The Somali Post-conflict Economic Reform problem

The Somali Post-conflict Economic Reform problem - Emergency to Development

Friday July 21, 2017
By Mohamed Omar Hashi and Adan Omar Hashi

The economic reconstruction of Somalia which is coming out of armed conflict that have embarked in the complex transition to peace is one of the biggest challenges facing the country. With conflict raging and the country making efforts in economic reconstruction, we must revisit and reflect on previous failures and find ways to avoid repeating it.

As turmoil or wars come to an end, Somalia will come into a multipronged transition to harmony: organizations for public security must be founded or reorganized to bring terror, crime, threats and violence under control (‘security transition’). The prevalent fragmented federalism system should give way to participatory governance and the rule of law, both at the local and national level (‘political transition’). Clan fights must give in to national settlement so that prior enemies can go back to the same towns and live in peace (‘social transition’). And war-torn, mismanaged and informal economies must be rebuilt and turn into feasible economies that allow citizens to make a decent and lawful living in a viable way (‘economic transition’).

Even though our study concentrates on the economic transition itself, the four facets of the multipronged transition to peace are carefully related and support each other. Failure in any one of these would put the others in danger. It is comprehensible, and to be anticipated, that such an irresistible transition would certainly take a long time and defy enormous challenges.

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The demobilization, disarming, eradication, and productive rehabilitation of prior fighters and other armed militias is a serious facet of the ‘security and social transition’, that has ascertained to be sine qua non for an effective transition to national reconciliation and peace. While this programme should have urgency, productive prevention and reintegration needs livelihoods and sustainable jobs that Somalia would struggle to generate as it comes out of war. Failure in the economics area to generate feasible prospects has resulted in failure of the social and security areas, since security needs sustainable employment to discourage the youth from joining extremists groups and reintegrate former militias, and other groups providing arms.

Though Somalia made gains in the direction of a fragile political peace by choosing a new president, the nation faces an unsustainable economy and huge reliance on foreign support - getting an incredible amount of aid as percentage of its GDP but nonetheless remain at the bottom of the Human Development Index.

A change of strategy is thus required. Many claim that international support has been inadequate. But with military and economic support to averaging a huge proportion of its GDP, and with the AMISOM offering a large peace-building operation, support is definitely not lacking. A blend of imprudent policies, out-of-place priorities and sequence, unsuccessful and fragmented support, and lots of corruption are the reason of the gloomy record. The dearth of accuracy has also frequently resulted in the conflation of short- and long-term policies, reconstruction, humanitarian, economic and development policies, amongst others; this phenomenon has not only caused failure but has also resulted in unmaintainable aid dependencies.

For Somalia’s post-conflict economic reconstruction to prosper and for policies to be workable, it is vital that the government harmonizes policies and sets urgencies on the basis of a wide national agreement. An arbitrary model based on donors’ priorities shall not be forced on the nation. The UN system—consisting the World Bank and the IMF—with bilateral and other multilateral organisations, NGOs, and other shareholders ought to be in the back seat, facilitating.

At the time of reconstruction, Somalia should move along 3 different paths that by no means are independent of each other. To maintain peace and to be capable to stand, on its own feet, it requires to be capable to take these paths as soon as possible. Prolonging Somali’s dependency on humanitarian aid or technical support and on external financial will make it lose possession of its own policies, which in turn will make these policies unsustainable. Deviations from these extensive paths are probable to put success, peace, self-reliance and stability at risk.

The Path in the Direction of Normal Development

While the long-term goal is to get Somalia back on the path of normal growth where ideal or first-best policies can be designed with a medium - and long-term prospect in mind, to get the country needs to go first by an intermediate phase, that is called ‘the economics of peace’ or ‘post-conflict economic reconstruction’, the overruling goal of this phase should be to evade lapsing into conflict, even if, in the course, structural reform and economic stabilization, as well as basic development benchmarks in terms of education, infrastructure and health are late.

Reconstruction can only prosper if it aids to keep amity in the short run and if it opens the path to long-term development. This path can only be discovered by means of dynamic growth and social and economic presence. In the short term, reconstruction is mainly a political process for the reason that any judgement will have clear or implied political results that will either assist to consolidate amity and reconcile or push the nation back into conflict.

For the reason that the political (or peace) goal should always triumph over the economic (or development) one on this stage, a basic idea for efficient reconstruction is that chief best economic policies are not at all times attainable or even necessary at this stage. This makes this stage essentially different from development as usual in nations not affected by chief conflict.

Every time this premise has been disregarded, Somalia has gone back to war or have found it hard to recommence the normal development path, disturbed by the conflict. The economics of peace need to have a twofold purpose: to support economic activity in a comprehensive way so that the populace at large can notice a peace dividend in terms of livelihoods and better lives; and to make sure that policies followed by the government and their global supporters are conflict-sensitive so as to evade infuriating social tensions. Therefore, regardless of the explicit features of each transition, the reactivation of investment, and employment in a peace-supporting environment needs that nations move along the given path.

