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C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 001032 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL:  12/12/2017 
TAGS: ECON ETRD PREL PGOV LY EG JO SY TU
SUBJECT: LIBYA CLOSES BORDER WITH EGYPT TO NON-EGYPTIAN IMPORTS 
 
 
CLASSIFIED BY: Chris Stevens, DCM, Embassy Tripoli, Department of State. REASON: 1.4 (b), (d)

1.(C) Summary: Libya closed its land border with Egypt in October to imports of non-Egyptian goods as part of an effort to encourage greater use of its eastern port in Benghazi. A desire to better regulate imports and tariffs, as well as to reduce importation of used vehicles, may have prompted the decision, which was not coordinated with Egypt and which has disrupted business. The badly coordinated measure underscores the continuing dissonance between senior political leaders' calls for economic reform and the adoption of policies that hinder, rather than help, business. End summary. CLOSING THE EASTERN BORDER TO NON-EGYPTIAN IMPORTS

2.(C) Libyan businessman xxxxxxxxxxxx(protect) told Pol/Econ Chief November 6 that the GOL adopted new rules in early October to prevent importation of goods of non-Egyptian manufacture across the Egyptian-Libyan land border. Only products manufactured in Egypt may be imported overland from Egypt to Libya; products manufactured elsewhere that had previously been trans-shipped via Egypt to Libya were no longer permitted. (Note: xxxxxxxxxxxx is the senior sibling of a family-owned holding company whose varied commercial interests include import/export and distribution under license of foreign-manufactured products. End note.) xxxxxxxxxxxx complained that the new strictures, which were implemented without advance warning to businesses using the overland route, had seriously disrupted imports of consumer goods, contributing to shortages of some items during the several weeks it took companies to adjust their import and distribution networks. EGYPT SURPRISED

3.(C) Egyptian DCM Ayman Musharafa confirmed November 9 that the new strictures were in place. Indicating that the GOL had given Egypt's government less than 24-hours notice that the new rules would go into effect, he attributed the measures to the GOL's desire to encourage greater use of the Benghazi port, ostensibly to facilitate better regulation of imports and tariffs on same. Conceding that the Egyptian-Libyan land border is porous, Musharafa said the GOL had complained for some time that it was unable to better regulate the flow of overland imports. Rumors over the summer to the effect that the GOL would seek to close the Egyptian-Libyan border to all imported goods had prompted a senior-level demarche by Egypt to the GOL protesting the proposal. Egypt's understanding was that the plan, to include bans on non-Egyptian products, had subsequently been dropped altogther; the October initiative came as a surprise. BENGHAZI PORT THE NEW ENTREPOT

4.(C) Benghazi's port, which both Musharafa and xxxxxxxxxxxx described as "the worst" in Libya, had recently undergone some physical and administrative refurbishment (NFI) and the GOL was keen to funnel imports through it. Despite the changes and the GOL's efforts to encourage its use, the Benghazi port remains so "chaotic" that some importers have preferred to incur additional expense to route their products through the better-run ports at the Misrata Free Trade Zone or Tripoli.

USED GAS GUZZLERS PART OF THE PROBLEM?

5.(C) Musharafa said the new measures were prompted in part by the GOL's desire to better regulate and limit importation of fuel inefficient used vehicles. The GOL discounts car prices as part of the basket of subsidies it provides to Libyans in exchange for political quiescence. Imports and sales of vehicles, many of them used, have increased dramatically in the last 18 months. Noting a recent, short-term gasoline shortage occasioned by delayed delivery of two tankerloads of gasoline (details septel), Musharafa said the GOL had belatedly realized that its gasoline import and distribution networks weren't sufficient to supply the newly enlarged fleet of Libyan cars. TRIPOLI 00001032 002 OF 002 The GOL was particularly concerned about importation of used vehicles, many of which were purchased in bulk in Europe and shipped overland through Turkey, Syria, Jordan and Egypt to Libya. The GOL is reportedly also keen to limit imports of used vehicles from Tunisia.

6.(C) The relative porosity of land border crossings, together with less-developed customs and immigration systems at land border checkpoints, made it more difficult to police them. The move to encourage greater use of its ports was part of a broader GOL effort to better manage imports. xxxxxxxxxxxx noted that funneling imports through the ports also limited the ability of individual border guards to solicit bribes, but potentially made it easier for more senior officials involved in port administration to do so. He indicated that corruption remained a greater problem at Benghazi than at Misrata or Tripoli.

7.(C) Comment: xxxxxxxxxxxx was scathing in his criticism of the GOL's ill-considered and poorly implemented decision, citing it as a sign of what he characterized as a lack of commitment to and clarity about economic reform among senior GOL leaders. The measure highlights a continuing feature of the landscape here: the disconnect between senior-level rhetoric about the need for and commitment to economic reform and a series of decisions -- requiring Arabic-language translations of foreign passport biodata pages, increasingly stringent requirements that foreign companies employ Libyans who may or may not be qualified -- that hinder business at the practical level. End comment. MILAM 0 12/12/2007 5685 ECON,ETRD,PREL,PGOV,LY,EG,JO,SY,TU LIBYA CLOSES BORDER WITH EGYPT TO NON-EGYPTIAN IMPORTS Libya closed its land border with Egypt in October to imports of non-Egyptian goods as part of an effort to encourage greater use of its eastern port in Benghazi. A desire to better regulate imports and tariffs, as well as to reduce importation of used vehicles, may have prompted the decision, which was not coordinated with Egypt and which has disrupted business. The badly coordinated measure underscores the continuing dissonance between senior political leaders' calls for economic reform and the adoption of policies that hinder, rather than help, business.