Commerce Rises From Ashes in Somalia

It was not so long ago that Somali entrepreneurs needing permits to conduct business had to travel hundreds of miles to the capital, Mogadishu, and then spend at least a month begging and bribing government officials to procure the proper stamps and signatures.

Even making a business call sometimes required crossing into another country, as Somalia’s state-controlled utility left broad swaths of territory without service.

This enterprise-stifling socialist system collapsed in 1991, leading to warfare among rival clans, the destruction of an already deteriorating infrastructure and a vast governmental void. But in an ironic twist, the political disorder has also been good for business.

Commerce is flourishing in parts of Somalia, where an extreme dose of laissez faire has replaced the tight controls on business imposed during the regime of dictator Mohamed Siad Barre. Even the war-torn south, in particular Mogadishu, has benefited, but the change is most notable here in the country’s northwest region.

Since the region hurriedly declared itself the independent Republic of Somaliland after Barre’s fall, its de facto government has let private enterprise run largely undisturbed. The conditions have drawn many Somaliland expatriates back from all corners of the globe to take a lead in rebuilding their homeland.

Ali Omar Gulaid built the first kindergarten in Hargeysa, the Somaliland capital, in 1997 as a way of convincing his wife and two children to return to the region from their adopted home in Los Angeles. Gulaid, 42, came home in 1994 after selling his Beverly Hills janitorial and building renovation company.

“It’s up to people like me to help build my country,” said Gulaid, who studied process engineering at the University of Houston in the 1980s and now owns a restaurant, three guest house villas, car and video rental services, and a public relations firm. “It’s easier to do business today--more freedom. I don’t have a bank [in town], I don’t have a recognized government. I pay a little tax, but I can do what I want.”

The news is not all good. The international community does not recognize Somaliland’s independence. Critics say the region’s leaders are corrupt and undemocratic. And a recent ban on Somali livestock by Saudi Arabia--once the country’s main livestock trade partner--is threatening the region’s prosperity.

What’s more, the lingering stigma of a failed 1992 U.N. humanitarian mission in Somalia has left few countries willing to deal with Africa’s easternmost state.

“We are not Somalia,” Somaliland President Mohammed Ibrahim Egal said in a recent interview. But “we are held to blame for what happens in Somalia. We are still suffering this image problem.”

Foreign donors and U.N. agencies contribute about $60 million annually to Somalia, a fraction of what was spent during the U.N. operation, according to Dominik Langenbacher of the U.N. Development Program.

No Longer a Crisis

“Somalia is no longer in a state of humanitarian crisis, which means the flow of humanitarian funds is drying up, and rightly so,” Langenbacher said. “However, due to the political circumstances and the negative image that Somalia has, that has created a fatigue among donors. No one is willing to invest in longer-term development; there is no return. So the private sector is crucial.”

Somaliland’s new breed of entrepreneurs knows this and has tried to keep the country’s peace by bolstering its economy.

Ignoring teasing from friends who said he would probably become a warlord, Moustapha Osman returned to Somaliland in 1995 with a degree in political economy from Reading and Oxford universities in England to run his family’s imported food business.

“It’s a new country,” said Osman, 26. “There are a lot of opportunities to do a lot of different things without someone saying you can’t.”

His company imports and wholesales Brazilian sugar, Italian pasta, French wheat flour and Malaysian vegetable oil and ships the products to southern Somalia and parts of Ethiopia. About a dozen jobs have been created since Osman’s return.

Every little bit counts in a region with close to 100% unemployment and a history of being neglected.

During the Barre era, the northwest was in shambles. Of the few roads that were paved, most had not been repaired since the 1930s, longtime residents of Hargeysa say. Only a handful of citizens had access to potable water and electricity. And the spotty service provided by the lone telephone exchange that served the whole of Somalia forced businesspeople here to travel to neighboring Djibouti or Ethiopia just to make a call, recalls businessman Mohammed Hawadle Madar.

Though much remains to be done, Somaliland has made remarkable progress in rehabilitating its infrastructure. More than half the houses in this town now have access to piped water; private vendors supply the rest of the homes. The private sector also provides electricity and telephone service.

The private ventures have been profitable.

Abdulkader Hasni Elmi returned from Kuwait a few years ago to build the 24-room Maan-Soor Hotel, which is considered to offer Hargeysa’s most luxurious guest accommodations at $40 a night.

He recalls with irritation his efforts to open a guest house in Mogadishu when Somalia had a central government. His license was denied, he said, because the venture was not part of a business cooperative that had Barre loyalists as its partners. Elmi then tried to make his living in the fishing industry; he won a license to catch fish but not to sell them.

Today, says Elmi: “It’s up to you to run as fast as possible. Government has nothing to do with any kind of business. It’s free now, and we want to keep it that way.”

The Somaliland government has imposed only minimal taxes and light import duties and has even given some business owners a two-year tax break to help them get on their feet.

Commerce is so healthy that some are even willing to give up more of the profits. “We are ready to pay more taxes,” Madar said, “so that the government can use [the money] to keep security.”

Peace Among Clans

Indeed, the business boom is likely to prevail largely because Somaliland has maintained peace among rival clans. Former militias integrated into the region’s army and police force are given monthly pay and food rations. Every clan is represented in the region’s 82-member Senate and 32-member parliament, and while tribal-based political favors still exist, they are far less frequent than under Barre.

“No one expected us to be this far today,” said Abdalla Ali Ahmed, the mayor of Berbera, an alumnus of UC Berkeley and a former partner in a gas station venture in Seattle. “Everybody expected us to fall back into anarchy.”

The security and stability of the land is evident on the dusty streets of Berbera, where money-changers sit with bundles of Somaliland shillings, tied with rubber bands in stacks worth $700. None of the vendors has a guard.

“You don’t need one,” said money-changer Abdul Hakim, 29. “There is good peace here now. Before the war, there were murderers on the streets, bandits.”

But the cash flow into Somaliland could be put into serious jeopardy if Saudi Arabia upholds its livestock export ban--also imposed on Ethiopia, Eritrea, Sudan and Kenya--over fears that an outbreak of Rift Valley fever in Kenya could spread.

Somaliland, which reportedly has not detected any cases of the fever, used to export about 3 million livestock to Saudi Arabia annually, generating about $12 million from the selling price of the beasts, export duties and connected commerce activities at the port.

“Our resources are beginning to dry up,” said President Egal, predicting that anarchy will return if funding for the militias disappears. “People are going to be hungry. These young boys will go back to the roads with their guns. They will begin fighting among themselves. There will be a retrogression, and something similar to the situation in the south will come back here.”

Political opponents say that if the country falls back into mayhem, it will be the fault of Egal’s own corruption, mismanagement and dictatorial tendencies.

But many in Somaliland’s upstart business community are confident this will never happen.

“I think that if we can build on our strength--that is, basically, peace--we can achieve a lot,” said Osman, the food importer. “I think a lot of people are sick of fighting. . . . People just want to get on with their lives and make the most of it.”