As war finishes, Somalia requires to move out of the ‘economics of war’ of the past—that is the subversive economy of rent-seeking that flourish in conditions of chaos or war among decrepit infrastructure and services and macroeconomic imbalances.

One chief feature that has obstructed Somalia from standing on its own feet in the shift towards peace is the struggle to move straight from the ‘economics of war’ to the ‘economics of development’— development as normal practices, the best practices and optimal policies. While it is right that Somalia goes through development challenges, like, reducing poverty and obeying the UN Millennium Development Goals (MDGs) and more recent Sustainable Development Goals (SDGs), these are long-term plans. In the short run, the challenge of post-conflict economic reform is mainly to help in national reconciliation and the union of peace. Unless this succeeds, peace is not going to be long lasting. In the absence of peace, development will not be workable.

Time is very important for Somalia. Whilst under normal development, economic strategies and programmes aimed at addressing economic stagnation, poverty, poor human resources, weak institutions, and other pathologies of underdevelopment are designed with a medium and long-term prospect in mind, no such amenity is present during post-conflict reconstruction.

Thus, a second basic premise for effective economic reconstruction is that, as Somalia comes out of war, emergency policies adopted decisively and without delay are needed to deal with the population needs, draughts, hunger and diseases, terror threats, returnees, and displaced populations, as well as all other immediate needs created by the crisis. These policies frequently serve short-term security, humanitarian or political resolution but frequently make economic misrepresentations and have other unintentional concerns on medium- and long-term development. Delays in agreeing on payment of funds in the direct transition to peace and ill-advised urgencies—reflecting the development as normal approach of bilateral and multilateral development organizations—have frequently hindered successful reconstruction and require to be evaded at all cost.

In conditions of post-conflict, importance must frequently be given to groups most disturbed by the conflict and are most probable to take up arms again. Therefore, a third principle for successful economic reconstruction is that policy makers frequently require to put aside the guiding development principle of equity (which is, the belief of treating equally all groups with the same requirements) in support of reconstruction (or political) principle that rationalises providing special treatment to groups that most endured agony from the war or are most probable to return to it—even in the attendance of others with alike economic needs.

For amity to be long lasting, reconstruction policies ought to be targeted toward reducing the complaints of those groups. As, children, women, and youth groups have been intricate as fighters, have played numerous other roles, and have been victims of explicit violence against them at the times of the conflict, rehabilitation programmes that embrace them, together with male fighters, are mainly vital to address and redress some of these glitches. Reintegration is the most expensive, challenging, difficult, and longer-term activity concerning the post-conflict reconstruction and the one in which the economic and political intents of reconstruction are most entwined for national reconciliation. The achievement of reintegration programmes is frequently reliant on economic recovery, but it also relies on good sequence, planning and timing.

Effective reintegration is frequently reliant also on the government making tough financial and political decisions to resolve perilous problems relating to, amid others, technical assistance, property rights, housing, services, and lack of credit. The government should execute reintegration efforts unceasingly and pitilessly, from the early emergency phase to the end of post-conflict economic reconstruction, when the nation moves back into a normal development path. The main step should be to make an accurate valuation of financial and economic needs and conditions.

In terms of economic restructuring, there are some activities that have a particular order, which might not be probable to carry out unless others take place prior. For instance, even if policy makers want to begin offering credit for microenterprises instantly, this will not be possible till the monetary authorities and the basic legal structure are in place. In Somalia, the challenges are enormous, i.e. restore the payments system, without which all other policies would have be ineffective, the currency exchange.

The Path in the Direction of Dynamic Growth

Dynamic growth ought to be the longer-term goal path of Somalia whose economy requires to ‘catch up’ after years of war. In the short-run, the chief goal ought to be to enhance security so that people can go back to their normal everyday lives and can reinstate basic livelihoods—even if only at survival levels. This ought to be done by means of investment rather than mainly by means of access to humanitarian support, as has been the case. Advanced productivity investments can trail once the basic infrastructure institutional framework and the essential policy are in place.

Waiting for the latter to be in place prior to basic investment starts is actually not an option that Somalia can afford. Reform requires to begin within whatever economic and political outline Somalia has, as, it cannot wait for the international organisations to get their act together or for civil servants to be proficient to do it right. Waiting for ideal settings might take a long time. In the meantime, the nation will perhaps revert to conflict and turn aid reliant.

A huge part of the population either are reliant on food support, a dependence from which Somalia has found it hard to recuperate. At the same time, there is a propensity to build the infrastructure and services that generally profits the most productive investors—consisting foreign investors and other advanced productivity projects in infrastructure without making a level playing field for most of the population. Therefore, in place of moving away from the economics of war, contributors’ practices frequently entrench corruption and other unlawful practices of the underground economy in the post-conflict period.

