On 13 November 2017, Somaliland, an unrecognized country, went to the polls to elect its fifth president since its founding 26 years ago. Somaliland’s role in the region is changing as key players in the Gulf are waking up to its strategic location.
By Bashir Ali
Somaliland was a former British protectorate that secured independence on 26 June 1960. Five days later, it united with the Italian protectorate of Somalia to form the Somali Republic. It was during the regime of ruthless dictator Mohamed Siyad Barre that the North (modern-day Somaliland) decided it had enough, and launched the SNM, its rebel movement.
In May 1991, Somaliland unilaterally declared independence, having succeeded in exiling the dictator and his military forces. Since then Somaliland has charted its own trajectory, very different from its parent state, Somalia which has seen dozens of weak, unelected presidents come and go.
In contrast, Somaliland has seen consistent transfers of power between presidents after free and fair elections. Somaliland has also seen success in its attempts to stave off instability and extremist insurgencies with its last attack coming in 2008 from the same Al-Shabaab that kills innocents in Mogadishu on a weekly basis. Analysts attribute this to Somaliland’s decision to allocate 70% of its national budget to the security sector.
Despite such positives, Somalia still possesses what Somaliland craves: international recognition as a sovereign state, with access to multiple streams of international aid and a seat at the table of the UN, World Bank, African Union, Arab League and other institutions where funds are distributed.
Challenges facing the new administration
On 21 November 2017, Musa Abdi Bihi from the ruling Kulmiye party was elected the fifth president of Somaliland and mandated with a five-year term. Bihi is a former air force commander turned rebel leader in Somaliland’s liberation war. Bihi’s military background and no-nonsense style could be the perfect antidote to stamp out corruption in the unrecognized Republic.
Bihi has already outlined his vision and warned members of his own ruling Kulmiye party that they can expect no rewards. The success of this anti-corruption drive is tied to his administration’s efforts to balance the economy as well as combating high inflation hindering the economy.
Somaliland has other pressing concerns, such as the extremely high unemployment rate in a country where 70% of the population are under 30. This could be a tinderbox for the government if they’re not able to absorb these young people into the labor market. This is urgent as a growing pool of idle, angry young men could drive long-term instability in Somaliland.
Somaliland can leverage regional tensions to its advantage
Somaliland’s role in the region is changing as key players in the Gulf are waking up to its strategic location. Bihi and the ruling Kulmiye party were the preferred option for the UAE who have been forging closer ties with Somaliland in the past year. The most controversial deal between Somaliland and the UAE was struck in February 2017 when Somaliland’s parliament granted permission for the UAE to build a military base and airport in Berbera.
This is in line with the UAE’s muscular foreign policy of creating alliances to pre-empt and contain the threat from Iran. It’s no coincidence that the UAE’s military base in Eritrea and its planned base in Berbera are all within shooting distance of Yemen where the UAE is fighting an Iranian-backed insurgency along with perennial ally, Saudi Arabia.
Risks for Djibouti
However, Somaliland and the UAE’s closer ties will raise tensions between Somaliland and its small, but an influential neighbor, Djibouti. Since 1998, UAE-based DP World has operated the main port in the region from Djibouti where the small polity handles 95% of Ethiopia’s maritime traffic.
This is expected to change following the deal reached between Somaliland and DP World in early 2017 whereby DP World invested $442 million to modernize Berbera port in conjunction with Somaliland’s landlocked neighbor, Ethiopia. The UAE is also investing over $200 million to create the fabled “Berbera Corridor” which will connect Ethiopia to the Red Sea via the port-city, Berbera. This could be a game-changer for Somaliland as Ethiopia is one of the world’s fastest-growing economies and has a young population of 90 million.
Djibouti is aware that if Somaliland can tap into only a portion of Ethiopia’s import needs, then this could divert hundreds of millions of dollars in customs revenue away from Djibouti. As part of China’s “One Belt, One Road” initiative Djibouti is currently building an International Free Trade Zone which they plan to turn into a multi-billion logistics hub and a key destination for inward trade to Ethiopia, South Sudan and the wider region. To add insult to injury, the UAE is also committed to creating an International Free Trade Zone with the plan to turn Somaliland’s commercial city, Berbera into a multi-billion logistics hub in the Horn of Africa.
For Djibouti, the issue is critical as Somaliland’s port is much closer to Ethiopia’s main commercial centers and in a growing vote of confidence Ethiopia signed a Memorandum of Understanding (MOU) in 2016 with Somaliland to increase trade and divert as much as 30% of its trade to Berbera port at the expense of Djibouti. In short, Somaliland’s port investment will have an adverse impact on Djibouti’s near monopoly on Ethiopia’s inward trade.
Window of opportunity
Nevertheless, this development offers a unique window of opportunity for Somaliland. With UAE backing, Somaliland can leverage its strategic location at the intersection of the Red Sea, the Gulf of Aden and the Indian Ocean to compete with Djibouti as an FDI destination in the region. The new administration of President Bihi will thrive if it can tap into FDI to invest in labor-intensive sectors such as agriculture and infrastructure. This will enable Somaliland to tackle the high unemployment rate and to offset the significant costs of being an unrecognized Republic.
Bashir Ali is an Analyst in emerging markets and freelance writer. He has a MSc in Public Policy & Administration from the London School of Economics & Political Science (LSE) and a BSc in Economics from the School of Oriental & African Studies (SOAS). Bashir writes on economic, political and business trends in Sub Saharan Africa with a specific focus on markets in East Africa such as Kenya, Ethiopia, Somalia/Somaliland, Tanzania and Rwanda.