Unrecognised States: Impact

4.1 Introduction

Somaliland is one of those unrecognised states, characterised by weak economies and in stability on their borders. Like most of unrecognised states, Somaliland pays high costs for non-recognition. There are dozens of issues, affecting its long-term sustainability and survival, such as its weak economy and international isolation. This chapter aims to critically analyse and explain the impact and consequences of non-recognition to Somaliland government. In doing so, the chapter will first explain in detail the impact of non-recognition to Somaliland’s government with respect to securing its borders from terrorism and piracy. It will also discuss at the impact of non-recognition to Somaliland government from the perspective of international engagement. Finally, the chapter will critically analyse the impact of non-recognition to Somaliland’s trade.

4.2 The impact of non-recognition to Somaliland government

Somaliland’s lack of de jure recognition means, it is unable to sign formal international agreements on a bilateral basis and it cannot receive direct government to government assistance. Lack of recognition has had different effects on Somaliland’s ability to build and develop a fully functioning state. The challenges, posed by non-recognition status on practical perspective, include Somaliland’s lack of capacity to produce a recognised passport, which its citizens can travel, itsinability to sign government to government agreements as well as lack of access to international financial institutions. While Somaliland is widely considered to have achieved a great deal in terms of both economic and political development in the absence of external funding, the demands of building effective state institutions without international recognition that have been a huge challenge. The following paragraphs will critically explain the negative impact that non-recognition had on the Somaliland government with respect to secure its borders from piracy and terrorism as well as Somaliland’s international relations. It will also look at the non-recognition impact on Somaliland’s trade.

4.2.1 Securing Borders (Terrorism and piracy)

Despite Somaliland’s impressive state-building efforts for the last twenty-seven years as well as its effective territorial control, it has not succeeded to secure its borders fully from terrorism and Piracy. Somaliland borders with three different countries- Ethiopia, Somalia and Djibouti, and borders the Gulf of Aden from the north of the sea. It has long coastline, which is 720 Kilometres long. Terrorism and Piracy have been one of the major challenges facing on Horn of Africa region, which Somaliland also situates. After the 9-11 attacks against the United States, the Horn of Africa has come under the increased limelight as a strategic focal point in the war against terrorism.

Before further proceeding to the main analysis, it is important to define what Piracy is from International law dimension. From International law perspective, the United Nations Convention on the Law of the Sea (UNCLOS 1982) defines as follows:

1. Any illegal acts of violence or detention, or any act of depredation, committed for private ends by the crew or the passengers of a private ship or private aircraft and directed :
   1. On the high seas against another ship or aircraft, or against persons or property on board such ship or aircraft.
   2. Against a ship, aircraft, persons or property in a place outside the jurisdiction of any state.
2. Any act of voluntary participation in the operation of a ship or an aircraft with knowledge of facts making it a private ship or aircraft.
3. Any act of inciting or intentionally facilitating an act described in subparagraph (a) or (b).

From this definition, piracy can be considered as a crime committed on or over international water. These include the high seas, and exclusive economic zones, contiguous zones, international airspace and other places beyond the territorial jurisdiction of any state. This excludes the coastal areas of Somalia. It is important to note here that, the majority of the piracy attacks take place within the Somali territorial waters, and under UNCLOS, only a state, where, the attack happened in the territorial waters, that would be entitled to prosecute offenders. However, it is a political fact of life that Somalia’s inept and incapacity to do prosecution is as the lacks the capacity. The irony is that, Somalia and Somaliland share a long border- both land and sea, and this further complicates Somaliland’s capacity to prevent piracy in its territory. One might argue that, Somaliland has a higher institutional capacity-coast guard, police and court system than Somalia, and thus able to thwart maritime pirates from entering its territory. However, that was not always the case, and it harmed shipping, coming to Somaliland as well as the fishery industry. Somali piracy was not only disruptive to Somaliland but also to the whole region, since it takes place a route that is strategically significant for world trade, which is Gulf of Aden- the most important trading route where thousands of ships go through every year. One of the important areas that piracy has impacted with respect to Somaliland is the sea shipping lane. Since Somaliland’s main economy depends on livestock export and import trade, there are hundreds of ships, coming to Somaliland every year through that sea line. Since piracy started, this has greatly affected the ships coming to Somaliland because insurance companies have increased their prices.Another highly important area, which piracy has affected Somaliland is the fishery sector. A large numbers of fishery companies, operating in Somaliland, have reduced their production, because of the security threat from the pirates on the sea.

