After the civil war with Ethiopia in 1991, chaos ensued and Somalia collapsed into a stateless entity, dominated by bandits and warlords. The Somaliland Republic, a resulting break-a-way state of Somalia’s civil war, is yet to be internationally recognized as a nation state. Somaliland’s international status makes its 3.5 million people ineligible for foreign aid, however, Somalilanders seem to have developed an efficient means of keeping themselves and their local governments accountable—a system not observed in other parts of Somalia.
The end of conflict in 1991, ushered a political process that led to a fairly successful democracy in about a decade. The Somaliland government redistributed fiscal revenues to different regions across the country. The nation’s pre-existing assets: transport infrastructure (the port of Berbera) and its preserved traditional institutions were the means through which Somaliland ensured economic activity.
By exploiting features of “indirect rule”—remnants of its British colonial past— Somaliland elders (who by tradition have a significant level of authority in their communities) were given the power to run the country’s affairs at the local level, by exchanging security for revenues from port taxes. In so doing, the government established at a low cost the required level of security necessary for making economic activity successful and profitable. Tax revenue was used to invest in education and social services.
The traffic at the port of Berbera has been rising steadily over the last decade. Import containers have doubled between 2003 and 2007. Somaliland has managed to keep an acceptable level of security along the paved road connecting the port of Berbera to Ethiopia and a large share of Ethiopia’s international trade is now shipped through this port. Additonally, significant strides have been made in the education sector. Between 1997 and 2006, the number of primary schools has risen from 165 to 516, while the number of Universities has risen from 1 to 5.
The success of Berbera offers several lessons for policy makers with similar pre-existing conditions. The competitiveness of the port depends on (i) the profitability of doing business with competitors (other ports) and (ii) the costs of physical transport incurred while getting to the port. These two variables are further dependent on the bandits, who either chose to attack traders or not, and the tax authority, that determines the cost of using the port. In essence, this study shows that the right local conditions (political settings) are necesary to make redistribution of the benefits of cooperation among different stakeholders within a country credible and sustainable. In the case of Somaliland, elders were paid to keep violence controlled, ensuring economic activity at the port.
A comparison between Somaliland and other parts of Somalia, underscores the significance of a bottom-up governance approach, where traditional authorities are strong enough to deliver services and a central government is democratic enough to be credible. Furthermore, Somaliland offers examples of how diaspora of Somalilanders, who had fled conflict, have played a key role in the country’s political development and emergence as a democracy.