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Somalia and Survival in the Shadow of the Global Economy (Part 9)
ISSUE 68
Front Page
Index

Feature

- Somalia and Survival in the Shadow of the Global Economy (Part 9)

Headlines

- Supreme Court to Resume Hearings on Election Results Today

- Somaliland Elders Brokered Puntland Peace

- Para-Military Police Chief Attacks Haatuf Reporter

- Regulatory Body For Somali Livestock Exports

Health

- Drug: The Double Edged Knife (Part 7)

International News

- RSF Calls On Djiboutian Authorities to Release Journalist

- IGAD MPs Set Time For Writing Protocol

- US Moves Counter-Terrorism Operation Ashore

- Event Encourages Somali Students To Consider College

- Who Are The Somali Bantu?

- Conference Addresses Refugee Women's Health

- 24 Crew Members Of Korean Vessel Taken Hostage In Kismayo

- Candlebox: Top-Secret U.S. Commando Role In Iraq Revealed

- UN To Probe Arms Ban Breaches

- Rains Leave Thousands Of Somali Refugees Homeless

- Guelleh Visits CJTF-HOA Commander

Editorial & Opinions

- Tough Decisions, Hard Choices

- After Saddam, Liberate Somalia From Warlords

- Democracy as a System of Interrelated Political Processes

Peace Talks

- 170 Fake Somali Talks Delegates Thrown Out

- Aideed Announces Run for Somalia Presidency


Special to the Somaliland Times by Prof. William Reno
[Continued from the previous issue]

Marginality and a New Somaliland Identity 

This work to this point shows the importance of differences in the social control of violence for explaining divergent political outcomes in northern and southern Somalia. The most important difference has been in the relationship of local elites to economies, whether clandestine, patronage based or international. Where they have been tied to a centralized patronage network their armed groups turn into predatory gangs, as when Col. Omar Jess used Ogadeeni refugees to battle regime enemies in the north, then took them to the south to conquer agricultural lands. Politically marginal elites, on the other hand, find more incentives to organize armed groups as autonomous protective organizations. These elites also preserve and extend their power to settle disputes, give guarantees, enforce contracts, and ultimately tax those who they protect. In all instances, leaders of militias and local strongmen may look and speak alike and may feel very strongly about obligations to serve the interests of kin. Their differences derive from distinctive styles for managing the same resource: organized violence.

Somaliland, and to a lesser extent the autonomous Majerteen-dominated far northeastern autonomous region of Puntland provide vantage points from which to view the relevance of this difference for contemporary political organization in peripheral areas of the world economy. This internal process of controlling violence shows that the violent dissolution of political networks in collapsed states into ‘network wars’ is not inevitable. The contemporary world economy still permits local experimentation in forms bearing some resemblance to classic accounts of the formation of states as a consequence of reciprocal relations between ‘predators’ and ‘victims’ in which the former gains some interest in the security and productivity of the latter, albeit in a global economy that weighs much more heavily on this internal process. Internal institutional structures and norms, including informal ones, still influence how violence is distributed and controlled, and what types of organizations serve the interests of ambitious people. This in turn affects the efficiency and organization of economic exchange in a process that permits a diversity of outcomes, including broader social control over the exercise of coercion. This focus also highlights how wielders of force participate in the economy and conversely, how economic exchange affects those who manage force.

The self-declared Republic of Somaliland (and the Puntland State of Somalia), however, does not receive global recognition as distinct political communities. This reluctance of the international community to extend formal recognition of sovereignty is a double-edged sword. On the one hand, entrepreneurs in those places face difficulties obtaining access to international institutions and norms that regulate economic opportunities. For example, foreign businessmen complain that they cannot convince foreign insurance companies to write policies to indemnify their operations and protect assets. Their mutual problem lies in their inabilities to find suitable venues for arbitration of disputes, a precondition for any contract to be recognized by an underwriter, much less to attract investors. Nor will foreign investors agree to allow local authorities to adjudicate disputes out of fear that they will be biased in favour of fellow Somalis. In normal course, business partners from different jurisdictions chose a neutral venue and agree to a third party that all trust to adjudicate disputes. 

