Hoping for a Better Future: Somaliland Craves International Recognition, Stronger Ties with Ethiopia to Boost Economy

Somaliland, while not recognised as an independent nation, recently celebrated its independence day. The country is looking to not only gain official recognition from the international community but also hopes to become a regional economic player by encouraging trade through its port in Berbera. In fact, the United Arab Emirates has agreed to help develop the port, which may encourage landlocked countries, including Ethiopia, to do business there. As a special contribution to EBR, Elias Meseret visited Hargeisa to speak with government officials about their plans to bring recognition and development to Somaliland’s economy.

It has been 25 years since Somaliland, which lies in northwestern Somalia, on the Southern coast of the Gulf of Aden, declared independence from war-torn Somalia. Due to the lack of official recognition internationally, however, Somaliland’s socio-economic outcomes are lagging behind the region’s.
The solution and consequences of continuing without international recognition, which hinders Somaliland from accessing the financial support needed to grow its economy, was a point of contention when the country celebrated its 25th ‘Independence Day’ celebrations in Somaliland’s capital, Hargeisa, on May 18, 2016.
Indeed, the lack of recognition for Somaliland means that it doesn’t enjoy bilateral trade and aid from other countries. This has resulted in a slow pace of growth and infrastructure – especially roads, healthcare and industries – that is inadequate.
Matt Bryden, Director of Sahan Research, an independent Nairobi-based think tank, argues Somaliland’s state of legal limbo complicates access to external assistance and trade opportunities. “Very few donors are able to provide direct bilateral assistance, and most channel their funding through the United Nations or non-governmental organisations, rather than to the government,” he explains. “The international financial institutions are also limited in what they can do, so Somaliland remains largely dependent on its own resources. Many consider this self-reliance to be one of Somaliland’s more impressive attributes, but it does place limitations on the potential for economic growth.”
The country’s major economy revolves around remittances and there is no major industry, except a USD17 million Coca-Cola plant in Hargeisa. Experts stress that the negative impact of the lack of recognition is immense for Somaliland.
For instance, due to the absence of international acceptance, the Somaliland shilling is not an internationally recognised currency and has no official exchange rate. It is also not a valid tender in the Ayn, Sanaag, or Sool regions, located in northwestern Somalia, which all use the neighbouring Somali shilling. This forces the country to go through a dollarized economy, which is a monetary policy, not an option to stimulate economic activity.
Since Somaliland is unrecognised, international donors have found it difficult to provide aid. As a result, the government relies largely upon government budget that comes mainly in the form of taxes, which stood at USD150 million, as well as remittances from the large Somali diaspora, which contribute immensely to Somaliland’s economy.
Although concrete data is unavailable, the United Nations estimates that remittances worth approximately USD800 million reach Somaliland annually from émigrés living in the Gulf States, Europe and the United States.
However, officials of Somaliland say they are determined to become an internationally recognised country that enjoys all the benefits of statehood soon. Somaliland’s ruling party Chairman, Muse Bihi Abdi – who is widely expected to be sworn in as the country’s next president after an election that will be held next year, since the incumbent, Ahmed Mohamed Silanyo, will not be running for a second term – stresses that attaining global acceptance will be his first task.
“First, I want to achieve international recognition for my country during my presidency,” said Abdi, at his party’s office on the outskirts of Hargeisa. “I also want to work to improve the economic condition in my country and improve the security in this insecure region.”
According to Abdi, the reason behind his country’s rejection for full statehood and recognition by international powers is the African Union, which is based in Addis Ababa. “African heads of states should accept our recognition,” he pleaded. “In addition, our neighbours – especially Ethiopia, which is our ‘Big Brother’ in the region – should recognise us. They are giving us different excuses but it is time for us to be recognised.”
Ethiopia has relatively vibrant trade relations with Somaliland, and there are agreements in place between them for Ethiopia to use the Berbera Port once it is developed.
In fact, the 25th anniversary celebrations in Somaliland came as that port is set to receive a substantial amount of funding from the United Arab Emirates. The two countries signed a development contract on May 9, 2016 that will include Dubai World’s management and development of the port. The Dubai-based company is also expected to renovate the Berbera corridor that connects Somaliland to Ethiopia. The deal is worth USD400 million.
Following this, Ethiopia signed an agreement to boost trade through the Berbera port amid congestion at the facility in neighbouring Djibouti. However, Ethiopian officials have downplayed recent reports from Somaliland that they want to import food aid through Berbera.
