Libya: Sovereign wealth to finance infrastructure

Libyan Investment Authority (LIA) funds will be used to finance reconstruction inside the country rather than invested abroad. The sovereign wealth fund's acting chief executive, 46-year-old Rafik Nayed, recently told international wire services that he expected the $65 billion fund to contract in the short term because of this decision.

Since August, Nayed has led a team that is reviewing all LIA investments and has put a moratorium on operations until this is complete. 'We aren't interested in new deals,' he told the Wall Street Journal back in September. 'My mandate … is to untangle the inheritance of the regime and stabilise.'

When it was established, the LIA said that it aimed to be transparent and to follow the best international investment practices. This was partly to allay suspicion about the motives that a powerful Qadhafi-controlled fund might have for acquiring assets in Europe and the United States.

These resolutions were not kept. By 2010, several original members of the board of trustees had resigned. Documents leaked to activist organisation Global Witness in June 2011 showed that many large investments made by the fund had in fact lost money. Nayed has attempted to introduce greater openness, telling Reuters that cash, equities, and fixed income products accounted for about 77 per cent of the total assets under management. He identified potential problems in many of the asset classes, describing the equities holdings as insufficiently diversified and some of the strategic shareholdings, managed partly through the Libyan African Investment Portfolio,as loss making.

He also said that he planned to examine the alternative and hedge fund investments closely, including deals with Goldman Sachs and Société Générale.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2011 Menas Associates

Sudan needs a more transparent oil sharing deal

A new report published by Global Witness has called on Sudan for more transparent oil revenue disclosures in order to avoid conflict ahead of Sunday's [9th January] referendum on southern independence.

The report stated that with the upcoming “referendum on independence for southern Sudan just days away, oil sector transparency is now more important than ever to preserving the fragile peace between north and south."

The UK based resource lobbyist says that the unclear distribution of oil wealth has contributed greatly to the mounting tensions between northern and southern Sudan. Most of the country's oil comes from the south but the infrastructure remains in the north.

The current oil revenue sharing deal between the two regions indicates a 50:50 distribution, but Global Witness says the two sides need to come to a more transparent and effective agreement to replace the existing one that expires at the end of January.

"There has been much mistrust over whether the current revenue distribution system has been implemented fairly. Mistrust over revenue sharing was one of the primary reasons for the south's temporary pullout from the power-sharing arrangement in 2007. Evidence suggests that such concerns are not unfounded," the report said.

The upcoming referendum is part of the 2005 treaty that ended a two decade war between the north and the south. It is estimated that over 95 per cent of registered voters live in southern Sudan, while the remainder are in the north or abroad.

"With both sides hugely reliant on oil revenues from the south, this issue is paramount going into the referendum… so the single best way to ensure stability after the referendum is to put a transparent and verifiable new oil deal in place," added the report.

Sources: BBC News, CNN, FT, Bloomberg

For more news and expert analysis about the Sahara region, please see Sahara Focus.