Thus the absence of international recognition, observes an official of the Somaliland Chamber of Commerce, ‘means we cannot enter into formal trade agreements; we cannot even contact the outside world through direct postal services, as we are not a member of the postal union’. The fact that Somaliland is not a de jure recognized state-in fact no state officially recognized Somaliland as of late 2002, eleven years after its declaration of statehood-denies it and its business partner recourse to global basic commercial law infrastructure such as the 1958 Convention on the Recognition and Enforcement of Foreign Arbitration Awards. This convention provides the legal framework for transactions involving international agencies such as the World Bank. Most multilateral trade protection and regulation agreements, such as those protecting intellectual property rights and foreign investment insurance require contracts to conform to the principles of the 1958 Convention.

Somaliland remains outside this framework so long as international commercial law institutions have no mechanism for decertifying prewar ‘Somalia’. It is unlikely that the latter will be decertified so long as international organizations continue to support the effort to extend the authority of the Transitional National Government in Mogadishu. Global norms noted earlier against recognizing new states continue to inhibit consideration of this possibility. Thus Somali and foreign businessmen complain that conventional international venues for adjudicating commercial disputes such as the American Association of Arbiters, the International Chamber of Commerce, the London Court of International Arbitration, and the World Bank’s International Center for Settlement of Investment Disputes have become progressively less able to provide services for business transactions that involve partners based in non-recognized entities and jurisdictions. They complain that the growing prevalence of Anglo-Saxon common law as the standard framework for hearing international business disputes further limits their access to international commercial institutions. Outside Somalia, most parties prefer this legal norm. They appreciate its flexibility for dealing with novel and unanticipated legal and commercial situations, an advantage lacking in the legal codes of continental Europe that are more specific to countries’ situations and political priorities. Litigants also cite preferences for US legal culture and practitioners. Unlike most European jurists, typically considered auxiliaries of justice systems that prize a general interest and distance from clients. US litigators, however, have no hesitation in demonstrating legal inventiveness and tactical aggression, which clients take as evidence of the lawyer’s devotion to their client. This complaint finds substance in decisions of US District Courts to deny standing to litigants who base claims on laws of entities whose sovereignty is not recognized by the US Government, a hindrance that applies throughout the world of Anglo-Saxon legal practice which relies in large measure upon US commercial law precedence.

How do those who do business in Somaliland organize their transactions? Large foreign firms can make agreements with Somaliland authorities, but they must try to avoid conflict with earlier agreements signed by the legal government of Somalia (from an international view) in Mogadishu. Thus the European oil company TotalFinaElf supplies fuel to airports in Hargeisa and Berbera after ensuring that the pre-1991 Mogadishu government had made no contract with other firms to supply these services. On the same principle in 2001, TotalFinaElf signed a one-year agreement with the Mogadishu TNG to explore for oil in the southern region of the Lower Shabelle and Jubba Valleys. The TNG had legal competence to abrogate previous concession agreements and acknowledge old partner firms’ declarations of force majeure from the start of the war. Despite their greater de facto authority, Somaliland authorities did not have this de jure capability. Consequently, they have had to rely upon exploration agreements with less established firms that are willing to take the risk of doing business with a partner that might expose them to legal action in foreign courts from Agip, Amoco, Conoco, Phillips and Chevron, all of which held prewar concessions in the north. Chinese firms have played a dominant role in these agreements, as they have in Sudan, where they have replaced western firms that have left under pressure from international sanctions against the Khartoum regime. In this case, the Chinese government provides diplomatic and business support for these firms, helping them fill these niches that international commercial law renders out of bounds for most other firms. This leaves Somaliland authorities in a bind. They seek global recognition, and have declared that they will continue to honour existing contracts that foreign companies signed with the Barre regime. Since recognition has not been forthcoming, authorities are willing to risk dealing with rogue firms. But they must weigh this against the cost shifting partners and settling conflicting claims if others provide diplomatic recognition. One official observed the difficulties this contradiction created for his government. So long as western oil exploration firms are more competitive, Chinese authorities have a vested interest in frustrating Somaliland’s bid for international recognition, lest Chinese firms lose their protected niche.

