Country Analysis (Libya) for international business class - Essay Example

In addition to the normal requirements for a contract to be valid and implementable, sharia has strict guidelines on other religious requirements for contracts. These requirements put into account all recommendations and prohibitions of the Muslim law. However, this would be appealing to investors if applied to the letter. Other factors that influence the running of businesses in Libya include but not limited to corruption and discrimination. Legal protection of property The reign of Gaddafi has not given citizens the right to own property.

All property in Libya is everyone’s property in accordance to the principle of socialism. The only property that a family can own in Libya is their residential home. This was a good idea that could have worked if used legitimately instead of the way Gadhafi, his family and circle of friends used public property for personal gain (Heritage 2010). Even after change of regime, Gaddafi still wields power as the de facto leader of the oil rich North African nation. The transition government that has taken over leadership of Libya after Gadhafi’s ouster has a great deal to do to put in place mechanisms for an independent legal system.

In addition, it has to deal with the ills of the Gadhafi regime that have wrecked the governance system. In addition, the constitution must be changed to allow profitable property ownership as the power to privatize or nationalize property still freely solely with the government (Dep. of State, 2010). There has been no move in the right direction to change the laws on intellectual property rights since the government abolished them in 1978. The Libyan government has signed treaties on intellectual property rights but the implementation of the contents in Libya is wanting.

Libya ranked 113 out of 125 countries in the 2010 Intellectual Property Rights Index, having one of the most widespread trademark violations in the world (Heritage 2010). Country’s trade policy There is no levy for goods produced in Libya but all imports attract a 4% service tax. This attempt to make local goods more affordable fails majorly because of other factors that increase the cost of trade and the cost of final products. Some of these factors include government interference like price controls, practices in oil products trade, bans and restrictions, subsidies, competition from state owned corporations, sanctions and arbitrary and other unexplained charges.

Corruption plays a major role in order for private organizations to obtain trade licenses and to secure contracts and tenders. Since 2007 to 2009, inflation was moderated at 4.9% by the central government mostly by price controls through state-owned firms and via government utilities (Heritage 2010). Country’s laws regarding ownership (FDI) In most cases, foreign companies do not own land in Libya. This means that if one considers investing in Libya they have to put into account the cost of rent that is determined by the government and whose amount might be unfair for the investor.

This is however expected to change if the Libyan transitional government delivers a new, more democratic constitution. The worst part for foreign companies comes in when their ownership is considered. 35% of stake in foreign companies is reserved for natives. Even though legislation was passed in 2005 that allows foreign banks to operate in Libya, the high cost of credit, competition with state-owned banks and unavailability of funding are the major obstacles to investing in the