Analysis of Macro-Economic Situation in Somaliland

[Ducaysane_87]

http://storm.prohosting.com/mbali/doc122.htm


UNDP SOMALIA
UNITED NATIONS DEVELOPMENT PROGRAMME

Somalia Watching Brief
Discussion Paper Prepared by Academy for Peace and Development (APD)
August 2004
This document is being issued as a discussion paper without formal editing. It was prepared by Academy for Peace and Development (APD). The views expressed in this paper are those of the author and do not imply the expression of any opinion on the part of the United Nations Development Programme. Comments and suggestions may be forwarded to KNS Nair, at kns.nair@undp.org
Introduction
This macro-economic study is intended to present a snapshot of the prevailing macroeconomic conditions in Somaliland. It is intended as one part of a series of statistical reports that will appear under the World Bank/UNDP Somalia and Somaliland watching Brief Programme.
The information in this macro-economic study is based on information obtained from government documents, interviews, surveys and materials from local and international agencies.
The reporting and analysis in this study were conducted under the auspices of the Academy for Peace and Development, with funding from the World Bank and UNPD.
Objectives of the Study
The objective of the study was to compile data on key macro-economic sectors in Somaliland to address some of the critical data needs and gaps, and to begin to establish a macro-economic database for policy formulation, planning, and monitoring of rehabilitation, reconstruction and development efforts. The study covered the following sectors: the main production sector, import and export activities, domestic trade and public expenditures, in order to facilitate a better understanding of Somaliland’s macro-economic trends.
Major challenges
Obtaining statistical data was a major obstacle. As a consequence, macroeconomic analysis in Somaliland was also very difficult.
Limitations of the study
One significant weakness of the study is the existence of gaps and fragmentation in the type of data collected and the quality of data collection.
Chapter 1: Background
The land and people
Somaliland comprises the territory, boundaries and people of the former British Somaliland Protectorate. From the shores of the Gulf of Aden, Somaliland extends southwards to the Somali National Regional State of Ethiopia [is this ia formal title?, bounded by Djibouti to the Northwest and Somalia (Puntland) to the east. Within these borders, Somaliland’s territory covers an area of 137, 600 square kilometres, with a northern littoral of 850 kilometres (GOS – Somaliland in Figures, 1999). Three main topographical features locally known as the Guban, Oogo and Hawd distinguish the territory’s geography 1.
The Guban (meaning “burnt”) is the narrow coastal region, which is hot and humid with temperatures exceeding 40 degrees centigrade during the summer season (Xagaa) between June and August. The terrain is relatively barren, allowing only sparse, desert-type vegetation. Eastwards from the main port of Berbera stony mountains hug the coastline, while to the west, the plain widens to provide rich grazing for pastoralists during the cooler months between October and March. With the exception of Berbera, the population of the Guban’s sparse settlements tends to migrate southwards to the highlands during the torrid summer months, returning home when the climate becomes more bearable.
Inland from the coast, land elevation increases rapidly as the Guban gives way to the Oogo: the cooler highland zone dominated by the Gollis mountain range, which traverses Somaliland from west to east. The Oogo zone possesses an abundance of underground water, which together with its agreeable climate, is conducive to settlement and development. All of Somaliland’s major towns are situated in the Oogo, and it supports a degree of cultivation, notably between Hargeysa and Boorame in the west, and around Ceerigaabo in the east.
The third topographical zone is the Hawd, which stretches across the border from Somaliland into Ethiopia. Although rich in pasture, the Hawd has virtually no permanent sources of water. Historically, nomadic pastoralists grazed their herds in the Hawd during the rains, but were forced to migrate to more hospitable areas during the harsh dry season (Jiilaal) when water sources dried up. In the past half century, however, since the introduction of berkado (cemented underground water reservoirs), the Hawd has come to support permanent settlements. This has led to a steady process of desertification, and destruction of the rich pastures that once made the zone ideal for rearing livestock.
The inhabitants of these zones are ethnic Somalis, united by race, language, religion (Sunni Islam) and culture, which they share with the Somali inhabitants of neighbouring states. Population estimates range between 2-3 million inhabitants.2 Somaliland’s inhabitants also identify themselves as members of various clans and sub-clans, which include the Isaaq, Gadabuursi, Ciise, Dhulbahante, and Warsangeli clans 3. The Ciise and Gadabuursi clans predominate in the west. The Isaaq are chiefly settled the central regions, while the Warsangeli and Dhulbahante clans people the eastern areas, although not exclusively. Numerous smaller kin-groups share the Somaliland territory with these major groupings, and the major clans also contain numerous subdivisions.
Chapter 2: The productive Sectors
Livestock Production:
Livestock production has been and remains the mainstay of the Somaliland economy. Livestock husbandry is the dominant system of production in Somaliland, either via nomadism (or transhumant) or agro-pastoralism. Much of Somaliland’s post-war economic growth has been linked, directly or indirectly, to livestock production. However, a number of chronic problems beset Somaliland’s most important productive sector: various environmental pressures and vulnerability to external forces 4.
Livestock Census
There is no exact data on the size of Somalilands herds. In 2002, the government estimated the total population of livestock in Somaliland at 16,238,3045 head with an overall annual growth of 1.9%. This total comprises 6,836,695 goats, 7,516,708 sheep, 1,524,791 camels and 260,110 cattle.
International agencies put the figure lower: In 19995, the government put the livestock population at 15,337,252, whereas UNDP estimated that it was 12,244,740 head, a figure that is 25 percent lower.
However, as a result of cumulative pressures on the environment, there is growing evidence that the ability of Somaliland’s ecosystem to support these herds may soon be reached, if it has not already been surpassed. 15.4 million head of livestock equals 6.5 million Tropical Livestock Units (TLU)6; one TLU requires about 2.25 tons of fodder annually7. Therefore, 6.5 million TLU needs roughly 14.6 million tons of fodder. The estimated production of fodder in Somalia and Somaliland combined in 1986 was 13.7 million tons8 (Axmed, 1988), which is able to support only 6 million TLU, and which does not include the needs of donkeys, horses, and wildlife. In other words, Somaliland’s rangeland capacity is far below the level required to support either government or UNDP estimates.
Moreover, the population figures above don’t take into consideration the deaths and losses due to drought and other eventualities that have occurred recently. For example, drought in the Sool Plateau, which has rich grazing and is home to large numbers of livestock, has claimed the lives of a substantial number of livestock. A survey conducted by FSAU [Food Security Assessment Unit] in 2004 found that 7.3% of the 457 households polled lost less than half of their sheep and goat herds, roughly 50.5% lost more than 50% of their herds and 39.8% lost their entire herds of camels.
Pressures on the Pastoral Environment and its Impact
It is difficult to pinpoint the exact causes and effects of the changes taking place in the pastoral environment, given the complexity and inter-linked nature of the variables involved. The pressures on the pastoral environment are the result of numerous factors including 9:
- Cyclical drought
- Increased water points, human settlement and transport
- Charcoal production
- Private enclosures
Quantitative data on the extent of the impact of these changes on Somaliland’s pastoral environment are lacking. National concern about environmental change in the pastoral rangeland has arisen, not from comprehensive studies or analysis, but rather from anecdotal evidence and disconnected studies of specific problems. Among the most salient issues are rangeland degradation, the disturbance of grazing patterns, and the weakening of traditional social structures and coping mechanisms.
There is no reliable data on the number of people involved directly in livestock production. Certainly the ongoing out-migration from rural areas is reducing the labour available for animal husbandry. Young nomads, including women are migrating to urban centres, leaving older women, children and old men behind to tend the herds.
Another development is the change in the diet of nomadic households. The nomadic diet is largely composed of milk and milk products, complemented by rice, sugar, tea and small amounts of meat. However, there is growing evidence that nomads are consuming less milk and selling more in order to purchase other, non-pastoral foods and non-food items.
Agriculture
Rain-fed farming
Due to its arid ecology, Somaliland is essentially a pastoral economy with little room for agricultural development. Only 10% of its total geographical area of 137, 600 sq. km is thought to be suitable for cultivation and only 3% of that has been put to the plough. Cultivable areas are located principally in the Western districts of the Hargeysa region (e.g. Gabileh, Aallay-baday, etc), parts of Awdal region (e.g. Dilla, Baki,) and parts of Togdheer region such as Odweyne, and Sheekh).
Crops traditionally grown in these agro-pastoral regions of Somaliland are a long-cycle sorghum variety known locally as cilmi Jaamac and short-cycle maize. The normal cropping pattern of Somaliland consists of planting these crops as a monocrop at the beginning of the Gu (spring) season (April-June).
After harvest of the early maturity Gu maize, another early maturing karanmaize is planted on the eve of the Kaaran (short wet period) season (end July- September). The purpose of the Gu maize is to provide relief from hunger before the long cycle sorghum harvest. Thus, In a good year, three harvests are made: two maize harvests and one sorghum harvest as well as good quality fodder. Rainfall is the most essential factor for farmers to make use of the available moisture during cropping season so as to maximize output.
Table 2.1 Estimated area, production, and yield of major crops during pre-war and post-war periods Pre-war/post-war Major Crops

