Somalia - Framework for Planning of Long Term Reconstruction and Recovery

DRAFT CONFIDENTIAL 12531-SO SOMALIA FRAMEWORK FOR PLANNING OF LONG-TERM RECONSTRUCTION AND RECOVERY DRAFT Report of a Multi-Donor Task Force: Consortium of Nongovernmental Organizations in Somalia European Commission Food and Agriculture Organization International Monetary Fund Government of Italy United Nations Children's Fund United Nations Conference on Trade and Development United Nations Development Programme United Nations Educational Scientific and Cultural Organization United States Agency for International Development under the coordination of The World Bank December 15, 1993 FILE COPY /124/:: >-<0V/7 Report No: 12531 SO Type: SEC Acronyms and Abbreviations ADB African Development Bank CC Custodial Corps CID [Somali] Criminal Investigation Division CIF Carriage, Insurance, Freight CSBS Commercial and Savings Bank of Somalia DEO District Education Officer DHRR Division of Humanitarian Relief and Rehabilitation DO Development Office EC European Commission EIB European Investment Bank ENEE National Electricity Authority (former) GDP Gross Domestic Product HJC Higher Judicial Council IATA International Air Transport Association ICAO International Civil Aviation Organization ICRC International Committee of the Red Cross IDA International Development Association ISC International Steering Committee LPG Liquified Petroleum Gas MCH Maternal and Child Health MOE Ministry of Education and Culture MW megawatt NGO Nongovernmental Organization NPA National Petroleum Agency NSS National Security Service PEM Public Expenditure Management PHC Primary Health Care PIP Public Investment Program PTA Parents Teachers Association REO Regional Education Officer SNPF Somali National Police Force UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme UNECA United Nations Economic Commission for Africa UNESCO United Nations Educational Scientific and Cultural Organization UNCHS United Nations Center for Human Settlements UNHCR United Nations High Commissioner for Refugees UNICEF United Nations Children's Fund UNITAF United Task Force UNOSOM United Nations Operation in Somalia USAID United States Agency for International Development WDA Water Development Authority WFP World Food Programme SOMALIA FRAMEWORK FOR PLANNING OF LONG-TERM RECONSTRUCTION AND RECOVERY CONTENTS EXECUTIVE SUMMARY ...................................... i PART ONE: INTRODUCTION I. FRAMEWORK FOR COORDINATEDPLANNING ..................... 1 A. Purpose and Scope ..................................... B. Common Vision ....................................... C . Approach ........................................... 2 PART TWO: COUNTRY BACKGROUND II. COUNTRY PROFILE ....................................... 5 A . Introduction ......................................... 5 B. Topography, Climate, Hydrology, and Soils ...................... 6 C. Natural Resources and Environmental Issues ..................... 6 D. Human Resources ...................................... 6 E. Development Potential ................................... 7 F. Legal Framework ..................................... 8 G . Civil Security ........................................ 9 III. MACROECONOMIC AND FINANCIAL SITUATION ................. 13 A . Introduction ........................................ 13 B. Reconstruction of the Macroeconomic System .................... 13 C. Monetary and ExchangeSystems ........................... 16 D. Institutions for the Budgetary Process ......................... 19 This report was prepared by a multi-donor task force under the overall coordination of the World Bank. The task force, led by Mr. Richard Beardmore (Sr. Urban Planner, AF2EI), included Messieurs/Mesdames Anne Vaughn (Sr. Country Officer, AF2CO) Luciano Borin (Principal Industry Specialist, AF2PE), Young Kimaro (Economist, AF2PH), Balint Almassy (Sr. Municipal Engineer, AF2EI), Anthony Sparkes (Sr. Power Engineer, AF2EI), Rogati Kayani (Sr. Telecommunications Engineer, IENTI), Tom O'Connor (Principal Petroleum Engineer, IENOG), Jim Coates (Sr. Financial Analyst, AF2EA) Harry Walters (Chief, AFTHR), Amos Tincani (EC), Larry DeBoice (UNDP), Gonzalo Retemal (UNESCO), Ian Hopwood (UNICEF), Hugh Cholmondeley (UNOSOM), Peter Thomman, and Ron Ullrich (USAID), Emma Visman (NGO Consortium), Steven Rifkin (SCF/UK), Timothy Pitt (MSF/Spain) and Martin Ganzglass, Jamshid Damooie, Mohamed Alim, Mohamed Noor, Mathew Verghis, and Robert Nooter, (Consultants). Contributions were also received from EC, FAO, IMF, UNCHS, UNCTAD, UNDP, UNESCO, UNFPA, UNICEF, WFP, and Italy. UNDP prepared a report on the elements of a medium-term reconstruction plan with the assistance of the UNECA. Mr. Terry Anderson prepared the document for publication. Francis X. Colago is Director of AF2, Stephen Weissman is Division Chief of AF2EI, and Michael Carter is Division Chief of AF2CO. PART THREE: RECONSTRUCTION PRIORITIES IV. PUBLIC ADMINISTRATION AND CIVIL SERVICE .................. 21 A. Introduction ........ 21 B. Establishment of CivilService ............................. 21 C. Civil Service Remuneration ............................... 24 D. Maintenance of Security ................................. 26 V. SOCIAL SECTORS ........................................ 29 A . Introduction ........................................ 29 B. Health and Nutrition ................................... 29 C. Education .......................................... 34 D. Resettlement of Displaced Persons and Refugees .................. 37 E. Role ofW omen ...................................... 41 F. Food Aid and Food Security .............................. 42 VI. PHYSICAL INFRASTRUCTURE ............................... 47 A . Introduction ........................................ 47 B. Transportation ....................................... 48 C. W ater Supply and Sanitation .............................. 52 D. Shelter and Urban Services ............................... 54 E. Oil/Petroleum Products.................................. 55 F. Power and Electricity ................................... 58 G. Telecommunications ................................... 60 VII. PRODUCTIVE SECTORS ................................... 65 A . Introduction ........................................ 65 B. Agriculture ......................................... 65 C. Employment Generation ................................. 69 D . Industry ........................................... 70 VIII. SUMMARY OF PRIORITYACTIONS .......................... 73 A. Immediate Assistance Requirements .......................... 73 B. Medium-Term Rehabilitation .............................. 74 C. Long-Term Recovery Strategy ............................. 75 PART FOUR: PROGRAM IMPLEMENTATION IX. INSTITUTIONAL STRUCTURE OF RECONSTRUCTION PROGRAM ...... 77 A . Int roduction ............. ............ ... ....... ..... 77 B. Role of UNOSOM .................................... 77 C. Regional Approach to Reconstruction ......................... 78 D. Information Management ................................ 79 E. Long-Term Need for National Perspective on Reconstruction .......... 80 Map of Somalia SOMALIA FRAMEWORK FOR PLANNING OF LONG-TERM RECONSTRUCTION AND RECOVERY EXECUTIVE SUMMARY 1. This report represents the results of a multi-donor effort to define a planning framework for long-term reconstruction in Somalia. The planning framework has three main objectives: * to establish a common vision for the economic and social rehabilitation and development of Somalia; * to identify priorities for long-term recovery and the key performance requirements of the strategies to be developed to meet the priority needs; and * to establish a mechanism for coordinated action in both the short and long term. 2. The key elements of the common vision include the central role to be played by the Somalis in all aspects of the planning process, the coordinating role of the United Nations until such time as a viable Somali Government emerges, and the importance of considerations of long-term sustainability in all donor interventions. The framework outlines the priority needs in the social, productive and infrastructure sectors and presents some policy and institutional guidelines for macroeconomic reconstruction. 3. The report presents a brief analysis of the situation in the social sectors: health and nutrition, education, food security, displaced persons and the role of women and suggests a series of immediate and medium-lerm responses. The overall strategic approach is to build on the considerable capacities and coping mechanisms of households and communities and to strengthen districts to bring essential services as close to communities as possible. In order to move toward long-term sustainability, efforts need to be made to find the most appropriate mix of resources, combining user fees, other household contributions and national and external funding. Not only will communities need to contribute materially to service delivery, but mechanisms need to be developed to allow a degree of community management and control, reinforcing a sense of ownership and ensuring a greater degree of accountability by service providers. 4. The framework also examines the key productive sectors of agriculture and industry, the former accounting for about 65 percent of GDP in 1990. Most Somalis are associated in some way to agricultural or pastoral pursuits and these activities will remain the mainstays of the economy for many years. The priority action in the agriculture sector should focus on the improvement to marketing arrangements, particularly livestock export facilities and quarantine arrangements. It is concluded that livestock exports should be kept in the hands of the private sector, with government entering only to regulate health conditions and to facilitate export transactions. There is also a need to restore private markets in agricultural inputs, such as seeds, tractor services, implements and fertilizers. The thrust of the strategy to rehabilitate industry should focus on allowing the private sector to take on the challenge of producing goods and services that were once almost the exclusive domain of the former public sector. The private sector will be called upon, and indeed has already seized the initiative, to play a major role in the production of goods and services. 5. It is acknowledged that even before the outbreak of the civil war in the late 1980s, Somalia had run down its physical infrastructure through lack of maintenance. Since the outbreak of hostilities, much of the country's physical assets have suffered additional neglect and outright destruction. Preventing a further deterioration of basic infrastructure and gradually improving their operations within the medium term will in itself constitute a major achievement. The framework paper identifies the priority infrastructure sectors and the principles which should govern their rehabilitation. The principles include the recognition that it is neither necessary nor possible to rehabilitate everything that was damaged, that unproductive assets should not be included in the infrastructure reconstruction strategy, and that the environmental impact of major reconstruction activities needs to be considered. Furthermore, the proposed solutions should take into account the extremely limited budgetary situation in Somalia and as a consequence technical proposals should initially be adapted to the existing implementation and maintenance capacity of the local situation. Rehabilitation of roads linking agricultural areas to markets, reconstruction of rural and urban water supplies, operation of key sea ports, the resumption of telecommunications within the country and to the outside world, and the provision of electric power supply to diverse and scattered locations are all seen as priority infrastructure rehabilitation tasks. 6. In addition to the rehabilitation of infrastructure, the other key to success in reinvigorating the productive and social sectors of the economy lies in improving the macroeconomic framework. The paper suggests that initially the basic elements of macroeconomic management should be put in a market-oriented framework geared towards rebuilding confidence by avoiding monetization of the deficit, establishing realistic exchange arrangements, and ensuring positive real interest rates. The principles that should govern the design of institutional structures should be simplicity, transparency, and efficiency. On the fiscal side, Somalia requires a consolidated budget that incorporates all public revenues and outlays, a transparent budgetary process, and a tax system with low administrative costs. One of the major issues in this regard will be the reconciliation between the popular desire for regional autonomy and the need for some form of minimal but necessary central administrative authority. 7. The framework attempts to outline the basic elements of a new public administration and civil service. It is recognized that there is a need to assist in the creation of a responsive and enabling institutional infrastructure within the Somali context with the capacity to carry out essential government functions efficiently and effectively with the human and financial resources available to it. The design of the new system of public administration should take into account the principles of integration, sustainability and decentralization. The administrative responsibility of national, regional and sub-regional levels will need to be clearly demarcated and appropriate institutional relationships created. There must also be a clear division between the tasks and authorities of the political and administrative officials. 8. The report documents a framework for planning and not a plan itself. Further efforts to develop a plan and to begin implementation of reconstruction activities in Somalia will only be possible in the context of a stable and generally acceptable political environment in Somalia; and once Somalis have an opportunity to take ownership of the planning process. ii Assistance for the restoration of productive activities, the reconstruction of essential economic infrastructure, and the development of a sustainable capacity to deliver basic social services can only be provided in an environment in which relative peace and security prevail and in which the needs and aspirations of the Somalis can be communicated to the donor community through legitimate government structures and institutions. The next step in the process of rehabilitation and recovery, therefore, is in the hands of the Somalis. iii PART ONE: INTRODUCTION I. FRAMEWORK FOR COORDINATED PLANNING A. Purpose and Scope 1.1 The present document is a work in progress. It has been prepared by donors and international agencies working under the overall coordination of the World Bank. It should be seen as one step in an ongoing consultative process of planning for the economic and social reconstruction of Somalia. It is intended to provide a mechanism for the assessment of priority development issues facing Somalia, to outline the key policy imperatives, and to provide a framework to ensure that short-term interventions are consistent with longer-term development goals. Given the continuing fluid nature of the situation in much of Somalia, it is important to view the process of program planning and implementation as a dynamic one which requires a coordinating framework capable of responding to the changing country conditions. In the process of further elaborating the planning framework, we will need to explore how best to incorporate the views, concerns, and priorities of the Somali people. It must be recognized that the framework will only be of limited value as a basis for program implementation until the time that representative Somali political structures are in place and have had an opportunity to contribute to the framework's foundation and to assume ownership of its content. 1.2 The framework for planning and coordination of Somalia's reconstruction and rehabilitation has the following three specific objectives: * To establish a common vision of the economic and social reconstruction, rehabilitation, and development of Somalia. * To identify priorities for long-term recovery and indicate key performance requirements of the strategies to be developed to meet priority needs. * To establish a mechanism for coordinated action on reconstruction and rehabilitation in an environment of constrained human and capital resources. The resultant mechanism should be capable of being passed on to a future government of Somalia as the basis for development planning. B. Common Vision 1.3 The main elements of the common vision shared by the international community include: a) The implementation of reconstruction is only viable if it takes place in the context of a gradual shift of civil authority from UNOSOM to a successor Somali political authority, generally acceptable to the Somali people, and most likely involving a substantial degree of regional autonomy. 1 b) UNOSOM will act as the central coordinating body and the civil authority in Somalia until such time as there emerges a viable Somali government. c) Somalia has potential for sustained growth, which in the long run, could bring all Somalis above the poverty line. Past performance of the economy has shown that agriculture and livestock are the main sources of growth. Future growth will rely heavily on public and private initiatives in these two sectors. d) Critical to realizing the prospects for growth is the establishment of an enabling environment of good governance, characterized by not only the emergence of a stable political system, but also by liberalized economic policies, adequate supporting infrastructure, and effective public institutions, to give the private sector (from small farmers to multinational companies) the confidence to invest. e) All interventions to establish social and economic institutions must be designed to ensure their long-term sustainability. f) In the foreseeable future it is clear that, even with good governance, Somalia is in need of external assistance to start the process of reconstruction and rehabilitation of essential infrastructure. g) While donors, including a number of NGOs, are already investing in reconstruction and rehabilitation of Somalia, there is a need to agree on priorities for action and a mechanism for coordination. C. Approach 1.4 The planning framework and its associated coordinating mechanism would be developed taking into account the following precepts: a) Economic recovery would be framed in the context of long-term development so that short-term actions can be implemented on a basis consistent with that framework. b) Realistic strategies would take into account assets that have been destroyed, the recuperative ability of the country, the lack of functioning institutions and its consequences on implementation and absorptive capacity, and the amount and nature of the support that external donors are likely to provide. c) Planning efforts will be focused at the subnational level in close collaboration with Somali authorities, professionals, and communities and with priority given to districts and regions which have been able to provide a secure environment for project implementation and, particularly, where rehabilitation initiatives have already been taken by the local community. 2 d) Interlinkages between social, economic, political, and military factors would be recognized as would the need to manage all in tandem to achieve forward motion in the process of recovery. e) Where possible, the physical/institutional reconstruction would be linked with economic recovery and stabilization, e.g., get exports moving again with required infrastructure. f) The social sector reconstruction would build on the present relief efforts with the aim of ensuring the widest possible access to an essential minimum of services, with strong community involvement in both management and financing. 1.5 The major planning principles would include: a) Public investments in reconstruction and rehabilitation should be made in activities which are consistent with the essential role of government, regardless of the former arrangements. b) Encourage the establishment of efficient markets balanced by the need to ensure equitable sharing of components of reconstruction among all segments of society, including women, and balanced priorities between sectors. c) Emphasize the role of the private sector in mobilizing Somali resources. d) Keep proposed interventions simple, labor-intensive, and at an appropriate scale; do not rehabilitate or replace unproductive assets; reconstructed assets should be within Somalis' capacity to maintain. e) Target interventions to meet the needs of the most vulnerable groups in Somali society, including the nomads, the displaced, and the poorest women and children. f) Ensure that sectoral components are internally consistent and do not compromise the overall sustainability of the plan. g) Ensure efforts at resource mobilization and cost recovery, in combination with efficient pricing of government services. h) Assess existing implementation capabilities and identify appropriate short-term supports needed to strengthen them. i) Encourage environmentally sound practices and policies throughout the reconstruction process. j) Ensure coordination between zonal and regional offices to ensure common strategies in key sectors. 3 PART TWO: COUNTRY BACKGROUND II. COUNTRY PROFILE A. Introduction 2.1 Somalia is a physically large but sparsely populated country of about six million people with an arid to semi-arid climate. The mainstay of the economy has long been nomadic pastoralism. About 50 percent of the population are nomads who depend on livestock for their livelihood; only 25 percent are settled farmers. In an average year, livestock production accounted for almost 50 percent of the GDP and 65 percent of exports. Apart from livestock, commercial agriculture was centered mainly on the production of bananas for export, and sugar, sorghum, and maize for the domestic market. The agricultural sector accounted for about 63 percent of GDP. The manufacturing industry contributed only 5 percent of GDP and was dominated by some 23 plants, most of which were in the public sector. Somalia's low level of economic and social development was manifested by a per capita GDP of US$170 in 1988, 'and an average life expectancy of 46 years. B. Topography, Climate, Hydrology, and Soils 2.2 Located in the Horn of Africa, Somalia has a land area of 627,300 square kilometers with the Gulf of Aden on the north, Ethiopia and Kenya on the west, and the Indian Ocean on the east (see IBRD map no. 15413R2, attached). Its topography includes a hot and arid coastal plain, rugged mountains and plateaus, and lowlands of varying fertility. Rainfall is sparse and uncertain, averaging about 40 millimeters per year in the north but with widely recorded variations from 209 to 810 millimeters per year in the rest of the country. Over 80 percent of the rainfall occurs from April to September, and often comes in short intensive storms that cause rapid runoff, flash floods, and severe erosion. 2.3 Only about 13 percent of Somalia's land area is suitable for cultivation. However, with water being the main constraint, less than 10 percent of this potentially arable land was under cultivation. In 1990, cropland was estimated to be about 1.1 million hectares, of which 13 percent was irrigated and the rest was rain-fed, while 43 million hectares were in pasture and 9.6 million hectares were forests and woodlands. 2.4 Although the climate is semi-arid, the region possesses undeveloped water resources, particularly in the south. In the north, perennial water supply is small and with limited opportunity for irrigation. Traditionally, water is taken from shallow wells, extracted from the underflow or the river beds. Moderate droughts occur every three or four years, and major ones every eight to ten years. Drinking water is generally unpotable, even in urban areas. 5 C. Natural Resources and Environmental Issues 2.5 Although Somalia has no confirmed mineral or hydrocarbon resources, the results of a major Bank-funded national hydrocarbon assessment study suggest that a number of commercial reserves of both petroleum and natural gas may be present in several portions of the country. Based largely on this study, the results of which the Government made freely available to the industry, a significant exploration program by a dozen or more international oil companies was actively underway prior to the outbreak of hostilities. As a result of the ensuing lack of physical security, all companies declared force majeure, and temporarily withdrew from the country. It is likely that the majority of them will return with the onset of peace. 2.6 Somalia's rangelands are afflicted by dry winds, and prior to hostilities were chronically overgrazed by cattle. The damage was greatest around water points where destruction of the vegetation was leading to formation of sand dunes that grew and drifted, damaging the vegetation in surrounding areas and in some cases invading villages. The increase in grazing areas and cultivated land has also had a serious impact on Somalia's wildlife, and most of the larger species (elephant, leopard, cheetah, black rhinoceros, and zebra) have disappeared. 2.7 Soils in the irrigated Shebelli area have become increasingly salty because of poor drainage and water control, seriously reducing the productive capacity of the river's irrigation system. poor drainage was also causing the spread of malaria and bilharzia. Given Somalia's arid climate and fragile ecosystems, development programs will have to be carefully designed to avoid putting further stress on an already tenuous environmental situation and to assure sustainability of development over the long-term. D. Human Resources 2.8 Prior to hostilities, Somalia had an estimated population of about six million and an annual population growth rate of about 3 percent. About half of the population are nomadic pastoralists. Life expectancy was 46 years, infant mortality was 150 per thousand births, and the primary school enrollment was less than 10 percent. 2.9 With its literacy rate among the lowest in the region, Somalia's development potential is severely hampered by its weak human resource base. The dearth of skilled manpower was compounded by the exodus of a number of highly trained Somalis because of the repressive political environment even before the recent hostilities. A trend of declining financial support for the educational and health sectors, accompanied by declining school enrollment, further eroded the human resource base in the years preceding Siad Barre's downfall. 2.10 All of these problems and deficiencies have been compounded by the recent hostilities. Many schools and health clinics have closed and many educated Somalis have fled the country, although some may return when security is reestablished. 6 E. Development Potential 2.11 - Agriculture has long been the mainstay of Somalia's economy and will remain so for the immediate future. Indeed, in what is overall a resource-poor environment, agriculture activities in Somalia can be built on relatively abundant resources in relation to the population. The exploration of these resources will require judicious management, sound support services, and adequate infrastructure as well as a policy environment conducive to private sector initiative. 2.12 The main sources of growth for the agricultural sector are the livestock and crop subsectors. Although prior to the civil war rangelands were near the limit of their carrying capacity, there were good prospects for increased offtake through improvements in livestock health and improved marketing facilities allowing for reduction in the selling age. Significant opportunities also exist for increased livestock production in mixed farming areas in the south where animals can graze on crop residues. Growth rates for the subsector, following return to pre-war grazing levels, of 2-3 percent per annum are possible, with the potential for even higher growth rates if younger animals can be sold. 2.13 There is significant potential for increased grain production through rehabilitation and development of irrigation and exploitation of opportunities for diversification of rainfed crop production. Approximately one million hectares were under cultivation in 1989, but the potential exists for doubling this area. In the right policy environment and with the exploitation of irrigation potential, crop production, after return to 1989 levels, could increase by 5 percent per annum for at least five years. Most of the area under irrigation was supplied with water from the flow of the Shebelli river. Very little of the annual flow from Somalia's other major river, the Juba, was utilized, and annual flood damage was estimated at US$3 million a year. The previous government was working with the donor community to prepare a project at Bardhere to regulate the flow of the Juba river for irrigation and to generate power for Mogadishu and the Juba valley. Further consideration of this potential resource will need to be undertaken once the situation in Somalia stabilizes. 