Report No. 702-SO Somalia F UPY Recent Economic Developments and Current Prospects (In Two Volumes) Volume 1: The Main Report August 20, 1975 Eastern Africa Region Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank/lFC authorization. EQUIVALENTS Currency The basic monetary unit is the Somali Shilling. So. Sh. 7.51881 = SDR1 So. Sh. 6.295 = US$1 Weight All weights are expressed in kilograms and metric tons. Length and Area All lengths are expressed in kilometers and areas in square kilometers or hectares. CONTENTS SOMALIA: RECENT ECONOMIC DEVELOPMENT AND CURRENT PROSPECTS VOLUME I The Main Report Statistical Appendix VOLUME II Annex I - Public Finance and Fiscal Policy Annex II - The Agriculture Sector Annex III - The Livestock Subsector Annex IV - Public Management THE MISSION This report is based on the findings of an IBRD Mission, which visited Somalia in November/December 1974. The Mission comprised the following: Zafar Iqbal Chief of Mission Gottfried Ablasser Agricultural Economist C.P. Cacho Planning Expert Ved Gandhi Fiscal Expert Stevan,Silbiger Livestock Expert Rudolf Hablutzel was adviser to the Mission. TABLE OF CONTENTS Page No. Basic Data Map of Somalia SUMMARY AND CONCLUSIONS ....... .............. i - iii I. INTRODUCTION . ...... ..... 1 The Land and Its Resources ........... .......1 Political and Economic Development .......... 2 Economic and Political Objectives ........... 4 II. HUMAN RESOURCES ..... ........................ 4 Population and Employment ................. .. 4 Somalization and Manpower Availability ...... 6 Public and Private Sector Employment ........ 6 Self-Reliance and the Crash Program ......... 7 Education and Training ................ 7 Higher Education ....................... 10 Public Management .................1...... 11 III. RECENT ECONOMIC PERPORMANCE ..14 The Drought .......... ........................ 14 The Economic Setting . ....................... 15 Public Finance and Fiscal Policy ............ 15 Banking, Money and Credit ..... .............. 18 Commercial Banks ...... ...................... 19 Money and Credit Development .. ...... ........ 19 The Somali Development Bank (SDB) .... ....... 21 Foreign Trade and Balance of Payments ....... 24 External Assistance ........... ............... 28 Creditworthiness ...... ...................... 29 IV. RECENT DEVELOPMENT AND PROSPECTS OF THE MAIN SECTORS . ................................. 29 Agriculture ........ .......................... 30 Dryland Farming *......... .............. 30 Irrigated Agriculture ................ .. 32 Other Crops ............................ 36 The Agricultural Crash Program ........ . 36 Livestock ... ............................. 37 Fisheries and Fish-Processing Industry .. 42 Forestry .................. .................. 44 Wildlife and Tourism ..... ................... 45 Industry ......................... ............ 45 Mining ...................................... 48 Transport and Communication ......... ....... 48 TABLE OF CONTENTS (Cont'd) V. DEVELOPMENT STRATEGY AND ISSUES .... ......... 50 Development Strategy ..... ................... 50 Issues ........... ........................... 56 STATISTICAL APPENDIX ....... ................. 68 BASIC ECONOMIC INDICATORS / Area: 637,000 km2 Population: 3.1 million (approx.) in .1974 Population Growth: 2.6% per annum (1970-75) Distribution of land: Potentially cultivable 12.5 Suitable for grazing 54.9 Forest and scrub 13.8 Other land 18.8 Labor Force Characteristics: Sector % Agriculture and Livestock 80.0 Industry 7.0 Services 13.0 Total 100.0 Per Capita GDP: US$80.00 (approx.) 1969 1970 1971 1972 1973 7 --------- So.Sh. million ----------------7 Government Finance: Current revenue 272.3 288.8 336.7 406.o 446.4 Current expenditure 285.9 305.6 298.2 362.7 374.8 Current surplus -13.6 -.16.8 +38.5 +53.3 +71.6 Development expenditure N.A. N.A. 119.9 209.7 327.0 (Dec.) (Dec.) (Dec;) ('Sep.) Money and Credit:, 1971 1972 1973 1974 T ---- So.Sh. million ------------ Foreign assets (net) 166.2 293.4 248.8 '8.0 Claims on government (net) 27.8 -19.8 -45.8 0.7 Claims on private sector and public enterprises 297.4 398.1 673.2 926.5 Money plus quasi-money 391.1 516.5 608.2 7141.6 Percentage change 7 32 18 22 1/Population and growth rate, land distribution, labor force characteristics and GDP are estimates. No census has taken place in Somalia and there are no National Income Accounts. Balance of Payments: 1970 1971 1972 1973 1974 ( - So.Sh. millions --) (Estimate) Exports (f.o.b.) 228 272 395 358 344 Imports (c.i.f.) -326 -398 -503 -704 -985 Trade balance - 98 -126 -108 -346 -641 Services (net) - 35 - 5 - 29 - 77 - 92 Transfer payments (net) 92 137 83 180 281 Capital account (net) 85 44 159 199 384 Change in reserves (deficit -) 57 57 126 - 45 - 68 Merchandise Exports (average 1971-73) So.Sh. millions % Livestock 164.0 56.0 Bananas 68.0 23.3 Meat and Meat Products 25.0 8.6 Hides and Skins 18.0 6.3 Others 17.0 5.8 292.0 100.00 Rate of Exchange: So.Sh. 7.51881 = SDR1 So.Sh. 6.295 = US$1 External Debt, mid-1974 - US$145.0 million (disbursed) Debt Service Ratio (1974) - 5.6% IBRD 11512 w \ & '~~~~~~~~~~~~~~~~~~~~~48 MARCHI 19751 ` > -PEOPLE'S DEMOCRATIC 4A' REPUBLIC OF YEMEN 0/F. T. 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RT SAUDI ARABL' ELE/r Enlstig paved roods Bur .-\| 3|) y < *; ---Paved roads under Construction S U DAN)'~ J . >r / ct o /|| , , .B BravOc\L . Proposed paved roods : O F EhEN &oopre *1 <~~~~t~ rg- ..* Principal onpoved roods and tracks I \I IrE P'40't'Y d Atmado I . -.-r--r Railroads Ad FAirGl W jl~~~~~~~GelibX Rivers I .(_J Hoddurf Marsh urea jSOMALIA -a ~ ~~~~~~ .l; U Major htarborsp. _ U0 0 Minor horbors \~ ET HIOPIA4 / tNDlAN _ CHISIMAIO ')- lnternat,ono otr oIrpOrts2 i J * ~~~~~~~~Doesestrc airporrs ..A[OF DROUGHT AREA \s Jj G Gypsum , KENYA 0 200 000 600 /2 Th ,,.rrn o, ra u Regional boundso ins \ Ng" MILEO \xi/ n bp.**Je. olpsN,vrW - -Intrnon or boonduries 0f 250 500 750 10 ~~~~~~~~~u Z Z IdZ H..I I R44N- -6- TANANSNI1A L VSOK PROJECTAEA5 SUMMARY AND CONCLUSIONS 1. Somalia has been in existence for close to 15 years as an inde- pendent country. The present Government, which took power in 1969 has made very strenuous efforts to develop the country's economy. Its efforts have already begun to show results. While Somalia still remains a poorly endowed country with land as its main resource, and the bulk of its people engaged in subsistence livestock raising and agriculture, there have, nevertheless, been significant changes since 1969. In 1970, the Government formally an- nounced its adherence to 'scientific socialism'. Its major implications have been an emphasis on state control of productive enterprises and virtually exclusive reliance on the public sector for meeting its development objectives. A subsidiary element has been the nationalization or control of foreign enterprises in banking, commerce, industry and agriculture. 2. Till a few years ago, the country had been wholly dependent on external assistance not only for financing development but also for part of its recurrent expenditure. However, since 1971, the revenue budget has been in surplus and Somalia was contributing towards development expenditure at a growing rate till 1973. This process received a setback in 1974. 3. There are no national income accounts for Somalia, but available data indicate that domestic output in agriculture and livestock reached a peak in 1972. Output has been declining in 1973 and 1974 mainly on account of the drought which has now reached serious proportions. Many people in the affected areas have been rendered destitute and are moving into relief camps set up by the Government. Large numbers of livestock have also died. While this destocking has happened under unfortunate circumstances and would affect the output of the livestock sector in the immediate future, it offers a chance for introducing a comprehensive program for soil conservation, rangeland and pasture improvement and some reorganizing of livestock pro- duction on a more efficient and rational basis. Development priorities may need to be modified to rehabilitate the affected population. 4. Somalia's major exports are livestock and livestock products and bananas. Total exports increased sharply in 1972 when record levels both by volume and earnings were obtained for the major exports. Since then exports have been declining in volume but a proportionate decline in export earnings has been prevented due to higher prices for livestock and livestock products and a better average price for bananas because of a shift from lower-paying to higher-paying markets. There has been, as yet, no major structural change in the composition of exports but since 1969, meat, meat products and canned or processed fish are making growing contributions to total export earnings. Regarding future prospects, export of bananas can be increased further but the export products with the highest immediate growth potential appear to be fish and the further processing of hides and skins to more finished forms with a progressively increasing component of domestic value added. - ii - 5. The present Government launched its first three-year development program during the period 1971-73. This has been followed by a more ambi- tious five-year program (1974-78). The first program appropriately concen- trated on developing the infrastructure and a large proportion of planned investment was devoted to transport and communications with water resources development, irrigation, agriculture, industry and livestock playing a sub- sidiary role. Up to that time, Somalia's development performance had not been encouraging but performance in the three-year program, after a slow initial start, picked up rapidly. In financial terms, about two thirds of the program was implemented. About a third was financed from domestic resources. The five-year program envisages an average annual outlay almost two-and-a-half times the rate of investment attained in the last year of the previous plan and public savings at about three times that level. 6. There has been, in the last year, a dramatic improvement in Somalia's prospects of official capital inflows. Somalia became a full member of the Arab League in early 1974 and since then there is evidence of a substantial increase in foreign assistance. Although Somalia's public savings performance has been good, it is doubtful if it will be able to meet the ambitious domestic investment targets set in the Plan. However, given the trend of foreign capital inflows, it is quite possible that the Plan's financial targets will be met and the shortfall in domestic savings more than made up through external assistance. 7. The five-year development program (1974-78) is basically an output- oriented program with the largest investment planned for irrigated agriculture. The resource constraint having been largely removed, in Somalia's drought- prone environment, this strategy is justified. Large capital-intensive pro- jects in irrigation can be put up on a turn-key basis thus relieving pressure on local manpower and would, when completed, provide a relatively stable base for increases in agricultural output. Investment in industry is also to be expanded, partly to rehabilitate existing projects but mainly to put up comparatively large import substitution projects based mostly on domestic raw material. Transport and communications still continue to account for a substantial portion of planned investment. On the whole, the strategy adopted is appropriate although some priorities and phasing of implementation may need to be reviewed. The major shortcoming in the present Plan is the relatively low priority given to dryland farming and the overall development of the livestock sector. Dryland farming should be given greater attention, particularly for laying the groundwork for future development, and in the livestock sector a major, ecologically sound range management and pasture development project should be put together on a very high priority basis. Such a project could also be integrated with dryland farming, soil conservation and rehabilitation of the drought-affected population. 