Maize Sorghum Total Annual Average

1982-1988
Area(ha) 30,000 30,000 60,000
Production (tones) 4,293 31,440 35,733

Pre-war/post-war Major Crops

Maize Sorghum Total
Yield (tones/ha) 0.14 1.05 0.60

Gu 1996
Area(ha) 11,398 17,610 29008
Production (tones) 21,000 18,000 39000
Yield (tones/ha) 1.84 1.02 1.34

Gu 1997
Area(ha) 11,398 17,610 29008
Production (tones) 7,979 15,741 23,720
Yield (tones/ha) 0.70 0.89 0.82

Gu 1998

Area(ha) 11,398 17,610 29008
Production (tones) 3591 7084 10675
Yield (tones/ha) 0.32 0.40 0.37

Gu 1999
Area(ha) 8720 19105 27825
Production (tones) 6976 14845 21821
Yield (tones/ha) 0.80 0.78 0.78

Gu 2000-01
Area(ha) 8720 19105 27825
Production (tones) 3985 10957 14942
Yield (tones/ha) 0.07

Gu 2002
Area(ha) 5365 19168 24533
Production (tones) 1073 7800 8873
Yield (tones/ha) 0.20 0.41 0.36

Gu 2003
Area(ha) 11974 34081 28,210
Production (tones) 3290 24,925 4608
Yield (tones/ha) 0.163
The annual total area under cultivation is, on average, only 29,800 hectares., compared to 60,000 hectares prior to the war. Although yields per hectare were higher in 1996 and 1997 and peaking in 1999 than the pre-war level of 0.6 ton per hectare, production has been declining. The reason that farmers are utilising less than half of their available land for cultivation are10: The strength of the livestock sector and earning power of local livestock markets in the 1990s, among other factors, encouraged agro-pastoralists to favour animal husbandry over crop production11. Another factor that has contributed to the decline of crop production has been the provision of relief food to Somali refugee camps in Ethiopia. This has limited the marketability of locally produced sorghum and maize, as many Somalilanders have become accustomed to wheat products due to their experience as refugees. Competition from the rations supplied to refugees in Ethiopia, which is often sold in local markets, has also forced farmers to sell their produce at lower prices. In addition there is a labour shortage in the agricultural sector, since many local youth who see no future in farming are attracted to economic opportunities the cities.
Irrigated Farming
By contrast, irrigated farming in Somaliland has increased substantially during the last two decades12. This type of cultivation, also known as "tog (Valley farming", occurs mostly along the banks of dry riverbeds and perennial springs, and is used in production of fruits and vegetables. Some farmers use reservoirs for harvesting rainwater for irrigation, others sink shallow wells along the riverbanks or in the middle of the dry riverbed, with water pumps to raise the water. In Sanaag region and to a lesser extent in Saaxil, gravity irrigation from natural springs is more widely used.
The spread of irrigated farming activities within the country has been made possible largely by consumer demand for agricultural products in rapidly growing towns and cities, as well as the large pool of displaced people with farming experience from Somalia. In Sool and Sanaag especially, many who fled from Ceerigaabo during the civil-conflict have developed farming.
There are no national statistics on the level of fruit and vegetable production in Somaliland, and whether current production is sufficient to meet local demand. Climatic and technology factors, such as shortages in water during the jilaal (dry) season, lack of simple processing techniques, as well as competition from Ethiopia, inhibit producers from expanding production and being able to supply the market steadily and consistently throughout the year.
The main vegetables and fruits produced in Somaliland are: tomatoes, onions, peppers, cabbages, watermelons, oranges, papayas, and lemons.
Fishing
One of the nation's chief objectives is to achieve the kind of economic growth that will improve the living conditions of the people of Somaliland. A precondition to this is that growth takes place through the sustainable use of the nation's resources, one of which is a coastline that stretches over 850km along the southern shores of the Gulf of Aden, and which has a great potential resource in the form of fish that could generate employment and income for many people, enhance the diet of many Somalilanders and increase the country's foreign exchange earnings through exportation. In 1975 a Norwegian research vessel valued the stocks of grouper, horse mackerel, and other fish at more than 100,000 tons in Somali coastline.
There is little accurate information on fishery resources. What is known is that during the conflict period 1988-1991), much infrastructure was destroyed. Of the 350 boats in use before the war, only 170 are currently operational. Somaliland's yearly fish production is still far below pre-war levels. There is no reliable data for yearly production, but a rough estimate provides a range of between 1000-2000 tons per year. This is less than 2% of resource potential, and for this reason the sector remains untapped.
Some small-scale fishing takes place along the coast of Somaliland, mostly centred in Berbera, Seylac, Maydh and Laasqoray. Small boats, with various sizes of gill nets work out of these locations. Fishing operations in and around Berbera are mainly for local consumption. Around Maydh and Laasqoray sharks are especially targeted, but only the valuable fins are used, for export. In Laasqoray where the first tuna canning factories were built in the mid-1960s, entrepreneurs established a new fish-canning factory, which began production on November 19 2001.
Somaliland’s Ministry of Fisheries derive considerable income from the fishing sector through the issue of licenses, with the collaboration of local people for foreign trawlers to provide security to fish in Somaliland waters. These vessels fish along the coast of Saylac as shrimps is the prime target and they are mainly from Egypt. There are no statistics on the number of vessels or the money involved, nor the quantity of fish yields. Also, coastal communities allow Yemenis to fish in their respective waters in exchange for fees.
At the same time the government and coastal inhabitants are deeply concerned by the illegal activities of foreign fishing vessels in their waters. The government does not have the means to patrol its own coastline to prevent foreign incursions into Somaliland’s Exclusive Economic Zone (EEZ).
Frankincense
Frankincense production was a small but lucrative business before the war. Most of the frankincense production in Somaliland takes place in Sanaag region, in the highland forests of the Gollis mountain range. At present two types of commercial frankincense are collected: maydi (Boswellia frereania) and beeyo/moxor (Boswellia carteri). All the frankincense-growing areas are divided into ardaas (units). On average an ardaa can produce about five camel loads (625 kg)13 of gum; there are about 600 ardaas in Somaliland.
Though the frankincense trade has gradually been resumed, information on the scale of trade is not available although, anecdotally, Large numbers of people in Sanaag are engaged in the production and the business of frankincense.
Mineral Resources
To date, no mineral resources of economic importance have been found in Somaliland. But Somaliland is not short of mineral prospects; hundreds, if not thousands of Somalilanders are engaged in mineral exploration on an individual basis throughout the country. Large quantities of potentially precious stones are sent to Dubai markets for examination and sale.
Industry
On the whole, this sector is new, and contributes relatively little to GDP. But it is now expanding and it is gathering momentum. By the end of August 2004, there will be 30 industrial projects registered with the Ministry of Industry and Commerce and [not clear] are members of the recently formed National Industries Association as can be gleaned from the attached list. 18 of these 30 projects are currently operating while the remaining 12 are at varying stages of construction and implementation. The overwhelming majority of these projects have been initiated quite recently (since the year 2000) and except for a few, are located in and around Hargeysa. These facts indicate inter alia a growing sense of security and growing confidence in the future as well as the availability of the required financial resources and the willingness to invest.
The concentration of enterprises in and around Hargeysa is due to the fact that the capital provides the best investment environment (security, infrastructure, access to markets) in the country for these costly ventures to date.
Most of the enterprises are of small to medium size, reflecting the limited financial resources of Somaliland’s business sector, as well as the small size of the domestic market. Business owners are overwhelmingly corporate entities [as opposed to], again indicative of limited individual financial resources and the need to pool together funds. In many cases, enterprises are joint ventures between Diaspora Somalis and local Somalilanders. Virtually all enterprises are intended to service the domestic markets are [not sure I understand this sentence] import substitution. Though few are local-resource based (e.g. water plants; tiles; meat chilling; tanneries; vegetable oil processing, etc.), the majority of businesses process imported raw materials. As a result of various constraining factors (e.g. insufficient raw materials and market demand) capacity utilization rarely exceeds the 50% mark.
The Ministry of Industry has been actively involved in organizing, guiding, advising, incentivising the private sector and is thus the godfather of the National Industries Association, which encompasses all major investors. Some of the incentives provided by the government to members of the NIA include, free land, and a five-year tax exemption. The NIA was created to play an advocacy role for the industries. It has 22 Articles of Association, which set out its functions, duties and its organizational chart.
Table 2.2 Some profiles of the manufacturing sector in Hargysa city

