The problems faced by Somalia right now are too numerous to count. As Alex notes in his blog below, although some sectors of the economy are doing well, it doesn’t mean that Somalia is headed towards economic prosperity.
It will be interesting to see how Somalia’s enterprises will fare if a stable government is established – or if it will be possible to establish a stable government given the current attitudes of some of the country’s “entrepreneurs.” There was an interesting article in the International Herald Tribune a few weeks ago, which describes how some of them feel about the prospect of a government (“Profiteers, too, Fight Government in Somalia”). These entrepreneurs are prospering in the current anarchy and think that a stable government would hurt their businesses (meaning profits). Right now, they don’t have to pay taxes and are unregulated. As one olive oil exporter bluntly stated, “Taxes are annoying.” For someone who is not used to paying taxes, and who is used to surviving in a lawless environment without the various services that a government normally provides to its citizens, the prospect of handing over some of his hard-earned money is certainly distasteful.
So, whether you want to call them entrepreneurs, profiteers, or opportunists, these businesspeople are raising money to support the insurgency and even buying weapons to fight the government’s troops themselves.
They don’t, thankfully, represent all members of the business community. The current instability and absence of rule of law forces many businesspeople to turn to warlords or private militias for security – not always voluntarily. For them, a stable government and rule of law would allow them to do business without the fear and arbitrary extortion that they now face.
It’s somewhat like what happened in Russia in the early ’90s, when corruption and lawlessness allowed the mafia, via gangs of thugs, to extract protection fees in exchange for “security.” What that really meant was that the gang wouldn’t attack the business owners or ruin the business itself. I’m not sure if this is exactly what is happening in Somalia, but the result – businesspeople forced to pay fees that simply wouldn’t exist if there were rule of law – seems very similar.
So, how should the (very weak) government go about winning the support of the entire business community? Certainly not by levying huge, unmanageable taxes, as it is doing now. If the government can demonstrate to businesspeople that tax revenues – from fairly levied taxes – are being put to use to rebuild the country and establish institutions that make the business environment more stable, the government might earn their support. This, of course, will take time. The big question is, does anyone have the patience?
It’s a huge challenge that is either very rare or hasn’t occurred before. If anyone knows of another example, I’d be interested to hear about it.
Published Date: May 03, 2007