8. Somalia's basic problem today is not so much the availability of resources but the management infrastructure and manpower needed to identify and prepare projects and to implement the development program. Somalia is still extremely short of the necessary skills. Basic data on most aspects of the economy are lacking so that economic policy cannot be related to other - iii - macro-economic indicators such as growth, employment, the national budget and the balance of payments. It is vital for the Government to develop the necessary statistics and economic intelligence without which it would nlot be possible to formulate plans or conduct a sound management of the economy. One of the major issues in the field of economic policy is appropriate pri- cing. Because of the Government's strong public sector bias, many prices throughout the economy are administratively determined. Such pricing poli- cies need to be kept under review to ensure that the Government's objectives of increasing output in the economy as a whole as well as the capabilit:y of public entities to contribute surpluses for development are being met. 9. Public management, although substantially improved since the pre- sent Government took power, needs to use scarce manpower resources more effectively by rationalizing the structure of Government to avoid dupllcation and proliferation of a large number of uncoordinated agencies. The whole question of public entities in the productive sectors needs to be reviewed and their performance assessed in order to enable them to discharge their functions efficiently in the national interest. The success or failure of Somalia's development effort will depend upon its ability to generate the necessary manpower resources. This should continue to receive the highlest priority. Gaps existing at present and those likely to arise, until such time as Somalia develops its own capability, may be filled through appropriate technical assitance from abroad. 10. To sum up, although Somalia still remains a poor country without much natural resources, and with organizational problems and manpower con- straints, it has given a very creditable performance, in recent years,jin its attempts to achieve economic growth which would benefit the bulk of itis people. With the dramatic improvement in its prospects of resource availability for development, if the manpower constraint can be overcome, a continuation of the policies of austerity and self-reliance which has been-a marked character- istic of Government action, and, combined with appropriate economic pollicies, should enable Somalia to achieve its development objectives. INTRODUCTION The Land and Its Resources 1.01 Somalia lies in the North Eastern corner of the African continent and is placed geo-politically between the Peninsula of Arabia on one side and Africa on the other. Towards the North and East, it faces the Arabian Peninsula and the Indian Ocean. In the West and South, it borders on Ethiopia and Kenya, and in the North West with the French territory of Afars and Issas (French Somaliland). Its longest frontier is with Ethiopia. 1.02 Somalia lies between the latitude of 110 30' North and 10 30' South and has an area of over 637,000 square kilometers (246,000 sq. miles). In the Northern region and parts of the East, the relief is broken by chains of mountains. But most of the country consists of plateaus and steppe lands sloping from the Ethiopian highlands to the Indian Ocean in the East arid the Gulf of Aden in the North. There is a relatively broad coastal plain in the South. 1.03 From the point of view of rainfall and climate, Somalia may be divided into three regions. In the Northern and particularly North Western highlands, average rainfall in certain areas exceeds 400 mm per annum: although the predominant determinant of climate are the monsoon winds, these areas enjoy cool winters and a semi-Mediterranean type of climate. The central region of the country and the northern sea coast are mainly hot and arLd, and the annual precipitation over much of the area ranges from 50 to 150 mrm only. The South has a relatively higher precipitation, and an equatorial type of climate. The two main rivers of Somalia, the Shebelli and the Juba, fLow through the South. It is this inter-riverine area which has the highest rainfall; but even here on an average it is less than 600 mm annually. Over much of the country, there are two main rainy seasons. The principal rain falls in the 'Gu' season from April to June. There is a subsidiary rainy season, the 'Der', from October to December. 1.04 Most of Somalia is therefore classified as arid to semi-arid, and as a whole the country presents a harsh environment. Rainfall is not only low, but also irregular, so that the risk of drought is ever present. Ground- water resources of adequate quality which could have been a supplementary source of water are also limited. However, about 12% of total land area (8 million ha.) has been roughly classified as potentially cultivable. 1/ Out of this, about two million ha of usable land are estimated to be in the inter- riverine area (between the Shebelli and the Juba Rivers). With an average annual rainfall of 400-600 mm, it could be considered suitable for dryland farming. Up to 300,000 ha have been estimated to be potentially irrigable by the two rivers. As against potential availability, in the country as a whole, it is estimated that about 550,000 ha are cultivated under dryland farming and another 100,000 ha have some manner of either controlled or uncontrolled 1/ The basis on which this classification has been made is not known. It has therefore to be taken with a certain degree of caution. -2- flood irrigation from the Juba and the Shebelli Rivers. Other rivers and streams are seasonal torrents whose waters can seldom be utilized effectively. 1.05 Somewhat more than half of Somalia's lands are suitable for extensive stock production. Cattle predominates in the wetter South and goats and sheep in the central regions and the North. Camels are ubiquitous and are the main- stay of nomadic existence. The potential for livestock production can be improved through improving pasture management, animal health, and water supplies and removing tse-tse fly infestation in the inter-riverine area. 1.06 Somalia has the longest'coastline of any country in Africa and, in her position at the Horn of Africa, is strategically placed to fish in both the Gulf of Aden and the Indian Ocean. However, the indigenous fishing industry has remained undeveloped as much of the coast line has no populated hinterland; the Somali people being of nomadic origin still largely engage in raising livestock, have a preference for meat, and because of weather conditions, fishing is mainly a seasonal occupation between October and March. 1.07 Mineral resources are not yet making any contribution to Somalia's economy. Gypsum of good quality is available in substantial quantities but presents marketing problems, while uranium, which appeared promising a few years ago, poses problems of extraction and transportation. Interest in oil exploration which had begun to decline by 1973 has been given a stimulus by recent developments in oil prices, but nothing of significance has so far emerged. Somalia therefore still remains a relatively poorly endowed country with land as its main resource. Political and Economic Developments 1.08 Somalia was constituted as an independent republic in July 1960 by merging the Italian Trust Territory of Somalia and the former British Protectorate of Somaliland. The inhabitants of Somalia are predominantly of Hamitic stock with significant minorities of Bantu, Arabs and Asians, and some remaining Europeans, mainly of Italian origin. The Somali people belong to the group of Eastern Hamites which are said to stretch southwards from Egypt. The Somalis, however, now constitute a distinct linguistic and cultural group mainly inhabiting what is now Somalia. People of the same group can also be found in French Somaliland (now the French Territory of Afars and Issas). Elements of the nomadic population inhabiting the contiguous areas of Ethiopia (Ogaden) and Kenya are also of Somali origin and many have a seasonal migration pattern between Somalia and these countries. Because of this population distribution, there has been a history of border disputes between Somalia and its eastern and southern neighbors which has lead to an undue concentration of Somalia's meager resources on defense. However, in 1967 the former Shermarke/Egal regime reached an understanding with Ethiopia and Kenya that force would not be used to solve their border problem. Although border hostilities have declined, defense, nevertheless, remains a major preoccupation of the Somali Government, and "enhancing the country's defense potential" 1/ is a declared budget priority. 1/ "Budget Law for the Year 1973" in Bolletino Ufficiale (21 Jan 73) p. 18. - 3 - 1.09 A generally deteriorating political and economic situation came to a climax with the assassination of the President of the Republic, Abdirashid Ali Shermarke, in October 1969. Following closely on this, on October 21, 1969, a group of army and police officers took over power in a bloodless coup, suspended the constitution and established a Supreme Revolutionary Council (SRC) to rule by decree. 1.10 Since the dissolution of the legislature, the SRC has been the highest decision-making body in the country. The Council consists of IPresi- dent Major General Mohamed Siad Sarre and two Vice Presidents. It has a total membership of 21, all of whom are army or police officers. Government mini- stries are under the control of the Secretaries of State. These, sittiLng under the chairmanship of the President, constitute the Council of Secretaries or Cabinet. 1.11 There was an abortive revanchist plot in Many 1971, but since then there has been no serious challenge to the present government. Currently, there appears to be a tendency towards increased civilianization and pro- fessionalism in the central government machinery, and the number of anned forces officers as heads of ministries has declined. Today there is only one Secretary of State from the police and armed services. A major organiza- tional change recently introduced has been the abolition of the Ministry of Planning as a separate entity and its absorption into the President's Office. This presumably shows the greater importance being given to planning and economic management. 1.12 To bring efficient administration to all parts of the country, the SRC has also established revolutionary councils in regions and districts and appointed a military governor to be in charge of each region. The number of regions has been increased recently from eight to fifteen and there has also been an attempt at some degree of financial devolution, and a greater involve- ment of the regions with development. A few public sector enterprises are now under regional ownership and management although still with a strong element of tutelage and control from the center. 