Issue No. 716

 Balancing the Scales: Federalism and Resource-Sharing in Somalia
 

Balancing resource collection and distribution is vexing in any federal system. There is often an instinctive push-pull dynamic between the central government and peripheral administrations that agitate for independent and equitable forms of resource distribution. In Somalia today, agreements on collecting and sharing the domestic and international 'rents' remain highly fraught between the federal government and respective Federal Member State (FMS) administrations.
 
While Mogadishu claims to enjoy de jure control over national resources and wields this argument to collect sovereign rents on everything from overflight fees to fishing licenses to signature bonuses on petroleum deals, in reality, it is the FMS administrations that often exercise de facto control over natural resources and revenue collection. More broadly, tax and revenue collection remain highly contentious, with no agreed constitutional or legal framework and the federal government trying to impose a singular, unitary model that it can dispense at will. Since 2012, the attempts to standardise and bring income-generating assets under the federal government's control have run into resistance from FMS administrations. This is perhaps of little surprise when one considers that the deep sea ports of Bosasso and Kismaayo are instrumental in sustaining the incumbent presidents in Puntland and Jubaland, respectively, maintaining their independence from Mogadishu. Notably, one of the major reforms not achieved as part of Somalia's Heavily Indebted Poor Countries (HIPC) Initiative process was the harmonisation of customs tariffs across Kismaayo, Bosasso, and Mogadishu.
 
Still, last year, some progress was reached on paper between federal and regional ministries in agreeing to implement a number of financial and economic harmonisation reforms. Much of the groundwork was done as part of Somalia's push to complete the HIPC Initiative that forgave the overwhelming majority of the national debt at the end of 2023. The subsequent budget was the country's largest– topping USD 1bn for the first time– almost entirely derived from the international community. The FMS administrations were keen to reap these apparent rewards from debt relief, so it will be interesting to see whether any benefits from the windfall actually trickle down to Somalia’s regions. Moreover, Ministers' promises of increased tax collection are suspect when one considers that the federal government’s inland revenue is almost entirely derived from the municipality of Mogadishu, with Al-Shabaab controlling most of Somalia’s interior, and Puntland – the wealthiest FMS – suspending all cooperation with Villa Somalia.
 
The expected imminent tabling of Chapters 5-9 of the Provisional Constitution for parliamentary review, even if only serving to rubberstamp Villa Somalia's agenda, may throw other elements of resource-sharing back into the spotlight. Chapter 5 contains several key articles regarding Somalia's resources, particularly 50 and 54. The first outlines the principles of federalism, emphasising fair distribution of resources, cooperation, and the equitable sharing of national wealth. Article 54, meanwhile, deals explicitly with allocating powers and resources, stating that fiscal powers and resources shall be negotiated and agreed upon between the Federal Government of Somalia (FGS) and FMSs.
 
There may be little change to the actual wording of these articles, but the incumbent Hassan Sheikh administration has shown its disdain for federalism that permeated through his first term (2012-2017). With Puntland still absent from participating in the constitutional review process, the entire ordeal has been heavily compromised. Attempting to reword or undermine the federal model of resource-sharing – which can motivate Somali politicians more than just about any other issue – without the oldest and most stable FMS will surely prove unimplementable down the line.
 
At the heart of the ongoing Garowe-Mogadishu dispute are their contrasting visions of federalism, with Puntland the more vigorous advocate for a less centralised Somalia. And, again, resource distribution has been wielded by the federal government as a punishment against the Said Abdullahi Deni administration, currently withholding USD millions intended for the Northern FMS. This includes a reported USD 16 million in grants from the Global Partnership for Education designed for education projects in Puntland, which were supposed to be implemented by Save the Children and CARE International. Federal Education Minister Farah Abdulkadir's attempts to deflect criticism onto Puntland at a recent parliamentary hearing were roundly dismissed by several lawmakers.
 
This week also saw a revealing interview with Abdihakim Ainte, a senior climate government official, in The New Humanitarian. Attacking Somalia's aid dependency, humanitarian organisation and lack of development planning, he proposed directly funnelling the money into Mogadishu's accounts as a solution. While Ainte’s critique of aid dependency was largely legitimate, his proposed solution – to channel funds through the FGS instead – was, at best, disingenuous. He entirely neglected to mention that the federal government is incapable of delivering goods or services much beyond Mogadishu and its environs, or the graft that consistently places Somalia at the bottom of Transparency International’s Global Corruption Index.

Ainte did, however, inadvertently sum up one of the principal reasons federalism has never taken root in Somalia– that those who end up the centre are inevitably reluctant to decentralise power and resources. The withholding of money from Puntland hardly engenders other FMS administrations to sign up to release their lifeblood to Mogadishu or implement a unified import tax system when funds are so blatantly manipulated for political reasons. Despite the government's stated commitment to equitable distribution, Jubaland and South West State have also reported receiving inadequate funding for essential services and development projects when compared to Mogadishu.
 
In part, as a response to this, there have been growing instances where donor countries and international organisations have chosen to engage directly with individual FMS administrations and bypass routing money through Mogadishu. This is also a response to the massive corruption undermining project implementation. For example, in Galmudug, the World Bank has directly supported public administration reforms and local governance projects, while in South West State, USAID and the World Bank have provided direct support for education and health projects. The UN has also provided direct technical and financial support to Puntland for governance initiatives, including the preparation and execution of the recent direct local elections. The international community's increasing direct engagement with Somalia's member states suggests a mistrust of the federal government's ability to manage resources transparently or responsibly.
 
Somalia's federal system, designed nearly 20 years ago, was intended to decentralise power and ensure equitable resource distribution among its still-non-existent member states. Returning to the principles of federalism in Chapters 5-9, and where executive power lies in Article 94, should give those in the federal government a moment to pause. The centre and periphery agreeing on resource collection and distribution are fundamental to any competent and comprehensive federal system. More likely, though, if Villa Somalia can manipulate the parliamentary numbers to work in their favour, we will see a repeat of earlier this year, when the first four chapters were rushed through without effective scrutiny. There is a space for both collaborative resource collection in Somalia, currently a minuscule amount, and subsequent distribution, mainly from international partners. However, undermining the groundwork for short-term political wins will make any long-term economic progress far trickier. Finding a compromise and balance over the country's resources that can actually be implemented across Somalia is the finest of tightropes.

by the Somali Wire Team