2.14 Fisheries remain a largely unexploited potential both for food security and for export growth. Somalia has a coastline of 3,300 kilometers, the second longest marine littoral in Africa. Although estimates of fish resources are, at present, very imprecise, approximately 300,000 tons per year would be a conservative estimate. Fish consumption in Somalia is very low with local consumption limited to coastal areas where it can be eaten fresh. With the development of proper conservation processing facilities to service hinterland markets, fisheries could play an increasingly important role in providing relatively cheap animal fat and protein-rich food. Even with increased domestic consumption, however, large surpluses will be available for export. A significant obstacle to development of this important subsector in the past was the dominant role played by government in production and marketing. In the future, focus should be on encouragement of private sector exploitation of the fisheries potential through an appropriate policy environment and supporting infrastructure. An immediate priority will be to institute measures to halt illegal fishing in Somalia's territorial waters. Under the present conditions, the stock of fish is being depleted to the detriment of marine resources and of the marine environment. 7 2.15 Other subsectors with considerable for potential for export revenue are: a) processed hides and skins; and b) frankincense and myrrh. Private sector capacity to process hides and skins available from.domestic slaughtering exists and should be further developed. Exports will be encouraged by the present decontrolled market and realistic exchange rates, but supporting infrastructure including adequate riarketing arrangements and export facilities. F. Legal Framework 2.16 Background. The civil and criminal court system was established at the time of independence and existed throughout most of the Siad Barre period. It had four separate levels-the Supreme Court, the Courts of Appeal, the regional courts and the district courts. The Supreme Court was located in Mogadishu and had a president, a vice president, and four judges. The Supreme Court heard appeals from judgements of the lower courts and had the power to issue writs of habeas corpus. 2.17 The Courts of Appeals, located in each regional capital, had jurisdiction over a particular region. They heard appeals from the district courts and the regional courts. They also had the right to issue writs of habeas corpus for criminal cases within the region. The regional courts had jurisdiction over crimes punishable-by death, life imprisonment, or imprisonment of not less than ten years. The district courts were located in each district of the region. Their jurisdiction was limited to a district and included criminal jurisdiction over lesser crimes. 2.18 The attorney general, his deputies or police officers, and inspectors investigated and prosecuted criminal cases. The attorney general was also responsible for supervision of the prisons and the Custodial Corps, or prison guards. 2.19 The first Somali Constitution also provided for a Higher Judicial Council (HJC) to supervise the courts; make binding recommendations to the Minister of Justice on appointments, transfers, promotions, and termination of appointments; and to conduct disciplinary hearings for removal of judges. The HJC consisted of the president and members of the Supreme Court, the attorney general, and three members elected by the National Assembly who were not members -of the Assembly or practicing attorneys. 2.20 Current Situation. Somalia no longer functions under a uniform rule of law. Instead, it is a patchwork of districts, regions, and the capital city of Mogadishu, each groping to restore a modicum of normalcy and the return to civil law and order. 2.21 In Mogadishu, the responsibility for appointing judges is currently vested with an eleven-person Judiciary Committee appointed by the Joint Political Committee. The Judiciary Committee is supposed to be composed of equal numbers from the Aideed and Ali Mahdi factions with one "neutral" member. The Committee sees itself as having jurisdiction over the court system at least throughout the entire area controlled by both factions, and because of its claim to broad clan representation, perhaps the entire country. 2.22 The Mogadishu Court of Appeals is not functioning, and only two regional court judges'have reported to work. Currently, there are approximately 50 criminal and 100 8 civil cases pending. In the criminal cases, the courts are applying both the Somali Penal Code and the Code of Criminal Procedure. The courts are located in the former Ministry of Justice building. There are no usable records of former court personnel, including judges, reported decisions or records of court proceedings, forms or procedures, nor records of those licensed to practice law in Somalia, accredited members of the Law Faculty, or Notaries Public. An estimated 25-30 percent of former judges, legal scholars, and attorneys have fled the country. 2.23 In Afgoi, there are no functioning district or regional courts, but the elders appear to be taking an active interest in the administration of justice. 2.24 In Bardere, the local elders are hearing. cases and their decisions appear to have been accepted by the people. District or regional judges are expected to begin functioning soon in the former court building. 2.25 In Baidoa, the courthouse has been rehabilitated by UNITAF to house the district and regional courts and the regional Court of Appeals. The Baidoa courts are attempting to hear both civil and criminal cases. Currently, there is a president of the-regional Court of Appeals, a president of the district court and four, other judges. They were all - nominated from a list of former judges and elected by the people; -There is also a public prosecutor and two registrars, one for the district and one for the regional court. The-judges are applying the Penal Code and the Code of Criminal Procedure. 2.26 In Borama in the north, the former Somali Penal Code is being applied, along with the Sudanese Code of Criminal Procedure. The Conference recently approved the adoption of all laws in effect prior to July 1, 1960. They have accepted the Indian Penal Code which was the law in force in British Somaliland and for the four days from June 26 until July 1, 1960 when British and Italian Somaliland united to become the Somali Republic. This means that all of the laws passed by the Somali Republic after independence, including those adopted by the government of Mohamed Haji Ibrahim Egal who is now running for President of the Somaliland Republic, have been rejected. 2.27 In Bosaso in the northeast, there are currently five judges who were formerly district, regional, Court of Appeals judges, and Supreme Court judges. These judges are hearing civil but not criminal cases. Criminals apprehended by the police are being detained. and brought before the elders. One former judge is now functioning as a prosecuting state attorney. Based on the decision of the elders, persons convicted are being held in prison. 2.28 Summary. From this limited information, it is apparent that there is no longer a national system of laws and courts. Instead, piecemeal approaches are evolving at the local level based on prior laws,courts, and personnel with local authorities and customs. G. Civil Security 2.29 Background. The Somali National Police Force (SNPF) was created upon independence in 1960 from the British and Italian trained Somali police forces of British Somaliland and the Italian Trusteeship, respectively. Recruiting, promotions, and'assignments were made on a professional basis and not according to tribal affiliation. Policemen were 9 generally transferrable throughout the country and were normally assigned to areas other than their own. 2.30 National police headquarters was in Mogadishu. Regional commanders were based in regional capitals but reported to national headquarters. 2.31 Specialized units of the SNPF were the riot police (Birmaadka), the rapid deployment or strike force (the Darawishta), and the finance guards. All three units were headquartered in Mogadishu. The riot police' were an urban control force only, based primarily in Mogadishu. Total strength toward the end of the Siad Barre regime was one battalion. 2.32 The Darawishta were deployed throughout the country with regional commands in Kismayo, Baidoa, Beletweine, Garoe, Burao, and Hargeisa. Their primary function was to intercede in cases of clan violence, separate the warring factions, and prevent clan violence from escalating. They were the most heavily armed unit of the police. Total numbers of the Darawishta were approximately 7,000. Their use was strictly subject to civilian control, and they could not be deployed without the authority of the regional governor. For operational purposes they were under the SNPF group or regional commander. 2.33 The finance guards were trained in Italy. They had responsibility for collecting customs and duties at the ports, taxes as required by law, and preventing smuggling. 2.34 Integration of the SNPF following independence took approximately eighteen months. It was the first institution to function on a national basis. The United States initially trained new recruits of the regular police and built the police headquarters, academy, and the library. The Federal Republic of Germany provided communications equipment and training for communications and transport from 1963 forward. The Federal Republic of Germany also supplied police troop transports, equipped and maintained the transport unit (Gaaditka), supplied the police hospital which was built by the Italians, and trained and equipped the police air wing, after initial set up by the United States. The Germans also trained some of the criminal investigation division (CID) personnel. Italy trained not only the finance guards, but some of the CID, the riot police, and together with the United States, the Darawishta. Some of the members of the Special Branch, or police intelligence unit, were trained in the United Kingdom. There were also British advisors at SNPF headquarters training in police administration and record keeping. 2.35 In all police districts, policemen with the rank of Inspector served as prosecutors. At the regional level, criminal cases were prosecuted by lieutenants and above. All prosecutions were carried out under the supervision of the state attorney general whose office had responsibility for major cases. 2.36 Promotion courses and specialized and advanced training took place at the SNPF academy in Mogadishu and at the SNPF training school in Mandera in the north. Darawishta training took place in Beletweine, and basic recruit training in Baidoa and at the orphanage training center in Mogadishu. The academy had a capacity for 250 on campus, and 10 classroom space for 500; Mandera could handle 200; and the Darawishta center in Beletweine and the Baidoa recruit training centers could each handle 600. 2.37 Toward the end of the Siad Barre regime the SNPF was neglected in terms of supplies and training. Some members of the Somali army were transferred to the SNPF and put into the command structure. However, although the SNPF was allowed to decline through neglect, it was never corrupted for the regime's purposes. As both the UN and ICITAP reports have noted, the remnants of the SNPF continue to enjoy public support and still have the reputation for professionalism and impartiality. 2.38 Since independence, the prison guards or custodial corps (CC) were a separate unit from the SNPF, with different uniforms, command structure, headquarters, and training. The CC were trained by Italy, primarily in-country. The prisons associated with the regular criminal justice system were located in Mogadishu, Galkayo, Kismayo, Hargeisa, Afgoi, and Mandera. 2.39 The Siad Barre regime set up an entire national security apparatus, including the National Security Service, the national security courts, and national security prisons. These systems are generally held in ill repute because of their association with the excesses of the dictatorship. 11 III. MACROECONOMIC AND FINANCIAL SITUATION A. Introduction 3.1 Somalia's economic and financial position has been steadily weakening for several years. Between 1986 and 1990, real economic growth declined steadily and moved into negative ranges. Inflation also rose strongly as the fiscal position weakened, credit policy particularly toward the nongovernment sector became undisciplined, and the free market exchange rate depreciated sharply. The economic contraction and rising inflation also reflected the drought of 1989-90. The external position was structurally weak, reflecting a heavy dependence on external grants and a large accumulation of external arrears. 3.2 Given Somalia's recent history, it would be sensible to design institutions for macroeconomic management that have a built-in bias toward fiscal and monetary discipline. No information from official sources on economic and financial developments in Somalia has been available since late 1990, but it is clear that macroeconomic policy systems have collapsed. In view of this situation, the scope of this chapter is limited to qualitative recommendations for the reestablishment of the key macroeconomic systems in Somalia-namely the fiscal, monetary, and exchange rate systems. The reestablishment of these systems is a prerequisite for a new government's capacity to formulate and implement macroeconomic policies. The reconstruction of these macroeconomic systems will need to be substantially advanced along with the collection of basic macroeconomic data before a quantified macroeconomic framework can be eventually developed. 3.3 Other important elements for macroeconomic reconstruction are a functioning government, including a minimum level of physical infrastructure and an effective civil service-initially perhaps entailing some reliance on expatriates. Considerable technical assistance and external financial resources will be needed to put these initial conditions in place and ensure the effective functioning of the macroeconomic system. In view of these constraints, this chapter seeks to deal only with a few central areas of macroeconomic policy and institutions that are critical even in the early phase of a new government. 3.4 These macroeconomic elements assume a resolution to the present unsettled political and security conditions. The proposals should be considered a starting point given present conditions and are intended only to put in place the basic initial elements of fiscal, monetary, and exchange systems. B. Reconstruction of the Macroeconomic System 3.5 The reconstruction of Somalia's macroeconomic systems should initially be directed at putting in place the basic elements of macroeconomic management in a market-oriented framework, and at rebuilding confidence by avoiding monetization of the deficit, establishing realistic exchange arrangements, and ensuring positive real interest rates. The principles that should govern the design of institutional structures should be simplicity, transparency, and efficiency. The pace of economic recovery, moreover, will depend critically on early attention to structural problems confronting the productive sectors. These will need 13 to be addressed in order to revive activity in the agricultural and livestock sectors, promote small-scale enterprises, and attract foreign investment either as joint ventures or wholly foreign-owned enterprises. 3.6 Fiscal system. The guidelines proposed below are designed to put in place a basic fiscal system which avoids the major problems experienced previously in Somalia. Most of the proposals are intended for implementation during the first year of reconstruction. As noted earlier, given the present institutional and information gaps, these guidelines are fairly broad in nature. 3.7 The Somali environment requires a fiscal system that will seek the following objectives: a) A consolidated budget that incorporates all government revenues and outlays as well as all financing from domestic and foreign sources. In principle, no government fiscal transactions should occur off-budget. In the initial phase of reconstruction, however, specific programs to address particular reconstruction, development, or social needs, such as in the education and health areas, may need to be implemented directly by donors off-budget as this approach may be more acceptable to donors. Foreign-funded emergency relief programs would also merit being outside the regular budget in order to underscore their temporary nature. As more normal conditions are established, however, clear guidelines will need to be put into effect for consolidating into the budget all externally-generated resources or financing apart from direct humanitarian assistance. b) A budgetary process that is transparent and easy to administer. c) A tax system that has low administrative costs and the potential for an expanding tax base and tax buoyancy. d) Current expenditure allocations that make appropriate provisions for the government wage bill, the costs of economic and social services, as well as operation and maintenance expenses. In particular, the size of the civil service should be kept small in order that it can be adequately paid from budget resources. e) Domestic bank financing will not entail financing from the monetary agency (see below), and must be voluntary for domestic commercial banks. 3.8 Revenue. In the current situation, it is not practical to seek to levy new taxes, and this task should be left until later. During 1988-89, tax revenue accounted for about 85 percent of total revenue, with taxes on international trade accounting for over 35 percent of total revenue, and administrative and statistical taxes-essentially fees and charges-for about 15 percent. The criterion of low cost and easy administration suggest that first efforts at generating budget revenues be directed at reinstituting these taxes. Duty levels should be reasonable in order to encourage the private sector's use of operating ports and airports and to avoid incentives for smuggling. Fees and charges for public services and utilities should be 14 reestablished, and set at levels that cover production costs. The public enterprises, moreover, should be required to make profit transfers to the budget. 3.9 Excise and sales taxes are not likely to be practical initially, given administrative difficulties and because the match, cigarette, textile, and soft drink factories from which most of these taxes were formerly collected are currently inoperative. Nevertheless, technical work should be initiated for re-imposing simple excise and sales tax systems as soon as feasible. Until an effective administration is established which is able to identify the base for income and property taxes and collect these taxes, the tax system should not broadly apply these levies. However, initially it may be possible to implement withholding taxes on salaries of civil servants and the income of public enterprises and larger private firms. 3.10 It is also important to ensure that the structural problems that existed in the pre-war period do not reemerge to undermine new efforts at revenue mobilization. This will include: a) An adequate number of tax collection centers outside Mogadishu. b) An updating of tax laws. c) The establishment of an efficient tax and expenditure audit system. d) Appropriate penalties for tax evasion. 3.11 Expenditure. Since a new government's revenue collections will initially be limited, expenditures must be tightly restrained to contain the budget deficit.-In principle, current expenditures should be fully covered by domestic revenues. (In contrast, during 1989-90 revenue covered only about one-third of current expenditure.) To facilitate this goal, the costs of the civil service must be kept to the minimum necessary to provide basic public services. The civil service should be limited to a set of core ministries with only essential staff which are adequately compensated. The pre-war situation of an excessively large but underpaid civil service should be avoided. Additionally, an appropriate level of resources will need to be committed to operation and maintenance expenditures to ensure adequate servicing of public sector infrastructure. In the pre-war period, there were high levels of security- related outlays (20 percent) and foreign representation (10 percent) expenses. Fiscal policy will need to be firmly administered in order to avoid a reemergence of this situation. An appropriate balance must also be struck for public sector outlays among the different regions of the country and vis-a-vis Mogadishu, in order to avoid the type of centralization of expenditure that induced northern Somalia to declare independence. Therefore, the budget framework should make specific provisions for regional allocations which could take into account variables such as population size and state of development. 3.12 Foreign grants and other external resources may prove insufficient to meet the costs of reconstruction, reestablishment of social services, and other development needs, and the pace of these activities could move more quickly if budget revenues were available. 15 3.13 Financing. Government fiscal operations should not entail borrowing from the monetary agency (see below) as such a policy stance will enforce the discipline needed for sound fiscal operations. Moreover, under the proposed monetary system, there should be no requirement that domestic commercial banks provide financing to the budget. Eventually, borrowing from the dorhestic nonbank sector could be envisaged. 3.14 ' Given Somalia's large external debt and arrears, the new government should seek substantial debt relief and foreign assistance on a grant basis, and foreign borrowing to finance the budget and balance of payments should be avoided except on highly concessional terms. Financing will need to be mobilized to regularize Somalia's relations with international financial institutions. C. Monetary and Exchange Systems 3.15 This section provides some preliminary suggestions for basic monetary and exchange systems to be established by a new government., These take into consideration the macroeconomic problems experienced prior to 1991 and the need for financial and exchange rate stability required for an environment conducive to a reactivation of the private sector and economic growth. The suggested initial arrangements could be enhanced as conditions permit. 3.16 Monetary system. Given past experience, the reconstruction of the financial system should aim at putting in place simple monetary arrangements that restrict the government's role in the money creation process while facilitating private sector activity. For these purposes, the financial system could comprise a monetary agency (currency board) and a number of privately owned commercial banks. 1/ 3.17 The monetary agency. The monetary agency would have only the following limited functions:2/ a) Issue and redeem domestic currency. b) Offer commercial banks and other authorized exchange dealers convertibility of the domestic currency on demand at a fixed exchange rate. c) Act as banker to the Government. d) Maintain financial relations with 'multilateral organizations on behalf of the Government. e) Regulate and supervise commercial banking operations. j/ The financial system could eventually also include private insurance companies and other nonbank financial institutions as conditions permit. 2/ These could be supplemented over time as the agency gained experience and demonstrated its capacity to handle more complex responsibilities. 16 3.18 To ensure fiscal discipline, the agency would not finance budget deficits and would not hold government debt. Moreover, to prevent excesses in the provision of credit to the nongovernment sector, the agency would not discount public or private sector commercial paper and would not operate a discount window for commercial banks. Under the envisaged currency and exchange system (see below), the financial resources of the agency would be essentially limited to the foreign reserve backing for the domestic currency, and it would not be in a position to provide sizable liquidity to commercial banks.3/ Commercial banks therefore would need to maintain appropriate foreign correspondent banking arrangements to meet their liquidity requirements. To facilitate bank intermediation rather than the use of cash in domestic transactions. A principal implication of the above monetary arrangements is that the monetary agency will possess no domestic assets or liabilities apart from some limited miscellaneous holdings and valuation accounts, and therefore if the agency is correctly managed, the scope for financial instability would be virtually eliminated. 3.19 The weak performance of the former Central Bank of Somalia (CBS) stemmed from the low quality of its administration, overstaffing, and a complex organizational structure. In particular, the quality of management and thus operations suffered from the absence of a board of directors with policy formulation and oversight responsibilities. The new agency should therefore be managed by a governor responsible to a board of directors. The qualifications for senior management and director positions should include an appropriate educational background, previous banking experience, and sound character in order that the staffing and management of the agency are consistent with an efficient discharge of its obligations under its charter. The objectives of a simple organizational structure and efficient operations would be assisted by limiting the number of departments of the agency initially to four: a treasury department, an accounting and audit unit, a banking supervision unit, and a statistics unit. 3.20 Commercial banking. Somalia's former banking system was publicly owned, and government interference resulted in the gross mismanagement of the Commercial and Savings Bank of Somalia (CSBS), difficulties in establishing an alternate public sector bank, and impediments to the licensing of new private banks. These problems suggest that new government-owned commercial banks should be avoided. 3.21 Given the monetary agency proposal, a consistent commercial banking arrangement would entail local or foreign banks that are privately owned and not subject to government or agency control apart from prudential oversight. These banks would require a sound capital base and access to foreign correspondent bank resources. As a prerequisite, a banking law would need to be put in place quickly. 3.22 Available information indicates that, even in the current unsettled situation, the Somali commercial sector is actively engaged in financial and money-changing operations. Therefore it is likely that, given an appropriate political and economic environment, private Somalis will seek to set up private commercial banks, either wholly owned by nationals or as I/ In the event the agency's foreign exchange cover for the local currency exceeded 100 percent, it could employ some of its excess resources to provide lender-of-last-resort facilities to commercial banks. 17 joint ventures with foreign investors. Nevertheless, given the limited resources of Somalis, a new government may initially need to campaign actively for and facilitate the setting up of branches of foreign banks. The advantages offered by foreign participation would be lender-of-last-resort access and international confidence in the banking system. 