Qatar Funnels $8 Billion Into a Resurgent Libya

By , Money Morning •

By Jason Simpkins
Associate Editor

The State of Qatar will invest about $8 billion in Libyan companies across various sectors, officials told the Financial Times.

The investment is one of many made by large, national sovereign wealth funds, or global cash barons, and will help Libya diversify its economy away from a reliance on hydro carbons.

According to the FT, Barwa Real Estate Co., an affiliate of the Qatar Investment Authority's $40 billion property wing, agreed to invest $2 billion in state-owned Libyan Development and Investment Co to develop commercial, residential and leisure facilities. 

Libya and Qatar also agreed to establish a $2 billion joint-investment fund, a $600 million Libyan-Qatari bank, and a $300 million sports and services project, according to unnamed officials.

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In February, Qatari Diar Real Estate Development joined with the Libyan government to create the Libyan-Qatari Real Estate and Tourism Company. With a total capital of $8.3 million (10 million Libyan dinars), the goal of the venture is to build and operate utility services and infrastructure developments throughout the country.

That includes purchasing and developing residential, commercial and tourist real
estate, as well as improving the infrastructure in Libya's urban areas, by providing them with necessary services such as water desalinization and treatment solutions and electricity.

Libya plans to invest a total of $126.5 billion (150 billion dinar) in what will be a five-year infrastructure redevelopment plan to modernize water and sanitation facilities, and build airports, schools and houses.

Libya's Resurgence

In the 1980s Libya was anything but a friend to the United States, or the international community for that matter. In fact, Libya was one of the first staging grounds of the "war on terror" before there actually was a war on terror. 

In 1986, the bombing of a Berlin disco resulted in the killing of U.S. soldiers and provoked a series of American air strikes on Libyan military installations. More acrimony arose between the nations in 1988 when a Pan Am jet mysteriously exploded over Lockerbie, Scotland.  Many looked to Libya for answers but none were given.

But in 1999, Libya, and its leader, Muammar Qaddafi, had an apparent change of heart and handed over suspects thought by the United States to be involved in the Lockerbie bombing. Then, in 2003, it accepted responsibility for the attack, agreed to pay out compensation to relatives of the victims, and voluntarily gave up its nuclear program.  Three years later, the United States removed Libya from its list of state sponsors of terror and restored diplomatic relations in full.

Since dismantling its nuclear weapons initiative, Libya has been courted by a growing number of Western companies hoping to secure business and infrastructure contracts, particularly in the nation's energy sector. Its oil and gas industries earned Libya more than $40 billion in oil and natural gas revenue in 2007.

The country finds itself in a very favorable position, both politically and geographically, as Europe, which relies heavily on Russia for energy supplies, is looking for an alternative.

Libya is being pulled in both directions, having struck deals with Russian energy giants Stroytransgaz OAO and Gazprom OAO, as well as ExxonMobil (XOM), Royal Dutch Shell PLC (ADR: RDS.A, RDS.B), and Italy's Eni S.p.A (ADR: E).

To finance its renaissance Libya is dipping into the bank of petrodollars it has accrued as proprietor of the largest oil reserves in all of Africa. It is also getting help from sovereign wealth funds such as the Qatar Investment Authority, which has making moves of its own lately.

Money At Work

Two months ago, Qatar Investment Authority bought a 27% stake in Dragon Capital, a Vietnamese property fund, which will buy into offices and serviced apartments in Ho Chi Minh City. And in February, it bought a 15% stake in an Indian office development being built at the Bandra Kurla complex in Mumbai.
The fund has $60 billion to play with and one of its managers said that more emerging market real estate investments are in the works.

"We are focusing on prime cities in India, China, Singapore, Korea, Vietnam and Malaysia, cities around the world where there is strong [gross domestic product] growth and fundamental unmet demand for high quality real estate," Navid Chamdia, head of real estate at Qatar Investment, told Bloomberg at a wealth funds conference in Abu Dhabi. "About 40% of our real-estate investments will be in Asia."

Last week, the fund joined China Investment Bank, Singapore's Temasek Holdings Pte. Ltd., and Japan's Sumitomo Mitsui Banking Corp., in financing a $8.9 billion investment in struggling Barclays PLC (ADR: BCS).

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