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CFC In Brief - Post-Election Kenya: Democracy and Devolution, 12 July 2013

CFC In Brief - Post-Election Kenya: Democracy and Devolution, 12 July 2013

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Published by CFC Cimicweb
International stabilisation efforts continue to expand in Somalia as al Shabaab militants are pushed out of former strongholds and acts of piracy further decline. While security conditions remain tenuous, the Somali Federal Government (SFG) stewarded a new system of governance that includes judicial reform, administrative accountability and democratic initiatives. Civil society organisations (CSOs) are emerging after decades of war and the international community seeks channels for further cooperation within the war-torn country...
International stabilisation efforts continue to expand in Somalia as al Shabaab militants are pushed out of former strongholds and acts of piracy further decline. While security conditions remain tenuous, the Somali Federal Government (SFG) stewarded a new system of governance that includes judicial reform, administrative accountability and democratic initiatives. Civil society organisations (CSOs) are emerging after decades of war and the international community seeks channels for further cooperation within the war-torn country...

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Published by: CFC Cimicweb on Jul 12, 2013
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The Civil-Military Fusion Centre (CFC) is an information and knowledge management organisation focused on improving civil-military interaction, facilitating information sharing and enhancing situational awareness through the CimicWeb  portal and our weekly and monthly publications. CFC products are based upon and link to open-source information from a wide variety of  organisations, research centres and media sources. However, the CFC does not endorse and cannot necessarily guarantee the accuracy or objectivity of these sources. CFC publications are independently produced by Desk Officers and do not reflect NATO or ISAF policies or positions of any other organisation.
Opportunities for Economic Development in Somalia
Foard Copeland
Desk Officer, Horn of Africafoard.copeland@cimicweb.org July 2013International stabilisation efforts continue to expand in Somalia as al Shabaab militants are pushed out of former strongholds andacts of piracy
further decline. While security conditions remain tenuous, the Somali Federal Government (SFG) stewarded a new system of governance that includes judicial reform, administrative accountability and democratic initiatives. Civil societyorganisations (CSOs) are emerging after decades of war and the international community seeks channels for  further cooperation  within the war-torn country. These changes were accompanied by opportunities for economic investment that will requiremultilateral support, coordination between the private and public sectors, and public financial management.Humanitarian assistance will continue to play an essential role in providing services, food and shelter to millions of Somalis who do not benefit
from the country’s nascen
t economic growth. Additionally, recent calls by the UN for   public-private coordination suggest that humanitarian assistance might be coupled with infrastructure development and support from the commercial sector to achieve a broader stabilisation agenda. Many Somalis are capitalising on newfound economic and investment opportunities that have beenlargely absent for decades, hoping that large-scale investment projects willsoon be underway.
Economic Overview
As the African Development Bank (AfDB) notes,survey data and statistical analysis on a range of factors, such as household income, are practically non-existent for Somalia. However, where they can bemeasured, economic indicators for average Somali citizens continue torank near the bottom of most global indices. Unemployment rates are 50 per cent and average life expectancy in 2013 was 51 years. According to the World Bank, 43 per cent of the population lives on less than USD 1 per day. Livestock and agriculture are the backbones of the economy,accounting for 65 per cent of gross domestic product (GDP). Livestock also accounts for 50 per cent of all export earnings; additional mainstaysinclude fish, charcoal, bananas, sugar, corn and sorghum. Since 1991, thecountry has averaged a trade deficit of USD 190 million per year,according to ADB. Somalia survives predominantly on aninformaleconomy.International trade is controlled by a cadre of wealthy eliteswhile the majority of the population subsists on meagre incomes earnedthrough petty trade, farming and small-scale business. As
 All Africa
notes,key areas for  economic investment include ports and fishing, international trade and infrastructure.
A series of international conferences were held in 2013 to steer investors toward Somali markets. At the largest of these, a donor conference held in London on 07 May, the European Union (EU) announced that Somalia will receiveUSD 279 million.The Intergovernmental Authority on Development (IGAD), a regional economic body, outlinedstabilisation goals adopted at the conference. They focus primarily on political, security, and justice issues, as well as public financial management, health andinfrastructure. The Somali Reconstruction and Investment Conference(SORIC)was held in Nairobi on 28-29 May 2013. The
Somalia experienced a unique form of piracy wherein criminal organisations sought to capture individuals rather than pilfer cargo. Somali pirates  began hijacking ships for the sole purpose of ransoming captured crew. Millions of dollars were paid in ransom by governments, businesses, and victims
families. In 2011, at theheight of the epidemic, 200 vessels were captured. The international community curbed Somali piracy by adopting a land-based solution that imposed law and order in Puntland, Somalia while interrupting illicit revenue streams and increasing EU and NATO navy mandates.
