Sustainable development through investment in context of Somaliland tradition

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Introduction

It is too often that is only reported and talked about Africa, when something terrible happens, something like civil war, drought or refugee shipwreck in Mediterranean. For many people in other parts of the world, when they hear about Africa, they will get fast a much succinct and negative image. Unfortunately, these images reflect the horrific reality of in some African countriesin some times, but certainly not in all cases and areasin Africa. Since usually only crises in Africa are the focus in the media, many investors can’tbe aware, the fact that Africa has one of the fastestgrowing economic in the world. At the same time the consumer goods in Africa have increased dramatically in recent decades and Somaliland is one of them.

Usually, Somaliland society is a trade nation with international relationship for long time, especially with the country in Arab peninsula in Gulf of Aden in the red See. It is an open and enterprisingly society and it had trade relationship with ancient civilizations too, such as Egyptian, Persians, Indians, Arabs and Ottomans (see Zayla History). Somaliland sailors and merchants were the main suppliers of frankincense, myrrh and spices and valuable items to those civilizations. By the second century Arab trading relations were quite well established along the Somaliland coastal regions.

The total population of Somaliland is estimated at 3.5 million. 50 percent makes the majority of the population living in rural areas as nomads, while about 35 percent live in urban cities. The major cities are Hargeisa, Burao, Borama, Berbera, Erigavo and Las-Anood. The remaining 15% live outside the country, mainly in Europe and North America, where large groups from Somaliland have applied for asylum since the beginning of the 1980s. There is also a considerable number of Somalilanders living in the oil-rich Gulf States as a guest worker.

Due to the fact that Somaliland locates in a geographical strategic place between the Gulf of Aden and populous Ethiopia and central Africa and it has access to the Arab and Asian world, that it has richness of huge mineral resources too, it is certainly very attractive for foreign investments. In spite of not international recognition, Somaliland is stable and democratic country and is an investment potential. It has a lot to offer in trade and investment, if investment conditions and international relations are improved.

Political System

 

In 1991, as the dictator was ousted, Somaliland declared independence from the rest of Somaliland. It has begun to restore the peace and the stability a formed a functional democratic system. Somaliland has been built a functioning government from the bottom up, on its own, with little help from the outside.

Somaliland is currently stable anchor in the region. Despite it remains entirely non-recognized by the international community more than 25 years. Since then, it experienced several successful processes such peace building process and democratization, it has been held several times free, fairs and democratic elections (presidential, legislative and local). The democratic system in Somaliland consists of the mix western style, multi-party system and Somali traditional values (clan based).With regard of the constitution, the national institutions such as political parties, representative houses, supreme court, the electoral commission, central and local governmental institutions and others was set up very modern. It can be observed that their structures have strongly consolidated. The people are incredibly friendly and they are determined to ensure that this success story continues. Of course, there are some deficiencies in some areas, which can be obviously improved gradually.

In spite of tangible progress in many areas, richness of natural resources, securing peace and stability for decades and also on the recent good news about Somaliland in the direction of peace promotion on disputed area of Sool and Sanaag, it seems to be the way forward. Obviously, the euphoria is deceptive when the inflation rate has reached this year in 2017 the highest level than the last few years, which affected the livelihood of every household in Somaliland.

A combination of issues have caused a devastating economic situation: Livestock ban by Saudis, recurrent droughts disaster and that Somaliland has experienced the worst drought in 2017. People lost almost all their cattle. The cattle export was the only source of income for Somaliland. And due to that Somaliland is not yet internationally recognized, the necessary funding grants for many development projects and foreign investment were also left out. Hence, the national economic is nearly to collapse. By the way, in all parts of the administration in Somaliland, corruption, injustice and tribalism is widespread and it could be claimed that such grievance might be the main cause of economic misery.

There is a hope that forthcoming Somaliland presidential election on November, 2017 will have a major impact on social and economic and political in Somaliland. A recovery of the country’s economy through general reforms and investments are expected. Three parties are campaigning for the fifth presidential election. They are the ruling party Kulmiye with candidate of Mr Muse Bihi Abdi and opposition parties of Wadani with Dr Abdirahman Mohamed Abdullahi and Ucid with Eng. Faysal Ali Waraabe.