With respect to terrorism, effective border security is the key to the proper implementation of counter-terrorism steps pursuant to Security Council resolution 1373(2001). However, since Somaliland is not a member of the United Nations, it was not able to properly implement proper counter-terrorism programs. It is important to highlight that, Somaliland has succeeded to some extent to deny Al-Shabaab, the largest terrorist organization in the Horn of Africa to its territory. However, there have been several terrorist incidents in Somaliland, notably, 2008 attacks, which targeted the presidential palace, the UN Development Program compound, and Ethiopia’s diplomatic office, killing 19 people on the spot. Despite that, Somaliland spends one-third of its budget on security, it was not able to fully secure its borders, because of lack of facilities and funds. It is argued that, Non-recognition prevents other states and international organisations from offering required assistance to Somaliland security sectors, such as trainings and weapons. Similarly, Somaliland is not able to engage with regional organisations, which are directly involved in combating and preventing terrorism and piracy

4.2.1.1 Recommendations

This research recommends that Somaliland should be allowed to receive the necessary technical assistance, which would enable Somaliland to combat piracy and terrorism. Also, Somaliland should be offered as an observer status to the newly established Red Sea monitoring group- which many of Somaliland’s neighbouring countries are members.

4.2.2 International Relations

It is argued that, recognition of a state or government provides legal status, which is very important for the enforcement of rights and privileges, given to such entities in international law. For the state to function and participate in treaties and relations with other states, it should be considered as an independent state by other states. Nevertheless, independence alone is not enough, and there should be recognition. Similarly, non-recognitions affect both states and governments. Even though Somaliland has a strong legal and moral validity for statehood recognition, however, it has failed to receive de jure recognition. Diplomatically, non-recognition means Somaliland does not exist in international relations and is excluded from the cooperation and decision-making in international politics. For instance, Somaliland is denied to access to full participation in various international organisations since it is not a member or an observer of IGAD, Arab League or the AU. This lack of access to regional organisations has negatively impacted the Somaliland government’s role in the region. It is argued that Somaliland has tried several times to get an observer member from the African Union, but that attempt has not materialised. The problem was that, the African Union (AU) was not interested in Somaliland’s search for recognition, since its troops were mainly engaged in assisting the Federal government in Mogadishu, Somalia. It is believed that, AU’s record of sending diverse signals to Somaliland clearly shows a lack of unity within the organisation regarding the new aspiring states in Africa. Similarly, Somaliland has also attempted to get a special interim status, similar to that Palestine from the United Nations, but unfortunately, that has also failed. That status would have allowed to Somaliland to engage with international financial institutions, such as the World Bank and International Monetary Fund.

4.2.2.1 Recommendations

This research highlighted that, Non-recognition means that, Somaliland government to a large extent sits outside in international mechanisms, and is unable to play a significant role in strengthening its government institutions and delivering the necessary services required by its citizens. It is very important that, Somaliland should put more efforts into securing the observer status roles with respect to regional organisations such as the African Union (AU) Intern-government Organisation (IGAD) as well as the United Nations.

4.2.3 Trade, foreign investment, and financial services

The no-recognition status of Somaliland has a colossal effect on Somaliland government and its people. Somali Landers are isolated from the international community as they cannot trade effectively with the outside world to develop their economy. Perhaps a more economically significant impact of non-recognition results from the restrictions on Somali lander’s freedom to trade internationally. Non-recognitions means that Somaliland, to a large extent, stays outside from the mechanisms and international systems created for regulating the flows of trade and goods. The easiest non-recognition effect to explain is the economic ones. Businesses are deterred from investing in Somaliland because of its uncertain or questionable legal status.

The most high profile issue and perhaps the most severe and widespread in its effect has been Saudi’s embargo on Somaliland Livestock in 2000. The livestock comprises 60-65% of Somaliland’s GDP and has always played a significant role in economic development.

There are two important aspects of the ban related to Somaliland’s non-recognition status. First, Saudi Arabia justified the ban by pointing to Somaliland’s inability to certify the health of its livestock, because Somaliland’s certificates are not internationally accepted and it is not a party to any international agreements governing the health of livestock destined for export. Second, there was a widespread perception in Somaliland that, the Saudi government’s imposition of the ban may in part be politically motivated and be an attempt to push Somaliland toward political accommodation with authorities in Mogadishu. Interestingly, FAO technical assessment has declared that Somaliland’s livestock is healthy and out of disease, but that has not persuaded Saudi Arabia to lift the ban. What has been very evident from that ban is that Somaliland had no diplomatic leverage to engage with Saudi Arabia because of lack of recognition. For instance, in 1999, Somaliland government even tried to be granted special status as an autonomous territory like Kosovo or East Timor, so that it can enter into the international agreements with World Bank or International Monetary Fund. However, the International community did not accept the proposal and preferred to keep Somaliland status quo.

