Libya has an economy over dependent on hydrocarbon and the petroleum industry. In a bid to diversify, the Libyan government is looking at Free Economic Zones (FEZ) as a viable option versus other avenues, like Foreign Direct Investment (FDI). This thesis explores FEZ as a tool to fetch investment for the development of Libya's economy. Some of the factors in favour of FEZ are believed to be employment opportunities for local labour, enhancing their skills and knowledge, as well as bringing new technology along with management styles, thereby boosting not only the national economy, but overall growth of society. This thesis examines these arguments by comparing existing FEZ in various parts of the world, particularly Al-Ameria FEZ in Alexandria, Egypt. The case study revolves around this FEZ, as it has geographical and cultural similarity to that of Libya. In stimulating a potential decision making process, cost-benefit analysis is carried out to evaluate financial return against benefits envisaged. Finally, the study recommends the perceived best way forward in establishing successful FEZ to achieve desired sustainable economic growth in Libya. This is the first study of its kind in the Arab world that covers cost-benefit analysis of different industries within FEZ, and could prove to be a guideline for academics and business communities working in this field