The conflict in Sool, Sanaag and Togdheer has resulted in the closure of trade routes between Somaliland Administration, Puntland State and Sool, Sanaag, Cayn-Khaatumo interim administration (SSCK). It has had a negative impact on the economy of Somaliland administration, which partly depends on the free movement of people and taxation policies that put Puntland State at a disadvantage economically.
The donor countries, particularly Britain and Denmark, are putting political pressure on the SSCK interim administration to commit to opening trade routes in return for development aid. “Without inclusive trade agreements between stakeholders, opening trade routes could lead to resumption of conflict” said a senior economist in Bosaaso.
A 2021 Rift Valley Institute report on Lasanod discussed the taxation policy that Somaliland administration used while it occupied Lasanod and other parts of Puntland State of Somalia. Somaliland administration- imposed tariffs on goods from Puntland. Puntland and Somaliland, two “competing state entities… [were] seeking to expand their territories and tax bases along a major trade corridor.”
While Somaliland controlled Lasanod, Puntland traders bore the brunt of insecurity caused by the stand-off at Tukaraq between Somaliland and Puntland State forces before 2023. “While lower import tariffs and closer genealogical ties might be thought to benefit Bossaso over Berbera, traders and transporters report that ‘weakening security’ and a ‘fragile administration” argued Ahmed M. Musa, the author of a Rift Valley Institute report funded by UK aid from the UK government through the FCDO’s XCEPT programme.
The Somaliland administration levied a reduced tariff at Lasanod checkpoints – 40% – described as ‘tax bargaining’, “by which the Somaliland administration tries to keep the local population happy”. The aim was to buy the political loyalty of locals, but it backfired. “The Somali shilling and US dollar are accepted for daily transactions, while the Somaliland shilling is used to pay civil servants, who typically exchange their salaries into Somali shillings and US dollars,” wrote Musa.
The British and Emirati Role in Trade Routes
Britain and the UAE have vested interests in the opening of trade routes. According to British International Investment, “[Berbera] port is a cornerstone of the economy and by 2035 is expected to facilitate trade equivalent to nearly 27 per cent of GDP and 75 per cent of total trade, supporting indirectly 53,000 jobs in Somaliland. This will enable additional trade equivalent to 6 per cent of GDP by 2035. A variety of sectors is expected to benefit from the port expansion, including exporters of livestock, agricultural and perishable goods, textiles, and construction materials.” The UK’s development investment arm, CDC Group, invested $320 million in Berbera port’s expansion.
Before the Sool conflict, goods imported through Berbera port and products from small-scale factories in Somaliland-controlled areas were transported via Puntland State of Somalia when the secessionist administration controlled parts of territories under Puntland’s federal jurisdiction. These territories are now under the SSCK interim administration, whose legitimacy Puntland State recognises.
DP World, owned by the Government of Dubai, committed a $442 million investment to Berbera Port. Both Britain and the UAE were keen on what was known as the Berbera Corridor, which was intended to strengthen trade ties between Ethiopia and the Somaliland administration. Ethiopia’s goal to reduce dependency on Djibouti’s ports and its search for an independent sea outlet have diminished the importance of the Berbera Corridor proposition. In 2023 ”a unit of DP World won a 30-year concession in 2017 to develop and manage a multi-purpose port in Bosaso, Puntland’s commercial capital.” Puntland State of Somalia has a privately owned seaport in Garacad.
Proposed talks on trade routes that exclude Puntland State of Somalia will not materialise. Through SSC-controlled territories, the Somaliland administration seeks access to the larger Puntland market, which remains open to the rest of the Federal Republic of Somalia.
