On the role of sovereign wealth funds in encouraging foreign direct investment and good governance
Why is governance so central to the success of sovereign wealth fund investment?
ALI MAHMOUD: Good governance minimises risk and ensures that no one individual can sway the trajectory of the fund. We view governance as the cornerstone of long-term success. It allows sovereign funds to serve their broader national purpose – not just as financial actors but as instruments for intergenerational equity and national development. Any strategy, no matter how good, needs realistic execution. We have learned to focus on building strong internal capabilities and to work with well-respected specialists to ensure realistic, scalable implementation.
In what ways are Libya’s investment priorities shifting, particularly in terms of energy and infrastructure?
MAHMOUD: There is a major push in Libya to develop both the energy and infrastructure sectors. While green energy holds obvious promise – both economically and environmentally – the infrastructure space is even more critical for Libya. The government is actively seeking innovative ways to fund vital infrastructure without relying solely on the national budget. Libya faces fiscal constraints and it is not always practical to channel public finances into long-term infrastructure every year. That is where alternative funding models come in. Whether through multinational investors, sovereign partners or private capital, the LIA aims to act as a gateway, giving external investors the confidence they need to participate in Libya’s reconstruction and growth.
How is international capital being attracted to Libya?
MAHMOUD: Libya continues to offer considerable opportunities, particularly in sectors like energy, real estate, hospitality and infrastructure. While there are risks, they can be managed through robust governance and partnership strategies. One point that often gets overlooked is the nature of the UN sanctions. The freeze imposed in 2011 was not punitive – it was a protective measure, requested by Libya itself. It is important to clarify that certain domestic investment activities are not subject to the same restrictions and we are focusing our efforts there. Additionally, we are working on reclassifying our asset allocation to reflect a more inward-looking investment strategy. This internal focus helps build national resilience while laying the groundwork for future international re-engagement.
What are the core pillars of Libya’s investment strategy going forward?
MAHMOUD: Our investment strategy moving forward is focused on building international confidence, strengthening internal resilience and improving investment performance. Encouraging foreign investment involves continuing to prioritise transparency, aligning with international standards and engaging consistently with the global community. At the same time, strengthening internal resilience means channelling more resources into domestic infrastructure, supporting diversification beyond oil and reinforcing national capacity. Alongside this, we are refining our asset allocation models and risk management framework to ensure that investment performance continues to improve.
How can sovereign wealth funds play a greater role in national development?
MAHMOUD: Sovereign wealth funds have a dual role. They are custodians of national wealth, as well as enablers of national transformation. For Libya, the fund is a platform not just for returns but for rebuilding trust, fostering inclusive growth and setting the stage for long-term stability. Post-conflict environments require more than just capital: they demand a deliberate strategy to rebuild institutions, attract external partners and anchor the economy in a more diversified foundation. If done right, sovereign funds can help shape that trajectory, leading with example and discipline.
In what ways has the landscape for sovereign wealth funds evolved in Libya over the past decade?
MAHMOUD: The LIA has had its fair share of challenges – particularly in the years immediately following 2011. The key lesson over the past decade has been the importance of transparency and corporate governance. We have come a long way from being a large fund with few reporting standards to implementing a comprehensive, transparent framework. We were the first Libyan institution which applied the international standards across all reporting, and worked closely with top-tier auditing firms like Deloitte, EY and Oliver Wyman. Even with smaller entities – such as companies operating in Tanzania with complex ownership structures – we have worked from the bottom up to build a culture of auditability and transparency.
This interview serves as a preview of the in-depth analysis coming in The Report: Libya 2025.
