Somaliland’s recent alliance with Taiwan has sparked a demand for optimizing Foreign Direct Investments (FDI). Emerging economies rely on FDI as an indispensable funding source for the essential building blocks to achieve tangible and sustainable long-term development. Current key partnerships, projects and institutions are increasingly critical to sustain a meaningful and viable domestic economic growth in Somaliland. In Asia, emerging economic powers such as the Philippines, Malaysia and Vietnam have attracted significant foreign investment for decades, while these countries refined their foreign investment policies. These countries are a model for Somaliland’s burgeoning economy and could prove useful in developing similar partnerships like Taiwan and United Arab Emirates.

The core incentives that are critical for attracting FDI are a government’s economic policies and the performance of institutions that are interdependent on these polices. Somaliland’s de facto recognition as a state is increasingly gaining international recognition. This is a testament to the Somaliland government developing strategic partnerships with several countries and the political stability in the region for the past decade. These contributing conditions render Somaliland ideal for sustained economic growth that can only be enhanced when the economic policies are assessed and optimized.

While certain investments from United Nation (UN) agencies, such as the UN Development Programs, and development aid from a handful of European partner countries through the Somaliland Development Fund are worth mentioning, the first major FDI came from DP World, based in the United Arab Emirates (UAE). In 2016, DP World collaborated with Somaliland and Ethiopia to develop the Port of Berbera through a 30-year concession. Shortly thereafter, the second FDI breakthrough may occur when Taiwan and Somaliland entered into a bilateral agreement to open representative offices to further economic and political ties.

Somaliland is naturally situated in a prime geopolitical location situated near the Gulf of Aden, which serves as a major gateway for international commerce to enter economic regions of Africa, Middle East and Asia through the Red Sea and Suez Canal. Taiwan is one of the economic powerhouses in Asia, but political out of the landscape of Africa. This partnership with Taiwan brings new opportunities for Somaliland to strengthen its allies and expand the growth of this population of 5 million ready, willing and able young nation. However, the Somaliland-Taiwan economic ties necessitate an assessment of existing and new methods of planning.

First, a Somaliland Development Bank is essential to setting policies and programs on managing the country’s finances and promoting investment. Second, a Somaliland Investment Commission (SIC) can foster development in commerce, trade and service in FDI. Like the Ethiopian Investment Commission, the SIC can serve to initiate international projects and investments, develop trade agreements and oversee the implementation of existing projects. These organizations are essential for foreign and local investors to continue and maintain the stability of these projects.

Here are some Somaliland priority projects include:

Cement Factory

The Berbera Cement Factory could prove significant potential for long-standing growth in this region. The factory has the potential to create increased manufacturing jobs and provide much needed cement supplies for builders in the expanding demands of the housing market and infrastructures in Somaliland and the surrounding counties.

The Cement Factory requires more investment and the FDI could fill this gap to sustain the local economy and ultimately lead to increased self-sufficiency.  Funding sources could include FDI or Taiwanese investment in the cement factory for a limited fixed period until investors can recoup their initial investment and realize profits.

Upon completion of that tenure, transfer of ownership to a long-term joint venture with the Somaliland (government/public) and Taiwan interest holders could pose a viable option to maintain the cement factory. Alternatively, Taiwan and Somaliland could each own an interest in the factory with each sharing in the costs and profits for a limited period similar the DP World agreement, but 50/50 ratio.

Coal Powered Electricity Plant

Taiwan produces 30% of its electricity from coal and is the 14th largest coal producer in the world. Consequently, the average Taiwan household uses about US $7.00/kWh (about US $153 a month per customer using 1,000 kWh for electricity).

The electricity generated from nuclear power costs US $1.90, from coal US $7.00/kWh and from natural gas US $11.25. Power consumption in Taiwan is broken down into 18.2% for households, 54% for factories and 18.5% for routine businesses.

In Somaliland, the light industries necessary for taking the country to the next phase of development requires the production and availability of affordable electricity throughout the country.

Fossil Fuel and Liquified Natural Gas

Somaliland’s most critical and significant influence in attracting FDI development is its undeniable reservoirs of crude oil and natural gas. In 2012, Genel Energy was awarded an exploration license and stated: “Somaliland is a highly prospective, onshore exploration province, and Genel is targeting resources of over two billion barrels of oil.” The exploration and data collection phase are complete, while companies are assessing this opportunity. Genel will conclude the farm-out process in 2020 as the company continues to advise prospective partners on the operating and political landscape.

The CPC Corporation, a Taiwanese government-owned company, develops the natural energy sources for Taiwan. This company’s mandate to lead Taiwan’s energy sector is consistent with Somaliland’s FDI incentives. CPC explores, drills, refines and sells petroleum and natural gas.

Taiwan consumes 1.1 million barrels of fossil fuel, but only produces 28,000 barrels of petroleum per day. The interdependence of Taiwan and Somaliland’s economic interests requires a development plan that is transparent with a time frame to attract and enhance the FDI of additional partners.

Given the current global COVID-19 pandemic, oil prices have declined and forecasts show the decline to continue in the next few years. Some U.S. oil companies have closed down and oil rigs are idle. While the current partnership between Somaliland and Taiwan is only beginning, it is more significant now as the timing is ripe to attract FDI to Somaliland. Somaliland is a resilient, self-sufficient and secure state with an administration that has already attracted FDI partnerships. It is incumbent on the government and the people of Somaliland to focus on the development of FDI partnerships for the future of Somaliland’s place in the global community.

https://www.genelenergy.com/operations/exploration-and-appraisal-assets/somaliland/

Omar A. Yousuf

Email: omaryousuf455@gmail.com

Electrical Engineer with the traffic Division, California Transportation

Oakland, California USA

Ahmed J. Yassin

Email: ajyassin4@gmail.com

Clinical Laboratory Professional & an Advocate of Somaliland case UF Healthcare System

Jacksonville, Florida USA