Libya is seeking to cash in letters of guarantee issued for projects Turkish contractors undertook but had to temporarily abandon due to the country’s civil war…
Libya is seeking to cash in letters of guarantee issued for projects Turkish contractors undertook but had to temporarily abandon due to the country’s civil war despite Turkey’s military and financial aid to the opposition groups that toppled Muammar Gaddafi.
Libya has recently attempted to convert a letter of guarantee issued for a Turkish contracting firm, a member of the Turkish Contractors Association (TMB), into cash.
Upon the firm’s objection, which was based on a Turkish Cabinet decree that went into effect in July 2011, in accordance with UN Security Council sanctions previously imposed on Libya, the Libyan government’s move was blocked.
Turkish contractors that had to abandon projects due to violence in Libya — projects worth a total of $19.1 billion — are deeply concerned. The Libyan government’s cashing of the letters would have serious short- and long-term consequences for the more than 100 Turkish builders in Libya.
The contracting sector is anxious that the moves could cause major financial loss in the short term. In the longer term, industry representatives fear, the Libyan government may avoid granting tenders to Turkish contractors or may refuse to accept letters of guarantee issued by Turkish banks.
Faik Öztrak, the main opposition Republican People’s Party’s (CHP) deputy chairman in charge of economy, told Today’s Zaman that the issue is an indication that the ruling Justice and Development Party (AK Party) is losing credibility in Arab Spring countries. “Why do Libyan banks want to convert the letters of guarantee of … Turkish firms?” he asked.
Though he doesn’t rule out the possibility that the issue was caused by Turkish firms’ failure to finish the projects, Öztrak says the Libyan government may be acting out of dissatisfaction with some of the Turkish government’s initiatives.
The Libyan Foreign Bank is said to no longer accept letters of guarantee by Turkish banks after Turkey’s A&T Bank rejected demands to convert letters of guarantee for projects undertaken by some Turkish firms into cash. The total worth of letters of guarantee issued for Turkish projects in Libya is estimated at around $1.5 billion.
In an effort to ease the concerns of Turkish companies with uncompleted projects in Libya, Economy Minister Zafer Çağlayan said Friday that there is no way letters of guarantee will be seized by the Libyan state. Çağlayan said that letters of guarantee issued for Turkish contractors are under the protection of the Turkish government as per the Cabinet decree.
Turkey not only took part in the NATO-led operation to overthrow Gaddafi, but also agreed, back in 2011, to provide financial aid worth $300 million, $100 million of which was delivered in grant aid, to opposition groups fighting against Gaddafi.
For Sinan Ülgen, chairman of the İstanbul-based Center for Economic and Foreign Policy Studies (EDAM), the Libyan government’s attempts to cash in letters of guarantee are alarming. Although delayed payments to Turkish contractors in Libya were an issue when Gaddafi was in power, Ülgen said, “Even when Gaddafi was in power, Turkish contractors were not subjected to such treatment.”
Since the civil war started in the North African country in 2011, Turkish contractors have taken losses in machinery and equipment amounting to a total of around $1.3 billion.
The total of overdue payments to Turkish contractors for projects undertaken in Libya is more than $1 billion.
Other than national priority projects such as airports and highways as well as energy, education and health facilities, Turkish contractors do not know when they will be reimbursed for losses incurred during the civil war.
Ülgen expects Libya will change its behavior. “Libya needs Turkey’s assistance even more today, as it is busy building a new state,” he said.
Though Turkish contractors doing business in Libya are on tenterhooks, cooperation between the two countries continues as usual. At the beginning of the month a group of 185 Libyan soldiers arrived in the city of Isparta to receive training from the Turkish military.
As part of a memorandum of understanding previously signed between Turkey and Libya, a total of some 3,000 Libyan soldiers will take a 14-week course in Turkey.
Turkey, NATO’s only Muslim member state, supported the Libyan armed opposition during its attempt to topple the decades-old dictatorship of Gaddafi. The seeds of Turkey’s friendly ties with Libya were sown during a US arms embargo against Turkey following Turkey’s intervention in Cyprus in 1974, when Gaddafi’s Libya provided Turkey with spare parts to operate US-made jets. Since then, Turkish builders have become a mainstay of foreign business in Libya, despite an influx of Chinese, Russians and others later on.
In terms of volume of contracts Turkish contractors got abroad, Libya ranked second after Russia in the 2000-10 period with a share of 12.4 percent.