Somaliland: Berbera Port’s Prospects for Trade, Transit and Regulations

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Somalilands Berbera Ports Prospects for Trade Transit and Regulations

Somalilandsun – Today with an infusion of of almost $0.5m by Emirati global port operator DP World the Main Somaliland port of Berbera looks set for a brighter future
While this development came this year the ports prospects for trade, transit and regulation were examined a year ago by Finn Stepputat, senior researcher at the Danish Institute of International Studies (DIIS).
Below is a synopsis of his studies as pertains the nexus between protection, taxation and sovereign practices in the regulation of the Berbera trade corridor

Berbera Port is a major hub in the economic corridor that connects Somaliland and the Ethiopian hinterland. Commodities transiting through Berbera port mostly consist of livestock export and import of food, electronics, cars, spare parts, fuel, construction materials and other goods. The port generates about 70 % of Somaliland’s state revenue. Hence the maintenance and upgrading of the port’s infrastructure, its services, and its custom are of unique importance for the Somaliland authorities and economy. 

The prospects for development of the port are good since landlocked Ethiopia is interested in reducing its dependence on the much bigger Djibouti port. Negotiations between the governments of Somaliland and Ethiopia have been ongoing for over a decade, but an agreement on transit and trade seems closer than ever. While port upgrading and a transit agreement will increase the flow of goods from Berbera port to Ethiopia, a substantial improvement of the Berbera corridor  – in particular the road between Berbera and the border town of Wachale (Tog’wajale) is necessary.  

Furthermore, a transit agreement with Ethiopia will translate into a significant loss of customs revenue for Somaliland. Service fees and other economic activities in and around Berbera port are expected to increase. But in order to capture revenue, the Somaliland government will have to reform its overall taxation system. The plan is to move the revenue ’further inland’ as government officials put it.

The prospect of a transit and trade agreement with Ethiopia also challenge Berbera Port Authority, which was established as an autonomous agency in 1993. Berbera port requires improvements on various fronts, so the question is how the necessary investments will come about. The World Bank and other international organizations have suggested getting private investors on board by privatizing some of the port functions. While this solution is not uncontested, Somaliland laws will have to be adjusted to accommodate contracts that are acceptable for both investors and the government. Consequently, the development of Berbera port is not only an important driver for economic growth in Somaliland, but also for the strengthening of the regulatory capacity of its state institutions.

This is a research update by Finn Stepputat, senior researcher at the Danish Institute of International Studies (DIIS). He studies the nexus between protection, taxation and sovereign practices in the regulation of the Berbera trade corridor.

© Finn Stepputat (2015)

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