Despite Mounting Economic Woes,
By: Mahmoud Mohammad Hassan Abedi Translated from As-Safir (Lebanon).
Are emerging signs of international interest in Somalia's stability hiding investment projects in lucrative economic sectors, such as oil, gas and mining? The majority of Somalis are from rural areas, or work in government agencies and offices. They live in a state-sponsored economy, where the state is the main merchant and the sole provider of major services; it is in charge of all parts of life. Yet Somalis have been steadfast, despite the huge human losses during the years of conflict, and despite the lack of stability. They will have to employ the experience they earned through this steadfastness and conflict in order to pick up on signs of hope in the transition from steadfastness to recovery.
About This Article
Mahmoud Mohammad Hassan Abedi describes the present economic situation in Somalia and notes that, despite major challenges, Somalis remain steadfast.Publisher: As-Safir (Lebanon)
Somalia Resists…Will It Recover?
Author: Mahmoud Mohammad Hassan Abedi
First Published: January 16, 2013
Posted on: January 27 2013
Translated by: Tyler Huffman
Categories : Somalia
Grazing, fishing and agriculture
The Somali people depend on agriculture and animal husbandry as their main source of income. Approximately 80% of the population works in this field. About 10 million people live in Somalia, a country with an area of 633,000 square kilometers. The presence of two rivers, along with the abundant rainfall in the highlands of the north, create an environment suitable for grazing and agriculture. Somali clans own the largest number of camels in the world, estimated at 7 million and accounting for 50% of the world's camels.
There has been a big jump in the export of Somali livestock, especially after Gulf states lifted their ban on importing the country's livestock. In 2010, Somalia exported 4.3 million camels, cows and sheep. The country also has a diverse range of agricultural crops, from grains to legumes to fruits. The agricultural sector accounted for 47% of the country's exports and 17% of its imports in 2001. The country has the potential to produce 200,000 tons of fish per year, without causing a negative impact on the renewal of the natural reserves of marine species. Work has begun on the production of canned fish in the town of Las Qouri on the northern coast. It is no secret that the clash between local fishermen and foreign vessels over foreign waste was the main impetus behind the violent local reaction to defend the county's marine resources in the absence of the state. This later transformed into widespread piracy.
Industry and ports
Industry, the third largest sector in the country, provides for 5% of Somalia's total GDP. This sector's activities are focused on food industry — such as canned goods, beverages, oil presses, sugarcane and pasta production — along with processing industries such as leather, oil, sugar and salt processing, and chemical industries such as the manufacture of cleaning agents.
Ports have provided a golden opportunity for regional business. Ports such as Berbera, Bosaso, Mogadishu and Kismayo have become conduits for transporting large quantities of goods to consumers in Djibouti, Ethiopia, Kenya and southern Sudan. The value of goods passing though the port of Mogadishu is estimated at $1 billion per year, while the return on customs at the port of Berbera is estimated at $70 million to $100 million annually. The geographical location of Somalia — given it's proximity to South Asia, the Middle East and eastern Africa — is important in this regard.
War economy: a Kalashnikov for $140
The absence of the state, since the collapse of the "socialist" system in the beginning of the 1990s, is a major cause behind the subsequent significant economic changes in the country. A lot of national capital has been invested in regional neighboring countries. Somalis established real estate development projects in Kenya and Djibouti, and also entered into the real estate sectors in Dubai and Ajman. Moreover, the absence of the state was a factor in Somalis working and investing in the service sector, due to the deterioration of basic infrastructure in the country, particularly the roads. Statistics indicate that 88% of roads in the country are unpaved, while the rest of the paved roads (2,608 km) are in need of extensive maintenance and development. The same is true for the country's airports and seaports.
However the absence of the state, alongside the state of chronic conflict characterizing large areas of the country, were behind the emergence of the war economy. The entirety of the country transformed into a black market. Anything could be entered into the black market; anything could be bought or sold, imported or exported, shipped or smuggled. Piracy, arms trafficking and illegal immigration all played a major role in this arena.