The consequence is that the majority of cross border transactions and foreign investments in Somaliland are most easily conducted through personal networks. This is where the defensive measures that local strongmen, clan elders, and members of the diaspora developed during the Barre regime become valuable tools for organizing Somaliland’s relations with the global economy while promoting Somaliland’s stability, a crucial task in sustaining the region’s self-determination project. While the legal infrastructure of international commerce keeps larger firms at bay, small Somali entrepreneurs with family ties to the region are able to use practices such as abban and other clan-based customs to guarantee contracts and protect transactions from risk. This also means that Somali entrepreneurs run nearly all businesses in Somaliland and most have significant connections to the diaspora community and its capital.

This social complexion of commerce gives local authorities a stake in protecting entrepreneurs, most of whom have family ties in the region. Not only does this protect entrepreneurs from competition from larger foreign rivals, it binds the social control of violence that developed in the 1980s and 1990s to the protection of a local business class and the collection of revenues. Adjudication of business disputes and protection of contracts is an extension of the negotiation process that local authorities were able to impose on militia leaders from the late 1980s to the present. This also gives local authorities the means to keep out entrepreneurs who they determine might disrupt local order. Their denial of protection keeps resources out of the hands of political entrepreneurs who might otherwise use their wealth to raise a militia to contend for power in Mogadishu or make themselves powerful enough that foreign peace brokers will have to include them in negotiations. This arrangement also explains why members of Somaliland’s diaspora do not become financiers of armed groups the way they do in the south where legitimate local authorities do not exercise social control over connections between wealth and coercion. Local authorities’ control over the Security Forces of Somaliland, a 7,000-man army of paid soldiers financed through an official budget, along with informal control over customary adjudication ensures that those who lack protection will not fare well.

Mogadishu provides a good contrast of commerce that is not regulated through these informal institutions. Militias began to proliferate again in 2001-2002 as the TNG appeared to pose a more credible threat of imposing order on local strongmen. UN investigators reported that ‘some leading businessmen have outflanked militia leaders from their own clans and have started buying the backing of individual militia fighters’. This they attributed to ‘part of the competition between Somali groups in advance of the anticipated conference of concerned parties in Nairobi under the auspices of IGAD (Intergovernmental Authority on Development) peace negotiations’. This commercial independence also enables entrepreneurs to use militias to improve their economic fortunes. An attack on the home of the TNG’s Interior Minister in March 2002 and again in May appeared to stem from a dispute concerning the minister’s business operations in the Middle Shabelle Region where he controlled farms. Likewise, splits within the Rahanwein Resistance Army (RRA), a southern-based militia, show a similar connection between business, political fragmentation and disorder. After declaring a ‘South-Western Regional State of Somalia’ in April 2002, fighting broke out in July between an RRA commander-a former Barre-era National Security Service Commander-and his deputies over the right to tax trucks passing through Baidoa. Since elders exercise little leverage over militia members who have come from other parts of Somalia it is the entrepreneurs who determine how coercion is used, not local customary authorities.

Somaliland businesses still encounter trouble with organizing transactions with non-Somali enterprises. Thus businesses that actually conduct operations in Somaliland and Puntland use off-shore ‘home offices’ in the globally recognized jurisdictions of Djibouti, and increasingly in more reliable and internationally connected venues in the United Arab Emirates (UAE), much as the business associates of the SNM in the late 1980s, and local entrepreneurs throughout the Barre era ‘borrowed’ their Ethiopian and Djibouti neighbours’ sovereignty to avoid predators within Somalia. During Barre’s time this was a defensive measure. Now, these ties, reinforced through diaspora connections, are deployed to seek out new economic opportunities, a demonstration of the transformation and reinforcement of an old ad hoc practice put to the service of a new task. For example, Somaliland’s largest of three airlines, Daallo Airline, is based in Djibouti ‘to ensure neutrality, flexibility and independence.’ An official in the firm also notes that this arrangement enables underwriters to write policies to insure the company’s aircraft. Daallo’s venue also is critical for managing inter-airline agreements with foreign carriers, for gaining access to the Gabriel, Galileo and Amadeus global reservation systems, and organizing financial services to collect fares via electronic payments and internet-based systems, all of which require mutually agreeable venues for resolving possible commercial problems.