1.13 On the international front, Somalia, in view of its geo-political situation, its history, religion and culture, serves as a meeting poirnt for Africa and the Arab world. Somalia had already been playing an active role in the OAU and in 197A President Siad Barre became chairman of that organi- zation, but its relations with the Arab world remained close. As stat:ed by the Government after becoming a member of the Arab League, "3omalia's histori- cal role in this respect is a complex one, but we shall spare no effort to strengthen the solidarity and cooperation between Africa and the Arab world .... Somalia will be the bridgehead uniting the Africans and the Arabs." 1/ Somalia's membership in the Arab League on February 14, 1974 was followed by the holding of the OAU Annual Meeting in Mogadiscio in the middle of 1974. However, with respect to Somalia's development prospects its membership of the Arab League, following closely on the emergence of the oil exporting Arab States as a major source of investible funds, is of great significance. 1/ Ministry of Information, Somalia and the Arab League, Mogadiscio, June 1974, p. 37. -4- Economic and Political Objectives 1.14 At the time it took over power, the Government's main objectives were the eradication of tribalism and corruption; the promotion of economic development through the efforts of the people and the exploitation of the country's natural resources; the achievement of social justice and the right to work; and finally, the elimination of illiteracy and the development of a script for the Somali language. In 1970 the Government formally announced its adherence to "scientific socialism." In practice, apart from a more pronounced emphasis on egalitarianism and social justice, its major economic implications have been an overwhelming, if not exclusive, reliance on develop- ment through the public sector, control or nationalization and take-over of foreign-managed or controlled enterprises in banking, agriculture and industry, and an attempt to develop the small-scale private sector through the establish- ment of cooperatives in agriculture, fishing and industries. In the past, this policy was associated with a negative attitude towards (larger-scale) private investment, although currently the Government appears to be taking a more practical view of the role of private initiative in development. Within this framework, economic and financial policies of the Government have been characterized by austerity and an emphasis on self-reliance not unmixed with pragmatism. II. HUMAN RESOURCES (Manpower, Employment, Training and Public Management) Population and Employment 2.01 The first comprehensive census of population as well as livestock took place in early 1975 with assistance from the UN. The organization created for the crash program for rural literacy in 1974 took over the task of enumeration. The data of the census are being processed and the results should be available later during the year. 2.02 A manpower survey conducted in 1963 estimated total population at 2.3 million of which about 600,000 were in the North (Hargeisa and Burao), 300,000 in the central regions (Migiurtinia and Mudugh) and about 1.4 million in the South. Another manpower survey was conducted in 1968 and the latest one in 1971. Its report was published in 1972. 2.03 According to the 1971/72 manpower survey, total population is pro- jected at about 3.1 million in 1974, implying a growth rate of about 2.6% per annum between 1970 and 1975. The change in occupational structure be- tween 1960 and 1980 has been roughly estimated as follows: Distribution of Labour Force by Industry Group 1960 to 1980 Agriculture/Animal Total Husbandry Industry Services Employient (000) % (000) % (000) % (000) 1960 812 87.85 41 4.56 71 7.70 924 1970 897 82.75 70 6.46 117 10.79 1,084 1975 1,006 80.00 87 7.1 150 12.90 1,243 1980 1,115 78.80 109 7.7 191 13.50 1,415 Derived from data provided in Manpower Survey Project for Somalia, 1971/1972. The above projections have to be viewed in the light of the fact that basic quantitative data for Somalia are lacking. The implied growth rates for employment between 1970 and 1975 are 2.3% for agriculture and animal husbandry, 4.5% for industry and 5% for services. These projections are roughly in line with the currently estimated rate of population growth. 1/ 2.04 In view of recent changes in Somalia's economic prospects, a fresh survey would probably be necessary. Taking into account the proposed pattern of investments in the 1974-78 Plan, it appears that employment in agriculture may grow at a rate somewhat faster than animal husbandry and related activities. There also appears to be an increasing trend towards some form of mixed farming together with livestock as against pure stock raising. Rough estimates in- dicate that probably about 35-40% of the population is still purely nomadic; 25-30% is engaged in some mixture of stock raising accompanied by seasonal cultivation, and about 15-20% is engaged in sedentary cultivation mainly in the south, where rainfall is higher and irrigation water is also available from the rivers. The balance of the population is in urban centers. 2.05 The drift towards increased urbanization represents a process of major demographic and occupational change. This movement seems to have been overwhelmingly concentrated in Mogadiscio and current estimates of population for the capital range from 400,000 to 600,000. 2/ Other urban centers and townships have also attracted population but at a much slower rate. If the drift into Mogadiscio is to be slowed down, the Government would have to adopt a set of conscious policies for dispersal of employment opportunities to other towns and regions of the country. 1/ Participation ratio of about 39% will remain practically unchanged. See Table 2-2. 2/ The population estimate of 275,000 for Mogadiscio given in the Manpower Survey appears to be low. -6- Somalization and Manpower Availability 2.06 A normal concomitant of national independence is the desire to take control over the economic, political and social development of the country. In Somalia, nationalization was enacted in three phases. The most significant first step was taken in May 1970 when business in the fields of banking, electric power generation and distribution, import and wholesale distribution of petrol, manufacturing of sugar, export of bananas and the development of the banana industry was nationalized. The second act of nationalization (January 1972) covered the retail distribution of petroleum products-and lubricants, distribution of medicine, import and distribution of cinemato- graphic films, wholesale distribution of sugar, and import and wholesale dis- tribution of tea, coffee and some other items of food. The third act of nationalization (October 1972) covered educational insitutions and publishing enterprises. 2.07 In the private sector, the bulk of the businesses in terms of numbers (89.6%) is now Somali-owned but the foreign-owned and managed sector still makes an important contribution to employment. In 1971, large establishments in Mogadiscio alone provided employment to over 2,500 workers. While Italians are concentrated more in the processing of fish and meat and the cultivation of bananas, Arabs and Asians are mainly in commerce. Due to the shortage of experienced and qualified personnel, foreign nationals are continuing to play a diminishing but useful role in Somalia's development effort, and the Govern-- ment, while pressing for Somalization, has in general taken a practical view of the matter, and the original staff of nationalized enterprises has been retained for a reasonable period of time. About 6% of the high level manpower was foreigners as of the end of 1971, and as a whole the private sector employed about 1,500 foreign workers (about 1.4% of total employment) mainly in the skilled categories. Public and Private Sector Employment I/ 2.08 The various acts of nationa]ization between May 1970 and October 1972 have shifted the balance towards public sector employment, and it is estimated that this trend will be further emphasized after the Government's declaration of adherence to "scientific socialism." In 1971, it was estimated that the public sector, including the crash program (discussed in para. 2.09), accounted for about 38% of total (mainly non-agricultural) employment, but by 1976, it would account for nearly 50%. Details are given below. 1/ In October 1972, a new law was promulgated requiring centralized recruit- ment to all jobs in the public sector as well as in private companies. The Establishment Division and Directorate of Personnel have been em- powered to prescribe the manner of advertising for applicants. Certain other preconditions of national service and participation in other orien- tation courses have also been laid down. A special Recruiting Board has been set up on which the government agency or private company desiring to fill a vacancy is represented. -7 - EmpoyInent /2 Changes 1971 1976 Public Sector /1 35,273 69,569 34,296 Crash Program 5,900 13,900 8,000 Private Sector 67,204 84,476 17,272 Total 108,377 167,945 59,568 /1 Includes Autonomous Agencies and municipalities. /2 Excludes (private) employment in agriculture. Differences with theX table under para. 2.03 are mainly accounted for by "unemployment" and miLitary personnel. Source: Manpower Survey, Vol. I, 1972. Self-Reliance and the Crash Program 2.09 Crash programs are one of the means of implementing the policy of self-reliance. Such schemes have also made some contribution to employment. The objectives of the program have been, firstly, to instill proper attitudes towards work and a belief in the dignity of labor of all kinds and, secondly, to use human potential to the fullest extent of its capacity. The Government has demonstrated its ability to stimulate popular involvement and organize participation in such activities. While the primary objective is nation- building, the programs may be divided roughly into two categories, namely, one in which the ideological component of demonstrating the dignity of labor is uppermost and the other in which employment-creation through the utilization of human resources in labor-intensive projects in agriculture, rural develop- ment, road building, etc., is the predominant motive. In the first type, i.e., the ideologically oriented category, citizens, students, youth organ- izations, civil servants and members of the armed services are mobilized to undertake specific tasks on a more or less 'voluntary' basis (e.g., stabili- zation of sand dunes at Merca and to some extent, the literacy campaigns). In the second type, typified by the Agricultural Crash Program (ACP), the employment-creation aspect is uppermost although participants are termed 'pioneers', and the objectives of the-program are fairly broadly conceived. The ACP is discussed in some detail at Annex II (paras. 8.01-8.09) and at paras, 4.19 and 5.26 in the Report. Education and Training 2.10 Due to recent international events the resource availability to Somalia has improved significantly, however, manpower remains a major con- straining factor in Somalia's development. Education and training will have to play a vital role in overcoming this constraint. Unfortunately the - 8 - Somali education and training sector has significant weaknesses both quanti- tatively and qualitatively. Quantitatively, enrollment at the primary school level in 1972-73 was about 16% of the relevant age group falling to under 4% at the secondary level. Further, 83% of secondary school enrollments are concentrated around the main towns of Mogadiscio and Hargeisa. Educational opportunities in rural areas, particularly for nomads who constitute about two thirds of the population, are negligible. There is a shortage of skilled personnel of all kinds; for example, the present production of secondary school graduates falls so far behind demand that Government directs all the schools' output either into higher education or essential employment in the public sector. Qualitatively, most school teachers are unqualified by government standards; textbooks, teachers guides and vocabularies in the official script are lacking, and science equipment is so inadequate as to render the teaching of scientific and practical subjects largely ineffective. 