Humanitarian aid can save lives but it is vital to make these lives worth living. Merely reconstruction (or economic) aid targeting investment prospects that make use of local competences, natural resources and land can upsurge the productive competence of the nation and its people. The economic influence of reconstruction aid, though, will rely on how effectively it is invested, and the influence it has on protecting the environment, on the labour market, on reactivating production and trade, and on the exchange rate.

At the same time, reconstruction support must not follow a piecemeal approach of having a supporter build a clinic or school here, another one a road there, and a third one a dam somewhere else. To be successful, reconstruction aid requires to be offered in an integrated style, taking into account local situations and local requirements. This needs that donors network their support through the national budget, in place of off-budget rendering to their own agendas. In Somalia where the economy has been distraught and might not bear the fruits of centuries of research and change, there might be a requirement for well-designed and careful departures from laissez-faire.

The Path towards Fostering Comprehensive economic model and Independence

Somalia is hugely reliant on aid. It is vital that foreign direct investment and net exports begin replacing aid as chief sources of foreign exchange as soon as possible so that the nation can evade or come out of the debt trap, and be competent to stand on its own feet.

Drawing foreign direct investment—consisting into possibly highly profitable ventures for the abuse of natural resources is not simple owing to poor security and general ambiguity in the country, and to many business climate glitches (lack of skills, utilities, infrastructure, weak judiciary systems to impose contracts, etc.), which make investment extremely costly and risky. Drawing foreign direct investment for the domestic market is mainly problematic for the reason of the lack of purchasing power at the local level.

At the same time, conflict-insensitive government policies of giving specific incentive and other preferences and of building infrastructure and services targeting the needs of foreign investors and domestic elites—while ignoring the needs of small investors, and local communities—increase security risks due to confrontation between the two groups. Moreover, by failing to provide a level playing field for small entrepreneurs, including women, the country will miss out on the productive capacity and creativity of a large part of the population, making inclusive growth elusive.

To revamp the post-conflict record of war-ravaged Somalia, we cannot keep on doing the same things that had have been done earlier and believe that this time the consequences will be different. We are extremely aid-dependent nation and have to move towards more comprehensive self-reliance. The ‘reconstruction zones’ would contain two different but related areas to make sure co-operation between them—an ‘export zone’ generating wholly for exports and a ‘local zone’ generating for local consumption.

In the borders of gated export zones, the administration could offer services, security, basic infrastructure, and a stable legal and regulatory agenda for foreign investors that it could not offer across the nation. In return, investors would obligate to train local workers, generate employment by buying local services and inputs, revamp corporate practices and local providers’ standards, simplify the transfer of pioneering and productivity-enhancing technologies, and create links with local technical universities. Export zones might exploit natural resources in the livestock, agriculture, and natural resources, or collect low-skilled manufacturing goods.

The local zones would emphasis on integrated rural development of livestock and agricultural products for the domestic market to enhance food supplies and cut reliance on imports. By offering a level playing field for both men and women in terms of credit, security, infrastructure, social services, and other inputs (like agricultural machinery, seeds and fertilizers,), the local zones would also assist to boost gender empowerment in the rural areas, where the output of women is low specifically for the reason that they do not have access to these inputs.

The aim of reconstruction zones is also to address head on the chief impairments to private sector development in rural areas. By rectifying the empowering farmers and other small producers and providing prospects for the communities, business development in the local zones could result in more sustainable and comprehensive growth. This can only be done with monetary and other aid from investors and with a more successful and integrated usage of assistance in the local zones. In return, the communities would make sure that security is upheld in the zones, decreasing the investment risk, which the foreign investors face in these nations.

With the correct legal and regulatory agenda and with the conception of business prospects for the communities, the zones could be anticipated to generate positive externalities or spill-overs amid diverse activities in the zones in particular, and sooner or later with the local economy over-all.

In the procedure of reactivating the economy in a comprehensive and balanced way by conflict sensitive strategies and zero tolerance for corruption, reconstruction zones can become a main policy tool to revamp human security, consolidate peace, revamp aid efficiency, decrease aid reliance, and move Somalia more quickly towards self-reliance. The ill-advised policies, the inappropriate priorities, and the unsuccessful and fragmented policies that development agencies have chiefly supported in Somalia has resulted in an unsustainable record. Unsuccessful utilization of aid to revamp social services and basic infrastructure have left Somalia chiefly vulnerable to natural disasters and other disasters.