Legal Status Sole trader Company Corporation Family Business Total
33 66.8 0.1 0.1 100

Starting Capital $5000 $10,000 $50,000 $100,000 Total
0.0 8.35 8.35 83.3 100
Source of raw Local Imported Both -Material 1.6 96.4 1.6 - 100
Permanent Skilled Unskilled Male Female Employees 46.4 53.6 97.1 2.9 100
Permanent Yes No Yes No
staff Hired last year 83.3 16.7
Intend to hire next year 95 5
Business 2% 10% 40% Don’t know -
Growth 20.2 33.3 15.4 31.1 100
The premises Owned Rented 49.3 50.7 - - 100
Private Public Owned Private and owned
Source of 100
Power 19.2 18.8 16.9 45.3 100
Location Billboard Radio TV Others
Yes No Yes No Yes No Yes No Yes No
Attracting customers 33.3 66.7 33.3 66.7 83.3 16.6 83.3 16.6 66.7 33.3
Lack of Banking Lack of foreign investment
Lack of insurance
Lack of capital Lack of regulation/policy
Yes No Yes No Yes No Yes No Yes No
Constraints 66.7 33.3 33.3 66.7 51.1 48.9 15.5 84.5 67.7 32.3
Locally Outside Yes No 100% 50% Less 50%
Who consumes Total
your product 82.3 17.7
Introducing new product 66.6 33.4
Level of capacity 33.5 16.7 49.8 100
Chapter 3: Trade and Commerce
The bulk of Somaliland’s commerce and trade is based on export and import activities. Exports are mainly livestock and Imports are foodstuffs and consumer goods, most of which are destined for Somalia and Ethiopia. The resumption of livestock exports and border controls relaxed with Ethiopia has contributed to the growth of this activity. But nowadays, the livestock export ban and the border closure by the Ethiopian authority is having an adverse effect on trading.
External Trade
Somaliland’s external trade has been dominated by import and export activities, by simply exporting livestock in exchange of importing food stuff, constructions materials and all kind of consumer goods. Most of these goods are destined for neighbouring countries-notably Ethiopia.
Export
Livestock Export
Livestock export accounts for all exports from Somaliland. Other exports through Berbera port are statistically insignificant.
In Somaliland, livestock traders resumed shipments, mainly to Saudi Arabia in 1991 after the war, and livestock exports through Berbera steadily increased between 1991 and 1998. In 1993 livestock exports reached pre-war levels, and record levels of almost three million heads were reached in 199714.
Table:2.1 Livestock Exports Through Berbera

Year Sheep/goats Cattle camels Total
1991 482,508 11,756 102 494,366
1992 631,192 36,662 389 668,243
1993 1,014,921 80,861 14,824 1,110,606
1994* 1,685,265 55,729 38,025 1,779,019
1995 2,713,597 75,128 21,993 2,810,718
1996 2,417,656 64,596 42,828 2,525,080
1997 2,814,495 66,939 50,587 2,932,021
1998 957,623 92,213 11,663 1,061,499
1999 2,000,335 88,939 34,840 2,124,114
2000 1,233,851 46,289 10,100 1,290,240
2001 44,045 12,812 1,635 58,492
2002 366,613 36,678 20,782 424,073
Source: Ministry of Finance, 2000
From 1997 to 1998, livestock exports plunged dramatically from almost 3 million to about a million as a result of an imposed livestock ban by Saudi Arabia in response to an outbreak of Rift Valley Fever in southern Somalia. However, cattle exports to Yemen increased from close to 67,000 to 92,000 heads in that year. It is widely believed that Somali livestock continued to reach Saudi Arabia through other countries. When the ban was lifted in mid-1999, exports resumed and a total of 1,480,141 sheep and goats were exported in the second half of that year. The following year 1,062,618 heads were exported during the Haj season alone. However, a new outbreak of Rift Valley Fever in Saudi Arabia and Yemen in September 2000 led to a total ban on livestock imports from the Horn of Africa by Gulf States. For the second time since 1991, this brought livestock exports in Somaliland to a standstill. Two bans in four years illustrates the vulnerability of Somaliland’s livestock export economy to external market forces.
Table 3.2 Market value of livestock per head in US dollars and Somaliland Shillings

Livestock type Values 1998 1999 2000 2001 2002 2003

Camel/head Value SH SL VALUE 492,708 $130.7 385,535 $115.4 502,333 $167.5 336,250 $55.6 650,000 $96.6 1,327,000 $174.9
Sheep & goats/head Value/SH SL VALUE 68,125 $18.1 52,711 $15.8 68,130 22.71 56,000 $9.257 52,000 $7.7 102,600 $13.5
Cattle/head Value SH SL VALUE 334,167 $88.6 241,726 $72.4 177,639 $59.20 340,000 $56.2 435,000 $64.6 657,733 $86.7
Exchange rates of SH SLversus $US 3,771 3,340 3,00 6,050 6,730 7,585
* Source: Somaliland in figures
Table 3.3 the total market value15 of animals exported per year
Type of animal 1998 1999 2000 2001 2002

Camel $12,052,239 $10,263,560 $7,418,407.5 $195,322.8 $1,997,977.8
sheep/goats $17,332,976 $31,605,293 $28,020,756 $477,161 $2,452,904.3
Cattle $8,170,071.8 $6,439,183.6 $2,740,308.8 $4.478915.2 $2,425,471.6
Total $37,555,286.8 $48,308,036.6 $38,179,472.3 $5,151,399.00 $6,876,352.90
Apart from the decline in total income, market prices for camels and sheep/goats declined sharply in 2001 because of the ban. In 2003 there was a significant increase in the price of livestock in Somaliland, perhaps due to the prolonged drought. Both Hargeysa and Birco markets experienced an increase in meat prices as a result of animal shortages.
Other Exports
As previously mentioned, other exports from Somaliland are statistically negligible, even when livestock bans are in effect.
Table 3.4 Other Exports

Item Total export (kg) Price per unit Total cost
Animal skins 4,187,767pcs $4.0 $16,751068
Gums (export quality) 57,370 kg 6.50 $ $372,905
Fish 1000kg 2.0 $ $2000
Grain (mainly sorghum) 4795 bags 5.0 $ $23,975*
Oranges 1220 bags 12 $/bag $14640
TOTAL $17,164,588
Source: the Ministry of Finance * re-export
Revenue generated from livestock sales do not accrue to the producers alone. Between the karaal and the local market (seylad) many intermediaries play a role in the process, each taking a cut of the sales. Many people in urban centres go to the local livestock market to earn their livelihood. The importance of the seylad in terms of employment cannot be underestimated. The local market in Hargeysa, which is the second largest livestock market after Burco, employs about 2,255 persons.
Quantifying the actual national income from the pastoral sector is very difficult. This is due to what the International Labour Organization has described as the “highly unconventional” nature of the Somali economy, which does not lend itself readily to standard measurements of economic activity17. A study in 1998, gave a national income of US$176.6 million18 from livestock only. The Human Development Report of 1998, however, estimated the value of livestock exports in 1997 at US$ 120.8 million.
Import activities
Most of Somaliland’s trade consists of imports from other countries. The volume of trade in Somaliland surpassed pre-war levels in 199719. This increase was based on growth in livestock exports and the opening of the Ethiopia- Somaliland border, which created a vast new market for Somaliland. In the absence of formal economic institutions and regulations, traders respond flexibly to local demand, importing a range of basic goods, including food (sugar, rice, flour, pasta), building materials, bagaash (bundles of consumer goods such as sandals, cigarettes, clothes), spare parts, fuel, tyres, and electronic items and vehicles. The proportion of these destined for Ethiopia and other part of Somalia is undocumented, as the port of Berbera does not make distinctions for transit goods 20. Government officials estimate that about 85% of imports go to Somalia and Ethiopia, with the exception of construction materials almost utilize in the country. However, a leading local merchant put the figures lower, and says it is about 60-65 percent. The value of imported goods and materials in 2003 is put at about 200 million dollars. Imports are also a major revenue source for the government; with the exception of 1999 (41%) and 2000 (38%), when livestock was banned, they account for more than fifty percent of government revenues.
Table 3.5 Import through Berbera port in M/T.

