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C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 000741

SIPDIS

STATE FOR NEA/MAG; STATE PLEASE PASS TO USTR PAUL BURKHEAD; COMMERCE FOR NATE MASON; ENERGY FOR GINA ERICKSON; PARIS AND LONDON FOR NEA WATCHERS E.O. 12958: DECL: 8/5/2019

TAGS: ECON EFIN ELTN LY ETRD ECPS EPET CH

CLASSIFIED BY: Gene Cretz, Ambassador, U.S. Embassy Tripoli, U.S. Department of State. REASON: 1.4 (b), (d)

1.(C) Summary: In a recent meeting, the Chinese Commercial Counselor outlined the main sectors in which Chinese companies work in Libya as well as the challenges these firms face. Twenty Chinese firms are registered with the People's Republic of China Embassy in Libya, working mainly in construction, telecommunications, and oil services. Chinese companies face some of the same challenges as American firms here, i.e. delays in securing visa approvals, dealing with capricious and suddenly-announced commercial laws (like the residency visa regulations), and having to double-track issues through the byzantine Libyan bureaucracy. End summary.

2.(C) Econoff met with the commercial section of the Embassy of the People's Republic of China (PRC), which is comprised of a Commercial Counselor (Guo Chang Zhan) and a Second Secretary for Commercial Affairs (Qu Yuan). Zhan has had previous postings in Senegal and Ghana, while Libya is the first overseas posting for Yuan. They outlined the main sectors in which Chinese companies work in Libya, as well as the challenges these firms face. According to Zhan, Chinese companies face some of the same challenges as American firms doing business in Libya, including delays in securing visa approvals, dealing with capricious and suddenly-announced commercial laws (like the residency visa fees), and having to double-track issues through the opaque Libyan bureaucracy.

3.(C) Zhan said twenty Chinese firms are registered with the PRC Embassy in Libya, working mainly in construction, telecommunications, and oil services. In accordance with Libyan labor laws, the companies employ Libyan staff in at least 30 percent of their positions. Some Chinese firms are engaged in the trade of goods, including trucks, which are sold via Libyan distributors.

CHINESE FIRMS BUILDING HOUSES, INFRASTRUCTURE, AND RAILROADS...

4.(C) In terms of construction, Chinese firms have contracts with the Housing and Infrastructure Board (HIB), which are managed by the American company AECOM. [Note: AECOM provides overall program management and consulting to HIB. End Note.] China Railway Construction (CRC) is working on the 172 km stretch of railway between Tripoli and Ras Edjeer and the line between Al-Khums (east of Tripoli) and Sirte. [Note: Russian Railways is working on the 554 km railroad line between Sirte and Benghazi. End note.] CRC is also working on the 800 km railroad line between Misrata, on the Mediterranean Coast, and Sebha, in southern Libya.

...AND ALSO ACTIVE IN TELECOMS

5.(C) Chinese firms are also active in Libya's telecommunications sector. In April, the firm Huawei Technologies Co., Ltd. won a contract with Libya Telecom and Technology (LTT) to deploy "fiber to the home" networks for households in 800 homes on the Airport Road in Alzohor District in Tripoli in the first phase. The firm plans to expand network coverage to other districts in the project's second phase. In 2008 the Chinese telecommunications equipment supplier ZTE Corporation won a USD 58 million network expansion contract from Libyana, one of two Libyan mobile network operators. The deal enables Libyana to expand its existing network from 1 million to 6.5 million lines. [Note: Libyana is one of two mobile phone operators owned by the General Post and Telecommunications Company (GPTC), the other being Al Madar. GPTC is run by Mohammed al-Qadhafi, the eldest son of Muammar al-Qadhafi. End note.] ZTE also has a contract with LTT to build a WiMAX wireless Internet network, covering eight cities in Libya, and has already begun offering services in Tripoli.

THE CNPC-VERENEX SAGA

6.(C) Econoff raised the issue of the pending sale of Canadian oil company Verenex to the Chinese National Petroleum Company (CNPC) (reftel). While CNPC has made a play at acquiring Canadian oil firm Verenex - the only successful oil exploration company in Libya thus far - it has not enlisted the help of the PRC Embassy in lobbying the Libyan government on its behalf. Zhan said he heard the proposed deal was "unsuccessful," as he had heard Libya's National Oil Company (NOC) would not approve TRIPOLI 00000741 002.2 OF 002 the CNPC sale because the NOC desired to purchase Verenex. [Note: The CNPC offer to purchase Verenex expired on August 24, and CNPC did not move to renew that offer. End Note.]

WITH HEADACHES OVER VISAS AND CUMBERSOME LIBYAN BUREAUCRACY

7.(C) Zhan commented Chinese firms had complained about "sudden and unreasonable regulations" that caused work delays and related increases in operating costs. For example, the recent new decree requiring foreign workers to pay fees for residency permits (500 Libyan dinars, equivalent to about USD 400) had caused construction firms' costs to sky-rocket. He characterized the Libyan government as "inefficient" and lacking coordination among various entities. On visas, for example, he said approvals had to be obtained not only from immigration officials but also from the Labor Office, and there was little coordination between the two. As a result, companies often have to wait several months for visa approvals for their employees. Additionally, Zhan noted that many Chinese companies have had trouble importing equipment needed for projects due to new "fees" that are suddenly imposed on those imports.

COMMENT

¶8. (C) Comment: Chinese companies have carved out some niches for themselves in the Libyan market, namely in construction and telecommunications. Anecdotal evidence indicates that the Chinese commercial presence in Libya is growing, with scores of Chinese workers thronging flights between Tripoli and Benghazi, and Turkish Air flights regularly sold out with Chinese workers transiting Istanbul en route to Libya. Nevertheless, Chinese companies appear to face some of the same challenges as American firms, most of which seem to originate from Libya's opaque bureaucracy. End comment. CRETZ