How Libya can earn back 'frontier market' status

Six months ago the post-revolutionary North African nation was considered a 'frontier market' -- How can we turn back the clock? 

Al Bayda, Libya

Did we witness a revolution against socialism or an ouster of an unpopular leader, or a building civil war?” asked May Ann Deeb of the U.S. Library of Congress at a forum reviewing Libya’s institutions. 

It is a revolution and a civil war,” responded Karim Mezran, a Senior Fellow at the Rafik Hariri Center for the Middle East, as he described a Libya where external actors accelerated the revolution--but not the process of institution building.

The process of Libya’s institution building determines, not just security, but whether Libya qualifies as a frontier market.

Six months ago, Libya was considered a frontier market by some investment risk management companies, according to Financial News.

Each of those countries re-entered Libya to resume trade relations and profit from oil and gas opportunities because of Gaddafi’s ouster. On January 26th, France also issued an evacuation of its citizens from Libya as Britain, Germany and the Netherlands had done. At this juncture, there is little incentive to revisit a country’s institutional development--physically or theoretically--unless the topic of “frontier markets” emerges. How will Libya earn back its “frontier market” status? 

Frontier markets represent a business climate that operates at an even more uncertain stage before earning the “emerging” market category. The World Economic Forum’s weeklong retreat in Davos, Switzerland convened its selection of thought leaders to promote global economic growth and think about frontier markets.

According to the panelists participating in the WEF 2013 Agenda panel: Libya, like other North African countries, fits somewhere between demonstrating “challenges to Africa’s security environment” and a potential for a “missed opportunity”. The difference between the challenge and the opportunity lies within the country’s “fundamental institutions”, said panelist Frederico Curado, CEO of EMBRAER. 

Recently, the American-based global investment firm, MSCI launched an index, which “provides broad representation of the equity opportunity” in the ambiguous universe of frontier markets. Based on MSCI’s ratings, a range of MENA countries appear, like Jordan and Kuwait. (Aside from both countries operating as monarchies, they are quite different regarding institutions and resource wealth.) 

Tunisia and Egypt also appear as recent Arab transitioned countries.

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