Somaliland wants to be a trading hub. Here are the problems

..and the potential.

Somaliland, a semi-desert territory on the coast of the Gulf of Aden, has set its sights on becoming a regional trading hub for the Horn of Africa. Though not internationally recognised, Somaliland’s "autonomous" status has insulated it from the turmoil that has subsumed Somali for the past two decades. It has a functioning political system, government institutions, its own currency and relatively low levels of political violence.

At the heart of its economic potential is the port of Berbera, used as an import and export hub by landlocked Ethiopia. Its two airports have undergone a USD 10 million Kuwaiti funded makeover which Somaliland hopes will be the start of efforts to develop its infrastructure, creating the potential for it to augment its position as an alternative trade corridor to Djibouti for Ethiopia.

Ethiopia’s USD 43bn economy, while largely closed to the outside world, is growing by 7 per cent a year and the country is keen to develop coffee and leather manufacturing exports.

The need for enhanced infrastructure in the region is demonstrated by persistent bottlenecks at ports in Mombasa, Dar es Salaam and Djibouti. The appalling condition of the Mombasa road linking the port with the rest of Kenya and the countries of the interior exacerbates the backlog.

Ethiopia’s over reliance on one trade corridor through Djibouti leaves the country vulnerable to fluctuations in its relationship with its trade partner, thereby compromising its ability to effectively manage the political economy of trade logistics. The World Bank has encouraged Addis Ababa to develop transport routes through Somaliland to diversify its options and improve its negotiating position with transit corridors.

Infrastructure development will provide a boost to Somaliland’s fledgling natural resources sector. Sharing the similar geology to the oil rich Gulf states, Somaliland and neighbouring Puntland, offer attractive prospecting opportunities for oil & gas companies. Canadian-listed Africa Oil Corp and Anglo-Turkish oil company Genel Energy, have signed contracts with the semi-autonomous governments and are exploring in the region.

In a situation similar to the standoff between Baghdad and Kirkuk, the activities of international oil companies have sparked controversy over which authorities have the right to issue exploration licences. Following the presidential election in Somalia in 2012, Somalia authorities are reasserting their claim that the issuing of such licences falls solely within the remit of the federal government.

The Somali constitution gives considerable autonomy to regional governments to enter into commercial contracts for oil deals, while a petroleum law, not yet adopted by parliament is being invoked by federal officials in Mogadishu to claim that the central government can distribute natural resources contracts.

The seeds of this controversy dates back to the 1991 overthrow of a dictator that plunged Somalia into two decades of violent turmoil, first at the hands of clan warlords and then Islamist militants, creating a political vacuum in which two semi-autonomous regions - Puntland and Somaliland – emerged in northern Somalia.

Multinational oil companies with licences to explore Somalia prior to 1991 have since seen Somaliland and Puntland grant their own licences for the same blocks. At present the federal government is too weak to press its claim and is unlikely to remain so into the medium term. Any concerted effort to force Somaliland and Puntland to rescind contracts has the potential to provoke violent clashes between armed groups and the security forces in the territories.

Activity by a range of investors in infrastructure development and oil & gas exploration is indicative of the potential to be unlocked in even the most challenging territories. With appropriate insurance coverages providing balance sheet protection against the challenges posed by unpredictable government action and the threat of political violence, opportunities abound for the intrepid investor.

Photograph: Getty Images

JLT Head of Credit & Political Risk Advisory

Getty
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When Theresa May speaks, why don’t we listen?

Not many Prime Ministers have to repeat themselves three times. 

Theresa May is the candidate of Brexit and market panic. She ascended to the highest office because, in the fraught weeks after Britain’s vote to leave the European Union, she represented a safe haven for nervous Conservative MPs, the dependable family mutual that remained open while all along the Conservative high street, her rivals were shutting up shop.

Her popularity, as revealed in high poll ratings outside Westminster, too, owes itself to the perception that she is a serious politician in serious times, happily installed atop the ship of state to guide it through the rocky waters of Brexit negotiations.

