Somalia Needs a Long Term Focus and Holistic FDI Partners

Opinion

In January 2013 I commented on the threat of Balkanization for Somali society and noted that I thought Somalia could become a strong unified nation state, channeling the forces of international development for the benefit of all Somalis, thereby becoming an anchor for collective prosperity and development in all East Africa.[i]

There are still numerous critical discussions and decisions to come. One of these concerns the possible arrangement for oil and gas exploration with Soma Oil and Gas Holdings, Ltd. announced by Garowe online May 29th.[ii]  Of course I am uncertain as to where things stand now. I would like to note the decisions before the Somali people via the Ministry of Mineral Resources will be extremely critical because they will set the precedent for other Somali relationships with the international extraction industries. Certainly, the Ministry is seeking input from its staff as well as other ministries and functionaries and opinion leaders across the Somalia.

As a sociologist I submit that much of the  academic and policy literature on global economic development, e.g. concerning the World Trade Organization, Foreign Direct Investment (FDI), Foreign Aid, and / or structural adjustment in Africa can be assigned to one category of a three sector typology: the sector supporting globalization (particularly of size and scale)[iii], the sector critical of corporate control / domination, or a sector carefully technical so as to avoid or mask the important normative questions about the actual distribution of benefits with technical discussion.

The “critical” literature has focused on development as the dominance of resource hungry western / and now China and India– and or transitional (extraction) corporations. The lenses of the critical literature are usually focused on the enclave investment strategy of the global corporations, on the corruptibility power of huge FDI sums on the political process, the compromising and controlling features of foreign aid, and the corrosive economic / environmental consequences of the extraction industries.[iv]

I am uncertain whether the offer tendered by Soma Oil and Gas Holdings, Ltd. (according to the Garowe article) is above, below, or standard for the exploration, possible political risks involved, and / or with regard to the fluctuating price of oil, or with the specific technology to be utilized. However, whatever if any arrangement Somalia signs commits the public resources into private hands. Will Somalia get financial / contractual fairness? Certainly Somalia’s need for revenue is great; however the vastly more important view is that of the long term impact - sustainable economic growth.

In my opinion any long term focus should have immediate bearing on features of all FDI / large scale investment being offered to Somalia. In short, Somali should require those who would become its transnational corporate partners to engage in a long term holistic sustainable relationship as a genuine commitment to assist Somalia and as a model for FDI investment rather than simply a revenue deal.

For example, is Soma willing to engage in a permanent relationship of supporting the Somali universities with a commitment to (create, refurbish, strengthen) their engineering departments? Are they willing to commit to employ Somalis in on-the -job training, and recruit and train Somalis for permanent positions in their global operations? Are they willing to do this regardless of the outcome of their exploration? Such an arrangement would at very least document the sincerity of Soma and accrue them significant good will for future endeavors in Somalia and the Horn in general.

Sociology is known as a debunking social science; it makes one cautious about the distribution of benefits in any socio-economic policy arrangement, which trade relations with powerful transnational corporations certainly are.  The degree to which local benefits cascade toward Somalia’s base, working, and middle class is of vital long term importance. Without a sustainable host nation economic multiplier functioning at the local level, impact such investment represents little more than empty economic calories. Soma must be cognizant of this as should all the international corporations of size and scale.

Again, the critical literature on transnational behavior in Africa documents far too much BYI (bring your own infrastructure) with little or no benefit to the local (host nation) sectors. Elsewhere the literature on macro social change and in particular systems theory posits that the current economic order focuses on binding merging markets to the center periphery model, with business for the periphery, yes - but an arrangement greatly dependent on the demands / rules of the core.[v]

From my perspective this means that Somalia should employ a mixed portfolio for development by sector and within each sector with multiple international actor / players linked to local populations and local leaders. Development projects with the global corporate community should contribute to expansion of government capacity, and negotiate assistance for some portion of Somalia’s international debt obligations.

Although far from the best metric analogy, the pertinent point concerning the power of huge money and its incredible pull is illustrated by noting as an example that in 2010 Exxon’s total sales came to approximately $344 (U.S. billion), while collectively the GDP for IGAD nations was approximately $176 (U.S. billion).[vi] The transnational corporations TNC currently have record cash holdings; their standard worries include rule of law, state of infrastructure, and political volatility. Certainly Soma is demonstrating a degree of faith that Somali will successfully re-unite and resolve its fundamental conflicts and institutional issues in a manner that supports an active investment climate.

