Berbera Corridor and the Perils of Horn of Africa Economic Integration

[Deeq A.]

In 2018 when Abiy Ahmed, the Prime Minister of Ethiopia, paid an unannounced visit to Mogadishu, he had unveiled the Horn of Africa Economic Integration Initiative (hereafter HAEI ) involving Somalia, Ethiopia and Eritrea. Under HAEI, Ethiopia will, among other business ventures, invest in Somalia’s seaports.  How Somalia, a country with multiple authorities and currencies, can benefit from economic integration with Ethiopia and Eritrea has been an almost undiscussed economic mystery.  

Somalia’s comparatively weaker position affects its abilities to benefit from any economic integration initiative in Africa. Nothing demonstrates the precariousness of Somalia’s position in the new economic agenda in the Horn of Africa more clearly than the state of two of its seaports. Both Somaliland and Puntland administrations have signed concession agreements with DP World, a company owned by the United Arab Emirates government. In 2018 The former Somali Prime Minster Hassan Ali Kheire described the agreement between Somaliland Government and DP World as illegal. Why has a government that signs offshore oil exploration agreements with foreign companies, and grants fishing licences to China-owned vessels, failed to exercise its sovereignty on key national infrastructures?   

Somaliland President inaugurating the expansion of Berbera Port on 24 June 2021

Ten years ago when Somalia had a transitional government, subnational entities did not sign infrastructure-based agreements with foreign countries.  The establishment of a permanent Somali Federal Government able to enter agreements with foreign countries and companies was supposed to lead to the formulation of a common policy to safeguard Somalia’s seaports against unscrupulous politicians who view them as properties in clan fiefdoms. If the whole point of ending the transition was to promote a freewheeling entrepreneurial approach to signing questionable agreements with foreign companies, a question arises as to what Somalia can gain from its sovereignty in a world that prizes sovereign status of countries.  Professor Atul Kohli of Princeton University describes sovereignty as ‘a national asset’.

Berbera Port: DP World has modernised the seaport

DP World, the main investor in Berbera Port expansion and Berbera Corridor, also manages Bosaso Port through P&O, a company it acquired in 2019.  The UAE uses those concession agreements as a leverage to deepen its influence on Somali politics.  It was not in Somalia’s interest to end the transition without putting in place a government whose writ runs large throughout the country. If the national government cannot protect its infrastructures against exploitation by foreign countries it is likely that it has had a role in facilitating emergence of parallel authorities accountable to no one.  

Ethiopia is an investor in Berbera Port. One expects that Ethiopia would directly deal with the Somali Federal Government to invest in Berbera Port. Ethiopia has an embassy in Mogadishu, but it risks being accused of violating Somalia’s sovereignty by signing an agreement with a government that views itself as a sovereign state. Despite its claim to have seceded from Somalia, Somaliland has signed agreements with UAE and Ethiopia.   The Federal Government of Somalia cannot raise objections to Ethiopia’s role in Berbera Port. Ethiopia’s understanding of the economic integration initiative grants it the privilege to invest in Somali seaports without dealing with the Federal Government of Somalia.

The spirit of the HAEI promotes economic development projects such as Berbera Corridor.  In this charitable interpretation, HAEI is lays foundations for deeper economic ties between Somalia and Ethiopia, although it remains devoid of transparency: it is not clear how the Federal Government will oversee the agreement between Somaliland and Ethiopia. In this murky legal situation Somaliland risks being exploited by a bigger and a united Ethiopia, a country that, according to Professor Worku Aberra, Eritrea took advantage of between 1991 and 1998 when the two countries were economically integrated.  Professor Anthony J. Venables of the University of Oxford argues that economic integration between high-income countries reduces  differences in per capita income whereas in low-income countries (Ethiopia with per capita income of US$ 855.76 (2019), and Somalia with a projected per capital income of   US$ 225 (2021), for example), “there is some evidence that the opposite process is at work, with regional integration promoting divergence.”

Ethiopia stands a better chance to exploit Somalia’s weaknesses. It has Ethiopian Economics Association made up of experts who publish studies on the state of the Ethiopian economy. Somalia   does not have a similar association that  can advise the Federal Government and subnational entities on economic development programmes.  

As it stands,  HAEI could unwittingly become an economic exploitation tool for Ethiopia.  For several reasons, it will have disastrous economic and security consequences for Somalia. Firstly, economic integration between a functioning state and post-conflict state/subnational entity is a new, untested policy. Secondly, it could spark intra-state conflicts over disputed territories in Somalia. Thirdly, it could undermine the sovereignty of Somalia and reverse the slow progress made towards institution-building. 

Somalia’s political leaders have not devised strategies to mitigate possibly adverse consequences of an economic integration with Ethiopia.  Somali leaders at all levels have sold their country short. 

Liban A. Ahmad

libahm@gmail.com

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