The advent of the internet mitigates some of these difficulties, since this allows firms to conduct immediate transactions in ‘cyber-space’. In practical terms, this allows firms access to the laws and norms of the geographic space in which a server is located and enables the business entrepreneur to shop for the institutional benefits of different venues. For initial transactions, at least, the ability of a firm to remain connected to customers and services reassures both groups of partners that the firm is integrated into globally recognized norms and procedures. These technical advances favour financial intermediaries such as Dahab Shiil, which was noted above for playing an important role in facilitating the finances of the SNM. This firm, for example, formed a telecom subsidiary in Burao, Somtel, to handle directly the growing business in private remittances from migrants. Somtel has also helped address the Chamber of Commerce’s complaint about an absence of a postal union agreement though simply organizing a private postal system via an agreement with Ethiopia’s state post office. With 1,000 workers, Somtel claims to be Somaliland’s largest private employer. Other financial and telecom firms play important roles in organizing a central bank. President Egal (who died on 3 May 2002 and was replaced by Dahir Riyale Kahin) admitted that his regime’s currency reserves reside in the State Bank of Ethiopia, and that the instant communications of Somaliland’s efficient telecom and financial services make this unusual arrangement feasible.

Somaliland’s government gains a political advantage of reliance on business intermediaries that can remain offshore at arms length. Though it is reliant on these businesses for revenue, authorities also are forced to take into account business interests in promoting economically efficient policies and in limiting commercial risk within Somaliland. Thus unlike southern political actors, Somaliland’s authorities have an immediate interest in imposing uniform order and controlling coercion. These interests complicate any effort of political figures to subordinate business to a patronage network in Barre’s fashion. Somaliland thus emerges as a remarkable exception for appearing to have solved this serious obstacle to building effective and legitimate polities in the African context. Furthermore, it has done so through adapting to an unconventional international status, and more generally, as a response to marginality that in the eyes of many scholars ought to have condemned this community to violence and fragmentation. This relationship of commerce, customary authority and government represents a hybrid ‘re-traditionalization’ of power in that it recovers some of the flexibility of customary authority figures and practices to adjudicate disputes and distribute resources, much like the role of xeer in guaranteeing contracts in pre-colonial Somalia described earlier in this work. Only now, this social process takes account of a broader global context in which this flexibility becomes advantageous.

Likewise, Somaliland’s diaspora from among its two million inhabitants and their remittances force local authorities to adapt flexible methods to get access to their resources, while also limiting the power of these authorities. While it is difficult to determine what portion are northerners, Somali migration since the start of internal conflicts in the early 1980s has been considerable (see table). Unlike southerners, northern migrants had the advantage of arriving at already established ‘beachhead’ groups overseas that
consolidated and benefited from kinship connections through abbans and reverse migration, as well as the negative feature of having been specifically targeted for collective punishment prior to the spread of general conflict after 1990.

Table: Overseas Somalis (2000)

Canada 30,000 Denmark 14,000
USA 25,000 Sweden 12,000
Netherlands 25,000 Germany 8,400
UAE 25,000 Switzerland 5,400
Saudi Arabia 20,000 Finland 5,300
Britain 20,000 Norway 4,000
Italy 20,000 Australia 2,000
source: M-A. Pérouse de Montclos, ‘A Refugee Diaspora: When the Somali 
Goes West’, Khalid Koser, ed., New African Diasporas, (London: Routledge, 
2002.