I make these comments so as to note that relationship between Somali and FDI investors can and should be much more than a financial nexus. By seeking to develop such offers into models that bring financial benefit to both and in a manner that could redefine the relationship between the transnational corporation and the emerging market nations would be of significant benefit to Somalia and other emerging nations as well as to the transnational corporations.

As I stated over a year ago, Somalia can channel the forces of international development for the benefit of all Somalia, thereby becoming an anchor for the collective prosperity and development in all East Africa. I wish for the Somali people the best possible future.

Semper,

Paul R. Camacho, Ph.D.

The William Joiner Institute for the Study

of War and Social Consequences,

University of Massachusetts Boston (Retired)

Sources


[i] I believe that more today as I did then, particularly because of my participation at the National Security Conference organized by the Ministry of National Security (MoNS) at the behest of the President and the Prime Minister of the Federal Government of Somalia which was held at Jazeera Hotel in Mogadishu, Somalia on 20-23 April 2014.  It was an honor and a privilege to be invited to provide my views as an “outsider” for the conference "Security Sector Reform: Challenges and Opportunities - Abroad View with Recommendations", National Conference on Internal Security, April 2014, Mogadishu.

[ii] See http://www.garoweonline.com/page/show/post/2769/somalia-may-pay-90-oil-revenue-to-explorer-under-draft-deal#sthash.qD2HPzBG .

[iii] See Andrew Sumner, “Is Foreign Direct Investment Good for the Poor? A Review and Stocktake”, Development in Practice, Vol. 15, No. 3/4 (Jun., 2005), pp. 269-285.Se also  Leon E. Trackman, "Foreign Direct Investment: Hazard or Opportunity", George Washington International Law Review, 2009, Volume 41, Issue 1, pp 1-66. See also Prakash Loungani and Assaf Razin, “How Beneficial Is Foreign Direct Investment for Developing Countries?”, Finance & Development, 2001, Volume 38, Number 2, 1-7.

 The less formal literature includes (a) financial sector / industry / corporate reports, newsletters, investment marketing material. As examples see “Energy Resources - East Africa hits it big in oil, gas boom”, UPI.com, February 29, 2012; see http://www.upi.com/Business_News/Energy-Resources/2012/02/29/East-Africa-hits-it-big-in-oil-gas-boom/UPI-28311330532003/. For more examples see a presentation by "Oil and Gas in Somalia", Abdillahi Mohamud, Managing Director, East African Energy Forum; http://www.youtube.com/watch?v=KmOCqlm7ptA; See also "Stratigraphy and Petroleum Prospects in Northern Somalia", Somalia Watch, May 19, 2007 available at  http://www.somaliawatch.org/archivejuly/000922601.htm. See Hussein, Abdulkadir Abiikar, "Somalia's Oil and Gas Potential", Hiiraan Online, December 27, 2012,

http://hiiraan.com/op4/2012/dec/27479/somalia_s_oil_and_gas_potential.aspx

See "Puntland Oil and Gas Potential", Somalia online, June 18, 2012 - http://hornofafrica-abdikarim.blogspot.com/2012/06/puntland-oil-and-gas-potential.html

[iv] See the following: Ferguson, James, Global Shadows – Africa in the Neoliberal World Order, Durham: Duke University Press, 2006; Gary, Ian and Terry Karl, Bottom of the barrel: Africa’s oil boom and the poor, Baltimore: Catholic Relief Services, 2003; Karl, Terry, The Paradox of Plenty: Oil Booms and Petro-states, University of California Press, 1997; Reno, William, “The real (war) economy of Angola”, Angola’s War Economy, Jakkie Cilliers and Christian Dietrich (editors), Pretoria: South Africa Institute for Security Studies, 2000, pp. 219-235..

[v] See Alvin Y. So, Social Change and Development - Modernization, Dependency, and World-Systems Theories, Newbury Park, CA: Sage Library of Social Research 178.

[vi] GDP Source: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD; EXXON Assets http://ycharts.com/companies/XOM/assets

Related articles