Somaliland Needs Urgent Economic Reform to Meet the Development Aspirations of its People

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Dr. Adam Ismail HassanBy; Adam Ismail Hassan PhD

INTRODUCTION

(Somalilandsun) – Somaliland declared its independence and withdrew its union with Somalia in May 1991, after the collapse of the Somali state, but it has not been recognized by any country. Yet, despite not being recognized internationally, Somaliland continues to be peaceful, relatively stable, with central authority, a multi-party political system and elected government as well as active civil society and vibrant private sector.

In the context of a post-conflict economic base and without international aid consecutive governments in Somaliland have to varying degrees succeeded in establishing functioning administrations, promoted peace, reconciliation and stability, and created positive and enabling environment for economic growth and social development.

In other words the absence of international recognition did not stop the people of Somaliland to work towards the economic, social and political development of their country. However, the bulk of reconstruction efforts and activities were initially focused more on peace and security rather than on building the capacities of public institutions to deliver basic services to the people of the country. This has resulted weak government institutions that were not only unable to bring about necessary public finance reforms but also to regulate the growing private sector with a view to create business enable environment for sustainable economic growth. This article seeks to elucidate the steps that Somaliland needs to undertake in order to reform its economy and improve the management of the public finances with a view to establish good financial management systems and meet the donor requirements for international aid and the government’s good governance and anti-corruption goals and earn the confidence of foreign private investors from different parts of the world as well as the Diaspora communities.

CURRENT GOVERNMENT POLICIES

The present government which is relatively new and has been in power exactly for two years now has started to capacitate public institutions and develop their functions to support sustainable growth and development. Indeed the new government is currently in the process of focusing more on its core economic development functions, including: formulating and implementing strategies, policies and regulatory mechanisms and frameworks etc. with a view to enable the right environment for sustainable economic recovery, livelihood improvements, employment creation, fair competition, equitable access to resources, and investment opportunities etc. Achieving these core economic functions requires bold and strong actions including large scale public finance management reforms that will put the country into the path to sustainable growth and recovery and help the government to meet the aspirations of its people.

ROLE OF THE GOVERNMENT

As already pointed out the new government’s policies and strategies are geared up towards economic development and poverty reduction and sets out a clear role for the Public Finance Management (PFM). Indeed the government’s main remits include providing security, investing in human capital, and articulating and implementing a social policy focused on assistance to the vulnerable sections of the population and the elimination of poverty, while at the same time maintaining the pace of the economic development and growth through progressive legislation and regulatory frameworks. In order to achieve that goal the government should seek to create an enabling environment for the activities of the private sector, and make effective use of aid to attract trade and investment from partners, and put the economy on a sustainable path to recovery and growth. In addition the government must commit itself to building on community level participation and effective management at the local level. Although the new government does not see itself as the producer and manager of the economy, due to the strength of the private sector, it nevertheless should see itself as a regulator and promoter of the entrepreneurial energies of the people of Somaliland to achieve sustainable recovery and economic development.

NECESSARY ECONOMIC REFORMS

In order to continue on the path to sustainable recovery and growth the government must reform and bring about new and effective legislation in terms of public finance, public procurement, collection of revenues and customs as well as external audit and investment promotion. It is important to understand that the present system is not only archaic and outmoded as it was introduced more than 40 years ago by the last Somali government but also inefficient and not transparent and does not reflect the policies of any progressive government and the aspirations of our people. In addition these reforms are necessary in order to attract foreign investment and direct aid from the international donors who regard our current systems (investment and PFM laws and procedures) as inefficient and not transparent enough to warrant investment and direct aid from development partners and investors.

In this regard the Somaliland government, through its public sector service providers (i.e. Ministries and semi-autonomous agencies), must act and bring about the necessary economic reforms in partnership with all relevant economic actors including; private sector, donors and the national and international investors to implement its economic development programs, and realize its vision for the country through sound and positive legislation that will not constrain the economic development and employment creation that people are expecting to be achieved.