May’s premiership has been defined by market panics of a different kind, however. The first is in the currency markets, where sterling takes a tumble whenever she pronounces on Britain’s future relationship with the European Union, falling both after her conference speech on 2 October and after her start-of-the-year interview with Sophy Ridge on 8 January. The second is in the opinion pages, where May’s stock oscillates wildly from bullish to bearish.

In the first months of May’s government, she was hailed as an Anglo-Saxon counterpart to Angela Merkel: a solid centre-right Christian democrat who would usher in a decade of conservative hegemony. More recently, she has been compared to Gordon Brown because of her perceived indecisiveness and repeatedly accused of failing to spell out what, exactly, her government’s Brexit objectives are.

In a symbol of the splits on the right between the Brexiteers and Remainers, the Economist, that bible of free-market globalisation and usually a reliable tastemaker as far as Westminster groupthink is concerned, began 2017 by dubbing the Prime Minister “Theresa Maybe”. Though May’s Downing Street is less concerned with the minutiae of what goes on in the public press than David Cameron’s, the contention that she is indecisive was a source of frustration.

There is an element of truth in the claim that May still views the world through a “Home Office lens”. One senior minister complains that Downing Street considers the Ministry of Justice as a “rogue outpost” of May’s old stomping ground, rather than a fully fledged department with its own interests and perspectives.

Yet even the most authoritarian of home secretaries would struggle to secure a conviction against May on the charge of opacity as far as her Brexit approach is concerned. She has hit the same grace notes with the reliability of a professional musician: Brexit means freedom from the jurisdiction of the European Court of Justice and control over Britain’s borders, two objectives that can only be achieved as a result of Britain’s exit not only from the EU but also the single market. This was confirmed on 17 January in the Prime Minister’s Lancaster House speech in London.

David Cameron used to say that he would never have “a people”. Certainly, there is no Cameroon tendency in the country at large to match the generation of council house residents that became homeowners and lifelong Conservatives because of Margaret Thatcher and Right to Buy. However, there is, unquestionably, a Cameroon people or faction to be found at almost every rung of London’s financial services sector or at editorial meetings of the Economist, though it as at the Times and the Sun where the treatment of May is at its most noticably rougher than in the Cameron era. 

Michael Gove, her old rival, is not only employed as a columnist by the Times; he enjoys the confidence and admiration of Rupert Murdoch. That the Times secured the first British interview with Donald Trump was a coup for Murdoch, an old associate of the president-elect, and for Gove, who conducted it. It left May in the unlovely position of making history as the first prime minister to be scooped to a first meeting with a new American president by a sitting MP in modern times. It also attested to a source of frustration among May’s allies that she is, for all her undoubted popularity, still ignored or doubted by much of the right-wing establishment.

That condescension partly explains why her words are often listened to briefly, acted on hastily and swiftly forgotten, hence the pound’s cycle of falling when she makes an intervention on Brexit and rising shortly thereafter. The Lancaster House speech was designed to break this pattern. Downing Street briefed the most potent paragraphs at the weekend so that the markets could absorb what she would say before she said it.

As a result, the pound rallied as May delivered her speech, which contained a commitment to a transitional deal that would come into effect after Britain has left the EU. Some financiers believe this arrangement could become permanent, which once again demonstrates how much they underestimate May’s ability to enforce her will.

Being underestimated by Cameron’s people, in Westminster and the City, has the unintended effect of shoring up Theresa May’s position. A prolonged and sustained bout of panic would increase the pressure for a soft landing, but its absence makes it harder for Labour to oppose her effectively, although it has largely acquiesced to the Tory plan for Brexit, at least as far as membership of the single market is concerned. 

Yet for all the plaudits that the Prime Minister’s Lancaster House speech attracted, for all her undoubted popularity in the country, she is in the anomalous position of being a Conservative Prime Minister who has priorities on the European stage other than the preservation of the City of London and to whom Rupert Murdoch is not a natural ally.

As such, she may find that her deadlier enemies come from the right.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.