3.23 As the monetary agency can not provide sizable emergency liquidity to commercial banks, they should be required individually to hold adequate reserves abroad or locally, or be able to draw on external lines of credit to meet their lending and deposit liquidity needs. These arrangements could subsequently be modified to encompass borrowing from a domestic interbank market, if the latter were to be developed. Finally, to ensure a sound banking system, the monetary agency will need to possess a capacity for effective oversight, utilizing basic prudential regulations and supervisory practices including on-site and off-site monitoring. 3.24 Currency and the exchange system. It is proposed that the financial system operate with a new local currency issued by the monetary agency which has full foreign currency reserve backing at the margin and is convertible at a fixed rate into a specified foreign currency. Ideally, 100 percent reserve coverage would be desirable. But it is feasible to operate with initial coverage below 100 percent without running a significant risk of speculative attack, and to require 100 percent coverage of any subsequently issued currency. Foreign financial resources would need to be identified for the initial reserve backing. The reserve position of the agency, however, would benefit over time from seigniorage. A cautious approach to establishing the exchange rate for the new shilling will be required to avoid overvaluation while meeting the demand for money balances. The process of demonetizing the present Somali shilling would need to be initiated immediately after the new monetary and exchange arrangements are put in place. The exchange and payments systems should be fully open to all current account and capital transactions. 3.25 Currency boards require sufficient foreign exchange reserves. The amount cannot be determined at this writing, but any future government must plan to set aside these reserves to implement the currency board. If the resources are not forthcoming, an alternate plan will have to be considered. 3.26 These arrangements are intended to promote simple administration and transparency of the exchange system, confidence in the new currency, external openness, and monetary and price stability. In the latter regard, the full convertibility of the currency and the fully open nature of the economy would ensure that the domestic rate of inflation would not diverge significantly from inflation in the currency peg country. Since interest rates would also need to be fully free to move in tandem with rates in the currency peg country in order to avoid destabilizing capital flows, the monetary agency would not be able to pursue an independent monetary policy. 18 D. Institutions for the Budgetary Process 3.27 A Ministry of Finance/Budgetary authority can be charged with the budgetary functions: economic policy formulation, resource mobilization and budget preparation. 3.28 The Ministry/Authority could consist of three divisions: a) A macroeconomic analysis division to ensure that the macroeconomic 6 environment is taken into account when formulating policy. b) A budget and planning division to prepare and implement the Public Investment Programs (PIP) and the budgets. c) An accountant general's office to ensure timely record keeping and follow-up of actual expenditures. 3.29 Planning and budgeting at the Central level can be accomplished by three documents: a) The Public Investment Program (PIP) will be a rolling three-year plan prepared annually with one year added and one year dropped every year that will guide public investment decisions. It should be prepared early enough to provide input for the annual budget documents described below. The PIP will cover investment projects that are donor financed or domestically financed. Projects should be subject to cost-benefit analysis and the recurrent expenditures from these projects must be provided for in the ordinary budget. Sector authorities at both the central and regional levels can provide input into the PIP. b) The ordinary budget will cover recurrent expenditure and should be financed from domestic resources. Expenditures should be classified by program and by type of expenditure. Operational and maintenance expenditures from development projects as well as wages that should be paid after a project is completed must be included here. c) The domestic development budget will cover capital expenditure and will account for individual projects. These will be mainly donor financed but domestically funded capital projects must be included too. Information should be provided here on the total cost of these projects, spending to date, spending categories and shares of domestic and foreign financing. Note that recurrent expenditure arising from projects should be budgeted from the ordinary budget. 3.30 Inputs into the PIP and the budget documents should be provided by the sectoral and regional authorities who will actually implement projects and provide services. Sectoral and regional authorities should have budget sections to oversee budgetary activities. These budgetary sections will prepare priority lists and budgets for projects and provide bookkeeping services. 19 3.31 The budgetary process should involve close coordination between the Ministry of Finance/Budgetary Authority and sectoral and regional authorities. The fiscal year in Somalia is the calendar year. An approximate timetable for preparation of the budget could be as follows: a) The Ministry of Finance/Budgetary Authority should close the books on the previous year's actual expenditures and complete work on the PIP by mid August. The process for preparation of the PIP should be similar to that of preparing the budget documents. b) Budget calls can be issued by end August to the sectoral and regional authorities. These calls should include overall budget targets, principles to be followed in budget preparation and ceilings for different types of expenditures. c) By the end of September sectoral and regional authorities should submit budget proposals for both ordinary and development budgets. d) The Ministry of Finance/Budgetary Authority and the sectoral and regional authorities can negotiate specific allocations through October and mid November when the final budgets are submitted to the political authorities for approval. Budgets should be passed by December 31. 20 PART THREE: RECONSTRUCTION PRIORITIES IV. PUBLIC ADMINISTRATION AND CIVIL SERVICE A. Introduction 4.1 Objective. There is a need to assist in the creation of a responsive and enabling institutional infrastructure within the Somali context with the capacity to carry out essential government functions efficiently and effectively with the human and financial resources available to it. B. Establishment of Civil Service 4.2 Fundamental principles. The design of a new system of public administration should take into account the following principles: * Integrated system. The three fundamental government systems-the political system, the legal system, and public administration-are integral parts of a single system of governance. The public administration system can only be put in place within the context of the political and legal systems in which it is to function. Policy management, regulation, assurance of equity, and promotion of social cohesion which are the primary public sector functions can only be carried out under the protection of the rule of law and with the legitimized authority to implement policies and to raise and allocate revenues. * Sustainability. Institutions are sustainable only to the extent that adequate resources are available to operate and maintain them. The prospects for mobilizing domestic revenue, especially in the short term, are extremely limited and the role assumed by government must accordingly be also limited. Attention must first be focused on essential government functions, recognizing that many desirable government services may have to be foregone in the short- to medium-term. Underpaid government employees who lack the complementary inputs to carry out their functions in even the most minimal fashion result in costly and functionless bureaucracies which obstruct development and reduce the welfare of those they are intended to serve. Cost recovery mechanisms and efficient pricing of government services which are to be reestablished must be put in place at the start not only to ensure their sustainability, but to provide an adequate foundation for the expansion of such services as the economy develops. * Decentralization. The highly centralized system of government which existed in Somalia prior to the collapse clearly served the country poorly. Indeed, a national public administration was never fully developed, and what was in place had, for the most part, ceased to function long before the collapse of the government. It appears likely that a new government will opt for a more decentralized approach, bringing government closer to the people and thereby 21 making it more accountable. Local and regional authorities are beginning to emerge and should be the focus of early rehabilitation and reconstruction activities. Revenue generating potential at the local level needs to be explored. 4.3 Role of a national public administration. Given the severe financial and other resource constraints which a new Somali government will face, a national public administration must be lean and its functions limited to the bare bones of those activities which cannot be performed either at the local/regional level or by the private sector. In addition, as indicated under Sustainability above, some important government services will need to be phased in over time as the economy recovers and the country moves from the rehabilitation/reconstruction period to a development phase. In the first phase, key functions at the national level would include: a) Regulation of the monetary and banking systems. b) Revenue mobilization. c) Budget preparation and implementation. d) Economic policy formulation/National Accounts and statistics. e) Formulation of policy framework for health and education. f) Development administration and aid coordination. g) Regulation of commerce and business promotion. h) Formulation of petroleum policy including pricing and taxation; regulatory compliance. i) Agricultural research and advisory services, and formulation of national environmental policies. j) Port and civil aviation authorities (with private sector management). k) Issuance of passports and visas. 1) National civil service administration. m) Police training, setting, and monitoring of minimum standards. 4.4 The performance of the above functions should be carried out by the smallest number of primary subdivisions possible. For example, revenue mobilization, the budget exercise, and economic policy formulation should preferably be carried out by a single ministry or agency. The personnel function (civil service administration) would bewell placed as a small office reporting to the budget authorities. 22 4.5 The aid coordination function of development administration will be a key role of a new government given the limited availability of domestic revenues to finance development projects and programs in the short-term. The institution charged with carrying out this function could well carry out the core function of future sector ministries (should they become necessary) with small divisions responsible for each of the key sectors-agriculture, health, education, commerce, infrastructure. Although, initially, their primary focus would be on aid coordination, the sector divisions could also carry out the limited responsibilities for the sectors which remain with the central government, such as establishing national education standards. 4.6 Role of regional authorities. Regional authorities would be expected to do the following: a) Regional revenue mobilization. b) Regional budget preparation and implementation (as in the case of national government, the personnel function should come under the budget authorities). c) Police (selection, setting and administering pay scales, financing at the subnational level with centralization of training, and setting of minimum standards at the national level). d) Agricultural extension services (with service delivery by the private sector). e) Health and education-planning of basic infrastructure and staff deployment and supervision of districts. f) Basic health services and staff deployment and supervision of districts. g) Power generation and distribution (as part of the national regulatory function, common standards would be set at the national level to ensure regional grids could eventually be linked). Services on a full cost-recovery basis. h) Water supply and sanitation. 4.7 Areas of administrative responsibility at the national, regional or zonal, and subregional levels will need to be clearly demarcated and appropriate institutional relationships created. There must also be a clear division between the tasks and authority of the political and administrative officials. 4.8 Putting in place a national civil service. A new government will want to put in place its establishment register, conditions of employment, pay scales, and procedures for recruitment, promotion, etc. at an early stage. It is essential to ensure, particularly at the national level, that selection procedures are based on qualifications for the job rather than clan or political affiliations. A temporary Establishment Committee, drawing upon international expertise-with civil services procedures, will need to be put in place as soon as the political reconciliation process is completed and agreement on a new government has been reached. 23 Any recruitment, prior to the completion of the work of the Establishment Committee, should be done on a temporary contract basis. 4.9 Previous government employees. The drastic curtailment of government activities described above will require a civil service only a small fraction of its past size. Recruitment into the new civil service should be on a competitive basis with no automatic rehiring. C. Civil Service Remuneration 4.10 Background. Public administration in Somalia prior to the collapse of the government had all the familiar characteristics of an inefficient and ineffective civil service. It was overstaffed, levels of remuneration were absurdly low, there was no clear definition of employee functions and responsibilities, and complementary inputs were scarce to nonexistent. What was perhaps unique to Somalia was that these problems had become severe enough that the point was reached where, for all intents and purposes, the government administration ceased to function at all. 4.11 A review of the Somali civil service carried out in March 1990, estimated that the number of government employees were in excess of 56,000 with an average monthly salary of 6,366 shillings (1,000 shillings=US$1). The 1990 salaries had declined to less than five percent of those paid to public sector employees in 1975 and were well below the labor market rates in Mogadishu. As a result, the government was unable to recruit and retain a full-time and efficient labor force. For most civil servants, government jobs were incidental to the work that generated the most important part of their income. Absenteeism was common, with absences often extended to the point that employees became "ghost" workers. In this environment, corruption became endemic as civil servants resorted to sale of government property and services and, often, outright extortion to supplement meager civil service salaries. The result was a defacto privatization of all government services which granted individual government employees an uncontrolled and unregulated monopoly over those services. It is hardly surprising that in such an environment, if services were delivered at all, they were of minimal quality and at the highest cost. 4.12 Reform of the civil service would have been a massive undertaking, involving a complete restructuring and large-scale redeployment. A new government will have a unique opportunity to start afresh, and to put in place an efficient and cost-effective civil service. By limiting the role of government to only the most essential functions, it will be possible to keep the size of the civil servite within the means available from domestic revenues, with the necessary complementary inputs and with adequate salary levels. 4.13 Determining appropriate wage levels. A comprehensive study of personnel emoluments in the Somali civil service was carried out in December 1989 as part of the public expenditure review. On the basis of this study, a report was prepared and submitted to the government with recommendations for revised salary scales.l/ Most of the 4/ Somali Civil Service Reform. Peter Gregory. March 31, 1990. 24 recommendations remain valid and provide a reasonable starting point for determining appropriate government wage levels today. 4.14 Following extensive interviews with senior.civil servants, the fact emerged that real salaries paid in the mid-1970s were considered adequate by government employees and consistent with an efficient civil service in that incentive levels were high enough to ensure a full-time and productive work force. At that time (1975), there were approximately 20,000 government employees, slightly more than half of whom were employed in the education sector. The recommended methodology for determining appropriate salary scales was to take the 1975 salary scales as the base point and adjust them to reflect increases in the consumer price index to define 1990 equivalent salaries. This methodology yielded a range from 18,977 shillings per month for the lowest (apprentice) level up to 287,683 shillings per month for the top grade (see table 4.1). The salaries thus derived were compared with salaries paid for similar work in the private sector as well as public sector salary scales in other countries at levels of development comparable to Somalia's. Salary levels in the low and middle ranges were found to be somewhat higher than the comparators and thus, the proposed salary structure was readjusted accordingly. The salary scales proposed for 1994 appear in.the far right column of table 4.1, and were adjusted using 1990 figures. Although they have been adjusted for inflation, the lack of reliable data make these adjustments very tentative. Another aspect of the salary scales which will require further review (possibly by the Establishment Committee once it has been put in place) is the category of staff included in each salary range. Some categories of staff may no longer be required and others may need to be reclassified to match the requirements of a modern state. Nevertheless, in the immediate future, the 1975 salary scales provide a reasonable guideline both in terms of level and range. 4.15 It must also be recognized that aomestic revenues in the first years are unlikely to support the government employment levels (both regional and national) that pertained during the mid-1970s, much less the significantly higher levels of government employment of the 1980s and 1990s. In view of the larger role likely to be played by regional and local governments, some savings could result from service delivery at those levels, where lower consumer prices and extended-family support systems may permit slightly lower pay scales. 4.16 Allowances. The past practice of the payment of multiple allowances and non- cash benefits should be eschewed. Cash allowances distort the salary structure, introducing inequities and making the wage bill difficult to control. Allowances should be integrated into the pay structure to the extent possible, and the total remuneration accruing to each position should be clear, based on qualifications, experience, degree of responsibility, and performance. All wages should be paid out of the ordinaiy budget and no special project allowances paid from the development budget should be introduced. 4.17 Income taxes. Another aspect of government salaries prior to 1977 was that they were subject to a "development tax" which was deducted from the wage package before it was paid out. Serious consideration should be given to introducing a withholding tax on government salaries, and to adjusting salary levels accordingly. Taxing government salaries, even at very low marginal rates, helps to establish an environment in which the payment of income tax is an expected norm and facilitates the implementation of a more general system of income taxation. 25 D. Maintenance of Security 4.18 Introduction. The restoration of peace and security in Somalia will require the reestablishment of an effective police force, a legal system that provides the basis for police activities, and a penal system that can detain and punish offenders. The legal and law enforcement systems that are emerging on a piecemeal basis at the district level, as described in Chapter II of this report may have to be integrated into a comprehensive national system at some stage, albeit with latitude for local adaptations and preferences so long as these do not undermine national cohesion. Issues related to the security systems will be explored in this section of the report. 4.19 Police forces. There is no doubt that the present police forces that have been reformed (3,000 in Mogadishu and 1,500 each in the northeast and northwest) are inadequate to preserve law and order in Somalia even in normal times. UNOSOM is proposing that these forces be increased to 10,000 as soon as possible with the objective of having a trained force of this level by December 1994. UNOSOM further visualizes the expansion of this force to the pre-civil war level of 18,000 by March 1995. The cost of the first phase is estimated at US$39.5 million, including salaries, uniforms and equipment, vehicles, restoration of police stations, training, and technical assistance. Police forces would be under the operational control of regional and district councils until a national government structure is reestablished. 4.20 Judicial system. UNOSOM is reestablishing a three tier judicial system modeled on the prior existing court structure to operate under the 1962 Criminal Procedure and Penal Codes, and expects it to be in place by October 1993. This system, considered to be temporary, will be adjusted on the basis of decisions to be taken by the Transitional National Council when it comes into being. Judicial selection committees will be set up in each region to select judges and magistrates, and will oversee issues of ethics and discipline in the judiciary. Courtrooms will be renovated and provided with necessary equipment. The cost for supporting these operations for calendar year 1994 is estimated at US$3.5 million, including salaries, renovation, supplies, equipment, and training. 4.21 Prison system. UNOSOM is renovating prison facilities, and will employ members of the old Custodial Corps to manage them. Initially, it will pay salaries for 1,000 persons to run the prisons. The cost of reestablishing the prison system is estimated at US$2.2 million for calendar year 1994, including salaries, renovations, supplies, uniforms, equipment, and advisory services. 4.22 Issues. The principal issues related to the reestablishment of the civilian security system in Somalia is the ability of a future government to take over the cost of operating that system. This is especially troublesome based on the salaries that UNOSOM proposes to pay during the startup period. Failure to maintain the initial salary levels would undermine morale and weaken the service at whatever time international support was not available. This issue should receive careful consideration by UNOSOM before embarking on the planned expansion and startup of the police, judiciary, and penal systems. 4.23 Another issue relates to the relationship between a future national government structure and the local structures that are emerging, as well as the desirability of adopting uniform laws and legal procedures. These issues should receive early attention in any planning 26 process to assure that the interim steps being taken are compatible with a functional long term system of law and justice. Table 4.1: Current and Adjusted Civil Service Salary Structures Current 1977 Salary Ratio Salary in Shillings 1977 Salary Grade SteR 11/9. 1/1/90 Grade/18,977 Apprentice 1,530.20 18,977 1.00 D14 1 2,550.25 31,629 1.67 5 2,975.30 37,995 2.00 D13 1 3,099.25 39,537 2.08 5 3,595.15 45,863 2.42 D12 1 3,719.10 47,444 2.50 5 4,094.55 53,770 2.83 D11/C11/X4 1 4,215.00 53,914 2.84 5 5,026.05 64,912 3.42 C1O/B1O/X3 1 5,048.95 67,931 3.58 5 5,752.40 80,008 4.22 C9/B9/A8/X2/F3 1 6,512.20 90,575 4.77 5 7,341.00 103,514 5.45 C8/B8/A7/X1/F2/AY3 1 8,156.70 115,016 6.06 5 8,584.30 132,268 6.97 A6/Fl/AY2-1 1 8,673.05 143,770 7.58 3 9,010.80 152,396 8.03 A5 1 9,265.90 156,709 8.26 4 9,775.90 165,336 8.71 A4 9,860.90 166,773 8.79 A3/AY1 1 10,200.95 172,524 9.09 3 11,051.05 186,901 9.85 A2/AY1 1 11,901.10 201,278 10.61 3 13,309.85 230,032 12.12 Al 1 13,880.60 258,786 13.64 2 14,580.15 287,683 15.16 ** 13,946.00 275,171 Note: Current salaries were inflated by the Consumers Price Index for December 1989. The Index stood at 14,377 (1977= 100). ** University faculty 27 V. SOCIAL SECTORS A. Introduction 5.1 Coverage and quality of the social sectors was low and still deteriorating even before the current crisis further exacerbated the situation. The following chapter presents a brief analysis of the situation in health and nutrition, education, and displaced persons and suggests a series of immediate and medium-term responses. The overall strategic approach is to build on the considerable capacities and coping mechanisms of households and communities and to strengthen the districts to bring essential services as close to the communities as possible. In order to move toward long-term sustainability, efforts need to be made to find the most appropriate mix of resources, combining user fees, other household contributions, and national and external funding. Not only will communities need to contribute materially to service delivery, but mechanisms need to be developed to allow a degree of community management and control, reinforcing a sense of ownership and ensuring a greater degree of accountability by service providers. 5.2 The special circumstances of the country, together with the specific needs of the social sectors which are staff intensive and geographically dispersed require that planning be regionalized. Thus, planning would build on the different opportunities in the zones and regions, the ecology and topography, the population densities and distribution, the life styles (permanent settlement or nomadism), the availability of personnel, the level of literacy, the existing social infrastructure, and the social coherence and the cooperation among various clans. B. Health and Nutrition 5.3 Pre-war situation. Prior to the outbreak of civil war in Mogadishu, the health care system was already under-financed and scarcely functioning. In 1989, only 1.7 percent of its recurrent expenditures went to health, compared to a 5.9 percent average for sub-Saharan Africa. It was heavily oriented to curative services (70 percent of non-salary expenditure). Provision of services was spotty and without continuity, as it depended heavily on donor funding. It was disproportionately concentrated around urban centers. Twenty percent of the total population, living in Mogadishu, was served by 78 percent of doctors and 47 percent of nurses, leaving a large number of district hospitals (73), health centers (85), Maternal Child Health (MCH) centers (67), Primary Health Care (PHC) units (51) and health posts (409) that serviced the rural population, with very few qualified health workers. Health indicators were among the poorest in Africa. In 1987, life expectancy was 47 years, infant mortality 150 per 1,000, and an under five mortality rate of 190 per 1,000. 