Somaliland:The improvement of Private Sector

Somaliland: The Improvement of Private Sector.January 22 2000 at 5:31 PM

Since the upheaval of Somali society and the collapse of government system in Somalia early in 1991, Somaliland has undergone huge business and economic reforms. Despite the fact that there is no proper economic system and financial institutions currently in place, yet the economy is not idle. The private sector and individual business people provided jobs to thousands of unemployed citizens. Since there is no strong government system that regulates businesses many people perceived this opportunity and as a result took advantage of this chance and entered in to the world of business. The economic system currently in place seems to be laissez faire, where there are no suppressive government regulations, no strong taxes system and no tariffs.

In Somaliland, the private sector, especially service industry has experienced rapid growth over the past several years. Most of the recent business success in Somaliland goes to service industry- an industry that has been completely ignored in the past. Telecommunications services, airline services and remittance services are the major areas where development is taking root. One can argue that the communication service in Somaliland is considered to be among the most efficient and inexpensive in the whole continent.

The people of Somaliland have an easy access to use advanced telecommunications and can exchange information through satellites.Furthermore, you can keep in touch with your relatives and friends even if you live in remote villages. Thanks perhaps to Somali educated business people who successfully introduced these services to local people. Returnees from North America and Western Europe also contributed positively to the improvement of small businesses and the establishment of financial institutions.Several competitive telecommunication companies are presently rendering communication services more efficiently.

Comparing to neighboring countries, Somaliland telecommunication business entities provide much cheaper and reliable services with satisfactory and competitive price. For instance, in Kenya and Djibouti each one-minute is charged about 3 US dollars whereas here in Somaliland it is less than one dollar. Most of the Somaliland towns and districts are now enjoying international distant calls for the first time in their history. Rates charged by the existing telecommunication companies are reasonable and mainly determined by the market forces.Airlines are also another area where impressive development is taking place. There are several locally-owned airlines that provide prompt and reliable services to their customers. Even during the past forty years most of the towns did not have airfields except Hargeisa and handful of towns. At the moment, people can catch flights everyday in almost every major town in the country.

Remittance is also one of the most famous means of financial transfer. The absence of organized financial institutions particularly banking systems, necessitated the service rendered by the remittance agencies. Their role is to facilitate the delivery of money from Diaspora to friends and relatives back home. Almost every town and district in Somaliland has now at least one branch of either the two greatest remittance agencies- Albarakat and Dahabshiil. Some of the agencies that involved in remittance activities are currently considering opening saving accounts.

Credit also goes to Somali Diaspora who played an instrumental role to help their helpless and desperate brothers and sisters left behind. Barakat, one of the most successful remittance and telecommunication companies recently introduced banking system and many people responded and expressed interest in this new initiative. The export of livestock tripled for the past ten years. Millions of sheep, cattle and camels were exported to Gulf states mainly to Saudi Arabia, the most important external market. However, the ban of livestock by Saudi Arabian government due to the suspicion of the outbreak of Rift Valley Fever had tremendous negative impact on the economy and caused severe unemployment and contributed to the deterioration of living standard as well as social well-being of the local communities.

The banning of livestock also affected government revenue, as it constitutes one of the main sources of income for the government.Despite the growth and improvement of private sector economy for the past ten years, it has its own shortcomings and weaknesses as well. There are business setbacks that emerged just for the past ten years. These hazardous behaviors emerged in loose and unrestricted atmosphere with in which this economic success is taking root.

Many business activities have contributed to the misuse of natural resources such as cutting trees down for charcoal, and the export of other valuable assets, and thus contributed to the destruction of the same country in which they were supposed to advocate its development. Some consumers are very concerned about the quality and effectiveness of some pharmaceutical drugs, mostly imported from Pakistan by Somali business people. Others worry the lack of quality control and absence of consumer protection methods. More importantly, the lack of skilled employees and the absence of well- organized financial institutions are considered to be one of the greatest weaknesses of this slowly growing industry. For instance, loans and lines of credit necessary for further business expansion and investment are completely beyond the reach of business people.

However, Amoud University seems to be as the most appropriate means to assist the overall improvement of the current private sector success, and the business industry as a whole, as the faculty of Business and Public Administration will produce qualified entrepreneurs. All in all it's widely believed that Somaliland has experienced undeniable business changes and impressive achievements for the past decade.

This paper was written by:Mr Abdirahman Adam Mohamoud.Student at Amoud UniversitySchool of Business & Public Administration.Borama - Awdal Region - Republic Of Somaliland.
January 22, 2000
This article first appeared in The Republican Newspaper, Hargeisa