Libya’s protracted conflict has brought the economy to a critical juncture. Historical legacies and ongoing disruptions hinder development and reinforce deep structural vulnerabilities1. The conflict has significantly impacted the private sector, leaving enduring challenges that permeate various facets of the business landscape. However, as seen in many post-conflict situations, the private sector, while suffering in its potential for sustainability and growth, also plays a key role in resilience ensuring the provision of goods and services and finding alternative ways to maintain the economic structure of the country. This note describes the conditions of five strategic sectors and provides some policy orientations to improve the business climate and, in turn, enhance the economic performance of the country.
Before the conflict erupted, Libya's economic structure was predominantly state-driven, heavily reliant on oil revenues, with over 95% of export revenues deriving from the hydrocarbons sector (World Bank, 2021[1]). The dominance of state-owned enterprises, lack of competition, policy unpredictability, bureaucratic inefficiencies, weak governance, and limited access to finance and infrastructure hindered the emergence of a dynamic private sector, mirroring challenges faced by many transition economies. These structural constraints stifled innovation and business sophistication.
Libya also struggled to attract foreign direct investment (FDI) due to a poor business climate and anti-FDI sentiments and policies. In 2010, the World Bank's Ease of Doing Business Index ranked Libya 154th out of 183 countries, reflecting deep-rooted barriers even before the conflict.
The conflict exacerbated these challenges introducing new hurdles for Libya's private sector. According to a United Nations (UN) report, the absence of a conducive business environment, coupled with limited support mechanisms and insufficient incentives, continues to hinder the growth of Libya’s private sector and constrain the country’s broader economic potential (UN, 2021[2]). The World Bank estimates a 30% decline in foreign direct investment inflows into Libya in the years immediately following the onset of the conflict (World Bank, 2021[1]). Macro-economic uncertainty, political instability, corruption, regulatory policy ambiguity, and poor infrastructure, already prevalent, were further compounded by the conflict.
Despite these challenges, Libya’s private sector has shown remarkable resilience. Optimism about a post-conflict recovery persists, with 65% of businesses expressing confidence in the future economic environment, and the number of registered businesses increasing by 15% despite ongoing instability (World Bank, 2021[1]). Stakeholders articulate a long-term goal of economic diversification, aiming to develop higher added-value industries within the hydrocarbons sector and foster new sectors to reduce reliance on oil revenues.
The path to recovery and transformation is intertwined, necessitating short-term measures, such as securing oil production and rendering operational the financial sector, aligned with long-term goals concerning macroeconomic stability, and the development of the private sector. The World Bank reported that Libya's reconstruction needs were estimated at USD 90 billion, providing a substantial opportunity for private sector involvement (World Bank, 2021[1]). Immediate recovery efforts should strategically contribute to the overarching vision of economic diversification. Reconstruction projects, for instance, can be leveraged to develop local industries, but this requires supportive public procurement policies, capacity-building programs, and adequate staffing to ensure local firms can capitalise on these opportunities.
In this context, the “EU-OECD Project on Promoting Public-Private Dialogue in Libya (2020–2023)” was launched to support Libya’s post-conflict transition through a participatory, sector-focused dialogue process. The project aimed to improve the business climate by creating spaces for structured engagement between public institutions and private sector actors across Libya’s diverse regions. Rooted in the OECD’s methodology on Public-Private Dialogue (PPD), the initiative brought together over 200 stakeholders from government, business, and civil society to identify policy challenges, co-create solutions, and strengthen institutional and human capacities at both national and local levels.
This PPD initiative builds on previous OECD work under the MENA Transition Fund project on SME Development in Libya. That project involved sectoral analysis and consultations with public and private actors to assess Libya’s economic potential and advance private sector growth. A comprehensive review of sector trends and competitiveness resulted in the OECD publication “SMEs in Libya’s Reconstruction”, which assessed strategies to diversify the resource-based national economy and examined sectoral GDP contribution, employment, labour productivity, exports, and foreign direct investment (FDI) attractiveness (OECD, 2016[3]). The analysis also considered alignment with Libya’s development goals and job creation impact.
To operationalise this approach, the project conducted extensive consultations to identify and prioritise five key economic sectors that offer strategic potential for Libya’s economic diversification and resilience: Banking and Financial Services, Agribusiness, Information and Communication Technology (ICT), Infrastructure and Construction, and Transport and Logistics. These sectors were selected based on their alignment with Libya’s development priorities, their potential for job creation and private investment, and the feasibility of reform efforts given institutional and market realities.
The public-private dialogue process supported by this project not only aimed to generate targeted policy recommendations for each of these sectors but also to build trust, promote inclusive policymaking, and create a foundation for sustainable dialogue mechanisms in the future. The insights and proposals developed through the PPDs reflect the aspirations of Libyan stakeholders and draw on OECD good practices to support implementation.
This report builds on these dialogues and offers a comprehensive overview of Libya’s economic context, sectoral challenges, and reform opportunities. It begins with an outline of the national economic landscape, followed by five in-depth sectoral chapters. Each sectoral section combines analytical insights, policy challenges, and stakeholder priorities emerging from the PPD sessions. The report concludes with a synthesis of cross-cutting findings and implementation considerations to inform future policy efforts and donor coordination.