Somaliland: open for business

The self-declared independent state in the north-west corner of conflict-ridden Somalia has been an oasis of calm, and it is now seeking foreign investment

Somaliland's capital, Hargeisa. Photograph: Andrew McConnell/Alamy

Amid the war-ravaged landscape of Somalia, the self-declared independent state of Soma liland has carved out a reputation for relative calm.

Last week's London conference on Somalia made a nod to Somaliland, formerly a British pr otectorate, and the semi-autonomous region of Puntland. Without naming them, the final communique "welcomed the success in some areas of Somalia in establishing local areas of stability, and agreed to increase support to build legitimate and peaceful authorities, and improve services to people living in these areas".

Neither region was named because of Somalia's political sensitivities. Somaliland has not been recognised internationally since it broke away in 1991 after the fall of Siad Barre, the Somali dictator, and Somalis strongly reject the idea of Somaliland's independence. It was a diplomatic breakthrough in itself to have Ahmed Mahamound Silanyo, the Somaliland president, present at last week's meeting.
As the London communique indicated, Britain plans to concentrate its aid effort on Somalil and. The Department for International Development (DfID) plans to spend an average of 63m annually on Somalia until 2015, devoting more than 40% of its aid on this north-west corner, home to 3.5 million people.

Somaliland will need the money. Its 2012-16 national development plan (pdf) published in December set out a capital investment proposal of $1.19bn. The government is expected to provide $74m, the private sector $132m, the diaspora $4m, but the overwhelming amount is expected to come from aid donors $979m, 82% of the total investment plan.

"Given the meagre resources available to the government from its budget and the absen ce of credit facilities, the bulk of the investment required for the national development plan is expected to come from external sources," says a summary of the plan. The areas for investment are the economy, infrastructure, governance, social and the environment. Most of the investment for infrastructure is set to repair and upgrade Somaliland's dilapi dated road network.

Somaliland's minister of planning, Dr Saad Shire, provided an overview of Somaliland's eco nomic objectives before an enthusiastic crowd of supporters in the UK parliament on Wed nesday at a session chaired by Alun Michael from the all-party parliamentary group for Somaliland. The message was that Somaliland was open for business.

Shire trumpeted Somaliland as ideally located for access to east African markets, particu larly Ethiopia, markets in the Middle East and even Asia and what must be one of the wo rld's most favourable regimes for foreign investors.

Foreign direct investors will pay no tax for three years. After that they will have to pay only 10% on profits, which can be freely repatriated. There will be full compensation for any expropriations, which would be done only in the "public interest". There will also be no minimum wage. Shire listed a number of foreign investors already doing business in Somalil and, including Coca-Cola, Western Union and Nubian Gold.

In an idea that went down well with his audience, Shire said Somaliland suggested the Som ali diaspora make a $1 voluntary contribution to the state when they send remittances, w hich would come to between $300m and $400m a year. Several people in the audience sai d they would be willing to contribute much more than $1, while Quman Jibril Akli, from Som aliland Focus UK, went so far as to say the $1 contribution should be made compulsory.

Others cautioned against relying too much on the diaspora, as future generations may not feel the same emotional tug. "Our grandchildren may not have the same commitment, we're just a stopgap," said one Somalilander.

As for aid, Somaliland's lack of international recognition despite being independent to all extents and purposes for the last two decades means most aid goes through UN agencies rather than directly to the government. The clearly frustrated Shire complained that the aid usually ends up "in the wrong place [at] the wrong time", despite consultations.

He also voiced a complaint that will sound familiar to relief agencies: aid does not arrive until starving people are shown on TV screens.

"Last year we appealed for development money to dig 10 to 12 huge reservoirs, each costing about $400,000, which would have taken care of the drought, or at least provided some water," he said. "But the international community was not willing to spend the money. It was really a mistake, that's what's wrong with aid."

To have more control over when and how to spend money, Somaliland is in the process of setting up a trust fund. The plan is to have it up and running by September, with the UK and Denmark providing an initial amount of $20m in the hope that others will follow.

"We only see 20p out of every 1 of aid," Shire said. "Donations go through long channels; it's like passing ice cream round, by the time it gets to the recipient it will have melted. What we get isn't that much. We hope the $979m will go into the right sectors."