Anti-corruption reform

Corruption in Somalia is the sole major factor undermining the trustworthiness of the Somali government and the second most vital factor intimidating Somali’s national security. So far, corruption has developed persistent to a point where almost every person is making some kind of payment to simplify services that should be fragment of normal governmental administration. Furthermore, the administrative corruption that continues at all levels of government, corruption in the form of black market, contract fraud and embezzlement have also tapped tens of billions of dollars from the Somali government and have backed a horde of immoral activities around the nation. Putting blame for this state is almost counter-productive at this phase. What is vital, though, is understanding the modalities of corruption so that procedures could be developed to counter this sinister scourge that is accountable for hindering economic development and impasses Somalia’s admission into the international business community as an equal player.

There is a concatenation of condition in which corruption flourishes in the nation. It is these conditions that must be recognized to expedite early involvement to stem the flow of corruption and offer valued resources to penurious populations. The prospect of Somalia in relation to anti-corruption is challenging: the nation is Balkanized into political divisions and clans and sectors, all competing for kick-backs, sweet-heart contracts and other kinds of fraud that will get money to the self, its individual leaders or its political officials.

The intricacy of the condition in Somalia cannot be exaggerated. Although the political factors having an effect on systematic corruption in Somalia are over-arching and have the greatest risk to stability, other issues are challenging the moral fabric of the society.   None of these are favourable to short-term, simple solutions; though, each of these should be researched prior to developing a strategic implementation strategy. In Somalia, the aspects affecting corruption consist

1.     Psychosocial factors.

2.     Economic factors.

The psycho-social factors concerned in the combat for basic human needs contribute profoundly to administrative corruption. This is merely an overlap of corruption onto Maslow’s Hierarchy of Needs. Our nation has under the cycle of internal civil turbulence for nearly 30 years and the society has lost trust in public service. This loss of trust carries major social concerns. From a psychological viewpoint, Somalis experienced serious threats to their existence and well-being that it produced a primal response. Individual acts dedicated on getting basic personal needs, like, food, water and safety. In reverse, this emphasis on personal needs caused a weakening (almost vanishing) of social conscience. Corruption, for those who had means and chance turned into a way of strengthening the individual condition by providing for their basic requirements.

The superego is the higher part of the mind that provides a person a sense of right and wrong, and of what is usual and what is not. The superego consists the moral standards and ideals that we get from society and our parents.

The astounding loss of hope amid the general population resulted in a situation where, in addition to the other issues contributing to corruption, individuals provided for their personal requirements with little respect for right and wrong or other socially suitable behaviours. In Somalia, this was possibly simple for the reason that of the extensive insight that the whole bureaucracy was corrupt. Consequently, corruption lost any social disgrace. This insight, coupled resulted into an increase in administrative corruption. This psycho-social phenomenon contributes to corruption at all ranks but particularly at operational levels where money is really exchanged.

It is simply after development of a comprehensive implementation strategy concentrated on root grounds that an operational plan can be established to stop the growing corruption. From state institutions governance level, as an initial point, the Federal government ought to create an anti-corruption agency that would have a vital symbolic value by providing a strong signal of high level political commitment to the fight against corruption.

While crisis and corruption linked scandals can elicit impetus for reform, the establishment of such body would be merely window dressing interferences if there are no sincere political will and an ancillary broad-based political accord for reform. Efficacious anti-corruption campaign characteristically needs high level of political and public support that deciphers into adequate distribution of resources, capacity, broad investigative powers, satisfactory research capabilities, etc.

These kinds of interventions are characteristically staff and resource concentrated and offering sufficient technical, financial and human resources are significant requirements for the efficiency of the agency. In practice, such agency in Somalia could face concerns of lack of specialised expertise, under-funding and human resources shortage. The agency consequently requires incessant political support, regular funding and satisfactory staffing to make sure their feasibility overtime, with level of funding contingent on the scope of their order, the nation’s level of wages and other organisational deliberations. It will also require to be granted extensive capabilities and special powers to efficiently realize its mandate. In practice, it ought to be given the suitable powers to examine and impeach efficiently while they face high prospects to deliver, and are expected to effectively address corruption from the beginning at senior level.

The freedom of the agency is an important constraint for its efficiency, and generally refers to the capability of the organisations to carry its mission without interference from influential individuals or the political elite. Issues to reflect for making sure the institution’s independence comprise, founding transparent processes and rules for appointments and removal of the governing body, human and financial resources management, reporting rules, budgeting, etc.

Guaranteeing independence does not indicate operating in the lack of external controls. It is also vital to introduce suitable checks and balance and make sure study by numerous other oversight mechanisms to ensure that it is not in a position to misuse its independence and that it functions in an impartial manner.

Mohamed Omar Hashi was a Member of the Transitional Federal Parliament of Somalia from 2009 to 2012, and holds an M.A. in International Security Studies from the University Of Leicester.

E-mail: [email protected]

Adan Omar Hashi is a research scholar and holds a Bachelor Degree in German and English languages from the University Of Salford and an M.S.C in Development Management from the University of East London.

E-mail: [email protected]

Twitter: @ahashi19

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