World Bank Gets First Measure of ‘Unequal’ Somaliland Economy

By Sarah McGregor

Hargeisa - Somaliland, a breakaway territory in northern Somalia, has a gross domestic product of $1.4 billion with a “high” income gap between rich and poor, according to the World Bank’s first economic output estimate.

Somaliland’s GDP per capita of $348 in 2012 ranked as the world’s fourth-lowest after Burundi, the Democratic Republic of Congo and Malawi, the Washington-based lender said in an e-mailed presentation released today in the capital, Hargeisa.

“A focus on how to address inequality in Somaliland and ensure access to services for all, will be important to secure progress for all,” the bank said, according to the statement.

Somaliland, which has a population of 3.5 million, declared independence from Somalia after the fall of dictator Mohamed Siad Barre in 1991. No sovereign state has recognized the region as an independent nation. Companies including London-based Genel Energy Plc (GENL) and RAK Gas LLC of the United Arab Emirates are exploring for oil and gas in the region.

Somaliland’s Gini coefficient, a measure of the income gap, is 45.7 in rural areas compared to 27 in Ethiopia and 42.6 in urban centers against 37 in the neighboring country. The index ranges from 0, which represents perfect equality, to 100, which implies complete inequality, according to the bank.

The uneven distribution of wealth is a “major challenge,” with 29 percent of households in urban areas and 38 percent in rural Somaliland living in poverty, according to a 2013 household and enterprise survey carried out by the World Bank from January to March.

Livestock Contribution

The livestock industry accounts for 30 percent of the economy, followed by trade at 20 percent, crop production at 8 percent and real estate at 6 percent, the bank said.

The accuracy of the estimates is hindered by a lack of data and difficulty in measuring output by nomadic populations, and remittance and foreign aid flows are not captured, the bank said. While there are no isolated figures for Somaliland, overseas workers send home $1.2 billion to Somalia every year, while official development aid totaled $150 million for Somaliland in 2012.

The country’s “low” level of domestic revenue, which at 8.5 percent of GDP is about half of the sub-Saharan African average, consists largely of trade levies, while the country’s few “large businesses” pay insufficient taxes, the bank said.

The region should review its tax regime, which charges companies 10 percent of their profit, compared with 26 percent in Ethiopia and 28 percent in Kenya, according to the bank.

Half of government spending in the decade through 2012 has been spent on security, while health care and education expenditure has been kept low, it said. The al-Qaeda-linked Islamist militant group al-Shabaab has waged an insurgency against the Western-back government in Somalia since 2007 in a bid to impose Shariah law.

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

 
Source: businessweek.com