Overall remittances are difficult to quantify. Net estimates for all of Somalia range from $140 million to $800 million annually. This overshadows the $115 million in donor assistance to all of Somalia in 2000, of which 42 percent went to Somaliland and Puntland. A private analyst ventures an estimate of $150 million annually for Somaliland. Somaliland’s Ministry of Planning provides a more precise estimate of $97 million for remittances in 1997. Regardless of the precise figure, all of these estimates overshadow government budgets, which in 1999 stood at $26 million to provide for 6,000 civil employees. Remittances also compete with local returns from the export of livestock, which amounted to about $125 million in 2000. Saudi claims of detection of Rift Valley Fever in Somali cattle, coupled with their subsequent ban on Somali cattle imports, prompted a collapse of this source of income and increased local reliance on remittances from overseas. This is also thought to have increased the influence of clan elders who pressure overseas communities to send money home. This income has a substantial impact on local consumption, especially in Hargeisa where remittances are estimated to constitute about 40 percent of household income.

Somaliland’s diaspora community stands at arms length from the Somaliland government, yet is critical to the viability of a separate Somaliland polity. This relationship, along with the paucity of foreign aid, ensures that resources do not become concentrated in the hands of a single faction, nor in the dispersion and channels of resources do they present an easy target for predatory political entrepreneurs. This conclusion contradicts findings of the World Bank’s development research director, who states that ‘if a country which has recently ended a conflict has a large diaspora living in the USA, its risk that the conflict will resume is sharply increased’. This conclusion reflects the analysis that diasporas are more susceptible to extremist appeals and separatist romanticism because they do not suffer the consequences of subsequent violence. Thus they offer a source of easy revenues to political entrepreneurs. In fact, Somalia and Somaliland show that, like arguments linking natural resources with predation, this argument misses the variable nature of the underlying political economy of informal and clandestine economies-the main focus of this study-that are responsible for the different organizational outcomes of conflict.

Overall, marginality actually may promote order in Somaliland. This is not the marginality that preserves pristine local customs, as in the imagination of British colonial officers. Instead it promotes innovation. That Somaliland does not possess global recognition of its sovereignty, nor receives much foreign aid, forces its government to make deals with powerful groups, especially elders, who hold the key of access to overseas resources. Since local firms are forced to locate offices in places like Djibouti and the UAE where they are able to get access to underwriter’s services, arbitration acceptable to foreign business partners, and somewhat easier access to capital, Hargeisa officials have to rely upon the confidence of elders and families who have connections to diasporas to attract contractors willing to provide services and utilities and collect revenues. Some interpret this as a de-regulatory, free market success story. It is more accurate to describe it as a success of institutionalizing a ‘clandestine’ economy under the social control of clan elders to create order and fend off political entrepreneurs who would otherwise have incentives to prey upon local communities. This ability to constitute a separate political order in territory they control in the midst of a marginal external and violent regional political economy is critical to Somaliland authorities’ pursuit of self-determination.

Somaliland’s persistent lack of global diplomatic recognition remains problematic, however. Somaliland officials fit their political community within the confines of the former British Somaliland in the hopes that foreigners will recognize their state as they did Eritrea, as a final act of de-colonization to fulfill the post-colonial norm that each separate colony is entitled to recognition as an independent state. In terms of international law, Somaliland’s case is stronger, for example, than that for Bosnia. Unlike Eritrea, however, Somaliland’s army did not capture the capital of the state from which it separated, nor did it secure an agreement from its old capital separation. More important, continued international efforts to mediate Somalia’s conflict do not accept the principle of partition as a solution to conflict. Thus Somaliland self-determination is constrained by these persistent international norms.

Taiwan provides a useful parallel. A distant and locally illegitimate capital claims Taiwan as its’ own. Much of the rest of the world recognizes this claim. Nonetheless, Taiwan’s business families straddle international borders, using bases in Vancouver, Hong Kong and Singapore to provide services that require full-scale de jure sovereignty. Like Taiwan, Somaliland authorities for their part conduct what looks like diplomacy masquerading as business in conjunction with a huge commercial diaspora. Whether it is recognized or not, the end result is that Somaliland’s authorities have succeeded in asserting self-determination through state-like strategies of gaining control over the exercise of violence and negotiating with productive groups in society for support and revenues to increase the capacity and legitimacy of the political organization. In this regard Somaliland is more state-like in a classical de facto sense than are the majority of de jure sovereign states in Africa.

To be continued...


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