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the road to recognition

Saad Ali Shire, the foreign minister of 'de facto state' Somaliland, tells Timothy Conley about the difficulties of attracting investment to a country not recognised by the UN. However, deals with the likes of the UAE and Ethiopia, and FDI from Coca-Cola and DP World, show what can be achieved. 

Q: Given Somaliland’s lack of international recognition, how is the government trying to attract private investment?

A: The international community deals with us as a de facto state. We have an army, we have a flag, we have our own currency, we have our own central bank. We have everything that the state could have and I think that is acknowledged. Not recognised perhaps, but acknowledged. As a result, we do enter into agreements and memorandums of understanding with governments and international companies all over the world. Of course, they do that because they know we have sovereignty and authority over our territory.

Q: How much of a challenge is it to attract investment and aid without international recognition?

A: It’s a big challenge. Most of the aid has to come through third parties, particularly the UN and non-governmental organisations, and it’s difficult to get access to soft loans from development banks such as the World Bank or the African Development Bank. It also creates a barrier to international investment. People are not sure about the implications of coming and signing contracts with a state that is not recognised by the UN.

However, that doesn’t totally deter some people from coming to Somaliland. In fact we have been successful to some extent in attracting foreign investors despite a lack of recognition. We have a Coca-Cola plant that has been here for many years, and we have oil companies such as Genel Energy and DNO doing exploration works.

Q: What are the legal guarantees Somaliland’s government can offer foreign investors under these circumstances?

A: Most of the agreements we sign, particularly with international businesses, specify that any possible dispute is to be settled through the international arbitration court of London.

Q: In 2016 Somaliland signed a 10-year, $440m concession with Dubai-based DP World for the development of the Barbera port. Can you give some more details about the deal?

A: Location is the main reason why people are interested in Somaliland – particularly in the port of Berbera, which is a trade intersection between Europe, Africa, Asia and the Middle East. South of Somaliland there is Ethiopia, which is growing at about 7% per year and is a landlocked country. Beyond Ethiopia, there is Uganda and South Sudan, two other landlocked countries. DP World saw the opportunity of investing in Berbera; particularly when it fell out with Djibouti, it wanted to have another anchor in the region.

Q: The deal could increase tenfold the port's current capacity of 50,000 containers per year, but also drive the development of a free zone.

A: DP World will be in charge of attracting potential users for the free zone. We think the transfer of the port will be a catalyst to attract other investors because people will have confidence. If someone is willing to put in $440m in Berbera, it will give confidence to others who want to invest less than that.

Q: Have you got an agreement with Ethiopia yet?

A: In a previous national plan Ethiopia stated it wanted to use Berbera port for one-third of its imports. It’s not mentioned in the new plan any more, but it is still committed because today it depends entirely on Djibouti [for its imports/exports] and it wants to diversify the risks. We are working on two agreements with Ethiopia: a transit agreement in Berbera and a free-trade agreement that can clear the way for Ethiopia to use the port.

Q: How about the development of the so-called Berbera corridor linking up the port to the border with Ethiopia?

A: More recently we signed a deal with the United Arab Emirates to use the airport in Berbera as a military facility. As part of the deal, the UAE will build the road from Berbera to Wajaale at the border within a three-year period.

Q: Is this last round of deals with the UAE strengthening the case for international recognition?

A: We think the fact that we are signing agreements with international investors will take us closer to international recognition.  

This article is sourced from fDi Magazine
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