5.4 Shifts in the demographic distribution and vulnerable groups. One of the effects of the civil war has been the massive flows of people from major population centers back to the relative safety of their clan lands. In addition, there has been a steady inflow of returning refugees from neighboring countries. These movements have shifted the centers of population concentration about the country. Economic and physical capacities of the communities at the receiving end have been stretched to the limit; and a large share of the 29 population live without adequate water or sanitation facilities; without a regular sources of income; depending on the support of the extended family, family remittances, and food aid. It is believed that there are about one million displaced persons living in camps around the country. The most vulnerable groups are households headed by women and those without traditional clan support, e.g., urban squatters, the Bantus, etc. In a survey carried out in February 1993, about 80 percent of households in Mogadishu were displaced and dependent on food aid. 5.5 The current situation. Major health problems are still maternal mortality rates, sexually transmitted diseases, AIDS, diarrhea, acute respiratory diseases, malaria, tuberculosis, malnutrition, anemia, and physical and psychological trauma from war. During many months following the outbreak of fighting, health care was stalled by severe security problems. Preventable diseases took a high toll on an acutely malnourished population. As the security situation improved, some 30 hospitals, 73 MCH centers and 132 health posts were reopened with donor and NGO assistance. The UNICEF Supported Immunization Program vaccinated about 650,000 children against measles and provided them with vitamin A supplements. These efforts have paid off. More recent emergency health and nutrition data reveal that acute hunger and danger of starvation are over, and the health conditions of women and children have been improving. In Hoddur, Bardere, Mogadishu, and Baidoa where the problem has been most severe, the malnutrition rate is believed to have declined from 40 to 60 percent to 11 to 38 percent. It is estimated to be 13 percent in Kismayo, and 2 to 8 percent in the northeast and northwest regions. 5.6 However, acute shortage of trained manpower in health and management is a binding constraint. Though complete data are not available,5/ it appears that the already small number of trained health workers has been further decimated by casualties of war and through diaspora of the population in search of better security. This void needs to be filled through a concentrated effort to train health professionals at all levels. 5.7 Strategy for a new health system. Without an effective central government, there is no longer a central authority to plan and control health services. While this creates problems of coordinating and standardizing quality of services throughout the country, it also opens the opportunity to shift the foci of health service management to districts which are closer to the communities, and to design a system which responds to individual community needs. The following could serve as guiding principles for the new health system: * Ensuring phased establishment of access by all citizens to a package of essential health interventions. * Community participation, both in the identification of needs and the management of services. * Cost sharing based on the community and household ability to pay in order for the health services to be sustainable. * Shift of emphasis from curative to preventive care. * Greater women focus in interventions. 5/ WHO/Somalia has completed a health manpower survey in 14 regions. 30 * A central health authority trimmed of bureaucracy whose raison d'etre is to formulate policy, establish technical standards, facilitate the services provided by the districts, coordinate external assistance, and to provide managerial and technical support. * Elimination of the urban bias and unequal geographical/clan distribution of health services. Priority Action Plan in the Short Term 5.8 Provision of essential drugs and cost sharing. For some time to come, Somalia will not have the capacity to procure drugs to meet its needs. A minimum package of essential drugs will need to be provided to all health facilities. While public health institutions provide health care and drugs free, health workers often demand fees. The brisk business which has developed at private pharmacies indicates that there is a broad capacity and willingness in many places to pay for these services. Introduction of fees will ensure more transparency to the system, and allow the health facilities to use resources generated to improve facilities, replenish supplies, and/or increase remunerations of health workers. 5.9 Expand MCH centers to deliver integrated services and to function as training centers. Especially at a time of dire shortage of health professionals and facilities, it is not cost effective to adhere to a system of separate MCH clinics, exclusively serving mothers and children under five, while leaving other members of the family to seek health care elsewhere. These clinics could become multipurpose and function as a one-stop family health center delivering primary health care. With some additional orientation of the staff, they could also serve as temporary training posts on basic health care for health workers. The best approach to optimizing the health status of individuals in Somalia is through a primary Health Care/Basic Minimum Needs (PHC/BMN) approach, of which MCH programs are a subset of PHC programs. 5.10 Multipurpose basic health care mobile units. Mobile units have been an effective means of reaching the people accounting, for example, for 75 percent of all immunizations. As with MCH centers, these mobile units could be multipurpose. They could be equipped with the essential drugs and trained personnel to bring basic health care to the communities, in addition to immunization. The mobile units could also help bring health education to the communities. 5.11 Water and sanitation. UNICEF and other NGOs have been active in providing safe water and sanitary facilities for communities, but more needs to be done. Preventable waterborne diseases and diseases due to poor sanitary conditions still afflict a large share of the population. Through radio and contact with community leaders, campaigns could be launched to sensitize the public. Communities could self-select by volunteering free labor (or labor for food) in order to receive materials necessary to build or rehabilitate water and sanitation facilities. Emphasis would be given to training members of these same communities in the management and maintenance of the facilities, and to the establishment of back-up district technical support services. 5.12 Public education in health and nutrition with women focus. Women are the primary caretakers of health and nutrition of the family. More women health workers need to 31 be recruited to reach women more effectively. Advantages of breast feeding, healthy weaning practices, childcare, child spacing, and other basic health and nutrition information should be provided. Traditional midwives and health workers staffing the mobile units could be trained to spread the messages. Community leaders could help identify respected women in the community who could be trained in basic nutrition and health and could be encouraged to form women's support groups to spread messages and advice and reinforce good nutrition and healthy, sanitary habits. 5.13 Income generating activities with women focus. Casualties of war have left a large number of households headed by women. Surveys show these fainilies are poor and more vulnerable. Income generating activities such as special credit facilities, assistance in starting up in business, or training in skills and crafts could be introduced and specifically targeted at women and other vulnerable groups (which have no clan affiliation to fall back on). 5.14 Health/nutrition surveillance system; The health and nutritional status of the population has improved significantly compared to 1992 but it remains fragile. The security situation remains fluid, keeping economic activities depressed, and people's incomes still precarious. The need to respond to the most acute needs keeps donors and NGOs operations on the move from one locality to another. Therefore, there is a danger that slippage in health and nutritional status might occur in some pockets of the population. A health and nutrition surveillance- system needs to be established toldetect potential trouble spots and to provide early warning for timely intervention. At the same time, the surveillance system could provide periodic reports on sector performance by focusing on selected indicators of coverage and quality (e.g., immunizations coverage-and measles cases). 5.15 A steering committee to coordinate NGOg and donior agencie.,NGOs and donor agencies active in the sector have been largely free to set their own standards of quality control, management network, and staff remuneration scales. As their numbers increase, there is a greater need for closer coordination in order to establish comparable scales of remuneration, mutually consistent systems of operation, and to avoid arousing expectations which cannot be sustained in the longer run (such as iniflated salaries and wages). Economies of scale could also be realized by coordinating transport, which is one of the highest cost components in the provision of health services to rural areas. A steering committee consisting of a select NGO and donor agency, together with qualified Somali counterparts, could play this apex role, filling in for the absence of a central health authority. 5.16 Regional/district linkages. The key operational unit should be the district health team, answerable to recently established district councils. Each district will have a district hospital or referral center and provide technical support and guidance to the clinics and health outposts that serve the communities. An important challenge for those districts wiih a large nomadic population is to devise a system which can reach this population.to help improve their health and well-being. 32 Action Plan for the Medium-Term 5.17 Demographic survey. In light of the shifts in population distribution which has occurred in the last three years, a new demographic map will need to be prepared which will provide the basis for permanent location of hospitals, clinics, outposts, etc. 5.18 Physical rehabilitation/construction. Most of the health facilities have been looted, defaced, or taken over by squatters. An inventory of physical facilities and their condition will need to be taken, and those suitable for rehabilitation identified. Based on the results of the demographic survey and the existing facilities to be rehabilitated, loci of new structures will be planned to assure equitable access to health services. 5.19 Resumption of structured health personnel training. As a short-term measure, MCH/family health clinics are to be mobilized to provide training in basic health care. For the medium- to longer-term, Somalia needs to replenish and increase the number of health professionals by a combination of training abroad (preferably in neighboring countries or countries with similar conditions) and the strengthening of training institutions in the country. A feasibility study should be undertaken to identify staffing needs and profiles and to define a long-term strategy for health personnel development. 5.20 Women-focused health education. Community women's support.groups will continue to play a key role in educating community members on better health practices. Efforts will be made to apprise these groups of all elements of PHC, including the increased incidence of maternal mortality at childbirth due to female circumcision, and to mobilize their active support to educate the women and girls of their community to discontinue this practice. Family planning, information and services should be incorporated in the services provided by the PHC centers. 5.21 Drought, health and nutrition surveillance. In order to enable targeted and timely intervention in the future, health/nutrition surveillance teams will also be trained in drought surveillance which has a direct bearing on household food security, and by extension, on health and nutrition.status. In the long-term, a full health information system will be required. 5.22 Provision for war-injured and.disabled. It is proposed that a prosthetic workshop and vocational rehabilitation centers be established for the functional rehabilitation of war-injured and disabled with artificial limbs and anliances. 5.23 Legal and regulatory framework. Laws governing the provision of health services, licensing of physicians and pharmacists, and cost recovery andoperation of hospitals and clinics need to be revised to permit private sector operations and to put greater authority and responsibility at the district level for the delivery of health services. 5.24 Functions and responsibilities of different levels of government. The role of the central authority should be to formulate overall policy, provide technical and managerial support, mobilize additional resources (with an emphasis on underserved regions), and to set standards of quality and coverage. The regional level, at least in the interim, will be responsible for budget planning, allocation of human resources, supervision of, and 33 support to, districts. The districts will receive the authority and resources to take responsibility for the management of service delivery. C. Education 5.25 Background. In 1960, at independence, Somalia inherited 233 primary and 12 secondary schools from the Italian and British colonial systems. The two systems not only used different languages (Italian and English), they were also quite different in pedagogical approach, curriculum, and organizational structure. One of the government's priorities, therefore, was to create a unified school system, expand access to education, and set up a national university. 5.26 For the first ten years after independence, there was little growth in education. In 1972, Somali was adopted as the language of instruction in primary and secondary schools, school fees were abolished, and an intensive rural literacy campaign was launched. A period of rapid expansion then ensued: primary enrollments increased from 78,000 students in 1974 to 220,000 in 1981, representing about 30 percent of the primary school age population. Secondary enrollments also increased at a rapid rate, from 9,500 in 1973 to a peak of about 65,000 in 1983. These enrollment levels were sustained for two or three years after which worsening financial provision for education precipitated a significant decline. 5.27 By 1988, primary enrollments had fallen by 58 percent to about 159,000 (representing less than 10 percent of the primary age group) and about one quarter of all primary schools were closed. Enrollments in secondary and technical education decreased even more sharply from their peak levels. Thus, the crisis in education in Somalia started well before the collapse of Siad Barre's regime. 5.28 The structure of the education system was eight years of primary education, which consisted of a four-year elementary cycle and a four-year intermediate cycle. Secondary education (general or technical), was also four years. University education (four years for most courses) was provided at the Somali National University in Mogadishu. Teachers for secondary schools received four years of post-secondary training at Lafole College of Education, affiliated with the National University. 5.29 The introduction of Somali as the language of instruction was by no means uniform throughout the education system. Koranic education was provided in Arabic. Somali and Arabic were used as the language of instruction in primary and secondary education. Vocational and technical education was conducted in English, while most faculties at the Somali National University used Italian as the language of instruction. 5.30 The Ministry of Education and Culture (MOE) was responsible for the management of the system. The MOE had four levels of authority-central, regional, district and community levels. Policy decisions were made at the central level. At the regional level (eighteen in number) the Regional Education Officer (REO) was responsible for the implementation of the MOE's policies and programs and for providing feedback on educational issues to the central level. At the district level, the District Education Officer (DEO), reporting to the REO, was responsible for the monitoring and evaluation of schools in 34 the district and providing professional guidance to the teachers. At the community level, the Parents Teachers Association (PTA), together with school headmasters and teachers made up the fourth tier of systems management. The bulk of education expenditure was covered by the budget of the Ministry of Education and Culture. 5.31 Problems of education. The overriding issue in the education sector was the grossly inadequate provision for education financing. Inadequate financing impacts on all aspects of education. With respect to teachers, extremely low pay and difficult working conditions reduced the number of qualified teachers and limited the time available for teaching to those who remained. Today, few qualified teachers remain, particularly in rural primary schools. Most school buildings have been destroyed and looted and others are in an advanced state of disrepair. There are few textbooks, instruction materials, and almost no other educational equipment. Finally, educational management infrastructure is nonexistent. Since the civil war, most children and young people have received little or no formal education. The only surviving institution of learning-Koranic schools operated free of charge by religious leaders in the neighborhoods and displaced persons camps-provide children with a few hours of informal religious instruction each day. Youth who are encouraged to leave the various militia groups do not find easy access to nonformal education that could train them in marketable skills and revive their previous levels of literacy. 5.32 The priority problems of education in Somalia can be summarized as: * Lack of institutional infrastructure for the management of education. * Inadequate school buildings for school children. * Poor quality and demoralized teaching force. * Lack of basic instructional facilities. * Lack of textbooks for teachers and children. * A large number of children with psychological problems due to war trauma. * Lack of opportunities for skills training. 5.33 Objectives of education. The overall goal is to establish a sustainable education system which can, over time, provide a basic quality education to all children, equipping them with the knowledge and skills needed to earn a living and to improve the quality of their lives. The immediate goal is to ensure that as many children as possible have access to a basic learning package that will be defined in detail with local educators and community leaders. The specific objectives are: Objective 1: Assist communities in educational development and management through community ownership and management of schools. Objective 2: Assist communities to rehabilitate primary schools, make them functional, and improve the quality of education. Objective 3: Assist communities to generate financial resources to support quality education. Objective 4: Develop a model for the provision of counselling to traumatized women and children. 35 Objective 5: Develop cost-effective and innovative ways of increasing and improving access to basic education, including formal and nonformal modes. 5.34 Overall strategies. The strategies to achieve the above objectives include: Mobilization of communities and nongovernmental organizations: Community mobilization and facilitation techniques will be used to assist communities. in identifying their traditional methods of teaching children and in defining their education priorities and problems and the opportunities and solutions that arise from community. In particular, links will be strengthened with the Koranic schools and informal learning systems which could be of particular importance in reaching nomadic groups. The full participation of nongovernmental organization (NGOs) in the formulation, implementation, monitoring, and evaluation of education shall be actively sought. Strengthening of the partnership between school, home, and community: Parents, Parents Teachers Associations (PTAs), and district committees will need to take an active part in the management of education programs, and in sharing the costs of those programs. Local communities can assist in mobilizing financial resources and self-help labor. Some direct financial support from the families of school age children will be needed to supplement the meager resources available from the central budget. Such participation also helps to ensure that the type of education and training offered is relevant to local needs. Development of viable alternative learning systems: Viable alternative learning systems encompassing the formal and nonformal sources of knowledge need to be designed and developed in addition to support to formal primary schools. The media, mainly radio, can be utilized as an effective tool to expand the outreach and improve the delivery of basic education programs. The media and other nonformal techniques can also provide essential information in such areas as health, sanitation, nutrition, and environmental protection. Immediate Priorities * Formation of education committees at the community level. * Provision of tents to temporarily house schools. * Location of health and food distribution services in close proximity to school premises to attract children and teachers back to school. * Rapid functional rehabilitation and reopening of schools. * Provision of basic education kits. * Print primary school textbooks. * Train headmasters on basic principles of school site management. * Retrain primary school teachers through in-service programs. * Train selected teachers to deal with children and the disabled suffering from war trauma. 36 * Capacity building of the local education authorities, including mobilization and management of financial resources. * Develop skills-oriented nonformal programs. D. Resettlement of Displaced Persons and Refugees 5.35 Over the past two years, there have been several waves of people fleeing hostilities as well as a number of significant return migrations. These reflect the many diverse causes of displacement, including: a) flight from zones of conflict; b) ethnic adjustment resulting from conflict; c) drought; and d) acute food scarcity. 5.36 Various estimates made in September 1992 place the number of displaced people at 1,600,000, nearly one quarter of whom resided in and around Mogadishu. This estimate excliides an "invisible" displacement formed by people who have not taken up residence in camps or shells of buildings, but who have moved in with relatives, and thus, are integrated into the urban population. In Mogadishu, the conflict has created a massive internal displacement of people. Much of the population that originated from the central city-which is now in ruins-or from the no-man's land which separates the two halves of th city still reside in Mogadishu. These people are living with relatives rather than in camps. 5.37 Surveys conducted in August 1992 revealed that displaced people were willing to return home, but could not because: a) there was no guarantee that they could get food in their home areas; b) they had no resources to permit them to return and rebuild a livelihood; c) their homes were destroyed or occupied by other displaced people; or d) they were too weak to return. 5.38' Despite a general desire to want to return home, many displaced people are likely to remain permanently in Mogadishu. This is not unusual among displaced people. Past experience in other countries has shown that many rural to urban displacees in times of conflict do not go home when peace returns. This is especially true among teenagers and young adult males. It is also common among destitute women. (See Shelter and Urban sections). * Strategies for displaced persons in urban areas must include not only the process of repatriation but also one of integration into urban society. 5.39 A major problem has emerged among pastoralists. Their stock losses are total in some areas; elsewhere, a combination of drought, looting, disease, lack of veterinary services, and above all, of protracted distress-selling have reduced herds to 20 to 30 percent of normal size. Continued distress-selling for food needs will cause many herds to disappear within the next months, creating new waves of destitute displacees. Moreover, while agricultural areas can be rehabilitated in one or two seasons, rebuilding herds from scratch 37 can take from five to ten years, and there are limited prospects that traditional support mechanisms have the capacity in the short-term of assisting kin with rebuilding herds. * There is a critical, immediate need to reduce further stock depletion. The alternative will be the need for new re-active relief programs in a few months' time. 5.40 Therefore, veterinary programs urgently need to be assisted and expanded; well and borehole rehabilitation must begin in many areas; and delivery of dry rations must be expanded to curtail distress selling even though on the surface, pastoralists do not appear to be seriously malnourished. * It is essential that livestock populations be rebuilt by providing expanded veterinary services and rehabilitation of wells. This will lead to some displaced pastoralists gaining access to livestock through traditional means in the medium-term. In the meantime, the resettlement of some pastoralists on unused irrigated or rainfed lands as cultivators should be seen as an interim "solution"-any surplus income generated by those settlers will most likely be used to rebuild their herds. 5.41 Among the most vulnerable groups of people who need attention are orphans, the physically hndicapped and war injured, the mentally handicapped and trauma victims, the street children and child soldiers, the widows and female-headed households, the aged, and eventually, the demobilized militias and gunmen. Local informal institutions must be created to deal with these populations and appropriate NGOs must be recruited to assist with the development of social rehabilitation programs for them. * A major medium-term need will be for the development of programs of social rehabilitation. 5.42 Despite the end of the 1990 famine, the problem now is that large numbers of the population remain without any means of economic support, and thus, are unable or only minimally able to take advantage of the significant food supplies available in local markets throughout the country. The displaced population, especially those living in camps and outside traditional support mechanisms offered by kinship groups, remain the most vulnerable and continue to be almost wholly dependent upon food aid provided by WFP and some NGOs. Fair and equitable access to dry rations is, for many displaced, still a major impediment to recovery. * Establishing minimal levels of income generation for the displaced at their present locations must be seen as the principal rehabilitation and reconstruction need, or where feasible, facilitating return of the displaced to their home areas by ensuring that they have access to the means of production and sufficient food security until harvests can be produced. 5.43 Information available on the numbers of displacees is conflicting and a more realistic estimate is needed by the international community for planning purposes. However, 38 * The whole issue of population numbers is politically contentious and any attempts at carrying out an independent census would quickly encounter local opposition. An appropriate method for obtaining more reliable estimates needs to be identified. 5.44 Many of the displaced in the major cities are of two types-migrants from rural areas with few if any urban skills, and those of urban origin, many of whom have professional or technical skills or who were former merchants or bureaucrats. * Rehabilitation programs must, therefore, target quite different populations. An array of income generating activities need to be promoted, targeting both men and women. Indeed, in many cities, women have become the main bread-winners through their extensive "informal" economic activities. These capacities must be strengthened and developed. * Small scale urban-oriented credit schemes must be established to facilitate this process. In the absence of banking institutions, creative alliances must be formed between local NGOs, merchants, and clan elders for the mobilization of credit schemes. 5.45 With some exceptions, lack of food security is more of a deterrent to displacees returning home than is lack of personal security. Few areas have sufficient local surpluses to support even small numbers of returnees until the next harvest. Consequently, * any programs for return migrations to remote areas must ensure that both the means of production and dry rations lasting to the next harvest are made available. 