2.11 The low priority granted to education before 1971 is reflected in a literacy level of only 5%. However, since 1971, much greater emphasis is being placed by the Government on education and training intended to benefit the population as a whole; a substantial effort is being directed towards increasing literacy. The adoption of the Latin script in 1972 for the Somali language (which is in the process of development) is a major factor enabling the Government to introduce a uniform teaching medium to replace gradually the former diverse use of Arabic, English and Italian. 2.12 Under the 'crash program' a massive literacy campaign was launched in March 1973 whose target was to achieve 100% literacy by 1975. Urban population centers were taken up during Phase I of the campaign and an attempt was made to reach 800,000 people during this phase. Citizens, students, the 'vanguard youth', civil servants and members of the armed forces were pressed into service as teachers. A total of 8,000 teachers was mobilized for each course covering a three-month period. 1/ A follow-up of the 'crash program' would be maintained through non-formal adult education centers, whose curriculum would also include some training in nutrition, hygiene and citizenship. While it is difficult to assess precisely the numerical effectiveness of the program, there is little doubt that it was a very commendable effort. 1/ The size of classes varied from 30-40 in Mogadiscio to 10-20 in other areas. Chairs and desks and formal classrooms were dispensed with, and the only technical aid used was a blackboard. The major constraints were daylight and the weather when artificial light or indoor arrangements were not possible. Classes were generally scheduled between 3:00 p.m. and 10:00 p.m. Examinations were held at three-monthly periods and literacy certificates issued to the successful. An estimated 110,000 have been added to the literacy list every three months. An evaluation carried out in April 1974 assessed that by the end of that year about 600,000 to 800,000 additional people would have achieved literacy. - 9 - 2.13 Phase II of the crash program for literacy was designed to reach the rural areas and the nomadic population. As this was a more ambitious and difficult program with a target of 1.0 million, a greater organizational effort was needed, and in addition to the previous teachers, school children in grades 6 and 7 and those in forms 1 and 2 at the secondary level were also assigned this task. For these children, schools were closed for one year. About 20,000 teachers in all were made available. Preparation for mobilizing public opinion and laying down the organizational and logistic framework was commenced in February 1974. The program was launched on the 1st of August 1974 and was expected to last for about six months when its teaching personnel were to be absorbed into the census operations, mainly as enumerators for the following two months. The rural crash program has been rather more expensive than envisaged and no evaluation of the benefits and costs of this venture is as yet available. 2.14 Recent estimates of average annual output of the educational system as related to needs over the period 1972-83 were as follows: Average Present Requirements Output Shortfall Post Secondary 600 200 400 Secondary 2,500 1,500 1,000 Intermediate 10,000 5,000 5,000 While these estimates of needs provide only an order of magnitude, they nevertheless point up the present difficulties with regard to trained manpower in implementing Somalia's developement program, and bring out the need for expansion at all levels. Such expansion is taking place. 2.15 The five-year development program (1974-78) envisages an investment of So.Sh. 191.0 million or about 4.95% of the total investment program. About 70% of this investment is expected from external sources. Planned investment in 1971-73 was So.Sh. 48.6 million which was about 4.87% of total planned outlays during that period. However, only 60% was actually spent compared to an average of 66% for the plan as a whole. While there has been little difference in the proportionate amount going to education, the. increase in absolute terms is fairly large. What is important is the emphasis on education which would influence the determination of the Government ro implement the plan. The planned outlays have been approximately allocated as follows: - 10 - (millions) (i) Primary and Secondary 1/ - So.Sh. 48.5 (ii) Technical and Vocational - 40.9 (iii) Higher Education - 50.2 (iv) Others - 51.4 Under (iv) above is included an amount of about So.Sh. 18.0 million for nomadic education and about So.Sh. 13.6 million for various teacher training programs. 2.16 Somalia has been receiving external assistance for developing its education and training sector. There have been two IDA credits covering teacher training, improvement of secondary schools and technical and commer- cial schools and an innovative nomadic training center program. North Korea is providing assistance for increasing the supply of technicians and skilled workers, and the ILO has a project for improving vocational skills. 2.17 There is a fairly substantial emphasis on vocational and technical education to the extent that some concern has been expressed that there may well be an over-emphasis compared to the absorptive capacity of the Somali economy. 2/ These programs are also particularly difficult to implement because Somali-speaking teachers are required for imparting instructions effectively. Substitution with expatriate teachers is unsatisfactory because of language difficulties. Higher Education 2.18 The Somali National University has been developing gradually- since independence. Initially it started by providing a two-year course of instruction in Law and Economics. the students then proceeding to universities in Italy to complete their studies. By 1969 it had begun to give full university courses and grant degrees. However, by 1974 it had only produced graduates from three faculties -- 64 in Jurisprudence, 45 in Economics and 146 in Education. 1/ Educational enrollment is structured into two steps: (i) eight Years elementary, and (ii) four years secondary. Children enter at about age seven and those who go all the way through leave at age eighteen. There is a movement to lower the age of entry by one year with a corresponding lowering of age to seventeen at the other end. 2/ The polytechnic being put up with North Korean assistance will provide enrollment for 800 students, 200 for polytechnic (i.e., technicians) and 600 for technical instruction to produce skilled workers in building, electrical, mechanical and agricultural engineering. - 11 - 2.19 During the period 1974-78, the National University is expected to play a much more significant role in the further development of the country, by providing teachers and professional and tecinical personnel necessary in many important fields of activity, as well as Somalization of th-e teaching staff of the University itself. This is-planned to be accomplished by opening new faculties, increasing intake into existing ones and correspondingly expanding the physical facilities such as teaching space, laboratories, etc. In addition to the three faculties nentioned earlier, the University would now also have faculties of Agriculture, Mledicine, Veterinary Science and Sciences (including Engineering, Chemistry and-Geology). Table 2-7 shows projected numbers of graduates from each of the faculties for the period 1974-78. However, dependence on foreign-trained Somali nationals as well as expatriates may have to continue for some time. Public Management 1/ 2.20 The public service is required to play the most vital role in im- plementing Somalia's development progranm. The state of the public service when the present government took power was probably no better than that inherited at independence some nine years earlier. The civil service was not unified and followed the respective systems in the North and South instituted by the earlier colonial powers. Communications between the two parts of the country were further impeded by the existence of two official languages (English in the North and Italian in the South). While the adminis- tration continued to be geared to the narrow objectives of preserving law and order, nepotism, corruption and indiscipline had acquired a new significance in the period immediately following independence. By 1968 it was becoming clear that the single most important factor likely to affect development would be the deficiencies in the administrative machinery of government. lHowever, no progress was possible or likely without political commitment to the goals of development and a clean and efficient system of administration. 2.21 Since socialism was formally adopted by the new gpvernment at a fairly early stage (1970), it also called for a greatly enlarged public management system. The measures so far taken fall into the broad areas of remedial action, rationalization of structure and organization, installation of systems and manpower development. Remedial action was primarily concerned with the unification of the public service, and the removal of corruption and nepotism. These were to be achieved largely through the introduction of uniform terms and conditions of service throughout the public sector under a highly centralized personnel system. Unification has also been substantially helped by the replacing of the two official languages -- English and Italian (neither of which was universally understood) -- by the Somali language for which the Latin script was introduced in 1972. While this system seems to be attaining its objectives, there appears to be a need to explore ways of making it more flexible in the interest of improved discipline and efficiency without impairing achievement of these objectives. 1/ See Annex TV for a more detailed coverage. - 12 - 2.22 The more significant structural and organizational changes have concerned the organs for making national policy, accommodating an enlarged public sector, and the decentralization of public management. The Supreme Revolutionary Council, comprising 21 armed forces officers, has become the supreme decision-making and law-enacting body. It is assisted in its executive functions by a Council of Secretaries. While each secretary is the "political" head of a ministry, secretaries have tended to be technocrats. Regular meetings of the two bodies provide opportunity for sustained coordination and for speed in decision-making. 2.23 The number of ministries, however, has grown from 11 to 20 in the last decade, and the choice of state ownership of the means of production has led inexorably to the very rapid growth in the number and coverage of Autonomous Agencies (AA). This proliferation of ministeries and agencies has placed a considerable strain on Somalia's management resources, and is partly responsible for the rapid turnover in top and middle management positions, with its attendant problems. 