Complex Coverage
 July 2013 Page 2
Opportunities for Economic Development in Somalia
summit showcased opportunities for investment in Somalia with a special focus on Somaliland
. Conference leaders highlightedkey sectors such as infrastructure, health, banking, and energy for potential investors. The International Labour Organization(ILO), United Nations Development Programme (UNDP) and the Food and Agriculture Organization (FAO), in addition to privatesector donors, sponsored the conference. In July 2013, the Somalia Economic Forum(SEF)will host the Somali Investment Summit(SIS)in Nairobi, Kenya. Private sector investors, such as Chase Bank, Dahabshiil Group and Ernst & Young, have already agreed to participate. The conference will provide an opportunity for ministries and government agencies to coordinate withregional and international investors. The SEF advocates for joint cooperation between industry partners and the Somaliagovernment to outline critical infrastructure projects, improve service delivery and accomplish long-term state-building goals.
Private Sector Investment
Somalia has been a regional trading centre for centuries, leading
The Economist 
to note that nascent business opportunities provide
a “reason for hope”.
Recent security gains attracted talent and entrepreneurs from 
 to return to Mogadishuin the largest migratory wave in recent history. According to
Somaliland Press
, property value has skyrocketed and hotels areoften filled to capacity due to the influx. Many are investors with short-term itineraries, but many also return with technical skills,advanced education, and an intention to help rebuild the country. A recent UN investment strategy encourages returnees to investinagriculture and food security.
Youth represent a disproportionate percentage of the returning population, providing much-needed human capital. Many dedicate their talent and expertise to initiate development projects in the financial sector, real estate, shipping, education and banking. Even the tourism industry has seen a recent boon. A film series, 
,was madeabout diasporic youth relocating to the country. Women have also taken a lead in economic development, opening shops and small
 businesses in a way that was unimaginable under al Shabaab’s repressive presence.
Money-lending Somali companies move USD 1.6 billion 
in remittances each year. Private enterprises like Dahabsiil, Somalia’s
largest money-lending firm, recently expanded into other African countries, hoping to capitalise on the continent
s USD 40 billionremittance market. Many hope that remittances can spur local entrepreneurship. UNDP leveraged diaspora communities to deliver  communications infrastructure and other basic services through the Qualified Somali Technical Support Programme (QUEST) andthe Transfer of Knowledge Through Expatriate Nationals (TOKEN) programme. In addition to providing expertise and capital,diaspora entrepreneurs also behave like potential investors, monitoring financial transactions and maintaining accountabilitystandards. After years of delivering humanitarian assistance to the country, the UN concluded that  public-private partnerships will  be essential to rebuilding infrastructure. To this end, the UN established a list of local subcontractors that provide skills andservices to international operations. Service providers are vetted through a risk management unit that ensures local entrepreneursdo not have ties to terrorist organisations.Financiers seem particularly willing to invest in Somaliland,which has made significant efforts to foster private sector growth. The UK Department for International Development observed that by loosening restrictions onconstruction permits and property licenses, the government made it easier for companies to invest in Somaliland than any other conflict-affected state.According to the World Bank, it ischeaper and faster  to import or export containers through the Berbera port than any Sub-Saharan African port. It alsoattracted Coca-Cola to invest in a USD 17 million bottling plant, the largest private investment in the country since 1991. Economists are looking for signsthat multinational corporations (MNCs) will continue to invest in large-scaleeconomic recovery programmes, such as the Coca-Cola factory. Thus far,regional companies have taken the lead. TheOGF Group,Coca-
Cola’s main
investor for its Somaliland plant, has ties to Djibouti. China has partnered withDjibouti on several port projects. Ethiopia and Kenya are also keen to capitalise on the opportunities in their increasingly stable neighbour, according to
Standard Media
. Athi River Steel Plant,a Kenyan MNC, plans to ship ten per  cent of its total exports to Somalia in anticipation of a Mogadishu construction boom. Meanwhile, regional banks andnatural gas enterprises also moved into the country in 2012 and 2103.
Somaliland is an autonomous region in northwest Somalia on the Gulf of Aden. Although not internationally recognised, it has a functional government, police forces, and its own currency. Its capital is Hargeisa and its primary port, Berbera, serves both Somaliland and landlocked Ethiopia. In June 2012, political leadersagreed to hold talks with the SFG, a concession they have refused since 2004. Despite occasional attacks during the civil war, the region is relatively more stableand secure than the rest of the country, according to
 July 2013 Page 3
Opportunities for Economic Development in Somalia
Shipping Industry
Somalia’s coastline, which totals over  
,presents the greatest potential for the country’s long
-term economic recovery.Sectors such as shipping, fishing, and energy, all of which deteriorated after the fall of the Siad Barre regime in 1991, couldexperience a resurgence if security conditions continue to normalise. Thefishing industry remains largely underdeveloped, restricted by storage limitations, refrigeration and opportunities for export. Once crippled by offshore piracy,it saw growth in 2012 and 2013 and could trigger an economic stimulus and provide an alternative income for would-be pirates. According to
 Integrated  Regional Information Networks
), the EU will invest USD 6.5
million into a project that seeks to increase Somalilan
fishing capacity to 120,000 tonnes per annum. If goals are achieved, it would generate USD 1.2 billion in revenue.