Commodities 1999 2000 2001 2002
Sugar 125,187 (36.5%) 155,485(30.2%) 152,855(38.3%) 116,680(24.2%)
Rice 34,600 (10%) 66,351 (12.9%) 25,770 (6.5%) 53,383 (11.1%)
Flour 15,422 (4.5%) 48,850(9.9%) 25,894 (6.5%) 35,067 (7.3%)
Wheat 1,690 92,165 19,503 23,415
Cooking oil 4,432 20,652 12,813 21,333
Dates 2,970 11,744 897 1,417
Pasta 5,290 1,835 11,535 15,682
Biscuits 7,594 1,508 1,443 1,604
Cloth 2,059 3,436 5,376 9,045
Spare parts 3,539 6,512 6,537 5,142
Cigarettes 1,948 4,027 2,653 2,931
Soap 7,841 5,211 8,061 7,413
Building materials 102,450 (29.8) 82,744 (16%) 62,599 (16%) 122,564(25.4%)
Fuel 20,818 38,063 45,782 45,720
Others 7,559 12,633 17,172 21,595
Total 343,399 515,216 398,890 482,991
With resumption of livestock in mid 1999, import through Berbera in the third quarter has increased from 53,790 metric tons to 94,972 metric tons, which is almost half of the second quarter’s imports. The fourth quarter in that year also has experienced the same expansion in import about 54%. As much of 2000 (about ten months) livestock export ban was not in effect, import through Berbera has grown in 2000 by 50%. In 2001, when the ban was in effect it drop 22.6% and surprisingly it has bounced back in 2002 by 21.2%, with the exception of sugar, spare parts and soap all other goods has gained ground led by the import of the construction materials and which was doubled.
Domestic trade
In the post-conflict period the number of Somalilanders involved in domestic trading activities has increased. Women tend to be dominant.
Table 3.6 Import values in dollar
ITEMS NO. OF ENTRIES SH.SLD $ US

Household Goods & Other Utilities 68 369,103,634,268 105,458,181.2
Vehicles & Accessories 12 7,391,090,281 2,111,740.1
Cigarettes & Tobacco 2 11,904,392,863 3,401,255.1
Food Stuffs 31 246,972,957,807 70,563,702.2
Qaad 1 26,339,728,226 7,525,636.6
Fuel 4 19,069,749,778 5,448,499.94
Construction Materials 34 17,710,429,157 5,060,122.6
Total 199,569,137.74
Slaughter markets
Women are involved in all aspects of the slaughter market (daabax), from selling to butchering. The trade provides income and occupational opportunities for many lower-income women. Women jeeble (small traders) purchase female livestock across the border in Ethiopia for local consumption and for shipment to Djibouti.
There is no national data on the number of animals slaughtered annually in Somaliland. In Hargeysa, the most populous city in the country, an estimated21 439,200 head of sheep and goats; 14,640 camels, and 18,300 head of cattle are slaughtered annually, with an annual value of $11.6 million. The Hargeysa market employs about 1,886 people.
Milk Marketing
The demand for milk is growing in tandem with that of the rapidly expanding populations of many towns. Milk sales have increased in Somaliland, developing into an important source of income for the pastoralists. According to one report some 80% of the daily income of pastoralists comes from the sale of milk22. Women dominate this sector, either bringing the milk directly into the urban centres or selling it to associations of women in permanent settlements, which send it on to the urban centres.
Again, there are no national figures on the annual quantity of milked traded in Somaliland. The quantity of milk traded annually in Hargyesa, is estimated to be about 12.823 million litres, with annual value of $12.8 million and this business activity employs about 2,000 people.
Qaad trade
The Qaad trade has become one of the country’s major revenue earners in the last two decades. Among people who earn their daily income from the Qaad business are truck drivers, sales agents, retailers and porters. Qaad imports from Ethiopia have been increasing annually by 11% according to government statistics. In 2003, Somaliland imported about 8,812,514 kg of Qaad, with a value of roughly $8.424 million. These numbers do not fully represent the actual amount or value of the leaf that enters the country as some shipments go unrecorded and some enter the country illegally. Those come through the customs about 20%25 or more of its weight is not value by the government and it is tax-free. There are no figures on the monetary value of Qaad retailing prices. The official number of Kgs imported to the country Qaad at retailing prices probably accounts for more than $53 million. Moreover, there is no national data on the number people involved in Qaad business, however, in Hargeysa, about 3,293 persons are involved in Qaad trading26, most are street vendors and they predominately women. The leading importer of this business employs about 700 persons that deal with Jigjiga-Hargeysa operation and about three hundred people in Hargeysa operation.
Table 3.7 Distribution of employment in Qaad trading by type of activities

Type of activities Percentage
Import and distribution facilitation 6.3
General retail 2.2
Table retailers 5.7
Street vendors 85.8
Total 100
Source: FSAU Hargeisa Household Economy Assessment 2003
The impact of qaad on Somaliland society and economy is unmeasured, but few would disagree that it has become a social nightmare and economic predicament. It is widely blamed for many Somaliland’s social and economic ills. Some Somalilanders argue that qaad is a primary cause of unproductivity professional negligence and represents a tremendous hard currency drain on the economy. But it is also a major source of government revenue. Less controversy surrounds its deleterious impact on family life and income, or on personal health. Despite of that, qaad has become major income generators for many households and qaad chewing is tolerated and even encouraged within Somaliland’s society and no stigma is attached to its use.
Fruit and Vegetable Trade
Like milk trading, fruit and vegetable business expanding with the growth of urban sprawling. Large quantity of fruits and vegetables consumed in Somaliland are imported from Ethiopia and Somalia. Ethiopia mainly supplies potatoes, onions, garlic and spices, while southern Somalia supplies fruits. The local production of fruit and vegetables is growing. There are no reliable data on of the local producers in major trading activities. About1445 tons of fresh vegetables and about 1695 tons of fresh fruits are imported to Somaliland; the amount of money involved in this transaction is about $50027 thousands. In Hargeysa, nearly 2,000 persons are engaged in this sector28, ranging from largescale importers and distributors, to retailers of various sizes (shops, stalls, petty traders).
Table 3.8 Share of fresh vegetable by Household income Baki District in Awdel Region

Consumption/person in (g) Poor Households(Average) Middle households (Average) Rich Households (Average)
All Household (Average)
Consumption of tomato/person 16.7 54.6 40.6 37.3
Consumption of onion/person 11.7 21.4 34.7 22.6
Consumption of pepper/person 2.6 6.8 12.9 7.4
Consumption of potato/person 7.1 17.3 35.7 20.0
Consumption of lettuce/person 9.6 40.9 66.5 39
Consumption of cabbage/person 0.0 10.7 12.5 7.7
Consumption of garlic/person 3.7 5.7 12.0 7.1
Consumption of carrot/person 0.0 7.0 31.1 12.7
Consumption of beet root/person 0.0 21.6 22.3 14.6
Consumption of coriander/person 0.0 6.1 23.7 9.9
Total daily Consumption/person 51.3 192.0 292 178.4
Source: Agro-Action
Middle income households consumed more than three times of what the poor households consumed from fresh vegetables, similarly, the rich ones’ intake is more than five times of the poor ones and about one and half times of the middle ones.
Food and Non-Food Trade 29
Another major activity in the country is trading in food and non-food trading as wholesalers and retailers as well. There is no statistics on the number of such business and level of employment in the country. The amount of money involved in this sector is about 70 million dollars excluding the local productions. In Hargeysa over 15,00030 people are active in this sector, engaged in both large and small-scale trading.
In one of the populous districts of Hargeysa, the distribution in percentage of non-food outlets is illustrated in the following table. About 46 percent of these outlets as wholesalers or retailers are engaged foodstuff selling, followed by clothes and utensils.
Table 3.9 Distribution of food and non-food out-lets by type of activities (%) in one district of Hargeysa