1/ 2.24 Autonomous Agencies personnel are part of the national pool of public servants, and rules governing such other matters as financial management are so similar to those of central government departments as to raise questions about the extent of autonomy of these agencies. Although most produce goods and services for the market, there seems to be an absence of efficiency criteria to guide their operations. The absence of management authority to engage, discipline and provide incentives for workers seems to call for review to ensure the maintenance of worker discipline and productivity. Also, there appears to be a need to study the structure and operations of ministries and AAs with a view to obtaining better co-ordination and also eliminating dupli- cation and overlapping of functions; this should also ensure that Ms are linked to appropriate ministries. 2.25 The decentralization of public management to regional, district and village councils is a significant development. Its more important contribu- tions are expected through improved efficiency and increased mobilization of both human and material resources, via involvement of communities in planning and executing development projects. It also provides machinery for coordination of all operations within the local government body. A key to the long-term success of decentralization is the influence that community representatives are able to exercise given the advantage that the invariably more experienced ministry representatives who are ex officio members of local councils are likely to have for some time to come. 2.26 Perhaps the most critical constraint to development is the shortage of skilled manpower. The Government's concern for this is reflected in the changed role of the university from a supplementary to the primary source of skilled manpower, the rejuvenation and reorientation of what is now the Institute of Development Administration and Management (SIDAM), and increased emphasis on pre-service and in-service training at the ministry and agency levels. Given the limited output of the university over the next few years, 1/ Annex IV - para. 10. - 13 - it appears that the number of overseas scholarships has been reduced too drastically when we take into account the new policy of ensuring an increas- ing number of highly trained entrants to the labor force. The situation is, therefore, probably worth reviewing. Also, if SIDAM is to make a substantial contribution, its role should be clearly defined and the various committees concerned with its operations appointed at an early date. 2.27 By comparison with efforts in other fields of public management, planning, coordination and control have had inadequate attention and are in urgent need of strengthening. This is all the more important as the public sector has been chosen as the major instrument of development. These activities have therefore a larger and more critical part to play than in an economy more oriented towards private initiative. The Planning Commission (PC) has not been notably active. Some structures like Planning Units (PUs) have not been established, and others such as the former Ministry of Planning and Coordination (MPC) and the Ministry of Finance are established but lack the strength to be fully effective. The recent step of absorbing the MPC into the Presidential Office should improve coordination. To fill in the gaps in the 1974-78 Development Program, urgent attention should be accorded to policy studies and project preparation. At the same time, annual planning needs to be made more effective. Monitoring of plan execution is still inadequate and needs substantial improvement. Project identification and preparation capabilities are extremely limited. 1/ High priority must be given to the staffing of these organs, and necessary technical assistance obtained for the agencies responsible for planning and coordination and the Ministry of Finance to help establish central economic work on a sound basis and provide in-service and on-the-job training. 2.28 Financial discipline should be more effective in order to obtain adequate revenue generation from public entities and to prevent diversion of foreign capital inflows which are actually meant for specific projects but once merged with governmental balances are diverted to other, presumably lower priority, uses, e.g., construction in the public sector. 2.29 While Somalia has made considerable progress in this field, to assist in further developing the required capabilities in public management, a high priority technical assitance package would be needed. (i) to strengthen the two crucial central organs for development management, namely, the Direc- torate of Planning and Coordination and the Ministry of Finance; (ii) provide on-the-job training and training through courses conducted locally where practicable in collaboration with the Somali Institute of Development Administra- tion (SIDAM); (iii) introduce cost systems into the autonomous agencies along with Appropriate efficiency and profitability criteria. 2/ 1/ Annex IV - para. 70. 2/ Annex IV - Appendix I gives an outline of technical assistance needed. - 14 - III. RECENT ECONOMIC PERFORMANCE The Drought 3.01 The failure of rains over certain areas and the generally lower rainfall in many other parts of the country in 1973 had already begun to cast their shadow over Somalia's economy. The continuation of the drought into 1974 has now turned into a major disaster in large parts of central and northern Somalia, from which it will take the economy some time to recover. While it has already affected economic performance during 1973 and 1974 it may now be expected to exercise a retarding effect for the next few years also. 3.02 According to the Government the existing drought has already affected seven regions in the north and central areas and is expected to affect four more in the southwestern part before the arrival of the next rains in April/May of the year, by which time the famine is expected to reach its peak. The affected population has been classified into two categories (i) people who have not as yet lost all their livestock and (ii) people who have totally lost all their livestock and who are currently in reception camps where they are provided with food and water, shelter, medical attention, etc. During the months of November and December, refugees were flowing in at the rate of 2,000 or so daily and the rate was going up progressively. By March it was estimated that 4,000 to 5,000 people would be coming in daily into the camps. However the inflow seems to have levelled off at around 250,000 by mid-May 1975, after which the number of people in camps is expected to decline over the coming months. 3.03 Losses in livestock are expected to be fairly high but reliable esti- mates are not yet available. The loss in animals also means losses in current production of milk, meat, and by-products, and a loss of future output. Losses in crops since 1973 have been estimated by the Government at 120,000 tons of foodgrains (see para. 4.06 and accompanying table on marketable surplus). The exportable oujtput of bananas and (output of) sugar was also affected. 3.04 While it is a little early to evaluate the exact loss of animals, the drought is of serious proportions and may have proloniged effects on the economy. The main immediate consequence is the diversion of resources from investment to meet the essential consumption requirements of the affected population. If a large number of people are left without means of livelihood, the development program fornmulated for 1974-78 would need to be revised, or enlarged, in the light of the emerging situation. Since most of the food re- quirements will be imported, a large increase in the trade gap is forecast for 1975, from about So.Sh. 600 million in 1974 to about So.Sh. 890 million in 1975. I/ 1/ Data provided bv Somali Authorities. - 15 - The Economic Setting 3.05 Since the take over by the new Government in October 1969, Somalia has put up a creditable performance in economic development but it still remains a poor country with a simple and largely non-monetized economy depend- ing on subsistence from livestock and agriculture. No valuable natural resources have so far been revealed, and while manufacturing industry has made some progress in the last three or four years, it is still relatively undeveloped. Nor does the low per capita income and small population provide a good base for the rapid expansion of industry in the near future. 3.06 Since 1969 there has been a shift in the relative importance of the public and private sectors in the economy. In the monetized sector, in iustry is overwhelmingly controlled publicly: banking, insurance, shipping andl much of the import trade have been nationalized and recently the export trade in hides and skins. The commercial production of bananas and the livestock trade is mainly in private hands, but the export trade in bananas is controlled by the Government, and there is also a greater degree of government regulation of livestock exports. 3.07 There have been some improvements lately, but statistical infobrmation on Somalia is still extremely weak. There are no national income accounts, and even such basic data as population, number of livestock or output oE major agricultural crops are lacking. The first population and livestock census has taken place early in 1975 with support from the UNFPA, but its result are not yet available. In the absence of such basic information it is difficul|t to make a quantitative analysis of the economy and an assessment of economic per- formance has to rely largely on rough estimates and indirect indicators. Public Finance and Fiscal Policy 3.08 Following independence, Somalia had a history of budget deficits for financing current expenditure. The salient features of Somalia's Centrlal Government budget were its continuous though diminishing dependence on Italian budgetary support, and its complete reliance on external assistance to finance development expenditures. However the period 1960-69 saw a decline in the total budget deficit from So.Sh. 51.2 million to So.Sh. 13.6 million in 1969.j 3.09 The present Government which took over power in 1969 placed great emphasis on self-reliance and has succeeded in converting earlier deficits into increasing surpluses for investment -- at least up to 1973. The table below summarizes the position of revenues, expenditures and development outlays. - 16 - Revenue and Expenditure 1969 1970 1971 1972 1973 1974 /1 (So.Sh. Million) Current Revenues 272.3 288.8 336.7 406.0 446.4 575.3 Current Expenditures 285.9 305.6 298.2 362.7 374.8 449.5 Current Surplus -13.6 -16.8 +38.5 +53.3 +71.6 +125.8 /2 Development Expenditures N.A. N.A. 119.9 209.7 327.0 N.A. /1 Budget estimates. /2 Revised estimates indicate a surplus of around So.Sh. 70.0 million. Source: Ministry of Finance, Government of Somalia. The changeover from a deficit to a surplus has been brought about by a combi- nation of austerity measures and an increase in direct taxation. For instance, an absolute cut in the salary levels of all government employees reduced the size of the current budget by 4% in 1971. The imposition of additional taxes, which included the 'development levy', a graduated tax on income from employment in non-government sectors, a turnover tax on public entities and a streamlining of profit shares from these enterprises, was alone estimated to provide 20% of total revenues in 1974. In addition, the Somali Government has also raised certain rates of import duty particularly on beer, liquor, gasoline and footwear, and has doubled the rate of excise duty on sugar between 1965 and 1974. 3.10 As it stands at present, the 'average' tax burden in Somalia seems heavy by international comparisons. Assuming a population of about 3.0 million, the per capita tax is about $26.00 per head. National income accounts for Somalia do not exist but on the basis of rough estimates, it appears that tax revenues are of the order of 35% of GDP. 1/ While these figures cannot be taken as accurate, they nevertheless provide an order of magnitude and show that Somalia's tax efforts are already fairly substantial: any large increases from this source by a simple raising of rates may not be possible. 