5.46 There is a need to ensure that * there is greater coordination between agencies engaged in promoting return and reintegration programs. It is essential that return movements respond to "pulls"-that is, by providing seeds and rations at the village level. For many displacees, transport will also be needed, but the * provision of transport without the parallel provision of the necessary means of survival at destinations must be avoided. * Under no circumstances should UN agencies, NGOs, or donors assist in resettlement programs promoted by local authorities whose aim is purely to relocate displacees out of an area. 39 Organized returnee programs will be more effective if the implementing agency first promotes meetings between the elders of intending returnees and elders in the source areas. 5.47 As the peace process continues, disarmament and demobilization of the militia will likely accelerate. Since reconstruction and rehabilitation can only benefit from enhanced security, * the reintegration of demobilized militia into the mainstream of society must be given high priority. Few are likely to want to return to their rural roots, but if they can be assured that they will have realistic prospects for gerirating income, many may opt for resettlement as cultivators. Urban based programs, however, must be emphasized. Alliances with local NGOs and local business communities must be explored in order to develop effective reintegration programs for youth and young adult males. In some cases, they may also benefit from social- psychological counseling. 5.48 A major constraint to the whole reconstruction process is the lack ot local institutions through which to implement programs. * Dependence upon expatriate NGOs is clearly not a realistic longer-teri option.' The capacities of local authorities, therefore, must be developed whenever possible. Matching funds for locally generated revenue is one route which needs to be more fully explored. The linking of expatriate NGO programs with local "ministries" must also be extended. * A local government institution building and support program must be developed and must draw on the large pool of unemployed professionals and intellectuals. Such programs could readily be staffed by expatriate Somalis brought back on short-term contracts. 5.49 There is also a parallel need to better utilize the local NGO capacity. Since it will be several years before government institutions are fully operational, Somali NGOs have a significant role to play in the reconstruction process. Many of the recently formed local NGOs have personnel with substantial professional and technical skills. Many, but not all, also show high levels of motivation and integrity. Developing the capacity of local NGOs would be greatly enhanced by linking them with expatriate NGOs;, donors of expatriate NGOs should make this ai conditionality. Also, *V a Somali NGO support 'unit is 6rgently needed to provide them with training, on all facets of running effective and accountable NGOs. 40 E. Role of Women 5.50 In the conflict being fought principally by men, women have been the main victims, often left alone to face starvation and cope with an emergency situation without the, traditional means of support. In order to deal with the daily problems they encountered, many of them have set up support networks and independent organizations. They have in fact become reliable counterparts for the emergency and rehabilitation activities being carried out by the international agencies. These women's organizations, often involving members of more than one clan, have been among the only entities to look beyond the present situation of emergency and attempt to start up micro-activities to generate income, whenever the conflict allowed. Once the emergency situation gives way to the rehabilitation process, the true roles of the Somali women in society (reproduction, production, and community management) must not be forgotten. 5.51 Women cannot be removed from the family context. Therefore, they must be given the help they themselves have requested and which is essential to them for- carrying out their roles. They must be provided with the necessary input for performing their productive tasks (as fariers, livestock breeders, and traders) more efficiently and at the same time they must be given the necessary technology to reduce their productive and domestic workloads. It should also be noted that the number of female breadwinners has grown as a result of the civil war, in both urban and rural areas (in some rural areas they represent between 35 and 40 percent). These women have special needs (in terms of income, input, and training) compared with their male counterparts, needs that must be monitored and registered. 5.52 In the short- to medium-term,, a certain number of actions directed, solely at the female population must be undertaken. as the women's orLanizations themselves have requested: * In the field of physical and mental health, family planning clinics and special services for women's reproductive health through the MCH projects should be set up along with the consultancy facilities; * In the training sector, relief and training centers for women and girls left alone or- badly wounded should be created; * In the credit sector, special revolving. funds and credit schemes available not only to groups but also to small-scale individual entrepreneurs, in urban or rural areas should be provided. 5.53 The active role played by women's associations to date in planning emergency action and in the peace process must be fully recognized. The fact that the Addis Ababa accord made provision for a certain quota of female participation in the National: Transition Council is to be welcomed as an initial,acknowledgement of the role played by women's organizations in guaranteeing female integration in all activities of social and cultural reconstruction and economic rehabilitation. Particular attention should be paid to training women in the areas of administration, planning, recruitment and staff training, and project and information systems management, so that they will be better equipped to carry out the role assigned to them, not just in the transition period, but also in the future. 41 F. Food Aid and Food Security 5.54 The immediate food security and food aid concerns of Somalia are dominated by the fall-out of the recent conflict: restoring security; providing food for refugees, returning farmers, and other vulnerable groups; restoring production; and reestablishing a balance between domestic food production and inflows of food, including food aid. Many of these can only be dealt with in the field by those with specific knowledge of the needs and circumstances of different groups and regions within an evolving security and governance environment. This underscores the need for flexibility as the circumstances change and as security is restored. This section deals with the framework that needs to be restored, and then considers some of the issues presently dominating concern within that context. 5.55 The important points to note are: * Food production stagnated in Somalia from 1970 through 1980 at about 250,000 tons of cereals, and another 50,000-75,000 tons of pulses and oilseeds. The main reason for this was tight government control over domestic marketing and prices of basic foods. During the first half of the 1970s food imports and food aid were small. After 1975, however, food imports averaged 157,000 tons per year, 62 percent of production, and food aid was one-third of this. Average cereals availability for food (less feed, seed, and waste) declined from 154 kilograms per capita in 1970 to 110 in 1974, but rose during the last half of the decade to an average 175 kilograms, due entirely to increased imports, most of which were commercial. * From 1980 onwards, however, three important changes took place. First, cereals imports rose sharply to average nearly 350,000 tons annually. Second, food aid was more than 200,000 tons of this, an important element of which was food aid for refugees. Third, as the government's capacity to control food marketing collapsed after 1980, forcing the liberalization of cereals and oil seed marketing, there was a dramatic rise in domestic food prices and production, of both cereals and other foods. From 1980-1985, domestic cereals production more than doubled to 620,000 tons, and it remained at this level through 1990. The combined effect of sharply increased domestic production and high imports (mostly food aid), produced a dramatic increase in cereals availability for food, from less than 150 kilograms in the early 1970s to 250-300 kilograms from 1981 through 1989. The importance of this is that in a "normal" situation in Somalia high levels of production and imports must coexist. 5.56 The situation since 1990 is murky. Extremely low levels of domestic production are reported-281,000 tons in 1990 and around 200,000 tons in 1991 and 1992. These are somewhat suspect however. Low levels of food aid are also reported for 1989-91, in the range of 66-94,000 tons. But total imports are reported at nearly 200,000 tons, which may be an underestimate. The reported levels of food aid in 1992 and particularly 1993 (July 1992-June 1993 of 455,000 tons) are probably more or less correct, but their distribution during these two years needs to be treated with caution. Nevertheless, it seems clear that there was a sharp drop in supplies during 1991-92, with massive inflows of food assistance from 42 July 1992. These inflows of food aid clearly overcame the worst effect of the famine, but are said to now have saturated the market. 5.57 Some key issues now are: a) how fast can domestic production be expected to resume; b) what are the key elements in the resumption of domestic production; c) what levels of food aid are needed: d) what form should food aid take (direct deliveries of food or monetization); and e) how should the supply and demand of food aid and imports be managed? The Resumption of Domestic Production 5.58 Reports from the field suggest that the resumption of domestic food production will be slow because: a) many farmers have abandoned their fields and will require assistance (inputs and food) to reestablish themselves; b) excessive supplies of food aid overhang the market, producing low prices, which, in turn are causing farmers to abandon their crops in the field or not to plant; c) the destruction of the irrigation system along the Shebelli and Juba rivers and the shortage of production inputs has reduced production possibilities. 5.59 Counter evidence (FAOIWFP Crop Assessment Report) to this is a reported Der harvest (January-March 1993) of 123,000 tons. While the reports suggest that this is only 60 percent of normal, it is in fact about average. The Der crop is usually some 20 to 25 percent of the total crop and is relatively minor. Total Der production in 1987-89 was respectively 110,000, 138,100 and 195,000 tons, with the last being a record. Thus, the reported Der crop suggests that production resumed more rapidly than might have been expected. There is also reported to be a "good" Gu crop, harvested during July and August, which is normally 75 to 80 percent of the total. The average Gu season crop during 1987-89 was just over 500,000 tons. If by a "good" crop production near this level in 1993 is meant, total production may be much closer to the past levels of 600,000 plus tons in 1993. 5.60 There are other reasons to believe that production may resume much sooner than thought. The previous production increases from 250,000 to 620,000 tons took place very rapidly between 1981 and 1985, despite limited improvements in the irrigation system, and few improvements in production inputs. The marketing and distribution systems were relatively undeveloped. The main feature of the 1981-85 production increases were sharply higher producer prices due to the collapse of the government's capacity to enforce low prices and deliveries to the state. Needed Food Aid Levels 5.61 Judging from the situation in the mid-1980s, cereals imports will be needed of between 200 and 300 thousand tons, but these will have to be carefully balanced to encourage domestic production. This balance was not well managed in the past, however. The essential guiding principle should be border pricing, with a good internal system of supply and demand determination, and monitoring of internal prices. An important need is a small but effective unit that monitors these movements in domestic production and commercial imports, with food aid being the residual. This needs to be a national system, donor supported. 43 5.62 For some time to come, however, there will be a need for specialized interventions to protect the household food security of refugees, displaced people, disabled, orphans, and other vulnerable groups. In addition to targeted food aid, these interventions could include measures to improve access to skills training, credit, simple technologies for storage and processing, and other inputs required to increase household incomes and restore depleted assets. As much as possible, the targeted food interventions should be clearly distinguished from the broader issues of the management of food aid overall, and the efforts toward market stabilization. 5.63 While concern now seems to center on reestablishing farmers on their land, providing them with inputs and food, and using monetized food aid to finance this, recovery of production may not be as hard to achieve as presumed. Similarly, restoring the production system (especially the irrigation system) may not be as critical as suggested, although obviously important in the long-term. The system was not in such good shape before. Without precise field knowledge of the damage, it may not be realized how inadequate that system was before 1990. 5.64 The central concern is to reestablish and reinforce the marketing system (vehicles, fuel, spare parts, etc.) and rehabilitating the road network. These improvements need to be backed up by the reestablishment of a good market information system, such as that which functioned in the Ministry of Agriculture's Food Early Warning System Project, to guide marketing choices. Is the Country Saturated with Excess Food? 5.65 Early reports emphasized the excessive supply of food in the country and the impact this was having on forestalling domestic production or marketings. While this may have been a danger, the evidence reported seems exaggerated. July/August 1993 prices reported for Mogadishu and a few other markets indicate prices of major cereals on the low side, but not as disastrously low as indicated. Prices in Mogadishu were reported (except for some anomalies) at $212 per ton for maize and $148 for sorghum. In other markets, wheat, maize, and sorghum were reported at $146, $125, and $140 per ton, respectively. If these prices were correct, while low, they can be compared with generous import parity prices of roughly $300 per ton for rice; $190 for wheat; $170 for maize; and $169 for sorghum. Since there was a reported premium for domestic cereals, these prices were not so far from import parity levels. 5.66 Some of the steps taken to relieve the pressure of possible oversupply were in the right direction, such as diverting some shipments and stopping general distribution programs. But others, such as monetization and the transfer of such resources to production and price support need to be considered with care. 5.67 By itself, monetization does not solve the problem of balancing domestic supply and demand at incentive prices to producers. It simply converts imported food aid into cash at an early stage. If the quantity converted is excessive it will result in reduced prices in the same way that distribution in kind would have done. 44 Monetization 5.68 While there is a presumed advantage to converting monetized food aid into counterpart funds for use in other projects, there are three issues that need to be considered. Are the mechanism in place to convert monetized food aid into counterpart funds? Are the funds used on the right investments? And does such a system lead to a dependency among competing agencies and NGOs similar to that of the government in the past? Field reports suggest that there are multiple projects in need of counterpart funds, always a questionable assumption. The priorities for such projects (as articulated by UNOSOM/Humanitarian division) are the following: a) emergencies; b) returnees; c) economic enterprise activity; d) education; and e) health. A recent report also advocates use of counterpart funds for local purchase to support local prices. 5.69 While all of these are worthy causes, there is a notable lack of emphasis on undertakings that help to restore the country's marketing system or help to manage it. There is also some ambiguity over the uses of counterpart funds. Some, for emergencies and returnees, are clearly linked to the food aid being provided. Others, while important, fall more in the area of general development assistance, and stray rather far from any direct link to the level of food aid, such as economic enterprises, education, and health. Priority should be placed on: * Reestablishing and improving national food marketing. * Balancing food aid supplies with national production. * Targeted interventions to achieve food security. * De-linking food aid from development support. Reestablishing and Improving National Food Marketing and Balancing Food Imports with Domestic Market Prices. 5.70 A system should be put in place that monitors and forecasts national production and adjusts imports (including food aid) so that domestic prices equate to border prices. This should be a Somali driven, donor supported, effort that combines production monitoring, price monitoring and forecasting, and import/aid adjustment. Resources should be allocated to support private marketing, including transport, open-marketing, monitoring, etc. If the donors and NGOs are serious about reestablishing a national market, this team should be highly qualified, but separate from donors, and largely autonomous within the government. 5.71 Targeting interventions for food security. Specialized programs for refugees and returnees should be established based on need. A mix of commodity and cash (monetized) support should be provided depending on circumstances. These programs should be isolated from the market as much as possible. If other targeted interventions are needed (health/education/enterprise development) these should be financed separately. 5.72 De-linking food aid from development support. As much as possible, support for economic enterprises, health, and education should be financed separately and not tied to monetized food aid. Unless this is done, there is a danger of these development 45 objectives driving a demand for food aid (to obtain monetized resources) that would unbalance the inflow of food aid. Where food is needed to support these efforts, that aid should be separately managed. Using Monetized Food Aid to Support Local Prices 5.73 The need for local price support should be limited to the management of overall supply and demand. Food aid and imports should be limited to supply the residual after local supply has been exhausted. Food imports and food aid are more flexible than local production, and the key issue is monitoring the flow of grain before it reaches the country. 5.74 It is desirable that available funds be used for local purchases before food aid is resorted to. Such would reinforce domestic production and marketing. 5.75 Moreover, local purchases presuppose the capacity for local transport and storage, which is identical to that needed to control and manage food aid supplies. A better system is to move local supply around and store it if necessary, than to do this on top of excess food aid flows. 46 VI. PHYSICAL INFRASTRUCTURE A. Introduction 6.1 Even before the outbreak of the civil war in the late 1980s, Somalia had run down its physical capital, which had been only partially developed in the first place. The chronic lack of domestic resources and its allocation to nonproductive activities contributed to the decline of infrastructure through the virtually complete absence of maintenance. In most subsectors, the only resources available for capital investment and recurrent expenditure were those contributed by the donor community. Since the outbreak of hostilities, much of the country's physical infrastructure has not only suffered additional neglect but has been the target of outright destruction. * Preventing a further deterioration of basic infrastructure and gradually improving their operations within the medium term would in itself constitute a major achievement. 6.2 The current situation in Somalia dictates that long-term rehabilitation and reconstruction activities should be technically and financially feasible within a sustainable financial strategy. The following factors need to be kept in mind in developing a strategy for the reconstruction of physical infrastructure over the long term: * It would be neither necessary nor possible to rehabilitate everything that was damaged; unproductive infrastructure or assets should not be included in the strategy. * The proposed solutions should take into account the present extremely limited (virtually nonexistent) budgetary situation in Somalia. * Technical proposals should initially be adapted to the existing implementation and maintenance capacity of the entities concerned. 6.3 Sectoral priorities should be determined following five criteria: * number of beneficiaries; * absorptive capacity; * intersectoral linkages; * delivery of essential services to displaced people; and * the desirable role of the state as a new government unfolds. 6.4 This chapter attempts to identify the key elements of a planning framework which would govern the complex task of long-term reconstruction of physical infrastructure. The subsectors reviewed include transport, water supply, electricity, telecommunications, oil products, and housing and urban development. 47 B. Transportation 6.5 Overview. Somalia's transport infrastructure, even prior to 1991, was limited, consisting of 21,830 kilometers of roads, three principal ports, and four airports with paved runways. There are no railways, pipelines, or inland waterways, while coastal shipping, which once linked coastal cities both nationally and internationally, had essentially ceased. Domestic air transport was regarded as the means of transport to maintain communication with remote areas at affordable prices. Road transport is by far the most important means of internal transportation in the country. Because of the high foreign cost element in the transport system composed of roads and vehicles, traditional means of land transport to move goods, people, and services within the country are still common practice. Camels and donkeys are important: camels for carrying 100 kilogram loads over average distances of 30 kilometers per day and donkeys for small loads within and around towns and villages. Prior to the period of political instability which began in late 1989, the transport sector was managed by four inefficient parastatal organizations and no less than three Ministries. All of these now lie in ruins. * The role of the transport sector will be to maximize provision of transport services with minimum foreign exchange availability. Roads and Highways 6.6 In keeping with the overall policy on transport in Somalia which prevailed throughout the 1980s, the roads transport subsector policies should aim to: * delay new road construction; * avoid costly reconstruction of the paved road network through spot improvement and improved maintenance, if possible; and * achieve more efficient use of road vehicles by means of improved maintenance and higher load factors through greater private sector involvement. 6.7 The country's road network includes 2,559 kilometers of primary roads which are interregional in character and serve major population centers, 4,850 kilometers of secondary roads connecting settlements of local significance to each other and to the primary road network and rural feeder roads which are low-volume earth roads for which no reliable inventory exists. In 1990, less than 13 percent of the road network was paved with the majority of remaining roads built to earth standards (83.5 percent). The extent of the primary and secondary road network was judged to be adequate in 1990. However, despite considerable road upgrading prior to 1990, the standards and conditions of were not satisfactory. Paved roads constructed on the predominantly good well-drained soils of central and northern Somalia tend to remain in satisfactory condition, whereas those lying in the valleys of the Juba and Shebelli Rivers where soil conditions are difficult are generally in poor condition. 48 6.8 The north-south link between Mogadishu and Berbera on the Gulf of Aden via Beletweine, Galkayo, Garoe, and Burao (about 1400 kilometers) forms the backbone of the country's road system. The other most important roads are the coastal road from Mogadishu to Kismayo (about 475 kilometers), the road from Mogadishu to Dolo on the Ethiopian border, via Afgoi and Baidoa (about 600 kilometers), and the relatively newly built road from Garoe to Bosaso (about 500 kilometers) on the coast of the Gulf. UNITAF is reported to have rehabilitated as much as 2,000 kilometers of roads, including regional roads between Mogadishu, Kismayo, Bardera, Wajit, Baidoa, Oddur, Baledogle, Beletweine, and Gialalassi for two lane all-weather heavy truck traffic. In some cases, bridges destroyed by the war have been temporarily replaced with Bailey bridges provided by the military forces. The durability of the rehabilitation has not been assessed. None of the roads in the north have seen any improvement. Rehabilitation of roads linking the north and south should be left to the longer- term when traffic levels justify an adequate economic return.' * Road rehabilitation should focus on the roads linking major agricultural areas to market centers in the early part of the reconstruction program; the reconstruction of bridges across the Juba and Shebelli rivers should also be a priority. 6.9 Road maintenance. Since the outbreak of hostilities and the complete collapse and destruction of the Directorate of Highways, the maintenance has come to a complete halt and road conditions have deteriorated further. * When routine road maintenance is reestablished, it should be managed at the regional level. Arrangements should be devised whereby contiguous regions can share road maintenance facilities and equipment, along the lines of the proposed Highway Maintenance Areas which were to have been developed with IDA assistance under an infrastructure rehabilitation project which was never approved in 1990 owing to country conditions at the time. 6.10 Two years prior to the civil war, the now defunct Directorate of Highways established a Road Maintenance Fund generated by an ear-marked tax levied on the sale of fuel, all of which was imported. The potential revenue to be generated through the road maintenance element of fuel tax was estimated to be considerably in excess of what was being raised through other road user charges, (vehicle registration, licensing, and inspections) and, as such, represented an indispensable source of funds for maintaining Somalia's fundamental transportation system. * A central Road Maintenance Fund should be reestablished and generated from an ear-marked ad valorem tax on the importation of fuel. (See Oil/Petroleum Products, below.) 6.11 Institutional arrangements. The execution of the priority road reconstruction must necessarily rely on private contractors engaged by donors in consultation with subnational political units. During the physical reconstruction stage, donor support will also be required to regenerate the institutional capacity at the regional and district level within an overall road transport management framework with a prominent role for the private sector. 49 0 In the long-term, there is a need for a minimal central government organ to oversee issues of regulation, pricing of road user charges, road safety, and allocation of road fund revenues to the regions. 