PUBLIC FINANCE MANAGEMENT AND FISCAL REFORM

Being the legitimate representative of the people of Somaliland the key tasks and challenges for the government is to create the institutions and organizations that would embody principles and practices of accountability, democratization and good governance, and encourage the private sector to become the driving force behind sustainable economic development and improve the future prospects of the country. The government has drafted a new legislation containing various Bills intended to bring about a comprehensive economic reform in terms of public finance management and accountability legislation to:

• Provide for the development of an economic and fiscal policy framework for the country;

• Prescribe procedures for budget formulation, preparation and execution; something that our current laws are not comprehensive enough to give adequate guidance for the budget to meet international standards and to attract donor support. The draft legislation gives powers to the House of Representatives – Committee on Budget and Economy, and Public Accounts Committee – which is not given by the current system;

• Provide for the regulation of financial management of the government and make accounting officers responsible for the use of the public funds;

• Prescribe responsibilities of persons entrusted with financial management in the government including the secretary to the treasury, Accounting Officers, Internal Audit and the Accountant General;

• Regulate for the borrowing of money by the government;

• Provide for the audit of government, public agencies and other authorities of the state and establishment of audit committees;

• Provide for the establishment of a professional accountancy institute;

• Provide for other related matters including establishing good financial management systems with adequate internal controls;

It is expected that, if implemented, these reforms will strengthen the effectiveness and efficiency of our public and private institutions and bring about some highly needed check and balance systems which is totally lacked now and thereby improve not only the management of the public resources but will also increase the chances of donor support and external investment into the country. In this light it is important that the parliament and ministries fully understand that this reform is considered as a priority both in the public interest and in the government policy and must therefore be enacted and implemented as early as possible.

PUBLIC FINANCE MANAGEMENT LEGISLATION

The key tasks and challenges for the new government is to create the institutions and organizations that would embody principles and practices of sound financial management, accountability, democratization and good governance, and encourage the public sector to play its effective role towards the sustainable economic development and improve the future prospects of the country. Hence, the government has recently drafted a new legislation containing a set of Bills intended to bring about a comprehensive economic reform in terms of public finance management (PFM). The main components of these proposed bills are:

1. The Public Finance Management and Accountability Bill;

2. The Public Procurement Bill;

3. The Revenue Collection Bill;

4. Customs Collection Bill; and

5. The National Audit Bill.

Enacting and implementing these proposed legislations are expected to bring about the necessary economic reforms, through public finance management (PFM) in partnership with all relevant economic actors including; public and private sector, donors communities and international investors. In this regard adopting the PFM reform will help the new government to achieve its long/medium and short-term economic development plan and realize its vision for the country through sound and positive economic reform.

ADVANTAGES OF THE PROPOSED ECONOMIC REFORMS

The passing of the proposed public finance management (PFM) legislation and all its components (bills) will not only introduce institutional mechanisms and regulatory frameworks but also bring about enormous advantages for the country in terms of service delivery in the form of:

• Economic and fiscal policy framework;

• Procedures for budget formulation, preparation and execution;

• Direct budget support from international donors;

• Power to Parliament’s Public Accounts Committee on Budget & Economy;

• Regulation and management of all public finances;

• Making accounting officers responsible for the use of the public funds;

• Regulation for the borrowing of money by the government;

• Provision for the establishment of a professional accountancy institute;

There is no doubt that the implementation of these economic reforms with all the above noted advantages will assist the government to properly manage all the public finances and thereby enabling it to continue sustainable economic development path through growth, recovery, livelihood improvements, employment creation, fair competition, equitable access to resources, and investment opportunities.

CONCLUSION

It is believed that if Somaliland implements the above mentioned economic reforms that will help the country to improve its public finances and strengthen the effectiveness and efficiency of its public institutions and regulatory frameworks and bring about some highly needed check and balance systems and mechanisms which are presently in short supply in Somaliland and thereby improve not only the revenue mobilization and customs collections as well as the management of all public resources but will also increase the chances of direct budget support from the donor communities and foreign investment into the country. In this regard it is extremely important that both the public and politicians fully understand that Somaliland urgently needs economic reform and public finance management which are considered as a priority, both in the public interest and in the government policy and must therefore be enacted as early possible.

Adam Ismail Hassan PhD

Academic and Writer

qaraamiuk@gmail.com

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