3.11 While the trend of fiscal performance has been very encouraging up to 1973, the performance in 1974 has been disappointing. At the time of budget preparation, the Government had estimated a revenue surplus close.to So.Sh. 126.0 million. In reviewing the position on the basis of available information in November 1974, it was estimated by the Mission that there may 1/ Assuming a GDP of around US$240-250 million. - 17 - be a small decline in receipts from So.Sh. 575 to So.Sh. 570 million. 1/ The expenditure position, however, appears to have changed considerably and against a budgeted expenditure of So.Sh. 450 million, it is now likely to be So.Sh. 500 million leaving an investible surplus of So.Sh. 70 million or 12% of revenues, and would represent a substantial drop from the 16% achieved in 1973. This trend would need to be reversed if domestic savings are to play an important role in Somalia's development effort. 3.12 An understanding of the causes which have brought about an Lncrease of 33% in the current expenditure of the Somali Government between 1973 and 1974 is therefore important. Contributing factors appear to have been an overrun in the rural mass literacy campaign which was originally budgeted at So.Sh. 22 million for seven months, but whose revised estimates are in the region of So.Sh. 100 million if funded on the basis of the original concept. This, of course, may not occur but some additional expenditure would Ln any case be incurred. In order to compensate the lower paid government ernployees for steeply rising prices at the end of 1973, the Government allowed a salary increase of 10% for employees earning So.Sh. 400 or less per month and 5% for employees earning between So.Sh. 400 to 600. It is estimated that this alone could add about So.Sh. 20 million to budgeted expenditure. Other budgeted expenditures which have increased are the crash program, education, agriculture and drought relief. There also appears to have been a somewhat large expan- sion in government-owned transportation. 3.13 In spite of its best efforts and its rather remarkable success in doubling contribution from direct taxation to 20% of revenues, the Government still faces serious fiscal problems. Defense (and police) expenditurets con- tinue to absorb about two fifths of the Government's current budget. The autonomous agencies are still not making the kind of contributions expected from them, and the trend of events in 1974 seem to show that some relaxation in the earlier attitudes of austerity has occurred. Taxes on imports still form a very large proportion of revenue receipts (about 50%) and these in turn are dependent to a great extent on foreign capital inflows. 3.14 The ambitious development plan adopted by the Somali Government for the period (1974-78), despite its heavy reliance on foreign assistance, never- theless calls for substantial additional domestic resource mobilization. On the basis of assumptions embodied in the Plan, out of an average annual development expenditure of about So.Sh. 770 million, about So.Sh. 250 million is to be provided domestically. While this target is extremely ambitious even in view of the very creditable performance up to 1973, the performance in 1974 does not indicate the likelihood of achieving the projected level of domestic resource mobilization in the near future. 1/ There would be a shortfall in revenues from public entities of about So.Sh. 50 million or a reduction of 50% over the estimated contribution, but this would be offset by larger receipts from import duty resulting from the much higher level of imports. - 18 - 3.15 However, the mission has attempted to identify certain areas which could yield increases in government revenue (Annex on Public Finance); these are reduction of 'leakages' from import taxation, rationalization and removal of inequities from income tax, and a more efficient enforcement of turnover tax and profit-sharing with public entities. Export duties may be made ad valorem instead of specific, or possibly adjusted upward in proportion to the rise in export prices; new alternative sources of revenue such as pricing of new services, e.g., irrigation water, and an extension of the present system of excises into a general sales tax could also be considered. There seems to be an urgent need for establishing a Tax Commission to investigate the possible scope for tax reforms and exploiting new revenue instruments. Central Government Revenues (So.Sh. Millions) 1969 1970 1971 1972 1973 1974 (estimate) I Direct Taxes (a) Turnover tax /1 - - - 8.4 15.6 46.0 (b) Others 23.5 29.5 37.6 46.4 45.9 46.0 Sub-total 23.5 29.5 37.6 54.8 61.5 92.0 II Indirect Taxes (a) Duties & taxes on Imports/2 157.8 163.0 191.0 216.1 234.0 258.0 (b) Others 68.2 72.1 76.1 78.0 101.5 129.2 Sub-total 226.0 235.1 267.1 294.1 335.5 387.2 III Non-Tax Revenue (a) Share of Profits of Public Entities 0.4 1.0 5.9 29.2 12.1 53.9 (b) Others 22.4 23.2 26.1 27.9 37.3 42.2 Sub-total 22.8 24.2 32.0 57.1 49.4 96.1 TOTAL REVENUES 272.3 288.8 336.7 406.0 446.4 575.3 /1 In effect levied as an income tax on public entities. See Annex I, para. 3.28. /2 Includes import, adminsitrative and statistical duty and fiscal monopoly profits. Banking, Money and Credit 3.16 The Somali National Bank (SNB) was set up at the time of Independence in 1960 and in addition to being the central bank it was at that time also engaged in commercial banking. In 1968 it was decided to streamline the banking system by stopping the SNB's commercial banking activities and creating sep- arate institutions for commercial banking and medium- and long-term lending for - 19 - investment. In May 1970, the Government nationalized the branches of the four foreign commercial banks operating in Somalia and laid the foundiation of the banking structure as it exists today. These are: (a) cessation by the SNB of its commercial lending operations and confining its role to that of a central bank; (b) creation of the Somali Commercial Bank (SCB) which took over the assets and liabilities of the nationalized foreign banks and the Somali Credit and Savings Bank (SCSB) which took over the commercial banking activities of the SNB; (c) the Somali Development Bank (SDB) which had been establisheid in May 1968 for medium- and long-term lending absorbed withiLn itself the Credito Somalo, an existing governmental institultion, set up even earlier for much the same purpose except that iit also gave short-term loans. Commercial Banks 3.17 Both the SCB and the SCSB officially started functioning on the 1st of January 1971 and have now completed four years of operations. Both banks were created with a capital of So.Sh. 2.50 million subscribed in equal proportions by the Government and the SNB. The development of commertcial banking is still relatively modest and both banks together have barel y more than 20 branches throughout the country. Some experiments with mobile banking units are being attempted but because of the large public sec'tor component in Somalia and liberal discount facilities provided by the SNB, there is not much drive towards mobilization of private savings. It w7as roughly estimated that since much of the import trade has been nationalized, about two thirds of all commercial banking activity relate to the publiic sector. The private sector was, however, still active mainly in the livestock export trade and some residual items where import had not been nation alized. Private investment was flowing into real estate largely in Mogadiscio1; there was also evidence of interest in commercial farming - mainly bananas. Money and Credit Developments 3.18 The growth of the banking system and its nature can be gaugied from the monetary survey given below and Table 3-3 showing the position of,the commercial banks. - 20 - Somalia - Monetary Survey, 1970-74 (So.Sh. Millions) 1970 1971 1972 1973 1974 Dec. Dec. Dec. Sept. Dec. Sept. Foreign assets (net) 109.5 166.2 293.4 261.1 248.8 98.0 Domestic credit 308.6 325.2 378.3 474.6 627.5 927.2 Claims on Government (net) (60.8) (27.8) (-19.8) (-80.3) (-45.7) (0.7) Claims on private sector and public enterprises (247.8) (297.4) (398.1) (554.9) (673.2) (926.5) Money supply 314.2 333.2 439.5 450.1 407.4 594.1 of which: Demand deposits (146.9) (158.3) (192.3) (204.0) (230.4) (273.7) Quasi-money 50.2 57.9 77.0 95.8 100.8 147.5 Other items (net) 53.7 100.3 155.2 189.8 268.1 283.6 Source: Somali National Bank, Bulletin; and data provided by the Somali Authorities. Money supply has grown by 32% in the 12 months ending September 1974 and domestic credit expanded by 66% in 1973 and another 48% in the first nine months of 1974. Since 1973 the system has been expansionary and 1974 saw a continuation of this trend. The quarterly price index chart for Mogadiscio at Table 3-8 seems to follow this expansion in credit, and prices have risen fairly sharply in 1974. Between October 1973 and October 1974 the food price index rose by 34.4%. But it is difficult to assign the roles of cause and effect on the domestic price level resulting from domestic shortages, rising international prices of imports and credit expansion. - 21 - 3.19 The sectoral credit position has been as follows: Commercial Bank Credit by Major Activity (So.Sh. Millions) 1970 1971 1972 1973 1973 1974 Dec. Dec. Dec. June Dec. June Agriculture 9.1 18.3 46.1 58.9 71.1 96.0 Industry 53.2 69.0 48.2 43.8 75.9 108.6 Trade 166.0 181.2 276.6 353.9 462.3 496.5 Others 19.5 28.9 27.2 15.5 63.9 49.6 Total 247.8 297.4 398.1 472.1 673.2 750.6 Although other sectors have also expanded, the bulk of the expansion in bank advances in 1973 and 1974 is related to trade (largely in the public sector), and has been caused by the import financing requirements of such agencies as ENC (the nationalized import agency), the Agency for Building Materials and the Pharmaceutical Import Agency (ASPIMA) reflecting both their essential import requirements and rapidly rising world prices. A further amount of credit expansion derives from high prevailing import prices of food grains, and their supply to the consumer at lower prices so that the importing public enterprises were unable to reduce their indebtedness to the banking system. Attempts have been made by the Central Bank during 1974 to curb this increase in credit to the public sector but with limited effect. Interest rates were increased in November to borrowers in the private sector -- except exporters, but those for public entities remained preferential. 3.20 While the Central Government has, as far as its own budget is concerned, maintained a net revenue surplus and creditor position for the last few years, vis-a-vis the Somali National Bank, towards the end of 1974, it had also become a net debtor. Credit expansion during 1973-74 has also been caused by the dependence of many public enterprises on the banking system for their capital requirements. One enterprise 1/ alone was said to have re- ceived So.Sh. 90 million during the first nine months of 1974. The Somali Development Bank (SDB) 3.21 This institution has been in existence for about six years. It is now the only source for medium and long-term credit in Somalia as the loan portfolio of the Credito Somalo relating to such loans was absorbed by the 1/ INCAS - the plant for producing packaging material for exporting bananas. - 22 - SDB 1/ under the banking reforms of 1970, and the Credito Somalo ceased to exist as a separate organization. M4any of the Credito Somalo loans were even at that time not being paid on schedule. The Afgoi brick factory and the Alula fish plant were the largest industrial projects in which substantial funds of the Credito Somalo were tied up. Both projects had run into serious difficul-- ties. IHowever, the brick factory of Afgoi has since been reactivated at a cost of So.Sh. 6.0 million and is expected to produce 51.0 million bricks per year and provide employment for about 100 people. Attempts are also being made to reactivate the fish freezing plant at Alula on the basis of a joint venture with an Italian firm. Eatlier arrangements of leasing out the plant, which were tried in 1972, do not appear to have been successful. 