Somalia: Don’t Rush Pell-mell Into Joining East African Community

[Deeq A.]

Leaders of the East African Community Member States

Mogadishu (PP Editorial) — In his book on the pre-1991 monetary policy of Somalia Mohamed Dalmar, a retired central banker, noted an unwarranted policy mishap adopted by the military regime shortly after the overthrow of the civilian regime on 21 October 1969. The military rulers abrogated the central bank law that prevented the civilian leaders from printing Somali shillings without independent and impartial economic advice. The Supreme Revolutionary Council members reneged on the promise that “they will rule with brains, not with bayonets.”

For over decades the military regime devised monetary policies devoid of the input of independent economists’ judgement on the state of the national economy. As a result Somalia turned out to be a country known for politically motivated food shortages, recessions and higher unemployment rate. Even after the military regime enacted an Investment Law on the heels of economic liberalisation policies in 1980s, foreign investors did find Somalia a country still vulnerable to statist policies and nationalisation of private companies.

In 2023 Somalia stands on the opposite pole: it is a country with a recognised government that does not fully control the sovereign territory of Somalia, a country whose government’s economic policies have no bearing on the post-state collapse national economy commandeered by local conglomerates.

The flag of the East African Community.

Somalia has a central bank but not a single national currency used throughout the country nor does it have a harmonised tax regime for imports or exports. As Abdiqani Hirad, a Somali economist, discussed in his seminal paper on the institutional weaknesses that will make Somalia a rule-taker if its application to join the East African Community gets approved, gradual process will shield Somalia from the impact of trading with member states with comparatively robust institutions. Both property rights and the rule of law are severely underdeveloped in Somalia. The threat of nationalisation in pre-1991 Somalia has been replaced by the threat of dispossession. The EAC rules will not be watered down to take Somalia’s institutional weaknesses into account.

Goods imported by Somali traders are now taxed by Somali regional authorities. Inter-country trade with member states have separate taxation rules that Somali regional authorities will find less appealing due to possible adverse impact of tax revenues levied on imported goods.

The Federal Government of Somalia has not conducted nationwide consultations on its application to join the East African Community. For this reason, Somalia deserves not to rush pell-mell into joining EAC as a member state. The national interest of Somalia is best served if the application to join the East African Community gets rejected.

© Puntland Post, 2023

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