Somalia is fascinating because it is dysfunctional and at the same time resilient. It is also a country divided. Since 18 May 1991, the northern coastal region of the country (known as Somaliland) has acted as a sovereign, independent country. Although recognized internationally as an autonomous region of Somalia, Somaliland has not gained international recognition as an independent state. Unlike the rest of Somalia, Somaliland does have a functioning government and enjoys a modicum of stability and prosperity. On the 20th anniversary of Somaliland's declaration of independence, the Financial Times published a couple of interesting articles and an audio slideshow about the region. Katrina Manson, who wrote both the articles and narrated the slideshow, reports, that Somaliland "is largely peaceful and has built itself up from ruin with very little outside donor help." ["Somaliland aims to show coming of age," 17 May 2011] She continues:
"Over the past 20 years, as its neighbour has descended into war, terrorism and piracy, Somaliland has sought to establish the trappings of a functioning state with its own currency, something approaching a central bank, democratic elections and a fiscal team of econometricians in pursuit of a wider tax base."
Despite "the trappings of a functional state," Manson admits that commerce is "largely unregulated." Nevertheless, business is being successfully conducted. She continues:
"Local businessmen say that ... commerce ... is flourishing against the odds and characterised by ferocious appetite for a tidy profit. 'The lifeblood of every Somali is trade,' says Paul Crook, chief technical adviser to the UN International Labour Organisation's Somalia programme, who has lived in Hargeisa, the Somaliland capital. Somalilanders have also become technologically savvy, transferring money across the world, making calls on solar-charged smartphones and shopping with debit cards. Their thriving business acumen may be the best way to effect de facto recognition."
In other words, globalization has permitted the region to progress against staggering odds. Manson reports that the local mobile communications operator has 400,000 subscribers in a region containing only 3.5 million people. Manson describes some other aspects of globalization that have helped Somaliland. She writes:
"The government aims to boost tax revenue from 5 per cent of gross domestic product, one of the world’s lowest, to 13 per cent next year – still far below the sub-Saharan Africa average of 18-20 per cent. Officials calculate that one company alone evaded $9.13m in taxes. Investors remain wary but some, including Chinese telephone infrastructure companies and UK frontier private equity, are backing it. So confident is one British Somalilander, who runs a UK investment firm, he wants to set up a £30m diaspora fund. 'Somaliland is the classic anomaly: the perception and the reality are far apart and in the middle is a huge amount of money,' says Mohamed Yusef, CEO of London's Invicta Capital. He has already secured an oil block unencumbered by potential rival claims from foreign oil companies, who pulled out long ago. He also sees fishing, livestock exports and power generation among possible growth sectors, saying: 'I see Somaliland as an undervalued share – buy low and ride the tiger up.' The UN Food and Agriculture Organisation estimates Somaliland’s 850km shoreline could yield 40,000 tonnes a year of fish compared with between 1,000 and 5,000 a year now."
In a companion article, Manson writes, "While no government recognises Somaliland, the business stamp of approval is proving less elusive." ["Coca-Cola boosts Somaliland economy," Financial Times, 17 May 2011]. She continues:
"Coca-Cola has issued a second licence within Somalia, which will cover Somaliland and neighbouring, semi-autonomous Puntland, a tacit recognition of Somaliland's functioning economy. The company’s other franchise, which is based in Mogadishu, is no longer able to function because of violence in the Somali capital. Coca-Cola's vote of confidence – long withheld – may do more to propel investor interest and confidence than any political move."
The businessman who won the franchise, Ahmed Guelleh, owned a Coca-Cola franchise some 26 years ago before Somalia became a failed state. Manson reports that Mr. Guelleh and his four brothers are a highly successful trading family. "Their $5m-a-year import-export operation brings in everything from porridge oats to tyres while sending out animal skins and frankincense, as well as serving as agents for a shipping company and DHL." The significance of the Coca-Cola franchise, however, is that the bottling plant will be "among the first manufacturing investments in Somaliland." Manson reports the factory will use "brand new machinery from Austria and Italy." Although the factory "has cost $10m," Manson reports that it "is expected to generate an annual $3.2m profit, bottling 11,000 an hour and employing 130."
The more economically successful Somaliland becomes, the greater the pressure there will be to recognize it as a sovereign nation. Many economically unviable regions of the world are seeking independence and governments fear that recognizing Somaliland would establish a bad precedent. Regardless, you have to give the people there credit. The government appears to be holding corruption in check. It is trying to build its economy on fiscally sound policies. And the theme of its 20th anniversary celebration of independence is: "Somaliland is the champion of democracy in the Horn of Africa." Supporters of Somaliland independence are hoping that three things result from this year's celebration:
"[First] that the world will appreciate the achievements and commitment of Somaliland to peace, stability and democracy in the region in the last 20 years. Secondly, ... that the international community including the African Union, European Union, United Nations, U.S, supports the sustainability of the democratic system established in Somaliland. Thirdly, ... that the international community steps in to urgently recognise Somaliland as a sovereign state as Somaliland fulfils all the criteria of statehood legally and politically." ["20th anniversary of Somaliland's independence celebrations kick in Europe," Somaliland Press, 18 May 2011].
Those hopes are unlikely to be realized for a number of reasons. First, Somaliland's economic base is modest and mostly involves the trading of livestock. It needs a much more diversified economic base to prove its long-term viability. Second, it has the misfortune of being in a very bad neighborhood. Ships are reluctant to pull into Somaliland ports for fear of being hijacked by Somali pirates. Finally, there are efforts to transform Somaliland's democratic government into an Islamic one. Such efforts are met with great skepticism around the world. Somalilanders would be better served to pursue a Turkish model than a Taliban model. Nevertheless, you must take your hats off and salute the resilience of people of Somaliland. Whether they gain the international recognition they desire or not, I wish them another twenty years of peace and prosperity.
Source: Enterprise Resilence management blog