3.22 The SDB is playing an active role in the industrialization of the country by itself setting up and managing industries and also by extending medium- and long-term loans to other government agencies and privately owned industries. It will be seen from the table below that the bank has rapidly expanded its operations since 1971. Against a total of So.Sh. 87.79 million of loans sanctioned, So.Sho. 61.74 million or about 70% of all loans had been disbursed. Details of sectoral lending may be seen in Table 3-6. Industrial loans have accounted for 60% of all lending. The bulk of the industrial loans (96.5%) have been made to the public sector and only 3.5% to the private sector. Year Loans Sanctioned Loans Disbursed (Million So.Sh.) 1971 /1 19.48 14.80 1972 15.95 12.80 1973 49.36 34.14 Total 87.79 61.74 /1 Up to 1971. Source: Annual Report 1973, SDB. Somewhat greater attention is now being paid to the needs of the private sector and, currently, private investment proposals estimated at So.Sh. 28 million are under active consideration of the bank. 2/ However, the main 1/ Under the take-over arrangements losses against these loans would be made good by the Government. 2/ These are mainly in import-substitution industries such as paints, tiles and ceramics, beverage production and batteries. Domestic value added in these projects is roughly estimated at 30%. - 23 - thrust of the SDB is still in promoting industrial ventures in the public sector as, under present government policy, projects of any size are not open to private investment. 3.23 Next to industry, the most important sector has been agriculture, accounting for about 13% of all loans sanctioned till the end of November 1974. The volume of loans has declined by almost 30% between 1972 and 1973, and the declining trend seems to have continued into 1974. This is accounted for, to some extent, by a lack of funds with the SDB. The major identifiable (end-use) recipients of such loans have been banana growers who by October 1974 had been granted 70 loans totalling So.Sh. 6.20 million. Othei credits granted for agriculture have been largely for mechanization, mainly for the purchase of tractors, a fact indicating private interest in agriculture. In 1974, credits are being granted for the first time to cooperatives under guaranties from the relevant government ministries. These were expected to amount to So.Sh. 4.0 million by the end of the year; however, by October 1974, only So.Sh. 1.0 million had been committed. These are interest-free credits against government budget appropriations. The SDB is allowed a 1/2% charge for supervision. 3.24 Interest on short-term loans granted by commercial banks ranges from 7 to 10%. However, medium- and long-term loans are granted at preferential rates of interest as may be seen below. Interest Rates of the SDB Agriculture/ Industry & Livestock Handicrafts Mining Others Medium Term (2-6 years) 5.5 5.5 6.0 6.5 Long Term (7-20 years) 6.0 6.0 6.5 7.0 Only the ADC enjoys better terms (5%) as all credits to this organization are refinanced by the SNB at 2-1/2%. 3.25 While the SDB is playing an important role in providing medium- and long-term credit for investment, its main constraint (other than the avail- ability of funds) is shortage of trained manpower. The broad criteria being used by the SDB in identifying and setting up projects are availability of raw material, the existence of local demand and the presence of adequate levels of technical and managerial competence for operating the plant. These are in the main sensible as broad guidelines for action, but as there is greater movement into the import-substitution sector a more elaborate benefit-cost analysis would become necessary. - 24 - Foreign Trade and Balance of Payments 3.26 Livestock and related products contribute about two thirds to Somalia's export earnings and bananas about 20%. One of the problems faced in analyzing Somalia's export performance is the major discrepancy between export receipts recorded in exchange control data and as recorded by Customs in 1972. According to exchange control data, 1972 was a year in which exports recorded a spectacular increase of about 45% over the previous year while according to customs records the increase over the previous year amounts to only 11.5%. 1/ 3.27 Exports were relatively stagnant between 1968 and 1970; in 1971 they recorded an increase of 12% over the average for the preceding 3 years, and reached a maximum in 1972. Due to poor rainfall, exports fell in volume in 1973 although price increases for livestock compensated for the decline in volume. 2/ Total exports receipts nevertheless declined by 9% over 1972. Export volumes have fallen even further in 1974 mainly on account of the continued drought which affected both livestock exports and bananas. Better average prices for bananas caused by a shift from Italy to Saudi Arabia and the Gulf region, 3/ and much higher prices for livestock and meat exports would compensate for the fall in volume and total export receipts are likely to be higher. 1/ Some variations between the two sets of figures are to be expected, but between 1968 and 1970 these differences were fairly small. Customs figures tended to be slightly higher than Exchange Control figures. Since 1971, a reverse trend is noticeable and Exchange Control figures have tended to be higher. Prior to 1972, there was some over-recording of export receipts by the SNB as some c.i.f. values were also included. Since 1972, the SNB adjusts export figures to f.o.b. values. In 1972 there seems to have been a very substantial under-recording, by Customs authorities, of the value of livestock exports. This probably occurred because customs used "benchmark" prices for collecting the export duties while market prices, which in 1972 were much higher, are reflected in the SNB figures of foreign exchange returns. This creates a somewhat anomalous position with respect to 1973 in which, according to Customs data, exports showed a rise in value but according to Exchange Control data they show a fall. The latter seems to reflect the actual position since 'i73 was not a good rainfall year, and increased prices did not offset decline in volume. 2/ On the basis of Customs data, livestock volume declined by about 10% for cattle, 18% for sheep and goats, and increased by 32% for camels. Since earning figures appear to have been understated in Customs data particu- larly for 1972, it poses problems in assessing unit price trends for livestock. Banana exports declined by 16-1/2% in volume in 1973 (NBB data). 3/ According to data obtained from the National Banana Board, approximate f.o.b. price per metric ton for Saudi Arabia and the Gulf was about So.Sh. 890 per MT compared to an estimated f.o.b. price of around So.Sh. 535 per ton for export to Italy. See also Annex II, para. 4.12. - 25 - Exports (So.Sh. Millions) Year Livestock Bananas Others Total 1968 147 41 31 219 1969 167 43 32 242 1970 136 50 42 228 1971 /1 160 45 67 272 1972 206 89 99 394 1973 182 75 101 358 1974 /2 249 74 79 402 /1 1968-71 partly f.o.b., partly c.i.f., since 1972 has been adjusted for f.o.b. values. /2 Estimates provided to the Mission by the SNB. Source: SNB Exchange Control. 3.28 Somalia's balance of payments has been in deficit since the country gained independence. All development imports have been financed through foreign assistance and also a proportion of imports for current consumption. Since 1972, Somalia seems to have reached a new plateau in its export perform- ance. This is accounted for in the case of bananas by increased output and partly through development of alternative markets and, in the case of livestock and processed meat, largely due to a price increase. Future livestock exports would be affected by the drought. However, in spite of its improved export performance and substantial capital inflows, its net deficits have been in- creasing in 1973 and 1974 mainly due to a sharp rise in imports. The summary balance of payments for the period 1968-74 presents the following features: - 26 - Summary Balance of Payments (1968-74) So.Sh. Millions 1968 1969 1970 1971 1972 1973 1974 /1 A. Trade Balance -114 -154 -98 -126 -108 -346 -643 Exports (mainly f.o.b.) 219 242 228 272 395 358 402 Imports (mainly c.i.f.) -333 -396 -326 -398 -503 -704 -1045 Services -49 018 -35 -5 -29 -77 -73 B. Unrequited Transfers 140 78 92 137 83 180 292 C. Capital Account 44 132 85 44 159 199 359 D. Errors and Omissions 2 7 (-5) -7 5 (-1) 9 E. Allocation of SDRs - - 18 14 15 - - F. Monetary Movement -23 -45 -57 -57 -126 45 56 (Increase -) /1 Estimated Final Balance of Payments - SNB. Source: IMF Balance of Payments Yearbook and data provided by SNB. 3.29 The adverse trade balance on goods and services account declined during the period 1970-72 over 1968-69 but has risen very sharply in 1973 and even more in 1974. Due to adequate inflows of foreign capital and other transfers, foreign exchange reserves of the Somali banking system continued to rise till 1972, and stood at So.Sh. 251.0 million on 31st Dec. 1972. During 1973 and 1974, in spite of a much higher level of capital inflows, foreign exchange reserves dropped by So.Sh. 45.0 million in 1973 and are estimated to have dropped about So.Sh. 56.0 million in 1974. The adverse trade balance has been caused mainly by a rapid rise in imports. It is estimated that be- tween 1970 and 1974 they tripled in value. The table below gives imports by commodity groups. - 27 - Imports by Commodity Groups (So.Sh. Millions) 1971 1972 1973 1974 /1 Food Items 173.7 134.6 151.2 212.1 Consumer Goods 90.2 87.2 142.9 118.1 Petroleum Products 20.3 24.8 35.3 120.3 Metals and Machinery /2 116.6 179.7 238.4 419.6 Others 69.9 98.5 72.2 130.1 Total 470.7 524.8 640.0 1000.2 /1 Estimates. /2 Includes metals and metal products, electrical and non-electrical machinery, miscellaneous manufactures and transportation equipment. Source: Data provided by the Somali Authorities based on Customs statistics. To some extent, this increase in imports has been caused by an intensification of the development effort and such imports are estimated to have increased from around 25% of total imports in 1971 to around 40% in 1974. Bad harvests in 1973 and 1974, due to failure of rain, have caused an increase in food imports in the face of sharply rising world prices. There has also been a substantial increase, in 1974, in the volume of oil imports (50%) over the previous year. Due to the drought the position in 1975 may deteriorate even further. The Government has tried to keep food imports down and has permitted inte'rnal prices to rise. Food prices began to increase sharply by the last quarter of 1972. By October 1973 the food price index stood at 121.2 and by October 1974 at 162.7, giving annual rates of increase of 11.8% and 34.3%, respectively. 1/ Over 1974, the situation has worsened as stocks in the country began to be de- pleted and import prices accelerated. In an effort to keep prices down the Government has adjusted consumer prices by less than the cost increases and government importing agencies have been operating at negative margins for many food items: 2/ the element of government subsidy has therefore increased in the face of rising import prices. 