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Ambitious Growth Fund Seeks to Jumpstart Libyan Economy
The Washington Diplomat / October 2009

By Larry Luxner

Some of the biggest and most dramatic infrastructure projects now rising across Libya from hotels to high-rise apartment buildings are being funded by a government entity that aims to help low-income families through asset-building rather than handouts.

The Economic and Social Development Fund (ESDF) was created by Col. Muammar Qaddafi in mid-2006 and manages 14 billion Libyan dinars (about $11.3 billion) in assets.

"This is not a sovereign fund, but a fund owned by families," said Hamed Arbi El-Houderi, ESDF's chairman and general manager. "We are only managing it. The ultimate owner is those families, so all income and dividends go directly to them."

The ESDF is distinct from the Libyan Foreign Investment Company (Lafico), which invests Libyan funds overseas and is currently active in 38 countries from Brazil to Russia.

El-Houderi spoke to The Washington Diplomat from his office at ESDF's Tripoli headquarters, which is lavishly decorated with murals of both Qaddafi and some of the projects ESDF is bankrolling.

The largest of these is Energy City Libya, a groundbreaking $2 billion project located west of Tripoli, on the Mediterranean coast near the ancient Roman ruins of Sabratha.

"A fully integrated business city serving the needs of the region's energy industry, Energy City Libya will provide a significant stimulus to the fast-growing Libyan economy, helping it rise to spectacular new heights," says an ESDF pamphlet promoting the ambitious project.

Built around a silver needle-like tower, the 700-hectare development will feature a series of specialized satellite clusters dedicated to different sectors within the energy industry. Energy City Libya is a joint venture between one of ESDF's subsidiaries and Gulf Finance House, a investment house headquartered in Bahrain.

Construction of Energy City Libya hasn't started yet, though groundbreaking is expected sometime before year's end.

El-Houderi said the ESDF hopes to benefit 300,000 families throughout Libya.

"Traditional welfare programs never allow poor or low-income families to build assets or wealth," explained the official, who studied English at Lousiana State University in Baton Rouge; he's also lived in New York and Ohio.

"For this reason, under the direction of our great leader Qaddafi who insists on the equitable distribution of wealth among all Libyans funds were allocated to this program to be invested on behalf of qualified families. This will encourage such families to be active within the economic cycle and generate income from their work and investment, rather than relying on donations or basic salaries."

El-Houderi said the fund's investments are distributed in five sectors: finance (LD2.94 billion), services (LD2.18 billion), real-estate (LD1.68 billion); industry (LD1.19 billion) and tourism (LD1.27 billion). The fund consistently enjoys a 10 percent rate of return, said El-Houderi, noting that its investments include stakes in cement factories, steel mills, pharmaceutical plants and engineering companies.

There are also four financial institutions in ESDF's portfolio Alwahda Bank, Sahara Bank, First Gulf-Libyan Bank and Alwafa Bank as well as $2 billion in various hedge funds, fixed-income accounts, equities and other short-term investments. In all, nearly 27,000 jobs are provided by the fund.

As Libya shifts from a centralized, socialist econmy to one increasingly driven by market forces, El-Houderi said investment opportunities will continue to multiply, for the benefit of all the country's citizens.

"The Libyan economy is doing well. You know that Libya was under an embargo for 15 years," he said. "At that time, most of our development programs were frozen. It's very difficult to work on a program while you're under sanctions. So after the embargo was lifted, we started building our infrastructure. At this stage, we're still new, because most of our projects are still under construction."

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