By Mohammed Dahir Ahmed
Continuing with the Economic pillar analysis,the biggest share of Somaliland public expenditure is on staff salaries (56.7%) and operational and administrative expenses (19.53%) according to public expenditure break down in 2011,when the five years plan was under development.Moreover,as far as budgetary sectoral allocations are concerned,50% of state budget is allocated for security and 29% for the governance and rule of law,which itself is a security related,with social services getting only 12% of the national budget.
When the plan was under construction,there were known deficiencies in our budgetary ,accounting,and review systems . Therefore the plan was expected to address those deficiences. For instance,our budgeting system is incremental budgeting system,where you add or deduct as per last years figures with no sufficient justification and analysis. Thus,Somaliland needed to adopt other types of budgetary systems such as Zero based budgeting system. In addition,our government accounting system was single entry system at the time and still it is. This system is highly deficient,corrupt and outdated,for example if you purchase a vehicle with cash,you just record cash spent in single entry by overlooking to record the other entry which is the additional asset or vehicle procured. Under single entry accounting it is easy to manipulate transactions and it is hard to follow transactions from the start to the end. Similarly our government accounting system does not conform to internationally accepted standards which further erodes confidence and financial integrity in our government finance. Money spent,with no review and audit machanism quarterly,semiannually and yearly is tantamount to gross financial irregularities.Hence the plan should have considered those grey areas such as ghost workers ,overcharged price list for procured items and insured that the prescribed solutions are promtly implemented.
By qouting the national development plan’s statement on the financial services sector it says: “ Somaliland has no commercial or investment banks.Financial intermediaries are essential to encourage and pooling national savings,and pulling in international capital,to be put to productive use by local entrepreneurs. . Industrial establishments and medium and large enterprises cannot develop and function without access to capital and credit. To address this problem, the government will provide the necessary legal and policy framework to encourage the formation of indigenous financial institutions and establishment of foreign banks. “
Howev er,the necessary legal and policy framework necessary for the formation of indigenous financial institutions is not complete. The central bank istself is not yet ready to behave as a fully fledged central bank,as it lacks basic requirements such as having independent board of governers and deals only the normal central bank functions and divests itsself from the commercial banking aspects it conducts currently.Moreover,Somaliland needs to solve the issue of conventional banking versus islamic banking saga abruptly as I have mentioned in part three,98% of the 50 plus members in the organization of islamic conference(IOC) provides in their respective countries both islamci and conventional banking systems and Somaliland can not be different from them.
The plan states in one sentence that support for small and medium sized enterprises will be enhanced. However the plan downplayed the importance and obstacles faced by SMEs in Somaliland.The SMEs sector is the biggest income and employment generator,it hosts thousands of people and is the largest business sector. There are no strong financing schemes that target SMES. Commercial banking and micro-finance institutions targeting SMEs are not available in Somaliland. And this puts further strain on those businesses that face shortage of liquidity.Lack of basic knowledge of book-keeping, sales, marketing and business planning further complicates the problems the SME sector in Somaliland is facing. Non-existence of periodic workshops on evaluation of business health, entreneurship and business management training is another plight.Further, the regulatory framework in Somaliland is not conducive to SMEs. There is almost no commercial legal framework and commercial arbitration mechanism at SMEs. Hence, conflicts are often resolved abruptly.Lack of linkages with international and regional businesses continues to erode the chance of sharing best business practices. The pain is even more intense for female entrepreneurs, who face inherent stereotypes and cultural bottlenecks.Therefore the National development plan should have planned appriopriate interventions as far as SMEs are concerned,since SMEs have the above mentioned national importance.
By: Mohammed Dahir Ahmed,M_ddahir@hotmail.co.uk,Senior financial consultant and independent political analyst.