1/ Table 3-8 Mogadiscio consumer price index (1968-74) - 1966 = 100. 2/ Annex II paras. 5.10 to 5.15. - 28 - External Assistance 3.30 Foreign aid has played and will continue to play a crucial role in Somalia's economic development. From 1965 to 1971, annual average disburse- ments of loans and grants were approximately US$23 million, and were used to finance deficits in the recurrent budget as well as development projects. Seventy percent of this external assistance was on grant terms. Major donors in this period were Italy (which provided over one third of foreign grants), the United States, the European Economic Community, the United Nations, the Federal Republic of Germany, and the U.S.S.R. The United States and the Federal Republic of Germany suspended their economic aid programs to Somalia in 1970, although the implementation of already committed projects was not affected. More recently, the Peoples' Republic of China and North Korea have become important sources of foreign assistance. China is now financing the largest single aided project, the Belet Wein-Burao Road, which will link the Southern and Northern parts of the country. 3.31 However, the most significant development for Somalia's foreign aid and economic development prospects has been the emergence of the Arab oil- producing states as a major source of investible funds and Somalia's membership of the Arab League in early 1974. Libya had already been playing an important role, particularly in financing Libyan-Somali joint ventures. Iraq has played a somewhat lesser role in the past but is now planning to step up investments, and funds expected from Saudi Arabia, Kuwait and the Gulf Sheikdoms would make a major contribution towards financing the investments proposed under the current five-year development program (1974-78). 1/ By mid-1974, Arab states already accounted for about 16% of foreign aid disbursements (on long- and medium-term debt) of about US$145 million (up from 6% in 1971). Several large commitments were made in 1974 from several Arab governments and funds (notably US$20 million from Saudi Arabia). 3.32 The Plan calls for about US$600 million investment over 1974-78. Roughly two thirds is to be financed from external sources or about US$80 million per year. This would require an increase in foreign assistance from US$60 million per year in 1973 to US$80 million annually during the Plan period. The Plan probably understates the share of foreign financing required, especially since the drought is likely to result in a large increase in current outlays. Besides, due to a world-wide increase in prices, the physical targets implicit in the Plan would now probably require a higher level of investment. The target of domestic financing of about 33% of total investments also appears very ambitious and may not be realized. While the currently estimated annual requirements of US$80 million of external resources should be forthcoming, it would not make the physical contribution to development projected in the Plan due to higher prices and likely shortfall in domestic savings. 2/ 1/ Table 9.8. 2/ See para 5.35 for further discussion on the role of external assistance in Somalia's development. - 29 - New commitments in Calendar Year 1974 exceeded US$105 million, and net dis- bursements from loans and grants are currently estimated at about US$105 million for that year. Out of this, 45% are grants. Creditworthiness 3.33 At the end of 1973, Somalia's total debt outstanding amounted t:o US$267 million; disbursements as of the middle of 1974 were US$145 million. The U.S.S.R. accounted for 38% of disbursements while the share of the Arab countries was about 16%. The IDA share of debt outstanding and disbursecl as of June 1974 was only 11%. While a high proportion of the assistance to Somalia has been on soft or grant terms, the ratio of debt service payments to exports has nevertheless been rising. The ratio was only 2% in 1970 and 3.4% in 1972, but increased to 5.8% in 1974 and will hover around 10% in the nlext 3-4 years, barring either a spectacular rise or fall in exports. Somalia has experienced some difficulties in servicing its external debt in the past, and sought relief through a series of rescheduling arrangements with the IJ.S.S.R. in 1966, 1968 and 1971. 3.34 From the point of view of its government's commitment to development and its capacity to take the necessary difficult decisions, Somalia may be regarded as a potentially creditworthy country. However, given its poor en- dowment of resources and the current problems it is facing on account of the drought which are likely to affect its export performance, and public ancl private savings, a considerable degree of caution should be exercised in taking on any external debt on commercial terms. In any case at present it is in a position to obtain all or nearly all of its financing needs as grants or on relatively soft terms. It should therefore engage all its efforts towards obtaining such capital inflows. Should foreign exchange financing, at some stage in the future, become a constraint in its development effort, it could consider borrowing limited amounts on commercial or near-commercial terms for suitable projects. IV. RECENT DEVELOPMENTS AND PROSPECTS OF THE MAIN SECTORS 4.01 Since there is little statistical knowledge about even such basic economic data on Somalia as population, number of livestock or output of major agricultural crops, it is difficult to give a quantitative assessment of performance or prospects, and an assessment would have to depend on rough estimates and indirect indicators. Somalia, being a country with relatively low rainfall, depending mainly on livestock and, to a lesser extent, on agriculture, the main determinants of output in any year are the amount <tiid timeliness of rainfall and, to the extent that irrigation is practiced in the South, the precipitation in the catchment areas of the two main rivers. Agriculture 4.02 On the basis of rough land use estimates, it appears that about 650,000 hectares are currently cropped or fallow; about 550,000 hectares are under some form of dryland farminZ and another 100,,000 hectares or about 15% of the cultivated area are under irrigation. Out of this, about 34,000 hectares are under controlled irrigation and another 66,000 hectares are under (uncontrolled) flood irrigation. The area suitable for irrigation is estimated at 235,000 hectares. (See Annex II for more detailed coverage of this sector.) 4.03 Dryland Farming. On the basis of estimated land use capability, 8.0 million hectares or 12% of the total land area are considered cultivable. The basis on which this assessment has been made can not be readily traced, but given the soil conditions and prevailing climate and rainfall pattern in Somalia, much of this area may well be marginal. It is the considered opinion of experts 1/ that once the average rainfall drops appreciably below 400 mm per annum, its distribution, both in terms of area and in time, becomes so erratic as to make the practice of agriculture a very high risk activity. Even in somewhat better rainfall areas (hardly any place gets above 600 mm per annum in Somalia), periodic drouglhts are common. The most favorable areas for dryland farming appear to be concentrated in the Upper Juba region in th-ie South and in the Northwest. In the Upper Juba, 2/ which, with a rainfall between 400-600 mm per annum, is one of the best regions in the country for dryland farming, rains fail in one out of four of the 'Gu or main rainfall seasons (April-July) and in one out of two of the 'Der' or subsidiary rainfall season (September-December). 4.04 The major problems with dryland farming may be characterized as follows: (a) The carrying capacity of the land is generally low because of inferior soils and unfavorable climate; (b) The fertility of the land is gradually deteriorating due to natural conditions as well as bad cultural practices: (c) Due to the unevenness of rainfall in many areas, periodic droughts are common; 1/ Problems of Nomadism in Sahelian Africa - RTNS/1/E, ILO, Geneva, 1968. 2/ Bay region study area. - 31 - (d) Applied agricultural and livestock technology is primitive, reducing the carrying capacity of the land far below its potential. Crop yields and animal off-take are low; (e) As a result, the rural economy fluctuates between periodic famine conditions in some areas at certain times and subsistence to subsistence plus in other areas at other times. Even though the nature of these problems has been reasonably well identified, accurate quantitative information is 'almost completely lacking, as past records and development efforts have focused primarily on irrigated agricul- ture. However, it should be recognized that the opportunities to be realized in Somalia's dryland areas are modest. They consist primarily of improvements in grazing conditions, soil conservation, rational water development, and expansion and improvement of crop farming leading to a gradually increasing mixed livestock and crop production. Such a pattern promises to give greater combined yeilds than may be possible otherwise. While mixed livestock and crop production is already said to be a noticeable activity, it has led to a certain amount of overgrazing in such areas, 1/ so that the too rapidlex- pansion of this production system, still largely untried in Somalia, could conceivably upset the ecological balance and be subject to greater economic risk than traditional practices. Whenever the rains fail for two or more years in succession, crop failure, famine conditions and loss of livestock would result. On the plus side, it appears that the effects of drought can be reduced through improved seed and more appropriate cultural and soil con- servation practices. Along with some overall destocking, 2/ a more rationally planned herd build-up and off-take relative to good and bad rainfall years should also help to reduce the level of risk in raising livestock. 3/ 4.05 The crops mainly grown under dryland conditions are maize, sorghum and sesame for cooking oil. Some maize and sesame are also grown under irrigation. Estimates of areas under production of these crops vary over wide ranges: maize (70,000 to 120,000 hectares), sorghum (up to one million hectares) 4/ and sesame (currently 50,000 hectares). Direct measures to increase yields in the past few years have been minimal and ineffective but Somalia can be considered self-sufficient in maize and sorghum in "normal" 1/ There is a possibility of competitive use of land between farming and livestock. 2/ The recent drought has already resulted in destocking though under rather unhappy circumstances. 3/ See Annex III, para 20. 4/ Seems overestimated even for two crops a year. - 32 - years. During the period 1969-73, large imports took place only in 1971 and because of continuing poor harvests due to insufficient rain in 1973 and 1974, imports would again be necessary in 1974 and 1975. In effect, production and marketable surpluses fluctuate sometimes sharply from year to year due to the variability of the weather. 4.06 Since there are no reliable statistics of total output, the best available indicator of output is the marketable surplus purchased by the Agricultural Development Corporation. The position for the last seven seasons is given in the table below. (--------- Metric tons
Groupe de la Banque mondiale · Pre-2003 Economic or Sector Report
Somalia - Recent economic developments and current prospects (Vol. 1 of 2) : The main report
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Pre-2003 Economic or Sector Report
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