The recent peace talk with Khatumo sate is another highlight for Somaliland, it is also a hope for peace talks for Somaliland and Somalia. For this reason, the peace talk of Khatumo is so important and could lead to a reconciliation talk between Somaliland and Somalia, which obviously emerge to international recognition for Somaliland. Republic of Djibouti their role as a mediator could make the process truly fruitful and successful. In addition, it will benefit political sustainability for the region in the future. Economic cooperation, prosperity and recovery of the civil war is the advantage of the process.

However, if the international community do not the take a cooperative active role, the peace talk could not be reliable and trustful for all stakeholders. The international community was always supported and was part of the initiative of development aid and reconciliation and peace building programs for Somalia and Somaliland. And also this time the support of the international community is most essential. In my opinion, since ex – political veteran Mrs. Adna Adan, appointed special envoy for peace talks in Somaliland and Somalia, there is a hope to find a solution to the long conflict between the two parties.

International relationship and business cooperation

Somaliland Government, mainly Ministry of Foreign Affairs and International Cooperation and Ministry of Trade and Investment were committed to put a great effort to improve international relationship and international business cooperation to gain foreign investors, which is the roadmap to international recognition for Somaliland.

It was greatly appreciated that the Somaliland –German Business Day on 10th, November last year, was held very successfully and through it both sides became an awareness of a mutual interest and economic cooperation. Somaliland’s people have the honor to express their gratitude on the appreciation and priority that has been given by the German-African Business Association ( Afrika- Verein) and they are very aware of the hard work done by the German organization for Somaliland. These steps play a crucial role in seeking for Somaliland international recognition. Hence, to strengthen international relationship and international business cooperation, it is necessary continuing such forum and meeting continuously.

We all agree that the globalized world obviously requires enhanced international cooperation. Due to its legitimacy, the international relationship that Somaliland has with the international community is weak because of the lack of international recognition and that makes exchange and communication very difficult.

The business event “Somaliland- German Business Day, on November 10, 2016 in Berlin” was a crucial test for diplomatic relationship and for legal disputes which can happen at foreign investment projects in Somaliland. Somaliland usually has de facto state status and therefore has diplomatic relations with almost all countries. Some countries have their official diplomatic office in the capital of Hargeisa, such as Ethiopia and Turkey. In addition, many volunteers from Somalilander have done very good work. They spent a lot of time in the networking service to create the necessary international connections. I can say they have done the job for ambassadors. Nevertheless, you will see that there is a gap for international relations with Somaliland.

For example, After the visit of “Afrika – Verein” delegation in Somaliland on 24, October 2015 and in respect of agreements of mutual trade and investment relations of Somaliland and German government, it has been suggested to organize a Somaliland Business Forum in Berlin as the prototypical of investment conference in London on October. 2014, jointly by African- German Business Association (Afrika- Verein) with Somaliland Ministry of trade and investment and Ministry of foreign affairs and international cooperation.

A delegation from Somaliland of high-ranking diplomats and Somaliland businessmen were invited to participate the business event of Somaliland-German Business Day, on 10th November 2016 in Berlin, Germany, but the difficulties they faced, such as visa processing was enormous. The business event has been postponed several times before it was successfully held. From the side of the German organizer, the delay was caused by lack of political consultation for the responsible offices of Somaliland. The Somaliland trade is mainly based on informal trade system. The businessmen from Somaliland, therefore believe that trade with the Asians is associated with less bureaucracy and the business in Far East Asia, such as China, is more lucrative. For this reason, many invited companies were not clear about the advantage of the event in Berlin.

As we all know, since the collapse of the regime of the Democratic Republic of Somalia in the 90s, the most western embassies in Somalia are not functioning from ground level and therefore the Somali population, including people from Somaliland have almost no access to the necessary diplomatic service of the embassies. Since then for those who have relations in western countries such as families, businessmen, students or patient who can’t be treated domestically has been severely affected.