Related to the above, lack of recognition also severely disadvantages Somaliland when negotiating with other governments or private sector actors, for instance the lack of internationally recognised certificates for its livestock exports makes Somaliland far more dependent on Saudi Arabia than it other would be, and this allows the Saudis to use that leverage for securing better deals from Somaliland.

Connected to the question of lack of foreign trade and investment is the argument that, if Somaliland does not receive international recognition, the economic condition in the state might worsen. This, in turn, leads to youth unemployment, which is critical to the security of the region.

With respect to Foreign Direct Investment, Somaliland has very limited foreign direct investment and is ranked roughly the 180th in the World for gross fixed capital formation as a percentage of FG. It is important to stress that, Somaliland has tried its best to attract foreign investment, and has created an environment for the investors by introducing policies favoring foreign investors, such as no tax for the first three years. However, it is also important to highlight that, Somaliland has not succeeded to attract substantial foreign investors due to its non-recognition status. It is argued that, international investors are skeptical by the lack of insurance and other investment protections, and they contend their interests have not been protected under the international commercial law because of Somaliland’s unrecognised status; foreign vessels wanting to use Berbera port have to pay higher insurance charges. Even the companies, which are serious about investing Somaliland, face significant obstacles in terms of securing export funding and insurance coverage because of Somaliland’s unrecognised status. However, as argued earlier, Somaliland has created quite significant investment protection policies, but it is clear that, the absence of formal political recognition is a significant challenge for Somaliland’s development and investment attraction.

With respect to financial services, the absence of international commercial facilities that can issue letters of credit means that exporters send their livestock abroad without effective price guarantees, often being forced to accept lower prices than they might otherwise obtain. This for instance affects the local economy, which almost 70% of Somaliland high currency earning depends on Livestock. Similarly, this non-recognition situation with respect to financial services also causes high inflation, and the cost of living becomes high. One might argue that, research on bilateral recognition impact on newly recognised states suggest that economy or trade will not dramatically increase; nevertheless, when obtained (multilateral) United Nation membership. Their trade could improve. It is also important to note that, when Taiwan was accepted to be a member to World Trade Organisation (WTO), its international trade with the rest of the world increased, and that has contributed into its economic development. Also, it is noteworthy to mention that, Taiwan’s admission to WTO has enhanced its sovereignty, when sovereignty is understood in its contemporary meaning.

In short, without a doubt, Somaliland’s unofficial status hugely impacts its crumbling financial services which have been struggling for some time now.

4.2.3.1 Recommendations

There is widespread feeling both within Somaliland and among external observers that were Somaliland to be recognised by the international community it would stand to gain significant financial and economic benefits. The ability to sign agreements as a bona fid estate party with other recognised states would remove technical restrictions on the receipt of bilateral aid, and the government would be eligible for a boost in financial support to bolster its meagre budget.

Somaliland should lobby to join to World Trade Organisation, because WTO membership is not restricted to recognised states only, for instance, Taiwan which its statehood has been contested by China has succeeded to join in 2002.

5. Conclusion

This chapter first analysed the impact of non-recognition to Somaliland’s government, especially securing its borders from terrorism and piracy. The chapter realised the critical role that, non-recognition has played on piracy and terrorism in Somaliland’s borders. Secondly, the chapter discussed the non-recognition impact on Somaliland government’s international engagement. The chapter has critically emphasised Somaliland’s lack of membership of international organisations such as African Union (AU), Inter-Governmental Organization (IGAD) and Arab League. This lack of membership has hindered Somaliland government’s role in the region with respect development in its country as well as the region. Thirdly, the chapter looked the negative impact of non-recognition to Somaliland’s trade. Despite Somaliland’s tireless efforts in enhancing its regional trade, it was not able to overcome the devastating consequences that non-recognition has caused. Recognition of Somaliland would be the most cost-effective mechanisms to improve to Somaliland’s ailing economy. This does not mean that recognition will solve all the economic and trade problems that Somaliland is facing today, but at least, it will contribute to the betterment of the economic and trade development in Somaliland.

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