strategic location on the Gulf of Aden and the Arabian Sea could open valuable routes with Gulf countries as well asIndia, China and Southeast Asian partners. Home to four major ports, the country can also benefit from trade with landlockedneighbours in need of access to natural harbours to export goods. Specifically, ports could serve South Sudan, Ethiopia andUganda. Kenya and, more recently, Djibouti have monopolised this commercial opportunity for years due to insecurity in Somalia. However, a wave of international investors could provide the country with the resources to improve  port infrastructure and reclaim its prospects for becoming a regional shipping partner.According to
, a  potential conflict could emerge between autonomous regions and the SFG, or perhaps even between MNCs coordinating with authorities in autonomous regions and the SFG. In December 2012, Somalia President Hassan Sheik Mohamoud stat
ed his administration’s intention to oversee o
 perations of 
the country’s
 four major   ports in Berbera, Bosaso Kismayo, and Mogadishu. Three of these, Berbera, Kismayo, and Mogadishu, aredeep water ports,and the port in Bosasounderwent a recent expansion. Two of these ports lie within autonomous regions and are operated by local authorities, potentiallyin opposition to SFG. Control of the Kismayo port, located in semi-autonomous Jubaland,led to gunfights between rival warlords in June 2013. The port once provided an economic lif 
eline to al Shabaab and it remains unclear how Mogadishu’s 
weak centralgovernment will exert authority over it in the near future, reports
 Agence France-Presse
. Indeed, federal administration of the ports might necessitate economic and political arrangements with local authorities at each port.
 Port of Berbera
,located on the Gulf of Aden in Somalia’s autonomous northwest region of 
Somaliland, serves as a lifeline for  the Somaliland economy and one of the centres of livestock export for the country. In 2010, 2.5 million cattle were transportedfrom the harbour. The biggest trading partners are Saudi Arabia, Egypt and Yemen and livestock, as of 2012, exports to thosecountries accounted for 60-
65 per cent of the facility’s
. The majority of Somaliland’s residents are pastoralists and
international trade has offset periods of drought in the past. When food stocks decline due to dry conditions, herders - benefittingfrom an economic stimulus of overseas trade - have been able to purchase food staples. For this reason, the Berbera port manager,Ali Omar Mohamed, wanted in 2012 to increase the berth from its current level of 12 meters to 20 meters, which woulda
ccommodate the world’s largest container ships of 300,000 tonnes. Current depth allows for ships
weighing only 35,000 tonnes.Bolloré Africa Logistics, a French conglomerate, hoped to expand capacity in Berbera in 2009 by linking the trade zone with landlocked Addis Ababa. Known for  developing port infrastructure despite insecure conditions (the company worked through wars
in Cote d’Ivoire and Rwanda), it postponed its Berbera investment strategy
for undisclosed reasons. Nevertheless, economists in2013 pointed to the  prospects for a lucrative expansion. Since 2009, rumours circulated widely about secret deals from companies
like Bolloré, UAE’s Dubai World Africa(
)or China’s 
PetroTrans,that might re-invest in the project or potentially lease the port.
 Port of Bosaso
Located on the Gulf of Aden in northeast Somalia, Bosaso is the commercial centre of Puntland
and the region’s largest city. It is a
strategic livestock trading post for much of the Arab world, dealing primarily with the transport of goat, sheep and camels. The
city’s port was built
in the 1980s under the Barre regime. The Italian government initiated a project to convert Bosaso
’s port
into adeep water facility, but abandoned it during the civil war. Many residents still hope to see a conversion, noting the populationincreased from 40,000 to over 650,000 in just two decades. Local officials planned construction of a new port in 2012 that willsupport small-scale fishing 
operations; however, details of the project’s progress are limited. In March 2013,
the World FoodProgramme (WFP) completed a multi-year 
“special operation”
project to dredge 
Bosaso’s harbour, 
improving capacity  by over fifty per cent. Officials noted the two-fold improvements would affect both delivery of humanitarian aid and potential for exportsfrom the region.
The city of  Kismayo,the capital of Jubaland, is positioned halfway between Mogadishu and the Kenyan border. It is the most important political and economic centre in southern Somalia. Due to the recent deployment of Kenyan and Ethiopian troops under the African Mission in Somalia(AMISOM)banner, external stakeholders in Jubaland include Ethiopia, Kenya and al Shabaab.

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