Despite the international ban on arming Somalia, the country became an open market and way station for all types of light and medium weapons heading in all directions. Here we must mention the name of the most important market in east Africa for goods and weapons: the Bakaara Market in Mogadishu. This market includes over 400 dealers selling "potent" weapons. It is a paradise for those interested in buying weapons, in terms of both quality and price. A Kalashnikov assault rifle costs no more than $140. Prices can increase depending on the quality, with some weapons costing up to $1,000 — the price of a Russian-made pistol. Yet you can buy a land mine for only $100 and a hand grenade for $25. The amount of arms owned by civilians exceeds the amount owned by the weak state by between five to seven times.
Piracy generates money for villages
In the midst of acts of maritime piracy — which have changed the course of things for international shipping in the western Indian Ocean, the Gulf of Aden and the Red sea — ransom money is pouring into coastal villages in the states of Puntland and Galmudug. These villages have transformed into launching pads for pirates. Most of the money paid for ransoms, which amounted to $238 million in 2010, goes to anonymous patrons of piracy — members of international organized crime. Yet despite this fact, a single pirate receives at least $10,000-15,000 for each successful operation. The effect of this revenue is evident in increased construction and stimulated commercial trade in areas that were once deemed the poorest in the country. These are areas that had no resources other traditional fishing.
The birth of new occupations: gravediggers for example
Grave-digging is among the professions that generate rewarding profits, particular during periods of increased clashes in the capital, which claimed more than 18,000 victims in two years. The same goes for makers of coffins, those who deal sheets of iron — which have become an economical alternative to wood in coffin production — and dealers of white cotton fabrics for funeral shrouds…
The "new" economy
Somalia's GDP amounts to just over $5 billion annually (according to the CIA World Factbook), ranking 165th globally. National investment has increased in multiple projects, transforming the absence of the state — which could have been pursuing a policy of intervention — into a blessing for the private sector. The telecommunications sector grew, with eight national companies providing the most effective communication networks on the African continent. The Internet entered the country in the 1990s, reaching urban areas and remote villages alike. Moreover, "Zad" was launched, a program for making financial transactions via mobile phones.
Somali expatriates also developed successful working relationships with businessmen throughout the world, contributing to a growth in the commercial sector. Networks for transporting goods stretched between Asia and Africa, from China in the east to Senegal in the west.
With an increase in Somalis migrating abroad — escaping the war and in search of a better life — the remittance sector grew. This brought about an important economic resource and revenues, as Somalis secured easy means for the immediate transfer of funds. Somalis took it upon themselves to provide this service. A network of money transfer offices sprung up, covering countries throughout the world (144 countries). This sector has provided the national economy with $1 billion to $2 billion annually.
A troubled framework
Continued turmoil in the south of the country has led to frequent waves of displacement. Hundreds of thousands of refugees have set out in all directions, whether inside the country or to neighboring states. The instability led to a large segment of the population losing their livelihoods and tools of trade, which they left behind in their search for safety and security.
This has put the displaced in a critical economic situation, completely exposed to fluctuations in weather that affect large areas of the country. This is particularly true given the recurring effects of El Nino, which is increasingly tough decade after decade. This has led to periods of severe drought, almost destroying the vegetation in vast areas of the country. These droughts have also killed many livestock, leading to hundreds of thousands of shepherds and agricultural workers and their families joining the destitute convoys of the displaced. It seems clear that they will not survive without urgent humanitarian aid.
The Somali people have overcome this situation with the least amount of aid. Moreover, when the aid arrived — if it ever arrived — it was subject to corruption on the part of offices of aid organizations, through corrupt officials, warlords and politicians. The aid was seasonal and in the end was as damaging to production cycles and the marketing of crops as were fluctuating environmental conditions.
The above article was translated from As-Safir Al-Arabi, a special supplement of As-Safir newspaper whose content is provided through a joint venture of As-Safir and Al-Monitor.
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