Somalia - Mogadiscio Port Extension Project

0 r -I '-' CIRCULATING COPY Atp X TO BE RETURNED TO REPORTS DESK DOCUMENT OF INTERNATIONAl; DEVELOPMENT ASSOCIATION Not For Public Use CIRCULATMNG COPY TO BE RErURNED TO REPORTS DESK Report No. P-1689-SO REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE SOMALI DEMOCRATIC REPUBLIC FOR THE MOGADISCIO PORT EXTENSION PROJECT September 11, 1975 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization' The Bank Group does not accept responsibility for the accuracy or completeness ol the report.  EQUIVALENTS Currency Currency Unit - Somali Shilling (So. Sh.) US$1 = So.Sh. 6.2327 So.Sh.l = US$0.1604 So.Sh.l m = US$160,444 Government of Somalia Fiscal Year January 1 - December 31  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE SOMALI DEMOCRATIC REPUBLIC FOR THE MOGADISCIO PORT EXTENSION PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Somali Democratic Republic for the equivalent of US$5.2 million on standard IDA terms to help finance the extension of a deepwater port in Mogadiscio. The proceeds of the credit would be relent to the Somali Port Authority (SPA) on IDA terms. PART I - THE ECONOMY 2. A report entitled "Recent Economic Developments in Somalia" was dis- tributed to the Executive Directors on August 29, 1972. Country Data Sheets are attached as Annex I. A Bank economic mission visited Somalia in November/ December 1974; its final report is expected to be distributed to the Board shortly. 3. The Somali Democratic Republic was formed in 1960 by a merger of the former Italian Trust Territory of Somalia and the British Protectorate of Somaliland. Following a decade of parliamentary rule, the Government was taken over by the military in 1969. The Supreme Revolutionary Council, consisting of army and police officers, is the highest decision-making body. 4. In 1970 the Government announced its adherence to a program of scientific socialism, emphasizing egalitarianism and social justice, develop- ment through the public sector, nationalization of certain foreign enterprises, and the formation of cooperatives. This policy was at first associated with a negative attitude toward private investment, but the Government now appears to be taking a more favorable view of the role of private initiative. In general, the Government's development efforts have been characterized by austerity and self-reliance. Somalia joined the Arab League in February 1974. This step has significantly improved the country's foreign assistance prospects. 5. Somalia is located on the Horn of Africa with three thousand kilome- ters of coastline on the Gulf of Aden on the north and the Indian Ocean on the east. It has an area of 246,000 square miles. The topography varies from a hot and arid coastal plain, which gives way to sparsely wooded savannah, to rugged mountains, agricultural plateaus and lowlands of varying fertility and rainfall. Much of the country is arid; water supplies are scattered and often unreliable, and periodic droughts bring great hardship to both the people and their livestock. Only a small proportion of the land is arable. While geology suggests mineral resources, exploration is still in  -2- the early stages. Lacking other known resources, development plans center on agricultural and livestock development. However, progress in the develop- ment of stock-raising and agriculture will depend upon careful management of scarce land and water resources. 6. With an estimated per capita income in the order of US$80, Somalia is classified by the UN as one of the 25 least developed countries of the world. Of the total population of approximately three million, about two- thirds are nomads, who depend on livestock for their livelihood, and about 20-25% are farmers cultivating land along the Juba and Shebelli Rivers and in the higher rainfall northwest region. The small monetary sector of the economy provides only limited opportunities for employment. Apart from the traditional export of livestock, commercial agriculture is mainly cen- tered on the production of bananas for export, in which Italian concession holders are still important, and the production of sugar for the domestic market. Manufacturing and other sectors of the economy are restricted in their potential by the small size of the market, poor infrastructure, and the shortage of capital and entrepreneurial experience. No income distribu- tion data exist, but about 70% of the population lives at subsistence levels. Social services are still very inadequate; the school enrollment ratio is among the lowest in the world, barely reaching 16% of the elementary school-age population. Recent Economic Performance 7. There is little economic data on Somalia. Even basic figures such as GNP, population, number of livestock, or output of major agricultural crops are only our rough estimates. Therefore, it is extremely difficult to measure economic performance. 8. Due to favorable rainfall, 1972 harvests reached record levels and substantial food surpluses were purchased by the Government Marketing Agency. Poor rainfall in 1973 and a virtual absence of rain during 1974 have led to widespread crop failures. The drought has cut exports of livestock and bananas, the two largest earners of foreign exchange, and required large imports of maize, sorghum, rice and sugar.