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Italy’s trade with Libya at a standstill

by Laura Cavestri

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What ever happened to plans for a $1 billion highway to be funded with Italian money as a “compensation” for the colonial period in Libya?

“Only feasibility studies, and no bulldozers,” said Gianfranco Damiano, president of the Libyan-Italian Chamber of Commerce.

In 2008, under the Treaty of Benghazi signed by then Prime Minister Silvio Berlusconi and Libyan leader Muammar Gaddafi, Italy pledged to build infrastructure in the country worth $5 billion through 20 years, with an annual investment of $250 million.

After the demise and death of Gaddafi, the agreement remained in place. But progress remains very slow. The most important project is that of a coast highway which should run through Libya, connecting the Tunisian border to Egypt: more than 1,700 km for €960 million.

A group of businesses led by engineering group Salini Impregilo and including Condotte, Pizzarotti and CMC has won the project. But the Fund for Libya, which was expected to be funded through a small percentage of the revenues from oil extracted by Italian major ENI, has never taken off. It served to fund our domestic emergencies, including the temporary layoff scheme, or CIG.

Yet, Italy remains the most important partner for Libya. The fall of Gaddafi's regime fuelled new optimism in the construction sector, with small and medium sized companies returning to the country to build bridges, canals and other infrastructure. In 2013, we imported for €8 billion (90% crude and gas) from Libya and exported to the country €3 billion worth of petroleum products, machine tools, technology and vehicles.

“There are more than 100 Italian firms in Libya,” Damiano said. “Some are still operating in the south, where there is no fighting. This country represents a big opportunity for jobs and investment that Italy has never fully taken.”

Now, payments and orders are at a standstill. Between January and September 2014, trade halved compared with the same period of 2013, and 2014 gross domestic product dropped 5.2%.