Somaliland Central

The economy of Somaliland, which is described as an open economy, heavily depends on international trade. Due to a lack of information, only an estimated GDP of USD 1.9 billion is available for Somaliland for 2015, and an estimated GDP per capita of USD 347.

Although this GDP per capita would be the fourth lowest in the world, ahead of Malawi, the Democratic Republic of the Congo and Burundi, it also shows an increase from the estimated GDP of USD 290 in 2003. This is largely due to the peace and stability in the region that has attracted international organizations. It has also faced the problem of trade deficit. However, this has been financed by external aid from mainly NGOs and remittances from the Somaliland Diaspora, which is invested in areas such as education, health services and small businesses. Now the establishment of the Somaliland Development Fund (SDF) has meant that the Government has greater control over external resources. The main factor that is holding back Somaliland’s economy currently is the lack of a structured financial system.

EXPORTS

The most important source of income for the Republic of Somaliland is livestock, which is estimated to contribute to almost 30% of the nation’s GDP. In this, camels, cattle, sheep and goats are the primary species. Cereals, crops, hides, and gums (eg. frankincense) are other important exports. Only 3% of Somaliland’s land is under cultivation, but there is an additional 7% of land that has potential. Despite the estimated maximum sustainable yield of 40,000 tons of fish that could be harvested in the national waters, production of fish contributes to less than 2% of the GNP, and so fisheries have a lot of potential. The majority of these exports are shipped from the Port of Berbera to Somaliland’s main trading partners: Saudi Arabia (the leading trading partner), the United Arab Emirates, Yemen, Ethiopia, China, Pakistan, India, Kenya, Brazil, Thailand and Malaysia. Other than that, they are sold predominantly in urban markets, but occasionally in local markets.

IMPORTS

Due to the lack of domestic production, the primary imports are food, fuel and manufactured goods, which once again come in through the Port of Berbera. Somaliland’s main trading partners for imports are Ethiopia, Yemen, Brazil, Thailand, China, Oman, Kenya, Saudi Arabia, Egypt, Malaysia, India, Pakistan, Turkey, the United Arab Emirates, Japan, Malta and Italy.

NATURAL RESOURCES

Somaliland has available a wide range of natural resources, such as gold, iron, lead and rubies. The main deposits drawing international attention are coal, gas and oil, where agreements have already been reached with Genel Energy, Distribution Network Operator (DNO), and Ophir Energy – all based in the UK. Renewable energy has even more potential, especially solar and wind energy, and a legal framework is being developed to better regulate this sector and protect the investors.

DIASPORA

The majority of the Somaliland Diaspora lives in western Europe, north America and the Arabian Peninsula, and they contribute greatly to the economy through the money they remit to the country. As well as this, on returning to Somaliland, these displaced people are able to transfer ideas and knowledge for the success of the nation, further contributing to the economy.

TOURISM

As a result of the prevalent security concerns in countries like Somalia, tourism in Somaliland only creates a small revenue for the country. The main attractions are the natural and manmade landmarks such as the rock art and caves at Laas Geel on the outskirts of Hargeisa and the old British colonial buildings in the historic town Sheekh, near Berbera.

BERBERA PORT

1.With Dubai Port World (DP World) – that will mean, for 30 years, DP World will manage Berbera Port, adding to its global portfolio of more than 75 terminals. In this, they plan to build a 400m new terminal with a container section, set up a Free Trade Zone, and rehabilitate the old port. This also means that the services provided at the Port of Berbera will be jointly managed by DP World and the Somaliland Government.

With the United Arab Emirates – who plan to build a 250km road connecting Berbera and the border town of Wajaale.

3. With Ethiopia – that will mean Ethiopia can conduct 30% of its trade through the Port of Berbera, seeing as its own country is land-locked.