Type of activities Percentage
Food stuff 46.3
Clothes/utensils 29.1
Pharmacies 9.8
Restraunts 6.5
Consumer goods 4.9
Spare parts 2.1
Fuel stations 1.3
Total 100
Charcoal and fuel-wood trade
Fuel-wood and charcoal are the main sources of energy for Somaliland and as the population and settlements have grown, the demand for forest products has increased. Charcoal production has greatly increased since the collapse of the last government in 1991 as a result of increased urban consumption, due to returning refugees and out-migration from the rural areas. Charcoal production and trade has increased during the livestock ban, as rural households seek a means to make ends meet. In 2000, charcoal consumption in the whole of Somaliland was estimated to be 480,000 ton per year, on average each household in Somaliland uses about 1.6 ton per year31. The market value of one ton is 258$. The number of people involved in this business in Hargeysa city is about 1,900 persons excluding the producers 32.
The production of charcoal and firewood is a major environmental concern. Its impact on the environment is immeasurable and could lead to catastrophic consequences. In Somaliland today, an estimated 8 million trees are cut annually for charcoal production33. Acacia Bussei, a slow growing species locally known as galool, is the preferred tree for charcoal. A large galool tree can produce three sacks of charcoal. In one hectare, there are an estimated 65 galool trees. The overexploitation of this tree will eventually deplete reserves, because re-growth is slow. There is also growing evidence of using wet trees for charcoal production. This will eventually result in an energy shortages and higher energy prices. And much of deforestations and range degradation is attributed to charcoal productions.
Chapter 4: The Service Sector
Somaliland’s service sector has experienced rapid growth in the post-war period. Telecommunication, airlines business and financial transfer companies have emerged to fill the vacuum left by the collapse of the former government. The expansion of these services has created a new labour market34 requiring skilled professionals, as well as semi-skilled and unskilled workers.
Remittance
The economic importance of remittances has been increasing since the oil boom in the Gulf States in 1970s and became more significant in the post war period, as the main source of income and foreign exchange earnings, when thousands of refugees migrated to Europe and North America. Remittances largely have averted an economic disaster during the livestock export ban of 1998-9 and again since 2000. Remittances have financed ongoing economic activities such as the housing construction boom and import activities. The only source of income comparable with livestock earnings, and which may even exceed them, is remittances. However, the estimation of remittances in Somaliland is problematic for a number reasons 35.
- They are transferred in number of forms and through different channels
- They can be in cash and kind
- No data is available on the global numbers of migrants
Remittances received from abroad by six companies in Hargeysa excluding Dabashiil, were estimate to be more than $50 million in 2003. The seven major companies have about 147 branches through the country; employ about 355 persons and all of them claimed that the livestock export ban has been positive36. With the exception of Dahabshiil, all of them are partnership companies.
Table 4.1 profiles in the construction sector in Hargysa city
Legal Status Sole trader Partnership Corporation Family Business Total 14 15 71 0.0 100
Monthly value $115,000 $300,000 $480,000 $1.3 million No disclosed
transferred in terms of no. of companies 1 1 1 2 1
Permanent Skilled Unskilled Male Female
Employees 91.8 8.2 90.3 9.7 100
Intended to hire Yes No Yes No
next year 42.9 57.1
Establishing new branches 57.1 42.9
Business Growth 0.0% 10% 30% N/A Total 14.2 14.2 28.4 43.2 100
The premises Owned Rented 14.3 85.7
Source of Power Private Public Both Owned Total 71.4 0.0 14.2 14.4 100
Location Billboard Radio TV Others
Yes No Yes No Yes No Yes No Yes No
71.5 28.5 73.1 26.9 58.2 41.8 57.1 42.9 57.1 42.9
Yes No Yes No Yes No Yes No Yes No
Attracting customers 56 44 66 34 32.3 67.5 16.6 83.4 17.3 82.7
Telecommunication
There are seven major Telecommunication companies in Somaliland as listed below. These companies are linked to international ones and provide fixed telephone lines, mobile telephone lines, Internets, fax and other telecommunication services to the major urban centres and towns. The initiation and subsequent expansion of this new and vibrant service facility has been inspired by and is driven by the demands of the economy, facilitating the flow of remittances and information for trade. The quality of the services these companies provide are far superior both in quantitative and in qualitative terms to what existed before the pre-war period. They have enabled the local customers to make instant contact with the outside world speedily and relatively cheaply: the charges per minute not exceeding one US dollar and in fact falling. Like the remittance companies these attest to the ingenuity and enterprenial élan of the Somali business community. Besides the much-needed technological transfer they introduced, these companies have also provided much needed employment to hundreds of skilled, semi-skilled and unskilled local labour. Some of the skilled labour forces are returnees from the Diaspora. Nearly 1,000 persons are employed in this activity, consisting of professionals and semi-skilled ones.
The lack of regulation, however, is creating problems of efficiency, one of the main problems being the inability to communicate between the different systems.
Table 4.2 Some profiles of the telecom companies

[Ducaysane_87]

Legal Status Sole trader Partnership Corporation Family Business Total 0.0 14.9 85.1 0.0 100
Starting Capital More than $50,000 More than $100,000 Total 28.6 71.4 100
Type services Telephones mobiles Internet Internet only - 85.7 71.4 71.4 14.2 -
Permanent Skilled Unskilled Male Female -
Employees 52.6 47.4 87.3 12.7 -
Permanent staff Yes No Yes No
Hired last year 71.4 28.6
Intend to hire next year 97.3 2.7
Business Growth No increase 0.0% 30% 80% Total 14.5 14.8 42.1 28.6 100
Lack of Banking Lack of foreign investment
Lack of insurance
Lack of capital Lack of regulation/policy
Yes No Yes No Yes No Yes No Yes No
Constraints 71.4 28.6 57.1 42.9 57.1 42.9 57.1 42.9 42.8 57.1
Airlines Services 37
There has also been a vital growth in air transport. Locally owned airlines connect all main towns in Somaliland to parts of Somalia, Djibouti, Saudi Arabia, Dubai, Addis Ababa and Nairobi. There are about five airlines in Somaliland. One carrier (Daallo) has begun flights to Europe (London and Paris). Some international carriers, such as Ethiopian Airlines have also started to offer flights to Somaliland’s capital Hargeysa. However, the local ones have suffered a set back, when UAE (Dubai), the main hap for these airlines, have stopped the use of Russian Aircrafts for carrying passengers. As all of these airlines were a Russian build carriers.
Table 4.3 the volume of traffic in Somaliland Airport

Traffic Volume Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total

Number of flights 208 213 229 170 200 267 324 297 259 253 236 638 2,884
Arrival passengers 2,815 1,773 1,796 2,064 2,342 3,458 4,006 7,266 6,296 4,344 2,029 2,889 41,358
Depart. Passenger 2,629 2,445 2,533 2,141 2,900 5,729 7,572 4,322 3,207 2,901 2,182 2,916 41,477
Arrival cargo/tons 358 162 239 180 920 217 1,105 402 2,035 3,552 15,607 6,874 31,651
Depart. Cargo 12 14 23 14 4 14 38 10 174 4,861 5,192 10,839 21,195
Table. 4.4 The volume of traffic in Somaliland Airports (%)
Traffic Volume Jan Feb Mar April May June July Aug Sept Oct Nov Dec Total

Number of flights 7.2 7.4 7.9 5.9 6.9 9.3 11.2 10.3 9 8.8 8.2 7.9 2,884
Arrival passengers 6.8 4.3 4.4 5 5.8 8.5 9.7 17.6 15.3 10.6 5 7 41,358
Depart. Passenger 6.3 5.9 6.1 5.2 7 13.8 18.3 10.4 7.7 7 5.2 7.1 41,477
Arrival cargo/tons 1.1 0.5 0.8 0.6 3 0.7 3.5 1.3 6.4 11.2 49 21.9 31,651
Depart. Cargo 0.05 0.06 0.1 0.06 0.02 0.06 0.2 0.05 0.8 22.9 24 51.1 21,195
As illustrated by these tables the traffic volume increase at Somaliland airports particularly Hargeysa during the summer months of June, July and August, in which Somaliland Diaspora come for the summer break. The quantity of (incoming and out coming) cargo has picked dramatically from September and onwards. This is due to an increase at Berbera airport.
Table. 4.5 The distribution of out-going passengers of Daallo Airlines 2003(%)

