECD member countries and non-member countries to share their experiences and best practices for the compilation of FDI statistics. Furthermore, the WGIIS conducts research to improve the measurement of FDI. Currently, the WGIIS is overseeing the update of the OECD’s Benchmark Definition of Foreign Direct Investment (to the 5^th edition) and contributing to the update of the IMF’s Balance of Payments and International Investment Position Manual (to the 7^th edition) in the area of direct investment. These updated manuals will include improved guidance for the compilation of FDI statistics, particularly in the valuation of FDI positions and the measurements of FDI income, as well as guidance for more meaningful measures of FDI, including better identification of Special Purpose Entities and statistics by ultimate partner economy.

The goal of this review is to evaluate Libya’s FDI statistics to assess the institutional setting for compiling the statistics, the data sources and estimation methods used, and their compatibility with the current international guidelines (BPM6 and BD4). The review resulting from this assessment makes five principal recommendations, including eight specific actions, to improve the compilation of FDI statistics in Libya. The OECD has offered a prioritisation of these recommendations based on our knowledge and understanding of the costs and benefits of implementing the recommendations; however, the Libyan authorities have deeper understanding and knowledge of the costs and the needs of policymakers and, thus, may have different priorities.

The review also offers guidance on topics in the compilation of FDI statistics relevant to the Libyan economy, such as FDI in the natural resource sector that is one of the key sectors of interest to foreign investors in Libya. This review is based on Libya's response to a survey asking for information on their FDI statistics; other information on data sources and methods, such as the metadata Libya provided for the IMF's Balance of Payments statistics; an analysis of Libyan FDI statistics; the presentations at a workshop held in Tunisia on 17 and 18 January 2024 with representatives from the Central Bank of Libya, the General Authority for Investment Promotion and Privatisation Affairs of Libya, and Libyan Ministry of Economy and Trade; email exchanges following the workshop; and our knowledge of best practices for the compilation of FDI statistics.

The review begins with a summary of recent trends in FDI in Libya based on data from the Central Bank of Libya, the General Authority for Investment Promotion and Privatisation Affairs of Libya, and mirror data from the OECD’s FDI statistics database and the IMF’s Coordinated Direct Investment Survey (CDIS). This is followed by a section discussing each of the principal recommendations, including advice on their implementation. Table ‎1.1 briefly summarises the high priority recommendations. The last section offers conclusions.

This section briefly explores FDI trends in Libya. It starts by looking at the data on FDI transactions from the CBL. Then, it uses data from the General Authority for Investment Promotion and Privatisation Affairs and mirror data to explore Libyan FDI to and from the OECD and the world. It also compares the experience of Libya to other countries in North Africa.

Table ‎1.2 shows the FDI transactions in FDI assets and liabilities reported to the IMF by the Central Bank of Libya. The data begin in 2010, which was the year that Libya issued Law No. 9 that encouraged domestic and foreign investment within the framework of state policy and to achieve economic and social development. Among the development objectives mentioned in the law was enhancing the human capital of the Libyan workforce, technology and knowledge transfer, diversifying the economy, and exploiting locally available raw materials.

At the January workshop, it was clarified that the zeroes for FDI liabilities were legitimate zeroes as there had not been any new investment. However, net incurrence of FDI liabilities was USD 603 million in 2021, the most recent year for which data are available. The net acquisition of FDI assets is lower than in 2010 and 2012 in recent years and have fluctuated between positive and negative amounts.

The General Authority for Investment Promotion and Privatisation Affairs collects data that can be used to estimate inward FDI positions. They also collect information on the sector of the foreign investment. Figure ‎1.1 shows the sectoral distribution of inward FDI stocks in Libya. The data show that the services sector, which includes petroleum services, is the largest sector, followed by manufacturing, and tourism.

Because FDI crosses borders, it means that both countries involved in a transaction or holding a position will record it. Thus, it is possible to use mirror data to examine FDI in a country. For countries that do not publish FDI statistics, this is very useful because it provides insights into FDI in the country that are not otherwise available. For countries that do publish FDI statistics, they can compare their FDI statistics by partner country to the mirror data to identify partner countries that are disseminating significantly different statistics (that is, identifying significant bilateral asymmetries). This information can help improve data quality by identifying potential areas of under-coverage to further explore. Please see Box ‎1.1 for a list of sources of bilateral FDI statistics.

When examining mirror data, it is important to remember that the data the partner countries report as outward FDI to Libya are inward FDI from Libya’s point of view; likewise, the data reported by partner countries as inward FDI from Libya corresponds to outward FDI from the point of view of Libya.

Using mirror data reported by OECD member countries, it is possible to employ their outward FDI position data disaggregated by partner economy to construct inward FDI stocks held by OECD countries in Libya. Table ‎1.4 presents the total FDI inward position of OECD member countries with data for the top five investing countries shown below. The data are for the most recent five years available.

The inward position of OECD member countries in Libya was USD 1.5 billion in 2018, rising to USD 4.2 billion in 2022. However, it is difficult to follow the trend given that the largest investor, the Netherlands, had to suppress the data for 2018 and 2019 for confidentiality reasons. Investment from the next three largest investors trended down, although Korea has not yet reported data for 2022. In contrast, the investment positions of Germany increased over the period, going from a small negative position to become the second largest OECD investor in Libya.

Table ‎1.5 compares OECD FDI in Libya to other countries in North Africa: Algeria, Egypt, Libya, Morocco, and Tunisia. Again, it is difficult to assess the trends because of uneven reporting across OECD countries as they either have to suppress some cells to protect confidentiality or they may not have reported the most recent year yet. Nevertheless, it is clear that Egypt attracts the most investment in the region from the OECD, followed by Morocco and Algeria.