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African Drylands Institute for Sustainability
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Review of World Bank report ‘Somaliland’s Private Sector at a Crossroads’

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Date and time: 
Tue, 2017-02-21 13:30

Somaliland’s Private Sector at a Crossroads: Political Economy and Policy Choices for Prosperity and Job Creation (2016) is the World Bank’s first comprehensive analysis of the private sector in Somaliland. The 90 page report takes stock of the evolution of the private sector over the past two decades, it identifies priority policy options as well as the necessary reforms that would enable the private sector to take advantage of opportunities. The report draws on a political economy lens to study how dynamics of power, interests and relationships between key (economic, social and state) actors and sociocultural contexts interplay and influence public policy and private sector activites. The report focuses on three sectors: enterprise, finance and government with a bundle of policy recommendations proposed for each. Overall the report emphasizes the need to formalize the private sector and build the capacity of civil servants to lead this formalization process. Doing so would, according to the World Bank, enable Somaliland’s economy to take advantage of opportunities, promote a climate that favours investments as well as job creation. In my attempt to review this report, I take the position of someone who has lived and worked in Somaliland for the past five years. I summarize the report’s main findings and explain how they resonate with my previous research experience on economic actors and dynamics in Somaliland. 

Investors understand the language of regulation 

The report demonstrates that Somaliland’s private sector, to this day, remains largely informal and unregulated. This form of informal governance poses an incremental challenge to economic growth and job creation as it limits access to finance, which makes it difficult for new enterprises to enter the market. My 2016 data collection on the business sector in Somaliland produced similar findings; foreign investors cannot insert themselves into the informal economy as they do not share the same socio-cultural traits, which are often instrumental in guiding business operations in the absence of formal regulations. Foreign investors base their decision to invest or not to invest on the existence and enforcement of regulations, which protect their investments and interests. 

‘Necessity’ is no longer necessary 

The report acknowledges that Somaliland’s ‘economic growth’ has been achieved through ‘pragmatic tools’ (p. 8) including a reliance on a pluralistic legal system and informal deals between authorities and private sector actors. These tools, which are also present in Somaliland politics and state decision-making, have emerged out of necessity during the state rebuilding process of the 1990s. But they are increasingly unnecessary. As ‘Somaliland of today bears very little resemblance to the Somaliland emerging from the war and dislocations of the early 1990s’ (p. 83), it is not only physical structures that have transformed, but citizens’ expectations have evolved as well. Hence the demand for formal and transparent structures and procedures in Somaliland is growing. This necessitates, as the World Bank recommends, a pragmatic and holistic review of legal, political and institutions’ structures in order to match citizens’ expectations of good governance.

Expiry Date: 
Tue, 2017-02-21 13:30
Contact Person: 

Ahmed Mohamed PhD Student

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