Destination Percentage
Dubai 28
Mogadishu 20.3
Djibouti 17
London 12.4
Jeddah 11.4
Addis Abba 7.5
Paris 2
Nairobi 1.3
Bossaso 0.1
Total 100
More than quarter of Daallo’s out-going passenger travel to Dubai, followed by Mogadishu, (20.3%), Djibouti (17%), Jeddah (12.4%) and London (11.4%).
Construction Service
The construction sector has been swelled by the massive need for rebuilding and repair of dwellings. Building construction and associated activities represent the second most important economic sector after the food/non-food trade and services sector. As a result of extensive dialogue with key informants in a few construction companies, the number of ongoing buildings every month has been estimated to be between 90 to100 in Hargeysa. There are about a dozen well-established companies engaged in this sector.
Table 4.6 the trends in the construction sector in Hargysa city
Legal Status Sole trader Partnership Corporation Family Business Total 13 37 37 13 100 Starting $5000 $10,000 50,000 100,000 Total Capital 50 16.6 16.7 16.7 100 Residential Business and Residential Sectors Public All Total involved in 50 16.7 16.6 16.7 100 Permanent Employees 21.6 78.4 99.3 0.7 100 Permanent Yes No Yes No staff Hired last year 83 17 Intend to hire next year 66 33 Business 0.0 10 20 25-30 Total Growth (%) 16.5 16.3 16.5 50.7 100 The premises Owned Rented 33 66 Source of Private Public Both Private and owned Total Power 16.5 33 33 16.5 100 Location Billboard Radio TV Others Yes No Yes No Yes No Yes No Yes No Attracting customers 66% 34% 16.6% 83.4% 33% 66% 33% 66% 33% 66% Lack of Banking Lack of foreign investment Lack of insurance Lack of capital Lack of regulation/policy Yes No Yes No Yes No Yes No Yes No Constraints 56 44 66 34 32.3 67.5 16.6 83.4 17.3 82.7
The amount of money and services involved in this activity at national is not available. However, about $5.3 millions of imported construction material through Berbera port has been utilized. What is not available is the monetary value of local materials and labour force. In Hargeysa, about 8,47738 persons are involved in construction and associated activities.
Table 4.7 distribution of type of activities (%) Type of activities Percentage

Construction labour 74
Brick makers 0.7
Joinery workshops 2.3
Carpenters 3.2
Trucks 11.5
Building material stores 8.3
Total 100
Sources: FSAU, 2003
Hotel services
Hotel services have been expanding in urban centres such Hargeysa and Burco for the last five yeras. A number of big hotels have been built in Burco and Hargeysa. In Hargeysa, there are two high-class hotels and about 33 other regular hotels and they employ about 245 persons39. The annual monetary value of their services is not recorded, however, annual value of their services ranges from $7,000 to $45,000, excluding, the two high class hotels Mansoor and Ambassador.
Transport services
There are number of people in the country, which are involved in transport services. Transport services consist of truck, bus and taxi services. People that are involved in this sector comprise of drivers, conductors, and brokers. In Hargeysa about 3,61840 people are employed in this transport services.
4.8 distribution by persons type of activities

Type of Activities Percentage
City buses/taxis 52
Trukcs 48
Total 100
Source:FSAU
Other services
Large number of people are involved in host of other services that include: travel agencies, cinema/video, recording, photographs, internet, printing, beauty saloons, money exchange, phone services, car repair and wash, laundry, tailors, high frequency radio etc. The following table shows the distribution of these services in one of the districts of Haregeysa.
Table 4.9 Distribution of type of services in one of the populous district in Haregsya

Type of services Percentage
Phone services 17.7
Tailors 10
Photo services 3.4
HF radio 3.1
Furniture making 17.7
Automobile repairing 7.7
Private schools 2.3
Private clinics/lab 3.1
Private Bathrooms 2.3
Barbershops 4.1
Welding 4.6
Recording 3.1
Money exchange 2.3
Food Processing 3.1
Laundry 1.5
Photo copying 1.5
Printing 1.5
Beauty saloon 3.1
Travel agency 0.3
Ice-making 0.3
Inter-net 2.3
Video-cinema 3.8
Blacksmith and shoemakers 1.2
Total 100
Chapter 5: Expenditure
Central government’s public expenditure
The progress in establishing an administration was achieved by increasing the government’s resource base. From 1994 and onwards the government began to budget government revenues and expenditures. The central government’s budgets officially indicate the public sector spending particularly the Central government spending. However, the numbers in the official budgets do not represent actual public spending for multiple reasons.
1. The government (the Minister of Finance) is not allowed to have dollar account to manage the revenue it receives in dollar41. All dollar accounts are under the control of the director of the central bank. So, government’s dollar revenues are budgeted at the official rate, which well below the market value and at the same time expenditures42 incurred in dollar by the government are paid in market rates or are budgeted in market rate. In another words dollar received in revenue by the government is valued at official rate whereas dollar needed by the government is rated at market value.
2. All public expenditures do not go through the proper channels such the ministry of finance and the accounting generals. As the leadership in the bank can authorize expenditure both in dollar and in Somaliland Shilling without the knowledge of the minister of finance and the accounting general.
3. Government expenditures through the Ministry of Finance or the accounting general and through the central bank exceed the authorized funds without the knowledge of the parliament.
Table 5.1 government budgets and source of revenues

Type of tax 1999 2000 2001 2002 2003
Export $ 40,192 $ 43,901 $ 27,778 $ 7,122.00 $ 6,390
Import 43 $ 9,175,233 $ 9,695,694 $ 6,719,301 $ 6,811,165 $6,869,871
Tax levy $ 8,722609 $ 7,696,336 $ 342,920 $ 406,838 $498,403
Private services$ 3,421,927 $ 4,206,181 $ 4,510,539 $ 4,445,345 $4,095,978
Income $ 290,787 $ 820,037 $264,328 $ 315,313 $ 873,293
Production $ - $ - $ 0.0 $0.0 $0.0
Public services $ 519,852 $ 2,435,481 $ 1,374,913 $ 1,216,593 $ 1,212,336
Total $22,170,60044 $ 24,897,630 $13,239779 $13,202,376 $13,556,271
Source: the Ministry of Finance
The reduction of government revenue due to the livestock export ban puts enormous strains on the Somaliland government’s budget. According to government budget of 2000, revenue from livestock exports constituted as much as 33% of government revenue in 200045. However, since not all livestock export revenues are reflected in the budget, this figure may be an underestimate. The 2000 budget submitted by the government was 74 billion Somaliland Shillings, equivalent to US$25 million46. By the end of 2000, there was a shortfall of 5 billion shillings due to the livestock ban. In 2001, the budget submitted by the government was 8747 billion Somaliland Shilling, as the government had increase export taxes and improved its revenue collection systems. However, in real terms this budget was equivalent US$13 million - about half of the 2000 budget - due to the devaluation of Somaliland shilling.48 The main source of revenue is import tax. Government uses official rate to tax the incoming goods, so it is getting half of what it would have gotten at market rate. So in sense, the government is subsiding import and loosing revenues.
Similarly, the export levy tax on livestock is received in dollar, but it shows in the budgets in Somaliland shillings at official rate, which is half the amount received.
Unfortunately, the need to maintain a large military and other political pressures continue to weaken fiscal discipline and perpetuate the unstainable level of fiscal expenditure. The civil services are too grossly underpaid to perform their duties properly and honestly.
In short, at the moment, the public sector is too pauperised and ill-manned to properly shoulder the regulatory and other state duties devolving on it. These illustrate the make-up of government expenditures. Security, which includes the three national armies (the Army, Police and custodian corp) top the list and get more than fifty percent of the budget. Number of government employee is about 22,727 persons. About 4650 persons are civilian staff and the remaining belongs to the three national armies: Army, police and custodian corp.)

Table 5.2 Allocation for Ministries and government agencies (%)

S/n Sectros Allocation (%)
1 Social Services 13.71
2 Economic Service 9.66
3 Security 51.35
4 Judiciary 2.24
5 Administration and political affairs 19.53
6 Public services 3.51
9 Total (100)

Table 5.3 Budget Allocation 2004 in terms of items

S/n Organization % allocation

1 Salaries and allowance 49.91
2 Ration for armed forces and prisons etc 8.67
3 Ambassadors 1.02
4 Communication 0.69
5 Fuel 5.12
6 Stationery 0.72
7 Emergency service 2.98
8 Investment 7.09
9 Other expenses 23.8
Total (100)
The other sources of public expenditures that have their own budgets and staffs are:
1. The central bank and its branches throughout the country
2. Berbera port
3. Local governments
4. Other public agencies such as: the national printing press, water agencies, electricity agency etc.
The central Bank
Another big source public expenditure is the central bank. It is the national treasury and it controls all government account dollars and Somaliland shillings. It disburses funds in Dollar and Somaliland shillings without the knowledge of the Ministry of Finance and the accounting general.49
By the end of 1998, the government owed the bank 19 billion Somaliland shillings, expensive mainly incurred due to the civil war of 1994-1995, and at the end of 2001 fiscal the government owed the bank about 30.5 billion Somaliland shillings and the detailed is provided by table. No data is available beyond these years.
Table 5.4 government debts to the central bank Year Government debt in Billion (SL) Surpluses by the government or deficit in Billion (SL) Expensive by the bank without the knowledge of the MOF and Accounting office, or outside the budget charged to the governemnt in Billion (SL) Final government debt in Billion (SL) 1998 19 1999 19 4.5 3 17.5 2000 17.5 0.0 6 23.5 2001 23.5 0.0 7 30.5 Local government expenditure
After 1991 local government authorities collected significant revenues for many years by taxing goods entering their jurisdictions from other districts of Somaliland. This practice has been stopped, when the central unified the tax collection and then divided between the districts. Moreover, municipalities began to expand their tax bases and developed functioning collection system.
The public of expenditure of the local governments in Somaliland is not known with the exception of the grant (10.2% from custom taxes) and those revenues collected on their behalf (11%)50by the central government. It is shown in government budgets. However, in 2001, the Ministry of Finance estimated that the total public spending of all Somaliland municipalities amount to $4.3 million. The number of people employed by in Somaliland’s local governments is 3,100 employees.
Household expenditure pattern
There is no information on the spending pattern of Somaliland households.
There are few studies that have been conducted by agencies such as FSAU but rather at city or at rural communities, not at national or regional levels. The following tables illustrate.
Table: 5:5 Household expenditure pattern per month in Hargeysa