INVESTMENTS

Almost every sector in Somaliland, from the livestock and fishery sectors to the media sector to the energy sector are potentially prosperous opportunities for investment due to their current developmental immaturity and given that the country is relatively stable. However, investing in Somaliland can prove difficult, due to the structure of the economy: access to credit is limited; transport and power costs are high; and the legal framework can be poorly implemented, all coupled with the informal status of Somaliland as a country. Schemes to address these problems over the recent years have included the Somaliland Development Fund, chartered with rebuilding much needed infrastructure such as roads and water supply systems, which in turn facilitates international and local business opportunities.

TAX

The tax system in Somaliland is a regressive tax system, and one that needs improving since the country collects less than 7% of its GDP in tax revenues

– below the minimum level of 20% considered by the UN as necessary for sustainable growth. Moreover, corruption exists in this tax system.

Despite this, over recent years the tax system has been shifting from an informal system to a more coherent one, and local authorities are taking control so that it can be dealt with more effectively. In addition, the population of Somaliland is still very willing to pay tax, not only because they want to support their unrecognized country as it receives a very low level of foreign support, but also because they have seen improvements from the income of taxes, such as newly constructed roads, rubbish collection and vehicles for establishments such as hospitals.

BANKING

Since 1991, Somaliland has gone from having no banking system in place at all, to having just money transfer companies, to establishing a central bank in 1994, to the instalment of its first commercial bank in 2009.

Currently, Somaliland has a dual banking system, encompassing a Western banking system and an Islamic banking system, and a lot of the banks, especially in Hargeisa, are often crowded. Furthermore, most banks provide business, international, personal and private banking to their clients, and accommodate commodities exchanges.

The Bank of Somaliland, which formed in 1994, is the Central Bank of Somaliland. It also operates as a commercial bank and has 8 branches throughout the country.

Another prominent bank, Dahabshiil, operates in 155 other countries as well as Somaliland, including Somalia, Djibouti and Ethiopia. With the country’s tallest building, an eight-storey office in Hargeisa, Dahabshiil set up its first commercial bank in 2014 and now has domestic banking branches located in the rural areas of Somaliland. It offers services such as insurance, letters of credit and interbank financial transfers.

Another bank that has a branch in Hargeisa is the ‘Banque pour le Commerce et l’Industrie – Mer Rouge’ (BCIMR). It was first established in Djibouti, where it is now the largest bank in the Horn of Africa, with a market share of around 45%. In addition, BCIMR was the bank that opened the first commercial bank in Somaliland, in February 2009.

There are only a few ATMs in Somaliland and they accept Visa, Mastercard, American Express and Salaam Card. ATMs are found in locations such as the Ambassador Hotel and Safari Hotel of Somaliland, however there are plans to set up more.

Fisheries I

Somaliland possesses rich fishing grounds along its northern coast, which could potentially support a valuable fishery industry and contribute to the nation’s food security and socio-economic wealth (Van der Elst: 1997). The inhabitants of coastal communities, however, generally show little interest in developing marine resources, and seek instead to improve their access to the livestock export trade and to opportunities for employment and collection of government revenue. The governor of Sanaag region is perplexed by his people’s lack of interest in the sea: “Though the potential is there, fishing activity in our region is virtually non-existent.”

A number of small-scale development projects, intended to enhance the fisheries sector were initiated under the Barre regime, with foreign assistance. These were severely disrupted by the war, but a activities have since resumed in certain areas. Both Berbera and Laas Qoray are sites of small scale fishing activity. Despite its relatively advanced facilities and the support of an international NGO, COOPI, Berbera’s embryonic fisheries sector is unable to satisfy the demands of Hargeysa’s market. The Governor of Saaxil believes that better cold storage facilities are essential to the development of the sector: “The lack of sufficient ice and cooling systems is impeding the development of fisheries in our

region.” In contrast with Berbera’s domestic focus, Laas Qoray specialises in shark fins for export abroad, often through the nearby Boosaaso market.

