Impact of Libyan Economic Reforms and Expansion in Signed DTTs on FDI Flows

Abstract

This paper reviews and analyses the impact of Libyan most recent Economic Reforms and Expansion in signed double taxation treaties on foreign direct investment flows. The analysis shows that these reforms have been successful in attracting approximately $ 4.7 billion from foreign capital in 2006 to Libya; these investments were directed to oil activities and other economic activities. In 2007, foreign capital jumped markedly to reach an excess $ 6.2 billion as result of increasing foreign investors’ confidence in investment conditions in Libya. Libya was rerated on country risk composite from low risk to very low risk; Indicator of country risk composite refers to political risks, economic risks and financial risk (Libyan foreign investment board, 2007). However, the amount of foreign capital plummeted in 2008 to reach $ 4.1 billion as a result of the global economic crisis, in 2009 foreign capital continued to decline to hit $ 2.7 billion (Libyan foreign investment board, 2009). In 2010 foreign capital have recorded highest number ever to hit $ 19 billion   have directed mostly to construction sector and oil sector, the major reason for increasing the level of foreign investment is signing Libya DTTs with Germany and England. This study revealed that the most recent economic reforms and expansion in double taxation treaties have led to a quantum leap in economic growth and FDI flows to the country.

Keywords: Double Taxation Treaties, FDI, Foreign Capital, Bilateral Treaties