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Somalia did not join EAC, who lost?

The region would have made huge benefits from the untapped potential in Somalia whose trade has been focused in other regions whose geographical proximity is not as close as in East Africa.

TSIM Analysis

When leaders of the East African Commu­nity met in Arusha Tanzania in March, this year, one resolution stood out; So­malia had failed to be admitted into the regional block even as South Sudan got admission. In a joint communiqué signed after the 17th ordi­nary summit of the East African community heads of state, the regional heads noted that certain conditions were yet to be met by the Horn of Africa country to be admitted into EAC.

The heads of state including President John Pombe Jo­seph Magufuli of the United Republic of Tanzania, President Yoweri Kaguta Museveni of the republic of Uganda, Pres­ident Paul Kagame of the republic of Rwanda, President Uhuru Kenyatta of the republic of Kenya, and Dr. Joseph Butore, 2nd vice president of the republic of Burundi said Somalia will be considered in the next meeting after the necessary preparations have been concluded.

“The summit noted that the verification exercise for the admission of the republic of Somalia into the East African Community was not undertaken, as preparations with the government of the republic of Somalia have not yet been finalized. The summit directed the council to undertake the verification exercise,” read the joint communique released after the summit.

Somalia on the other had has repeatedly outlined inter­est to join the bloc saying it has taken all possible initiative to join the East African community as an opportunity for Somalia and its neighbours to reaffirm a commitment to constructive and supportive bilateral relationship based on the principles of territorial integrity, mutual respect, friendly relations, cooperation and non-interference in the internal affairs of one another.

In a foreign policy released last month, the government of Somalia is even looking at joining several other trading blocs to maximize her strategic position as a link between Africa and the rest of the world.

“Somalia is in the process of becoming a member of the Common Market for East and Southern Africa, COMESA. As the largest African regional economic bloc, COMESA is of Strategic importance to Somalia’s economic and political diplomacy. It will provide an extensive market for Somalia imports and exports and is a major source of investment opportunities,” read the policy in part.

Apart from these ties the country is also considering tight ties with the Islamic countries, especially those in the OIC as one of the best venues for pursuing solutions to many challenge including underdevelopment (in particular, in the fields of research and education), inter-and in­tra-state-conflicts, fanaticism and Islamophobia.

The relationship with key OIC member like the Re­public of Turkey, the United Arab Emirates, the State of Qatar and the Kingdom of Saudi Arabia is meant to boost her trade links and cooperation in addressing challenges that threaten its economic renaissance

WHO LOST?

So by not admitting Somalia this early to the EAC, did the region lose a crucial partner and what would they have stood to gain if Somalia was incorporat­ed? What would Somalia have gained in return? The Somalia Investor Magazine took a brief look into the dynamics.

Although incorporation of Somalia into the bloc would come with its own share of baggage and chal­lenges considering the trouble caused by radicaliza­tion and active militant groups in the region there are still prospects both sides would benefit it its admitted.

Economically speaking, Somalia’s GDP is dominated by private consumption and imports. The household consumption, financed by remittances, was equiva­lent to more than 100 per cent of Somalia’s nominal GDP in 2014, with food and beverages accounting for about 60 per cent of the total.

More reliable aggregate trade data reported by trading partner countries show that imports reached $3.3 billion in 2013 and were projected to reach $3.7 billion in 2015. The largest recorded imports through the Berbera and Bosaso ports are food (sugar, khat, wheat and wheat flour, rice, and cooking oil); building materials; and fuel.

Exports almost tripled during the past six years, reaching $779 million in 2013. Livestock continues to dominate exports (and did so even during the years when Somali livestock to Saudi Arabia was banned), followed by charcoal, fish, and hides and skins.

The country’s largely arid climate also means most horticulture which does well in the other EAC coun­tries would have a ready market in the country. Somalia’s largely underdeveloped industrial sector saw the nation import most nonfood goods (cleaning products, medication, paper and paper products, of­fice supplies, and other nondurables) accounting for about 34 percent of the total consumption. The other developed nations in the bloc would be the biggest gainers in the economic bloc arrangement.

Somalia’s port of Kisimayo is in direct sea link with eight other ports including those in Kenya and Tanza­nia. The ports including the Lamu, Malindi and Mom­basa ones in Kenya as well as the Tanga, Kibaha, Dar es Salaam , Kilwa Kivinje , Lindi and Mtwara in Tanzania are well connected to Somalia’s vast coast line.

In 2013 Somalia ran a trade deficit of 39 percent of GDP, after importing goods and services worth 62 percent of GDP and exporting goods worth just 14 percent. The deficit was financed through remittanc­es (equivalent to 41 percent of GDP) and direct donor support (equivalent to 9 percent of GDP) pointing to the fact that Somalia is a net importer thus bringing Somalia close to the EAC bloc would largely benefit her trading partners whose goods would find ready markets at friendly terms that comes with member­ship to the same trading bloc.

The Horn of Africa nation has links on livestock trade from Ethiopia and Djibuti. In fact it is the largest sec­tor in Somalia, the largest employer in rural areas with nomadic cultures, and the largest export. It actually accounts for more than 80 per cent of total exports. Some of the states with already developed meat pro­cessing and ability to export ready meat would have the advantage of this huge trade.

According to the Food and Agricultural Organisa­tion (FAO), Somalia exported a record 5 million heads of livestock to markets in the Gulf of Arabia in 2014 (including 4.6 million goats and sheep, 340,000 cattle, and 77,000 camels), with an estimated total value of $360 million. The livestock industry has been recov­ering following the lifting of a nine-year ban on the import of livestock from Somalia (aimed at prevent­ing the spread of Rift Valley fever), with exports of live animals on the increase at both the Berbera and the Bosaso ports.

The resurgence of the livestock sector reflects the large investments being made to help make the sector more competitive in international markets. With donor support, investments in livestock infrastructure, fod­der production, and livestock vaccination and treat­ment services are paying off.

The region would have made huge benefits from the untapped potential in Somalia whose trade has been focused in other regions whose geographical proximity is not as close as in East Africa. The Fish market is another huge potential the coun­try has which members of the bloc with bigger export muscle would capitalize on and take the processed products to far-flung markets in Europe and America.

Somalia’s oil sector would be a key spot to watch as the East African Economic giants begin to eye the black gold business. Both Kenya and Uganda are mulling the start of a refinery while it very clear that oil reserves both off shore and in deep sea Somalia are still far more than what the two nations have antici­pated. With the ultimate idea of having the entire East Africa as one bloc in future, the oil would be crucial in fuelling that vision and keeping the regional on a high­er economic momentum.

Seismic studies suggest that the Somali basin may contain hydrocarbon reserves. Although commercial exploitation would be decades away, if well managed these resources could fund economic development of the entire region. Somalia would also stand to gain from foreign ex­change earnings from the increased trade with her neighbours, a crucial element in boosting the strength of her depreciated currency. The country is currently highly dolarised.

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