6.12 Road transport. Before the civil war, road freight transport was dominated by the private sector which handled over 80 percent of the demand for internal movement of goods. The balance of the demand was met by the parastatal National Transport Agency, which, now defunct, should not be resurrected. Passenger transport was provided only by the private sector and should remain so in the future. Ports 6.13 Somalia, with the second longest coastline in Africa, has three main sea ports, each of which has sheltered deepwater facilities providing a combined total of fourteen berths. All ports rely on ships' gear for general cargo loading and unloading. Mogadishu handled most of the export/import traffic, while Berbera and Kismayo handled the export of livestock and bananas, respectively. In 1987, a third medium sized port was developed (without equipment) in Bosaso. Finally, there are two small ports at Merca and Brava, which are essentially beach landings about which nothing need be done for the foreseeable future. 6.14 Mogadishu Port facilities. Mogadishu Port is currently operated by the WFP with assistance from a foreign consultant. In the absence of a Mogadishu Port Authority, UNCTAD has taken on the responsibility for developing port policy and providing technical assistance to ensure the early recreation of a port authority or authorities. The port is operating satisfactorily but major refurbishment of damaged infrastructure and the repair or replacement of equipment is needed. Revenue is reportedly being collected and held in trust for handover to a future government. 6.15 Other port facilities. The ports at Kismayo, Bosaso, and Berbera currently confront the same problems: the marine structures, quays, and breakwaters are in place and require some repair and maintenance to varying degrees. However, pavements, bollards and fenders, transit sheds, buildings, equipment and workshops, tugs, navigational aids, water and power supplies, and oil installations which existed before the civil war in Kismayo and Berbera have all been damaged or destroyed and require extensive repairs, replacement or refurbishment, or maintenance. Bosaso, never having been fitted with port accessories, remains in relatively good shape, with the exception of navigational aids which are missing, and the administration, building which was destroyed. UNCTAD has identified the priority physical rehabilitation needs for all three ports. Aside from the rehabilitation of buildings, UNCTAD proposes the acquisition of cranes, forklift trucks, tractors, trailers, communications equipment, and workshop tools and spare parts. Strengthening the security systems in all the ports is also required to ensure, inter alia, that port revenue (vessel and cargo related dues and charges) were accounted for properly. 6.16 Port operations. Prior to the civil war, there existed a Somali Ports Authority which, in effect, operated as a stevedoring company, providing services to ensure the loading and unloading of ships. UNCTAD has taken on the role of the Mogadishu Port Authority while WFP functions as the port operator on an interim basis, pending the reestablishment of an indigenous management arrangement. Technical assistance is being provided by a large 50 European port operator. In 1993, the operation of the port of Berbera was contracted out to an international firm on a revenue earning basis. This operation could serve as a model of future policy and needs to be monitored closely. Where possible, the refurbishment of ports with equipment and the like should be negotiated as part of the service contracts with the private sector. Alternatively, some form of build-operate-transfer (BOT) arrangement could be examined, where "B" means "rebuild." 6.17 Port traffic and revenues. Berbera, being the primary port for the northwest region of Somalia, has always been the major exporter of livestock to the Arabian Peninsula. Before the war, almost the entire export of sheep and goats and 90 percent of the camel export were passed through the port. Despite the reduced scale of operations at the port, over one million head reportedly exported in the twelve months ending September 1993. * The rehabilitation of the port of Berbera is a priority task essential to the success of goal of reestablishing Somalia's capacity to generate foreign currency revenue through the export of livestock. 6.18 The rehabilitation of Kismayo port, currently managed by Belgian naval officers, will be a priority task associated with the resumption of the export of bananas, Somalia's second largest export. 6.19 The port of Bosaso is flourishing. There is daily truck traffic carrying imported commodities inland. Livestock exports are rebounding and a major problem is the port's capacity to handle the traffic wanting to pass through it. Bosaso is currently the only freely functioning port in the country with revenue essentially running the regional government. 6.20 Civil aviation. Somalia has fifteen airfields of which five are capable of functioning as international airports, two in Mogadishu and one each in Kismayo, Berbera, and Hargeisa. The current status of Mogadishu's second airport and that of Kismayo is unknown. In 1993, the International Civil Aviation Organization (ICAO) began the provision of technical assistance and training to Somalis at Mogadishu in air traffic control, fire service, and air information. The current status of Mogadishu as a war zone prevents foreign carriers from overflying Somali territory. This fact, combined with the absence of a recognized central government, militates against the International Air Transport Association (IATA) collecting the associated overflight fees. Such fees as are being collected are being put in escrow against the day that the proper benefactor can be identified. The airport at Hargeisa is subject to continuing extortionate demands by the controlling sub-clan and therefore is currently used only minimally by agencies for imports. * A priority activity in the civil aviation subsector, aside from improving safe operations, is the resumption of management of the air space as a means of generating revenue in foreign currency; in the short term, consideration should be given to relocating the air space management function off-shore 51 C. Water Supply and Sanitation 6.21 Prior to the outbreak of the civil war at the end of 1990, all formal water- related institutions in Somalia were in an advanced state of deterioration and the piped water supply in Mogadishu, Kismayo, and Hargeisa urban areas was less than half of what was demanded. The central Water Development Agency (WDA) was responsible for promoting the development of rural water supply. With the exception of key core technical staff, who ran the physical facilities, very few other employees engaged in any real work. Billings and collection of water tariffs was far below standard, with consequent financial distress. Remuneration of the staff was as low as the morale, employees' (and managers') attendance was nominal. With the onset of the civil war and the breakdown of security, the Mogadishu water supply was subject to looting and destruction, now partially repaired with donor assistance. The Kismayo water supply system, originally constructed to supply the port, had long been in disrepair. Many of the wells in the rural areas and in the smaller urban centers had been rendered inoperative by the retreating Barre forces. As a result, water remains one of the most pressing human needs; it is a rare and expensive commodity that is being sold in many places. Water sources are almost entirely clan controlled and are therefore prone to vandalism and looting when clan conflicts occur. Where security permits, first priority should be given to the rehabilitation of drinking water supply systems to deal with the increased cases of diarrhea, typhoid, and tetanus. Second priority should be given to the rehabilitation of sources for livestock and agriculture with due attention to be given to the potential environmental consequences such as pasture degradation through overgrazing. 6.22 Organization of the water supply sector. A legal framework and chain of command for the water supply sector needs to be established within an appropriate regulatory framework. The three urban water agencies should be restructured on the basis of clear, simple organizational principles. Staff should be kept to the minimum and reasonably well salaried 6/. Although formal privatization in the water utilities does not appear viable at this time, the agencies should be autonomous to the maximum degree possible: (personnel policy, financial, and technical matters should be decided at the agency(ies) management level, with overall policy guidelines, specifically regarding water resources management, new investments, and pricing policy (but not price setting). Consideration should be given to either a management contract or a twinning arrangement, with independent foreign management firms/water utilities; which would assist the establishing of the new organization, and train counterparts-say for a three year period (at least for MOGWATER). 6.23 The role of WDA should be revisited. Some of the rural (mostly borehole based water points) schemes need to be rehabilitated and operated, traditionally the role of WDA and often poorly carried out. However, it is expected that local communities will also have difficulty, in the medium term of ensuring adequate fuel supply, maintenance, and operation of engine driven installations. Consideration should be given to decentralizing the provision of rural water supply to the regional or even district level, involving the private sector in the construction and operation of boreholes on a cost recovery basis. 6/ This issue is directly connected to the reputation of civil service. 52 6.24 Community involvement, specifically in the rural areas, should be pursued, with the assistance of NGOs and bilateral donors. However, a coordinating advisory panel, specifically regarding technical (and financial) approach, should be set up. This forum could also assess and monitor the experiences of community involvement. 6.25 Financing the water supply sector. The assessment of the agency(ies) assets and liabilities should be a part of the reorganization exercise. It may be done by the institutions themselves, but the services of independent engineering/financial management consultants could lead to better (and even quicker) results. The liabilities should also include the agency(ies) prior and inherited loan servicing obligations as well as the damaged/lost physical assets. 6.26 On the principle of "independent and autonomous agency(ies)," the water supply services should not be free, and charges should be set to allow full cost recovery (plus buildup of at least some modest reserves for future expansion). However, Water tariffs set for full cost recovery are unlikely to be affordable by a very large part of Somalia's population. Therefore, in the medium-term, revenues from water tariffs should just be sufficient to cover: * operational and maintenance cost, and * repayment of loan obligations. 6.27 Tariffs, regardless of the bases on -which they are established, should be annually adjusted in line with either general inflation, or more properly, on the basis of future projections of the agencies' financial requirements. To cover rehabilitation (an expansion) cost, grant aid should be sought, which would not be onlent, but passed on as grant to the agency(ies). It is unlikely that reserves could be generated for some time to come. In the context of the overall macroeconomic situation, subsidies for water supply services should not be entirely left out of consideration. However, it should be provided on a diminishing basis. Another way of subsidization could, of course, be providing tax exemptions to this agency(ies), including fuel, chemicals, and other materials for operational purposes. 6.28 A tariff is only as good as its billing and collection service. Individual metering is the ideal as it encourages conservation. However, in Mogadishu, due to the chemical characteristics of the water, material deposits (calcification) at the meters (where pressure drop is significant) render them useless in 6-12 months. By 1990, Mogadishu's metering was already in shambles-at least 80 percent of the meters did not work or were unreliable. As flat rate charging does not encourage water conservation, an alternative method of charging for water in Mogadishu needs to be established, based on size of the plot, number of rooms, and number of stories of the building. A consumer registration drive needs to be carried out as a priority. 53 D. Shelter and Urban Services 6.29 Somalia's urban population has been the most affected by the military conflict since the various militia concentrated their energies upon controlling the urban centers. In many cases, towns were completely deserted while battle fronts moved through the regions. However, once urban areas are secured and the military fronts moves elsewhere, populations usually return. This has been the case with most towns but the rate of return may be delayed by the extent to which towns were destroyed or how people perceive subsequent security conditions. Bulo-Burti and Dusa-Mareb have seen almost all their populations return. By August of 1992, Baidoa had 'little left in the town to attract people back but had been occupied by displacees from elsewhere. 6.30 Mogadishu, the center of much of the heavy artillery fighting in 1991, has been heavily damaged. Most government installations have been looted and destroyed. The Mogadishu water supply is reportedly operating at 40 percent capacity. 6.31 The total destruction of Hargeisa (current population 100,000) by Barre forces in 1988 resulted in the exodus of its residents as well as the population of other regional towns to camps across the border in Ethiopia. The residual Ethiopian population still in the northwest at the time also joined the exodus across the border. Hargeisa began to be repopulated in 1992, especially as the de-mining operation made the town increasingly safe for rehabilitation. The town is now very much in the process of rebuilding. The market is active and most consumer goods are reappearing, albeit for a price. Trade is mostly via Djibouti and merchants appear to be able to move their goods to Hargeisa without much difficulty. 6.32 Berbera was spared any major destruction during the war and has essentially resumed its pre-war population of 35,000. The market economy is active and expanding. Berbera contains several displaced persons camps wherein reside a large number of stranded, destitute war-widows of the former Barre forces. 6.33 Burao (population 17,000) is described as being the most "normal" of the three major northern towns. Its market is active and the business community is well organized and active in the town's administration. Two electricity companies are competing to re- electrify the center of the town. Water supply was identified as the principal need of the town. Overcrowding of existing shelter was observed as in Hargeisa and Berbera. Aside from those forced to live in makeshift shelters, there is a chronic problem of occupation by squatters of government and public buildings such as former schools, offices, and banks. These structures are now needed as schools begin to re-open and administrations begin to reestablish themselves. * There is an urgent need to strengthen the capacities of the local police forces in Berbera, Hargeisa, and Burao. * Policies and programs for assisting displaced and other impoverished urban dwellers with shelter materials need to be developed throughout the urban centers. 54 * Relocation of squatters from government buildings must be to locations within the town since most have at least some fingerhold on economic activity which must not be disrupted. 6.34 Income generating opportunities are still very limited in all urban areas, consisting of primarily informal sector activities. Women appear to dominate this sector, having become the major bread-winners on most families. * In all urban areas there is an urgent need for programming for small scale income generation whereby alliances are formed between NGOs and local business communities. (See Chapter VII-Productive Sectors.) 6.35 Bosaso faces problems of overcrowding and lack of income-generating opportunities for the displaced. The problem is being exacerbated by newly arriving migrants drawn by the perceived prosperity of the town. The ratio of displaced to local residents is as high as 4:1. Some displaced may choose to return to their areas of origin but many will not. In many urban areas, there will be a tremendous need for the construction of permanent shelter of the next few years. * An innovative shelter program is needed which will require the local authorities to devise a mechanism to gain access to marked land inside and at the periphery of the urban areas. Development assistance could be tied to the authorities taking appropriate steps to make land available for the displaced. * Donors must critically review all requests for assistance from local authorities to simply relocate displacees out of the town. * The onus for reconstruction of dwellings must be placed on the inhabitants themselves, supported by public programs providing access to credit, technical assistance, and materials. E. Oil/Petroleum Products 6.36 Exploration/production. There is no production of either oil or gas in Somalia. Prior to the civil war however, there was an active exploration program underway, and there are strong rumors that Conoco has made an inland discovery in the Garoe/Las Anod area. 6.37 Following cessation of civil unrest, a governmental attestation should be made to the effect that the existing petroleum law will continue to be respected, and that all exploration contracts which were in existence at the fall of the Barre government, will continue in force. With this assurance, the oil companies will return almost overnight, to continue their exploration. Nothing more needs to be done. 6.38 The technical data, including most of the existing contracts, is physically located with a consultant in Denver, USA. Once payment of unmet fee claims is made, these 55 data, and the consultants themselves, may be accessed as a de facto Ministry of Petroleum until such time as a formal ministry is organized. 6.39 Refinery. The Iraqsoma refinery is small, ill equipped to meet the country's product needs, inefficient with poor yields, poor operating practices, and major portions of the heavy product output must be re-exported for sale elsewhere at distress prices. There is no reason therefore: * to rehabilitate the existing refinery, * upgrade or enlarge it, or * restart it. 6.40 It is instead, far more economic to rehabilitate and upgrade the associated product tank storage portion of the refinery. This may then serve as a receiving and storage area for petroleum products purchased externally, and shipped into Somalia in bulk for inland distribution. The refinery itself should be scrapped. Product Supply and Distribution 6.41 Supply. It is significantly cheaper to purchase the required range and volumes of petroleum products from the large regional refineries in Saudi Arabia, the Gulf, or elsewhere, than it is to purchase crude oil and refine it into its product state in Somalia. In the event that oil producing donor nations wish to provide crude oil to Somalia, it is proposed that tanker loads of product would be a more suitable alternative. Heretofore, Somalia has made its foreign purchases exclusively through a single broker (SOMPET), which is demonstrably above world price levels. The former government had taken steps to liberalize regulations governing the importation of fuel, however, the parastatal was still the sole importer in 1991. * Importation of petroleum products should be opened up to the private sector. Assistance to the private sector can usefully be supplied in the form of mechanisms for periodic tendering for purchases of required products in tanker-load lots, with purchases paid in advance through the provision of revolving letters of credit, in order to realize maximum price efficiencies. 6.42 Storage/loading facilities. The storage facilities at Mogadishu, the Iraqsoma refinery, Kismayo, and Berbera were generally adequate for pre-war demand levels. They therefore should need no more than an inspection, rehabilitation, and general maintenance to be undertaken in order to bring them back into operation. The exception is the general lack of bulk storage for LPG (butane/propane) anywhere in the country. As a result, such facilities need to be installed in each of the three ports for use, particularly in the urban areas, as a replacement for wood products as domestic fuel. Unlike the storage facilities, the product unloading arrangements in each of the four named areas are unsatisfactory and need to be redesigned and built as new construction, independent of what was in place before the war. 56 6.43 Inland distribution. This has universally been undertaken by road through the use of tanker trucks and flat bed loads of product drums. To the extent that the roads and rolling stock are capable of handling liquid freight, no special rehabilitation is required. Should not enough trucks be available, it is highly likely that commercial trucks and drivers from Kenya and Ethiopia will avail themselves to the opportunity for haulage if the road tariff structure is appropriate. For retail distribution, most of the stations, although badly damaged, can rapidly be rehabilitated through the use of local cooperatives, rather than resurrecting the state owned marketing firm ISKIASH, or the National Petroleum Agency (NPA). Summary (in order of sequence of required steps) * With the technical assistance of the donor community, form a Ministry of Energy (there have been no antecedents in pre-war Somalia) to deal with petroleum policy; pricing and taxation; and regulatory compliance. * Engage the capabilities of the international oil industry to undertake/supervise the construction of unloading facilities; repair and upgrading of product storage tanks, including the addition of LPG tanks; and through the local cooperatives, the rehabilitation of the existing retail outlets throughout the country. * Establish pricing policy based on international product prices CIF at the four Somali loading ports, with appropriate taxation and road haulage tariff levels. * Provide the enabling regulations to permit the private sector oil companies to purchase from refineries within the region, transport, unload, and sell the required product slate within Somalia. Funding requirements are low: * The required port and storage facilities may be funded through the international agencies, with the companies paying for their use on a unit throughput basis, or the companies may construct the facilities themselves, with the incremental unit costs being included as part of the product pricing structure. * The provision of revolving letter of credit facilities may significantly reduce the finance costs of bulk product purchases, depending on what arrangements are made with the private oil companies. Should such credit facilities be required, these could usefully be supplied by interested individual donor agencies. Technology transfer: None is required: * The thrust of Somalia's requirements are in the areas of petroleum policy making and policy implementation. This is people intensive, rather than capital intensive work. 57 * It is possible to start on the required policy and implementation work prior to the cessation of hostilities. If the required policies are in place, implementation can start as soon as the fighting stops. F. Power and Electricity 6.44 Overview. The electricity subsector and the supporting Power Rehabilitation and Energy project (US$94 million) financed by IDA, ADB, EIB and Italy, had become an exemplary success by 1990. ENEE's generation capacity to supply Mogadishu had improved six-fold (from 7 MW at appraisal in 1987 to more than 45 MW by late 1990), electricity receivables were almost non-existent, tariffs approximated long-run marginal cost of electricity, competitive salaries and wages were being paid, and technology and administration transfer was being provided through an IDA-financed management contract which was being performed by a European consultancy consortium. Investments in the sector had amassed to about US$400 million. The rehabilitation project concentrated on Mogadishu, but in 1990 preparation was well in hand for an infrastructure project which was planned to include the provision of electricity to several towns in the vicinity of Mogadishu. The projects did not accommodate the needs for electricity elsewhere in Somalia. 6.45 None of the 45 MW of steam and diesel generating plant mentioned above now exists, nor does the 20 MW of new diesel generators, which were supplied under the rehabilitation project, and which were being readied for start-up when hostilities broke out. The plant has been removed from the country and only the concrete plinths (they may be re- useable) remain. Buildings, plant and auxiliaries have been destroyed, demolished, and/or "exported." The same applies to the transmission and distribution systems. Nothing remains of these except for some locally fabricated, heavy steel reinforced concrete transmission line poles. Service cables to domestic and commercial premises and meters have also been exported. Overhead lines have been removed and underground cables excavated and "exported." 6.46 Reports indicate that the situation is a little better in the north, where, at Bosaso, Borama, and Berbera, some electricity is being generated, but generally into transmission and distribution systems which have been badly damaged and are only fractions of those which existed before the war. 6.47 Economic impacts. The major impact being caused by the total destruction of the electricity system must be the inadequacy of water supply, because certainly for the Mogadishu area, most potable water has to be pumped. Other impacts include lack of refrigeration for medical, commercial, and domestic purposes, electricity for hospital uses, and especially for security lighting and communications. Any commercial operations which are being undertaken will be utilizing captive generation with its usual inefficiencies brought about by small size and poor maintenance. Power Sector Rehabilitation/Reconstruction Priorities 6.48 The electricity bottleneck contributing to the problems described above could be addressed with a few hundred kilowatts of generation (wind power and solar power would 58 need to be considered for outside of the main urban areas, but would need to be of already well-proven designs). However, the major constraint to the reconstitution of the industrial and commercial sectors caused by lack of electricity will need 10 or 20 MW of diesel generation, and the replacement, initially of tens of kilometers of transmission and distribution reticulation. Reconstruction of the generation, transmission, and distribution systems to the status of late 1990 is likely to take 3-4 years and in the Mogadishu area alone is likely to need an investment in ballpark figures of $250 million. The program of reconstruction will need to address the shortcomings of the whole of Somalia. Because the locations needing supply are so diversified geographically, separate isolated schemes will need to be designed for each town. Investments in the Kismayo area will probably be in the region of $50 million, and in the north-Hargeisa, Berbera, Bosaso, Garoe-$100 million. 6.49 Planners of the electrification schemes will need to analyze and advise on the practical issues associated with Somalia's resources. With the chance to design systems from scratch, the most basic of questions should be addressed for the electricity supply systems-what electrical generation frequency should the new Somalia adopt? Planners will also need to decide on the location of power stations, the voltage of new transmission and distribution reticulation schemes, consumer service facilities including the types of meters to be used, their location, and the method of payment (post-payment, pre-payment, credit-card payment, control-card payment). The affordability and economics of electricity supplies will need to be evaluated for the various towns taking into account the size of the cash-generating population and the transient and refugee population. 