Somaliland (eBook)

Private Sector-Led Growth and Transformation Strategy

PhD Osman Sheikh Ahmed (Autor)

eBook Download: EPUB

2023 | 1. Auflage
128 Seiten
Bookbaby (Verlag)
979-8-3509-2611-8 (ISBN)

Infos

Somaliland, an unrecognized country in the Horn of Africa, has built a growing and resilient economy over the past three decades. Much of this progress is the result of the private sector, which accounts for 90 percent of the economy. However, the sector is narrowly based and faces many Constraints. This publication outlines a comprehensive strategy to develop Somaliland's private sector to encourage sustained economic growth and economic transformation It Identifies the key constraints to private sector development and proposes measures to effectively address them. It also notes emerging investment opportunities and recommends measures to support interested investors and strengthen public-private collaboration. Opportunities abound in Somaliland, from the recently modernized Berbera Port and associated facilities, including Berbera airport which has one of the longest runway in Africa, to the significant fishery potential along the country's long coastline, and considerable but as of yet undeveloped mineral and hydrocarbon resources, The proposed strategy can serve as an example for other fragile post-conflict economies as well as other similar and similarly placed developing countries aiming to climb the development ladder through development of their private sectors.

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This publication, which focuses on Somaliland, lays out a strategy for inclusive growth that creates jobs, reduces poverty, improves the lives and livelihoods of the population, and enhances the government's revenue base so that it can deliver basic services to the public. Based on the private sector, which accounts for 90% of Somaliland's GDP, the proposed strategy aims at just growth but also the transformation of the economic base to a diversified, highly productive one that uses technology and innovation. The comprehensive strategy for private sector development, which is outlined in this publication, will explore the nature of the impediments and constraints that the private sector faces today and will outline how to best remove them. It will also highlight the type of proactive support (beyond removing impediments) that is needed to help the sector to develop and contribute to the country's development objectives. It will attempt to identify areas for investment opportunities that are also developmentally impactful. This should be particularly useful to both foreign and domestic investors who desire to make investment decisions but lack the necessary information on which to base those investment decisions.

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Executive Summary

THIS PROPOSED STRATEGY aims to help achieve inclusive growth that creates jobs, reduces poverty, improves the lives and livelihoods of the population, and enhances the government’s revenue base so that it can deliver basic services to the public. The envisioned result is not just economic growth but also the transformation of the economic base to a diversified, highly productive one that uses technology and innovation.

Based on its past track record in a difficult, post conflict environment, the private sector is key to such growth and transformation. To that end, the proposed strategy focuses on the development of the private sector, which accounts for 90 percent of Somaliland’s gross domestic product (GDP). The intended audience is the Somaliland government, the Somaliland business community, potential foreign investors, as well international development partners.

Following the destructive war of 1988–1990, in which Somalia’s last military government waged a full-fledged war against the people and cities of Somaliland (then-the northern region of Somalia), the private sector in Somaliland played a key role in the reconstruction and revival of the country’s economy. With a very limited enabling environment and minimal government support, the sector has succeeded in delivering a range of critical goods and services to the population — from basic needs such as food to social services like schools and health facilities. According to a 2016 World Bank report, “the resilience, vibrancy, and innovation of Somaliland’s private sector are there to be seen by all.”

The private sector can do the same today provided the many challenges and impediments that makes it difficult to achieve its full potential are removed. There are significant opportunities for the sector to grow and prosper once a business environment that facilitates investment is created.

The proposed strategy includes the following four key pillars, which are explored in greater detail in the Executive Summary and in the main text that follows:

•Creating a policy and regulatory environment conducive to private investment

•Improving access to essential infrastructure, including physical, financial, and human resource infrastructure.

•Identifying and promoting investment opportunities in high-value, growth-generating areas.

•Providing direct support to businesses to take advantage of those opportunities and promoting and supporting enterprise development, especially among micro-, small-, and medium-scale enterprises (MSMEs).

A crosscutting measure is establishing effective and synergistic public-private collaboration to catalyze investment, and growth is critical for achieving desired results.

I. Creating an enabling environment for private investment

Legal and regulatory reforms and strengthening implementation and enforcement

•There is a need for policymakers to close legal gaps and enact key laws that relate to private investment and business operations in such areas as conventional banking and energy. Policymakers must also reform and strengthen regulatory frameworks in areas such as business licensing and registration, land ownership and titling, and exit/liquidation mechanisms. For business licensing and registration, the recently operationalized One-Stop Investment Center is a good start. Businesses can now log into the One-Stop Investment Center’s website, apply online in any region of the country, and receive a registration and business license within few days. But it needs to be developed into a truly “one stop” shop which that enables investors to access all the government regulations and services without going to each entity separately.

