IRIN interview with Mohamed Said Mohamed "Gees"

Over the last two years, many people have returned to the self-declared state of Somaliland, northwest Somalia, to re-establish their homes and businesses. Hargeisa, the capital, was left empty after it was destroyed by the former government of Mohamed Siyad Barre during the civil war in the north. In May 1991, the Somali National Movement - which fought government troops in the north during the 1980's - declared unilateral independence for Somaliland. No government has officially recognised it since; but humanitarian agencies have established aid and development programmes, private business has boomed and some regional countries treat it as a de facto independent state. Recent economic successes, however, have been hit hard by the effects of a livestock ban imposed on the Horn of Africa by the Gulf States, after an outbreak of Rift Valley fever in Saudi Arabia and Yemen last year. Somaliland Minister of Finance, Mohamed Said Mohamed "Gees" talked to IRIN in Hargeisa about how the public sector planned to cope. QUESTION: Hargeisa has grown enormously over the last few years. What is the basis of the economy? ANSWER: Well, I would say the basis is peace. When there is peace, people invest. They rehabilitate their houses, they establish private companies, there is open trade between different parts of Somaliland and its neighbours, including Ethiopia, Djibouti, and Yemen. So, I would say it is the establishment of peace and the Somaliland administration. It has encouraged many Somalilanders from the Diaspora to come back, establish businesses, telephone companies, airlines... there are factories underway. I think people are optimistic about the future. Q: How does the government finance itself? A: Apart from licences and regulations... we don't interfere with people's business as long as they abide by the laws of the country, and as long as they pay taxes. For the first time, they are going to pay profit taxes, before they only used to pay custom duties at the port of entry, like Berbera. Now, they will pay inland revenue and regulation fees - proper income tax, profit tax, and service tax. Our budget, since 1994, has gone up. Q: But there is still a strong dependence on remittances from the Diaspora? A: Yes, it is very important, especially in periods like this, while we go through the livestock ban. Then, remittance becomes very important. But in normal circumstances it doesn't amount to so much because we are exporting livestock. Last year we exported something like 1.5 million heads of sheep and livestock; in 1999 we exported about 2 million heads, in 1998 there was also a ban... Most of our success comes from livestock export. Q: So how do you plan to make up the shortfall this year? A: Well, from government revenue we are loosing something like US $11 million a year... for the shortfall we will raise the taxes to cover the deficit. Today I go to parliament to present my budget, it is balanced - we balance every year. Q: But if you raise taxes, doesn't that mean people suffer more under the livestock ban? A: No, it's not like that. We are not really raising the taxes. What we do is to subsidise our imports - not directly, but indirectly. We use different exchange rates for the dollar. For example, I think the rate is 5,000 Somaliland shillings for US $1. But when we are taxing at the port [Berbera] we value the dollar at 1,500... The value of the dollar is the tax base. Q: You recently appealed to international organisations to help with development projects that had been abandoned by the government because of the effects of the livestock ban. A: We have an ordinary budget, there is not a development budget because we have no development tax. So, in a year we used to collect something like US $0.5 - 1 million for development purposes and build schools, hospitals, water wells, and rehabilitate roads. But this year, after the ban, we switched and used that for other purposes. This year we are not embarking on any development projects, and the affected area is mainly the regions [outside Hargeisa] where international agencies do not go... we are afraid it may cause problems for the regions. Q: Was there any response to the plea? A: I didn't really get any response. I was not as optimistic as Ali Khalif Galayr [prime minister of Mogadishu-based Transitional National Government] who appealed to the international community for US $300 million; I just asked for US $500,000. It shows how tight-fisted Western donors are nowadays. Q: So you feel that despite successes here, the fact that Somaliland doesn't have international recognition still affects the economy? A: With our budget, we employ something like 26,000 people, so something like 70 percent of our revenue goes to salaries. Actually, we are ploughing back our revenue to society. As to the problem of recognition: well, as far as we are concerned we are not in a hurry. We don't demand recognition. But we must have access to international finance and international finance institutions... but they are not very interested in aid per se. What we are really interested in is investment. We would like people to invest in Somaliland. We have had very interested parties so far... if you go to Berbera you will see the [petroleum] company Total, which has facilities in Berbera. We have had international delegations... people are very interested in making business in Somaliland. The problem we have, is with banking facilities. We need facilities where you can take loans, and which investors can use. Now, with assistance from UNDP we have drafted the Somaliland Investment Act... to invite investors to Somaliland, you must have the laws in place. Q: Who is your main trading partner? A: Ethiopia. With Ethiopia, our borders are very peaceful. You can drive from here to Addis Ababa - it's very normal, with no check points. People can take their own cars from Berbera, to Addis Ababa, to Djibouti, and back to Somaliland. We do all kinds of trade with the southeastern part of Ethiopia... which is really influenced by Somaliland. Various traders come from near Harar [southeastern Ethiopia] to Hargeisa... their main port is Berbera. If you go to Jijiga and Dire Dawa [southeastern Ethiopia], all those small towns there, you see you are still in parts of Somaliland... So our main trading partner is Ethiopia and we are now trying to harmonise our customs, our custom duties and develop the official trade between the two countries. We are trying to rehabilitate the roads. The European Union pledged to us to widen the roads and do something about Hargeisa airport. I think the Ethiopians are very interested to extend the road from Jijiga all the way to Berbera. Unlike those from Arta [the Mogadishu-based Transitional National Government], we have good relations with the Ethiopians. Q: Is there much trade with the south? A: There is not much trade... the only thing that comes from the south is bananas and papayas, and qat [a mild narcotic leaf], so there is not much trade between us and Somalia. Q: If the economy improved in the south, would it be considered a good thing? A: Well, we believe if there is improvement in any part, it would be a blessing, because all we get now from the south is refugees. If you go to the streets of Hargeisa, the beggars at the traffic lights are from the south, not Somaliland... We don't want to be a receptacle for the problems in Mogadishu and stretch our limited resources. Any Somali can come here and establish themselves peacefully, but we don't want the generals from the south to run our fate again.