6.50 Indigenous resources-short term development-biomass, wind and solar. Biomass was (and must be to an even greater extent since the war) the major utilized energy resource in Somalia. In 1986, Somali households consumed about 1,300,000 tons of oil equivalent of wood, mainly for cooking purposes. It was transported to the urban centers, especially Mogadishu, from two or three hundred kilometers away at great economic cost. In Somalia, both wind and solar energy have been shown to have economic potential for meeting pumping and some electrical generation requirements (e.g. village refrigeration of medicines), because they can compete well with the main source of electrical energy-imported petroleum products and imported crude oil, which in the past Somalia has had to resort to. A wind power test station at Gezira a few kilometers south of Mogadishu produced excellent results, generating electricity at an annual plant factor as high as any such installation elsewhere in the world. Simple solar cooking ovens would work well in Somalia for most of the year. 6.51 Indigenous resources-longer term development-hydropower and hydrocarbons. There are some hydropower sites on the Juba river-the Bardere site of 100 MW potential capacity has been long-studied, would be expensive to develop and would have a construction period of at least seven years. A small (4.8MW, 1OGWh per year) hydropower station existed before the war at Fanoole on the Juba river-it has a minimal firm energy capacity. 6.52 Reconstruction and operations of the sectors. Several of the senior staff of the sector are already making efforts to run piece-meal electricity supply operations in Mogadishu and some of the other towns. However, the reconstruction of the infrastructures would be outside the scope of even the 1990 utility staffing resources. Most of the 59 reconstruction will need to be performed through supply and erect contracts, which should include two or three year operation and maintenance options. 6.53 Some of the staff mentioned above are the managers and senior staff of the various utilities, and it is likely that they could, in several towns, if supported by technical assistance, set up organizations to operate the facilities, when they have been built. This exercise could embrace a municipality approach, whereby the system, as-and-when-built, is handed over to the township, for it to finance and operate on a self-financing basis, as is already occurring in the northern town of Bosaso. Such an operation would include the reemployment of ENEE's staff by the municipalities, with central administrative support for specialist services and spares. Each municipality would be responsible for revenue collection and the financing of operating costs, including staff remunerations, and fuel and consumables procurement. Under this arrangement, central administrative support would be procured by the municipality from the center on a cost-plus basis. G. Telecommunications 6.54 Most of the telecommunications facilities in Somalia have been destroyed during the war. Even before the war, the quantity and quality of telecommunications services were unsatisfactory due to a number of reasons, including weak institutional arrangements, lack of trained manpower, and lack of financial resources. The large size and complexity of reconstructing the telecommunications facilities is too big to be left to the same institutional arrangements that prevailed during the war. New arrangements have to be put in place to plan and supervise the creation of an appropriate institutional framework and the choice of a suitable technology. It is proposed that the actual reconstruction should be left to the private sector. A telecommunications body should be set up within the government to define the policy and regulatory framework under which the private sector would provide service and to create the necessary enabling environment for the private sector. A number of technological options are available to provide service on a short- and long-term basis. In the short run, a mix of satellites for the long distance/international facilities and cellular technology for the local network seems to be the most plausible. With these technologies, service could be restored within two years if the necessary government administrative mechanisms are in place. 6.55 Background. Postal and telecommunications facilities in Somalia were provided by the Ministry of Posts and Telecommunications (MPT) before the civil war. Even at the best of times before the war, posts and telecommunications services in Somalia were among the worst in the world in both quantity and quality. With about 21,000 connected lines the telephone density was estimated at 0.3 telephones lines per 100 population which was below the poor sub-Saharan average of 0.4 lines per 100 lines. Besides the low penetration, the quality of service was poor. On the average more than 30 percent of the lines were actually out of order at any one given time and faults took several days to clear. Call completion rates were estimated at less than 10 percent for local, 5 percent for domestic long distance, and 2 percent for international. About 71 percent (15,000 lines) of the total network was installed in Mogadishu. A new 15,000 line digital exchange had just been installed in Mogadishu before the war to work side by side with an old and obsolete electro-mechanical exchange which had substantially contributed to the poor quality of service. Electro- mechanical switches also existed in Kismayo, Hargeisa, Jawher, and Marqa. There was hardly 60 any telephone service outside these urban centers. These centers were linked by a microwave radio network. A satellite earth station installed in Mogadishu, equipped with 36 channels and one receive only TV channel, provided international telecommunications services. Other telecommunications facilities existing in Somalia before the war included a 2000 line telex exchange installed in Mogadishu. 6.56 It is therefore evident from the above that even before the war telecommunications services were almost nonexistent. There were a number of constraints which precipitated the above poor status, constraints which should be addressed in order to realize sustainable reconstruction of the sector. The sector constraints, which have been worsened by the war, include, inter alia a) lack of a policy and legal framework which would have defined the objectives of the sector and lay out a strategy for its long term development including commercialization and private sector participation; b) lack of financial resources (local and foreign) which limited Somalia's ability to procure essential equipment for maintenance and expansion; and c) lack of management capacity and trained manpower at sector and entity level to: a) define the policy and legal framework of telecommunications services in the country and b) to operate and maintain the existing facilities efficiently and to plan and implement development programs. 6.57 Currently, there are no public postal and telecommunications services in Somalia. All telecommunications services are through hand held mobile telephones operated by UN personnel and NGOs. Some local businessmen have set up their own private satellite based networks which are made available to the public at exorbitant prices. The public employs these facilities only in matters of life and death. Postal services are through private arrangements with travellers to Kenya and the United Arab Emirates (UAE). Some arrangements exist between Somali businessmen and Kenya/UAE businessmen who operate semi-commercial flights. 6.58 Availability of basic postal and telecommunications facilities will be pivotal to the efficient planning and implementation of an economic and social recovery program; particularly, it will be difficult for any government to conduct business without these facilities and therefore their restoration should feature as one of the major priorities of the reconstruction program. Similarly, the resumptions of trade and business within and outside Somalia will require basic telephone services as a minimum. Even before the war, only a small percentage of the demand was actually met and therefore the short term objective should be to meet very basic needs for telephone, fax and data communications. 6.59 Facilities to be provided. Recent reports from Somalia indicate that all telecommunications facilities were completely destroyed by the war. As a minimum, in the short run (1-3 years), the quantity of telecommunications facilities should be restored to the level they were before the war. Since this would be achieved using new modern equipment, the quality would improve substantially over that prevailing before the war. The restoration of these facilities will involve the supply and installation of the entire network including: subscriber plant, switching, domestic long distance, and international facilities. This will involve the installation of telephones, fax machines, teleprinters, cables, exchanges equipment for domestic and international services, terrestrial microwave radio, optical fiber cables and satellite earth stations. 61 Strategy for Sector Reconstruction and Development 6.60 Institutional arrangements. Investment requirements for reconstructing and developing adequate telecommunications facilities are large. It is unlikely that the government can secure sufficient funding from multilateral/bilateral sources to finance these investments. In addition, given the sector constraints mentioned above, it would be unwise to leave the development of the sector to the same institutional arrangements as were prevailing before the war. The short and long term solution to the telecommunications problems in Somalia lies in the private sector. We have heard that recently some Somali entrepreneurs have formed joint ventures with overseas partners to cash in on the present acute shortage of telecommunications facilities. This is a welcome development but there is a need for the Government to put order into this and draw out a short and long term development strategy for the sector. The planning for the reconstruction and development of the postal and telecommunications services in Somalia could be structured along the following lines: a) formulation of policy; b) establishment,of a legal framework;' c) establishment of a regulatory body; d) reconstituting the MPT, separating whatever is left of the postal and telecommunications assets and establishing two commercial entities for postal and telecommunications services; and e) privatizing the telecommunications entity. 6.61 Policy formulation. The formulation process includes clear definition of: problems, issues, objectives and targets to be achieved, policy instruments to be pursued, legal instruments available, monitoring mechanisms for implementing such policies, and implementation timetable. The policy objectives would ensure that services are efficiently provided at reasonable price, existing MPT monopoly is abolished, resources available for the sector are maximized through private sector participation, competition is introduced, and operators are controlled and interests of consumers are protected through appropriate regulatory mechanisms. 6.62 Legal framework. This will translate the policy framework into appropriate laws to guide the operation and development of the sector. 6.63 Regulatory framework. This would define the framework of a regulatory capability which would administer the chosen policies including oversight of operators and giving assistance to the Government in the further development of sector policies. 6.64 Reorganization and commercialization of posts and telecommunications. In order to prepare for commercialization and privatization it will be necessary to separate postal from telecommunications operations, establish two commercial entities and then privatize the telecommunications entity. The privatized telecommunications entity would then be just one of the operators. 6.65 Technology. There are several technical options that could be used to provide telecommunications services on a short and long term basis. The most important criterion is that any solution that may be adopted in the short term must be consistent with the long term strategy. Since time will be the most critical factor in the short run, it is important to select technologies that could be supplied and installed in the shortest time frame. A typical telecommunications network consists of three main components: local plant; switching and transmission equipment. For each component there are several technical options that could be 62 adopted to provide service. The conventional method of providing local network in urban areas is by using buried copper cable. Although still the least expensive in the long term, the installation of copper cable takes considerable time and would even take longer in an environment where the urban authorities are nonexistent and every utility is trying to put its facilities in the ground. The quickest way to provide this service is to employ wireless technology. Cellular radio would be ideal for this. Although this technology is more expensive compared to conventional copper wires, prices are coming down rapidly. The long term design of the local network will be a hybrid of fiber optic transmission and copper wires. For the transmission network the three different technologies that could be employed include: optical fiber transmission; terrestrial microwave radio; and satellite communications. While installation of terrestrial microwave radio and optical fiber cables is the long term solution for the inter-urban long distance network, in the short run a satellite based technology could provide the optimum solution. For the international network the satellite solution has always been the most economic one. 6.66 The recommended network configuration would therefore be a cellular based local network working into a satellite earth station providing domestic and international connections. The earth station at Mogadishu would be a large (say Standard A earth station) for domestic and international applications while in the other main towns smaller earth stations would be used. 6.67 Implementation. Given the sector constraints mentioned above, there is neither the organization nor the manpower capacity in Somalia to think through and implement the above strategy. First and foremost will be to establish a telecommunications body within the government to plan and supervise the reform process. This body will be responsible for preparing the policy and regulatory framework and arranging for the necessary legislation for liberalization of the sector. The body will also have a regulatory capacity for frequency management and resolution of conflicts that are likely to arise at the early stages of liberalization. In addition, the body will be responsible for evaluating and separating whatever is left of the assets of posts and telecommunications facilities and establishing two entities for postal and telecommunications services. The body could then continue with the privatization of the telecommunications entity and commercialization and liberalization of some aspects of the postal services. Alternatively, once the telecommunications assets have been identified, they could be sold off to highest bidder. This would save the Government the trouble of setting up a telecommunications company in the interim. 63 VII. PRODUCTIVE SECTORS A. Introduction 7.1 Reestablishing a national economy with prospects for sustainable growth in Somalia will require the revitalization of its productive sectors. First and foremost of these is agriculture, long the mainstay of Somalia's economic production finctions. Manufacturing industry, predominantly held by the public sector, has collapsed and efforts need to be made to resurrect the basic manufacturing capacity in the hands of the private sector. With the coming demobilization of the militia and the significant possibility of former pastoralists opting to stay in the urban areas, employment generation in both formal and informal sectors is a necessity, with an emphasis on the latter. B. Agriculture 7.2 Importance of agriculture. In 1990, the agricultural sector accounted for about 65 percent of GDP and was growing at a rate of about 3.2 percent per annum. The growth in crop production was for the decade 1980 to 1990 very rapid at around 6 percent per annum due to a significant increase in the cultivation of grains and fruit, particularly bananas resulting from the decontrol of markets introduced by the previous government. The rapid growth in the crop sector led to a considerable increase in its importance compared to livestock which heretofore had dominated the economy. Together livestock and crop production made up about 90 percent of the value of production. Virtually all exports were derived from agriculture, the dominant ones being livestock products and bananas. 7.3 Contribution of agriculture to social development and poverty reduction. Most Somalis are nomadic or semi-nomadic and associated in some way to agricultural or pastoral pursuits. Given the importance of these activities they will remain the mainstay of the economy for many years. While irrigation is important to grain and fruit production in the Shebelli and Juba valleys, livestock production and large areas of grain crops are still dependent on the two annual rainfalls. The bi-annual rainfall pattern means that Somalia is not as vulnerable to drought as some other countries in the Horn. There is no question that the sector can, even with even moderately good rainfall, achieve a growth rate of about 4 percent per annum which is in excess of the estimated growth of the population. 7.4 Major constraints to growth. The major constraints to agricultural growth in the past were * poorly sustained macroeconomic policy, * low quality infrastructure (irrigation, roads), * inadequate marketing arrangements (livestock export facilities and quarantine arrangements), and * lack of sound technology and extension services. 65 Action on the first three are immediate priorities and the fourth should be a medium-term objective. Longer term objectives are again in the area of infrastructure, namely to upgrade and expand the existing facilities. 7.5 Formal administrative framework and implementation. Some of the actions envisaged will be implemented by the private sector so long as there is peace and security, and the opportunity to import necessary inputs. However, there are a number of activities which will require the coordination of a formal administrative authority. The need for a formal administrative authority will be indicated below as the various priorities are discussed. In general, implementation and sustainability was a problem with many agricultural projects in the past and specific steps will need to be taken to address this issue. 7.6 Costs. The costs for the proposed activities is difficult to estimate before an inspection of the existing facilities. Once information is at hand the actual estimation of costs should not be onerous. Prior to action in any of the areas indicated, surveys will be necessary to establish the baseline situation. Immediate Rehabilitation and Reconstruction Priorities for Agriculture 7.7 Improving the macroeconomic framework. There is a need to provide a macroeconomic framework which will encourage investment and production for domestic and export markets. The immediate source of growth for agriculture is production to meet the domestic demand for food; the most important source of long term growth for the economy as a whole will be increased exports of livestock and bananas. To stimulate these exports there will, inter alia, need to be a reliable currency and exchange rate regime, stabilization of the economy, a banking system which will safeguard deposits and provide liquidity for livestock buyers, an arrangement for the conversion of export earnings into local currency, and in the longer term, a restructuring of the banking system. (See Chapter III - Macroeconomic and Financial Situation). The establishment of a new macroeconomic policy will require a formal administrative arrangement, however, improvement in banking services to facilitate trade is possible to some extent without a formal administration. 7.8 Infrastructure rehabilitation. With regard to the rehabilitation of irrigation systems, action is needed on two fronts: a) to rehabilitate the main barrages on the Shebelli river to control the flow and allocation of water. b) to rehabilitate irrigation canals and drains in the Lower Shebelli River Valley. These works can proceed simultaneously. It is not clear how much work is needed on the main barrages on the Shebelli. Rehabilitation of these requires fairly sophisticated engineering and construction work. A mission will be required to investigate this matter. The rehabilitation of the irrigation canals are relatively simple works which can be executed with a minimum of design and mechanical equipment. The rehabilitation of the canal systems will generate some returns, even if the main barrages are not completely functional. The payoff will be immediate in terms of increased food crop and fruit production, and employment. Already, some NGOs are working on the rehabilitation of small canals. Arrangements for the '66 maintenance of the structures will need to put in place. Finally, if there is to be choice of which irrigation systems to rehabilitate first, then those serving predominantly food producers should be given preference. An association of water users would eventually have to be set up to control the allocation of water along the river. Producer organizations, community groups, and NGOs can probably be the core implementing groups for the rehabilitation of simple works, and no formal administrative framework is likely to be necessary. Community organizations will be required to allocate water along the canals. If the water allocation and rights become issues, then a formal arrangement for conflict resolution will be needed. 7.9 The second priority in agriculture-related infrastructure is to repair the main road system, especially between Mogadishu and key towns in the Shebelli valley. This will complement improvements to irrigation systems. Road rehabilitation is discussed in another section, but action in this area will be critical for reducing the marketing cost of agricultural produce, and making food production a viable activity. This is of special concern given competition from food aid made available directly in Mogadishu. While improvements to rural roads are also important, these activities will need to become medium-term priorities. Rehabilitation of roads is a costly and time consuming exercise, with requirements for intensive planning and technical evaluations. Perhaps road rehabilitation can be conducted in stages, where the conditions of the roads are improved gradually, evolving from a rough but level gravel surface to the paved surfaces of the pre-war period. 7.10 Marketing and trade. Rehabilitation of livestock marketing and quarantine facilities, particularly in northern Somalia, are immediate priorities. Livestock exports should be kept in the private sector, with government entering only to regulate health conditions, and to facilitate export transactions. There will be a need to urgently explore the prospects for the substantial and sustained entry of Somali livestock exports into the former traditional markets. In addition, steps should be taken to assist the private sector to rehabilitate marshalling yards, as well as animal feeding, watering, and handling facilities all through the marketing system, with priority at the export points (Berbera, Bosaso, and Mogadishu). Action will also be needed, along with the private sector, to rehabilitate the marketing infrastructure for the banana exports from Mogadishu and Kismayo. The repair of the physical infrastructure and communications facilities for all traders (telex and radio) should be improved. Arrangements should also be made to rehabilitate the facilities at the main ports for the import of goods. Finally, a way needs to found to improve the availability of foreign exchange for the purchase by the private sector of medium size trucks and spare parts for the marketing of agricultural produce. Government should focus its efforts on the holding facilities at export points. Most of the livestock marketing facilities were publicly owned and managed. It should be possible to establish a community-managed institutional structure in which the traders and producers have an equal voice. If such a community structure could be established, then the management of a facility could be done by full time employee of the community structure. 7.11 Veterinary and agricultural services. A priority action is the provision of access to veterinary drugs to the livestock industry. Given the importance of livestock to the economy, the most immediate requirement for services is to rehabilitate a private sector veterinary service for producers and traders, and to facilitate the import by the private sector of acaricides, anthelmintics, and other animal husbandry related chemicals and veterinary drugs. The advice of prospective livestock importers should be sought on quarantine requirements. Second, the availability of seed for crop production, simple hand tools, and 67 farm machinery should be improved, either through grants or sales. The distribution of drugs and seeds could be managed by NGOs or community groups. Cost recovery would need to be established, since, for areas which are remote from the distribution points, pastoralist and farmers would need to pay full price. There should be an immediate understanding that the private sector would ultimately need to be the distributors for veterinary drugs and in the medium-term licenses will need to be issued to authorized distributors. Medium Term Priorities 7.12 Agricultural support services. Restoration of private markets in agricultural inputs (seeds, tractor services, implements, fertilizers) is required. Agriculture in the Shebelli Valley, the breadbasket of the country, had been fairly input intensive. Improved varieties of maize had been used, as well as rice and sesame. Vegetables and other high value crops were also grown. Tractor services and fertilizer were also used both by the smallholder and the plantation sector. Farmers are aware of the benefits of intensification. If a market for produce exists, then steps should be taken to assist the private sector to provide these services once again. Measures to ensure access to foreign exchange, improve the quality and reliability of the infrastructure, improve the operation of markets in agricultural produce, and reduce the risks associated with physical insecurity will have an effect on reestablishing markets in agricultural inputs. 7.13 Reconstitution of the extension and adaptive research service is required in the medium-term. The restoration of the capacity of an extension and adaptive research service for agriculture to provide the basis for adequate professional advice to farmers. This will form a basis for long-term growth in agriculture. This will involve attracting the former officials of the extension service back and establishing demonstration and research programs. Some form of administrative framework will be necessary to establish a public extension service. The first priority should be to explore the availability of qualified staff. 7.14 Infrastructure reconstruction.The main objective of the medium-term agricultural infrastructure reconstruction program should be to reconstruct the irrigation systems for which simple rehabilitation is not possible. This work is likely to include the reconstruction of barrages and major canals, and would focus on the large, plantation based farms producing bananas and other crops for export. A combination of government intervention on the common elements of the irrigation systems and private finance for on-farm rehabilitation could be used. As with extension, there will be a need for a formal administrative arrangement to design and construct public facilities such as irrigation works. 7.15 Fisheries. Somalia has a coastline of 3,300 kilometers, the second longest in Africa. The continental shelf, calculated to cover 39,000 square kilometers, harbors one of the richest fishing grounds on the continent. The average pre-war fish production is estimated to be less than 7 percent of the potential of 300,000 tons per year. Most of the industrial activities associated with fishing were government controlled and operating at very low levels of efficiency. These activities included cold storage and tuna canning factories. The industrial exploitation of Somali waters is still undertaken by a fleet of six large vessels owned jointly by the former Somali Government and a foreign firm. The absence of any coast guard capacity has opened up Somali fishing grounds to uncontrolled fishing by other national trawlers. 