The Somaliland passport isn’t being accepted by embassies. Even those who have foreign passports, such Ethiopian or Djiboutian passports may face difficult in visa application procedure. Moreover, the security of the travellers from Somaliland in neighbour counties, such as Kenya and Ethiopia is currently a concerning issue and even the entry Visa for those countries became more difficult.

There are diplomats and businessmen who make excellent businesses jobs, which have great importance for the common interest of the two nations. They often do not get the permission for travelling to Western countries, if they have been invited by their business partners or healthcare facilities.

In addition, thousands of citizens of Somaliland who can afford a treatment aboard need currently a quality medical care. There are many acute cases among them, which can’t be treated locally. As an example, it was case, which really touched me deeply personally, as it was informed me by eye witness, that a very popular businessman die just from a very light wound by gunshot. Students who want to study in western countries, the main obstacle for them be challenged, is the opportunity to travel to those countries and document certification. The embassies justified their attitude that businessmen and diplomats would not want to return. My opinion that is insulting and ignoring long traditional economic relationship and exchanges Europe with Africa. For example, more than 30 business delegation from Somaliland was issued visa for participation business event November 10, 2016 in Berlin and all came back, which is a proof that the travellers do not intend to apply for asylum in Europe.

 The need of foreign investment

 

In one hand, there is main obstacle and key constrains for the direct foreign investment for Somaliland, because of some challenges such as, that Somaliland has not yet recognized by international community, in the other hand there are enormous

opportunities. Somaliland economic based presently, especially on the livestock export and remittance send by the Diaspora for their families. An Investment in the infrastructure and other economic sectors could make possible for transformation of economic development.

There is no doubt that Somaliland needs foreign investment in every field, instead of humanitarian or development aid, to improve its economic development and to be resilience to natural disasters, such as drought, which is currently a very present topic in Somaliland. The investment of vocational training, water supply and health care is the most urgent and prerequisite for the investment of the main economic and infrastructure development.

 Diaspora investment

 

Many Diaspora investments thrive in the private sector in Somaliland, a particularly luxury hotels, which gives the entire economy a boost. Their investments are strongly represented in the import and export sector, too. In writing my research paper, I suddenly made interesting observations: most of the successful returnees Somaliland diaspora were from Scandinavia, especially from Norway, Great Britain, Canada and the Gulf. They have contributed decisively to reconstruction and investment in the country. This encourages them to take the largest part of the land grabbing that took place in Somaliland. The problem of land grabbing in Somaliland has a negative impact on economic development: it inhibits the urbanization of the cities and creates a huge and permanent land conflict. A disturbance of cattle feeding for nomads is often criticized and is usually a problem for investments.

The community of Norway has particular characteristics and is observed to have a strong cohesion than other diaspora communities. This will give them motivation to build strong lobbies, to represent and to defend their interest in all levels of government authority.

 Foreign investment

 

Very few foreign investors has yet dared Somaliland to invest. Coca-Cola Company and PD World Dubai for Berbera port have invested tremendous amount. For example, Coca-Cola Company has invested in 2012 an amount of 15 $ million for bottling plant, and what they can claim is only about success, despite many challenges. Almost all and most popular beverages in Somaliland are from Coca-Cola Company. The investment of Berbera Port by PD World Dubai is still proven. There are some reproaches and confrontations about labor complaints. There are also some allegation about deceptive action of the investment that one needs to know the reality about the agreement, but to judge whether it is successful or not is too early.

If we look at the London Somaliland investment conference in October 2014 and Somaliland- German business day on 10th November 2016 in Berlin, we should recognize that there is indeed enormous interest of foreign investors for Somaliland, however it will be observed, too, that there is still major concerns and challenges about investment conditions in Somaliland.

 Opportunities and Challenges

 

According to the political stability, it is the time for prosperity for the country, hence the foreign direct investments are very essential for basic economic building and

economic growth, so that the poverty can be eradicated, and the risky immigration of young people could be stopped through basic vocational training and job creating.

Actually, there is a huge demand for investment specially, in the economic sectors like agriculture, livestock, fishery, energy, industrial, tourist, health care and yet untapped raw materials.

