Somaliland: The Somaliland Economy and its prospects (worth to read)

[Wiil Cusub]

I have noticed that amongst Somalilanders it is clear to see that we often spend much time writing or reading editorials and opinion pieces on the state of politics in Somaliland or the wider Horn of Africa region. However, what surprises me most is that we often spend less time debating issues to do with national development and economic growth in our burgeoning state. Therefore, this opinion piece of mine will share with you all my hopes for Somaliland’s economy and developmental prospects.

 

As Calvin Coolidge stated in a famous quote of his; “Economy is the method by which we prepare today to afford the improvements of tomorrow.” When looking at Somaliland it is a country which can be ranked in the top 10 of African states in terms of its political reform and democratic credentials. However, when it comes to its economy it will be most definitely ranked lowly. Some may argue that this is not the fault of Somaliland as it is a relatively young country (just turned 21) and to be fair unlike other African states it does not have international recognition as a fully-fledged country meaning in economic terms that it does not have no access to bilateral aid or large sums of development funds to help aid infrastructure and development. This lack of recognition has the negative economic consequence that it has hampered the private sector through the limitation of foreign investment and foreign private entrepreneurship as foreign investors are weary that their investments will not be respected in a country which does not have internationally recognised institutions. Indeed the good part is that this has made successive Somaliland administrations virtually debt free. However, granted that this lack of recognition may act as an impediment to economic growth, yet it is not the sole reason for a lack of development in Somaliland. Somaliland administrations regardless of which party or ideology should always strive to put the economy at the heart of its policies and plans and not wait for an oil boon or international recognition to address the needs of its populace.

 

Instead this lack of genuine development in terms of infrastructure and roads is due mainly to a lack of a genuine economic development strategy on the part of successive Somaliland administrations for that reason it has been refreshing to read this current administrations National Development Plan (NDP) for up until 2030 and specifically for the 5 year plan from now until 2016. To be honest the NDP is brave and there are some significant holes that exist within it that only the government can answer. In particular the main opposition I have to it is that it is projected that around 80% or more for the NDP is expected to be donated by external donors or international aid donors. (See http://www.guardian.co.uk/global-development/poverty-matters/2012/mar/01/somaliland-open-for-business). However, what concerns me the most about this revelation of the NDP is that this in effect holds us hostage to the whims of international aid donors and institutions, only the government can answer whether these aid donors have pledged this amount or whether it is a projected amount. To be reasonable, a billion dollar development plan for a nation is extremely meagre; however it is a step in the right direction for the current Somaliland administration. The current administration have been efficient in terms of its Savings which has led to a budget which has been substantially increased and the mechanisms for tax collection and revenue generation have somewhat been improved. However, the Somaliland government must always remember that its main role is that of a regulator of the economy to ensure its smooth transition and smooth economic growth. It can never try and adopt the role of a Developmental State since the government is too weak at the moment. To be fair Somaliland has done the right thing in consolidating its political culture before embarking on economic growth as most countries in Africa and Asia always do the opposite. However, recent policies and events such as the Banking Law and the establishment of a jointly owned Coca Cola factory have been encouraging as it has allowed the Somaliland government to project a sense of calm and stability which is crucial to attract foreign investors. My only wish is to see a continued improvement in competition for projects which are crucial to the development of Somaliland such as roads, its airports and especially the jewel of the Somaliland economy; the Berbera Port. This increased involvement of the private sector in public projects can be realised through the use of PPP (Public Private Partnerships) which has many advantages, principally being the increase in efficiency and quality.

The existence of the Road networks department/agency is a welcome sign, however it needs to be an agency with considerable clout, because as one will notice there are often many agencies within the Somaliland government that although existent do virtually anything. Also, Somaliland’s cities, especially Hargeisa need to utilize the expertise of town planners as this will put a halt to the unorganized and ad hoc nature of the city’s plan as often there seems to be no structure in some parts of Hargeisa. Indeed this use of strategic city planning will make it easier for Somaliland to utilize street and strict names along with Post codes as it has endeavoured to try and create a postal service in its NDP. Furthermore, it is important that the government continues to strive and perfect its tax collection initiatives which makes Somaliland unique in the region in that its government taxes its businesses, the government needs to ensure that there is progressive taxing which is fair and stimulating to the economy, perhaps the creation of road taxes can be used to develop the roads. Furthermore, the notion of a “Patriotic Tax” from the diaspora is indeed an innovative and feasible idea. In short this argues that Somalilanders in the diaspora when sending remittences should have a tax of roughly 2-3 dollars extracted for the development of Somaliland, this would then enable the government to use these funds for projects which are good for the public wellbeing and the establishment of a committee will ensure that these funds are allocated fairly and efficiently. However, the problem is that this idea is easier said than done and it is crucial that the government’s diaspora ministry takes this innovative idea on board.

 

 

Another problem is that the current Somaliland administration although efficient in some aspects has a somewhat bloated bureaucracy and a large number of civil servants. This then leads to a larger share of the National budget being spent on these public officials; however the problem is that in Somaliland often public officials have a poor work ethic whereby they work 4-5 hour shifts which is surely not appropriate for people being paid upwards of $50,000 per annum. It really is imperative that Somaliland administrations integrate the young and hungry graduates from their own institutions and universities instead of relying on diaspora 50 something’s to oil the machinery of government within Somaliland. Surely if Somaliland wants an innovative and dynamic economy it has to strive hard to integrate these hungry graduates into the political and economic sphere especially as so many university graduates are becoming disenfranchised economically and socially. It is also imperative that the Somaliland administration and Laws of Somaliland make it so that women can freely enter the workforce, own property and become economically involved in the development of the country. Although Somaliland has taken some encouraging steps in this regard; there needs to be more done to address this. If Somaliland ever wants to be an economically viable state it has to integrate women into the economical pursuits of the state. Indeed Somaliland should aim to follow the model of Botswana, as most development economists unanimously agree is a success story among African states with its democracy, innovative economy and well educated and equitable populace.

 

Finally, the recent creation of the Somaliland Development Corporation (SDC) has acted as a welcome and innovative concept which can hopefully overcome the issue of lack of international recognition within Somaliland which deters international investors, it is now imperative that the Somaliland administration make the SDC into an organization with teeth. To Conclude, Somaliland in terms of its burgeoning economy has experienced some encouraging steps in recent months such as; the nature of the NDP, the Banking Law, the attraction of MNC and investors such as Coca Cola and the creation and inauguaration of the SDC in London. Therefore, it would not be over-optimistic to state that Somaliland is on the path to economic development if the current administration follows its NDP to the letter whilst at the same time attracting Foreign Direct Investment (via the SDC) and also if the priavte sector is strengthened through the provision of better infrastructure and roads from the Somaliland government. The next 5-10 years will prove to be crucial for the development of Somaliland and it is crucial that the current administration address the economy first and foremost, it is important that Somalilanders treat the economy with as much importance and emphasis as its search for international recognition.

 

By Jawse MN

BSc Economics Student

London