68 * Regions with coastal fishing potential should seek support of neighboring countries to patrol fishing areas to reduce incidence of illegal poaching by other nations. * Rehabilitation of industrial activities associated with fishing to be done by private sector with public sector support in form of regulations and standards. C. Employment Generation 7.16 Changes in postwar Somalia are likely to include: an accelerated move from nomadic pastoralism to agropastoralism and settled agriculture; from autoproduction to more involvement in the monetary economy; a growing need for non-farm rural activities in the informal sector; and an increase in multi-occupational urban sector activity. As more people will be forced out of a lifestyle in which they produced all or most of what they needed and consumed and into a context where increased procurement of goods from outside the family unit will become more common, the activity of marketing in a general sense will become more significant. Increased exchange of goods will imply increased marketing, demand for better marketing strategies, and the need for improved access to markets, good communications, and transport. There is also likely to be a decrease in the short term of remittances from abroad putting a new constraint on cash flow in the informal economy. In the recent past, the modem formal economy never employed many people in Somalia: at most 13 percent of whom 43 percent were in the private sector, mainly self-employed. The disproportionate public sector is unlikely to reemerge in post war Somalia, thus further reducing the prospects for formal sector employment in the near future. Almost 90 percent of the labor force worked in the traditional rural sector, nearly two thirds in the pastoral subsector and 22 percent in farming. While there are grounds for anticipating increased participation in monetary activities in the postwar era by large sections of the population, there is less justification for predicting the development or desirability of increased formal sector employment at least in the short term. These considerations reduce the need for formal sector training institutions in postwar Somalia. * Emphasis should be placed in future on productive sector training, not necessarily for formal sector employment but increasingly for productive informal sector employment, for small and medium enterprises and microbusiness. 7.17 Credit Schemes. * Credit to groups and individuals for microbusiness. * Credit to companies at intermediate level. * Credit to training institutions. Employment resource centers. These centers are needed to meet the urgent need for small scale urban and village based employment promotion. They should be small in 69 scope and situated near the majority of workers at district level under the auspices of a private or community body, to be determined by the community. The centers should include the following components: * skills training * production units * credit units to service the credit schemes * planning units 7.18 Criteria for allocation of resources. As for the selection of loanees and trainees, criteria should be developed to target special social groups including: * women * the war wounded and disabled * ex-militia (demobilized forces) * youth (between ages 12-20 yrs) * displaced people 7.19 Extension of indigenous employment creation structures. Entry into informal sector employment and agricultural activity usually takes place through apprenticeship. The system is in practice in Somalia and both small and large business and craftsmen have expressed willingness to take on more apprentices and trainees if offered an incentive such as access to credit or assistance in extending their business capacity or working space. Most master artisans and businesses had no problems with taking on an agreed quota of women apprentices. 7.20 Labor-intensive public works. Reconstruction programs need to be formulated with a view to incorporating labor intensive methods of building consistent with economic efficiency. D. Industry 7.21. Background. At independence in 1960, Somalia had a very small industrial base. After 1963, the government took the lead in industrialization and in the 1970s nationalized most industrial production, distribution and finance. Even at its peak in 1978, however, industry's contribution to GDP remained low (3.8 percent). At the end of the decade, industrial performance, never strong, deteriorated rapidly. By 1984, capacity utilization in public eniterprises was down to 26 percent and industry's share of GDP to 1.6 percent. 7.22 Government's major investment in public enterprises in general, and in industrial enterprises in particular, yi8lded no significant returns. Many enterprises (for example, the petroleum refinery, the urea plant, and the Kismayo meat factory) were never economically viable in Somalia and would not have existed in a less distorted environment. Overall, the performance of the public sector in industry in Somalia has been dismal. The government's failed attempt to develop an industrial sector in Somalia clearly illustrates the problems of government-led industrialization in a poor, sparsely populated country with few 70 natural resources, a narrow capital base, and an economy in disequilibrium. Not only did the expected industrialization not occur, but the poor performance of public enterprise sector severely taxed the resources of the Treasury and the banking system, with increasingly scarce resources continuing to flow into loss-making enterprises. Furthermore, as performance in the public industrial enterprises deteriorated, employment in these enterprises increased rather than decreased, exacerbating the decline in productivity and the financial drain on the Treasury. 7.23 Future prospects for industry in Somalia will depend on a stable economy, appropriate policies which encourage a competitive and efficient private sector, the development of supporting infrastructure, and no direct government involvement in industrial production or distribution. 7.24 Private Sector. Most, if not all, public industrial enterprises in Somalia have been completely destroyed and assets looted. Therefore, for all intents and purposes, public enterprises no longer exist in Somalia. A new government will have neither the managerial nor the financial resources to attempt to develop an industrial sector through the recreation of now defunct enterprises or the direct involvement in the creation of new industries. Indeed, the experience of the past is that government dominance of the sector suppressed the natural development of existing private sector entrepreneurial capacity and dynamism, retarding rather than accelerating industrial development. 7.25 Somalia has a long tradition of commerce with experienced traders. Private sector entrepreneurs have quickly emerged to fill the gap left by the collapse of government administration and services. It is clear that the capacity and interest exists, even under present circumstances, for the private sector to take the lead in developing small scale productive enterprises which could quickly generate considerable employment. Constraints to private sector growth such as lack of financing, shortage of managerial and technical skills, and almost total lack of supporting infrastructure will need to be addressed over time. However, it is becoming increasingly evident that the constraints of oppressive government involvement in the sector, inappropriate policies, and a highly overvalued exchange rate were the most serious obstacles to expanded private sector activities; and the collapse of the government has unleashed a long-dormant entrepreneurial class which should be encouraged to make the maximum contribution to medium-term rehabilitation and recovery and long-term economic growth. 7.26 It is, therefore, essential that a new government move quickly to establish a policy environment which supports the emerging entrepreneurial class and encourages private sector investment, both domestic and foreign. Where government regulation is necessary, interventions should be transparent, simple, and avoid the creation of differential incentives between activities and firms. 7.27 Policy Environment. Elements of a policy environment which can support industrial development in Somalia would include: 7.28 Legal System. A functioning legal system is a prerequisite for the development of a private enterprise-driven industrial sector. In Somalia, the first step would 71 be the reestablishment of law and order. Law will then need to be promulgated covering private property rights, contracts, bankruptcies, labor, and accounting standards. 7.29 Macroeconomic stability. Low rates of inflation which reduce risk to savers and investors, thereby encouraging entrepreneurship, investment, and growth is an essential element for industrial development. The monetary and exchange systems proposed in Chapter III of this document can provide the required stability and fiscal discipline. One of the risks of the proposed fully-convertible currency is"capital flight. Low rates of inflation will make it possible to have positive real rates of interest, thus preventing capital flight. 7.30 Trade policy. Somalia's industrial development will be facilitated by policies which encourage export growth. In this regard, two factors are particularly important in the Somali context-an exchange rate which is not overvalued (thus making exports uncompetitive), and policies which encourage foreign investment (thereby providing badly needed funds, technology, and expertise). There should be no differentiation in regulations governing domestic and foreign investment. 7.31 The design of appropriate tariffs will be very important for Somalia because import and export duties will be a major source ofPincome until a comprehensive tax system is instituted. At a minimum, there should be no anti-export bias. Any import tariffs should be offset by incentives such as duty exemptions, free-trade zones, etc. for exporters. Import tariffs should be uniform and kept to a minimum so as not to provide incentives for rent seeking and smuggling. 7.32 Public sector investment. Two kinds of public sector investment will be important for the development of Somali private industry: infrastructure and education. Infrastructural investments which have the greatest impact on productivity and consumption are those that respond to actual demand. Charging user fees, as recommended in Chapter VI, will lead to a more efficient use of infrastructure as'well as having a beneficial macroeconomic impact.- With regard to investments in education, a relatively well-educated labor force has been an important characteristic of countries which have successfully industrialized. 72 VIII. SUMMARY OF PRIORITY ACTIONS A. Immediate Assistance Requirements 8.1 Given the volatile nature of current events in Somalia and the resultant impediment to rehabilitation of social and economic institutions, there will be a continuing need for relief assistance to vulnerable population groups in various locations throughout the country. By nature, such assistance is short-term and, where necessary, will continue to be provided within an emergency context in order to save lives and without regard to political objectives. Humanitarian assistance may also be required to provide relief throughout the transition from emergency conditions, where initial rehabilitation efforts are vulnerable and gains fragile. It is important that assistance provided during the transition period between relief and rehabilitation begin the process of developing local capacity. In this regard, UNOSOM must urgently consider providing members of the Somali private sector the opportunity to participate in the provision of goods and services to the large UN and NGO community. There are many ways in which Somali entrepreneurs can compete in UNOSOM's procurement processes. These steps would contribute to an open market and encourage increased Somali participation in rebuilding their country and investment confidence. Short- term priorities for assistance are as follows: Maintain Security: * Continue demining operations in affected areas (6.31) * Strengthen capacity of emergent urban police force in select towns (6.33) Social Services: * Provision of essential drugs and supplies (5.8) * Use MCH facilities as multi-purpose clinics and training centers..(5.9) * Provision of basic education kits (5.34) * Print primary school text books (5.34) * Reduce/control food aid to create incentive for more local food production (5.65) * Develop nonformal skills oriented training programs (5.33) Resettlement of Displaced Persons: * Establish minimal levels of income generation for displaced at present locations (5.42) * Ensure greater coordination between agencies promoting return of displacees and reintegration programs (5.46) * Reintegrate ex-militia into mainstream society (5.47) Physical Infrastructure: * Inventory of physical facilities, their location, and condition * Shift air space management function offshore and resume income generation (6.20) * Relocate squatters from government buildings within towns to free up useable space (6.33) 73 * Develop techniques to use wind and solar power for household use (6.50) * Safeguard urban water supplies; begin restoration of rural water supplies Productive Sectors: * Rehabilitate irrigation systems (7.8) * Repair main road system linking farms to markets (7.9) * Rehabilitate livestock marketing and quarantine facilities (7.10) * Provide access to veterinary drugs to the livestock industry (7.11) * Seek support from neighboring countries to patrol coastal fishing areas to reduce rampant trawling by foreign fishing vessels (7.15) B. Medium-Term Rehabilitation 8.2 The medium-term program is to be designed to guide the implementation of rehabilitation efforts over the next 2-3 years. Immediate priorities of the rehabilitation program will include the reintegration of displaced populations and capacity building to manage the recovery process, meet basic needs through social services, reinvigorate the productive sector, and manage human settlements. The medium-term priorities include: Maintain Security: * Reestablish civil security throughout the country on a financially sustainable basis (4.12) Social Services: * Physical rehabilitation of education/health facilities, starting at district level (5.18) * Resumption of structured health personnel training (5.19) * Training of headmasters and primary school teachers (5.32) * Develop programs of social rehabilitation for orphans, war-wounded, trauma victims, and others (5.41) * Establish national unit to monitor domestic production and commercial imports of food for the benefit of establishing a functioning internal market (5.70) * Train instructors for nonformal skills oriented training (5.34) * In the field of physical and mental health, family planning clinics and special services for women's reproductive health through the MCH projects should be set up along with the consultancy facilities (5.52) * In the training sector, relief and training centers for women and girls left alone or badly wounded should be created (5.52) * In the credit sector, special revolving funds and credit schemes available not only to groups but also to small-scale individual entrepreneurs in urban or rural areas should be provided (5.52) Resettlement of Displaced Persons: * Develop capacity of local NGOs to support resettlement efforts (5.49) 74 Physical Infrastructure: * Delay new road construction (6.6) * Road rehabilitation to focus on linking agricultural areas to markets (5.64), (6.8) * Reestablish routine road maintenance at regional level (6.9) * Reconstruct damaged bridges over Juba and Shebelli rivers (6.8) * Create port authorities at level of city/town that it serves (6.16) * Resume on-shore management of air space (6.20) * Fees and charges for public services should be reestablished and set at levels that cover production costs (3.8) * Develop innovative shelter system which allows for allocation of undeveloped urban land according to acceptable land tenure system (6.35) * Establish pricing policy for oil products based on international prices (6.43) * Provide telecommunications between ports and sites of livestock herding (7.10) Macroeconomy: * Carry out technical work to re-improve simple excise and sales tax system (3.9) * Establish monetary agency and a number of privately owned commercial banks (3.15) Productive sectors: * Restore private markets in agricultural inputs (7.12) * Reconstitute the extension and research service (7.13) * Reconstruction of irrigation systems (7.14) * Provision of local seeds to encourage return of displaced people (5.53) * Introduce productive sector training for informal sector employment (7.16) * Establish policies to encourage export growth (7.30) C. Long-term Recovery Strategy 8.3 The primary purpose ;or preparing a planning framework for long-term strategies is to establish a mechanism for coordinated development of recovery programs given constrained human and capital resources. The strategy will present program goals and components to be achieved through the application of domestic and international resources. While focusing primarily upon long-term reconstruction and development, the,strategy will recognize relief activities and set achievable goals for rehabilitation efforts over the short-and medium-term. The strategy will be primarily directed toward capacity building at all levels and will aim to ensure full participation of Somali leadership in policy formulation and implementation integrating political, economic, and social systems. Some long-term recovery strategies will only be triggered by the creation of some form of central administrative apparatus. Since reconstruction of the infrastructure to functional levels will comprise a 75 significant element of various program components, requirements for capital investment will be outlined in the strategy document. Priority long-term actions include: Social Services: * Demographic survey after inter-clan tensions cool off (5.17) * Resume drought and health/nutrition surveillance (5.21) * Capacity building of local health/education authorities (5.34) Public Administration: * Establish minimal central government organ to oversee transport regulation (6.11) Physical Infrastructure: * Rehabilitation of Port of Berbera to maximize capacity for livestock export (6.17) * Rehabilitate piped water treatment and supply systems in Mogadishu, Kismayo, and Hargeisa (6.22) * Rehabilitate major road network including priority rural roads (6.8) * Reestablish Road Maintenance Fund (6.10) * Do not rehabilitate/upgrade/enlarge/restart Iraqsoma oil refinery (6.39) * Install capacity for large scale storage of LPG at each of three main ports (6.42) * Engage international oil industry to oversee construction of oil product unloading facilities (6.43) * Replan electrification of Somalia (6.48) Productive Sector: * Establish legal system supportive of development of a private enterprise driven agroindustrial sector (7.25) 76 PART FOUR: PROGRAM IMPLEMENTATION IX. INSTITUTIONAL FRAMEWORK OF RECONSTRUCTION PROGRAM A. Introduction 9.1 In the absence of a central government in Somalia, some central organizing agency or institution is needed to facilitate the process of rehabilitation and reconstruction. Such an institution would coordinate donor activities guided by the principles set out in the planning framework, collect and maintain up-to-date information on all on-going relief and rehabilitation efforts in Somalia, and carry out the analytic work which provides the basis for macroeconomic planning. At present, the institutional arrangements, reflecting the political situation, are in a state of flux. Accordingly, this section reflects the institutional framework designed and incorporated in the Declaration of the Fourth Humanitarian Conference on Somalia, held in Addis Ababa from November 29-December 1, 1993. B. Role of UNOSOM 9.2 It had been assumed that UNOSOM would play the above roles until such time that a formally-recognized Somali Government can assume these responsibilities. UNOSOM's mandate is limited, constraining its ability to undertake this role. In December 1992, when. the Security Council authorized the Secretary General and member states to establish a secure environment for humanitarian relief operations in Somalia, UNOSOM's role included the following main elements: a) To monitor that all factions continue to respect the cessation of hostilities. b) To prevent any resumption of violence and, if necessary, take appropriate action against any faction that violates or threatens to violate the cessation of hostilities. c) To maintain control of heavy weapons of organized factions which will have been brought under international control. d) To seize small arms of all unauthorized armed elements. e) To secure or maintain security at all ports, airports, and lines of communication required for the delivery of humanitarian assistance. f) To protect, as required, the personnel, installations, and equipment of the UN and its agencies, the ICRC as well as NGOs and to take such forceful action as may be required to neutralize armed elements that attack, or threaten to attack, such facilities and personnel, pending establishment of a new Somali police force which can assume this responsibility. g) To continue the program for mine-clearing. 77 h) To assist in the repatriation of refugees and displaced persons within Somalia. i) To carry out such further functions as may be authorized by the Security Council. 9.3 Thus, the UNOSOM mandate is primarily for a military and political role. The humanitarian relief function (centered around item (h) above) is the responsibility of the Division of Humanitarian Relief and Rehabilitation (DHRR). A review of the budget breakdown reveals no item that can be directly linked to any activity of humanitarian assistance. Thus, the mandate as well as the resources provided are inadequate if UNOSOM, through DHRR, is to act as an effective coordinating body for relief and recovery, and much less for activities associated with longer-term reconstruction and development: resource allocations between regions and between sectors and administering government revenue, and licensing of national and joint ventures. 9.4 The Fourth Humanitarian Conference agreed that the Division of Humanitarian Relief and Rehabilitation will be reorganized and strengthened to effectively respond to the transition from relief through rehabilitation and reconstruction to development with a coherent strategy, especially during the critical period immediately ahead. It should also strengthen its field presence. 9.5 The Development Office would embrace the skills and experience of the Somali professionals, UN agencies, and NGOs. It should be staffed at the proper senior levels so as to support Somali efforts in the establishment of functioning public institutions, and economic instruments to manage the process of rehabilitation and development. Its functions will include: (i) serving as a Secretariat for the Development Council, and of the aid coordinating body; (ii) provide analysis of policy and operational issues relevant to effectiveness of development activities in Somalia. C. Regiorial Approach to Reconstruction 9.6 As the time period without a national government has become more extended and the security situation in Mogadishu has continued to be unstable, support has developed for a regional approach to reconstruction and development. The agreement on a regional approach was formalized at the Fourth Humanitarian Conference. The approach aims to invest in those regions which have attained stability and security and where freedom of movement permits the implementation of rehabilitation activities. This principle will be non- discriminatory in its implementation. In other words, any region attaining stability and security will be given priority for receiving reconstruction and rehabilitation assistance, and the international community will cooperate with a Somali entity which is able to guarantee such stability and security. 78 9.7 The donor community will be an effective supporter of the Somali people in the process of rehabilitation and recovery, once the necessary preconditions related to peace, security, and reconciliation have been established. Donors agreed to collaborate and support the Development Office to ensure adequate communication, cooperation, and coordination. Donors concurred that there should be common criteria for resource allocation to regions. Donors further agreed to develop a common approach among themselves for the allocation of resources. In this regard, the Development Office would play the secretariat role, supporting an aid coordinating body composed of representatives of donors. UN agencies and programs, NGOs, and other multilateral and African institutions and organizations, and possibly countries in the region. D. Information Management 9.8 Crucial to the success of the reconstruction effort will be the availability of accurate and up-to-date information to monitor the on-going relief and rehabilitation efforts in Somalia. The exchange of information on implementation will be one of the main mechanisms for donor (including NGO) coordination, under the overall guidance of the DO. Initially, the DO would establish an information system which would provide data on projects which are already being implemented, as well as those that have been planned and funded. This data base would be made available to all donors and updated regularly. The proposed health and nutrition surveillance and drought early warning system should also provide valuable inputs to the system. The information system, to be known as SORRIN 7/ would be used for the following purposes: a) Reporting to the donor community during program implementation. b) Allow the DO to act as a focal point for advising which among the implementation partners does what, where, and how. c) Building a geographic information system capable of expanding as the needs grow. d) Providing a link with the public information function of the UN. 9.9 Specifically, the information system will: a) Collect relevant information which relates to relief and rehabilitation activities from other UN bodies, NGOs, and other sources of local information including reconstitution of relevant historical data bases. b) Catalog all information collected through a documentation center, place original source materials in secure storage. 7/ Somali Relief and Rehabilitation Information Network. 79 c) Prepare reports, briefing materials, and information files to aid decision making processes of all parties involved in reconstruction. E. Long-Term Need for National Perspective on Reconstruction 9.10 In focussing assistance at the regional level, however, it is important to recognize the risks involved and to avoid interventions which could weaken or undermine a future national authority. For example, it is relatively easy to devolve responsibility for raising revenues to regional or local levels, but it is likely to be difficult to withdraw these powers if, on the reestablishment of a central authority, it becomes necessary to redefine divisions of responsibilities. It is also essential to avoid the establishment of any mechanism which would or could have damaging repercussions for the free movement of goods across regional boundaries. 9.11 These concerns, as well as the lack of a comprehensive macroeconomic analysis which would feed into regional economic profiles and underpin guidelines on appropriate interventions, suggests the need for a minimalist approach in the short to medium term, focussing on activities which support the natural regeneration of private sector activity. It is clear, however, that significant efforts to implement programs and projects for reconstruction and recovery in Somalia will only be possible in the context of movement towards a stable and generally acceptable political environment, and once the Somalis, through this processp have determined the basic structure of their government. 80 18RD 15413 ERITREA = дд. 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