A brief look at five factors that will shape the Libyan business environment in 2013:

Security and safety

While the situation on the ground is arguably better than portrayed, and varies widely from place to place, worries over everyday security and crime levels discourage consumer spending and investment by private companies. Major pieces of bad news - like the death of the US ambassador in September last year - also harm Libya's image more generally, and can put off potential investors from even exploring opportunities in the country.

Security worries also add to the cost of doing business - companies will charge more for their services in Libya if they perceive that greater risk is involved - while on a more practical level, clashes have frequently damaged essential utilities like telecoms and power networks in certain areas of the country. 

In 2013 the interim government will need to restore greater confidence in the state’s ability to provide law and order, especially in areas outside of the major towns and cities. Doing so will be a fundamental part of creating a workable business environment, especially in Benghazi, where the security situation remains a major issue.

Business legislation

These are still early days for the new government, but one key question surrounds legislation on foreign companies' activity in Libya.

In July 2012 the National Transitional Council (NTC) published Decision 207, which restricts shareholdings of foreign companies in Libyan joint venture firms to 49% (except in special cases) and outlines a number of restricted sectors where only Libyan companies are permitted to operate.

The decision was met with some criticism from the business community, but it remains unclear whether the law will be revised during the relatively short term of the current government.

Other potential new business legislation could include steps to make it easier and quicker for Libyans to set up and finance new companies, and to reduce red tape and bureaucracy in dealing with government institutions.

State contracts

Although the transitional government signed some new contracts in 2012, the majority of pre-2011 work has remained on hold. In many cases, contract terms and payments are being reviewed or renegotiated, a process that many local and foreign companies will be hoping to see accelerate in 2013.

In parallel, the fate of some significant government entities remains unclear, with the possibility of restructuring at organisations like the Economic and Social Development Fund (ESDF) or the Libyan Investment Authority (LIA) and their subsidiaries.

State budgets are also worth watching. While oil production recovered much more quickly than expected in 2012, the government is now spending more money on subsidies and public-sector wages than it was prior to the revolution. In the first ten months of 2012, those two categories accounted for more than half of total state spending.

It is not beyond the realms of possibility that Libya will incur a budget deficit in 2013, and may need to seek external financing in the future in order to fund its ambitious infrastructure development programme.

Labour action

Many state-owned companies, particularly in the oil and gas sector, were severely affected by protests, strikes and sit-ins during 2012. Some employees demanded improvements in the security situation or working conditions, while others demonstrated over the provision of jobs, medical treatment or greater decentralisation of power.

In 2013 the new government will have to tread a thin line between not caving in to demands from protesters, but at the same time avoiding prolonged strikes which could disrupt oil production or exports.

Decentralisation

The overall level of political and administrative decentralisation in Libya will be a major talking point in discussions over the new constitution. How much decision-making power will be devolved away from Tripoli, and how will this affect businesses? Will companies be required to contract from local government entities in individual towns in the future, rather than directly from the capital? How much spending and decision-making power will be given to local authorities?

Several government ministries took steps in 2012 to open branches outside of Tripoli, while the National Oil Corporation (NOC) also plans to split off its downstream refining and petrochemicals activities, which are to be based in Benghazi. Other important government institutions may follow suit in 2013.