•Regulations in the financial sector, as well as oversight and effective supervision of private banks, are weak. Oversight of mobile money — which accounts for almost 80 percent to 90 percent of all transactions — is next to nonexistent. In this regard, enforceable prudential regulations and strengthening the capacity of the Central Bank are critical.

Capacity-building and institutional reforms

Policymakers must also strengthen the capacity, efficiency, and service-orientation of existing and new public sector organizations that provide support and services to businesses. Sometimes, simple steps and requests from investors can take considerable amount of time and effort, particularly for new investors who are not familiar with the landscape and personalities involved.

It is also critical that the government’s ongoing public sector reforms, particularly civil service reform and Public Financial Management (PFM) reform, continue and deepen for more effective interaction and collaboration between the government and the business community.

II. Access to finance and credit, quality infrastructure, and skilled labor

Improve access to finance and credit

A lack of credit and financial services has constrained business formation, expansion, and productivity. Today, there are no commercial or investment banks in Somaliland, and Parliament has yet to pass legislation for conventional commercial banks. In the meantime, important provisions in Islamic Banking Law and current practices of existing Islamic banks — service charges, collateral requirements, lending practices — need to be examined with the aim of improving the current system. New banks should be encouraged to enter the market in order to enhance competition. At the same time, the laws, regulations, systems, and procedures that are necessary for supervision, prudential regulations, and effective monitoring of financial institutions by the government should be put in place on a priority basis. The unique needs of MSMEs, which may not have access to finance even under a better-developed banking system, need to be addressed.

Remittances are a very important source of financing household consumption and for investments, particularly in MSMEs. The huge amounts of remittances — estimated at $1 billion to $1.2 billion — should be properly mobilized, pooled through appropriate saving instruments and used for investment and growth. The government and private financial institutions can collaborate in this area to ensure effective mobilization and efficient use of those resources.

Develop Somaliland’s physical infrastructure

Somaliland’s physical infrastructure — its power, roads, water, ports, and airports — is in extremely poor condition and is a major reason for the high cost of doing business in the country. The country’s information and telecommunications infrastructure, which the domestic private sector has successfully developed, is one exception. However, even here, the legal and regulatory framework is weak or lacking (there is no information and communications technology law, for example). These issues must be fixed over the short term. The cost of electricity (currently $.70 per kilowatt-hour) is still high despite recent reductions from $1.0 per kWh. The cost of electricity in Somaliland continues to be among the highest in the world.

A strategy for infrastructure development should include institutional, legal, and regulatory reforms, including passing a revised Energy Act that builds upon the 2016 law and developing an energy sector strategy to guide sector policies and investments. It should also include promoting wind and solar energy — Somaliland has an abundance of both — and mobilizing internal and external resources for infrastructure development. Initiating public-private partnership (PPP) and creating an enabling environment for PPP would also be critical.

Given the paucity of domestic resources and the difficulty of attracting adequate private capital (outside of the power sector), support from the international donor community would be key for infrastructure development. At the same time, consideration should be given to develop enterprise zones and industrial parks where common infrastructure facilities and land are availed to businesses on a fair and transparent manner and in accordance with clear criteria.

Develop skill levels of the workforce

To meet the needs of a growing economy, Somaliland needs a workforce with adequate skills. However, aside from several fragmented initiatives, there have been few efforts to fill the skills gap. Quality vocational education and market-driven skills development programs must be started and implemented.. Efforts in this area can initially target recent secondary and university graduates, the bulk of whom are unemployed, to equip them with skills in line with potential market demand and to enable them to start their own businesses, where appropriate.

III: Identify investment opportunities and growth drivers

The private sector, which is driven by market incentives, is best positioned to determine where and when to invest given profit opportunities, incentives, and risks. The role of the government and public-private support institutions is to provide the right incentive signals and the necessary information on existing and emerging business opportunities. This is particularly important for a private sector such as Somaliland’s that is still small and embryonic.

Potential...

Produkt-Details

• Erscheint lt. Verlag: 5.10.2023
• Sprache: englisch
• Themenwelt: Wirtschaft
• ISBN-13: 979-8-3509-2611-8 / 9798350926118