Our Investment and Fiscal policies are misguided; the Poor are getting Poorer and the Rich Richer, writes Hassan Yusuf.
Somaliland has put the chart before the horse as far as economic planning is concerned. Our business planning and government fiscal policies are not geared towards eradication of poverty, economic growth and job creation which are the top priorities for any developing economy. Luxury Car Showrooms, Furniture Galleries and Soft Drink Bottling Factories could be considered significant contribution in terms of the trust in Somaliland as a place for viable investment. We hope these unnecessary lavish spending ventures will, otherwise, open the doors for much larger and more grass-root oriented investment opportunities.
Besides, we expect these local ventures will also encourage much larger Direct Foreign Interments (DFI) into the country. These DFI will provide the needed hard currency and technical know-how into our economy.
However, it is obvious that our business community as well as government planners, need to redirect their compasses. Emphasis should be placed on areas that benefit the low-income communities and long-term economic wellbeing of the poor. The real targets should be: Selective Economic Growth with emphasis on Reduction of Poverty, Job Creation and Improving the Livelihood of the Masses.
Somaliland is one of the poorest nations on Earth. Importing luxury cars would further increase the consumption of imported fuel which will, in turn, drain the few hard-earned dollars out of our country. It is ironic that these few dollars are earned by our poor rural communities but the hard currency is used for luxury cars, cosmetics, soft drinks and Kaat narcotic which is a source of an increasing number of serious health problems. In other words, our dollars come from the poor who are deprived of the basic health services, education and clean water for their children. The same bucks are used by the rich to purchase luxurious items which contribute nothing to improve the life the rural people – the actual earners of the dollars.
On top of that, our taxes are not selectively levied to encourage import of raw materials that would be used for manufacturing and processing which would create thousands of jobs. For example, the import duties that we charge tailored garments and untailored textile are generally the same. This is wrong and depicts a misguided fiscal policy. We should heavily tax the import of tailored garments and second-hand clothing (who-died), but sharply reduce duties on untailored textile. This will encourage small garment factories who would employ thousands of tailors (mostly women) across the nation. By so doing, the hard currency will come from the poor (rural) and go to the poor (tailors).
Similarly, we are importing furniture from China and Turkey that a time when our carpenters are unemployed or unable to feeds their children. Government fiscal policies should be remodelled to fix this problem. We should impose heavy import taxes on furniture and sharply reduce taxation on the import of timber and related carpentry raw materials. In a short period of time, you will see scores of small furniture manufacturing factories that would employ thousands of the people throughout Somaliland
Hassan Abdi Yousuf
Retired Senior Banker & Geopolitical Analyst