Item Poor Middle Rich
Food (58%) (39%) (20.5%)
Rice 17.7 7 6.1
Flour 13.3 5.7 4.6
Pasta 0.2 5.7 4.1
Bread 0.0 5.1 2.9
Cereal 4.8 3.1 1.1
Sugar 14.2 8.4 6
Ghee 0 0.0 12.7
Vegetable oil 10.1 6.4 3.8
Fruit/vegetable 12.1 15.3 18.3
Cowpeas 4 3.1 3.2
Milk powder 4 13.2 6.3
Fresh milk 0 7.6 7.3
Meat 10.1 17.2 21.9
Salt 0.8 0.8 1.5
Tea leave 1.6 1.4 1.3
Sub total 100 100 100

Non-food (42%) (61%) (79.5%)

Water 13.5 7.3 1
Charcoal 14.1 3.6 1.2
Electricity 0.0 5.4 1.6
Telephone 0.0 5.4 5.3
Kerosene 4.2 1.4 0.4
Transport 3.3 6.3 1.3
Medicine 3.8 0.4 3.1
Qaaraan Clan obligation 1.9 2.4 1.6
Education services 8.9 5.7 3.1
Clothes 9.4 12.1 3.1
Soap and detergent 5.6 3 0.6
Body beauty staff 0.0 2.4 1.2
Domestic worker/drivers 0.0 5.7 23.6
Gifts 0.0 8.1 7.9
Qaad 28 24.3 14.2
Untensils 00 2.4 0
Government tax 00 0.4 0.3
Savings 00 0 30.1
Others 7.1 00 00
Sub-total 100 100 100

Sources FASU 2003
As table 2.5 indicates all three-income categories spend a significant amount of household income. In real money high-income households spent more than the other the lower-income households, though percentage-wise in its income is lower than lower-income ones. Higher income households tend to spend more on non-food items.
In another survey51 in Borome town two households with each earning the same salaries of $500 per month. The first household consist of 13 persons (five male and 8 females) and the second one is 12 (6 and 6). The daily expenses per person are $1.28 and $1.38 respectively. The first household’s share of food in its come is 48% that more than half of the share the second households spends on food, which is 23%.
International donors’ expenditure
Though Somaliland government has not been recognised and does not qualified for bi-lateral aids or direct assistance, international aid organizations have been active in the country since early 1991. The contributions of foreign donors were through the United Nations and International NGOs. Since the donors adopted a so-called ‘peace dividend’ approach in Somalia in the late 1990s and made aid conditional on security and good governance, Somaliland 52 share in international aids to Somalia has been increasing relative to other zones of Somalia. The Aid contribution to Somalia through Somalia Aid Coordination Body (SCAB) is about $272 million. Of the $15153 million disbursed in 2003 through SCAB, 17% was spent in Somaliland. The SCAB does not include all financial aid flowing to Somalia and Somaliland.
There are around 120 institutions/organizations in Hargeysa town, including national and international NGOs and UN agencies and they employ about 500 persons.
The Regulatory Environment
Government Policies and Regulations
Domestic and foreign investment in Somaliland suffers from an ill-defined and somewhat chaotic regulatory environment. Government policies, regulatory instruments, laws and services are widely perceived by the business community to be insufficient, and where they do exist they are typically weak and selectively applied.
Complaints from the business community are wide-ranging. Some seek greater protection from foreign competition. Other entrepreneurs are less worried about foreign competition than domestic monopolies and cartels. In the import/export trade, domination of local retail networks by major importers has also caused alarm among small businesses. Lately, the government in attempt to regulate the competition has introduce a law that regulate the licenses of the import and export activities: Some one who has a license of import/export can’t have a retailing licenses for his merchant he has to sell it to someone who has license for retailing. However, in reality nothing has change on the ground.
Infrastructure
The little infrastructure Somaliland possesses is in a state of disrepair, and is deteriorating year after year. The road network in Somaliland has never been good and has suffered from neglect since the civil war. The only sealed (tarmac) route is the Tuka Raq – Dila road, which crosses Somaliland from east to west. All other roads are dirt tracks, and even these are lacking in the northern mountain range, the coastal slopes and the much of the rangeland in the south. Road links to Ethiopia and Djibouti are no better than the internal network. At no point does the tarmac road traverse the border to a neighbouring country, except the link with Somalia between Laas Caanood and Garoowe. The road network across the border in Ethiopia is inadequate, limiting the possibilities for cross-border commerce.
Somaliland’s port infrastructure is dilapidated and underdeveloped. Many natural harbours like Maydh, Seylac, and Laas Qoray lack basic facilities and either function below capacity or stand idle. The main port of Berbera manages a high volume of cargo with very limited means.
The growing air traffic between Somaliland and neighbouring countries has tested the limits of its few, rudimentary airports. Two major asphalt runway airports can accommodate large aircraft at Berbera and Hargeysa, and there are many dirt airstrips elsewhere in Somaliland. Most operate with very limited equipment. An extension of Hargeysa airport terminal building, intended to make it safer and more efficient, has been build.
Finally both human resources and other essential infrastructures such power supplies are short in supply.
Financial Institutions
The growth of the private sector has been constrained by the absence of commercial banks and credit institutions. Entrepreneurs find it difficult to obtain capital, or to establish lines of credit for business expansion or survival in difficult times.
Insurance services are also unavailable within Somaliland, a lacuna that most affects the import-export trade. Mishaps are common during shipping along the air and sea routes linking Somaliland to other countries in the region. Ships carrying livestock to Yemen and Saudi Arabia, or bringing goods from the United Arab Emirates are regularly lost or disabled in high seas. Without insurance, there is no way for traders to mitigate these considerable material and human losses. Although Somaliland’s enterprises have no choice but to function in this way, the lack of insurance services discourages foreign investment, severely restricting the possibilities for economic growth.
Multiple currency
Despite the total collapse of formal financial institutions in 1991, the informal currency exchange market was only briefly disrupted. Since that time, a multiple currency system has functioned in Somaliland. In October 1994, after the Central Bank of Somaliland was established, a new Somaliland Shilling was introduced. Today this circulates together with the former Somali Shilling and numerous foreign currencies. The Somaliland Central Bank, which exercises some control over the supply of Somaliland Shillings, has certain influence on the exchange rate. The bank has also complicated the market by using an official rate, which is below the market value. Some believe because of the lower official rate Somaliland Shilling is under valued54. But the market also responds to speculation about the supply and demands for dollars and Somali or Somaliland shillings. Fluctuations in exchange rates tend to take place simultaneously throughout the main trading centres in Somaliland.
After September 2000, when the Gulf States banned the import of Somali livestock for the second time in as many years, the Somaliland Shilling again lost ground against the dollar. The Central Bank tried to intervene by setting daily exchange rates and accused money changers of overvaluing the dollar. But the intervention was not successful, largely because the Bank had no means to increase the supply of dollars in the market and was simultaneously under pressure to expand the money supply to finance government expenditure. In the east of the country where the Somali shilling is in circulation, a influx of new notes drastically devalued the Somali shilling to So.Sh. 18,000 per US dollar, forcing the market in Burco to close several times. Over time there has been a slow dollarisation of the economy with many transactions now taking place in dollars.
The Somali shilling has continued to circulate in Ceerigaabo, Burco and east of Burco, mainly because the east is economically tied to the rest of Somalia via the livestock trade. Similarly, in the western part of Somaliland the Ethiopian Birr is used alongside the Somaliland shillings.
There are no reliable data on the amount of US dollar; the exchange markets in Somaliland manage. However, in Hargeysa the market handles about 1455 million dollars per day. Table 5.6 illustrates some price index of sommodities.
Table 5.6 prices indexes on some items