“Yes, we have made a minor adjustment to an already existing document on the modalities of how to use of the port,” says Mekonnen Abera, Director General of Ethiopia’s Maritime Authority. “I think eagerness from Somaliland officials has resulted in widespread speculation about the deal we signed recently. I don’t really understand where that eagerness came from, as this is not a new deal and we don’t intend to import food aid through Berbera.”
Mekonnen says what Ethiopia signed is neither a major deal nor a new one. “It is just the type of agreement that we have with Djibouti and Sudan regarding the utilisation of their ports in line with international standards,” he adds. “Berbera Port can’t handle the massive ships that are currently being unloaded at Djibouti’s ports.”
The Ethiopian official estimates that more than 95Pct of Ethiopia’s imports currently come through the Port of Djibouti and there is no plan to shift the traffic to Berbera Port or the Port of Sudan.
Nevertheless, Abdi says his country aims to develop its port services and also establish small and medium scale industries in the near future. “We are looking to the landlocked African countries, primarily Ethiopia. We want them to use our ports,” he said. “We have no big rivers like Ethiopia and most of our lands are not fertile, hence [they are] not suitable for agriculture. But we have to live and make a living, so we will develop our ports, use our sea resources and establish small and medium industries.”
Mekonnen argues it will take time for Ethiopia to use Berbera. “It is a small corridor for Ethiopia’s current demands. We see it as a strategic port for the future,” he explains. “But it is far away from relieving the congestion at the Port of Djibouti. [Therefore], we don’t have any [current] plans to send our ships to Berbera.”
But Abdi Jama Awed, a former member of the Somalia National Movement that declared self-rule in Somaliland in 1991, says both countries have a strong relationship already. “We are more culturally attached to Ethiopia than Somalia. As a ‘Big Brother’, they should continue helping us to counter Al-Shabaab,” argues Awad. “On the economy side, we also need our neighbours to buy our products instead of just sending khat to our country.”
Ethiopia is the first country in the world to open a General Consulate in Somaliland, with duties to enhance the historic and long-standing economic and security cooperation. Of particular emphasis are infrastructural interconnectivity through roads, railway, affordable electricity and broadened transit services, which will pave the way for more balanced trade flows, shared growth, as well as mutual economic and social interdependence.
Experts say that thanks to such regional relations, Somaliland’s economy has proven remarkably resilient given the absence of international banking, an inconvertible currency and limitations on trade.
In Somaliland, which rests on an area of 137,600 square kilometres with approximately four million residents, various telecommunications firms have branches. Among these companies is Golis Telecom Somalia, one of the largest such operators in northern Somalia. Founded in 2002 with the objective of supplying the local market with telecommunications services such as mobile, fixed line, and Internet access, it has an extensive network that covers all of Somalia’s major cities and more than 40 districts in both the Somaliland and Puntland regions. Other telecommunication firms serving the region include Somtel, Telcom and NationLink.
Tourism is the other pillar of Somaliland’s economy. The rock art and caves at Laas Geel, situated on the outskirts of Hargeisa, are a popular local tourist attraction. Other notable sights include the Freedom Arch in Hargeisa and the War Memorial in the city centre. Natural attractions are very common around the region. The Naasa Hablood are twin hills located on the outskirts of Hargeisa that Somalis in the region consider to be a majestic natural landmark.
But unemployment is high and recent inflation has undercut purchasing power. Many youth see emigration as the best pathway to advancement, joining the exodus of migrants to Europe and the Middle East.
According to a study prepared by the World Bank in 2014, more than a quarter of households do not have enough to meet their daily basic needs, while access to education, health, water and sanitation is low and inequitable, making poverty more challenging to combat. Investment as percentage of gross domestic product stood at 11Pct, which is low as compared with many east African countries.
To improve the situation, officials of Somaliland say all they need is international acceptance. “Our union with Somalia was a disaster for our people,” said Sa’ad Ali Shire, Somaliland’s Foreign Affairs and International Cooperation Minister. “We do not want any special treatment from the international community. We simply want recognition of the reality that has existed in Somaliland for 25 years.”
It seems like the people of Somaliland are not without support, especially from regional countries. “I’m here to celebrate together with the Somaliland people their achievements in the past 25 years and to call on the international community to recognise them,” Mohamed Shidiye, a Kenyan lawmaker from Garissa County, who was among attendees of the celebration, said. “For me the Somalia government in Mogadishu is clinically dead. It doesn’t exist.” EBR