Despite the government commitment to improve the investment conditions, there is still a major limitations and constrains. Clearly there is a huge problem in view of the judicial and administrative system. Why some investors have already failed in Somaliland is the lack of the legitimacy – the absence of international recognition, is the part of the failure. If the international relations law does not work, of course that is one main reason why the interest of the investor is not too keen to Somaliland investment.

Of course, some restrictions and limitations, such as law and regulation of the dispute or land tenancy problem, could not be improved, due to a lack of good governance.

The administrative system of all parts of the government is not transparent enough and is very poor in management. It can be observed that almost all state institutions do not have an adequately implemented accounting system and the capacity of the staff is very poor. Similarly, officials do not feel to be accountable for what they do, since there is no factual, reliable audit system and public opinion supports such abuse.

Lack of infrastructure and reliable, cost-effective energy, one of the biggest obstacles, makes investment in Somaliland more difficult. And finally, the lack of professional staff is another aspect that needs to be addressed. Every company that wants to invest in Somaliland, the lack of specialists, is the first thing to worry about.

Although thousands of foreigners, mainly from Asia are employed for technical skills every year, and most of the time market demand could not been met, thousands of Somaliland youths migrate because of unemployment. Thousands complete every year schools and the universities, which would have no prospects, because they do not find a job and particularly they do not have the necessary craft training. It is believed that the population of Somaliland is growing exponentially, and more than sixty percent of them are younger than thirty and unemployed, desperately hanging on the street.The young people may transform themselves as violent crimes when they do not see any way out. They can be therefore, regarded as a threat to the country’s development, notably as security and stability are the foundation on which the development is based. The consequence of this illegal migration of young people, became trend in Somaliland or I can say, it is disaster. It is widely known today in Somaliland that many youth among them women and children immigrate through the Sahara of Libya, who will be held as hostages in the middle of the Sahara and be requiring for huge sum of bounty which is not payable for concerned parents. Investment which creates an economic growth and jobs would address such disaster.

Further obstructions, there is no international recognized finance system, lack of credit for the domestic investor and mismanagement of the offered credits. During the chaotic period a kind of monopolization which weakens the competition and state Authority has formed in private sectors. Some private sectors even replace the role public institutions.

 

 Conclusion

 

Due to its strategic location, stability and wealth of natural, physical and human resources, Somaliland is an investment potential and has a lot to offer in trade and investment, if investment conditions and international relations are improved. The winning party in the upcoming presidential election has really the duty to make some tough decisions for general reforms.

 Recommendation

 I recommend to promote a good governance and accountability and eradication of corruption, mismanagement, injustice and tribalism.

 To react the climate change and to provide programs to make the country resilience against the recurrent drought.

 It should be promoted of vocational technical schools and primary health care.

 

 After election, the coming government have to promote international relationship and economic cooperation

 Mustseek the international recognition with itsstrongest effort.

 The new government must be able to put pressure on partner countries from the EU to accept Somaliland as a sovereign state with de facto status. For this reason, people from Somaliland should be provided visa facilitation for the convenience and the possibility to travel to the EU countries. The EU must open a consul office in Somaliland as an example for Turkey and Ethiopia.

 The business forum Somaliland- German Business Day in Berlin should be organized this year, too.

 The Businessmen from Somaliland, are called for participation the business forum in Berlin.

 I appeal to be organized a peace talk conference and international community, including, Djibouti should support such peace talk proposal.

 

The benefits of such event are followings;

 To meet numerous companies from Germany, EU and from all regions of Africa and to establish networks of business or investment partnerships

 To gain insight on current development and future potential of the German-African business relationship

 Networking with high ranking representatives from business and politics as

 

Platform for Somaliland international recognition

Sources:

Somaliland:FM Receives German-African Business Association Delegation

Research paper “Sustainable development through investment in context of Somaliland tradition” Eng. Hassan Ismail Abdi, 2017.

http://www.afrikaverein.de/kalender/veranstaltungen/detail/?id=9aa2e363-59ee-a9a2-93ed-573daba2bdde

By: Eng. Hassan Ismail Abdi

danjire@hotmail.de

Somaliland Investment _article_1_2-3_4

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