Items 2001 2002 2003 2004
SL per dollar 6,050 6,730 7,500 6,200
Rice per KG in $ 0.32 0.31 0.31 0.38
Sugar per KG in $ 0.25 0.35 0.34 0.41
Wheat flour 0.19 N/A 0.32 0.41
Diesel liter/ $ 0.1 0.08 0.35 0.47
Charcoal/bag/ $ 1.2 1.2 1.7 2.5
Patrol liter/ $ N/a 0.07 0.35 0.5
Unskilled labour $ 3.7 3.7 2.6 3.4
Chapter 6: Conclusion
The analysis of this short study provides an overview of the macro-economic trends in Somaliland. This study is simply an indicator to how the Somaliland economy has undergone important structural changes since the war. However, the analysis, based on fragmented and low quality data, is far from being comprehensive. Accurate data is in short supply and what was able were both fragmentary quantitative and less qualitative, and does not give the luxury to do in-depth analysis of the different sectors and sub-sectors.
The dissolution of state monopolies and rigid economic controls, together with private sector expansion, has significantly contributed to the growth of Somaliland’s economy in the aftermath of war, providing employment opportunities and capital investment for the process of reconstruction. Trade through Berbera port has surpassed pre-war levels. The service sector has experienced rapid growth in the post-war period, with a proliferation of companies providing the latest communication facilities, airlines and financial services. Small enterprises like bakeries, restaurants, convenience stores and office supplies have returned to the marketplaces of the urban centres.
Livestock represented the bulk of Somaliland’s export earnings, and a significant percentage of government revenues. But its dependency on single resource/single export market makes the economy vulnerable to external forces, as the Saudi ban on Somali livestock clearly illustrated. The impact of the ban has been dramatic. The ban affected all sectors of society, both urban and rural, and all economic activities. Herders, traders, service providers, petty traders, local and central government all lost income. The availability of hard currency and food imports declined. There was a drop in employment opportunities for poor urban and rural groups and a devaluation of the Somaliland Shilling against the US dollar. Furthermore, environmental pressures, inadequate infrastructure, substandard veterinary services, and the impact of commercialisation on the livestock economy threaten the vitality this mode of production and the nomadic way of life.
Remittances constitute an important sector of the Somaliland economy, and largely averted an economic disaster during the livestock export. There is little accurate information about the actual volume of the cash flow. It does appear that earnings from remittances could be comparable with earning from livestock export when the ban was in effect.
Since employment opportunities are short in supply, many Somalilanders notably women, are engaged in various trading activities. Whatever social and economic ill it may bring, Qaad industry is big business in Somalialnd and leading employer of a large number of urban women.
There is also widespread concern that economic trends are not all for the public good. Commercialized livestock trading is creating unprecedented environmental pressures. The absence of an effective regulatory framework has encouraged irresponsible and sometimes noxious practices like charcoal trading, overfishing and uncontrolled pharmaceutical traffic. Unproductive competition in the telecommunications and energy sectors has led to the irrational and inefficient proliferation of small service providers. In many sectors, the profit motive is unrestrained by considerations of quality control, consumer protection, or environmental conservation.
Lack of basic financial institutions such banks and insurances and the poor condition of Somaliland’s economic infrastructures have hampered the establishment of a conductive business environment. Local enterprises have no access to venture capital or credit-either from financial institutions, or foreign direct investment.
Finally, APD hopes this studies on Somaliland’s macro-economic trends will spur the establishment of a national institutions for data collections and storage, in order to be able to conduct extensive studies and analyses that will bring to light greater understanding of the prevailing socio-economic and macro-economic conditions in Somaliland.
NOTES
1 Lewis, I. M. A Pastoral Democracy. London: Oxford University Press 1961.
2 The official figure from the Ministry of National Planning and Co-ordination is 3 million.
3 Mohamoud, Omar. Paper on Statehood and Recognition of Somaliland Republic (Revised and Updated). Hargeysa: 1996.
4 The dependency on single market: Saudi Arabia
5 UNDP (Human Development report, 2000) estimate is based on 1989 census, whereas the government one is based on 1975.
6 One Tropical Unit is equal to 250 Kg. Converting rate Camels 1.2, Sheep/Goat 0.1 and Cattle 0.8
7 Axmed, Cali Yuusuf, Dhibaatooyinka Abaaraha iyo Nabaadguurka, Siyaabaha looga Hortagi Karo iyo Saamaynta Dhaqaalaha iyo Nabadgelyada, Akadeemiyadda Sare Istraateejiyada Qaranka SMCX Kuliyadda Sare Difaaca & Nabadgelyada Qaranka, Muqdisho,1988.
8 ibid
9 The Academy for Peace and Development (2002)“Regulating the Pastoral Economy” Hargeysa
10 ibid
11 Crop production exceeded animal husbandry only in areas of greatest rainfall.
12 SAPD/WSP (1999) “A Self-Portrait of Somaliland: Rebuilding from the Ruins” Haregysa
13 A camel load is about 125 kg13.
14 The Academy for Peace and Development (2002) “Regulating the Livestock Economy of Somaliland” Haregysa
15 this is the at local markets
16 2001 onwards the ban was in effect
17 Drysdale J. Stoics without Pillows: A way forward for the Somalilands, Haan, London, 2000.
18 Drysdale, J. Mini-Research on Somaliland‘s Economy 1997. Unpublished paper prepared for UNDP, Agencies and Donors, Nairobi, May, 1997.
19 UNDP (Human Development report, 1999)
20 Berbera port statistics cannot yet differentiate what is in transit and what is for Somaliland.
21 FSAU Hargeisa Household Economy Assessment 2003
22 Bertolli, L., Emerging Opportunities to Develop the Processing and Manufacturing Industry with the Private Sector in the Somaliland Republic. UNDP, Nairobi, 2000.
23 the base line is from FSAU Hargeysa Household Economy Assessment 2003
24 based on the custom value, but it is street is more than that
25 It is consider as bulk-no value
26 FSAU Hargeisa Household Economy Assessment 2003
27 excluding local production,
28 FSAU Hargeisa Household Economy Assessment 2003
29 Excluding construction materials: cement, limestone, iron sheets, aluminium etc, fruit, vegetables, and Qaad
30 The City of Haregsya,2003
31 Bertolli, L., Emerging Opportunities to Develop the Processing and Manufacturing Industry with the Private Sector in the Somaliland Republic. UNDP, Nairobi, 2000. (Bertolli, 2000).
32 FSAU Hargeisa Household Economy Assessment 2003
33 IUCN, 1997
34 Though non-of these is labour intensive, theses companies particularly Dahab Shiil money transfer have branches at village level employing one or two people.
35 Ahmed 2000
36 Based on a survey conducted by the principle researcher
37 The local airlines are in a tough time due to the refusal of Dubai of Somali passports and Russian make Aircrafts, which was the basis for their business activities. So far, one Airline has gone under and became bankrupt
38 FSAU Hargeisa Household Economy Assessment 2003
39 Hargeysa city, 2003
40 FSAU Hargeisa Household Economy Assessment 2003
41 Revenues form export tax levy on livestock, taxes on fuels, charges on visas and aircraft landing at airports are in dollar
42 expenditures such as ration for the all three national forces, foreign missions etc are paid in dollar by the central
43 the government uses the official rate, so the amount would have double
44 Due to the resumption of livestock export to KSA in May 1999, there has been a windfall of 30%
45 Also, the ban led 10% percent reduction in other revenues in 2001
46 January-September the market rate was 3,000 Somaliland Shilling to one US dollar.
47 The ministry of Finance did not include in its budget any revenue for livestock
48 July 2001 the market rate was 5,600 Somaliland Shilling to one US dollar.
49 All Somaliland Public expenditure is required by law to go through the Ministry of Finance and the general accounting office
50 The port of entry gets about 10 percent of the total customs tax, for example, Berbera gets 10% from all custom duty through Berbera Port , and it is collected by the central government.
51 Agro-action
52 UNPD Human Report, Somalia 2001
53 Please note that the above does not include $121 from the EC, as a breakdown of this figure by zone was not available.
54 The officials in the central bank or the bank benefits from the lower official rate, because the dollar received by the government is being exchange in the open market, and the bank gets the differences between the two exchanges.
55 Our observation