Open for business

The lifting of US trade sanctions last year has suddenly made the Libyan market a viable proposition for IT companies previously forbidden from developing channels in this part of North Africa. But those who are now beginning to take the Libyan IT sector seriously are advised to tread carefully if they wish to build the routes to market required to justify their investment.

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By  Andrew Seymour Published  December 23, 2007

In addition to demonstrating considerable patience, companies expanding into Libya also need to bear in mind other idiosyncrasies that could influence their performance in the market. Factors such as limited hotel space, an undeveloped banking network and a legal structure that one market report describes as "multi-layered", have to be taken into account, as do logistical hazards. "With the poor distribution structure and the huge area of the country, the geographic coverage is the biggest challenge we have encountered," confessed Sharma at Tripp Lite. "While Tripoli is the capital city, and one of the biggest markets, other cities such as Benghazi, which is over 1,100 kilometres from the capital, is also considered to be an important market."

Tripp Lite says that a major regulatory change introduced at the tail end of last year has also posed another challenge that has negatively impacted its business. "The new law mandated that there should only be a sole distributor for each brand, but with over 1,000 products - varying from a basic surge suppressor or network CAT6 patch cable to a highly sophisticated parallel online double conversion UPS unit - it will be very hard for a single company to do the sales and service for that wide a range," explained Sharma.

Unsurprisingly, reliable market data is difficult to obtain too. Many vendors blame lengthy project life-cycles and channel fragmentation for the dearth of accurate statistical data on the value of the market. Some sources have suggested that Libya has the potential to ship as many as 40,000 PCs a quarter, but such an estimate seems grossly optimistic given the size of the neighbouring Egyptian market - with a population ten times as large as Libya - is barely worth 350,000 units a year. That said, vendors Intel and Microsoft recently confirmed a deal with the Libyan government to supply 150,000 rugged laptops that cost US$200 each to build. The order for the Classmate-branded PCs is understood to have been directly placed­ by the education ministry, although the cost of the deal remains undisclosed.

One distinctive feature of the market is that it is regarded as government-centric, with some sources estimating that 75% of IT spend is driven by the central purse. The telecommunications sector is also significant and with more than 90% of Libya's export earnings stemming from oil production, the oil and gas vertical is also luring outsiders.

"The obvious attraction is there are a lot of oil companies and if you look at what we are trying to sell, which is Red Hat Linux, it has a lot of currency within the oil sector," said Allinson at Opennet. "A lot of people who have traditionally run big systems on Unix are increasingly migrating to the Linux platform. We also have a massive reference account in Aramco in Saudi Arabia," he added.

Companies capable of building strong links into the key verticals are certain to prosper in the coming years as the Libyan IT market begins to flourish and becomes less reliant on third party exports. Both fixed-line and mobile telecommunication improvements are expected to generate huge infrastructure investments, as will Libya's ambitious plans to double oil production to three million barrels a day in the next five years. The private sector, meanwhile, retains a more modest profile in Libya, but is anticipated to increase as foreign investors establish local operations.

Yet, when all said and done, the Libyan market needs to be put in perspective. It's young, fragmented and opportunistic - characteristics that will prevail long into the future. "You can see people grabbing opportunities even though they are not related to that business at all," commented Youssef at networking distributor FVC. "But they have grabbed that opportunity and they just want to fulfil it. There are definitely companies targeting long-term business, but you still can't segment the market properly yet.

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