Despite their apparent lack of interest in their seacoast, Somalilanders are deeply concerned by the illegal activities of foreign fishing vessels in their waters. The authorities and inhabitants in coastal communities are unanimous in their condemnation of foreign incursions into Somaliland’s Exclusive Economic Zone (EEZ), which they attribute to the government’s inability to patrol its own coastline. A fisheries officer in Seylac denounces the practice of illegal fishing, but adds that the authorities have nevertheless managed to make virtue out of necessity: Illegal fishing is a fact of life in our waters, and we have no means to prevent it; in the night the whole sea lights up from the lamps of boats involved in a frenzy of illegal fishing. Our Yemeni neighbours are the greatest violators of our waters. Since we have no capability to stop them, we issue licenses for those that request them, and charge them a small fee.

The revenues received through this system might be of some comfort were they not offset by lasting damage to Somaliland’s marine environment and resources – resources that Somalilanders may one day decide to develop for themselves.

Fisheries II

The once thriving Somali fishing industry has deteriorated into a ‘free for all’ equally accessible to the world’s fishing fleets. For over a decade, hundreds of vessels from various countries have continuously fished in Somali waters in an unreported and unregulated manner. This has had far reaching consequences and may already have had a disastrous effect on the sustainable management of Somali marine environment. With comparatively long coast line Somaliland embraces great diversity and abundance of marine resources.

The country possesses rich fishing grounds along its northern coast, which could potentially support a developing fishing industry and contribute to the national food security and socio-economic wealth. The maximum potential catch that could be harvested from Somaliland’s marine resources is estimated to be between 90,000-120,000 metric tons a year, but currently less than 5% of that quantity is harvested. However, lack of effective management undermines sustainable exploitation, in particular for shark and lobster fisheries, and threatens endangered species (e.g. turtles).

Despite its economic potentiality and diversity, the people of Somaliland seem to prefer livestock meat and the majority does not eat or even saw fish before. The popularization of fish as a diet is largely constrained by a lack or scarcity of infrastructural inputs (cold storage, ice making machines etc), awareness on fish consumption and outdated artesian skills. Fishing and fishery production could be a good option of development.

On September 1995, Somaliland Law on Fisheries was promulgated to deal with jurisdiction of the Somaliland maritime zone, resources management, licensing and penalties. To strengthen the Law of Fisheries, the Coastal and Marine Resource Policy of Somaliland was approved at the end of 2000. However, fishing communities along the coastline, are deeply concerned of the illegal and unregulated activities of foreign fishing vessels – a sizable number of them licensed by the Government which, paradoxically, does not have neither the means to patrol its own coastline to prevent foreign incursion into the 12 nautical mile National, Coastal Boundary, let alone the 200 mile Exclusive Economic Zone (EEZ) nor the necessary data and surveys of fishing resource densities and potentialities in the sea.

Exploitation of fish by foreign fleets, using sophisticated systems of netting and collecting has lately become more frequent. This threatens the reproductive capacity of unique and rare species.

From 1993 onwards, a major scale of illegal, unregulated and unreported (IUU) fishing operations were being done in the entire coastal areas. The operations were executed by foreigners and nationals using large sophisticated stern trawlers, and long liners that arrived from Europe, America and Far East Asia. The unscrupulous foreigners were simply taking advantage of the confusion created by the civil war to catch whatever they wanted. Their vessels were widely reported using universally prohibited fishing gear and equipment, including nets with very small mesh sizes and sophisticated underwater lighting systems to lure fish to their traps.

These vessels illegally harvest the unprotected marine resources, incurring heavy destruction on the marine ecosystem including fish spawning grounds, coral reefs, seabed grasses and killing indiscriminately endangered marine spp. such as: dugongs, sea turtles, dolphins and baby whales due to their selective fishing practices. Dredging and hauling of fishermen’s gear on board their vessels is also reported. Worse than this, some of the vessels are armed in order to silence the poor fishermen’s protestations.