Introduction:
Somaliland declared independence from the rest of Somalia in May 1991, thereby restoring the colonial borders of the former British Somaliland. Somaliland organized independence and endorsed its own constitution. Somaliland transformed itself into a democratic state and had organized several presidential, parliamentary and municipal elections. Somaliland has demonstrated that a small African country can succeed in the management of its own affairs without sustained and strong support from external sources. Somaliland has become a model for conflict resolution and peace building. On the other hand, Somaliland is still struggling to convince the international community in order to secure diplomatic recognition.
Somaliland economy can now be characterized as purely capitalistic.
Many private enterprises thrived over the years and a small percentage of the society has amassed wealth while the great majority of the population is in absolute poverty. The role of the state is very small compared to the private enterprises. The government budget is around 100 million dollars.
This relatively small budget is hardly enough for covering the salaries of the civil servants and the security institutions. Government expenditure on infrastructure is almost negligible, not to mention any social security benefits. The government runs some electricity and water supply services, but these are very limited and do not cover more that 20% of the demand.
Economic Development Models
Three different economic models are there to choose from. These are as stated below:
Capitalist Model. This model is followed by the western liberal democracies. The basic theory of this model states that “the economic activities of the nation shall be left to the demand and supply forces of the free market and the government shall have no role in the system except in the levying of taxes and the management of government expenditure that is financed through the tax revenues”. Under this theory, the production of needed goods and services must be absolutely left to private business firms that are operating under the market forces of supply and demand. This economic model is applicable in economies where there are perfect enabling environments like in North America and Western Europe. Even though, there is nothing un-Islamic about this model, it is not suitable for the least developed economies like that of Somaliland.
Marxist Model. This model is followed by former Marxist nations that used to prohibit private ownership of property. The theory of this model advocates for the full management of factors of production by the state agents. The state determines who is employed where and who manages what. All goods and services are produced and managed by the state-owned enterprises. This model runs counter to the basic tenets of the Islamic religion and hence, not applicable to Somaliland.
Mixed Model. This model allows for parallel production systems. The private firms are allowed to operate to the maximum of their capacities and to engage in any sector of the economy that they want given their capacities. Under this model, the state can also engage in the production of goods and services.
This model is applicable to the developing nations like Somaliland. The aim objective of this model is to speed up economic development so that poverty can be eliminated within the shortest time possible. This model is not against the Islamic Sharia.
The model that best suits Somaliland is the mixed economy model. In Somaliland, the government does not have access to abundant financial resources. On the other hand, the government needs to increase revenues in order to enhance its expenditure on social services development. Similarly, the government has to exercise a certain degree of allocative power, meaning that the government should protect the economic interests of Somaliland. At the moment, the economic interests of the Somaliland nation are severely at a disadvantage. Every basic commodity (except meat) is imported into the country. This puts the country at a comparative disadvantage. Basically, any sovereign country shall produce some of its basic consumption goods. When we analyze the Somaliland import-export situation, we can conclude that there is fundamental problem and the situation must not continue as it is. Immediate steps must be taken in order to establish a semblance of fairness in the system. Why on earth do we need to import cement when we have the cement factory established in 1985 by the Siad Barre Regime, when this factory does not need much capital to re-open it? Similarly, why do we need to import tuna fish from Thailand when we have one of the best fish varieties in our national sea waters? Why do we need to import milk from Yemen and Saudi Arabia when we are basically a pastoralist country with large livestock resources? The problem does not have anything to do with financial capital; our traders are importing these goods anyway. The problem has a lot to do with our sense of nationalism. Every Somaliland trader knows that if he/she transforms his/her business from importing to local production, he/she would benefit his/her country in terms of increased employment. If the 30 major Somaliland importers invest their capital by establishing international standard factories in this country, the Somaliland youth would be saved from migrating abroad through the Libyan Desert since their only motive is to get employment in Europe and other countries.
Developing Somaliland Industrialization Strategy: Public Private Partnership
The government is advised to assign its economists to immediately devise Public-Private Partnership Policy and Strategy (PPPS). First the policy has to be passed through the national parliament, then the strategic document shall be prepared for at least 10 year period. This strategy shall clearly define the particular industries that are suitable for the PPP. It should also define the terms of the PPP under each industry. The priority industries are cement, food production, fishing, agro-industry, diary, and livestock production.
As soon as the PPPS is defined and passed through the parliament, business plans (BP) shall be developed. The BP documents must be prepared in a comprehensive way so that they are sellable and can be accepted by the donors.
The government shall mobilize funds from the international community and invest these funds in the abovementioned industries in partnership with the Somaliland investors. By implementing this strategy, Somaliland will be put on the road to economic prosperity and its youth can be saved.
Abdirashid Ahmed Guled
abdirashidaa@gmail.com