Somaliland is a thriving and relatively stable part of a region plagued by crime and political violence and offers many investment opportunities. Could the breakaway region become a blueprint for development in Somalia?
By Chris Solomon
In 1991, the northern enclave of Somaliland separated from the rest of Somalia after the collapse of Siyad Barre’s authoritarian regime. Somaliland established its own currency and its government has transitioned through several peaceful elections. The autonomous region is struggling to gain international de jure recognition, but that may change soon.
Somaliland’s Foreign Minister, Mohamed Bihi Yonis, has said that with the new government in Somalia as a willing negotiating partner, he is confident that bilateral recognition would soon follow. Turkey has taken the lead in facilitating negotiations between Somalia and Somaliland in Istanbul.
Despite these promising signs, bilateral recognition may still be some time off. Somalia wishes to regain control of the region’s airspace and questions its right to issue oil licenses. Furthermore, sources reported that Somalia still intends to retain a policy of national unification. In addition, bitter border disputes and political tension continues between Somaliland and its fellow autonomous region of Puntland.
Renewed interest in oil resources
Tony Hayward, the former BP CEO, has recently reappeared unexpectedly on the oil scene in Somaliland working with the Turkish-owned Genel Energy. The company has temporarily halted expanding its operations in Somaliland due to the security situation in Somalia but visits by Genel officials indicate that exploration and further ventures are set to resume. Somaliland’s Minister of Energy and Minerals Hussein Abdi Dualeh expressed his belief that Somaliland may have billions of barrels of oil in reserves.
According to Jamal Hassan with the Justice and Welfare Party, Somaliland is hopeful that an expansion of the energy sector will dramatically expand the country’s budget, which was only $125 million in 2013. With new energy sources also being discovered in Tanzania, Mozambique, Kenya, and Ethiopia, East Africa is poised for a surge in revenue that could drastically alter the standard of living for the better. Hopefully, as the region develops, they will avoid the type of waste and mismanagement that is rampant in oil-rich Nigeria.
Financing and investment still missing
Somaliland still faces significant hurdles for foreign investment. Lack of recognition has restricted the development of Somaliland’s banking and finance infrastructure, but that has not stopped transnational corporate interest. Sino-Somaliland relations are taking off with the signing of a mining deal with China’s Guangzhou Dongsong Energy Group Co Ltd. China has also shown interest in investing in Somaliland’s fisheries.
Nevertheless, Somaliland is still in the early stages of developing its banking and financial infrastructure. There is a lack of ATMs and the use credit cards is widely rejected. Dahabshiil, a financial transfer service company, allows Somalilanders access to US currency. Customers are notified in advance by text message when their funds are available.
But there is a trend of new business innovation in Somaliland. An idea to develop Africa’s first livestock insurance in agreement with Sharia offers a huge potential market. Estimates show that the Horn of Africa region has over 70 million herders in rural areas without bank accounts. The insurance plan already has some 4,000 policy holders in Somaliland, Kenya and Ethiopia, and enrollment is steadily increasing.
In conjunction with the EU’s “New Deal” for Somalia, a portion of the 1.8 billion euros allocated has been spent by Kings College Hospital in London training health care professionals and investing in expanding primary education enrollment and assistance with the aim that Somaliland’s Veterinary Code will help protect a largely pastoral society.
South African Gavin Dehning, a manager of a new Coca-Cola factory, while acknowledging the difficulties of transportation and infrastructure in Somaliland, told NPR, “It’s an open market for any potential investor who in the next five to 10 years will be able to come in, set up their business and really gain a tremendous market share.”
Telecommunications to connect large parts of the region
A new underwater fiber optic cable project created as a cooperation between Canadian telecommunications company Optelian and Somaliland’s Somcable will be ready by the end of 2014. Additionally, transmission hubs are in various stages of development with the goal to branch out to other countries such as Ethiopia, Rwanda, Uganda, and South Sudan.
“We have set a target to provide one million subscribers with access to high-speed broadband by 2015, to help move Somaliland into the knowledge-based economy,” said Michael Cothill, the CEO of Somcable. He explained that the absence of high-capacity wireless networks in East Africa will provide lucrative opportunities for new business.
Somaliland also offers superior health care services compared to the rest of the region. Patients come from nearby Ethiopia and as far as Mogadishu to the Edna Adan University Hospital. A nonprofit founded by Somaliland’s former Foreign Minister and the former first lady of Somalia, Edna Adan, the facility offers a clean environment, modern equipment and crucial training services for nurses and midwives. Compared to the extremely high infant and maternal mortality rate in the rest of the region, Somaliland has managed to reduce child mortality by 50 percent.
Edna told the Christian Science Monitor how the training was spreading throughout Somaliland, saying: “What is most inspiring is when I see those young women who could barely look you in the face when you ask their name, who would be so timid, who get trained and go back to their village and start practicing midwifery.”
Somaliland offers hope for the Horn of Africa, but not without significant challenges. Wedged between a regional military power, Ethiopia, and Somalia, which is still struggling to recover from civil war, Somaliland has treaded carefully so far. If there is ever an expansion of the East African Community, Somaliland could be a strong contender.
Chris Solomon is a Middle East Analyst and works for a U.S. defense consultancy in the Washington DC Metro Area. He has presented at the University of Maryland’s School of Public Policy, on the U.S. strategy to combat ISIL. Chris’ writing has also appeared on NATO’s Atlantic Treaty Association, Raddington Report, Small Wars Journal, and Syria Comment. He holds an MA in International Affairs from the University of Pittsburgh’s Graduate School of Public and International Affairs (GSPIA). You can follow Chris on Twitter @Solomon_Chris